<PAGE>
UNITED STATES SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT
For the transition period from __________ to ________
Commission File Number 000-21729
APPLIED INTELLIGENCE GROUP, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-1247666
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification Number)
13800 Benson Road
Edmond, Oklahoma 73013
(Address of principal executive offices)
(405) 936-2300
Registrant's telephone number, including area code
Check whether the Registrant(1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act
during the past 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No __
As of May 5, 1998 there were 2,735,575 outstanding shares of Common
Stock, par value $.001 per share.
Transitional Small Business Disclosure Format: Yes ___ No X
<PAGE>
APPLIED INTELLIGENCE GROUP, INC.
FORM 10-QSB
TABLE OF CONTENTS
PART I - CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C> <C>
Page
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
Consolidated Balance Sheets (unaudited) as of
March 31, 1998 and December 31, 1997 3
Consolidated Statements of Operations (unaudited)
for the three months ended March 31, 1998 and 1997 4
Consolidated Statement of Stockholders' Equity
(unaudited)for three months ended March 31, 1998 5
Consolidated Statements of Cash Flows (unaudited)
for the three months ended March 31, 1998 and 1997 6
Notes to Consolidated Financial Statements (unaudited)
- March 31, 1998 7
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 8
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS 13
Item 2. CHANGES IN SECURITIES 13
Item 3. DEFAULTS UPON SENIOR SECURITIES 13
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 13
Item 5. OTHER INFORMATION 13
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 13
Signatures 14
</TABLE>
<PAGE>
PART I - CONSOLIDATED FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
APPLIED INTELLIGENCE GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
ASSETS March December
31, 1998 31, 1997
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 116,134 $ 80,769
Accounts receivable-trade, net of allowance
for doubtful accounts of $1,455 at March
31, 1998 and $1,724 December 31, 1997 1,748,891 1,337,322
Other receivables 44,208 44,893
Inventory 10,532 8,707
Current portion of deferred tax asset 44,502 44,502
Prepaid expenses 131,453 51,634
---------- ----------
Total current assets 2,095,720 1,567,827
Furniture, equipment and leasehold improvements, net 1,354,457 1,462,575
Software development costs, net 1,815,060 1,735,420
Deferred tax asset, net 970,457 1,004,938
Other assets 36,893 33,393
---------- ----------
Total assets $6,272,587 $5,804,153
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Book overdraft $ - $ 23,619
Accounts payable and accrued liabilities 1,951,116 1,507,018
Deferred revenue 134,840 236,134
Current portion of capital lease obligations 115,954 132,422
---------- ----------
Total current liabilities 2,201,910 1,899,193
Capital lease obligations, net of current portion 24,139 44,194
Notes payable to shareholders, net of current portion 482,830 482,830
Long-term debt 616,865 490,000
---------- ----------
Total liabilities 3,325,744 2,916,217
Stockholders' equity:
Common stock, $.001 par value; 30,000,000 shares
authorized; 2,730,548 and 2,729,509 shares
issued and outstanding at March 31, 1998 and
December 31, 1997, respectively 2,731 2,730
Additional paid-in capital 4,501,636 4,498,988
Retained earnings (deficit) (1,557,524) (1,613,782)
---------- ----------
Total stockholders' equity 2,946,843 2,887,936
---------- ----------
Total liabilities and stockholders' equity $6,272,587 $5,804,153
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
APPLIED INTELLIGENCE GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Revenues $3,098,404 $1,836,419
Expenses:
Direct cost of sales 377,068 188,495
Salaries and benefits 1,787,430 1,374,617
Selling, general and
administrative 558,599 586,890
Interest expense, net 36,116 5,565
Depreciation and amortization 248,452 179,522
---------- ----------
Total expenses 3,007,665 2,335,089
---------- ----------
Income (loss) before income taxes 90,739 (498,670)
Provision (benefit) for income taxes 34,481 (189,495)
---------- ----------
Net income (loss) $ 56,258 $ (309,175)
========== ==========
Basic and diluted earnings:
Net income (loss) per common share $ 0.02 $ (0.11)
========== ==========
Weighted average common shares
outstanding 2,729,521 2,726,944
========== ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
APPLIED INTELLIGENCE GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
For the Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
Additional Retained
Common Stock Paid-in Earnings
Shares Amount Capital (Deficit)
--------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Balance (deficit),
December 31, 1997 2,729,509 $ 2,730 $4,498,988 $(1,613,782)
Stock issued under Employee
Stock Purchase Plan 1,039 1 2,648 -
Net income - - - 56,258
--------- ------- ---------- ----------
Balance (deficit),
March 31, 1998 2,730,548 $ 2,731 $4,501,636 $(1,557,524)
========= ======= ========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
APPLIED INTELLIGENCE GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended March 31, 1998 and 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 56,258 $ (309,175)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 248,452 179,522
Deferred income tax provision (benefit) 34,481 (189,495)
Decrease (increase) in accounts receivable (411,569) 883,275
Decrease in other receivables 685 57,441
Decrease (increase) in inventory (1,825) 10,687
Increase in prepaid expenses (79,819) (85,080)
Increase in other assets (3,500) (4,986)
Increase (decrease) in accounts payable and
accrued liabilities 444,098 (410,082)
Decrease in deferred revenue (101,294) (18,425)
---------- -----------
Net cash provided by operating activities 185,967 113,682
---------- -----------
Cash flows from investing activities:
Capital expenditures (21,771) (141,652)
Capitalized expenditures for software
development (198,202) (131,064)
---------- -----------
Net cash used in investing activities (219,973) (272,716)
---------- -----------
Cash flows from financing activities:
Decrease (increase) in book overdraft (23,619) (179,624)
Proceeds from long-term debt 616,864 -
Proceeds from exercise of stock options - 279
Proceeds from employee stock purchase plan 2,649 -
Payments of capital lease obligations (36,523) (32,215)
Payments of shareholder loans - (20,000)
Payments on long-term debt (490,000) -
---------- -----------
Net cash provided by (used in) financing
activities 69,371 (231,560)
---------- -----------
Net increase (decrease) in cash 35,365 (390,594)
Cash and cash equivalents at beginning of period 80,769 1,821,014
---------- -----------
Cash and cash equivalents at end of period $ 116,134 $ 1,430,420
========== ===========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
<PAGE>
APPLIED INTELLIGENCE GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
March 31, 1998
NOTE 1. DESCRIPTION OF BUSINESS
Applied Intelligence Group, Inc. (the "Company") provides a
diversified range of management consulting and computer systems
integration services, along with providing network services and
network-based computer applications. All services are focused
primarily on the retail and wholesale distribution industries.
Through the Company's wholly owned subsidiary, ijob, Inc., the
Company also provides a human resource recruiting application
accessible through either the Internet or by telephone. The
Company's clients and customers range from small, rapidly growing
companies to large corporations and are geographically disbursed
throughout the United States.
NOTE 2. BASIS OF PRESENTATION
Reference is made to the Company's Annual Report on Form 10-KSB
for the year ending December 31, 1997.
The accompanying unaudited consolidated financial statements have
been prepared by the Company in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-QSB. Accordingly, they do
not include all of the information and footnotes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments
(consisting of normal recurring items) considered necessary for a
fair presentation have been included. These interim unaudited
consolidated financial statements should be read in conjunction
with the audited financial statements and related notes included
in the Company's Annual Report on Form 10-KSB as filed on March
31, 1998.
Operating results for the three month period ended March 31, 1998
are not necessarily indicative of the results that may be
expected for the full year ended December 31, 1998.
Note 3. RECONCILIATION FOR BASIC AND DILUTIVE EPS
<TABLE>
<CAPTION>
For the Quarter Ended 3/31/98
Income Shares Per Share
(Numerator) (Denominator) Amount
----------- ------------- ---------
<S> <C> <C> <C>
Basic EPS
Income available to
common shareholders $56,258 2,729,521 $0.021
======
Effect of Dilutive Securities
Options - 50,144
-------- ---------
Dilutive EPS
Income available to
common shareholders
plus assumed conversions $56,528 2,779,665 $0.020
======= ========= ======
</TABLE>
Options to purchase 60,000, 102,500 and 50,000 shares of common
stock at $5.00, $3.875, and $3.50 per share, respectively, were
outstanding during the first quarter of 1998 but were not
included in the computation of diluted EPS because the options'
exercise prices were greater than the average market price of the
common shares. The options, which expire on November 30, 2001,
March 1, 2007 and June 12,1999, respectively, were still
outstanding at the end of the quarter ended March 31, 1998.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Statements of the Company's or management's intentions, beliefs,
anticipations, expectations and similar expressions concerning
future events contained in this Report constitute "forward-
looking statements" as defined in the Private Securities
Litigation Reform Act of 1995 ("Act"). Any forward-looking statements
are made by the Company in good faith, pursuant to the safe-harbor
provisions of the Act. As with any future event, there can be no
assurance that the events described in forward-looking statements made
in this Report will occur or that the results of future events will not
vary materially from those described in the forward-looking statements.
These forward-looking statements reflect management's current views and
projections regarding economic conditions, industry environments
and Company performance. Important factors that could cause the
Company's actual performance and operating results to differ
materially from the forward-looking statements include, but are
not limited to, changes in the general level of economic activity
in the markets served by the Company, introduction of new
products or services by competitors, sales performance, expense
levels, interest rates, changes in the Company's financial
condition, availability of capital sufficient to support the
Company's level of activity, delays in implementing further ehancements
to the Company's viaLink and ijob services, and the ability of the
Company to implement its business strategies.
The Company's expectations with respect to future results of
operations that may be embodied in oral and written forward-
looking statements, including any forward-looking statements that
may be included in this Report, are subject to risks and
uncertainties that must be considered when evaluating the
likelihood of the Company's realization of such expectations. The
Company's actual results could differ materially.
OVERVIEW
The Company is engaged in the business of selling computerized
information management systems and providing consulting services
to retail companies and the product suppliers of such retailers
(i.e., manufacturers, wholesalers and other distributors). The
Company is currently organized in two divisions. The Retail and
Store Systems Consulting Division provides management consulting,
computer system integration support services ("customer
support"), and markets software products and applications
("solutions"), including the Company's proprietary software
products, RETAIL SERVICE APPLICATIONS (RSA) and CHAINLINK, and
resells computer hardware and point-of-sale systems ("hardware
and product sales"). The Network Services Division offers
subscription services through telecommunications (including
private networks and the World Wide Web of the Internet), which
include the Company's viaLink and ijob services, network-based
computer applications, and the production and operation of web
site hosting on the Company's computer systems.
RESULTS OF OPERATIONS
REVENUES. Revenues increased $1,261,985 (69 percent) from
$1,836,419 for the quarter ended March 31, 1997 to revenues of
$3,098,404 for the quarter ended March 31, 1998. All categories
of the Company's revenues increased except for commissions. No
commissions were earned on referrals of certain hardware sales in
the first quarter 1998, as all hardware sales were made directly
by the Company rather than on a referral basis.
Hardware and Product Sales. Hardware and product sales increased
$163,761 (71 percent) from sales of $231,489 in the first quarter
of 1997 to sales of $395,250 in the first quarter of 1998. During
the first quarter of 1997 one large customer purchased the
majority of its point-of-sale hardware directly from the hardware
vendor, which reduced the Company's hardware sales in the first
quarter of 1997; however, commissions of $73,244 were earned on
these purchases during this same period. During the first quarter
of 1998, this large customer purchased hardware directly from the
Company, and, as a result, hardware and product sales increased
in the first quarter of 1998 compared to the same period in 1997.
In addition, the overall increase in hardware and product sales
in 1998 was partly due to a single sale of equipment for
approximately $100,000. This sale was a result of a referral from
a large retail software company, which the Company is currently
in negotiations with to serve as the preferred supplier of
hardware to their customers.
Solutions. Solutions revenues increased $110,416 (262 percent)
from revenues of $42,104 in the first quarter of 1997 to $152,520
in the same period of 1998. The increase was due to a single sale
of the Company's RSA software in January 1998.
Consulting Fees. Consulting fees earned during the three months
ended March 31, 1998 totaled $2,085,550 compared to $1,240,567
for the same period in 1997. Beginning in the fourth quarter of
1997 the Company refocused resources on the consulting and
systems integration area. The Company aggressively pursued new
clients and projects and assigned consulting personnel and
programmers from internal projects to consulting and systems
integration projects. As a result of these efforts, consulting
fees for the first quarter of 1998 increased $844,983 (68
percent) over consulting fees for the first quarter of 1997.
Customer support. Customer support revenues totaled $125,257 for
the first quarter of 1998 compared to revenues of $71,769 for the
first quarter of 1997. The increase of $53,488 (75 percent) was
due to additional customer support contracts obtained throughout
1997 and in the first quarter 1998. The increase was also due to
a rate increase upon renewal of certain support contracts and
higher levels of billings for hours in excess of the standard
contract levels.
Network services and applications. Revenues from the Company's
network services and network based computer applications were
$339,827 for the three months ended March 31, 1998 compared to
$177,246 for the same period in 1997. This represented an
increase of $162,581 (92 percent). The increase was principally
due the increase in ijob revenues from $72,000 for the first
quarter of 1997 to $210,541 for the first quarter of 1998, an
increase of $138,541 (192 percent). The remaining increase
($24,040) was attributable to an increase in web site
maintenance, hosting, and viaLink services. The Company has and
will continue to make significant expenditures for investment and
development of its network subscription services in order to
further develop a recurring base of revenues.
DIRECT COST OF SALES. Direct cost of sales, which consists of
hardware and certain software purchases for resale, and costs
associated with the Company's proprietary software products,
increased $188,573 (100 percent) to $377,068 in the first quarter
of 1998 from $188,495 in the first quarter of 1997. The increase
was attributable to increased hardware and product sales and
solutions revenues.
SALARIES AND BENEFITS. Salaries, wages, taxes and related
benefits, and contract labor expenses totaled $1,787,430 for the
three months ended March 31, 1998 compared to $1,374,617 for the
same period in 1997, an increase of $412,813 (30 percent).
During the first quarter of 1998, the Company utilized contract
programmers for client engagements to a greater extent than in
the same period in 1997 to meet the skill demands and workload of
clients' projects. Contract labor expenses totaled $346,664
during the three months ended March 31, 1998 compared to a total
of $121,776 during the three months ended March 31, 1997.
Direct payroll costs of salaries and wages increased to
$1,447,998 for the three months ended March 31, 1998 from
$1,210,269 for the same period in 1997. This increase was due to
employed personnel increasing from 119 at the end of the first
quarter of 1997 to 146 at the end of the first quarter of 1998.
This increase was in part associated with the start-up of ijob,
which was not fully staffed until June 1997.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general
and administrative expenses decreased $28,291 (five percent) to
$558,599 for the three months ended March 31, 1998 from $586,890
for the three months ended March 31, 1997.
Occupancy expenses, including rent expense, utilities, equipment
rentals and leases, increased $22,885 (23 percent) to $122,339
for the first quarter of 1998 from $99,454 for the same period in
1997. The increase was primarily due to increased expenses for
an equipment lease entered into in the third quarter of 1997.
The lease provided new equipment for staff growth and production
and development equipment for the continued development of
viaLink.
General insurance increased $27,504 (1643 percent) from $1,674
for the first three months of 1997 to $29,178 for the same period
in 1998. The increase was primarily due to additional insurance
coverage obtained by the Company. Employee practice liability
insurance was obtained for ijob, Inc. beginning in the third
quarter of 1997 due to the nature of the services of ijob, Inc.
In addition, directors and officers insurance was obtained for
the Company due to the addition of two outside Board of Directors
who began serving in December 1997 and January 1998.
Telecommunications expense increased $31,294 (71 percent) from
$44,902 for the three months ended March 31, 1997 to $75,386 in
the same period of 1998. This increase was due to (i) the start
up of ijob operations and the opening of a service center in the
first quarter of 1997, (ii) to the expansion of the Company's
communication systems for viaLink and web site hosting services,
(iii) and greater long distance usage due to the increased
marketing activities of the Company.
Advertising and promotion expenses totaled $45,751 for the first
quarter of 1997 compared to $15,791 for the same quarter in 1998.
The decrease of $29,960 (65 percent) was due to normal
expenditures for advertising and promoting viaLink in several
trade publications being delayed to later in 1998.
Supplies and resources, which consists of office supplies,
miscellaneous hardware and software expenses, printing and copy
charges, memberships and subscriptions, decreased $49,569 (70
percent) from $70,837 for the first quarter of 1997 to $21,268
for the same period in 1998. In the first quarter of 1997
approximately $15,000 of the supplies and resources costs were
associated with the start-up of ijob, Inc., these costs were not
incurred during the first quarter of 1998, which, contributed to
the overall decrease in supplies and resources. The remaining
decrease was as a result of cost reduction and control measures
implemented by the Company.
Professional fees decreased $26,924 (21 percent) to $98,854 for
the three months ended March 31, 1998, compared to $125,778 for
the three months ended March 31, 1997. The decrease was
primarily a result of the decrease in professional services used
by ijob, Inc. in the first quarter of 1998 compared to the first
quarter of 1997, when legal and consultant services were used to
assist in the development and start-up of ijob, Inc.
NET INTEREST EXPENSE. Net interest expense increased $30,551
(549 percent) to $36,116 for the three months ended March 31,
1998 from $5,565 for the same period in 1997. Proceeds of the
Company's initial public offering in November 1996 were used to
pay off the Company's total outstanding bank debt at that time.
There were no outstanding borrowings on the bank line-of-credit
at March 31, 1997. During the second, third, and fourth quarter
of 1997, certain borrowings were made under the Company's bank
line-of-credit and during the first quarter of 1998, the Company
completed a new credit facility with a commercial lender that
replaced and increased the working line-of-credit with the bank.
As of March 31, 1998, the new credit facility had an outstanding
balance of $616,865. Average total outstanding debt, including
shareholder loans and capital leases, during the first quarter
1998 was $1,128,000, compared to average total outstanding debt
in the first quarter of 1997 of $767,000.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization
expense totaled $248,452 for the first quarter ended March 31,
1998 compared to $179,522 for the same quarter ended 1997, an
increase of $68,930 (38 percent). The increase was due to
capital asset expenditures made during 1997, totaling $332,987,
and software development costs capitalized of $751,158.
TAX PROVISION. The Company recorded a tax provision of $34,481
related to the pre-tax income of $90,739 for the three months
ended March 31, 1998. As of March 31, 1998 the Company had a
cumulative deferred tax asset of $1,014,959. Management believes
realization of such deferred tax benefit is more likely than not
based upon expected future taxable income and therefore a
valuation allowance has not been provided.
POTENTIAL FLUCTUATIONS IN OPERATING RESULTS
The Company's quarterly operating results have in the past varied
and may in the future vary significantly depending on factors
such as the size, timing and recognition of revenue from
significant customer consulting and systems integration activity,
hardware and software sales, the timing of new product releases
and market acceptance of these new releases, increases in
operating expenses, and to some extent, the seasonal nature of
its business. Thus, the Company's revenues and results of
operations have and may continue to vary significantly from
quarter to quarter, period to period, and year to year based upon
frequency and volume of sales and licensing of the Company's
software applications and providing of consulting services during
such period, as well as software applications developed by the
Company. Due to the relatively fixed nature of certain of the
Company's costs throughout each quarterly period, including
personnel and facilities costs, the decline of revenues in any
quarter typically results in lower profitability in that quarter.
There can be no assurance that the Company will be successful in
achieving profitability or avoiding losses in any future period.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998 the Company had cash and cash equivalents of
$116,134, and a working capital deficit of $106,190, with a
working capital ratio of 0.95 to 1. During the first quarter of
1998, the Company completed a new credit facility with a
commercial lender that replaced and increased the Company's
current line-of-credit with a bank. Under the new credit
facility the Company may borrow up to $1,000,000; however,
amounts borrowed are limited to 75% of the Company's accounts
receivable as defined by the new facility. The facility is
collateralized by accounts receivable and all tangible assets of
the Company and is guaranteed by three principal officers of the
Company. The note will become due in July 1999. As of March
31, 1998, the Company had borrowed $616,865 under the new credit
facility, bearing interest at 11.25%. In addition, during the
first quarter of 1998 the Company obtained a credit facility
including a $1,000,000 large sale financing option with IBM
Credit Corp., whereby the Company may finance directly with IBM
Credit Corp. large sales of hardware and software. As of March
31, 1998, there were no sales financed under the IBM Credit Corp.
arrangement.
During the three months ended March 31, 1998, net cash increased
a total of $35,365. Net Cash provided by operating activities for
the first quarter of 1998 was $185,967 compared to net cash
provided for the first quarter of 1997 of $113,682. Income of
$56,528 for the three months ended March 31, 1998 was recorded
compared to a loss of $309,175 for the same period of 1997.
Accounts receivable increased a net $411,569 during the three
months ended March 31, 1998, from $1,337,332 at December 31,
1997, to $1,748,891 at March 31, 1998, primarily due to increased
revenues for the period. Accounts payable and accrued
liabilities increased a net of $444,098 primarily due to
liabilities for the cost of products for the Company's hardware
sales and month end payroll accruals for the April 3, 1998,
payroll.
During the three months ended March 31, 1998, the Company
expended $21,771 for investing activities in various fixed assets
and $198,202 for software development costs of its proprietary
software products, compared to total expenditures of $141,652 and
$131,064, respectively, for the same items in the three months
ended March 31, 1997.
During the three months ended March 31, 1998, financing
activities provided net cash of $69,371, which was provided by
net borrowings under the new credit facility of $126,864 and
receipts of $2,649 from the purchase of stock under the Employee
Stock Purchase Plan. Such receipts were offset by payments on the
Company's capital lease obligations of $36,523 and a decrease in
the book overdraft of $23,619. During the three months ended
March 31, 1997 the Company used net cash of $231,560 in financing
activities.
The Company anticipates that its operations and growth strategy
will be financed through cash and cash equivalents, operating
cash flows generated from the Company's focus on its consulting
services engagements, the new line-of-credit facility of
$1,000,000, capital lease sources and the financing arrangement
with IBM Credit Corp. The Company believes that these sources of
funds will be sufficient to satisfy the Company's operating and
capital requirements for at least twelve months. There may be
circumstances, however, that would accelerate the Company's use
of such financing sources. If this occurs, the Company may, from
time to time, incur indebtedness or issue, in public or private
transactions, equity or debt securities. There can be no
assurance that the Company will be able to obtain requisite
financing when needed on acceptable terms.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the first quarter ended March 31, 1998.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Report:
Exhibit
Number
Description
10.45 Trinity Capital, Inc. Accounts Receivable Purchase and
Security Agreement dated March 16, 1998.
10.46 IBM Credit Corp Agreement for Wholesale Financing dated
January 28, 1998.
10.47 IMB Credit Corp Addendum to Agreement for Wholesale
Financing, Large Sale Financing Option dated January 28, 1998.
(b) Reports on Form 8-K
On February 12, 1998 the Company filed a Form 8-K, regarding
the appointment of two outside directors to its Board of Directors.
On April 27, 1998 the Company filed a Form 8-K, regarding the press
release for an earnings announcement for the quarter ended March 31,
1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
APPLIED INTELLIGENCE GROUP, INC.
By: /s/ ROBERT L. BARCUM
Robert L. Barcum
Chairman of the Board
President and Chief Executive
Officer
May 5, 1998
By: /s/ JOHN M.DUCK
John M. Duck
Vice President and Chief
Financial Officer
May 5, 1998
Exhibit 10.45
ACCOUNTS RECEIVABLE PURCHASE AND SECURITY AGREEMENT
This Accounts Receivable Purchase and Security Agreement
(hereinafter referred to as "Agreement"), made and entered into
this 16th day of March 1998, by and between Applied Intelligence
Group, Inc. (also known as AIG), an Oklahoma Corporation (Tax
ID#: 73-1247666), with its principal offices at 13800 Benson
Road, Edmond, Oklahoma 73013 (hereinafter referred to as
"Client") and Trinity Capital, Inc., an Oklahoma corporation,
with its principal offices at 50 Penn Place, Suite 590, Oklahoma
City, Oklahoma 73118-1803 (hereinafter referred to as "Trinity").
WITNESSETH:
Whereas, Client desires to sell its certain accounts receivable
to Trinity and Trinity agrees to purchase said accounts
receivable, upon the terms and conditions herein provided;
Now Therefore, in consideration of the foregoing and the mutual
covenants hereinafter contained, it is hereby mutually understood
and agreed as follows:
1. Assignment and Sale of Accounts. In consideration of the
sums of money paid by Trinity to Client, hereinafter referred to
as "advance", Client hereby sells, assigns, transfers, sets over
and delivers to Trinity, with full recourse, and Trinity hereby
purchases from Client, Client's right, title and interest in and
to, but none of its obligations or indebtedness under, Client's
accounts receivable, all returned and repossessed goods arising
therefrom, and all proceeds thereof, which are now existing and
owned by Client and referred to on the initial Assignment
Schedule of Accounts executed and delivered by Client to Trinity
herewith, or hereafter arising in favor of or acquired by Client,
and all records evidencing the same; with full and irrevocable
right and power for the benefit of Trinity, either in Trinity's
name or Client's name, to collect, enforce, sue on, compromise or
discharge the same, and to endorse the name of Client on any
instruments, documents or evidences of payment which are payable
to Client, and to do all acts necessary or proper, hereby
ratifying and confirming all that Trinity shall lawfully do or
cause to be done by virtue hereof (all of the foregoing
hereinafter collectively referred to as the "Accounts").
Client shall execute and/or deliver to Trinity such additional
instruments, documents and agreements including, but not limited
to, a Secured Promissory Note in the amount of $1,000,000.00,
Assignment Schedules of Accounts and duplicate original invoices
bearing endorsements, in form and substance acceptable to
Trinity, indicating that the Accounts have been sold and assigned
to Trinity and are payable only to Trinity, which Trinity shall
mail to the debtors of such Accounts, as Trinity shall require,
from time to time, to better effect Trinity's interest in the
Accounts.
Client may discontinue offering for sale to Trinity the
receivables of any Client's Customer by giving written notice to
Trinity; however, Client agrees to instruct such Client's
Customer to send all payments directly to Trinity at its
designated address on all invoices from Client whether or not
such invoices have been sold to Trinity until Trinity has been
fully paid for all receivables purchased by Trinity. Trinity
agrees to promptly credit Client's Reserve Account for all
payments received upon invoices, which Client has not received
any advances from Trinity.
2. Payment for Accounts; Servicing Fee. Trinity shall advance
to Client up to seventy five percent (75.0%) of the gross amount
of Accounts acceptable to Trinity, less Trinity's servicing fee.
The term of any advance shall be the period of time from the date
upon which the funds are advanced by Trinity to Client to the
payment date of the receivables, based on actual days elapsed on
the basis of a year consisting of 360 days. At no time shall the
aggregate of such advance amounts exceed $1,000,000.00. The
amount of such advance, calculated prior to deducting the service
fee, shall bear interest from the date upon which funds are
advanced until collection date of Accounts at a rate equal to the
adjusted floating prime commercial rate of interest ("Prime
Rate") as announced by Trinity's primary operating bank on the
day such Prime Rate must be determined, plus three percent (3.0%)
("Fluctuating Rate"). In the event the calculation of the
Fluctuating Rate yields a rate higher than the maximum amount
allowed by state or federal law ("Maximum Rate"), the Maximum
Rate will be used. Each and any change in the rate charged to
Client shall be effective without notice to Client on the date
when a change shall have been made, but in no event whatsoever
shall the amount paid or agreed to be paid by Client, received or
demanded by Trinity, exceed the maximum amount permitted by state
or federal law. Such rate shall be charged to Client's Reserve
Account, if any, without demand or notice or may be payable
directly from Client to Trinity on a monthly basis. However, it
is agreed that all sums of money which shall not be paid to
Trinity by Client when due shall bear interest at 2.0% per month
or at the highest rate allowed by law from such due date until
paid in full, at Trinity's sole discretion. Upon collection of
such Accounts, Trinity shall pay Client the difference between
the amount collected and the payment first made to Client by
Trinity with respect to such Accounts, less the Servicing Fee, as
defined hereinbelow, on such Accounts and any other obligations
and indebtedness of Client to Trinity for Accounts charged back
hereunder or otherwise howsoever arising.
For its services hereunder, Trinity shall earn, and Client shall
pay, a Servicing Fee equal to three fourth of one percent (0.75%)
of the gross amount of any and all receivables purchased by
Trinity as set forth at the time of initial funding. Trinity's
Servicing Fee is due and payable on the date a receivable is
purchased from Client by Trinity. The Servicing Fee constitutes
consideration for Trinity's services in processing and collection
of the purchased receivables. In addition, upon execution of this
Agreement, Client shall pay a one-time, non-refundable Closing
Fee of $2,650.00.
3. Warranties. Covenants and Representations. In order to
induce Trinity to enter into this Agreement, Client hereby
represents, warrants, covenants and agrees to and with Trinity
that:
a. Client's exact name is Applied Intelligence Group, Inc.,
Client was incorporated on May 31, 1985, and Client is a duly
organized corporation validly existing and in good standing under
the laws of the State of Oklahoma. Client is licensed and has
full power and authority to carry on its business as it is now
being conducted and to own or hold the properties and assets it
now owns or holds; is duly qualified, licensed, authorized and
empowered to carry on its business as a foreign corporation in
good standing in each jurisdiction in which the conduct of its
business, the owning or leasing of real property or the
maintaining of an office by it makes such qualification and
licensing necessary; and is in compliance with all laws,
regulations and orders in every applicable jurisdiction;
b. Client has the corporate power to make, deliver and perform
this Agreement on the terms and conditions hereof and has taken
all necessary corporate action to authorize the execution,
delivery and performance of this Agreement. This Agreement
constitutes a valid agreement of Client legally binding upon it
and enforceable in accordance with its terms. No consent of any
other party and no consent, license, approval, authorization,
registration or declaration with, any governmental commission,
authority, bureau, agency or other governmental entity is
required in connection with this Agreement, the sale of the
Accounts, the granting of the collateral contemplated hereby or
the execution, delivery, performance, validity or enforceability
of this Agreement. Client further warrants that none of Client's
transactions with Trinity are a breach or will constitute a
breach of any agreement between Seller and any other person(s) or
creditor(s);
c. The execution, delivery and performance of this Agreement by
Client will not violate any provision of any existing law,
regulation, order or decree of any court, governmental authority,
bureau or agency, or Client's articles of incorporation or
by-laws, and will not violate any provision of, or constitute a
default under any mortgage, indenture, security agreement,
contract, insurance policy, undertaking or other agreement or
instrument to which Client is a party or which is or purports to
be applicable to or binding upon Client, the conduct of its
business or the ownership of any of its property or assets;
d. Client is in compliance with all existing laws and
regulations applicable to it, the violation of which would or
could adversely affect its operations or its ability to fulfill
its obligations under this Agreement;
e. No litigation or administrative proceeding involving Client
is presently pending and, to Client's knowledge, no such
litigation or proceeding is presently threatened against it or
any of its property, that if adversely determined, would
adversely affect its financial condition, business or operations
or its ability to fulfill its obligations under this Agreement;
f. Client has filed or caused to be filed all tax returns and
estimates required to be filed and has paid all taxes shown to be
due and payable on said returns and estimates or on any
assessments made against it, except for Oklahoma County ad
valorem taxes and Oklahoma withholding taxes, which Client shall
pay from the proceeds of its first advance from Trinity under
this Agreement; and no tax liens have been filed and no claims or
assessments are being asserted with respect to such taxes. Client
shall immediately notify Trinity in writing of its delinquency in
the payment of any taxes. No adverse change in Client's tax
liability is contemplated should its tax returns be audited by
any tax authority;
a.
g. Client has filed or caused to be filed all financial
statements, reports and information required to be filed by all
applicable regulatory agencies and no claims or deficiencies or
other matters which could have an adverse affect on its financial
condition, business or operations, or its ability to perform its
obligations under this Agreement have been asserted or are
contemplated to be asserted by any of said agencies;
h. All of the covenants, representations and warranties herein
or pursuant hereto shall survive the date hereof, shall be
continuing and shall remain in full force and effect irrespective
of any investigation which may make in connection with or in
reference to transactions contemplated hereby or any matter
involved herein;
i. Each of the Accounts and all instruments, documents, and
records relating thereto are genuine and valid and in all respect
what they purport to be, arising out of bona fide sales of goods
or services for moneys due Client in full compliance with
applicable law to which the same are subject. Each of the
Accounts is due and payable within thirty (30) days after the
invoice date in United States Dollars, to the best of Client's
knowledge, is not subject to any set-off, credit or deduction and
the payment thereof is not contingent or conditional upon the
fulfillment of any contract, condition, obligation or warranty,
past or future, express or implied. To the best of Client's
knowledge, the debtor of each Account is solvent and able to pay
its debts as they become due; proper entries have been made on
the books of Client disclosing the absolute and unconditional
sale of the Accounts to Trinity; Client has good and absolute
title to each Account and right to sell, assign and transfer the
same and has no knowledge of any fact which would impair the
validity thereof; none of said Accounts are subject to any lien,
charge, encumbrance, security interest or adverse claim nor has
Client granted or permitted to exist any thereof; and none of
said Accounts nor moneys due or to become due thereunder are to
be collected or held by Client in trust for any person except
Trinity;
j. Client will keep all of its books and records on a
consistent basis in accordance with Generally Accepted Accounting
Principles. All information furnished by Client to Trinity
concerning the Accounts and proceeds thereof, Client's financial
condition or otherwise, is and will be complete, accurate and
correct at the time the same is furnished. Client shall furnish
to Trinity its annual financial statements within ninety (90)
days after closing of its fiscal year, its quarterly financial
statements within forty five (45) days after closing of each of
its fiscal quarters, and such additional information as and when
required by Trinity;
k. Client shall not change its name, business structure, or
identity or use any new trade name, or merge or consolidate with
any other entity, without Trinity's written consent; and
l. Client shall maintain at all times a Tangible Net Worth of
at least $2,000,000 effective on or after December 31, 1997.
4. Collection of Accounts. Upon an occurrence of an event of
default under this Agreement, which is not cured by Client as
provided in Section 8 hereunder, Trinity agrees to diligently,
carefully and lawfully perform in its own name or Client's name
the services of administering, demanding and collecting the
Accounts, receipt and accounting for the proceeds thereof and
paying or otherwise discharging both necessary and reasonable
outside costs and expenses incurred in connection therewith.
Client shall pay and/or reimburse Trinity for all costs, fees and
expenses, including, without limitation, attorneys' fees,
incurred by Trinity to collect the Accounts. Trinity shall have
the right to make allowances, extend, defer, credit, adjust or
settle with any debtor on any Account without notice to or
consent of Client.
The Client appoints Trinity as its attorney-in-fact to receive,
open, and dispose of all mail addressed to the business
pertaining to Receivables; to endorse the Client's name upon any
notes, acceptances, checks, drafts, money orders, and other
evidences of payment of Receivables that may come into Trinity's
possession, and to deposit or otherwise collect the same; and to
do all other acts and things necessary to carry out the terms of
this Agreement. This power, being coupled with an interest, is
irrevocable while any Receivable shall remain unpaid.
Client agrees at all times to allow Trinity or its agents, to
examine, audit and make extracts and copies of any books and
records pertaining to the Accounts, including bank records and
reconciliations thereof; and to use Client's premises for this
purpose, at any reasonable time, without cost to Trinity. After
default by Client hereunder, Client shall pay and/or reimburse
Trinity for all costs, fees and expenses incurred by Trinity in
the actions described in the preceding sentence. Client further
agrees to furnish Trinity with a monthly aging of the Accounts
and such other instruments, documents, papers and information
relating to the Accounts, which shall be the property of Trinity,
as Trinity shall require from time to time, including, but not
limited to, all original purchase orders or contracts, invoices,
bills of lading, proof of delivery and related correspondence and
memoranda.
Client shall immediately advise Trinity of any asserted set-off,
credit or deduction by any debtor of the Accounts or the
occurrence of any dispute, default or incident that may in any
way impair such Accounts or tend to reduce the amount thereof.
Client shall have no right and agrees not to make allowance,
extension, deferral, credit, adjustment or settlement with any
debtor on any Account without in each case the written consent of
Trinity, which such consent shall not be unreasonably withheld.
If in Trinity's sole judgment, the credit worthiness of any
debtor of a receivable purchased by Trinity becomes impaired
before delivery of the related goods and/or rendition of services
to such debtor, Client will, upon Trinity's request, at Client's
expense use its best efforts to stop delivery of goods and/or
rendition of services to such debtor, provided that Client has
received advances on Accounts relating to said goods and/or
rendition of services prior to delivery of said goods and/or
rendition of services to account debtor.
Should any suits, arbitration or other proceedings be instituted
for the collection or enforcement of any Account or in defense
thereof, Client shall, without expense to Trinity, make available
such of its officers, employees, agents, books, records and
files, and retain counsel and experts, as may be necessary and
expedient to make proper proof therein.
All proceeds of the Accounts received by Client shall be held IN
TRUST for Trinity and immediately delivered to Trinity, in kind.
Client hereby authorizes Trinity, at any time, to debit its
bank(s) account(s) at any banking institution it maintains
account(s) and banking relationship(s), at Trinity's option,
without notice to Client, for any and all proceeds of the
Accounts received by Client, but not delivered to Trinity, in
kind.
Notwithstanding anything to the contrary in this Agreement,
provided that Client is not in default under this Accounts
Receivable Purchase and Security Agreement or any other
agreements between Client and Trinity, Client shall not be
required to place Trinity's name on any invoices Client presents
to its customers. Notwithstanding anything to the contrary in
this Agreement, Client hereby agrees to require its customers to
pay and remit all payments for the Accounts directly by Client's
customers to Trinity's lockbox address at P.O. Box 91092,
Chicago, IL 60693 (lockbox at Bank of America, Chicago), or any
other lockbox address Trinity may require in the future.
In the event (i) any Account shall not be collected by Trinity
within ninety (90) days after the invoice date; (ii) any Account
is due from a debtor which has, or against which was, filed a
petition in bankruptcy or for reorganization under the bankruptcy
laws, makes an assignment for the benefit of its creditors, has a
receiver appointed for its property, suspends its business, is or
becomes insolvent or defaults in the payment of other
indebtedness to Client or Trinity; (iii) any Account is due from
a debtor which is then debtor on Accounts aggregating in face
amount twenty five (25%) or more of the Accounts then
outstanding; (iv) any Account shall be subject to any dispute,
claim, charge, counter-claim or set-off by the debtor thereon;
(v) the debtor of any Account refuses to execute and deliver to
Trinity a waiver of set-off, in form and substance acceptable to
Trinity, if required by Trinity at any time hereafter; (vi)
Trinity is requested or required to return any collection on an
Account as a voidable preference or other transfer under the
bankruptcy laws; or (vii) any other circumstance shall occur with
respect to any Account which shall impair the collection thereof;
Trinity may thereupon, or at its option at any time thereafter,
charge said Account back to Client and Client shall repurchase
said Account from Trinity, without recourse, for a sum equal to
the amount paid to Client by Trinity therefore, plus the
Servicing Fee and applicable interest expense thereon calculated
at 2.0% per month or at the highest rate allowed by law from such
due date until paid in full, at Trinity's sole discretion.
Client hereby exonerates Trinity for, and agrees to indemnify,
defend and hold Trinity, its officers, directors, employees,
attorneys, accountants and agents harmless from and against, any
and all claims, demands, charges, expenses, including attorneys'
fees, damages, actions, and causes of action, whether at law or
in equity, now or hereafter existing, and howsoever arising, and
in connection with the past, present or future actions of Client,
Trinity or their agents in the administration, prosecution or
collection of the Accounts or the Collateral, or howsoever
related to or otherwise arising or alleged to arise, whether by
virtue of Trinity's interest in the Accounts acquired pursuant to
this Agreement or otherwise.
5. Collateral. To secure all of the present and future
obligations and indebtedness of Client to Trinity under this
Agreement, any other agreement now or hereafter existing between
Client and Trinity, or otherwise howsoever arising or incurred,
regardless whether direct or indirect, absolute or contingent,
arising by operation of law or by agreement, Client hereby
irrevocably and unconditionally grants and gives to Trinity a
general and continuing first and senior lien and security
interest in and to all accounts and invoices and their proceeds
purchased by Trinity pursuant to this Agreement, and a general
lien in Client's other assets including, but not limited to, all
instruments, documents, chattel paper, general intangibles,
inventory, goods, equipment, and fixtures which are now existing
and owned by Client and in all which will hereafter arise or be
acquired by Client; together with all other grants and pledges of
security heretofore or hereafter given; and in all reserves,
funds, moneys, property, goods, accounts, instruments, documents,
chattel paper and general intangibles now existing and hereafter
arising, in which Client now has or hereafter acquires any
interest whatsoever and which are or come into the possession of
Trinity or are or may hereafter be due or payable to Client by
Trinity; in all proceeds of all of the foregoing; and in all
books and records evidencing or pertaining, in whole or in part,
to any of the foregoing (all of the foregoing herein collectively
referred to as the "Collateral"). Client shall execute and
deliver to Trinity such Uniform Commercial Code financing
statements in form and substance required by Trinity, as Trinity
shall require to perfect and maintain Trinity's first priority
security interest in the Collateral. Notwithstanding anything to
the contrary in this Agreement, Trinity hereby agrees to waive
any of its security interest or subordinate its first lien
security interest, at Client's request, on certain specific
equipment to be purchased by Client and sold to one of Client's
account debtors in the future from IBM with defined serial
numbers and related proceeds thereof ("IBM Equipment") to IBM
Credit Corporation to permit Client or its account debtor to
receive certain Purchase Money Security Interest financing from
IBM Credit Corporation in the future on said IBM Equipment,
provided that there are no advances outstanding against said
specific IBM Equipment or any Accounts relating to said IBM
Equipment from Trinity.
6. POWER OF ATTORNEY. The Client appoints Trinity as its
attorney-in-fact to receive, open, and dispose of all mail
addressed to the Client pertaining to Accounts; to endorse the
Client's name upon any notes, acceptances, checks, drafts, money
orders, and other evidences of payment of Accounts that may come
into Trinity's possession, and to deposit or otherwise collect
the same; and to do all other acts and things necessary to carry
out the terms of this Agreement including, without limitation,
endorsing or executing UCC financing statements, bills of sale,
invoices or any other documents necessary to protect Trinity's
rights and security interests in the Collateral. This power,
being coupled with an interest, is irrevocable while any Account
shall remain unpaid.
7. Guaranty. The Undersigned, if more than one, jointly and
severally, guarantor(s) is engaged in business as a corporate
affiliate or subsidiary or owner, principal or officer in
whatsoever form desiring to induce Trinity, at its option, to
enter into this Agreement and purchase receivables or to extend
financial accommodation to the Client (consideration benefit to
the guarantor), shall hereby irrevocably and unconditionally,
guaranty all of the obligations and indebtedness of Client to
Trinity under this Agreement or otherwise howsoever arising,
pursuant to the Guaranty and Corporate Guaranty attached as
Exhibit A and Exhibit B hereto. Guarantor(s) hereby specifically
agrees and acknowledges that his (her) liabilities to Trinity
pursuant to the Guaranty will not be affected or impaired by any
failure, neglect or omission of Trinity to protect in any manner
the collection of Advances or other indebtedness of Client to
Trinity or the security given therefore.
8. Defaults and Remedies. The occurrence of any one or more of
the following events, which is not cured within 15 days of notice
thereof by Trinity to Client, shall constitute a default by
Client hereunder:
a. If any representation or warranty or any other statement of
fact contained herein or in any writing, certificate, report or
statement at any time furnished to Trinity in connection with
this Agreement by Client or its agents shall prove to be false or
misleading;
b. The failure to perform any provision or breach of any
covenant, warranty, representation or agreement of this
Agreement, or any other agreement with Trinity or any person(s)
or creditor(s) now existing or hereafter arising, including
supplements or amendments thereto, or if any such instrument,
document or agreement shall terminate or become void or
unenforceable by operation of law or otherwise;
c. The failure of Client to pay any moneys or other
indebtedness or perform any obligation now or hereafter owing to
Trinity under this Agreement or otherwise when due; or
d. If Client or any Guarantor (i) files a petition in
bankruptcy or for approval of a plan of reorganization under the
bankruptcy laws, or makes an admission seeking the relief therein
provided, or any such proceeding is commenced against Client;
(ii) is unable or admits in writing its inability to pay its
debts as they become due; (iii) makes an assignment for the
benefit of its creditors; (iv) has any of its certificates of
authority or licenses revoked or any action brought against it to
revoke the same or to rehabilitate or liquidate its business,
attach or seize its assets or enjoin it from conducting its
business; (v) has a receiver, trustee, administrator, liquidator
or other person appointed, voluntarily or otherwise, for its
business, affairs or property; (vi) is adjudicated a bankrupt;
(vii) suspends its business; (vii) permits a judgment to be
obtained against it which is not promptly paid; (ix) becomes
insolvent; (x) has in Trinity's judgment, an adverse change in
financial condition, business or affairs; (xi) fails to pay or
perform any obligation how or hereafter owing by Client to
Trinity; or (xii) violates any law, statute, regulation, judgment
or order now or hereafter applicable to it, its business or
assets.
Should any one or more of the above defined defaults occur,
Client hereby agrees that Trinity may, at its option, without
notice or demand, terminate this Agreement; notify the debtors on
Accounts that all payments to be made thereunder shall be made to
Trinity as the owner thereof; charge back the Accounts to Client,
and Client shall repurchase the Accounts from Trinity, without
recourse, for a sum equal to the gross amount thereof plus
factoring commissions thereon; exercise any one or more of the
rights and remedies accruing to a secured party under the Uniform
Commercial Code; enter, with or without process of law, any
premises where the Accounts or any other Collateral of Trinity
hereunder, and records relating thereto, is or may be located,
and without charge or liability to Trinity therefore, seize all
of the same; and/or accelerate and fix any or all of Client's
obligations and indebtedness to Trinity, whether fixed or
contingent, direct or indirect, all of which shall thereupon be
immediately due and payable with interest thereon from the date
due and payable through the date paid at the rate of 2.0% per
month or at the highest rate allowed by law from such due date
until paid in full, at Trinity's sole discretion. Client shall
remain liable to Trinity for any deficiency.
If any default by Client shall occur hereunder, the damages which
Trinity shall be entitled to recover from Client as a result
thereof shall include all reasonable attorney's fees, court costs
and all other expenses which may be expended or incurred by
Trinity to obtain or enforce payment of any of the Accounts, or
in the prosecution or defense of any action or concerning any
matter growing out of or connected with this Agreement, the
Accounts or the Collateral.
The waiver by Trinity of any default hereunder shall not be
construed or act as a waiver of any subsequent default. The
failure or delay of Trinity to exercise any right, power or
remedy shall not be construed as a waiver thereof, but all
rights, powers and remedies shall continue in full force and
effect until all Accounts, together with all charges,
commissions, debts and liabilities of Client to Trinity shall
have been fully paid, and all rights, powers and remedies herein
or in any other instrument provided are cumulative and none is
exclusive.
9. Term. This Agreement shall continue in effect until July 15,
1999 or unless terminated by Client by giving ten (10) days prior
written notice to Trinity. Trinity's rights and remedies
hereunder shall continue in full force and effect until all of
Client's obligations and indebtedness to Trinity shall be
irrevocably, unconditionally and finally paid to Trinity.
10. Binding Effect: Governing Law. This Agreement when executed
by Client and Trinity shall become effective and binding upon the
successors and assigns of Client and Trinity. This Agreement
shall not be assigned by Client. No modification or waiver of any
provision of this Agreement shall be effective unless in writing.
Client shall pay and/or reimburse Trinity for all costs, fees and
expenses, including, without limitation, attorney's fees, now or
hereafter incurred by Trinity in connection with this Agreement.
This Agreement, as the same may be amended and supplemented from
time to time, shall be governed in all respects, solely at
Trinity's discretion, by the laws of and the decisions of the
courts of the States of Illinois or Oklahoma, where Trinity
maintains offices; or the law of the situs of the collateral. All
actions with respect to this Agreement shall be maintained in
courts situated in the States of Illinois or Oklahoma, in
Trinity's sole discretion. TRINITY AND CLIENT EACH HEREBY WAIVE
THE RIGHT TO TRIAL BY JURY.
Client warrants and represents to Trinity that Client has read
this agreement in its entirety prior to signing and that prior to
signing this agreement, all blanks were filled in (except
Trinity's acceptance) and all alterations of this form agreement
were initialed by Client.
In Witness Whereof, Client and Trinity have caused this Agreement
to be duly executed by their respective officers "hereunto duly
authorized, all as of the day and year first above written.
Client: Applied Intelligence Group, Inc., an Oklahoma Corporation
By: /s/ Robert L. Barcum
Name:Robert L. Barcum, its Chairman of the Board, President and Chief
Executive Officer and as Guarantor
By: /s/ Robert N. Baker
Name:Robert N. B Baker, its Vice President
and as Guarantor
By: /s/ David North
Name:David North, its Vice President
ijob, Inc., an Oklahoma corporation (Tax ID Number 731518715) as
Guarantor
By: /s/ David Mitchell
Name:David Mitchell
Title:President
Accepted this 18th day of March, 1998
Trinity Capital, Inc. (as Secured Party)
By: /s/ William H. Hatamyar
Name:William H. Hatamyar, President
Exhibit 10.46
IBM Credit Corporation
AGREEMENT FOR WHOLESALE FINANCING
(SECURITY AGREEMENT)
TO: IBM CREDIT CORPORATION DATE: Jan 28, 1998
In the course of our business, we acquire inventory and
want you to finance our purchase of such inventory under the
following terms and conditions:
1. You may in your sole discretion from time to time decide
the amount of credit you extend to us, notwithstanding any
prior course of conduct between us. You may combine all of your
advances to make one debt owed by us.
2. You may in your sole discretion decide the amount of
funds, if any, you will advance on any inventory we may seek to
acquire. We agree that any decision to advance funds on any
inventory will not be binding on you until such time as the
funds are actually advanced.
3. All financing provided by you to us will be used
exclusively for the acquisition of inventory for which you have
approved us to receive financing pursuant to the terms of this
Agreement (the "Approved Inventory"). From time to time, you
will identify such trademarks and tradenames to us in writing.
When you advance funds, you may send us a Statement of
Transaction or other statement if you choose. If you do, we will
have acknowledged the debt to be an account stated and we will
have agreed to the terms of the financing programs
identified on such statement, unless we notify you in writing of
any question or objection within seven (7) days after it is
mailed to us.
4. To secure payment of all of our current and future debts
to you whether under this Agreement, any guaranty that we now
or hereafter execute, or any other agreement between us,
whether direct or contingent, we grant you a security interest in
all of our inventory, equipment, fixtures, accounts,
contract rights, chattel paper, instruments, reserves,
documents of title, deposit accounts and general intangibles,
whether now owned or hereafter acquired, and all attachments,
accessories, accessions, substitutions and/or replacements
thereto and all proceeds thereof. All of the above assets are
defined pursuant to the provisions of Article 9 of the Uniform
Commercial Code and are hereinafter collectively referred to as
the "Goods". This security interest is also granted to secure our
debts to all of your affiliates. We will hold all of the Goods
financed by you, and the proceeds thereof, in trust for you
and we will immediately account for and remit directly to you
all such proceeds when payment is required under the terms of our
financing program with you. You may directly collect any amount
owed to us with respect to the Goods and credit us with all
sums received by you. Your title, lien or security interest will
not be impaired by any payments we make to the seller or anyone
else or by our failure or refusal to account to you for proceeds.
5. Our principal place of business is located at: 13800
Benson Road, Edmond, Oklahoma, Oklahoma 73013, and we
represent that our business is conducted
as a______ SOLE PROPRIETORSHIP, ________PARTNERSHIP,
__XXX_____CORPORATION (check applicable term). We will notify
you immediately of any change in our identity, name, form of
ownership or management, and of any change in our principal
place of business, or any additions or discontinuances of
other business locations. The Goods will be kept at our
principal place of business. We will immediately notify you if
any of the Goods are kept at any other address. We and our
predecessors have done business during the last six (6) months
only under the following names:_Applied Intelligence Group,
Inc._. This paragraph is for informational
purposes only, and is not in any manner intended to limit the
extent of your security interest in the Goods.
6. We promise that the Goods are and will remain free from
all claims and liens superior to yours unless otherwise agreed to
by you, and that we will defend the Goods against all other
claims and demands. We will not rent, lease, lend,
demonstrate, pledge, transfer or secrete any of the Goods or
use any of the Goods for any purpose other than exhibition and
sale to buyers in the ordinary course of business, without
your prior written consent. We will execute all documents
you may request to confirm or perfect your security interest in
the Goods. We warrant and represent that we are not in default
in the payment of any principal, interest or other charges
relating to any indebtedness owed to any third party, and no
event has occurred under the terms of any agreement, document,
promissory note or other instrument, which with or without
the passage of time and/or the giving of notice
constitutes or would constitute an event of default thereunder.
We will promptly provide our year-end financial statement to you
after our fiscal year ends and, if requested by you, we will also
promptly provide our financial statement to you after each
calendar quarter. Each financial statement that we submit to you,
is and will be correct and will accurately represent our
financial condition. We further acknowledge your reliance on the
truthfulness and accuracy of each financial statement that we
submit to you in your extension of various financial
accommodations to us.
7. We will pay all taxes, license fees, assessments and
charges on the Goods when due. We will immediately notify you
of any loss, theft, or destruction of or damage to any of the
Goods. We will be responsible for any loss, theft or
destruction of Goods. We will keep the Goods insured for their
full insurable value against loss or damage under an "all risk"
insurance policy. We will obtain insurance under such terms
and in amounts as you may specify, from time to time, with
companies acceptable to you, with a loss-payee or mortgagee
clause payable to you to the extent of any loss to the
Goods and containing a waiver of all defenses against us that
is acceptable to you. We agree to provide you with written
evidence of the required insurance coverage and loss-payee or
mortgagee clause. We assign to you all amounts owed to us under
any insurance policy, and we direct any insurance company to
make payment directly to you to be applied to the unpaid debt
owed you. We further grant you an irrevocable power of attorney
to endorse any checks or drafts and sign and file all of the
necessary papers, forms and documents to initiate and settle
any insurance claims with respect to the Goods. If we fail to
pay any of the above-referenced costs, charges, or insurance
premiums, or if we fail to insure the Goods, you may pay such
costs, charges and insurance premiums, and the amounts paid will
be considered an additional debt owed by us to you.
8. You have the right to enter upon our premises from time
to time, as you in your sole discretion may determine for your
sole benefit, and all without any advance notice to us, to:
examine the Goods; appraise them as security; verify their
condition and non-use; verify that all Goods have been properly
accounted for; verify that we have complied with all terms and
provisions of this Agreement; and assess, examine, and make
copies of our books and records. Any collection by you of any
amounts we owe under our financing programs with you at or
during your examination of the Goods does not relieve us of our
continuing obligation to pay our indebtedness owed to you in
accordance with the terms of such financing programs.
9. We agree to immediately pay you the full amount of the
principal balance owed you on each item of inventory financed by
you at the time such inventory is sold, lost, stolen,
destroyed, or damaged, whichever occurs first, unless you
have agreed in writing to provide financing to us on other terms.
We also agree to provide you, upon your request, an inventory
report which describes all the Approved Inventory in our
possession (excluding any inventory financed by you under the
Demonstration and Training Equipment Financing Option and the
Rental Equipment Financing Option). Regardless of the terms of
any scheduled payment financing program with you, if you
determine, after conducting an inspection of all of our
inventory, that the current outstanding indebtedness owed
by us to you exceeds the aggregate wholesale invoice price of
the Approved Inventory in our possession, we agree to immediately
pay to you an amount equal to the difference between such
outstanding indebtedness and the aggregate wholesale invoice
price of such inventory. We will make all payments to you at
your appropriate branch office. Any checks or other
instruments delivered to you to be applied against our
outstanding obligations will constitute conditional payment until
the funds represented by such instruments are actually received
by you. You may apply payments to reduce finance charges
first and then principal, irrespective of our instructions.
Further, you may apply principal payments to the oldest
(earliest) invoice for the inventory financed by you, but,
in any case, all principal payments will first be applied to
such inventory which is sold, lost, stolen, destroyed, damaged,
or otherwise disposed of. If we sign any instrument for
the amount of credit extended, it will be evidence of our
obligation to pay and will not be payment. Any discount,
rebate, bonus, or credit for the inventory granted to us by any
third party will not, in any way, reduce the debt we owe you,
until you have received payment in cash.
10. During each year or part of a year in which you have
extended credit to us, we will pay you finance charges on the
total amount of credit extended to us in the amount agreed to
between us from time to time. The period, during which any
third party provides a finance charge subsidy for us, will
be included in the calculation of the annual percentage rate of
the finance charges. Such finance charges may be applied by you
to cover any amounts expended for your: appraisal and
examination of the Goods; maintenance of facilities for
payment; assistance in support of our retail sales; your
commitments to manufacturers or distributors to finance shipments
of Goods to us; recording and filing fees; expenses incurred
in obtaining additional collateral or security; and any
costs and expenses incurred by you arising out of the financing
you extend to us. We also agree to pay you additional charges
which will include: late payment fees; flat charges; charges
for receiving NSF checks from us; renewal charges; and any other
charges applicable to our financing program with you. Unless we
hereafter otherwise agree in writing, the finance charge and
additional charges agreed upon will be your applicable finance
charge and additional charges for the class of Goods involved,
prevailing from time to time at your principal place of business.
You will send us, at monthly or other intervals, a statement of
all charges due on our account with you. We will have
acknowledged the charges due, as indicated on the statement, to
be an account stated, unless we object in writing to you within
seven (7) days after it is mailed to us. This statement may
be adjusted by you at any time to conform to applicable law and
this Agreement. If any manufacturer or distributor fails to
provide a finance charge subsidy for us, as agreed, we will
be responsible for and pay to you all finance charges billed to
our account.
11. Any of the following events will constitute a default by
us under this Agreement: we breach any of the terms, warranties
or representations contained in this Agreement or in any other
agreements between us or between us and any of your affiliates;
any guarantor of our indebtedness to you under this
Agreement or any other agreements breaches any of the terms,
warranties or representations contained in any guaranty or other
agreements between any guarantor and you; any representation,
statement, report or certificate made or delivered by us
or any of our representatives, employees or agents or by any
guarantor to you is not true and correct; we fail to pay any of
the liabilities or indebtedness owed to you or any of your
affiliates when due and payable under this Agreement or under any
other agreements between us or between us and any of your
affiliates; you determine that you are insecure with respect to
any of the Goods or the payment of our debt owed to you; we
abandon the Goods or any part thereof; we or any guarantor become
in default in the payment of any indebtedness owed to any third
party; a judgement issues on any money demand against us or
any guarantor; an attachment, sale or seizure is issued against
us or any of the Goods; any part of the Goods are seized or
taken in execution; the death of the undersigned if the
business is operated as a sole proprietorship or partnership,
or the death of any guarantor; we cease or suspend our business;
we or any guarantor make a general assignment for the
benefit of creditors; we or any guarantor become insolvent or
voluntarily or involuntarily become subject to the Federal
Bankruptcy Code, state insolvency laws or any act for the
benefit of creditors; any receiver is appointed for any of our
or any guarantor's assets, or any guaranty pertaining to
our indebtedness to you is terminated for any reason
whatsoever; we lose any franchise, permission, license or right
to sell or deal in any Goods which you finance; we or any
guarantor misrepresent our respective financial condition or
organizational structure; or you determine, in your sole
discretion, that the Goods, any other collateral given to you to
secure our indebtedness to you, or our or any guarantor's net
worth has decreased in value, and we have been unable, within the
time period prescribed by you, to either provide you with
additional collateral in a form and substance satisfactory to you
or reduce our total indebtedness by an amount sufficient to
satisfy you. In the event of a default:
(a) You may, at any time at your election, without notice or
demand to us do any one or more of the following: declare
all or any part of the indebtedness we owe you
immediately due and payable, together with all court costs
and all costs and expenses of your repossession and
collection activity, including, but not limited to, all
attorney's fees; exercise any or all rights of a secured
party under applicable law; and/or cease making any
further financial accommodations or extending any additional
credit to us. All of your rights and remedies are
cumulative.
(b) We will segregate, hold and keep the Goods in trust, in
good order and repair, only for your benefit, and we
will not exhibit, transfer, sell, further encumber, otherwise
dispose of or use for any other purpose whatsoever any of the
Goods.
(c) Upon your oral or written demand, we will immediately
deliver the Goods to you, in good order and repair, at a
place specified by you, together with all related documents;
or you may, in your sole discretion and without notice or
demand to us, take immediate possession of the Goods,
together with all related documents.
(d) We waive and release: any claims and causes of action
which we may now or ever have against you as a direct or
indirect result of any possession, repossession, collection
or sale by you of any of the Goods and the benefit of all
valuation, appraisal and exemption laws. If you seek to take
possession of any of the Goods by court process, we
irrevocably waive any notice, bonds, surety and security
relating thereto required by any statute, court rule or
otherwise.
(e) We appoint you or any person you may delegate as our duly
authorized Attorney-In-Fact to do, in your sole
discretion, any of the following: endorse our name on any
notes, checks, drafts or other forms of exchange received as
payment on any Goods for deposit in your account;
sell, assign, transfer, negotiate, demand, collect,
receive, settle, extend or renew any amounts due on any of
the Goods; and exercise rights we have in the Goods.
If we bring any action or assert any claim against you which
arises out of this Agreement, any other agreement or any of
our business dealings, in which we do not prevail, we agree to
pay you all costs and expenses of your defense of such action or
claim including, but not limited to, all attorney's fees. If
you fail to exercise any of your rights or remedies under this
Agreement, such failure will in no way or manner waive any of
your rights or remedies as to any past, current or future
default.
12. We agree that if you conduct a private sale of any Goods
by soliciting bids from ten (10) or more other dealers or
distributors in the type of Goods repossessed by or returned to
you hereunder, any sale by you of such property in bulk or in
parcels within 120 days of (a) your taking physical possession
and control of such Goods or (b) when you are otherwise
authorized to sell such Goods, whichever occurs last, to the
bidder submitting the highest cash bid therefor, will be deemed
to be a commercially reasonable means of disposing of the
same. We agree that commercially reasonable notice of any public
or private sale will be deemed given to us if you send us a
notice of sale at least seven (7) days prior to the date of any
public sale or the time after which a private sale will be made.
If you dispose of any such Goods other than as herein
contemplated, the commercial reasonableness of such sale will
be determined in accordance with the provisions of the
Uniform Commercial Code as adopted by the state whose laws govern
this Agreement.
We agree that you do not warrant the Goods. We will pay you in
full even if the Goods are defective or fail to conform to any
warranties extended by any third party. Our obligations to
you will not be affected by any dispute we may have with
any third party. We will not assert against you any claim or
defense we may have against any third party. We will indemnify
and hold you harmless against any claims or defenses asserted
by any buyer of the Goods by reason of: the condition
of any Goods; any representations made about the Goods; or for
any and all other reasons whatsoever.
13. We grant to you a power of attorney authorizing any of
your representatives to: execute or endorse on our behalf any
documents, financing statements and instruments evidencing our
obligations to you; supply any omitted information and
correct errors in any documents or other instruments executed by
or for us; do any and every act which we are obligated to perform
under this Agreement; and do any other things necessary to
preserve and protect the Goods and your rights and security
interest in the Goods. We further authorize you to provide to
any third party any credit, financial or other information on us
that is in your possession.
14. Time is of the essence in this Agreement. This Agreement
will be effective from the date of its acceptance at your branch
office. We acknowledge receipt of a true copy and waive
notice of your acceptance of it. If you commit to advance
funds under this Agreement, you will have accepted it. This
Agreement will remain in force until one of us gives notice to
the other that it is terminated. If we terminate this
Agreement, you may declare all or any part of the indebtedness we
owe you due and payable immediately. If this Agreement is
terminated, we will not be relieved from any obligation to you
arising out of your advances or commitments made before the
effective date of termination. Your rights under this
Agreement and your security interest in present and future Goods
will remain valid and enforceable until all our debts to you are
paid in full. We agree that we cannot assign this Agreement
without your prior written consent. This Agreement will
protect and bind your and our respective heirs, representatives,
successors and assigns. It can be varied only by a document
signed by your and our authorized representatives. If
any provision of this Agreement or its application is
invalid or unenforceable, the remainder of this Agreement will
not be impaired or affected and will remain binding and
enforceable. If we are a corporation, this Agreement is executed
with the authority of our Board of Directors, and with
shareholder approval, if required by the law. All notices you
send to us will be sufficiently given if mailed or delivered
to us at our address shown in paragraph 5.
15. The laws of the State of ___Illinois__________ will
govern this Agreement. We agree that venue for any lawsuit will
be in the State or Federal Court within the county, parish, or
district where your branch office, who provides the financial
accommodations, is located. We hereby waive any right to
change the venue of any action brought against us by you.
16. If we have previously executed any security agreements
relating to the Goods with you, we agree that this Agreement is
intended only to amend and supplement such written agreements,
and will not be deemed to be a novation or termination
of such written agreements. In the event the terms of this
Agreement conflict with the terms of any prior security agreement
that we previously executed with you, the terms of this
Agreement will control in determining the agreement between us.
17. We waive all exemptions and homestead laws to the maximum
extent permitted by law. We waive any statutory right to
notice or hearing prior to your attachment, repossession or
seizure of the Goods. We further waive any and all rights of set-
off we may have against you. We agree that any proceeding
in which we, or you or any of your affiliates, or our
assigns are parties, as to all matters and things arising
directly or indirectly out of this Agreement, or the relations
among the parties listed in this paragraph will be tried in a
court of competent jurisdiction by a judge without a jury. We
hereby waive any right to a jury trial in any such proceeding.
ATTEST:
/s/ Robert N. Baker Applied Intelligence Group, Inc.
Secretary Customer
Print Name: Robert N. Baker By: /s/ John M.Duck
Print Name: John M.Duck
(CORPORATE SEAL)
Title: Vice President &
Chief Financial Officer
SECRETARY'S CERTIFICATE OF RESOLUTION
I certify that I am the Secretary and the official custodian
of certain records, including the certificate of incorporation,
charter, by-laws and minutes of the meeting of the Board of
Directors of the corporation named below, and that the
following is a true, accurate and compared extract from the
minutes of the Board of Directors of the corporation adopted at a
special meeting thereof held on due notice, at which meeting
there was present a quorum authorized to transact the business
described below, and that the proceedings of the meeting were in
accordance with the certificate of incorporation, charter and by-
laws of the corporation, and that they have not been revoked,
annulled or amended in any manner whatsoever.
Upon motion duly made and seconded, the following resolution
was unanimously adopted after full discussion: "RESOLVED, That
the several officers, directors and agents of this corporation,
or any one or more of them, are hereby authorized and empowered
on behalf of this corporation: to obtain financing from IBM
Credit Corporation ("IBM Credit") in such amounts and on such
terms as such officers, directors or agents deem proper; to enter
into security and other agreements with IBM Credit relating to
the terms upon which financing may be obtained and security to be
furnished by this corporation therefor; from time to time to
supplement or amend any such agreements; and from time to time to
pledge, assign, guaranty, mortgage, grant security interest in
and, otherwise transfer to IBM Credit as collateral security for
any obligations of this corporation to IBM Credit and its
affiliated companies, whenever and however arising, any assets
of this corporation, whether now owned or hereafter acquired;
hereby ratifying, approving and confirming all that any of said
officers, directors or agents have done or may do in the
premises."
IN WITNESS WHEREOF, I have executed and affixed the seal of
the corporation on the date stated below.
Dated: January 28,1998
/s/ Robert N.Baker
Secretary
Applied Intelligence Group, Inc.
Corporate Name
Exhibit 10.47
IBM Credit Corporation
ADDENDUM TO AGREEMENT FOR WHOLESALE FINANCING
LARGE SALE FINANCING OPTION
This Addendum is hereby made to the Agreement for Wholesale
Financing (hereinafter referred to as "Agreement") executed on
the 28th day of January, 1998, between IBM Credit Corporation and
Applied Intelligence Group, Inc..
The following provision is hereby incorporated into the
Agreement as if fully set forth therein:
"You may from time to time at your discretion extend financing
to us under the terms of the Large Sale Financing Option
(hereinafter referred to as "LSFO") and its three optional
plans which you may offer to us from time to time. The
financing to be extended by you will be based on Approved
Inventory sold to a particular customer or accounts due from a
particular customer or both (hereinafter referred to as
"Collateral"). Such financing will be subject to the following
terms and conditions:
a. You may in your sole discretion determine the amount of
financing which you elect to extend to us based on the
Collateral;
b. You may, in your sole discretion, apply, in whole or in
part, the proceeds of any accounts used as Collateral to any
amount which we owe to you under the terms of any other
financing programs between us, including any other financing
transactions under the LSFO.
c. We will pay you the full amount which we owe you upon 1)
the collection of the Account or within ninety (90) days
from the date of the advance made by you on the Collateral,
whichever occurs first when we are using the LSFO/Product
plan; or 2) within sixty (60) days from the date of the
advance made by you on the Collateral when we are using the
LSFO/Accounts Receivable or LSFO/Cash plans; plus for items
1) and 2) we will have an additional thirty (30) days to pay
you the full amount when the customer is a government
organization and we use the LSFO/Extension plan;
d. We will pay you all charges which are due under the terms
of a LSFO plan;
e. We will provide you the purchase order, invoice, proof of
delivery and the acceptance certificate (only upon request)
for the goods and services sold by us to the customer who is
obligated to pay for the inventory;
f. Upon your request, we will provide you any credit
information required by you to evaluate the credit of such
customer, and to determine your advance rate for the
Collateral;
g. We will obtain a Subordination Agreement, in a form
deemed acceptable to you, from any of our creditors that you
may request to provide you a priority security interest in
(i) all of our Approved Inventory; (ii) accounts used as
Collateral; and (iii) all proceeds thereof;
h. We will assign to you each account used as Collateral by
you under the LSFO and will execute an Assignment in a form
deemed acceptable to you. You may, in your sole discretion,
require account debtors to agree to make payments in respect
of such account directly to you. Upon your request, we will
execute and deliver such further instruments and documents
and take such further action as you may request to preserve
or obtain the full benefits of your security interest in the
Collateral.
i. You may at any time and from time to time communicate
with account debtors on the accounts used as Collateral to
verify with them to your satisfaction the existence, amount
and terms of any such accounts.
The Agreement is hereby amended by deleting Paragraph 4 in its
entirety and restating as follows:
"To secure the payment of all of our current and future debts to
you whether under this Agreement, any guaranty that we now or
hereafter execute, or any other agreement between us, whether
direct or contingent, we grant you a security interest in all of
our inventory, equipment, fixtures, accounts, contract rights,
chattel paper, instruments, reserves, documents of title, deposit
accounts, and general intangibles, whether now owned or hereafter
acquired, and all attachments, accessories, accessions,
substitutions and/or replacements thereto and all proceeds
thereof. All of the above assets are defined pursuant to the
provisions of Article 9 of the Uniform Commercial Code and are
hereinafter collectively referred to as the "Goods". This
security interest is also granted to secure our debts to all of
your affiliates. We will hold all of the Goods financed by you,
and the proceeds thereof, in trust for you and we will
immediately account for and remit directly to you all such
proceeds when payment is required under the terms of our
financing program with you. You may directly collect any amount
owed to us with respect to the Goods and credit us with all sums
received by you. Your title, lien or security interest will not
be impaired by any payments we make to the seller or anyone else
or by our failure or refusal to account to you for proceeds."
Except as otherwise provided, the provisions of the
Agreement will remain unchanged and will continue to be in full
force and effect.
IN WITNESS WHEREOF, the duly authorized representatives of
the parties hereto have executed this Addendum on this 28th day
of January, 1998.
IBM Credit Corporation Applied Intelligence Group,Inc.
Customer
By: ______________________ By: /s/ John M. Duck
Print Name: _______________ Print Name: John M. Duck
Title: ____________________ Title: Vice President & CFO
ATTEST: /s/ Robert N. Baker
Secretary
Print Name: Robert N. Baker
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE BALANCE SHEET
FOR MARCH 31, 1998 AND THE STATEMENT OF OPERATIONS FOR THE THREE MONTHS
ENDED MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 116,134
<SECURITIES> 0
<RECEIVABLES> 1,750,346
<ALLOWANCES> 1,455
<INVENTORY> 10,532
<CURRENT-ASSETS> 2,095,720
<PP&E> 3,247,730
<DEPRECIATION> 1,893,273
<TOTAL-ASSETS> 6,272,587
<CURRENT-LIABILITIES> 2,201,910
<BONDS> 0
0
0
<COMMON> 2,731
<OTHER-SE> 2,944,112
<TOTAL-LIABILITY-AND-EQUITY> 6,272,587
<SALES> 0
<TOTAL-REVENUES> 3,098,404
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,971,549
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 36,116
<INCOME-PRETAX> 90,739
<INCOME-TAX> 34,481
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 56,258
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
