<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, 1996
[ ] 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 or organization)
(IRS Employer Identification 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 1, 1996, there were 16,325,461 shares
outstanding of the registrant's common stock, par value $.001,
which is the only class of common or voting 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, 1996
I N D E X
Page
PART I - Financial Information
Item 1 - Consolidated Balance Sheets as of March 31, 1996
and June 30, 1995 1
- Consolidated Statements of Operations for the
Three and Nine Month Periods
Ended March 31, 1996 and 1995 2
- Consolidated Statements of Cash Flows for the Nine
Month Periods Ended March 31, 1996 and 1995 3
- Notes to Consolidated Financial Statements 4-5
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 6-7
PART II - Other Information 8
<PAGE>
WISMER*MARTIN, INC.
CONSOLIDATED BALANCE SHEETS
As of March 31, 1996 and June 30, 1995
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
----------- ----------
ASSETS (Unaudited) (Audited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 540,404 $ 91,225
Trade receivables, net of allowance for
doubtful accounts of $64,000 and $255,647 769,064 854,474
Unbilled costs and expenses 135,750 37,800
Inventories 130,869 184,803
Prepaids and other assets 36,786 148,066
------------ ------------
Total current assets 1,612,873 1,316,368
Property, plant and equipment, net of accumulated
depreciation of $2,438,880 and $2,095,850 1,343,068 1,802,139
Software development costs, net of accumulated
amortization of $1,915,673 and $1,491,918 3,367,911 2,879,421
Other assets, net of accumulated amortization
of $249,702 and $206,637 62,437 249,235
------------ ------------
Total assets $ 6,386,289 $ 6,247,163
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Note payable to bank $ - $ 583,964
Accounts payable 344,776 863,110
Accrued wages and related taxes 294,066 351,562
Other accrued liabilities 89,979 184,516
Deferred revenue 1,731,334 1,922,539
Long-term debt, due within one year 34,937 70,335
Obligations under capital leases,
due within one year 36,097 30,500
------------ ------------
Total current liabilities 2,531,189 4,006,526
Other liabilities 54,590 86,984
Long-term debt, due after one year 744,657 879,662
Convertible subordinated debentures - 3,000,000
Obligations under capital leases, due
after one year 52,664 67,615
------------ ------------
Total liabilities 3,383,100 8,040,787
------------ ------------
Stockholders' Equity (Deficit):
Common stock, $0.001 par value 20,000,000 shares
authorized; 16,325,461 and 9,847,625 shares
issued and outstanding 16,325 9,848
Additional paid-in capital 4,881,190 1,203,809
Excess purchase price of acquired subsidiary (2,533,308) (2,533,308)
Retained earnings (deficit) 638,982 (473,973)
------------ ------------
Total stockholders' equity (deficit) 3,003,189 (1,793,624)
------------ ------------
Total liabilities and stockholders' equity $ 6,386,289 $ 6,247,163
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
WISMER*MARTIN, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three and Nine Month Periods Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Sales:
Software license fees $ 563,923 $ 581,158 $ 2,558,594 $ 2,149,057
Equipment, software and supplies sales 372,530 487,970 1,076,920 1,920,152
Software and hardware maintenance contracts 1,066,269 977,449 3,112,531 2,879,754
Service revenue 441,564 534,890 1,367,052 2,154,972
Discounts (161,647) (597,768) (446,409) (1,273,462)
------------ ------------ ------------ ------------
Net Sales 2,282,639 1,983,699 7,668,688 7,830,473
------------ ------------ ------------ ------------
Operating Expenses:
Cost of software license fees 170,376 163,376 413,655 459,619
Cost of equipment, software and supplies sold 264,797 373,709 793,557 1,401,011
Cost of support and operations 583,741 641,294 1,655,718 2,197,585
Selling and marketing 351,035 627,077 999,550 1,895,603
Product research, development and enhancements 439,370 589,246 1,464,875 1,887,622
Less: amount capitalized related to enhancements (299,079) (499,943) (845,546) (1,287,927)
General and administrative 660,710 791,478 1,966,245 2,819,313
------------ ------------ ------------ -------------
Total operating expense 2,170,950 2,686,237 6,448,054 9,372,826
------------ ------------ ------------ -------------
Operating Income (Loss) 111,689 (702,538) 1,220,634 (1,542,353)
------------ ------------ ------------ -------------
Other Income (Expense):
Interest and other income 22,931 7,722 33,699 19,274
Interest expense (24,309) (129,527) (141,379) (301,584)
------------ ------------ ------------ -------------
Total other income (expense) (1,378) (121,805) (107,680) (282,310)
------------ ------------ ------------ -------------
Income (Loss) Before Income Tax Provision 110,311 (824,343) 1,112,954 (1,824,663)
Income Tax Expense (Benefit) - - - (342,862)
------------ ------------ ------------ -------------
Net Income (Loss) $ 110,311 $ (824,343) $ 1,112,954 $(1,481,801)
============ ============ ============ =============
Net Income (Loss) Per Share $ 0.01 $ (0.09) $ 0.07 $ (0.15)
============ ============ ============ =============
Weighted average common shares outstanding 16,325,461 9,847,625 14,887,559 9,685,500
============ ============ ============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
WISMER*MARTIN, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Month Periods Ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,112,954 $(1,481,801)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 905,267 927,624
Loss on disposal of property, plant and equipment 10,249 -
Change in operating assets and liabilities:
Trade receivables 85,410 1,074,831
Unbilled costs and expenses (97,950) (23,897)
Inventories 53,934 357,648
Prepaids and other assets 111,280 12,164
Deferred Income Taxes - (341,845)
Accounts payable (518,334) (82,775)
Accrued wages and related taxes (57,496) (183,097)
Other accrued liabilities (94,537) (163,970)
Deposits - (15,211)
Deferred revenue (191,205) 86,709
Other liabilities (32,394) -
------------ ------------
Net cash provided by operating activities 1,287,178 166,380
------------ ------------
Cash flows from investing activities:
Proceeds from disposition of property, plant
and equipment 155,595 -
Purchase of property, plant and equipment (110,319) (324,752)
Additions to software development costs (902,146) (1,287,926)
Purchase of other assets (1,068) (70,952)
------------ ------------
Net cash used in investing activities (857,938) (1,683,630)
------------ ------------
Cash flows from financing activities
Payment of debt obligations (170,403) (96,642)
Net proceeds from issuance of common stock 783,660 121,750
Payments under capital lease obligations (9,354) (18,467)
Net proceeds (payments) on note payable to bank (583,964) 958,949
------------ ------------
Net cash provided by financing activities 19,939 965,590
------------ ------------
Net increase (decrease) in cash and cash equivalents 449,179 (551,660)
Cash and cash equivalents at beginning of period 91,225 588,349
------------ ------------
Cash and cash equivalents at end of period $ 540,404 $ 36,689
============ ============
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest $ 232,204 $ 331,255
============ ============
Income taxes $ 1,736 $ -
============ ============
Noncash financing activities:
Conversion of convertible subordinated
debentures to equity $ 500,000 $ -
============ ============
Subordinated debentures accepted as
consideration for common stock $ 2,500,000 $ -
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
WISMER MARTIN, INC.
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------
1. COMPANY ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by
generally accepted accounting principles for complete
financial statements. These financial statements should be
read in conjunction with the financial statements and
related notes included in the Company's 1995 Form 10-KSB.
In the opinion of management, all adjustments (consisting
only of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results
for the nine-month period ended March 31, 1996 are not
necessarily indicative of the results that may be expected
for the year ending June 30, 1996.
2. CONVERTIBLE SUBORDINATED DEBENTURES
On August 26, 1993, the Company issued convertible
subordinated debentures with a face value of $500,000 in
exchange for cash. The debentures are due August 31, 1998.
Interest accrues on the outstanding principal of the
debenture at the rate of 7% per annum and is payable semi-
annually on February 28 and August 31 during the term of the
debenture. The debenture allows the holder to convert in
whole, or in part, the outstanding balance into shares of
the Company's common stock at any time during the term of
the debenture at a fixed conversion price of $.60 per common
share. The Company may, at its option, call the outstanding
principal amount of the debentures for redemption at any
time after December 31, 1993. As of November 1, 1995, all
of the holders of these convertible subordinated debentures
have converted their debentures into common stock, utilizing
the conversion feature of their debentures.
On February 10, 1994, the Company issued convertible
subordinated debentures with a face value of $2,500,000 in
exchange for all the outstanding stock of Integrated Health
Systems, Inc. ("IHS"). The debentures are due January 31,
1999. Interest accrues on the outstanding principal of the
debenture at the rate of 7% per annum and is payable semi-
annually on January 31 and July 31 during the term of the
debenture. The debenture allows the holder to convert in
whole, or in part, the outstanding balance into shares of
the Company's common stock at any time during the term of
the debenture at a fixed conversion price of $3.23 per
common share.
The above conversion rates are subject to adjustment if (a)
the Company pays a dividend or makes a distribution of
common shares (b) the Company consolidates or merges into
another corporation or (c) sells any common shares
(excluding existing stock bonus and option plans) for less
than the conversion price if the cumulative value of these
transactions exceeds $100,000. On August 15, 1995 the
Company's Form SB-2 Registration of approximately 6 million
shares of common stock for sale to the public became
effective with the Securities and Exchange Commission. The
Board of Directors of the Company set the price to the
public at $0.60 per share. As of September 26, 1995, the
holders of all of these convertible subordinated debentures
have canceled their debentures in exchange for common stock
being offered through the public offering, at $0.60 per
share.
4
<PAGE>
WISMER MARTIN, INC.
PART I - FINANCIAL INFORMATION, Continued
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------
3. STOCK OFFERING
On August 15, 1995, the Company's Form SB-2 Registration of
6,066,667 shares of common stock for the public offering
became effective with the Securities and Exchange
Commission. The Board of Directors set the offering price at
$0.60 per share on August 21, 1995. The offer was completed
as of November 1, 1995, and the Company raised capital of
approximately $3,384,000 through the offering and conversion
of its convertible subordinated debentures.
4. RECLASSIFICATIONS
Certain financial statement amounts have been reclassified
to conform to the current period's presentation. These
reclassifications have no effect on the net loss or retained
deficit previously reported.
5. NET INCOME (LOSS) PER SHARE
The computation of net income (loss) per share in each
period is based on the weighted average number of common
shares outstanding. When dilutive stock options, debentures
and warrants are included as share equivalents using the
treasury stock method, fully diluted net income (loss) per
common share is not materially different from primary net
income (loss) per common share.
5
<PAGE>
WISMER MARTIN, INC.
PART I - FINANCIAL INFORMATION, Continued
-------------------
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Nine Months Ended March 31, 1996 (1996) Compared with
Nine Months Ended March 31, 1995 (1995)
NET SALES
As a result of decreases in service revenues and sales of
equipment, software and supplies, 1996 net sales decreased from
1995 net sales by approximately $162,000 (2%).
OPERATING EXPENSES
Total 1996 operating expenses, compared to 1995, decreased
by over 2,924,000 (31%) due to certain cost cutting measures
taken during the period, as well as, an ongoing effort to make
the overall operations more efficient.
Interest expense for 1996, compared to 1995, decreased by
approximately $160,000 (53%). The reduction related to the
conversion and pay-off of convertible debentures and other debts.
The Company used a portion of its prior years' net operating
loss carryforwards to offset the income tax provision on its'
1996 operating income. The remaining net operating loss
carryforwards will be available to offset the future reversal of
temporary differences created by software development costs and
other items which give rise to deferred tax liabilities.
The above resulted in a net income of over $1,112,000 ($0.07
per share) for 1996 compared to a net loss of $1,481,801 ($0.15
per share) for 1995.
Three Months Ended March 31, 1996 (3Q96) Compared with
Three Months Ended March 31, 1995 (3Q95)
NET SALES
Net sales for 3Q96 were approximately $2,283,000,
representing an increase of approximately $299,000 (15%) from net
sales for 3Q95. The increase predominantly resulted from an
increase in the Company's sales force and concentration of the
Company's marketing efforts in larger healthcare providers.
OPERATING EXPENSES
In an ongoing effort to reduce costs and make the Company's
operations more efficient and profitable, operating expenses for
3Q96 compared with 3Q95 were reduced by over $515,000 (19%).
Interest expense for 3Q96 was approximately $24,000, a
decrease of over $105,000 (81%) from 3Q95. The reduction
resulted from the conversion and pay-off of convertible
debentures and other debts.
The above changes resulted in a net income of approximately
$110,000 ($0.01 per share) for 3Q96 compared with a loss of
approximately $824,000 ($0.09 per share) for 3Q95.
6
<PAGE>
WISMER MARTIN, INC.
PART I - FINANCIAL INFORMATION, Continued
-------------------
Financial Condition and Liquidity
During the first nine months ended March 31, 1996, in
addition to approximately $1,287,000 cash provided by operations,
the Company raised capital of approximately $3,384,000 from
issuance of common stock to the public investors, $2,500,000 of
which was through the conversion of subordinated debentures to
shares of common stock. The Company paid-off amounts due on its
revolving line of credit and note payable to Seafirst.
Additional cash proceeds of over $155,000 were provided from
disposition of property, plant and equipment. The Company
invested over $900,000 in software development costs and
approximately $110,000 in property, plant and equipment.
Management believes that the Company has sufficient
resources to meet its immediate working capital needs.
7
<PAGE>
WISMER MARTIN, INC.
PART II - OTHER INFORMATION
-------------------
Items 1 through 5 of Part II are not applicable on this report.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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: April 24, 1996 By: /s/ Mehdi Moussavi
---------------------------------
Mehdi Moussavi
Vice President of Finance
Chief Financial Officer
(Principal Financial and Accounting Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1996 AND THE CONSOLIDATED STATEMENTS
OF OPERATIONS AND CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> $ 540,404
<SECURITIES> 0
<RECEIVABLES> 833,064
<ALLOWANCES> 64,000
<INVENTORY> 130,869
<CURRENT-ASSETS> 1,612,873
<PP&E> 3,781,948
<DEPRECIATION> 2,438,880
<TOTAL-ASSETS> 6,386,289
<CURRENT-LIABILITIES> 2,531,189
<BONDS> 0
0
0
<COMMON> 16,325
<OTHER-SE> 2,986,864
<TOTAL-LIABILITY-AND-EQUITY> 6,386,289
<SALES> 1,076,920
<TOTAL-REVENUES> 7,668,688
<CGS> 793,557
<TOTAL-COSTS> 3,482,259
<OTHER-EXPENSES> 2,965,795
<LOSS-PROVISION> 16,000
<INTEREST-EXPENSE> 141,379
<INCOME-PRETAX> 1,112,954
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,112,954
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,112,954
<EPS-PRIMARY> 0.07
<EPS-DILUTED> 0.07
</TABLE>
