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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 October 31, 1996
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-24454
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Wave Technologies International, Inc.
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(Exact name of small business issuer as specified in its charter)
Missouri 43-1481443
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(State or other jurisdiction of incorporation or organization)(IRS Employer ID
No.)
10845 Olive Boulevard, Suite 250, Saint Louis, Missouri 63141
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(Address of principal executive offices)
(314) 995-5767
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(Issuer's telephone number)
n/a
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(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all the 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
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APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: The issuer had 3,931,726 shares of
common stock, par value $.50,
outstanding as of December 5, 1996
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Transitional Small Business Disclosure Format (check one): Yes No X
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WAVE TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
April 30, October 31,
1996 1996
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ASSETS
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 747,064 $ 1,087,508
Accounts receivable (less allowance of $474,000 and
$472,000, respectively) 5,044,471 5,144,590
Inventory 699,914 618,887
Prepaid expenses 203,296 346,170
Other current assets 168,141 167,295
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Total current assets 6,862,886 7,364,450
Property, plant & equipment - net 3,883,263 4,099,150
Prepaid direct mail cost 467,517 845,820
Deferred courseware 1,617,634 1,556,730
Other assets 826,510 748,349
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Total assets $13,657,810 $14,614,499
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ---------------------------------------------------------
Current liabilities:
Accounts payable $ 1,969,700 $ 2,385,754
Accrued expenses 1,260,578 1,361,124
Deferred revenue 3,121,444 3,064,526
Bank line-of-credit 228,000 250,000
Current portion of long-term debt and capital lease
obligations
Related party 228,163 239,015
Other 32,973 34,872
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Total current liabilities 6,840,858 7,335,291
Long-term debt
Related party 431,612 305,886
Other 56,295 38,310
Accrued rent liability 345,496 315,760
Common shareholders' equity:
Common stock, $.50 par value, authorized 20,000,000 shares;
issued, 3,920,993 and 3,931,726 shares; outstanding,
3,913,636 and 3,924,369 shares 1,960,497 1,965,863
Additional paid-in capital 7,012,474 7,033,739
Accumulated deficit (2,996,833) (2,443,895)
Cumulative translation adjustment 22,109 78,243
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Total 5,998,247 6,633,950
Less treasury stock, at cost (7,357 shares) (14,698) (14,698)
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Total common shareholders' equity 5,983,549 6,619,252
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Total liabilities and shareholders' equity $13,657,810 $14,614,499
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</TABLE>
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WAVE TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
-------------------------- -------------------------------
1995 1996 1995 1996
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<S> <C> <C> <C> <C>
Revenues:
Publishing $3,237,312 $3,743,861 $ 6,386,273 $ 6,538,036
Instructor-led training 1,999,363 2,343,260 3,761,061 4,745,744
Custom Solutions 798,786 1,270,010 1,792,707 2,740,391
---------- ---------- ----------- -----------
Total revenues 6,035,461 7,357,131 11,940,041 14,024,171
---------- ---------- ----------- -----------
Cost and Expenses:
Cost of services, products and development 3,358,077 3,570,337 6,482,378 6,853,442
Sales and marketing 1,643,900 1,928,380 3,493,583 3,556,978
General and administrative 1,467,413 1,503,165 2,880,048 3,018,505
---------- ---------- ----------- -----------
Total costs and expenses 6,469,390 7,001,882 12,856,009 13,428,925
---------- ---------- ----------- -----------
Income/(loss) from Operations (433,929) 355,249 (915,968) 595,246
Other income/(expenses) - net (12,870) (19,957) (20,092) (42,308)
---------- ---------- ----------- -----------
Income/(loss) before tax (446,799) 335,292 (936,060) 552,938
Provision for income taxes - - - -
---------- ---------- ----------- -----------
Net Income/(loss) $ (446,799) $ 335,292 $ (936,060) 552,938
========== ========== =========== ===========
Net income/(loss) per common shares $ (0.12) $ 0.09 $ (0.25) $ 0.14
========== ========== =========== ===========
Weighted average common shares 3,741,591 3,939,973 3,700,748 3,940,015
========== ========== =========== ===========
</TABLE>
<PAGE>
WAVE TECHNOLOGIES INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED OCTOBER 31
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income/(loss) $ (936,060) $ 552,938
Adjustments to reconcile net income/(loss) to net cash
from (used) in operating activities
Depreciation and amortization 769,612 825,672
Barter activity (300,021) (548,394)
Loss on disposal of capital asset - 108
Other - 56,134
Net changes in other assets and liabilities:
Accounts receivable (1,330,234) (100,119)
Inventory 211,855 81,027
Other current assets 91,434 (136,103)
Prepaid direct mail 1,287,569 (328,138)
Deferred courseware (385,712) 60,904
Other assets 20,765 (4,245)
Accounts payable (1,172,888) 416,054
Accrued expenses 258,929 100,546
Deferred charges 410,979 (218,105)
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Net cash from (used) in operating activities (1,073,772) 758,279
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (377,035) (337,219)
Disposals of capital equipment 1,712
Acquisition of ETI, Inc. (152,738) -
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Net cash used in investing activities (529,773) (335,507)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - net 204,401 26,631
Proceeds from borrowings under line of credit - net 1,123,333 22,000
Proceeds from term loan - -
Repayments of notes payable (236,110) (114,875)
Payments of capital lease obligations (21,099) (16,084)
----------- ----------
Net cash provided by financing activities 1,070,525 (82,328)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (533,020) 340,444
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,090,693 747,064
----------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 557,673 $1,087,508
=========== ==========
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE I. - GENERAL
The financial information herein is unaudited. However, in the opinion of
management, such information reflects all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the results of
operation for the period being reported. Additionally, it should be noted that
the accompanying condensed consolidated financial statements do not purport to
contain complete disclosures in conformity with generally accepted accounting
principles.
The results of operations for the six months ended October 31, 1996, are not
necessarily indicative of the results of operations for the full year.
These condensed consolidated financial statements should be read in conjunction
with the Company's consolidated financial statements for the year ended April
30, 1996, and the notes thereto.
The Company has reclassified certain 1996 fiscal year amounts to conform to
current year presentation.
NOTE II. - DEBT
On January 5, 1996, the Company issued a three-year term note to a bank in the
amount of $600,000, bearing interest at 9.25% per year, secured by certain of
Wave's equipment. The Company's operating line of credit is with the same bank,
and was increased from $1,500,000 to $2,000,000 effective September 1, 1996. It
bears interest at the bank's prime rate and is secured by the Company's accounts
receivable, inventory and equipment. The Chairman of the Board of the bank is a
member of the Board of Directors of the Company.
NOTE III. - EARNINGS PER SHARE
Net income per common share is computed by dividing net income by the weighted
average number of shares of common stock and common share equivalents. The
earnings per share calculation for the second quarter of fiscal 1997 included
dilutive stock options and warrants along with the average number of common
shares outstanding. For fiscal 1996, such potentially dilutive securities have
not been included in the calculation as a result of their anti-dilutive effect.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
OVERVIEW
The Company designs, develops and delivers training programs addressing
data communications, networking and client/server computing technologies. Wave
delivers these products and services through instructor-led courses,
informational seminars and published products and the Internet. The Company
markets its courses and published products to management information
professionals, systems integrators, value-added resellers and others with
systems management responsibilities.
The Company delivers its instructor-led training through twelve Company-
owned facilities in the United States and one center in the United Kingdom. The
Company increasingly sells training solutions utilizing a mix of multi-media
materials and live training. Wave has developed both domestic and international
distribution channels for its products.
THREE MONTHS ENDED OCTOBER 31, 1996 COMPARED TO
THREE MONTHS ENDED OCTOBER 31, 1995
Total revenues increased $1,322,000, or 22%, in the quarter ended October
31, 1996, to a record $7,357,000 from $6,035,000 in the same quarter in fiscal
1996, and increased $690,000, or 10%, over total revenues for the first fiscal
1997 quarter.
Publishing revenues increased $507,000, or 16%, from $3,237,000 to
$3,744,000, but decreased slightly as a percentage of total revenues, to 51%
from 54% in the second quarter in fiscal 1996. The increase in publishing
revenues during the second quarter of fiscal 1997 included sales of the
Company's self-study program for Microsoft NT, Version 4.0.
Instructor-led training ("ILT") revenues increased 17% to $2,343,000 from
$1,999,000 in the same quarter in fiscal 1996, and remained relatively stable as
a percentage of total revenues at 32% compared to 33% in the same quarter of the
prior fiscal year. In the second fiscal quarter, Novell-related ILT revenues
represented 25% of total ILT revenues, compared to 46% of total ILT revenues in
the same quarter of fiscal 1996, while Microsoft courses accounted for 53% of
ILT revenues for the quarter ended October 31, 1996 compared to 47% for the
second quarter of fiscal 1996. Total center attendance increased dramatically as
over 2,000 information technology professionals attended the new Intranet
Solutions Workshop (ISW), which the Company began offering during the second
fiscal quarter. The ISW program consists of live technical products showcases
underwritten by vendors and delivered by the Company at its training centers.
Revenues for the ISW program include fees for the seminar deliveries which are
reported as ILT revenues and fees for program design, development and marketing
which are included in Custom Solutions revenues.
The Company recognized $561,000 in revenues for Club Wave sales and
$304,000 for corporate Club Wave sales in the quarter ended October 31, 1996.
Deferred revenue for Club Wave and corporate Club Wave sales was $1,311,000 as
of the end of the quarter, and total deferred revenue was $3,065,000 as of that
date. This compares to total deferred revenue at April 30, 1996 of $3,121,000,
and to total deferred revenue at July 31, 1996, the end of the first fiscal
quarter, of $2,894,000. Deferred revenue reflects completed sales by the
Company, where the Company has recognized the cost of selling and order
execution, so that Wave carries limited ongoing operating expenses to fulfill
these additional sales and recognize the related revenue.
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Custom Solutions revenues increased $471,000, or 59%, from the same period
in fiscal 1996, and represented 17% of total revenues, compared to 13% in the
second quarter of fiscal 1996. Sales of $169,000 related to Wave's new ISW
(Intranet Solutions Workshop) program, accounted for a significant portion of
the growth in Custom Solutions revenues. The Company intends to expand its
vendor showcases like ISW in the future. The remaining increase related to
additional sales to existing customers, including GTE and Sony. Custom Solutions
revenues will continue to fluctuate from quarter to quarter as they can be
significantly affected by the timing of such services.
International revenues accounted for approximately 17% of Wave's total
revenues in the quarter ended October 31, 1996, compared to 24% of total
revenues in the same quarter in fiscal 1996, and 19% in the first quarter of
fiscal 1997. A significant component of international revenues for the second
quarter of fiscal 1996 was a large initial stocking order from a Malaysian
distributor, of approximately $424,000.
Cost of services, products and development increased $212,000, or 6%, in
the quarter ended October 31, 1996, to $3,570,000, but decreased as a percentage
of total revenues to 49% from 56% in the same quarter in fiscal 1996. The
increased domestic costs reflected a $275,000 increase in product development
costs, including higher amortized product development costs of $170,000, and a
$105,000 reduction in capitalized development costs, in part because the
percentage of development expenditures expensed at the time incurred increased.
The proportion of the Company's development costs expensed compared to the
capitalized portion of such costs is likely to fluctuate from quarter to
quarter, based upon a variety of factors, including the number of products being
developed and the type and longevity of those products. The Company's costs
associated with delivery of Custom Solutions programs also increased $159,000,
or 133%, but increased only slightly as a percentage of Custom Solutions
revenues, from 18% for the first quarter of fiscal 1996, to 21%. Freight costs
increased $91,000, or 103%. These increases were offset by a decline in total
employment costs of $277,000, including a $472,000 decrease in domestic payroll
and related costs, net of an increase of $195,000 in temporary labor costs.
Material costs also decreased, by $165,000 from the same period in fiscal 1996.
Internationally, Wave's external trainer and course costs increased by $65,000
and $34,000, respectively, and were partially offset by a $29,000 decline in
material costs.
Sales and marketing expenses for the quarter ended October 31, 1996,
increased $284,000, or 17%, to $1,928,000, from the same quarter in fiscal 1996,
and remained relatively stable as a percentage of total revenues, at 26%
compared to 27%. Domestic sales and marketing payroll increased by $266,000 and
temporary labor costs increased $24,000 as Wave continued to expand its major
accounts sales team. Domestic direct mail expenses, which are capitalized and
amortized over six months, decreased by $245,000 over the same period last year,
reflecting decreased direct mail in past quarters. Printing and advertising
costs also increased, by $24,000 and $78,000, respectively. Total international
sales and marketing expenses increased by $147,000, as the result of a $229,000
increase in sales and marketing payroll and increased commission expense of
$58,000, partially offset by decreased direct mail amortization of $25,000.
General and administrative expenses increased slightly by $36,000, or 2%,
to $1,503,000 for the second quarter of fiscal 1997, but decreased as a
percentage of total revenues to 20% from 24% in the same quarter in fiscal 1996.
Domestic general and administrative payroll increased by $71,000. Accounting
expenses decreased $95,000, as the Company curtailed the use of outside
consultants and the Company's internal accounting staff handled all critical
functions. International general and administrative expenses increased by
$40,000, or 16%, to support future growth in international sales.
The Company's net income of $335,000, or $.09 per share, for the second
quarter of fiscal 1997, compared to a net loss of $447,000, or $.12 per share,
in the quarter ended October 31, 1996, and to net income of $218,000, or $.06
per share, for the first quarter of fiscal 1997.
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SIX MONTHS ENDED OCTOBER 31, 1996 COMPARED
TO SIX MONTHS ENDED OCTOBER 31, 1995
Total revenues increased $2,084,000, or 18%, in the six months ended
October 31, 1996, to $14,024,000 from $11,940,000 in the same period in fiscal
1996. Publishing revenues increased $152,000, or 2%, to $6,538,000 from
$6,386,000, but decreased as a percentage of total revenues, to 47% from 53% in
the first six months of fiscal 1996. Instructor-led training revenues increased
$985,000, or 26%, to $4,746,000, and increased as a percentage of total revenues
to 34% from 31% in the first six months of fiscal 1996. Custom solutions
revenues increased $948,000, or 53%, to $2,740,000 for the first six months of
fiscal 1997 and increased to 20% of total revenues, from 15% in the fiscal 1996
period.
International sales increased 19% from the first six months of fiscal 1996,
to $2,508,000, and remained relatively stable as a percentage of total revenues,
at approximately 18%. International publishing revenues for the six-month
period were $1,214,000, or 19% of total publishing revenues, compared to
$1,522,000, or 24%, in the same period in the prior fiscal year. International
ILT revenues were $1,294,000, or 27% of total ILT revenues, for the first six
months of fiscal 1997, compared to $593,000, or 16% of total ILT revenues for
the same period in the prior year. The significant increase in international
ILT revenues related to the success of corporate sales in the United Kingdom
center. The growth rate in ILT revenues in its London center will likely be
limited during the near term as the Company addresses physical classroom
capacity constraints.
Cost of services, products and development increased $371,000, or 6%, in
the six months ended October 31, 1996, to $6,853,000, but decreased as a
percentage of total revenues, to 49% in the current period, from 54% in the
fiscal 1996 period. Domestic cost of services, products and development
increased $169,000 as the result of increased development costs of $657,000
(including an increase of $303,000 in amortized development costs and a decline
of $354,000 in capitalized development costs), and as the result of a $129,000
increase in costs associated with fulfillment of new Custom Solution projects.
These increases were largely offset by a $757,000 decrease, in domestic labor
costs ($1,006,000 decrease in payroll and related expenses net of a $249,000
increase in temporary labor expense). Expenses for international cost of
services increased by $330,000, or 40%. International cost of material
increased $62,000, outside contractor costs associated with a special class
offering increased $75,000, and external trainer and external course costs
increased $122,000 and $54,000, respectively.
Sales and marketing expenses for the six months ended October 31, 1996,
increased $63,000, or 2%, to $3,557,000, but decreased as a percentage of total
revenues to 25% from 29%. Domestic direct mail amortization decreased by
$864,000 from the fiscal 1996 six-month period, but was offset by a $592,000
increase in payroll expenses and a $88,000 increase in printing and advertising
costs. International sales and marketing expenses increased by $194,000.
Increase of $155,000 in international payroll and related expense and of $21,000
in commission expense were partially offset by a $33,000 decline in amortization
of direct mail expense.
General and administrative expenses increased $138,000, or 5%, to
$3,019,000 for the first six months of fiscal 1997, and decreased as a
percentage of total revenues to 22% from 24% in the same period in fiscal 1996.
Domestic general and administrative payroll increased by $120,000, or 23%, to
staff the Company's continued growth, but was more than offset by a $208,000
decrease in professional fees, as all critical accounting and operational
functions were provided by internal staff. The Company also incurred
approximately $100,000 in costs associated with the launch of its WaveSource
program. WaveSource provides technical training targeted to professional
certification for persons in the
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temporary/contract labor market. The Company believes WaveSource will begin to
generate minimal revenues in the current fiscal quarter, ending January 31,
1997.
Other expense was $42,000 for the period, compared to $20,000 for the same
period in the 1996 fiscal year, as the result of increased interest expense.
Net income for the current six-month period was $553,000, compared to a net
loss of $936,000 for the same period in the previous fiscal year. Net income
per share was $.14 for the six months ended October 31, 1996 compared to a net
loss per share of $0.25 for the same period in fiscal 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's net cash balance at October 31, 1996, was $1,087,000,
compared to $747,000 at April 30, 1996. During that six-month period, accounts
payable increased by $416,000 from $1,970,000 at April 30, 1996, to $2,386,000
at October 31, 1996, due to the timing of purchases of materials and services
from outside vendors. Accounts receivable increased slightly from $5,044,000 at
April 30, 1996, to $5,145,000 at October 31, 1996.
Inventory decreased approximately 12%, from $700,000 at April 30, 1996, to
$619,000 at October 31, 1996, as the Company continued its efforts to monitor
and manage inventory levels more effectively.
Prepaid direct mail costs increased to $846,000 at October 31, 1996, from
$468,000 at April 30, 1996. This resulted from the Company's decision to
increase both sales and marketing efforts to support future revenues.
On September 1, 1996, the Company increased its line of credit from
$1,500,000 to $2,000,000. The balance borrowed under the Company's line of
credit as of October 31, 1996 was $250,000. This line bears interest at the
bank's prime rate and is secured by accounts receivable and inventory. See Note
II of Notes to Consolidated Financial Statements.
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Company's annual meeting of shareholders held on September
4, 1996, shareholders elected Raymond Kalinowski and Douglas
Wilmsmeyer to serve as directors of the Company until the annual
meeting of shareholders in 1999 and until their successors are
qualified. The votes were as follows:
Mr. Kalinowski - 3,388,686 shares in favor, and 216,401
shares withheld authority
Mr. Wilmsmeyer - 3,387,285 shares in favor, and 217,802 shares
withheld authority
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit
No. Title
- ------- -----
3.1 Articles of Incorporation, as amended and restated (filed as
Exhibit 3.1 to Registrant's Registration Statement on Form SB-2
(File No. 33-80556) and incorporated herein by reference)
3.2 Restated Bylaws (filed as Exhibit 3.2 to Registrant's
Registration Statement on Form SB-2 (File No. 33-80556) and
incorporated herein by reference)
4.1 Specimen Stock Certificate (filed as Exhibit 4.1 to Registrant's
Registration Statement on Form SB-2 (File No. 33-80556) and
incorporated herein by reference)
4.2 Warrant Agreement, including Form of Representatives' Warrant
(filed as Exhibit 4.2 to Registrant's Registration Statement on Form
SB-2 (File No. 33-80556) and incorporated herein by reference)
4.3 Warrant held by Kenneth W. Kousky (filed as Exhibit 4.3 to
Registrant's Registration Statement on Form SB-2 (File No. 33-80556)
and incorporated herein by reference)
10.1 Employment Agreement dated February 1, 1994, by and between the
Company and Kenneth W. Kousky (filed as Exhibit 10.1 to Registrant's
Registration Statement on Form SB-2 (File No. 33-80556) and
incorporated herein by reference)
10.2 Service Agreement dated June 1, 1994, by and between the Company
and John A. Kirkham (filed as Exhibit 10.2 to Registrant's
Registration Statement on Form SB-2 (File No. 33-80556) and
incorporated herein by reference)
10.3 Amended and Restated 1993 Stock Option Plan (filed as Exhibit
10.3 to Registrant's Registration Statement on Form SB-2 (File No.
33-80556) and incorporated herein by reference)
10.4 Wave Technologies International, Inc. Outside Directors Stock
Option Plan (filed as Exhibit 10-4 to Registrant's Annual Report on
Form 10-KSB for the year ended April 30, 1995, and incorporated
herein by reference)
10.5 Distribution Agreement between the Company and Ingram Micro,
Inc., dated April 19, 1995 (filed as Exhibit 10.8 to Registrant's
Annual Report on Form 10-KSB for the year ended April 30, 1995, and
incorporated herein by reference)
10.6 Stock Purchase Agreement between the Company and Radnor Venture
Partners, L.P. (filed as Exhibit 10.9 to Registrant's Registration
Statement on Form SB-2 (File No. 33-80556) and incorporated herein
by reference)
10.7 Agreement between the Company and Radnor Venture Partners, L.P.,
dated April 30, 1994 (filed as Exhibit 10.10 to Registrant's
Registration Statement on Form SB-2 (File No. 33-80556) and
incorporated herein by reference)
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Exhibit No. Title
- ----------- -----
10.8 Amendment Agreement between the Company and Radnor Venture
Partners, L.P., dated May 31, 1994 (filed as Exhibit 10.11 to
Registrant's Registration Statement on Form SB-2 (File No. 33-80556)
and incorporated herein by reference)
10.9 $2,000,000 Line of Credit Note to Commerce Bank, National
Association, dated September 1, 1996
10.10 General Loan and Security Agreement between Commerce Bank,
National Association, and the Company, dated as of August 31, 1995
(filed as Exhibit 10.15 to Registrant's Quarterly Report on Form 10-
QSB for the quarter ended October 31, 1995, and incorporated herein
by reference)
10.11 First Amendment to General Loan and Security Agreement, dated as
of January 5, 1996, between the Company and Commerce Bank, National
Association (filed as Exhibit 10.13 to Registrant's Quarterly Report
on Form 10-QSB for the quarter ended January 31, 1996, and
incorporated herein by reference)
10.12 $600,000 Note dated January 5, 1996, to Commerce Bank, National
Association (filed as Exhibit 4.3 to Registrant's Quarterly Report
on Form 10-QSB for the quarter ended January 31, 1996 and
incorporated herein by reference)
10.13 Second Amendment to General Loan and Security Agreement between
the Company and Commerce Bank, National Association, dated as of
September 1, 1996
10.14 Wave Technologies International, Inc. 1995 Stock Option Plan
(filed as Exhibit 4.3 to Registrant's Registration Statement on Form
S-8 (File No. 33-98462) and incorporated herein by reference)
10.15 International Distributor/Reseller Agreement - Published
Products & Instructor-Led Training between the Company and Oogjen
Consultancy B.V. i.o., dated as of November 1, 1995 (filed as
Exhibit 10.17 to Registrant's Quarterly Report on Form 10-QSB for
the quarter ended May 31, 1996 and incorporated herein by reference)
10.16 Products Order Agreement between the Company and Hitechniaga IT
Academy dated as of October 20, 1995, as amended by letter dated
October 24, 1995 (filed as Exhibit 10.18 to Registrant's Quarter
Report on Form 10-QSB for the quarter ended January 31, 1996 and
incorporated herein by reference)
10.17 Waveware License Agreement between the Company and SHL
Systemhouse Corp., dated as of January 30, 1996 (filed as Exhibit
10.19 to Registrant's Quarterly Report on Form 10-QSB for the
quarter ended January 31, 1996 and incorporated herein by reference)
(b) Reports on Form 8-K - The registrant did not file any reports on Form
8-K during the quarter ended October 31, 1996.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.
Wave Technologies International, Inc.
Dated: December 12, 1996 By: /s/ J. Michael Bowles
---------------------------------
J. Michael Bowles, Chief Financial
Officer
(Principal Accounting and
Financial Officer and Duly Authorized
Officer)
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EXHIBIT 10.9
LINE OF CREDIT NOTE
$2,000,000 Note # 9240904-9003
maximum amount and interest ----------------------------
St. Louis (Clayton), Missouri
September 1, 1996
FOR VALUE RECEIVED, the undersigned, Wave Technologies International,
Inc., a Missouri corporation, promises to pay to the order of COMMERCE BANK,
NATIONAL ASSOCIATION ("Bank"), at its main banking office in St. Louis
(Clayton), Missouri, the principal sum of Two Million Dollars ($2,000,000) or
the then outstanding and unpaid balance of sums advanced hereunder together with
accrued interest, on September 1, 1997. All sums advanced hereunder shall bear
interest from the date of advance at the per annum rate equal to the Prime Rate
of Bank, in effect from time to time, which rate shall change with, and be
effective on the date of, each change in the Prime Rate.
Interest shall be calculated on the actual number of days outstanding on
the basis of a year of 360 days and shall be payable on the 1st Business Day of
the month following the initial advance under this note and on the 1st Business
Day of each month thereafter until September 1, 1997, when all outstanding
principal and accrued interest shall be due and payable in full. This note
shall bear interest after maturity (whether by acceleration or otherwise) at a
rate of three percent (3%) above the rate stated herein but not exceeding the
maximum rate allowed by law. Acceptance of payments after a date on which Bank
may demand payment in full shall not constitute a waiver of Bank's right to
demand payment in full thereafter. Payments shall be applied first to interest
and then to principal.
This note is the "Line of Credit Note" issued pursuant to and referred to
in the Loan Agreement dated as of August 16, 1995, as amended by amendments
dated as of January 5, 1996, and September 1, 1996, (as amended, the
"Agreement"), between the undersigned and Bank. Said Agreement contains
provisions for, inter alia, the definition of "Prime Rate," and other
capitalized terms not otherwise defined herein, prepayments on account of
principal hereof, requirements for borrowings and reborrowings hereunder, events
of default, and the rights of the holder hereof as to acceleration.
In the event of default as defined in said Agreement, the principal of this
note and all interest thereon may be declared to be immediately due and payable
in the manner and with the effect as provided in said agreement.
All without notice to and without affecting the liability to Bank of any of
the undersigned: (1) each of the undersigned, and each guarantor, endorser,
accommodation maker, surety, or other party liable on or on account of this
note, waives presentment, protest demand, notice of dishonor or default, and
consents to the release of any party or parties directly or indirectly liable
for payment hereof or the release, subordination or substitution of any
collateral security for this obligation; and (2) each guarantor, endorser,
accommodation maker, surety, or other party liable on or on account of this note
consents to any and all amendments, modifications (including changes in interest
rate), and /or renewals and extensions (including successive renewals or
extensions and whether for the
<PAGE>
same term or such shorter or longer term as Bank may require) as may be agreed
upon by Bank and the undersigned.
Each maker and each endorser, guarantor, and/or surety, if any, jointly and
severally agrees to all the provisions hereof. This Note shall be construed in
accordance with the laws of Missouri.
Unless prohibited by law, the undersigned will pay on demand all costs of
collection, legal expenses and attorneys' fees incurred or paid in collecting
and/or enforcing this note.
Oral agreements or commitments to loan money, extend credit or to forbear
from enforcing repayment of a debt, including promises to extend or renew such
debt, are not enforceable. To protect you (borrower(s)) and us (creditor) from
misunderstanding or disappointment, any agreements we reach covering such
matters are contained in this writing, which is the complete and exclusive
statement of the agreement between us except as we may later agree in writing to
modify it.
WAVE TECHNOLOGIES INTERNATIONAL, INC.
By: /s/ J. M. Bowles
----------------------------
Title: CFO
-------------------------
2
<PAGE>
EXHIBIT 10.13
SECOND AMENDMENT TO GENERAL LOAN AND SECURITY AGREEMENT
This Second Amendment to General Loan and Security Agreement made and
entered into as of the 1st day of September, 1996, (the "Second Amendment
Agreement") by and between WAVE TECHNOLOGIES INTERNATIONAL, INC. (hereinafter
referred to as "Borrower") and COMMERCE BANK, NATIONAL ASSOCIATION (hereinafter
referred to as "Bank").
WHEREAS, the Borrower and Bank are parties to a General Loan and Security
Agreement dated as of August 31, 1995, as amended on January 5, 1996, (said
agreement, as amended, hereinafter referred to as the "Agreement"); and
WHEREAS, Borrower has requested the Bank to amend certain terms of the
Agreement upon the terms and conditions herein contained.
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereafter made by and between the parties hereto, the parties hereto do mutually
agree as follows:
1. Words and phrases having defined meanings in the Agreement will have
the same meanings when used herein.
2. The definition of Commitment Amount in Section 1.1 is hereby deleted in
its entirety and the following is substituted in lieu thereof:
"Commitment Amount" means Two Million Dollars ($2,000,000) from September
1, 1996, until the Termination Date, and shall thereafter mean the amount,
if any, agreed to by Commerce and Borrower and evidenced by a Line of
Credit Note prepared by Commerce and executed by Borrower.
3. The definition of Termination Date in Section 1.1 is hereby deleted in
its entirety and the following is substituted in lieu thereof:
"Termination Date" shall mean September 1, 1997, but shall be deemed to be
amended without further action to correspond to the Maturity Date of any
renewal or modification of the Line of Credit Note.
4. Section 6.19 of the Agreement is hereby deleted in its entirety and the
following is substituted in lieu thereof:
6.19 Tangible Net Worth. Borrower shall maintain at all times a Combined
Tangible Net Worth of not less than Three Million Dollars ($3,000,000).
<PAGE>
4. It is expressly understood that except as specifically modified hereby,
all of the terms, covenants, conditions, representations, warranties, and
provisions contained in the Agreement shall remain in full force and effect.
Oral agreements or commitments to loan money, extend credit or forbear
from enforcing repayment of a debt, including promises to extend or renew such
debt, are not enforceable. To protect you (borrower(s)) and us (creditor) from
misunderstanding or disappointment, any agreements we reach covering such
matters are contained in this writing, which is the complete and exclusive
statement of the agreement between us except as we may later agree in writing to
modify it.
IN WITNESS WHEREOF, the parties hereto have executed this instrument the
day and year first above written.
WAVE TECHNOLOGIES INTERNATIONAL, INC.
By: /s/ J. Michael Bowles
----------------------
Title: CFO
COMMERCE BANK, NATIONAL ASSOCIATION
By: /s/ Scott B. Lan
----------------
Title: AVP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements included in Quarterly Report Form 10-QSB for the quarter ended
October 31, 1996 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-START> MAY-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 1,087,508
<SECURITIES> 0
<RECEIVABLES> 5,616,590
<ALLOWANCES> 472,000
<INVENTORY> 618,887
<CURRENT-ASSETS> 7,364,450
<PP&E> 8,057,472
<DEPRECIATION> 3,958,322
<TOTAL-ASSETS> 14,614,499
<CURRENT-LIABILITIES> 7,335,291
<BONDS> 0
<COMMON> 1,965,863
0
0
<OTHER-SE> 4,653,389
<TOTAL-LIABILITY-AND-EQUITY> 14,614,499
<SALES> 6,538,036
<TOTAL-REVENUES> 14,024,171
<CGS> 1,149,731
<TOTAL-COSTS> 6,853,442
<OTHER-EXPENSES> 6,575,483
<LOSS-PROVISION> 39,998
<INTEREST-EXPENSE> 35,618
<INCOME-PRETAX> 552,938
<INCOME-TAX> 0
<INCOME-CONTINUING> 552,938
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 552,938
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
