<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
--------------
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
---------- ------------------
Commission File Number 0-17478
-------
WISMER-MARTIN, INC.
(Exact name of small business issuer as specified in its charter)
WASHINGTON 91-1196514
(State or other jurisdiction of incorporation (IRS Employer
or organization) Indentification No.)
N. 12828 NEWPORT HIGHWAY
MEAD, WASHINGTON 99021-9988
(Address of principal executive offices)
(509) 466-0396
(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
---- ----
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: AS OF APRIL 30, 1995, THERE
WERE 9,847,625 SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK, PAR VALUE
$.001, WHICH IS THE ONLY CLASS OF COMMON EQUITY STOCK OF THE REGISTRANT.
Transitional Small Business disclosure Format (check one):
Yes ; No X
---------- ----------
<PAGE>
WISMER-MARTIN, INC.
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1995
-------
I N D E X
Page
----
PART I - Financial Information
Item 1 - Consolidated Balance Sheets, March 31, 1995 and
June 30,1994................................................. 1
- Consolidated Statements of Operations - Three and Nine Month
Periods Ended March 31, 1995 and 1994........................ 2
- Consolidated Statements of Cash Flows - Nine Month Periods
Ended March 31, 1995 and 1994................................ 3
- Notes to Consolidated Financial Statements.................. 4-5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 6-10
PART II - Other Information
Item 4 - Submission of Matters to a Vote of Security Holders............. 11
Item 6 - Exhibits and Reports on Form 8-K................................ 11
<PAGE>
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1995 AND JUNE 30, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, June 30,
ASSETS 1995 1994
------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 36,689 $ 588,349
Receivables:
Trade, net of allowance for doubtful accounts
of $278,074 and $176,362 1,732,537 2,807,368
Unbilled costs and expenses 190,251 166,354
Inventories 267,370 625,018
Prepaids and other assets 186,988 199,152
Deferred income taxes 589,889 248,044
------------- -------------
Total current assets 3,003,724 4,634,285
Property, plant and equipment, net of accumulated
depreciation and amortization of $1,988,434 and $1,616,061 1,948,528 1,962,445
Software development costs, net of accumulated amortization
of $2,249,964 and $1,790,345 2,500,469 1,672,161
Other assets, net of accumulated amortization
of $171,468 and $404,836 184,602 209,282
------------- -------------
Total assets $ 7,637,323 $ 8,478,173
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Note payable to bank $ 958,949 $ -
Accounts payable 1,014,725 1,097,500
Accrued wages and related taxes 341,358 524,455
Other accrued liabilities 138,132 302,102
Deposits 13,136 28,347
Deferred revenue 2,318,510 2,231,801
Long-term debt, due within one year 62,234 64,465
Obligations under capital leases, due within one year 29,305 20,164
------------- -------------
Total current liabilities 4,876,349 4,268,834
Other liabilities 93,201 138,740
Long-term debt, due after one year 900,746 949,617
Convertible subordinated debentures 3,000,000 3,000,000
Obligations under capital leases, due after one year 75,721 69,625
Deferred income taxes 589,885 589,885
------------- -------------
Total liabilities 9,535,902 9,016,701
------------- -------------
Stockholders' equity (deficit):
Common stock, $.001 par value 20,000,000 shares authorized:
9,847,625 and 9,362,625 shares issued and outstanding 9,848 9,363
Additional paid-in capital 1,203,809 1,082,544
Excess purchase price of acquired subsidiary (2,533,308) (2,533,308)
Retained earnings (deficit) (578,928) 902,873
------------- -------------
Total stockholders' equity (deficit) (1,898,579) (538,528)
------------- -------------
Total liabilities and stockholders' equity $ 7,637,323 $ 8,478,173
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
WISMER-MARTIN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTH PERIODS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales:
Software license fees $ 581,158 $ 1,489,961 $ 2,149,057 $ 2,921,616
Equipment, software and supplies sales 487,970 633,522 1,920,152 1,899,258
Software support and hardware maintenance contracts 977,449 808,912 2,879,754 2,097,587
Service revenue 534,890 364,294 2,154,972 1,065,350
Discounts (597,767) (309,833) (1,273,462) (730,614)
------------- ------------- ------------- ------------
Net sales 1,983,699 2,986,856 7,830,473 7,253,197
Operating expenses:
Cost of software license fees 163,376 153,719 459,619 349,719
Cost of equipment, software and supplies sold 373,709 455,344 1,401,011 1,301,604
Cost of support and operations 641,294 771,431 2,197,585 1,931,892
Selling and marketing 627,077 592,428 1,895,603 1,208,875
Product research, development and enhancements 589,246 538,031 1,887,622 862,473
Less: amount capitalized related to enhancements (499,943) (229,813) (1,287,927) (493,230)
General and administration 791,478 879,800 2,819,313 1,649,521
------------- ------------- ------------- ------------
Total operating expense 2,686,237 3,160,940 9,372,826 6,810,854
------------- ------------- ------------- ------------
Operating income (loss) (702,538) (174,084) (1,542,353) 442,343
Other income (expense):
Interest income 7,721 10,094 19,274 21,297
Interest expense (129,527) (62,614) (301,584) (117,194)
------------- ------------- ------------- ------------
Income (loss) before income taxes and
cumulative effect of change in accounting principle (824,343) (226,604) (1,824,663) 346,446
Income tax expense (benefit) - (92,723) (342,862) 80,886
------------- ------------- ------------- ------------
Income (loss) before cumulative effect of change
in accounting principle (824,343) (133,881) (1,481,801) 265,560
Cumulative effect of change in accounting principle - - - (27,479)
------------- ------------- ------------- ------------
Net income (loss) $ (824,343) $ (133,881) $ (1,481,801) $ 238,081
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
Net income (loss) per share:
Income (loss) before cumulative effect of change
in accounting principle $ (0.09) $ (0.01) $ (0.15) $ 0.03
Cumulative effect of change in accounting principle Nil Nil Nil Nil
------------- ------------- ------------- ------------
Net income (loss) per share $ (0.09) $ (0.01) $ (0.15) $ 0.03
------------- ------------- ------------- ------------
Weighted average common shares outstanding 9,847,625 9,055,960 9,685,500 9,055,960
------------- ------------- ------------- ------------
------------- ------------- ------------- ------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
WISMER-MARTIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED MARCH 31, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (1,481,801) $ 238,081
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 927,624 566,229
Cumulative effect of accounting change - 27,479
Deferred income tax benefit - (26,639)
Change in:
Trade accounts receivable 1,074,831 298,043
Unbilled costs and expenses (23,897) 87,363
Inventories 357,648 (83,921)
Prepaids and other assets 12,164 (28,249)
Deferred Income Taxes (341,845) -
Accounts payable (82,775) (89,131)
Accrued wages and related taxes (183,097) (25,192)
Other accrued expenses (163,970) 28,818
Income taxes payable - 108,291
Deposits (15,211) 20,087
Deferred revenue 86,709 (9,489)
Other liabilities - (50,987)
------------ ------------
Net cash provided (used) by operating activities 166,380 1,060,783
------------ ------------
Cash flows from investing activities:
Net cash received upon purchase of consolidated subsidiary - 313,297
Purchase of property, plant and equipment (324,752) (335,004)
Additions to software development costs (1,287,926) (493,230)
Purchase of other assets (70,952) (11,913)
Payments received on notes receivable - 862
------------ ------------
Net cash used in investing activities (1,683,630) (525,988)
------------ ------------
Cash flows from financing activities
Payment of debt obligations (96,641) (22,477)
Proceeds from issuance of common stock 121,750 -
Proceeds from subordinated debentures - 500,000
Payments under capital lease obligation (18,467) (6,688)
Net proceeds (payments) on note payable to bank 958,949 (357,327)
------------ ------------
Net cash provided by financing activities 965,590 113,508
------------ ------------
Net increase (decrease) in cash and cash equivalents (551,660) 648,303
Cash and cash equivalents at beginning of period 588,349 87,716
------------ ------------
Cash and cash equivalents at end of period $ 36,689 $736,019
------------ ------------
------------ ------------
NONCASH FINANCING ACTIVITIES:
Issuance of subordinated debentures for acquisition of
Integrated Health Systems, Inc. $ 2,500,000
------------
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PART I - FINANCIAL INFORMATION
CONTINUED
WISMER-MARTIN, INC.
NOTES TO FINANCIAL STATEMENTS
_______
1. ANNUAL FINANCIAL STATEMENTS NOTES:
---------------------------------
Certain of the notes to the financial statements as of June 30, 1994, as
set forth in the Company's 1994 Annual Report, substantially apply to the
interim financial statements and are not repeated here.
The results for the period ended March 31, 1995 are not necessarily
indicative of future financial results.
2. MANAGEMENT'S STATEMENT REGARDING ADJUSTMENTS:
--------------------------------------------
The financial information given in the accompanying unaudited financial
statements reflect all adjustments which, in the opinion of management,
are necessary to a fair statement for the periods reported. The balance
sheet at June 30, 1994 has been derived from the audited balance sheet.
3. INVENTORIES:
-----------
Inventories at March 31, 1995 and June 30, 1994 are summarized as follows:
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
------------ ------------
<S> <C> <C>
Hardware held for sale $241,436 $591,298
Software 12,859 20,222
Supplies 13,075 13,498
-------- --------
Total $267,370 $625,018
-------- --------
</TABLE>
4
<PAGE>
PART I-FINANCIAL INFORMATION
CONTINUED
WISMER-MARTIN, INC.
NOTES TO FINANCIAL STATEMENTS
-----
4. STOCK OPTIONS:
-------------
The Company issued two common stock purchase options on November 11, 1994
to two employees of the Company. The common stock purchase options are
for the acquisition of a total of 50,000 shares of common stock of the
Company. The options are exercisable from October 25, 1994 to October 25,
1997. The exercise price of the options is $1.75 per share.
On March 18, 1995, the Company issued common stock purchase options to
three employees of the Company. The common stock purchase options are for
the acquisition of a total of 475,000 shares of common stock of the
Company. The options are exercisable from January 31, 1995 to January 31,
1998. The exercise price of the options is $1.60 per share.
5. RECLASSIFICATIONS:
-----------------
Certain consolidated financial statement amounts have been reclassified to
conform to the 1994 presentation. These reclassifications had no effect
on the net loss or retained earnings as previously reported.
5
<PAGE>
PART I - FINANCIAL INFORMATION
CONTINUED
WISMER-MARTIN, INC.
_______
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
- ---------------------
On February 10, 1994, the Company acquired all of the outstanding shares of
common stock of Integrated Health Systems, Inc. (IHS). The consolidated
financial statements include the results of operations of IHS since February 10,
1994. Therefore, the results of operations for the nine and three month periods
ended March 31, 1995 are not directly comparable to the same periods for 1994.
The 1995 results include the results of operations for IHS for complete nine and
three month periods, whereas the corresponding periods for 1994 only include the
results of operations for IHS from the date of acquisition, February 10, 1994,
through the end of the third quarter, March 31, 1994.
Management has implemented several changes in the operations of the Company.
Some of the changes made were (a) as of January 31, 1995, the Company reduced
its workforce and shifted resources to concentrate on the healthcare information
network (HIN) market leading to an expense reduction as well as a positive
impact on the sales and service levels of the Company, (b) a continued emphasis
on the elimination or reduction of nonessential expenses, (c) a reduction in the
number of remote branch offices of the Company which will yield reduced office
operating expenses in the coming months, (d) a corporate management
reorganization to maximize the efficiencies and effectiveness of the Company,
and (e) an increased emphasis on generating sales and revenues for the Company.
Management believes the changes will have a positive impact on the financial
condition and operations of the Company during the remainder of the fiscal year
ending June 30, 1995.
NINE MONTHS ENDED MARCH 31, 1995 COMPARED WITH NINE MONTHS ENDED MARCH 31, 1994
During the nine months ended March 31, 1995 (""1995''), sales were
approximately $7,830,000, representing an increase of $577,000 from the sales
of $7,253,000 for the nine months ended March 31, 1994 (""1994''). This
increase was due to (1) the inclusion of approximately $1,054,000 of revenue
from Integrated Health Systems, Inc.(""IHS''), which was acquired as a
wholly-owned subsidiary on February 10, 1994 (see above), and (2) a decrease
in Wismer-Martin, Inc.'s (""W-M'') revenue of $477,000.
The cost of software license fees increased from $349,700 in 1994 to $459,600
in 1995. This increase of $109,900 was the result of an increase in the
amortization of software development costs.
The cost of equipment, software and supplies sold increased from $1,301,600 in
1994 to $1,401,000 in 1995. This increase of $99,400 was due primarily to the
increase in the cost of equipment and supplies sold.
The cost of support and operations increased from $1,931,900 for the nine
month period ended March 31, 1994 as compared to $2,197,600 for the nine
month period ended March 31, 1995. This increase of $265,700 was due to (1)
the inclusion of $203,500 in cost of support and services from IHS and (2) an
increase in W-M's expense of $62,200.
Selling and marketing expenses increased by $686,700, or 57%, for the nine
months ended March 31, 1995 as compared to the same period in 1994. This
change resulted primarily from an increase in the number of sales and
marketing personnel assigned to the Blue Cross of Washington and Alaska
contract.
6
<PAGE>
PART I - FINANCIAL INFORMATION
CONTINUED
WISMER-MARTIN, INC.
---------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS, CONTINUED:
NINE MONTHS ENDED MARCH 31, 1995 COMPARED WITH NINE MONTHS ENDED MARCH 31, 1994
Product research, development and enhancement costs represent costs associated
with enhancements to and maintenance of existing software and research and
development expenses. These costs are capitalized and amortized on a straight-
line basis over the remaining economic life of the products, which is estimated
to be five (5) years. Product research, development and enhancement costs
increased $1,025,100, or 119%, for 1995 as compared to 1994. The increase in
the expense was due to (1) the inclusion of $682,000 of research, development
and enhancement costs in 1995 from IHS and (2) an increase in costs of $343,100
from W-M. Both W-M and IHS increased the number of personnel associated with
the Company's product research, development and enhancement projects. The
Company expects research and development expenses to remain at the current
quarter's expense level for the remainder of the fiscal year ended June 30,
1995.
The amount of product research, development and enhancement expenses
capitalized for 1995 increased by $794,700 as compared to 1994. The increase
in capitalized software development costs was due to (1) the inclusion IHS's
capitalized software development costs in the amount of $270,800 and (2) an
increase in the amount of software development costs from W-M in the amount
of $523,900. The increase for W-M and IHS was due to an increase in the
amount of time and expenses devoted to enhancing the Company's products. A
larger number of staff have been assigned to product enhancements during 1995
as compared to 1994.
The increase in product, research and enhancement expenses as well as the
increase in capitalized software development costs reflects the Company's
commitment to the continuing development of SM*RT link and its integration
with SM*RT Practice as well as the enhancement of the IHS product line. The
Company is currently developing SM*RT Care, a second-generation software
product in which the patient is the core element of the system. SM*RT Care
will incorporate patient demographics, insurance information, managed care
capabilities as well as a seamless SM*RT Link interface. The Company is
nearing completion in its development of Radiology, Clinical and Nursing
Information Systems, which are part of the Integrated Health Systems product
line being offered to hospitals. These products have been developed
utilizing a ""client/server'' architecture running on local PC networks, which
the Company expects to increase the marketability of the entire Integrated
Health Systems product line.
General and administrative expenses increased from $1,649,500 for 1994 to
$2,819,300 for 1995. The increase in expenses of $1,169,800, or 71% was due to
(1) the inclusion of $366,600 of general and administrative expenses from IHS
and (2) an increase in the general and administrative expenses for W-M of
$803,200. The increase in W-M's general and administrative expenses are the
result of an increase in the number and cost of personnel, an increase in bad
debt expense, depreciation and office operating expenses.
Interest expense has increased $184,400 from 1994 to 1995. The increase in
interest expense has resulted from (1) the issuance of $2,500,000 in
convertible subordinated debentures on February 10, 1994, which increased
interest expense by approximately $110,000 for the nine months ended March
31, 1995 as compared to the same period for 1994; and (2) increased
borrowings on the Company's line of credit (notes payable to bank).
7
<PAGE>
PART I - FINANCIAL INFORMATION
CONTINUED
WISMER-MARTIN, INC.
________
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS, CONTINUED:
NINE MONTHS ENDED MARCH 31, 1995 COMPARED WITH NINE MONTHS ENDED MARCH 31, 1994
Effective July 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 109, ""Accounting for Income Taxes'' (SFAS
109). The cumulative effect of this change was $27,479. During the six
month period ended December 31, 1993, changes in the tax law were made. The
affect of these changes to the Company was (1) to increase the effective
federal tax rate to 35% and (2) to retroactively reinstate the research and
development tax credit for the fiscal year ended June 30, 1993. The Company
recorded a $80,900 tax expense during the nine months ended March 31, 1994
based on income before tax for the nine months of approximately $346,000. An
income tax benefit of $342,900 was recorded for the nine month period ended
March 31, 1995 due to the loss incurred for the period.
The factors discussed above resulted in a net loss of approximately
$1,481,800, or ($0.15) per share, during 1995, as compared to net income of
$238,100, or $0.03 per share, during 1994.
THREE MONTHS ENDED MARCH 31, 1995 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1994
During the three months ended March 31, 1995 (""1995''), sales were
approximately $1,983,700, representing a decrease of $1,003,200 from sales of
$2,986,900 for the three months ended March 31, 1994 (""1994''). In 1994,
W-M sales included approximately $772,000 in large network/system sales.
There were no corresponding network sales in the quarter ended March 31,
1995, which is the principal cause for the reported decrease in sales. These
sales are high-dollar transactions which do not occur ratably from quarter to
quarter. Since there is no incremental ""cost'' to these sales, the periods
in which these sales are reported tend to distort the relationship between
cost of systems sold and sales (see next paragraph).
The cost of software license fees increased from $153,700 in 1994 to $163,400
in 1995. This increase of $9,700 was the result of an increase in the
amortization of software development costs.
The cost of equipment, software and supplies sold decreased from $455,300 in
1994 to $373,700 in 1995. This decrease of $81,600 was due primarily to a
decrease in sales volume.
The cost of support and operations decreased from $771,400 for 1994 to
$641,300 for 1995. This decrease of $130,100 was principally due to a
decrease in the number of support personnel company-wide. Management
believes that the current level of support personnel is adequate for the
Company's existing customer base. Additional personnel will be added when
increases in the customer base so warrant. The cost of the additional
personnel would be more than offset by new revenues.
Selling and marketing expenses increased by $34,600, or 6%, for the three
months ended March 31, 1995 as compared to the same period in 1994. This
increase was due to an increase in the number of sales and marketing
personnel assigned to the Blue Cross of Washington and Alaska contract.
8
<PAGE>
PART I - FINANCIAL INFORMATION
CONTINUED
WISMER-MARTIN, INC.
________
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS, CONTINUED:
THREE MONTHS ENDED MARCH 31, 1995 COMPARED WITH THREE MONTHS ENDED MARCH 31,
1994
Product research, development and enhancement costs represent costs
associated with enhancements to and maintenance of existing software and
research and development expenses. These costs are capitalized and amortized
on a straight-line basis over the remaining economic life of the products,
which is estimated to be five (5) years. Product research, development and
enhancement costs increased $51,200, or 10%, for 1995 as compared to 1994.
This increase was due to an increase in the amount of time and expenses
devoted to enhancing the Company's products. A larger number of staff were
assigned to product enhancements during 1995 as compared to 1994.
The amount of enhancement expenses capitalized as software development costs
for 1995 increased by $270,100 as compared to 1994. This increase was due to
an increase in the amount of time and expenses devoted to enhancing the
Company's existing products and developing new products. A larger number of
staff were assigned to product development and enhancements during 1995 as
compared to 1994.
The increase in product, research and enhancement expenses as well as the
increase in capitalized software development costs reflects the Company's
commitment to the continuing development of SM*RT link and its integration
with SM*RT Practice as well as the enhancement of the IHS product line. The
Company is currently developing SM*RT Care, a second-generation software
product in which the patient is the core element of the system. SM*RT Care
will incorporate patient demographics, insurance information, managed care
capabilities as well as a seamless SM*RT Link interface. The Company is
nearing completion in its development of Radiology, Clinical and Nursing
Information Systems, which are part of the Integrated Health Systems product
line being offered to hospitals. These products have been developed
utilizing a ""client/server'' architecture running on local PC networks, which
should increase the marketability of the entire Integrated Health Systems
product line.
General and administrative expenses decreased by $88,300 or 10% for 1995 as
compared to 1994. This decrease is due in large part to a reduction of
general and administrative expenses at IHS.
Interest expense has increased approximately $66,900 from 1994 to 1995. The
increase in interest expense results from the additional interest expense
relating to the $2,500,000 in convertible subordinated debentures (issued
February 10, 1994) being outstanding for the full quarter in 1995, and
increased borrowings on the Company's line of credit (notes payable to bank)
for 1995 as compared to 1994.
No income tax benefit or expense has been recorded for the 1995 period.
While management believes the Company will return to profitability in the
fourth quarter, it is expected that the income tax benefits previously
recorded will be adequate to cover the anticipated profits during the fourth
quarter.
The various factors discussed above resulted in a net loss of approximately
$824,300 ($0.09 per share) for the three months ended March 31, 1995, as
compared to a net loss of approximately $133,900 ($0.01 per share) for the
three months ended March 31, 1994.
9
<PAGE>
PART I - FINANCIAL INFORMATION
CONTINUED
WISMER-MARTIN, INC.
______
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
At March 31, 1995, total assets and stockholders' deficit were approximately
$7,637,000 and $1,899,000, respectively, compared to $8,478,000 and $539,000,
respectively at June 30, 1994. The decrease in total assets is principally
due to a decrease in the accounts receivable at March 31, 1995. The decrease
in the stockholders' deficit is the result of the loss incurred during the
second and third quarters.
Cash and cash equivalents decreased by $551,700 from June 30, 1994 to March
31, 1995. In addition to the $166,400 of cash provided by operations, cash
was provided by the sale of stock in the amount of $121,800, and $958,900
from the Company's line of credit. The major uses of cash were $325,000 for
the purchase of property, plant and equipment, $1,287,900 for additional
capitalized software and development costs and $115,100 for payment of debt
and capital lease obligations.
To date, the Company's primary sources of liquidity have been internally
generated funds, the sale of the subordinated convertible debentures and its
operating line of credit, of which $958,900 was outstanding at March 31, 1995.
The credit agreement related to the note payable to bank includes various
restrictive covenents, the most significant of which relate to limits on
capital expenditures, maintenance of a minimum working capital ratio and
maintenance of a maximum debt to equity ratio. As of December 31, 1994, the
Company was not in compliance with certain covenants. As a result, the
Company and the bank entered into a Third Amended Business Loan Agreement
which extended the time to cure the default to June 30, 1995 and modified the
revolving line of credit as follows: (1) $500,000 of the amount outstanding
was converted to a term loan due June 30, 1995 (which was paid by the Company
on April 21, 1995), and (2) the revolving line of credit was reduced to
$500,000. This commitment expires on June 30, 1996. The line of credit is
collateralized by the Company's accounts receivable, inventories, property
and equipment. THE FINANCIAL COVENANTS ARE TO BE MEASURED AS OF JUNE 30, 1995,
AND INCLUDE PROVISIONS RELATING TO CONVERSION OF NOT LESS THAN $1,000,000
OF DEBT TO EQUITY AND RAISING ADDITIONAL CAPITAL THROUGH THE SALE OF
EQUITY SECURITIES OR INTERNALLY GENERATED FUNDS OF AT LEAST $1,000,000.
In order to increase internally generated funds, Management has implemented
several changes in the operations of the Company. Some of the changes made
were (a) as of January 31, 1995, the Company reduced its workforce and
shifted resources to concentrate on the healthcare information network (HIN)
market leading to an expense reduction as well as a positive impact on the
sales and service levels of the Company, (b) a continued emphasis on the
elimination or reduction of nonessential expenses, (c) a reduction in the
number of remote branch offices of the Company which will yield reduced
office operating expenses in the coming months, (d) a corporate management
reorganization to maximize the efficiencies and effectiveness of the Company,
and (e) an increased emphasis on generating sales and revenues for the
Company. Management believes the changes will have a positive impact on the
financial condition and operations of the Company during the remaining months
of the fiscal year ending June 30, 1995.
In order to continue the growth and expansion of the Company, the Company's
management is continuing to seek additional funds and joint venture
opportunities. On March 21, 1995, the Board of Directors of the Company
approved a $2,000,000 stock offering. The Company anticipates the offering
to be filed with the Securities and Exchange Commission before the end of the
fiscal year, June 30, 1995.
10
<PAGE>
PART II - OTHER INFORMATION
WISMER-MARTIN, INC.
______
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Stockholders was held on March 21, 1995. At that
meeting, Messrs. Holden, Martin, Barnes, Eidemiller, Perez and Engel
(THE PERSONS NOMINATED BY THE BOARD OF DIRECTORS) were elected to serve until
the next Annual Meeting.
In addition to the election of directors, the shareholders also ratified the
selection of Coopers & Lybrand as independent public accountants of the
company for fiscal year ending June 30, 1995. Shares voting for: 8,947,847;
against: 5,200; and abstaining: 36,400.
No other business was brought to a vote at the Annual Meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
(10) Material Contracts
(27) Financial Data Schedule
(b) REPORTS ON FORM 8-K
A report on Form 8-K was filed on March 31, 1995 disclosing the
resignation of Coopers & Lybrand, LLP as independent public
accountants on March 28, 1995.
A report on Form 8-K was filed on April 11, 1995 disclosing Coopers &
Lybrand, LLP's (C&L) letter to the Company, dated April 10, 1995,
AS CALLED FOR UNDER ITEM 304 OF REGULATION SB.
On April 28, 1995, a report on Form 8-K was filed disclosing the
appointment of BDO Seidman as the independent public accountants for
the Company for the fiscal year ending June 30, 1995.
Items 1, 2, 3 and 5 of Part II are omitted from this report as inapplicable.
11
<PAGE>
WISMER-MARTIN, INC.
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.
WISMER-MARTIN, INC.
------------------------------
(Registrant)
Date: 05/12/95 /s/ Douglas A. Willford
-------------- ----------------------------------
Douglas A. Willford
Executive Vice President and
Chief Financial Officer
12
<PAGE>
EXHIBIT 10
MATERIAL CONTRACTS
<PAGE>
NON-QUALIFIED STOCK OPTION TO PURCHASE
SHARES OF WISMER*MARTIN, INC.
<PAGE>
WISMER*MARTIN, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated the 18TH day of March, 1995, to be effective January
31, 1995, between WISMER*MARTIN, INC., a Washington corporation (hereinafter
the "Company"), and DOUGLAS WILLFORD (hereinafter the "Optionee").
1. GRANT OF OPTION/PURCHASE PRICE. The Company hereby grants to the Optionee,
subject to the terms and conditions herein set forth, the right and option
to purchase from the Company all or any part of an aggregate of 100,000
shares of common stock of the Company ("Stock") at the purchase price of
$1.60 per share.
2. ACCRUAL AND EXERCISE OF OPTION.
a. ACCRUAL OF INCREMENT. This option may be exercised in full (without
increments) at any time and the exercisability date is January 31,
1995 for purposes of this agreement.
b. THREE YEAR EXERCISE PERIOD. Each increment shall be assigned an
"exercisability date" which shall be the date said increment became
exercisable under Section 2(a). For the purpose of this agreement,
the "exercise period" with respect to an increment shall be the
period beginning on said increment's exercisability date and ending on
the earlier of (i) the date specified at Section 2(d), below, or
(ii) the third anniversary of said exercisability date. The Optionee
shall have the right to purchase any shares covered by an increment,
in the manner set forth in Section 2(c), below, during said
increment's exercise period. The right to purchase any shares covered
by an increment shall terminate and lapse as of the last day of said
increment's exercise period.
c. METHOD OF EXERCISE. During the increment's exercise period, Optionee
may exercise his rights hereunder with respect to said increment in
installments (equal or unequal), at any time or times, as determined
by Optionee; provided, this option with respect to an increment, in
whole or in part, Optionee must, during the exercise period, deliver
to the Company a notice of exercise along with the full cash purchase
price required at Section 1 of the shares to be purchased. Upon
receiving notice of exercise and the cash purchase price, the Company
shall prepare and issue to the Optionee a certificate for the number
of shares designated in the notice. Optionee may only exercise his
rights hereunder in sequential order. Thus, for example, there may be
no exercise with respect to the second increment while any portion of
the first increment is outstanding. For the purchase of this
Agreement, an increment will be treated as outstanding until such
increment is exercised in full or is
1
<PAGE>
expired by reason of termination and lapse under Section 2(b) above.
d. TERMINATION OF ACCRUALS/TERMINATION OF PURCHASE RIGHTS.
i) TERMINATION FOR CAUSE. Upon an occurrence of an event which
constitutes a basis for the termination of Optionee's employment
"for cause", all rights under this Option Agreement, both accrued
and unaccrued, shall terminate and lapse. Thus, upon the date
of said event, no unexerciseable increment shall thereafter
become exercisable and no further purchases with respect to
outstanding and exercisable increments may occur. For the
purposes of this Section 2(d)(i), any of the following shall
constitute a basis for a "for cause" termination:
(a) CONVICTION OF A CRIME. The conviction of the Optionee of
any (i) crime involving moral turpitude, or (ii) any felony.
(b) BREACH OF FIDUCIARY OBLIGATION. The Optionee's breach of
any fiduciary obligation owed to the Company.
(c) The Optionee's failure to diligently and satisfactorily
discharge his obligations of employment (for reasons other
than death or disability).
ii) TERMINATION OF EMPLOYMENT WITHOUT CAUSE. Upon the date of
Optionee's employment with the Company is terminated by Optionee
or Company without cause, (a) no exercisable increment under
Section 2(a) shall thereafter become exercisable, and (b)
Optionee shall have the right, exercisable within sixty (60) days
after said employment termination, to exercise this Option (with
respect to any increment exercisable on the date of said
employment termination) in the manner described at Section 2(c).
Upon the expiration of said sixty (60) day period, all rights
under this Option Agreement shall terminate and lapse. For
purposes of the foregoing, the date of employment termination
shall mean the earlier of the date on which the Optionee or the
Company gives notices to the other of Optionee's termination of
employment or the date said employment actually terminates.
iii) TERMINATION BY REASON OF DEATH OR DISABILITY. Upon the
Optionee's death or disability, (A) no unexerciseable increment
under Section 2(a) shall thereafter become exercisable, (b) the
Personal Representative (or other legal representative) of
Optionee's estate shall have the right, exercisable within
ninety (90) days after the date of Optionee's death or the date
of Optionee's
2
<PAGE>
disability, to exercise this option (with respect to any
increment exercisable on the date of death or disability) in
the manner described in Section 2(c). Upon the expiration of
said ninety (90) day period, all rights under this Option
Agreement shall terminate and lapse. For the purposes of
the foregoing, (A) Optionee's employment shall be considered
to have terminated by reason of disability if Optionee,
because of a physical or mental disability, will be unable
to perform the duties of his customary position of employment
with the Company for an indefinite period which the Company
determines to be of long and continued duration, and (B) the
date of disability shall be the date of said determination by
the Company.
iv) DISSOLUTION/MERGER OR SALE OF ASSETS. Optionee's rights in the
event of a dissolution, merger or sale of assets shall be as
set forth at Section 8.
e. NONTRANSFERABILITY. Except as specifically provided at Section 2(d),
this Option shall be exercisable only by Optionee, as permitted under
this Agreement, while Optionee is employed by the Company.
f. ADJUSTMENTS. In the event of any change in the common stock of the
Company by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination, or
exchange of shares, or of any similar change affecting the common
stock, then in any such event, the number and kind of shares subject
to this option and their purchase price per share may be appropriately
increased or decreased consistent with such change in such manner as
the Company's Board of Directors, in its sole discretion, may deem
equitable to prevent substantial dilution or enlargement of the rights
granted Optionee hereunder. Any adjustment so made or any decision
not to make an adjustment shall be final and binding upon Optionee.
g. NO RIGHTS AS SHAREHOLDER. Optionee shall have no rights as a
shareholder with respect to any shares of Stock subject to this option
prior to the date of issuance to him of a certificate or certificates
for such shares.
h. NO RIGHT TO CONTINUE EMPLOYMENT. This option shall not confer upon
Optionee any right with respect to continuance of employment by the
Company, nor interfere in any way with the right of the Company to
terminate his employment at any time.
i. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. This option and the
obligation of the Company to sell and deliver shares hereunder,
shall be subject to all applicable Federal and State laws, rules and
regulations and to such approvals by any government or regulatory
agency as may be required. In addition, the Company shall not be
required to issue or
3
<PAGE>
deliver any certificates for shares of Stock prior to (i) the
listing of such shares on any stock exchange on which the Stock
may then be listed, and (ii) the completion of any registration
or qualification of such shares under any federal or state law,
or any rule or regulation of any government body which the Company,
in its sole discretion, shall determine to be necessary to be
advisable. This option may not be exercised and the Company shall
have no liability under this agreement if its exercise, or the
receipt of shares of Stock pursuant thereto, would be contrary to
any applicable law.
j. WITHHOLDING TAXES. Prior to the issuance of Stock pursuant to any
exercise, the Company shall (i) require the Optionee to remit to the
Company an amount sufficient to satisfy all withholdings and
employment taxes, and other obligations of the Company arising as a
result of Optionee's exercise, or (ii) make such other arrangements
for the payment of such obligations as the Board of Directors shall
determine.
3. RESTRICTIONS. Shares of common stock acquired pursuant to this Option
shall be subject to any and all federal and state securities laws and other
restrictions applicable to the common stock of the Company.
4. NOTICES. Any notice hereunder to the Company shall be addressed to it at
its offices. 12828 N. Newport Highway, Mead, Washington 99021, and any
notice hereunder to Optionee shall be addressed to him at the address
specified below; subject to the right of either party to designate at any
time hereafter in writing some other address. Notice shall be in writing
delivered in person (effective upon deliver) or by U.S. or certified
mail, return receipt requested (effective when properly addressed and
mailed).
5. GOVERNING LAW. This Agreement shall be interpreted, construed and governed
according to the laws of the State of Washington.
6. ATTORNEYS FEES. In the event that any party shall bring an action in
connection with the performance, breach or interpretation of this
agreement, or in any way relating to the transactions contemplated
hereby, the prevailing party in such action shall be entitled to recover
from the losing party all reasonable costs and expenses of litigation,
including attorneys fees, court costs, costs of investigation, accounting
and other costs reasonably related to such litigation, in such amount as
may be determined in the sole discretion of the court having jurisdiction
over such action.
7. ENTIRE AGREEMENT; AMENDMENT. This Agreement shall constitute the entire
agreement between the parties hereto respecting options hereunder and may
not be modified or amended, except by a written instrument signed by each
of the parties hereto, expressing such modification or amendment. This
Agreement completely supersedes any other agreement (oral or written)
4
<PAGE>
between the parties hereto respecting the options contemplated hereunder.
8. DISSOLUTION/MERGER/SALE OF ASSETS. Upon (i) the legal dissolution or
liquidation of the Company, (ii) a merger or consolidation in which the
Company is not the surviving company, or (iii) the sale of substantially
all of the Company's assets, any increment which has not yet become
exercisable pursuant to Section 2(a) shall automatically become
exercisable and Optionee shall have the right, exercisable within thirty
(30) days after the date of the shareholders of the Company approve said
dissolution, liquidation, merger or consolidation, or sale of assets, to
exercise this option, in whole or in part, by delivering to the Company,
within said thirty (30) day period, a written notice of exercise along with
the full cash purchase price required at Section 1 of the shares to be
purchased. Upon the expiration of said thirty (30) day period, all rights
under this Option Agreement shall terminate and lapse.
9. LEGAL AUTHORITY TO ISSUE STOCK. The inability of the Company to obtain
from any regulatory body having jurisdiction the authority deemed necessary
by counsel for the Company of the lawful issuance and sale of its stock
hereunder shall relieve the Company of any liability in respect of the
failure to issue or sell stock as to which the requisite authority has
not been obtained.
IN WITNESS WHEREOF, WISMER*MARTIN, INC. has caused this Agreement to be
executed by its President and Optionee has executed this Agreement, both as of
the day and year first above written.
COMPANY: WISMER*MARTIN, INC.
/s/ Ronald L. Holden
-----------------------------------
OPTIONEE: /s/ Douglas A. Willford
----------------------------------
DOUGLAS WILLFORD
Address: 5015 Nighthawk Way
-----------------------------------
Oceanside, CA 92056-5444
-----------------------------------
5
<PAGE>
NON-QUALIFIED STOCK OPTION TO PURCHASE
SHARES OF WISMER*MARTIN, INC.
<PAGE>
WISMER*MARTIN, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated the 18TH day of March, 1995, to be effective January
31, 1995, between WISMER*MARTIN, INC., a Washington corporation (hereinafter
the "Company"), and WILLIAM CAMPBELL (hereinafter the "Optionee").
1. GRANT OF OPTION/PURCHASE PRICE. The Company hereby grants to the Optionee,
subject to the terms and conditions herein set forth, the right and option
to purchase from the Company all or any part of an aggregate of 175,000
shares of common stock of the Company ("Stock") at the purchase price of
$1.60 per share.
2. ACCRUAL AND EXERCISE OF OPTION.
a. ACCRUAL OF INCREMENT. This option may be exercised in full (without
increments) at any time and the exercisability date is January 31,
1995 for purposes of this agreement.
b. THREE YEAR EXERCISE PERIOD. Each increment shall be assigned an
"exercisability date" which shall be the date said increment became
exercisable under Section 2(a). For the purpose of this agreement,
the "exercise period" with respect to an increment shall be the
period beginning on said increment's exercisability date and ending on
the earlier of (i) the date specified at Section 2(d), below, or
(ii) the third anniversary of said exercisability date. The Optionee
shall have the right to purchase any shares covered by an increment,
in the manner set forth in Section 2(c), below, during said
increment's exercise period. The right to purchase any shares covered
by an increment shall terminate and lapse as of the last day of said
increment's exercise period.
c. METHOD OF EXERCISE. During the increment's exercise period, Optionee
may exercise his rights hereunder with respect to said increment in
installments (equal or unequal), at any time or times, as determined
by Optionee; provided, this option with respect to an increment, in
whole or in part, Optionee must, during the exercise period, deliver
to the Company a notice of exercise along with the full cash purchase
price required at Section 1 of the shares to be purchased. Upon
receiving notice of exercise and the cash purchase price, the Company
shall prepare and issue to the Optionee a certificate for the number
of shares designated in the notice. Optionee may only exercise his
rights hereunder in sequential order. Thus, for example, there may be
no exercise with respect to the second increment while any portion of
the first increment is outstanding. For the purchase of this
Agreement, an increment will be treated as outstanding until such
increment is exercised in full or is
1
<PAGE>
expired by reason of termination and lapse under Section 2(b) above.
d. TERMINATION OF ACCRUALS/TERMINATION OF PURCHASE RIGHTS.
i) TERMINATION FOR CAUSE. Upon an occurrence of an event which
constitutes a basis for the termination of Optionee's employment
"for cause", all rights under this Option Agreement, both accrued
and unaccrued, shall terminate and lapse. Thus, upon the date
of said event, no unexerciseable increment shall thereafter
become exercisable and no further purchases with respect to
outstanding and exercisable increments may occur. For the
purposes of this Section 2(d)(i), any of the following shall
constitute a basis for a "for cause" termination:
(a) CONVICTION OF A CRIME. The conviction of the Optionee of
any (i) crime involving moral turpitude, or (ii) any felony.
(b) BREACH OF FIDUCIARY OBLIGATION. The Optionee's breach of
any fiduciary obligation owed to the Company.
(c) The Optionee's failure to diligently and satisfactorily
discharge his obligations of employment (for reasons other
than death or disability).
ii) TERMINATION OF EMPLOYMENT WITHOUT CAUSE. Upon the date of
Optionee's employment with the Company is terminated by Optionee
or Company without cause, (a) no exercisable increment under
Section 2(a) shall thereafter become exercisable, and (b)
Optionee shall have the right, exercisable within sixty (60) days
after said employment termination, to exercise this Option (with
respect to any increment exercisable on the date of said
employment termination) in the manner described at Section 2(c).
Upon the expiration of said sixty (60) day period, all rights
under this Option Agreement shall terminate and lapse. For
purposes of the foregoing, the date of employment termination
shall mean the earlier of the date on which the Optionee or the
Company gives notices to the other of Optionee's termination of
employment or the date said employment actually terminates.
iii) TERMINATION BY REASON OF DEATH OR DISABILITY. Upon the
Optionee's death or disability, (A) no unexerciseable increment
under Section 2(a) shall thereafter become exercisable, (b) the
Personal Representative (or other legal representative) of
Optionee's estate shall have the right, exercisable within
ninety (90) days after the date of Optionee's death or the date
of Optionee's
2
<PAGE>
disability, to exercise this option (with respect to any
increment exercisable on the date of death or disability) in
the manner described in Section 2(c). Upon the expiration of
said ninety (90) day period, all rights under this Option
Agreement shall terminate and lapse. For the purposes of
the foregoing, (A) Optionee's employment shall be considered
to have terminated by reason of disability if Optionee,
because of a physical or mental disability, will be unable
to perform the duties of his customary position of employment
with the Company for an indefinite period which the Company
determines to be of long and continued duration, and (B) the
date of disability shall be the date of said determination by
the Company.
iv) DISSOLUTION/MERGER OR SALE OF ASSETS. Optionee's rights in the
event of a dissolution, merger or sale of assets shall be as
set forth at Section 8.
e. NONTRANSFERABILITY. Except as specifically provided at Section 2(d),
this Option shall be exercisable only by Optionee, as permitted under
this Agreement, while Optionee is employed by the Company.
f. ADJUSTMENTS. In the event of any change in the common stock of the
Company by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination, or
exchange of shares, or of any similar change affecting the common
stock, then in any such event, the number and kind of shares subject
to this option and their purchase price per share may be appropriately
increased or decreased consistent with such change in such manner as
the Company's Board of Directors, in its sole discretion, may deem
equitable to prevent substantial dilution or enlargement of the rights
granted Optionee hereunder. Any adjustment so made or any decision
not to make an adjustment shall be final and binding upon Optionee.
g. NO RIGHTS AS SHAREHOLDER. Optionee shall have no rights as a
shareholder with respect to any shares of Stock subject to this option
prior to the date of issuance to him of a certificate or certificates
for such shares.
h. NO RIGHT TO CONTINUE EMPLOYMENT. This option shall not confer upon
Optionee any right with respect to continuance of employment by the
Company, nor interfere in any way with the right of the Company to
terminate his employment at any time.
i. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. This option and the
obligation of the Company to sell and deliver shares hereunder,
shall be subject to all applicable Federal and State laws, rules and
regulations and to such approvals by any government or regulatory
agency as may be required. In addition, the Company shall not be
required to issue or
3
<PAGE>
deliver any certificates for shares of Stock prior to (i) the
listing of such shares on any stock exchange on which the Stock
may then be listed, and (ii) the completion of any registration
or qualification of such shares under any federal or state law,
or any rule or regulation of any government body which the Company,
in its sole discretion, shall determine to be necessary to be
advisable. This option may not be exercised and the Company shall
have no liability under this agreement if its exercise, or the
receipt of shares of Stock pursuant thereto, would be contrary to
any applicable law.
j. WITHHOLDING TAXES. Prior to the issuance of Stock pursuant to any
exercise, the Company shall (i) require the Optionee to remit to the
Company an amount sufficient to satisfy all withholdings and
employment taxes, and other obligations of the Company arising as a
result of Optionee's exercise, or (ii) make such other arrangements
for the payment of such obligations as the Board of Directors shall
determine.
3. RESTRICTIONS. Shares of common stock acquired pursuant to this Option
shall be subject to any and all federal and state securities laws and other
restrictions applicable to the common stock of the Company.
4. NOTICES. Any notice hereunder to the Company shall be addressed to it at
its offices. 12828 N. Newport Highway, Mead, Washington 99021, and any
notice hereunder to Optionee shall be addressed to him at the address
specified below; subject to the right of either party to designate at any
time hereafter in writing some other address. Notice shall be in writing
delivered in person (effective upon deliver) or by U.S. or certified
mail, return receipt requested (effective when properly addressed and
mailed).
5. GOVERNING LAW. This Agreement shall be interpreted, construed and governed
according to the laws of the State of Washington.
6. ATTORNEYS FEES. In the event that any party shall bring an action in
connection with the performance, breach or interpretation of this
agreement, or in any way relating to the transactions contemplated
hereby, the prevailing party in such action shall be entitled to recover
from the losing party all reasonable costs and expenses of litigation,
including attorneys fees, court costs, costs of investigation, accounting
and other costs reasonably related to such litigation, in such amount as
may be determined in the sole discretion of the court having jurisdiction
over such action.
7. ENTIRE AGREEMENT; AMENDMENT. This Agreement shall constitute the entire
agreement between the parties hereto respecting options hereunder and may
not be modified or amended, except by a written instrument signed by each
of the parties hereto, expressing such modification or amendment. This
Agreement completely supersedes any other agreement (oral or written)
4
<PAGE>
between the parties hereto respecting the options contemplated hereunder.
8. DISSOLUTION/MERGER/SALE OF ASSETS. Upon (i) the legal dissolution or
liquidation of the Company, (ii) a merger or consolidation in which the
Company is not the surviving company, or (iii) the sale of substantially
all of the Company's assets, any increment which has not yet become
exercisable pursuant to Section 2(a) shall automatically become
exercisable and Optionee shall have the right, exercisable within thirty
(30) days after the date of the shareholders of the Company approve said
dissolution, liquidation, merger or consolidation, or sale of assets, to
exercise this option, in whole or in part, by delivering to the Company,
within said thirty (30) day period, a written notice of exercise along with
the full cash purchase price required at Section 1 of the shares to be
purchased. Upon the expiration of said thirty (30) day period, all rights
under this Option Agreement shall terminate and lapse.
9. LEGAL AUTHORITY TO ISSUE STOCK. The inability of the Company to obtain
from any regulatory body having jurisdiction the authority deemed necessary
by counsel for the Company of the lawful issuance and sale of its stock
hereunder shall relieve the Company of any liability in respect of the
failure to issue or sell stock as to which the requisite authority has
not been obtained.
IN WITNESS WHEREOF, WISMER*MARTIN, INC. has caused this Agreement to be
executed by its President and Optionee has executed this Agreement, both as of
the day and year first above written.
COMPANY: WISMER*MARTIN, INC.
/s/ Ronald L. Holden
-----------------------------------
OPTIONEE: /s/ William E. Campbell III
-----------------------------------
WILLIAM CAMPBELL
Address: 1336 98th Avenue NE
-----------------------------------
Bellevue, WA 98004
-----------------------------------
5
<PAGE>
NON-QUALIFIED STOCK OPTION TO PURCHASE
SHARES OF WISMER*MARTIN, INC.
<PAGE>
WISMER*MARTIN, INC.
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT dated the 18TH day of March, 1995, to be effective January
31, 1995, between WISMER*MARTIN, INC., a Washington corporation (hereinafter
the "Company"), and JOHN F. PEREZ (hereinafter the "Optionee").
1. GRANT OF OPTION/PURCHASE PRICE. The Company hereby grants to the Optionee,
subject to the terms and conditions herein set forth, the right and option
to purchase from the Company all or any part of an aggregate of 200,000
shares of common stock of the Company ("Stock") at the purchase price of
$1.60 per share.
2. ACCRUAL AND EXERCISE OF OPTION.
a. ACCRUAL OF INCREMENT. This option may be exercised in full (without
increments) at any time and the exercisability date is January 31,
1995 for purposes of this agreement.
b. THREE YEAR EXERCISE PERIOD. Each increment shall be assigned an
"exercisability date" which shall be the date said increment became
exercisable under Section 2(a). For the purpose of this agreement,
the "exercise period" with respect to an increment shall be the
period beginning on said increment's exercisability date and ending on
the earlier of (i) the date specified at Section 2(d), below, or
(ii) the third anniversary of said exercisability date. The Optionee
shall have the right to purchase any shares covered by an increment,
in the manner set forth in Section 2(c), below, during said
increment's exercise period. The right to purchase any shares covered
by an increment shall terminate and lapse as of the last day of said
increment's exercise period.
c. METHOD OF EXERCISE. During the increment's exercise period, Optionee
may exercise his rights hereunder with respect to said increment in
installments (equal or unequal), at any time or times, as determined
by Optionee; provided, this option with respect to an increment, in
whole or in part, Optionee must, during the exercise period, deliver
to the Company a notice of exercise along with the full cash purchase
price required at Section 1 of the shares to be purchased. Upon
receiving notice of exercise and the cash purchase price, the Company
shall prepare and issue to the Optionee a certificate for the number
of shares designated in the notice. Optionee may only exercise his
rights hereunder in sequential order. Thus, for example, there may be
no exercise with respect to the second increment while any portion of
the first increment is outstanding. For the purchase of this
Agreement, an increment will be treated as outstanding until such
increment is exercised in full or is
1
<PAGE>
expired by reason of termination and lapse under Section 2(b) above.
d. TERMINATION OF ACCRUALS/TERMINATION OF PURCHASE RIGHTS.
i) TERMINATION FOR CAUSE. Upon an occurrence of an event which
constitutes a basis for the termination of Optionee's employment
"for cause", all rights under this Option Agreement, both accrued
and unaccrued, shall terminate and lapse. Thus, upon the date
of said event, no unexerciseable increment shall thereafter
become exercisable and no further purchases with respect to
outstanding and exercisable increments may occur. For the
purposes of this Section 2(d)(i), any of the following shall
constitute a basis for a "for cause" termination:
(a) CONVICTION OF A CRIME. The conviction of the Optionee of
any (i) crime involving moral turpitude, or (ii) any felony.
(b) BREACH OF FIDUCIARY OBLIGATION. The Optionee's breach of
any fiduciary obligation owed to the Company.
(c) The Optionee's failure to diligently and satisfactorily
discharge his obligations of employment (for reasons other
than death or disability).
ii) TERMINATION OF EMPLOYMENT WITHOUT CAUSE. Upon the date of
Optionee's employment with the Company is terminated by Optionee
or Company without cause, (a) no exercisable increment under
Section 2(a) shall thereafter become exercisable, and (b)
Optionee shall have the right, exercisable within sixty (60) days
after said employment termination, to exercise this Option (with
respect to any increment exercisable on the date of said
employment termination) in the manner described at Section 2(c).
Upon the expiration of said sixty (60) day period, all rights
under this Option Agreement shall terminate and lapse. For
purposes of the foregoing, the date of employment termination
shall mean the earlier of the date on which the Optionee or the
Company gives notices to the other of Optionee's termination of
employment or the date said employment actually terminates.
iii) TERMINATION BY REASON OF DEATH OR DISABILITY. Upon the
Optionee's death or disability, (A) no unexerciseable increment
under Section 2(a) shall thereafter become exercisable, (b) the
Personal Representative (or other legal representative) of
Optionee's estate shall have the right, exercisable within
ninety (90) days after the date of Optionee's death or the date
of Optionee's
2
<PAGE>
disability, to exercise this option (with respect to any
increment exercisable on the date of death or disability) in
the manner described in Section 2(c). Upon the expiration of
said ninety (90) day period, all rights under this Option
Agreement shall terminate and lapse. For the purposes of
the foregoing, (A) Optionee's employment shall be considered
to have terminated by reason of disability if Optionee,
because of a physical or mental disability, will be unable
to perform the duties of his customary position of employment
with the Company for an indefinite period which the Company
determines to be of long and continued duration, and (B) the
date of disability shall be the date of said determination by
the Company.
iv) DISSOLUTION/MERGER OR SALE OF ASSETS. Optionee's rights in the
event of a dissolution, merger or sale of assets shall be as
set forth at Section 8.
e. NONTRANSFERABILITY. Except as specifically provided at Section 2(d),
this Option shall be exercisable only by Optionee, as permitted under
this Agreement, while Optionee is employed by the Company.
f. ADJUSTMENTS. In the event of any change in the common stock of the
Company by reason of any stock dividend, recapitalization,
reorganization, merger, consolidation, split-up, combination, or
exchange of shares, or of any similar change affecting the common
stock, then in any such event, the number and kind of shares subject
to this option and their purchase price per share may be appropriately
increased or decreased consistent with such change in such manner as
the Company's Board of Directors, in its sole discretion, may deem
equitable to prevent substantial dilution or enlargement of the rights
granted Optionee hereunder. Any adjustment so made or any decision
not to make an adjustment shall be final and binding upon Optionee.
g. NO RIGHTS AS SHAREHOLDER. Optionee shall have no rights as a
shareholder with respect to any shares of Stock subject to this option
prior to the date of issuance to him of a certificate or certificates
for such shares.
h. NO RIGHT TO CONTINUE EMPLOYMENT. This option shall not confer upon
Optionee any right with respect to continuance of employment by the
Company, nor interfere in any way with the right of the Company to
terminate his employment at any time.
i. COMPLIANCE WITH OTHER LAWS AND REGULATIONS. This option and the
obligation of the Company to sell and deliver shares hereunder,
shall be subject to all applicable Federal and State laws, rules and
regulations and to such approvals by any government or regulatory
agency as may be required. In addition, the Company shall not be
required to issue or
3
<PAGE>
deliver any certificates for shares of Stock prior to (i) the
listing of such shares on any stock exchange on which the Stock
may then be listed, and (ii) the completion of any registration
or qualification of such shares under any federal or state law,
or any rule or regulation of any government body which the Company,
in its sole discretion, shall determine to be necessary to be
advisable. This option may not be exercised and the Company shall
have no liability under this agreement if its exercise, or the
receipt of shares of Stock pursuant thereto, would be contrary to
any applicable law.
j. WITHHOLDING TAXES. Prior to the issuance of Stock pursuant to any
exercise, the Company shall (i) require the Optionee to remit to the
Company an amount sufficient to satisfy all withholdings and
employment taxes, and other obligations of the Company arising as a
result of Optionee's exercise, or (ii) make such other arrangements
for the payment of such obligations as the Board of Directors shall
determine.
3. RESTRICTIONS. Shares of common stock acquired pursuant to this Option
shall be subject to any and all federal and state securities laws and other
restrictions applicable to the common stock of the Company.
4. NOTICES. Any notice hereunder to the Company shall be addressed to it at
its offices. 12828 N. Newport Highway, Mead, Washington 99021, and any
notice hereunder to Optionee shall be addressed to him at the address
specified below; subject to the right of either party to designate at any
time hereafter in writing some other address. Notice shall be in writing
delivered in person (effective upon deliver) or by U.S. or certified
mail, return receipt requested (effective when properly addressed and
mailed).
5. GOVERNING LAW. This Agreement shall be interpreted, construed and governed
according to the laws of the State of Washington.
6. ATTORNEYS FEES. In the event that any party shall bring an action in
connection with the performance, breach or interpretation of this
agreement, or in any way relating to the transactions contemplated
hereby, the prevailing party in such action shall be entitled to recover
from the losing party all reasonable costs and expenses of litigation,
including attorneys fees, court costs, costs of investigation, accounting
and other costs reasonably related to such litigation, in such amount as
may be determined in the sole discretion of the court having jurisdiction
over such action.
7. ENTIRE AGREEMENT; AMENDMENT. This Agreement shall constitute the entire
agreement between the parties hereto respecting options hereunder and may
not be modified or amended, except by a written instrument signed by each
of the parties hereto, expressing such modification or amendment. This
Agreement completely supersedes any other agreement (oral or written)
4
<PAGE>
between the parties hereto respecting the options contemplated hereunder.
8. DISSOLUTION/MERGER/SALE OF ASSETS. Upon (i) the legal dissolution or
liquidation of the Company, (ii) a merger or consolidation in which the
Company is not the surviving company, or (iii) the sale of substantially
all of the Company's assets, any increment which has not yet become
exercisable pursuant to Section 2(a) shall automatically become
exercisable and Optionee shall have the right, exercisable within thirty
(30) days after the date of the shareholders of the Company approve said
dissolution, liquidation, merger or consolidation, or sale of assets, to
exercise this option, in whole or in part, by delivering to the Company,
within said thirty (30) day period, a written notice of exercise along with
the full cash purchase price required at Section 1 of the shares to be
purchased. Upon the expiration of said thirty (30) day period, all rights
under this Option Agreement shall terminate and lapse.
9. LEGAL AUTHORITY TO ISSUE STOCK. The inability of the Company to obtain
from any regulatory body having jurisdiction the authority deemed necessary
by counsel for the Company of the lawful issuance and sale of its stock
hereunder shall relieve the Company of any liability in respect of the
failure to issue or sell stock as to which the requisite authority has
not been obtained.
IN WITNESS WHEREOF, WISMER*MARTIN, INC. has caused this Agreement to be
executed by its President and Optionee has executed this Agreement, both as of
the day and year first above written.
COMPANY: WISMER*MARTIN, INC.
/s/ Ronald L. Holden
-----------------------------------
OPTIONEE: /s/ John F. Perez
-----------------------------------
JOHN F. PEREZ
Address: P.O. Box 3264
-----------------------------------
Rancho Santa Fe, CA 92067
-----------------------------------
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
CONSOLIDATED BALANCE SHEETS at MARCH 31, 1995 and the CONSOLIDATED STATEMENT OF
OPERATIONS for the nine month periods ENDED MARCH 31, 1995 and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 36,689
<SECURITIES> 0
<RECEIVABLES> 2,010,611
<ALLOWANCES> (278,074)
<INVENTORY> 267,370
<CURRENT-ASSETS> 3,003,724
<PP&E> 3,936,962
<DEPRECIATION> (1,988,434)
<TOTAL-ASSETS> 7,637,323
<CURRENT-LIABILITIES> 4,876,349
<BONDS> 3,976,467<F1>
<COMMON> 9,848
0
0
<OTHER-SE> (1,908,427)
<TOTAL-LIABILITY-AND-EQUITY> 7,637,323
<SALES> 1,920,152<F2>
<TOTAL-REVENUES> 7,830,473
<CGS> 1,401,011
<TOTAL-COSTS> 4,657,910<F3>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 226,510
<INTEREST-EXPENSE> 301,584
<INCOME-PRETAX> (1,824,663)
<INCOME-TAX> 326,126
<INCOME-CONTINUING> (1,481,801)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,481,801)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> 0
<FN>
<F1>This line item includes capitalized leases and mortgages, net of current
portion, plus Convertible Subordinated Debentures.
<F2>This line item excludes software license fees, which are considered
intangibles.
<F3>This line includes costs of software, equipment, support & operations, plus the
net cost of product research & development net capitalized.
</FN>
</TABLE>
