UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant To Section 13 Or 15(D) of The Securities Exchange Act of 1934
Date of report (date of earliest event reported): June 3, 2005
WPCS INTERNATIONAL INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 0-26277 98-0204758
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
One East Uwchlan Avenue, Suite 301, Exton, Pennsylvania 19390
(Address of principal executive offices)
Registrant's telephone number, including area code: (610) 903-0400
Copy of correspondence to:
Marc J. Ross, Esq.
Sichenzia Ross Friedman Ference LLP
1065 Avenue of the Americas
New York, New York 10018
Tel: (212) 930-9700 Fax: (212) 930-9725
ITEM 1.01 Entry Into a Material Definitive Agreement; and
ITEM 2.03 Creation of a Direct Financial Obligation
On June 3, 2005, WPCS International Incorporated (the "Company"), and each
of its subsidiaries entered into credit agreement with Bank Leumi USA ("Bank
Leumi"). The credit agreement (the "Credit Agreement"), provides for a revolving
line of credit in an amount not to exceed $5,000,000, together with a letter of
credit facility not to exceed $500,000. The Company and its subsidiaries also
entered into security agreements with Bank Leumi, pursuant to which each entity
granted a security interest to Bank Leumi in all of their assets.
Pursuant to the terms of the Credit Agreement, the Company is permitted to
borrow up to $3,000,000 under the revolving credit line, based upon eligible
receivables. Once the Company has provided financial statements to Bank Leumi
which evidence that the Company has earnings before interest, taxes,
depreciation and amortization of (i) $750,000 at July 31, 2005, (ii) $750,000 at
October 31, 2005, and (iii) $2,500,000 at April 30, 2006, the revolving
commitment amount will be increased to $5,000,000. The Credit Agreement contains
customary covenants, including but not limited to (i) restrictions on the
permitted ratio of total unsubordinated liabilities to tangible net worth plus
subordinated indebtedness, (ii) the Company's total tangible net worth, (iii)
working capital, and (iv) minimum earnings before interest, taxes, depreciation
and amortization. The loan commitment shall expire on August 31, 2008. The
Company may prepay the loan at any time.
Loans under the Credit Agreement bear interest at a rate equal to either
Bank Leumi's reference rate plus one half (0.5%) percent, or LIBOR plus two and
three-quarters (2.75%) percent, as the Company may request. The Company paid a
facility fee to Bank Leumi of $50,000 on the closing date.
The Company used the initial funds provided by the loan, in the gross
amount of $3,000,000, to repay existing bank debt of approximately $672,000, for
the payment of approximately $758,000 to the former shareholders of its
subsidiary Quality Communications & Alarm Company, Inc. for moneys due to them
pursuant to the terms of the purchase of their company, and for working capital.
ITEM 7.01 Regulation FD Disclosure
On June 8,2005, the Company disclosed certain financial information to an
institutional investor. The disclosed information was as follows: As the
business continues to grow, the Company believes that it can generate revenue of
approximately $50 million, net earnings of $2,3 million and earnings per share
of $0.58 for the fiscal year ended April 30,2006.
ITEM 9.01 Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
Not Applicable.
(b) Pro forma financial information.
Not Applicable.
(c) Exhibits.
10.01 Credit Agreement with Bank Leumi USA, dated as of June 3, 2005
10.02 Form of Security Agreement, dated as of June 3, 2005
SIGNATURE
Pursuant to the requirement of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WPCS INTERNATIONAL INCORPORATED
By: /s/ ANDREW HIDALGO
-----------------------
Andrew Hidalgo
President
Dated: June 8, 2005