<PAGE>
U.S. Securities and 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 June 30, 1997
-------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
------------ -------------
Commission file number 0-22464
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KOALA CORPORATION
------------------------------------
(Exact name of small business issuer
as specified in its charter)
Colorado 84-1238908
- ------------------------------ ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
11600 E 53rd Ave. Unit D, Denver, CO 80239
------------------------------------------
(Address of principal executive offices)
(303) 574-1000
-----------------
(Issuer's telephone number)
------------------------------------------------------
(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the 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......
The number of shares outstanding of the issuer's common stock, $.10 par value as
of August 1, 1997 was 2,481,260 shares.
Transitional Small Business Disclosure Format (Check one):
Yes..... No...X...
1
<PAGE>
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
KOALA CORPORATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED DECEMBER 31,
JUNE 30, 1997 1996
------------- -----------
<S> <C> <C>
ASSETS (Unaudited)
CURRENT ASSETS
Cash $ 253,776 $ 3,442,601
Accounts receivable, net of allowance
for doubtful accounts 2,151,665 1,656,515
Refundable income taxes 0 338,200
Inventory 1,171,450 443,680
Prepaid expenses 304,861 82,460
Deferred income taxes 10,900 10,900
----------- -----------
Total current assets 3,892,652 5,974,356
----------- -----------
EQUIPMENT, NET OF ACCUMULATED DEPRECIATION 1,107,405 697,789
----------- -----------
OTHER ASSETS
Intangibles and patents, net of accumulated
amortization 8,156,928 3,679,057
----------- -----------
Total other assets 8,156,928 3,679,057
----------- -----------
$13,156,985 $10,351,202
=========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
LIABILITIES
CURRENT LIABILITIES
Accounts payable $ 772,139 $ 273,511
Accrued expenses 535,197 56,921
Accrued income taxes 70,788 0
----------- -----------
Total current liabilities 1,378,124 330,432
----------- -----------
LONG-TERM LIABILITIES 0 0
----------- -----------
DEFERRED INCOME TAXES 242,200 242,200
----------- -----------
SHAREHOLDERS' EQUITY
Preferred stock, no par value, authorized 1,000,000
shares; none issued and outstanding 0 0
Common stock, $.10 par value, authorized 10,000,000
shares; issued and outstanding 2,481,260 248,126 248,126
Common stock to be issued, 40,000 shares 4,000 0
Additional paid in capital 5,247,884 4,651,884
Retained earnings 6,036,651 4,878,560
----------- -----------
Total shareholders' equity 11,536,661 9,778,570
----------- -----------
$13,156,985 $10,351,202
=========== ===========
</TABLE>
See notes to consolidated financial statements
2
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KOALA CORPORATION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME CONSOLIDATED CONSOLIDATED
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1997 1996 1997 1996
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
NET SALES $ 3,040,822 $ 2,435,219 $ 5,291,994 $ 4,306,025
Cost of sales 1,191,429 902,362 1,914,543 1,624,941
----------- ----------- ----------- -----------
Gross profit 1,849,393 1,532,857 3,377,451 2,681,084
----------- ----------- ----------- -----------
Selling, general and administrative expenses 876,776 696,444 1,597,562 1,189,964
----------- ----------- ----------- -----------
OPERATING INCOME 972,617 836,413 1,779,889 1,491,120
----------- ----------- ----------- -----------
Other (income) expenses (36,875) (26,438) (78,227) (66,959)
Amortization of intangibles and patents 36,313 27,687 62,626 49,299
----------- ----------- ----------- -----------
Income before provision
for income taxes 973,179 835,164 1,795,490 1,508,780
Provision for income taxes 345,478 304,835 637,399 550,705
----------- ----------- ----------- -----------
NET INCOME $ 627,701 $ 530,329 $ 1,158,091 $ 958,075
=========== =========== =========== ===========
NET INCOME PER SHARE $ 0.25 $ 0.21 $ 0.46 $ 0.37
=========== =========== =========== ===========
Weighted average shares outstanding 2,520,737 2,577,426 2,517,912 2,574,303
=========== =========== =========== ===========
</TABLE>
See notes to consolidated financial statements
3
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KOALA CORPORATION
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED
INCREASE (DECREASE) IN CASH JUNE 30,
1997 1996
----------------- -------------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,158,091 $ 958,075
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 43,026 35,484
Amortization 62,626 49,299
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable, trade (339,663) (327,101)
Refundable income taxes 338,200 0
Inventory (159,307) (571,850)
Prepaid expenses (196,441) (176,281)
Increase (decrease) in liabilities:
Accounts payable 359,392 82,399
Accrued expenses 351,266 (21,951)
Accrued income taxes 70,788 88,771
----------------- -------------------
Net cash provided by operations 1,687,978 116,845
----------------- -------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for capital expenditures (271,433) (94,118)
Payments for deposits 0 (5,791)
Purchase of Activities Unlimited, LLC 0 (500,000)
Purchase of Delta Play, Ltd., net of cash acquired (4,592,219) 0
Payments for patents and intangibles (13,151) (15,448)
----------------- -------------------
Net cash used by investing activities (4,876,803) (615,357)
----------------- -------------------
NET (DECREASE) IN CASH (3,188,825) (498,512)
Cash at beginning of period 3,442,601 2,994,130
----------------- -------------------
Cash at end of period $ 253,776 $ 2,495,618
================= ===================
</TABLE>
See notes to consolidated financial statements
4
<PAGE>
KOALA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
1. Description of business and principles of consolidation:
The Company and its subsidiaries ("the Company") are engaged in developing,
designing, manufacturing, and marketing infant and child protection products
and children's activity equipment for commercial, institutional and
recreational establishments. The consolidated financial statements include
the accounts of the Company and all subsidiaries. All significant inter-
company accounts and transactions have been eliminated in consolidation. The
operations of Delta Play, Ltd. are included in the accompanying financial
statements from June 1, 1997, the effective date of its acquisition. See note
6 below.
2. Unaudited information:
The accompanying financial statements are presented in accordance with the
requirements of Form 10-QSB and consequently do not include all of the
disclosures normally required by generally accepted accounting principles or
those normally made in the Company's annual Form 10-KSB filing. Accordingly,
the reader of this Form 10-QSB may wish to refer to the Company's 10-KSB for
the year ended December 31, 1996 for further information.
The quarterly financial information has been prepared in accordance with the
Company's customary accounting practices and has not been audited. In the
opinion of management, the information presented reflects all adjustments
necessary for a fair statement of interim results. All such adjustments are
of a normal and recurring nature. The results of operation for the interim
period ended June 30, 1997 are not necessarily indicative of the results for
a full year.
3. Inventory:
Inventories are stated at the lower of cost (first-in, first-out method) or
market. Inventory as of June 30, 1997 and December 31, 1996, consists of the
following:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
------------- -----------------
<S> <C> <C>
Raw materials and component parts $ 676,045 $ 62,879
Finished goods 495,405 380,801
---------- --------
$1,171,450 $443,680
========== ========
</TABLE>
4. Credit Facility:
The Company obtained a $2.0 million unsecured line of credit in June, 1997.
The line of credit may be used for short-term working capital needs and future
acquisitions. There are no compensating balance requirements and the credit
facility requires compliance with financial loan covenants related to debt
levels compared to annualized cash flows from operations. The credit facility
terminates on June 24, 1998. The Company had not utilized the credit facility
through June 30, 1997.
5
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KOALA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
5. Earnings per share:
Net income per share is computed based upon the weighted average number of
common shares and dilutive common equivalent shares outstanding during the
period using the treasury stock method. Dilutive common equivalent shares
consist of stock options and warrants. Fully diluted and primary earnings per
share are the same amounts for all periods presented.
In February 1997, the Financial Accounting Standards Boards issued Statement
No. 128, Earnings per Share, which is required to be adopted on December 31,
1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. For the second
quarter ended June 30, 1997 and June 30, 1996 and the six months ended on the
same dates, the impact of Statement 128 on the calculation of primary and
fully diluted earnings per share is not expected to be material.
6. Acquisition of Delta Play, Ltd.:
On June 23, 1997, the Company acquired substantially all of the assets of
Delta Play, Ltd.(Delta), a leading provider of custom indoor and outdoor
modular play systems based in Vancouver, British Columbia. The acquisition
was effective June 1, 1997 and was accounted for as a purchase. Results of
operations of Delta were included in the Company's consolidated statements of
income beginning on the effective date.
As initial consideration, the Company paid $4,159,682 cash and will issue
40,000 shares of Koala Corporation common stock valued at $600,000. In
addition, costs related to the acquisition of approximately $433,904 were
incurred. The purchase agreement also provides for additional consideration
in the form of cash payments if certain operating performance criteria are
met by Delta over the twelve month period from June 1, 1997 to May 31, 1998.
The range of additional consideration is C$900,000 (US$648,000) to
C$1,500,000 (US$1,080,000) and if minimum performance is not achieved, no
additional consideration will be payable. Any subsequent payment will be
allocated to cost in excess of the fair value of assets acquired.
7. Foreign Currency Translation:
Foreign currency transactions and financial statements of foreign
subsidiaries are translated into U.S. dollars at prevailing or current rates
respectively, except for revenue, costs and expenses which are translated at
average current rates during each reporting period. Gains and losses
resulting from foreign currency transactions are included in income
currently.
6
<PAGE>
FORWARD LOOKING STATEMENTS
This report contains forward-looking statements that describe the Company's
business and the expectations of the Company and management. These statements
are subject to certain risks and uncertainties that could cause actual results
to differ materially from those set forth. These risks and uncertainties
include, but are not limited to, the Company's reliance on the revenues from a
major product, the Koala Bear Kare(TM) Changing Station, which has generated a
substantial amount of the Company's revenues; the uncertainties associated with
the introduction of new products; management of growth, including the ability to
attract and retain qualified employees; the ability to integrate its Delta Play
acquisition and any other acquisition that the Company may make and the costs
associated with such acquisitions; dependence on Mark Betker, its chief
executive officer; substantial competition from larger companies with greater
financial and other resources than the Company; the success of its Koala Kids
marketing strategy; its dependence on suppliers for manufacture of some of its
products; currency fluctuations and other risks associated with foreign sales
and foreign operations; quarterly fluctuations in revenues, income and overhead
expense; and potential products liability risk associated with its existing and
future products.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPONENTS OF REVENUE AND EXPENSES
The Company's revenues are derived primarily from the sale of Baby Changing
Stations, disposable sanitary liners for the Baby Changing Stations, Child
Protection Seats, Infant Seat Kradles, and Booster Buddy seats which are sold
primarily to commercial, institutional, and recreational facilities such as
shopping centers, retail establishments, restaurants, sports and recreational
facilities, and other public buildings. In addition, in furtherance of the
Company's "Koala Kids" strategy discussed below, the Company acquired certain
assets of Activities Unlimited, a developer and distributor of commercial-use
children's activities products at the end of first quarter 1996 and Delta Play,
Ltd. (Delta), a leading provider of custom indoor and outdoor modular play
systems, in June 1997. It is anticipated that revenues from these companies
will reduce the Company's dependency on the sale of Baby Changing Stations.
Cost of sales consists of components manufactured for the Company and direct
labor and manufacturing overhead incurred by the Company. All major components
are manufactured by outside vendors. Direct labor and manufacturing overhead
relate to the assembly of the products. In September 1996, the Company sub-
contracted out the assembly operations for the Baby Changing Stations, Child
Protection Seats and Infant Seat Kradles.
Selling, general, and administrative expenses consist primarily of executive and
office salaries, related payroll taxes, advertising expenses, and other
miscellaneous selling expenses.
The Company's quarterly revenues and net income are subject to fluctuation based
on customer order patterns and Company shipping activity. Because of these
fluctuations, comparisons of operating results from quarter to quarter for the
current year or for comparable quarters of the prior year may be difficult.
Except as set forth below, these fluctuations are not expected to be significant
when considered on an annual basis.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RECENT ACQUISITION
In June 1997, the Company acquired substantially all of the assets of Delta for
cash and stock totaling $4,759,682. Based in Vancouver, British Columbia, Delta
and its affiliates generated operating income before taxes of approximately $1.1
million (U.S.) on sales of $4.5 million (U.S.) for its fiscal year ended March
31, 1997.
Primary customers for Delta's play systems include family entertainment centers,
quick service restaurants, shopping centers and theme parks. Delta's markets
are global in nature, with over one-half of sales occurring outside of North
America during the fiscal year ended March 31, 1997. The Delta acquisition is
intended to add to Koala's expanding umbrella of product lines under its "Koala
Kids" marketing strategy. This strategy is intended to allow Koala to target a
much broader age group within the commercial child protection and activities
market and to help further establish Koala as a leading provider of products
that help commercial organizations create "family friendly" atmospheres for
their patrons.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997 COMPARED TO THREE MONTHS ENDED JUNE 30, 1996
Sales increased 25% to $3,040,822 for the second quarter of 1997 compared to
$2,435,219 for the second quarter of 1996. Sales from Delta following the Delta
acquisition and the sales and marketing strategy implemented by the Company
contributed to the additional sales revenue for 1997. The Company continued to
increase sales and marketing efforts through focused marketing programs, and the
addition of sales personnel during 1997 and 1996.
Gross profit for the second quarter of 1997 was $1,849,393 (61% of sales)
compared with $1,532,857 (63% of sales) for the second quarter of 1996. The
gross profit percentage for the second quarter 1997 decreased from the gross
profit achieved for second quarter 1996 due to lower margins achieved on Delta's
sales as well as higher sales to distributors. These gross profit reductions
were offset somewhat by gross margin improvements from price reductions achieved
in the cost of raw materials and component parts and the change to sub-
contracted assembly in September 1996. The Company no longer maintains a
manufacturing facility for assembling its Baby Changing Stations, thus reducing
overhead costs.
Selling, general, and administrative expenses increased for the second quarter
of 1997 to $876,776 (29% of sales) from $696,444 (29% of sales) for the same
period in 1996. Sales and marketing expenses increased $263,036 for the second
quarter of 1997 compared to second quarter of 1996. These cost increases were
due to the higher level of sales, and included costs for various marketing
programs, commissions paid to manufacturers sales representatives and salaries
of the sales and marketing personnel added in the second quarter of 1997. These
costs were incurred in furtherance of the Company's sales and marketing
strategies discussed above.
General and administrative expenses decreased $82,704 for the second quarter of
1997 compared to the second quarter of 1996. The decreases in general and
administrative expenses were primarily realized from cost reductions obtained by
more efficient management of collections, accounting, and investor relations
activities.
Because the dollar amount of selling, general and administrative expenses are
relatively low, overhead expense patterns, which vary from quarter to quarter,
may cause fluctuations in total selling, general, and administrative expenses as
a percent of sales. Management expects that these fluctuations will not be
significant on an annual basis.
Net income for the second quarter of 1997 was $627,701 (21% of sales) compared
with $530,329 (22% of sales) for the second quarter of 1996. This represents an
18% increase in net income. Earnings per share for the second quarter of 1997
increased 19% compared to the second quarter of 1996. The Company believes that
the lower margins obtained from Delta's sales and the continued expenditures to
expand sales and marketing resulted in net income rising 18% over net income for
the second quarter of 1996 while sales rose 25% over that same period.
9
<PAGE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Sales increased 23% to $5,291,994 for the six months ended June 30, 1997
compared to $4,306,025 for the same period of 1996. The increased sales are the
result of sales from Delta following the Delta acquisition and continued
expenditures made to expand sales and marketing efforts.
Gross profit for the six months ended June 30, 1997 was $3,377,451 (64% of
sales) compared with $2,681,084 (62% of sales) in 1996. The Company continued
to benefit from efforts to reduce product costs during the first half of 1997.
At the same time, the savings from these product cost reductions were re-
invested in expansion of dealer/distribution markets which the Company
anticipates will result in higher sales volume at lower margins.
Selling, general, and administrative expenses for the six months ended June 30,
1997 increased to $1,597,562 (30% of sales) from $1,189,964 (28% of sales) for
the same period in 1996. Sales and marketing expenses increased by $400,984 for
the six months ended June 30, 1997. This increase is directly attributable to
the growth in sales over this period as well as the continued expansion of new
sales and marketing strategies.
General and administrative expenses increased $6,614 for the six months ended
June 30, 1997 compared to 1996. As noted above, the relatively small increase
in general and administrative expense compared to the sales increase was
primarily realized from cost reductions obtained by more efficient management of
collections, accounting, and investor relations activities.
Net income for the six months ended June 30, 1997 was $1,158,091 (22% of sales)
compared with $958,075 (22% of sales) for 1996. This represents a 21% increase
in net income. Earnings per share for the six months ended June 30, 1997
increased 24% to $0.46 per share compared to $0.37 per share for the six months
ended June 30, 1997. The percentage increase in earnings per share was higher
than the percentage increase in net income primarily as a result of a decrease
in common stock equivalents of 56,391 shares.
LIQUIDITY AND CAPITAL RESOURCES
The Company finances its business activities primarily from cash provided by
operating activities. Cash provided by operating activities for the six months
ended June 30, 1997 and 1996 was $1,687,978 and $116,845, respectively. Working
capital as of June 30, 1997 and December 31, 1996 was $2,514,528 and $5,643,924,
respectively, and cash balances were $253,776 and $3,442,601 for the same
periods, respectively.
The Company has historically utilized the operating cash flow to expand the
Company's marketing activities, for product development, and acquisitions of new
products and companies as well as for working capital purposes. As discussed
above, in June 1997 the Company utilized $4,159,682 in cash generated during the
first six months of 1997 and existing cash reserves to purchase certain assets
of Delta.
In anticipation of the impact of this acquisition on cash reserves and working
capital, the Company obtained a $2.0 million line of credit from a bank.
Management expects to utilize the credit facility periodically for short-term
working capital needs and for short-term financing of future acquisitions. The
interest rate on amounts borrowed under the line of credit ranges from LIBOR
plus 2.25% to LIBOR plus 2.75%. There were no borrowings under the line of
credit as of June 30, 1997.
The Company uses United Parcel Service (UPS) to ship a significant amount of
products ordered by its customers. On August 4, 1997, UPS employees belonging to
the Teamsters Union began a nationwide work stoppage. If the work stoppage is
prolonged, it could have an impact on the Company's cash flow from operations.
The Company will utilize the line of credit to supplement any short-term cash
requirements.
10
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PART II - OTHER INFORMATION
ITEM 1 - 3. NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
On May 30, 1997, the Company held its Annual Meeting of Shareholders. At
such meeting, the Company's shareholders ( i ) elected five directors to
serve until the Company's next annual meeting and ( ii ) approved the
appointment of Ernst & Young LLP to serve as the Company's independent
auditors. The number of votes cast in matters is set forth below:
Election of Directors
<TABLE>
<CAPTION>
VOTES AGAINST OR BROKER
NAME VOTES FOR WITHHELD ABSTENTIONS NON-VOTES
- ---- --------- ---------------- ----------- ---------
<S> <C> <C> <C> <C>
Mark A. Betker 2,299,524 2,500 0 0
Michael C. Franson 2,299,524 2,500 0 0
Thomas W. Gamel 2,299,524 2,500 0 0
John T. Pfannenstein 2,299,524 2,500 0 0
Ellen S. Robinson 2,299,524 2,500 0 0
</TABLE>
Approval of Appointment of Ernst & Young LLP
Votes For Votes Against or Withheld Abstentions Broker Non-Votes
----------------------------------------------------------------------------
2,293,782 3,200 5,042 0
ITEM 5. NONE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
Exhibit 10.1 Revolving Credit Agreement dated June 24, 1997,
by and between the Company and Colorado National
Bank.
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
On April 30, 1997, the Company filed a Form 8-K to report a change
in the Company's certifying accountant which was effective as of
April 24, 1997.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereto duly
authorized.
KOALA CORPORATION
August 13, 1997 /s/ Mark A. Betker
- ---------------- ----------------------------------------------
Chairman and Chief Executive Officer
(Principal Executive Officer)
August 13, 1997 /s/ Jeffrey L. Vigil
- ---------------- ----------------------------------------------
Vice President Finance and Administration
(Principal Financial and Accounting Officer)
12
<PAGE>
REVOLVING CREDIT AGREEMENT
This Revolving Credit Agreement (the "Agreement") is made as of June 24, 1997,
between KOALA CORPORATION, a Colorado corporation ("Borrower") and COLORADO
NATIONAL BANK, a national banking association ("Bank").
RECITALS:
i. Borrower has requested that Bank make available to Borrower a revolving
line of credit in the amount of $2,000,000 for working capital and
acquisition purposes; and
ii. Bank is willing to make available such line of credit as requested by
Borrower, upon and subject to the terms and conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
contained in this Agreement, Borrower and Bank agree as follows:
1. TERMS OF BORROWING
------------------
1.01 Revolving Credit Line. Subject to the following terms and conditions, Bank
---------------------
agrees to make a line of credit available to Borrower (the "Revolving
Credit Line") in the maximum amount of $2,000,000 (the "Maximum Line") or,
if less, the amount of the Cash Flow Limit (defined below), pursuant to
which Bank will make loans to Borrower (each an "Advance") in such amounts
as Borrower may request from time to time, the proceeds of which shall be
used for working capital and future acquisitions. The aggregate outstanding
principal balance of all Advances made hereunder may not exceed the Maximum
Line. Amounts borrowed under the Revolving Credit Line may be repaid prior
to the Termination Date (defined below) without penalty and may be
reborrowed subject to the terms hereof.
Bank's commitment to make Advances hereunder is subject to the conditions
in Section 3 below and the following limitations:
a. Bank's commitment to lend hereunder terminates on June 24, 1998 (the
"Termination Date"), if not sooner terminated under Section 7 below;
b. Bank shall not be obligated to make any Advance which would cause the
outstanding principal balance of the Revolving Credit Line (the "Line
Balance") to exceed the Maximum Line or, if less, the Cash Flow Limit;
and
c. Bank shall not be obligated to make any Advance if an Event of
Default, as defined in Section 6 below, or an event which, with the
giving of notice or lapse of time, or both, would become an Event of
Default (a "Potential Default"), has occurred and has not been cured
by Borrower or waived by Bank.
1.02 Line Note. Borrower's indebtedness to Bank for amounts borrowed under the
---------
Revolving Credit Line and for interest accrued thereon shall be evidenced
by Borrower's promissory note to Bank, on Bank's standard form for
commercial promissory notes and otherwise satisfactory to Bank, in the
principal amount of the Maximum Line (the "Line Note").
1.03 Interest. Borrower agrees to pay interest on the Line Balance from time to
--------
time as provided herein. Interest will accrue on the daily outstanding
Line Balance at a fluctuating rate per annum equal to the applicable
"Reserve Adjusted LIBOR Rate" plus the applicable margin as set forth below
for the selected Interest Period (see the attached Exhibit A which will be
---------
attached to and incorporated into the Line Note for terms and definitions
which will apply while the interest rate is based on a Reserve Adjusted
LIBOR Rate). Borrower shall have the option to select an Interest Period on
each new Advance. The interest rate for any new Advance or any Advance
outstanding on a one-month reset daily basis will be subject to further
1
<PAGE>
adjustment quarterly, as of the first day of each fiscal quarter, as
follows: When Borrower's ratio of Debt (as defined in Section 5.02) to
Annualized Cash Flow (as defined in Section 1.04) is within one of the
ranges set forth below, then the "margin" or "spread" to be added to the
applicable Reserve Adjusted LIBOR Rate shall be the rate per annum set
forth below opposite such range:
Range of Debt/Annualized
Cash Flow Ratios Margin
----------------- ------
(less than) 1.00:1 2.25%
1.00:1 (= or less than) 2.50:1 2.50%
(greater than) 2.50:1 2.75%
Accrued interest shall be due and payable (i) on the first day of each
month, (ii) at maturity of the Line Note and (iii) on demand after such
maturity. After the occurrence of an Event of Default or after maturity or
any acceleration of maturity of the Line Note, at Bank's option, the
interest rate applicable to the Line Balance may be increased as provided
in the Line Note and Borrower agrees to pay any such increased interest.
Interest shall be computed using the actual number of days in the period
for which such computation is made and a per diem rate equal to 1/360 of
the fluctuating rate per annum.
1.04 Cash Flow Limit. The "Cash Flow Limit" means from time to time an amount
---------------
equal to the result of multiplying Borrower's Annualized Cash Flow by 3.5
where "Annualized Cash Flow" means Borrower's earnings before interest,
taxes, depreciation and amortization calculated at the end of each quarter
for the previous four quarters (i.e. on a four-quarter trailing basis).
1.05 Repayment of Principal. Borrower agrees to repay all Advances made
----------------------
hereunder. The Line Balance will be due and payable in full at the
maturity of the Line Note, which will be June 24, 1998 subject to
acceleration upon the occurrence of an Event of Default.
1.06 Method of Borrowing. Requests for Advances may be submitted by Borrower in
-------------------
writing or by telephone. Bank shall be entitled to honor any such request
it reasonably believes to be genuine, whether or not the person making the
request is named as an authorized person in any corporate resolution or
instruction furnished Bank by Borrower. Advances shall be disbursed only
by deposit to a demand deposit account maintained by Borrower at Bank.
Proceeds of an Advance shall be disbursed on the Banking Day (as defined in
the Colorado Uniform Commercial Code) Bank receives Borrower's request if
such request is received before 2:00 p.m. Denver time on such day, and on
the next Banking Day if received at or after 2:00 p.m. on such day, and in
either case the conditions of Section 4 are met.
1.07 Letters of Credit. In the event and to the extent Bank issues a letter of
-----------------
credit (an "L/C") on behalf of Borrower under the Revolving Credit Line in
lieu of an advance, the Maximum Line shall be considered utilized by the
amount of such L/C. Borrower shall pay fees for any such L/C at the time
of issuance according to Bank's schedule of fees relating to letters of
credit in effect from time to time; and Borrower shall execute Bank's then
current standard form application and agreement for such L/C. Amounts
drawn under any such L/C and honored by Bank but not immediately reimbursed
by Borrower to Bank shall become an Advance hereunder in such amount at
such time evidenced by the Line Note and subject to all the terms of this
Agreement, whether or not any Event of Default or Potential Default has
occurred. No such L/C shall expire later than the Termination Date.
1.08 Loan Fee. Borrower agrees to pay Bank a fee of $2,000.00, being one-tenth
--------
of one percent (0.1%) of the Maximum Line, payable in advance on the date
of execution hereof by Borrower.
1.09 Annual Rest Period. Notwithstanding that the Line Balance is not due in
------------------
full until maturity, Borrower agrees to reduce the Line Balance to zero and
refrain from reborrowing for a period of 30 consecutive days commencing at
a time selected by Borrower not less than 30 days prior to the Termination
Date.
2
<PAGE>
2. REPRESENTATIONS AND WARRANTIES
------------------------------
To induce Bank to enter into this Agreement, Borrower represents and warrants
as follows:
2.01 Incorporation. Borrower is a corporation duly organized, validly existing,
-------------
and in good standing under the laws of the State indicated at the beginning
of this Agreement, and Borrower is duly qualified or licensed and in good
standing to do business as a foreign corporation in all jurisdictions in
which the nature of Borrower's business requires qualification.
2.02 Borrower's Authorization. The execution, delivery and performance by
------------------------
Borrower of this Agreement, the Line Note and any other documents required
by the Bank in connection with this Agreement (collectively, the "Closing
Documents") are within Borrower's corporate powers, have been authorized by
all necessary corporate action and do not and will not contravene
Borrower's Articles of Incorporation or Bylaws, violate any provision of
law or result in a breach of or default under any other agreement to which
Borrower is a party.
2.03 Litigation. There is no pending or threatened action, claim,
----------
investigation, lawsuit or proceeding against or affecting Borrower before
any court, governmental agency, arbitrator or arbitration panel, which if
decided adversely to Borrower would have a material adverse affect on the
financial condition or operations of Borrower or in any event which claims
or involves an amount exceeding $100,000 ("Material Litigation").
2.04 Financial Condition. The audited balance sheet of Borrower as at December
-------------------
31, 1996, and the related statements of income and retained earnings for
the fiscal year then ended, and the unaudited balance sheet of Borrower as
at March 31, 1997, and the related statements of income and retained
earnings for the period then ended, copies of which have been furnished to
Bank, fairly present the financial condition of Borrower as at such dates
and the results of the operations of Borrower for the periods ended on such
dates, all in accordance with generally accepted accounting principles
("GAAP") applied on a consistent basis, subject to year-end audit
adjustments for the unaudited March 31, 1997 financial statements, and
since March 31, 1997 there has been no material adverse change in such
condition or operations.
2.05 Valid Obligations. This Agreement constitutes, and each of the Line Note
-----------------
and the Closing Documents when delivered hereunder will be, a legal, valid
and binding obligation of Borrower, enforceable against Borrower in
accordance with its respective terms.
2.06 Taxes. Borrower (i) has filed all tax reports and returns required to be
-----
filed, including but not limited to reports and returns concerning income,
franchise, employment, sales and use, and property taxes; (ii) has paid all
of its tax liabilities which were due on or prior to the date hereof; and
(iii) is not aware of any pending investigation by any taxing authority or
of any pending assessments or adjustments which would materially increase
its tax liability.
2.07 Regulation U. Borrower is not engaged in the business of extending credit
------------
for the purpose of purchasing or carrying margin stock (within the meaning
of Regulation U issued by the Board of Governors of the Federal Reserve
System), and no proceeds of any Advance will be used to purchase or carry
any margin stock or to extend credit to others for the purpose of
purchasing or carrying any margin stock.
2.08 Disclosure. No information, exhibit or report furnished by Borrower to
----------
Bank in connection with the negotiation of this Agreement contains any
material misstatement of fact or omitted to state a material fact necessary
to make the statement contained therein not misleading.
2.09 Environmental Compliance. The ownership and operation of Borrower's
------------------------
properties have been and are in compliance with all applicable federal,
state, and local environmental protection and hazardous waste disposal
statutes and regulations. Borrower has not received any notice of claim
under or violation of any such laws affecting Borrower's properties.
3
<PAGE>
3. CONDITIONS PRECEDENT
--------------------
3.01 Conditions Precedent to Initial Advance. The obligation of Bank to make
---------------------------------------
its initial Advance hereunder is subject to the condition precedent that
Bank shall have received on or before the day of such Advance the
following, each in form and substance satisfactory to Bank:
i. the Line Note and such Closing Documents as may be specified by Bank,
each duly executed by Borrower, and any fees specified above;
ii. copies of the Articles of Incorporation and By-laws of Borrower, each
certified by the Secretary of Borrower to be a true and correct copy
thereof, including all amendments thereto, if any;
iii. certified copies of the resolutions of the Board of Directors of
Borrower approving this Agreement, the Line Note and the Closing
Documents, and of all documents evidencing other necessary corporate
action and governmental approvals, if any, with respect to this
Agreement, the Line Note and the Closing Documents;
iv. a certificate of the Secretary of Borrower certifying the names and
true signatures of the officers of Borrower authorized to sign this
Agreement, the Line Note and the Closing Documents; and
v. a certificate of the Secretary of State of Colorado certifying that
Borrower is a corporation duly organized and in good standing under
the laws of such State.
3.02 Conditions Precedent to All Advances. The obligation of Bank to make each
------------------------------------
Advance (including the initial Advance) shall be subject to the further
conditions precedent that on the date of such Advance:
i. the following statements shall be true:
(a) the representations and warranties contained in Section 2 are
correct on and as of the date of such Advance as though made on
and as of such date; and
(b) no event has occurred and is continuing, or would result from
such Advance, which constitutes an Event of Default or Potential
Default;
and Bank may request a certificate of an officer of Borrower stating
the foregoing;
ii. Bank shall have received such other approvals, opinions or documents
as Bank may reasonably request; and
iii. Bank's legal counsel is reasonably satisfied as to all legal matters
incident to the making of such Advance.
4. AFFIRMATIVE COVENANTS
---------------------
So long as the Line Note or any indebtedness of Borrower to Bank remains unpaid
or Bank has any commitment to lend hereunder, Borrower will:
4.01 Accounting Records. Maintain adequate books and accounting records in
------------------
accordance with GAAP, consistently applied, reflecting all financial
transactions of Borrower.
4.02 Inspections. At any reasonable time and from time to time, permit any
-----------
agents or representatives of Bank to examine and make copies of and
abstracts from records and books of account of Borrower, to visit and
inspect the properties of Borrower and to discuss the affairs, finances and
accounts of Borrower with any of its officers or directors.
4
<PAGE>
4.03 Maintenance of Property. Maintain and preserve all of its properties and
-----------------------
assets necessary or useful in the performance of its business in good
working order, repair and condition, ordinary wear and tear excepted.
4 .04 Insurance. Maintain insurance with responsible and reputable insurance
---------
companies in such amounts and covering such risks as is usually and
customarily carried by companies engaged in similar businesses and owning
similar properties, including, but not limited to, public liability,
property damage and worker's compensation, and deliver to Bank, at Bank's
request, schedules setting forth all insurance then in effect and copies
of such policies or certificates of insurance.
4.05 Payment of Taxes, Liens. Pay and discharge, before the same become
-----------------------
delinquent, (i) all taxes, assessments and governmental charges or levies
imposed upon Borrower or upon its property, and (ii) all lawful claims
which, if unpaid, might by law become a lien upon its property, except
any thereof which is being contested in good faith and by appropriate
proceedings.
4.06 Compliance with Laws. Comply in all material respects with all applicable
--------------------
laws, rules, regulations and orders of any government authority, non-
compliance with which would materially adversely affect its business or
credit.
4.07 Corporate Existence. Preserve and maintain its corporate existence and
-------------------
rights and franchises in its State of incorporation, and all licenses
necessary to do business; and qualify and remain qualified and in good
standing as a foreign corporation in each jurisdiction in which such
qualification is necessary in view of its operation or ownership of its
properties.
4.08 Reporting. Furnish Bank the following as soon as available and in any
---------
event:
i. Within ninety (90) days after the end of each fiscal year of
Borrower, a copy of the annual audited financial statements of
Borrower as at the end of such fiscal year, including a balance
sheet and income statement, audited by an independent Certified
Public Accountant ("CPA") reasonably acceptable to Bank, with an
unqualified opinion thereon by said CPA;
ii. Within forty-five (45) days after the end of each fiscal quarter,
(a) Borrower's internally prepared statement of financial condition
as at the end of such quarter, including a balance sheet and income
statement prepared substantially in accordance with GAAP and (b) a
certificate as to compliance with the financial covenant in the
form of Exhibit B hereto or in such other form as may be acceptable
---------
to Bank;
iii. Prior to the end of each fiscal year of Borrower, a copy of
Borrower's projected financial statements for the next fiscal year;
and
iv. From time to time such other information as Bank may reasonably
request.
4.09 Financial Condition. Maintain the financial condition of Borrower,
-------------------
determined in accordance with GAAP, so that it meets the following
requirement measured on a quarterly basis:
Borrower's ratio of (a) Debt to (b) Annualized Cash Flow will be not
more than 3.50:1.
4.10 Deposit Accounts. Maintain all material deposit accounts at Bank.
----------------
4.11 Notice of Significant Events. Promptly notify Bank in writing of 1) the
----------------------------
occurrence of any Event of Default or Potential Default; 2) any change in
its name, address, form of entity, or organizational or capital
structure; or 3) the threat of or commencement of any Material
Litigation.
5
<PAGE>
5. NEGATIVE COVENANTS
------------------
So long as the Line Note or any indebtedness of Borrower to Bank remains unpaid
or Bank has any commitment to lend hereunder, without the prior written consent
of Bank, Borrower will not:
5.01 Use of Funds. Use any of the amounts loaned to it by Bank pursuant to this
------------
Agreement for any purpose except as specified in Section 1.01;
5.02 Debt. Create, incur, assume or permit to exist any Debt except 1) Debt to
----
Bank; 2) Debt which is trade debt incurred by Borrower in the ordinary
course of business on a short term basis for the acquisition of supplies or
services; and 3) other Debt up to an aggregate amount of $150,000 at any
one time outstanding. "Debt" means (i) indebtedness for borrowed money or
for the deferred purchase price of property or services, (ii) obligations
as lessee under leases which shall have been or should be, in accordance
with GAAP, recorded as capital leases, (iii) obligations under direct or
indirect guaranties in respect of, and obligations (contingent or
otherwise) to purchase or otherwise acquire, or otherwise assure a creditor
against loss in respect of, indebtedness or obligations of others of the
kinds referred to in clause (i) or (ii) above, and (iv) liabilities in
respect of unfunded vested benefits under plans covered by Title IV of
ERISA;
5.03 Liens. Create, incur, assume, or permit to exist any mortgage, deed of
-----
trust, pledge, lien, security interest or other charge or encumbrance or
any other type of preferential arrangement, upon or with respect to any of
its properties, whether now owned or hereafter acquired, or assign any
right to receive any income, other than (i) purchase money security
interests or liens in or upon any property acquired or held by Borrower in
the ordinary course of business to secure the purchase price of such
property or to secure indebtedness incurred solely for the purpose of
financing the acquisition of such property, (ii) security interests or
liens existing in or on such property at the time of its acquisition, and
(iii) liens for taxes not yet due and payable, deposits or pledges in
connection with or to secure payment of workmen's compensation,
unemployment insurance or other social security or in connection with the
good faith context of any tax lien, provided that the aggregate principal
--------
amount of the indebtedness secured by the security interests or liens
referred to in clauses (i) and (ii) above shall not exceed $50,000 any time
outstanding;
5.04 Loans and Investments. Make any loans or advances to any person or entity
---------------------
or purchase or otherwise acquire the capital stock, assets, or obligations
of, or any other interest in, any person or entity or make any other
investments, except (i) readily marketable direct obligations of the United
States of America or a money market mutual fund investing solely therein;
(ii) certificates of deposit issued by commercial banks of recognized
standing operating in the United States of America; (iii) other loans or
investments in an aggregate amount in any one fiscal year not exceeding
$1,000,000; or (iv) loans or advances to wholly-owned or controlled
subsidiary corporations or similar limited liability entities
("Subsidiaries");
5.05 Guaranty. Guarantee or become liable in any way as surety for any
--------
liability or obligation of any other person or entity except by endorsement
of instruments for deposit or collection in the ordinary course of business
and except for guarantees of Subsidiaries up to an aggregate amount of
$150,000 at any one time outstanding;
5.06 Merger or Sale. Merge into or consolidate with any corporation or other
--------------
entity; or sell, lease, assign or otherwise transfer or dispose of all or
any material portion of its assets except for sales of inventory in the
ordinary course of business;
5.07 Nature of Business. Materially change the scope or nature of its business;
------------------
or
5.08 Distribution to Shareholders. Pay or declare any dividends, or purchase,
----------------------------
redeem or otherwise acquire any of its capital stock, or make any other
distributions of any property to any of its shareholders as such.
6
<PAGE>
6. DEFAULT
-------
If any of the following events shall occur, it shall be an event of default
("Event of Default"):
6.01 Non-Payment. Borrower fails to pay any principal of the Line Note or any
-----------
other sums payable by Borrower to Bank pursuant to this Agreement when due,
or Borrower fails to pay any interest on the Line Note within ten (10) days
after any such interest is due;
6.02 Representations. Any representation or warranty made by Borrower herein or
---------------
in connection herewith proves to have been incorrect in any material
respect when made;
6.03 Breach of Negative Covenants. Borrower fails to observe or comply with any
----------------------------
of the covenants in Section 5 of this Agreement;
6.04 Breach of Covenants. Borrower fails to perform or observe any other term,
-------------------
covenant or agreement contained in this Agreement (other than those
referred to in Section 7.01 and 7.03) and such failure has not been cured
within ten (10) days after Bank has notified Borrower of such failure;
6.05 Default on Other Debt. Borrower shall fail to pay any Debt of Borrower
---------------------
(other than Debt evidenced by the Line Note) or any interest or premium
thereon when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after
the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other default or event under any
agreement or instrument relating to any such Debt shall occur and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default or event is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or
any such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), prior to
the stated maturity thereof;
6.06 Insolvency. Borrower shall generally not pay its debts as such debts
----------
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors;
or any proceeding shall be instituted by or against Borrower seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition
of it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for
relief or the appointment of a receiver, trustee, or other similar official
for it or for any substantial part of its property and, if instituted
against Borrower, shall remain undismissed for a period of thirty days; or
Borrower shall take any corporate action to authorize any of the actions
set forth above in this subsection;
6.07 Judgments. Any judgment or order for the payment of money in excess of
---------
$100,000 shall be rendered against Borrower and either (i) enforcement
proceedings shall have been commenced by any creditor upon such judgment or
order or (ii) there shall be any period of 10 consecutive days during which
a stay of enforcement of such judgment or order, by reason of a pending
appeal or otherwise, shall not be in effect;
6.08 Change in Control. Any person, entity or group of persons acting together
-----------------
(not including the current principal shareholder(s) of Borrower) acquires a
sufficient number of the shares of Borrower's voting common stock to enable
such acquiring person, entity or group to elect a majority of Borrower's
Board of Directors.
7. REMEDIES
--------
Upon the occurrence of any Event of Default, Bank shall have the right by notice
to Borrower:
7.01 Further Loans. To terminate its commitment to make Advances;
-------------
7
<PAGE>
7.02 Acceleration. To declare the Line Balance and all interest accrued thereon
------------
and all other amounts payable under this Agreement to be immediately due
and payable whereupon all such indebtedness of Borrower to Bank shall
become and be immediately due and payable without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly
waived by Borrower; and
7.03 Other Rights. To exercise any other rights or remedies available to it
------------
whether under the Closing Documents, or at law or in equity.
8. MISCELLANEOUS
-------------
8.01 Waiver; Amendments. No waiver by Bank or any amendment of any provision of
------------------
this Agreement, nor any consent of Bank to any failure to comply with the
terms hereof by Borrower, shall be effective unless made in writing and
signed by Bank. No waiver by Bank of any default or of any right to
enforce this Agreement shall operate as a waiver of any other default, or
of the same default on a future occasion, or of the right to enforce this
Agreement on any future occasion. No delay in or discontinuance of the
enforcement of this Agreement, nor the acceptance by Bank of installments
of principal or interest after the occurrence of any Event of Default,
shall operate as a waiver of any default.
8.02 Rights Cumulative. The rights and remedies herein provided are cumulative
-----------------
and not exclusive of any rights or remedies afforded by any promissory note
or other agreement executed in connection herewith, or provided by law.
Bank's remedies may be exercised concurrently or separately, in any order,
and the election of one remedy shall not be deemed a waiver of any other
remedy.
8.03 Expenses. Borrower will pay to Bank on demand all expenses, including
--------
reasonable fees and expenses of attorneys, paid or incurred by Bank in
connection with the making or collection of Advances made pursuant to this
Agreement, or the protection, preservation or enforcement of Bank's rights
hereunder.
8.04 Successors and Assigns. This Agreement shall be binding upon and inure to
----------------------
the benefit of Borrower, Bank and their respective successors and assigns.
However, Borrower shall not have the right to assign or otherwise transfer
any rights in or under this Agreement without Bank's prior written consent.
Bank reserves the right to sell, assign, transfer, negotiate or grant
participations in the Advances provided for herein. In connection
therewith Bank may disclose all documents and information which Bank now
has or may hereafter acquire relating to the Advances, Borrower or
Borrower's business.
8.05 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of Colorado.
8.06 Notices. All notices, requests and demands given to or made upon either
-------
party must be in writing and shall be deemed to have been given or made
when personally delivered or two (2) days after having been deposited in
the United States Mail, first class postage prepaid, addressed as follows:
If to Borrower: Koala Corporation
Attn: Mark A. Betker
President and CEO
11600 E. 53rd Avenue, Unit D
Denver, CO 80239
If to Bank Colorado National Bank
Attn: Joni Fish, Vice President
918 17th Street
Denver, CO 80202
10.07 Accounting Terms. All accounting terms not specifically defined herein
----------------
shall be construed in accordance with generally accepted accounting
principles consistently applied, except as otherwise stated herein.
8
<PAGE>
10.08 Recitals. The recitals to this Agreement and any definitions set forth
--------
therein are made a part hereof and incorporated in this Agreement.
10.09 Entire Agreement. The following documents contain the entire agreement
----------------
between the parties concerning the subject matter hereof: this Agreement,
the Line Note and the Closing Documents (collectively, the "Relevant
Documents"). Any representation, understanding or promise concerning the
subject matter hereof, which is not expressly set forth in any of the
Relevant Documents, shall not be enforceable by any party hereto or its
successors or assigns. In the event of any conflict or inconsistency
between the terms of this Agreement and the terms of any other Relevant
Document, the terms of this Agreement shall govern.
10.10 Severability. The unenforceability of any provision of this Agreement
------------
shall not affect the enforceability or validity of any other provision
hereof.
10.11 JURY TRIAL WAIVER. BANK AND BORROWER EACH IRREVOCABLY WAIVES ITS RIGHT
-----------------
TO A JURY TRIAL IN ANY ACTION OR PROCEEDING OF ANY ISSUE, CLAIM,
COUNTERCLAIM OR OTHER CAUSE OF ACTION, WHETHER IN CONTRACT OR TORT, BASED
UPON OR ARISING OUT OF THIS AGREEMENT, THE CREDIT EXTENDED HEREUNDER, OR
ANY OTHER AGREEMENT OR DEALINGS RELATING TO THE SUBJECT MATTER OF THIS
AGREEMENT.
IN WITNESS WHEREOF, the parties have executed this Agreement the date first
stated above for the purposes set forth herein.
KOALA CORPORATION COLORADO NATIONAL BANK
By:/S/ JEFFREY L. VIGIL By: /S/ JONI FISH
-------------------------- -------------------------
Title: Vice President Title: Vice President
---------------------- ----------------------
9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 253,776
<SECURITIES> 0
<RECEIVABLES> 2,199,822
<ALLOWANCES> 48,157
<INVENTORY> 1,171,450
<CURRENT-ASSETS> 3,892,652
<PP&E> 1,316,474
<DEPRECIATION> 209,069
<TOTAL-ASSETS> 13,156,985
<CURRENT-LIABILITIES> 1,378,124
<BONDS> 0
0
0
<COMMON> 248,126
<OTHER-SE> 11,288,535
<TOTAL-LIABILITY-AND-EQUITY> 13,156,985
<SALES> 3,040,822
<TOTAL-REVENUES> 3,040,822
<CGS> 1,191,429
<TOTAL-COSTS> 1,191,429
<OTHER-EXPENSES> 876,776
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 973,179
<INCOME-TAX> 345,478
<INCOME-CONTINUING> 627,701
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 627,701
<EPS-PRIMARY> $0.25
<EPS-DILUTED> $0.25
</TABLE>
