DEBT	9 Months Ended
Jan. 31, 2012
Debt
DEBT	NOTE 4 - DEBT *Lines of Credit* On January 27, 2012, WPCS and its United States-based Subsidiaries entered into the Credit Agreement with Sovereign. The Credit Agreement provides for a revolving line of credit in an amount not to exceed $12,000,000, together with a letter of credit facility not to exceed $2,000,000. Pursuant to the Credit Agreement, the Company and these subsidiaries granted a security interest to Sovereign in all of their assets. In addition, pursuant to a collateral pledge agreement, WPCS pledged 100% of its ownership in the domestic Subsidiaries and 65% of its ownership in WPCS Australia Pty Ltd. Pursuant to the terms of the Credit Agreement, the Company is permitted to borrow up to $12,000,000 under the revolving credit line, under a Borrowing Base equal to the lesser of (i) $12,000,000 less the letter of credit amount, or (ii) the sum of (a) 80% of Eligible Accounts Receivable plus (b) the lesser of $750,000 or 40% of Eligible Inventory, minus (c) the letter of credit amount minus (d) such reserves, in such amounts and with respect to such matters, as Sovereign may deem reasonably proper and necessary from time to time at its own discretion. Borrowings under the Credit Agreement may be used for general corporate purposes, for permitted acquisitions, for working capital and for related fees and expenses. As of January 31, 2012, the total amount available to borrow under the Credit Agreement was $6,386,015 and the total amount outstanding was $3,103,830, resulting in net availability for future borrowings of $3,282,185. The Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants, and events of default. Principal covenants include (a) Fixed Charge Coverage Ratio of not less than 1.2 to 1.0, measured as of April 30, 2012 and as of each fiscal quarter end thereafter, in each case on a trailing two (2) quarter basis; and (b) Leverage Ratio of not more than 1.75 to 1.0, measured as of each fiscal quarter end. The Company met the Leverage Ratio covenant as of January 31, 2012. Due to the operating loss for the quarter ended January 31, 2012, it is expected that the Company will not meet the Fixed Charge Coverage Ratio of 1.2 to 1.0, when first required to be measured for the two quarters ending April 30, 2012. The Credit Agreement will expire on January 26, 2015. The interest rate applicable to revolving loans under the Credit Agreement is at the London Interbank Offered Rate (LIBOR) plus an interest margin initially of 2.75% (3.0228% at January 31, 2012), which interest margin could be reduced to 2.25% in the future based on the Company’s Fixed Charge Coverage Ratio on a trailing 12 month basis. The Company paid a loan commitment fee of $60,000 and will pay a monthly unused commitment fee during the term of the Credit Agreement of 0.375%. In addition, the Company shall pay Sovereign a collateral monitoring fee of $1,000 per month during the term of the Credit Agreement and 2.25% per annum on the face amount of each letter of credit issued by Sovereign. The Company may prepay the loan at any time and may terminate the Credit Agreement upon 90 days prior written notice. In the event that the Company terminates the Credit Agreement, the Company will pay Sovereign an early termination fee of 3% of the maximum credit amount if such termination occurs prior to the first anniversary or 1% of the maximum credit amount if such termination occurs after the first anniversary but prior to the expiration of the Credit Agreement. The obligations of the Company under the Credit Agreement may be accelerated upon the occurrence of an event of default under the Credit Agreement, which includes customary events of default including, without limitation, payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy of representations or warranties, cross-defaults, bankruptcy and insolvency related defaults, defaults relating to judgments, an ERISA reportable event occurs, a change of control and a change in the Company’s financial condition that could have a material adverse effect on the Company. The Company used the initial funds provided by the loan, in the gross amount of $2,837,668 to repay the existing loan of $2,428,491 to BOA, which loan agreement was terminated in connection with the Credit Agreement and the remaining $409,177 for fees and expenses in connection with the Credit Agreement. The Company is required to maintain a lock-box arrangement whereby its customers are required to submit all payments on invoices to the lock-box. Sovereign controls the lock-box and all collections are used to pay down the revolver. The Company may request new advances under the revolver on a daily basis. In addition, the Credit Agreement contains customary default provisions regarding a material adverse effect with respect to the Company’s business, assets, properties, and financial condition taken as a whole, which is commonly referred to as a subjective acceleration clause. The combination of the lock-box arrangement and the subjective acceleration clause requires the Credit Agreement borrowings at January 31, 2012 of $3,103,830 to be classified as a current liability. *Loans Payable* The Company’s long-term debt also consists of notes issued by the Company or assumed in acquisitions related to working capital funding and the purchase of property and equipment in the ordinary course of business. At January 31, 2012, loans payable and capital lease obligations totaled $429,415 with interest rates ranging from 7.8% to 14.3%. The Company’s management believes that the fair values of the loans payable do not differ materially from their aggregate carrying values based on stated rates not being materially different from market based rates as of January 31, 2012. *Due Joint Venture Partner* As of January 31, 2012, the China Operations had outstanding loans due the joint venture partner, Taian Gas Group (TGG), totaling $3,094,682 of which $2,359,725 matures on September 30, 2012, and bears interest at prime rate in China. The remaining balance of $734,957 is due on demand and represents interest accrued and working capital loans from TGG to the China Operations in the normal course of business.

DEBT

9 Months Ended

Jan. 31, 2012

NOTE 4 - DEBT

Lines of Credit

On January 27, 2012, WPCS and its United States-based Subsidiaries entered into the Credit Agreement with Sovereign. The Credit Agreement provides for a revolving line of credit in an amount not to exceed $12,000,000, together with a letter of credit facility not to exceed $2,000,000. Pursuant to the Credit Agreement, the Company and these subsidiaries granted a security interest to Sovereign in all of their assets. In addition, pursuant to a collateral pledge agreement, WPCS pledged 100% of its ownership in the domestic Subsidiaries and 65% of its ownership in WPCS Australia Pty Ltd.

Pursuant to the terms of the Credit Agreement, the Company is permitted to borrow up to $12,000,000 under the revolving credit line, under a Borrowing Base equal to the lesser of (i) $12,000,000 less the letter of credit amount, or (ii) the sum of (a) 80% of Eligible Accounts Receivable plus (b) the lesser of $750,000 or 40% of Eligible Inventory, minus (c) the letter of credit amount minus (d) such reserves, in such amounts and with respect to such matters, as Sovereign may deem reasonably proper and necessary from time to time at its own discretion. Borrowings under the Credit Agreement may be used for general corporate purposes, for permitted acquisitions, for working capital and for related fees and expenses. As of January 31, 2012, the total amount available to borrow under the Credit Agreement was $6,386,015 and the total amount outstanding was $3,103,830, resulting in net availability for future borrowings of $3,282,185.

The Credit Agreement contains certain customary representations and warranties, affirmative and negative covenants, and events of default. Principal covenants include (a) Fixed Charge Coverage Ratio of not less than 1.2 to 1.0, measured as of April 30, 2012 and as of each fiscal quarter end thereafter, in each case on a trailing two (2) quarter basis; and (b) Leverage Ratio of not more than 1.75 to 1.0, measured as of each fiscal quarter end. The Company met the Leverage Ratio covenant as of January 31, 2012. Due to the operating loss for the quarter ended January 31, 2012, it is expected that the Company will not meet the Fixed Charge Coverage Ratio of 1.2 to 1.0, when first required to be measured for the two quarters ending April 30, 2012.

The Credit Agreement will expire on January 26, 2015. The interest rate applicable to revolving loans under the Credit Agreement is at the London Interbank Offered Rate (LIBOR) plus an interest margin initially of 2.75% (3.0228% at January 31, 2012), which interest margin could be reduced to 2.25% in the future based on the Company’s Fixed Charge Coverage Ratio on a trailing 12 month basis. The Company paid a loan commitment fee of $60,000 and will pay a monthly unused commitment fee during the term of the Credit Agreement of 0.375%. In addition, the Company shall pay Sovereign a collateral monitoring fee of $1,000 per month during the term of the Credit Agreement and 2.25% per annum on the face amount of each letter of credit issued by Sovereign.

The Company may prepay the loan at any time and may terminate the Credit Agreement upon 90 days prior written notice. In the event that the Company terminates the Credit Agreement, the Company will pay Sovereign an early termination fee of 3% of the maximum credit amount if such termination occurs prior to the first anniversary or 1% of the maximum credit amount if such termination occurs after the first anniversary but prior to the expiration of the Credit Agreement.

The obligations of the Company under the Credit Agreement may be accelerated upon the occurrence of an event of default under the Credit Agreement, which includes customary events of default including, without limitation, payment defaults, defaults in the performance of affirmative and negative covenants, the inaccuracy of representations or warranties, cross-defaults, bankruptcy and insolvency related defaults, defaults relating to judgments, an ERISA reportable event occurs, a change of control and a change in the Company’s financial condition that could have a material adverse effect on the Company.

The Company used the initial funds provided by the loan, in the gross amount of $2,837,668 to repay the existing loan of $2,428,491 to BOA, which loan agreement was terminated in connection with the Credit Agreement and the remaining $409,177 for fees and expenses in connection with the Credit Agreement.

The Company is required to maintain a lock-box arrangement whereby its customers are required to submit all payments on invoices to the lock-box. Sovereign controls the lock-box and all collections are used to pay down the revolver. The Company may request new advances under the revolver on a daily basis. In addition, the Credit Agreement contains customary default provisions regarding a material adverse effect with respect to the Company’s business, assets, properties, and financial condition taken as a whole, which is commonly referred to as a subjective acceleration clause. The combination of the lock-box arrangement and the subjective acceleration clause requires the Credit Agreement borrowings at January 31, 2012 of $3,103,830 to be classified as a current liability.

Loans Payable

The Company’s long-term debt also consists of notes issued by the Company or assumed in acquisitions related to working capital funding and the purchase of property and equipment in the ordinary course of business. At January 31, 2012, loans payable and capital lease obligations totaled $429,415 with interest rates ranging from 7.8% to 14.3%. The Company’s management believes that the fair values of the loans payable do not differ materially from their aggregate carrying values based on stated rates not being materially different from market based rates as of January 31, 2012.

Due Joint Venture Partner

As of January 31, 2012, the China Operations had outstanding loans due the joint venture partner, Taian Gas Group (TGG), totaling $3,094,682 of which $2,359,725 matures on September 30, 2012, and bears interest at prime rate in China. The remaining balance of $734,957 is due on demand and represents interest accrued and working capital loans from TGG to the China Operations in the normal course of business.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

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