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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended May 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _____________ to ____________
COMMISSION FILE NUMBER 0-20866
WILSHIRE TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its charter)
CALIFORNIA 33-0433823
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5441 AVENIDA ENCINAS, STE. A
CARLSBAD, CALIFORNIA 92008
(Address of principal executive offices)
(619) 929-7200
(Issuer's telephone number)
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
The number of shares outstanding of the registrant's only class of Common
Stock, no par value, was 12,943,385 on June 30, 1997.
Transitional Small Business Disclosure Format. Yes No X
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WILSHIRE TECHNOLOGIES, INC.
INDEX TO FORM 10-QSB
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
PART 1 - FINANCIAL INFORMATION PAGE
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of 3
May 31, 1997 and November 30, 1996
Condensed Consolidated Statements of Operations 4
for the Quarters ended May 31, 1997 and
May 31, 1996
Condensed Consolidated Statements of Operations 5
for the Six Months ended May 31, 1997 and
May 31, 1996
Condensed Consolidated Statements of Cash Flows 6
for the Six Months ended May 31, 1997 and
May 31, 1996
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis 10
or Plan of Operation
- ------------------------------------------------------------------------------------------------------
PART II - OTHER INFORMATION
- ------------------------------------------------------------------------------------------------------
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
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WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
May 31, November 30,
1997 1996
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 72,000 $ 189,000
Accounts receivable trade, less allowance for doubtful
accounts of $20,000 and $17,000 at May 31,
1997 and November 30, 1996, respectively 583,000 571,000
Inventories (Note 2) 1,129,000 591,000
Current portion of note receivable (Note 3) 209,000 204,000
Other current assets 238,000 231,000
------------ ------------
Total current assets 2,231,000 1,786,000
Property and equipment, less accumulated depreciation
of $724,000 and $637,000 at May 31, 1997 and
November 30, 1996, respectively 683,000 723,000
Note receivable from the sale of discontinued business
less current portion (Note 3) 189,000 280,000
Goodwill, less accumulated amortization of $302,000
and $281,000 at May 31, 1997 and November 30,
1996, respectively 440,000 461,000
Patents and trademarks, net 111,000 104,000
------------ ------------
$ 3,654,000 $ 3,354,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 580,000 $ 393,000
Accrued expenses 513,000 454,000
Interest payable 148,000 31,000
Line of credit from Trilon Dominion Partners LLC (Note 4) 2,250,000 1,500,000
------------ ------------
Total current liabilities 3,491,000 2,378,000
Shareholders' equity:
Preferred stock, no par value, 2,000,000 shares authorized;
none issued and outstanding -- --
Common stock, no par value, 50,000,000 shares
authorized; 12,943,385 shares issued and
outstanding at May 31, 1997 and
November 30, 1996 25,857,000 25,857,000
Common stock warrants 275,000 275,000
Accumulated deficit (25,969,000) (25,156,000)
------------ ------------
Total shareholders' equity 163,000 976,000
------------ ------------
$ 3,654,000 $ 3,354,000
============ ============
</TABLE>
Note: The condensed consolidated balance sheet at November 30, 1996 has been
derived from the audited financial statements at that date but does
not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
See accompanying notes.
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WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended May 31
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Continuing operations:
Net sales $ 1,000,000 $ 884,000
Cost of sales 693,000 709,000
------------ ------------
Gross profit 307,000 175,000
Operating expenses:
Marketing and selling 153,000 153,000
General and administrative 342,000 508,000
Research and development 128,000 164,000
------------ ------------
Total operating expenses 623,000 825,000
------------ ------------
Loss from operations (316,000) (650,000)
Other income -- 191,000
Interest income (expense), net (71,000) 15,000
------------ ------------
Loss before provision
for state income taxes (387,000) (444,000)
Provision for state income taxes - current -- --
------------ ------------
Loss from continuing operations (387,000) (444,000)
Loss from discontinued operations (Note 6) -- (24,000)
------------ ------------
Net loss $ (387,000) $ (468,000)
============ ============
------------ ------------
Weighted average shares outstanding 12,943,385 12,931,885
============ ============
------------ ------------
Loss per share:
Loss from continuing operations $ (0.03) $ (0.03)
Loss from discontinued operations -- --
------------ ------------
Net loss per share $ (0.03) $ (0.03)
============ ============
</TABLE>
See accompanying notes.
4
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WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended May 31
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Continuing operations:
Net sales $ 1,591,000 $ 1,722,000
Cost of sales 1,211,000 1,473,000
------------ ------------
Gross profit 380,000 249,000
Operating expenses:
Marketing and selling 277,000 282,000
General and administrative 605,000 935,000
Research and development 191,000 257,000
------------ ------------
Total operating expenses 1,073,000 1,474,000
------------ ------------
Loss from operations (693,000) (1,225,000)
Other income -- 192,000
Interest expense (119,000) (68,000)
------------ ------------
Loss before provision
for state income taxes (812,000) (1,101,000)
Provision for state income taxes - current 1,000 1,000
------------ ------------
Loss from continuing operations (813,000) (1,102,000)
Loss from discontinued operations (Note 6) -- (6,000)
------------ ------------
Net loss $ (813,000) $ (1,108,000)
============ ============
------------ ------------
Weighted average shares outstanding 12,943,385 11,271,276
============ ============
------------ ------------
Loss per share:
Loss from continuing operations $ (0.06) $ (0.10)
Loss from discontinued operations -- --
------------ ------------
Net loss per share $ (0.06) $ (0.10)
============ ============
</TABLE>
See accompanying notes.
5
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WILSHIRE TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended May 31,
------------------------------
1997 1996
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (813,000) $(1,108,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 112,000 175,000
Provision for loss on accounts receivable 3,000 (25,000)
Loss on sale of discontinued operations -- 6,000
Net change in operating assets and liabilities:
Increase in accounts receivable (15,000) (13,000)
Increase in inventories (538,000) (160,000)
(Increase) decrease in other current assets (7,000) 61,000
Increase in accounts payable and
accrued expenses 246,000 9,000
Increase in interest payable 117,000 118,000
----------- -----------
Net cash used in operating activities (895,000) (937,000)
----------- -----------
INVESTING ACTIVITIES
Purchase of equipment (47,000) (49,000)
Decrease in note receivable from sale of discontinued operations 86,000 --
(Increase) decrease in other assets (11,000) 58,000
----------- -----------
Net cash provided by investing activities 28,000 9,000
----------- -----------
FINANCING ACTIVITIES
Proceeds from line of credit 750,000 1,000,000
----------- -----------
Net cash provided by financing activities 750,000 1,000,000
----------- -----------
NET (DECREASE) INCREASE IN CASH (117,000) 72,000
CASH - BEGINNING OF PERIOD 189,000 18,000
----------- -----------
CASH - END OF PERIOD $ 72,000 $ 90,000
=========== ===========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
In January, 1996, the Company completed an Exchange Agreement with Trilon
Dominion Partners,LLC pursuant to which the Company exchanged long-term debt and
accrued interest for common stock (Note 4).
In June, 1996, the Company completed the sale of certain assets of the Medical
Products division (Note 6).
See accompanying notes.
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Wilshire Technologies, Inc. (the "Company") develops, manufactures and markets
engineered polymer products for industrial clean room use. The Company, based in
Carlsbad, California, operates through two divisions - - Wilshire Contamination
Control ("WCC"), and Wilshire Gloves ("WGL") and a wholly-owned subsidiary.
During 1996, the Company divested its Medical Products and Transdermal Products
divisions. In 1997, the Company will focus primarily on products used in
industrial clean rooms, such as gloves and contamination control products.
The consolidated financial statements include the accounts of the Company's two
divisions and its wholly-owned subsidiary. Significant intercompany amounts and
transactions have been eliminated.
BASIS OF PRESENTATION
The accompanying condensed consolidated 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 for quarterly
reports under Section 13 or 15(d) of the Securities Exchange Act of 1934.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the quarter and six months ended May 31, 1997 are not
necessarily indicative of the results that may be expected for the fiscal year
ending November 30, 1997. For further information, refer to the financial
statements and footnotes thereto included in the Company's annual report on Form
10-KSB for the fiscal year ended November 30, 1996.
In March 1996, the Board of Directors authorized management to proceed with the
sale of the assets of the Medical Products division which was completed on June
30, 1996, pursuant to a Purchase of Assets and Assumption of Sublease Agreement
with Acacia Laboratories of Texas, Inc., (See Note 6). The disposition of this
business has been accounted for as a discontinued operation. Accordingly, the
financial statements of all prior periods have been restated to exclude the
results of the Medical Products division from the results of continuing
operations.
2. FINANCIAL STATEMENT INFORMATION
Inventories consist of the following:
<TABLE>
<CAPTION>
MAY 31 NOVEMBER 30,
1997 1996
---------- ------------
<S> <C> <C>
Raw materials $ 398,000 $ 141,000
Work in process 365,000 175,000
Finished goods 366,000 275,000
---------- ----------
$1,129,000 $ 591,000
========== ==========
</TABLE>
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3. NOTE RECEIVABLE
Pursuant to the sale of its Medical Products division, the Company received a
$540,000 secured note, payable over 36 months, and bearing interest at a rate of
5% per annum (see Note 6).
4. LINE OF CREDIT
On January 5, 1996, the Company and Trilon Dominion Partners LLC ("Trilon
Dominion") entered into a Credit Agreement (the "Agreement") for a credit line
of $1,000,000 secured by the Company's assets. Under the terms of the Agreement,
which was subsequently amended, the principal was due on June 30, 1996 and the
interest was payable monthly at a rate of prime plus 3.75%. In connection with
the loan, the Company issued Trilon Dominion a five-year warrant that entitles
Trilon Dominion to purchase 100,000 shares of the Company's authorized but
unissued common stock at an exercise price of $0.75 per share, subject to
adjustment to protect against dilution. The warrant is exercisable immediately
and expires on January 5, 2001. Also, under the terms of the Agreement, the
Company issued Trilon Dominion a second five-year warrant which became
exercisable when the Company amended the Agreement ("First Amendment") to extend
the termination date of the Agreement from June 30, 1996 to December 31, 1996.
The second warrant entitles Trilon Dominion to purchase 25,000 shares of the
Company's authorized but unissued common stock at an exercise price equal to the
closing price on June 30, 1996, which was $1.75 per share and it expires on
January 5, 2001. The holder of each of such five-year warrants may, without
payment to the Company, convert the warrant in whole or in part into shares of
the Company's common stock having a market value equal to the difference between
(x) the market value per share of common stock multiplied by the number of
warrants that are converted and (y) the warrant exercise price, multiplied by
the number of warrants that are converted. Pursuant to the Agreement, the
Company used part of the proceeds of the credit line to repay the $400,000
borrowed from Trilon Dominion under the sixth amendment to the November 18, 1994
Credit Agreement, plus the interest accrued on that amount.
On September 30, 1996, the Company and Trilon Dominion entered into a Second
Amendment to the Agreement ("Second Amendment") whereby the amount of the credit
line was increased from $1,000,000 to $2,000,000 and the termination date was
extended from December 31,1996 to June 30, 1997. Pursuant to the Second
Amendment, the Company drew on the additional credit line upon achievement of
certain milestones. In addition, two warrants were issued in connection with the
Second Amendment. The first warrant entitles Trilon Dominion to purchase 100,000
shares of the Company's authorized but unissued common stock at an exercise
price of $1.31 per share, subject to adjustment to protect against dilution. The
warrant is exercisable immediately and expires on September 30, 2001. Also,
under the terms of the Agreement, the Company issued Trilon Dominion a second
five-year warrant which became exercisable when the Company entered the Third
Amendment to the Agreement and extended the termination date of the Agreement
from June 30, 1997 to December 31, 1997. The second warrant entitles Trilon
Dominion to purchase 25,000 shares of the Company's authorized but unissued
common stock at an exercise price equal to the closing price on June 30, 1997,
which was $0.84 per share, and it expires on September 30, 2001. All other terms
of the two warrants are the same as those issued under the Agreement.
On April 15, 1997, the Company and Trilon Dominion entered into a Third
Amendment to the Agreement ("Third Amendment") whereby the amount of the credit
line was increased from $2,000,000 to $3,000,000 and the termination date was
extended from June 30, 1997 to December 31, 1997. In addition, two warrants were
issued in connection with the Third Amendment. The first warrant entitles Trilon
Dominion to purchase 100,000 shares of the Company's authorized but unissued
common stock at an exercise price of $0.50 per share, subject to adjustment to
protect against dilution. The warrant is exercisable immediately and expires on
April 15, 2002. Also, under the terms of the Agreement, the Company issued
Trilon Dominion a second five-year warrant which only becomes exercisable if the
Company does not pay Trilon Dominion the principal and interest due on December
31, 1997. The second warrant entitles Trilon Dominion to purchase 25,000 shares
of the Company's authorized but unissued
8
<PAGE> 9
common stock at an exercise price equal to the closing price on December 31,
1997, and it expires on April 15, 2002. All other terms of the two warrants are
the same as those issued under the Agreement and the Second Amendment.
5. COMMITMENTS AND CONTINGENCIES
BREAST IMPLANT LITIGATION
During the first six months of 1997, there have been no significant developments
in the Breast Implant Litigation. For information regarding legal proceedings,
refer to the information contained in the Company's Annual Report on Form 10-KSB
for the fiscal year ended November 30, 1996, under Note 6 to the Financial
Statements included therein.
6. DISCONTINUED OPERATIONS
On June 30, 1996, pursuant to a Purchase of Assets and Assumption of Sublease
Agreement, the Company sold certain assets of the Wilshire Medical Products
division ("WMP") to Acacia Laboratories of Texas, Inc. ("Acacia"), a
wholly-owned subsidiary of Acacia Laboratories, Inc., a California corporation,
that does business under the name of Horizon Medical, Inc. The assets sold
consisted of equipment, inventory, accounts receivable, patents, trademarks,
trade names, and regulatory approvals used in the Medical Products business. The
purchase price of $1,082,000 consisted of $200,000 cash at closing, $342,000 in
accounts receivable to be collected by the Company, and $540,000 in a secured,
fully amortized, 36 month promissory note in favor of the Company, bearing
interest at the rate of 5% per annum.
Sales of WMP for the quarter and six months ended May 31, 1996, were $558,000
and $888,000, respectively. The effect on the results of operations from the
operations of the WMP division for the quarter and six months ended May 31, 1996
was $(24,000) and $(6,000), respectively.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
During the first six months of 1997, the Company has made significant progress
on its business plan for both contamination control products and gloves. In the
first quarter, the Company's contamination control swab manufacturing equipment
was successfully moved from Texas to the Company's facility in Tijuana, Mexico,
thus lowering future production costs. In addition, the developmental glove
equipment moved from the UK to the Tijuana, Mexico, facility in the fourth
quarter of 1996 began producing gloves at the rate of 40,000 gloves per month at
a significantly lower cost. Customer response to the gloves produced in Mexico
has been excellent.
In the second quarter, the Company achieved sales of $1 million which set a
record for the highest quarterly sales. In addition, the Company completed a
distributor agreement for Singapore, Malaysia, Thailand, and Indonesia, an
important milestone for servicing the Company's customers in the computer
component industry in Southeast Asia. Also, in April the Company arranged
financing for the first full-scale glove production line and for working capital
needs in the second half of fiscal year 1997.
In the third quarter, the Company expects to receive the sales benefit of the
restocking by a major distributor of contamination control wipers to bring its
inventory levels back to normal. In addition, the Company plans to complete a
development and supply agreement for an improved glove polymer, and to make
further progress on the design and manufacture of the first full-scale glove
production line.
From time to time the Company may report, through its press releases and/or
Securities and Exchange Commission filings, certain forward-looking statements
that are subject to risks and uncertainties. Important factors that could cause
actual results to differ materially from those projected by such forward-looking
statements are set forth in Exhibit 99 to the Company's Annual Report on Form
10-KSB for the fiscal year ended November 30, 1996. These include operating
losses, liquidity, reliance on major distributors, new product development,
competition, technological change, patents, trade secrets, product liability,
dependence on key suppliers, and dependence on key personnel.
RESULTS OF OPERATIONS
NET SALES
Wilshire Contamination Control and Wilshire Gloves market their products
directly to end users through an internal sales force utilizing outside
distributors. Revenue for all sales is recognized when title transfers,
generally when products are shipped.
Quarter
Net sales set a quarterly record, and increased by $116,000 (13.1%) to
$1,000,000 in the second quarter of 1997 from $884,000 in the second quarter of
1996. Sales were favorably impacted by increased shipments of contamination
control products to customers in Southeast Asia.
Six Months
Net sales decreased by $131,000 (7.6%) to $1,591,000 in the first six months of
1997 from $1,722,000 in the same period of 1996. The sales decline primarily was
related to an abnormal inventory reduction by a major distributor of
contamination control wipers in the first quarter of 1997. The Company expects
to receive the sales benefit of the inventory restocking by the distributor in
the third quarter of 1997.
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GROSS PROFIT
Quarter
Gross profit increased by $132,000 to $307,000 in the second quarter of 1997
from $175,000 in the second quarter of 1996, primarily due to increased sales of
contamination control products and reduced costs of the developmental glove
plant. Gross profit margin as a percent of sales increased to 30.7% in the
second quarter of 1997 from 19.8% in the second quarter of 1996.
Six Months
Gross profit increased by $131,000 to $380,000 in the first six months of 1997
from $249,000 in the same period of 1996, primarily due to reduced costs of the
developmental glove plant. Gross profit margin as a percent of sales increased
to 23.9% in the first 6 months of 1997 from 14.5% in the same period of 1996.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses include additional costs related to
the Company's marketing activities and administrative costs (such as executive
and office salaries, related payroll expenses, investor relations, professional
fees, supplies and utilities).
Selling, general and administrative expenses decreased $166,000 (25.1%) to
$495,000 in the second quarter of 1997 from $661,000 in the second quarter of
1996. In the first six months of 1997, selling, general and administrative
expenses decreased $335,000 (27.5%) to $882,000 from $1,217,000 in the same
period of 1996. The expense reduction in both periods primarily resulted from
reductions in personnel, lower professional fees, and non-recurring expenses in
1996 related to the move of the developmental glove plant from the U.K. to
Mexico.
RESEARCH AND DEVELOPMENT
Research and development expenses decreased $36,000 (22.0%) to $128,000 in the
second quarter of 1997 from $164,000 in the second quarter of 1996. In the first
six months of 1997, research and development expenses decreased $66,000 (25.7%)
to $191,000 from $257,000 in the same period of 1996. The expense reduction in
both periods primarily was due to the divestiture of the Transdermal Products
business.
As a percentage of sales, research and development expenses were 12.8% in the
second quarter of 1997, compared to 18.6% in the second quarter of 1996. For the
first six months of 1997, research and development expenses as a percentage of
sales were 12.0%, compared to 14.9% in the same period of 1996.
OTHER INCOME
The other income in the second quarter and six months of 1996 was related
primarily to the gain from the payment of the note receivable by Advanced
Materials, Inc.
INTEREST INCOME (EXPENSE), NET
The Company reported higher interest expense in the second quarter and six
months of 1997 versus the same period of 1996 due to increased debt outstanding.
The interest expense was related primarily to the line of credit due to Trilon
Dominion Partners, LLC. (see Note 4).
11
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INCOME TAXES
For the quarters and six months ended May 31, 1997 and May 31, 1996, the Company
sustained losses for both financial reporting and income tax purposes. A tax
provision of $1,000 related to state income taxes was recorded in the financial
statements for 1997 and 1996.
LIQUIDITY AND CAPITAL RESOURCES
Management assesses the Company's liquidity by its ability to generate cash to
fund its operations. Significant factors in the management of liquidity are:
funds generated by operations; levels of accounts receivable, inventories,
accounts payable and capital expenditures; adequate lines of credit; and
financial flexibility to attract long-term capital on satisfactory terms.
During 1996 and the first six months of 1997, the Company has not generated
sufficient cash from operations to fund its working capital requirements. Net
cash used in operating activities was $895,000 in the first six months of 1997
versus $937,000 in the first six months of 1996. The decrease in the cash used
in operating activities was primarily due to lower operating expenses.
Net cash provided by investing activities was $28,000 in the first six months of
1997, versus $9,000 in the first six months of 1996.
Net cash provided by financing activities was $750,000 in the first six months
of 1997 versus $1,000,000 in the first six months of 1996. The debt financing in
both years was obtained from Trilon Dominion Partners, LLC.
On January 5, 1996, the Company and Trilon Dominion entered into a Credit
Agreement (the "Agreement") for a credit line of $1,000,000 secured by the
Company's assets. Under the terms of the Agreement, the principal was due on
June 30, 1996 and the interest was payable monthly at a rate of prime plus
3.75%. The Agreement was amended on June 30, 1996 ("First Amendment") to extend
the termination date of the Agreement from June 30, 1996 to December 31, 1996.
See Note 4 to the financial statements for details of the Agreement.
Pursuant to the Agreement, the Company used part of the proceeds of the credit
line to repay the $400,000 borrowed from Trilon Dominion under the sixth
amendment to the November 18, 1994 Credit Agreement, plus the interest accrued
on that amount. Also, the Company used an additional $400,000 of the credit line
in January 1996 to pay past due accounts payable, and the final $200,000
available under the credit line in February 1996 to fund working capital
requirements.
On September 30, 1996, the Company and Trilon Dominion entered into a Second
Amendment to the Agreement ("Second Amendment") whereby the amount of the credit
line was increased from $1,000,000 to $2,000,000 and the termination date was
extended from December 31,1996 to June 30, 1997. Pursuant to the Second
Amendment, the Company drew on the additional credit line upon achievement of
certain milestones. See Note 4 to the financial statements for details of the
Amendments.
On April 15, 1997, the Company and Trilon Dominion entered into a Third
Amendment to the Agreement ("Third Amendment") whereby the amount of the credit
line was increased from $2,000,000 to $3,000,000, and the termination date was
extended from June 30, 1997 to December 31, 1997. See Note 4 to the financial
statements for details of the Amendments.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
For information regarding legal proceedings, refer to
the information contained in the Company's annual report
on Form 10-KSB for the fiscal year ended November 30,
1996 under the heading, "Legal Proceedings" and Note 6 to
the financial statements therein.
ITEM 2. CHANGES IN SECURITIES:
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None
ITEM 5. OTHER INFORMATION:
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS:
10.94 Distributor Agreement, dated March 5,
1997, between Armstrong Industrial
Corporation and the Registrant.
10.95 Third Amendment, dated April 15, 1997,
to Credit Agreement and to Grid
Promissory Note dated January 5, 1996
between Trilon Dominion Partners LLC,
and the Registrant.
10.96 Agreement related to Gloves, dated
April 29, 1997, between Innovative
Technologies Ltd. and the Registrant.
27 Financial Data Schedule
(B) REPORTS ON FORM 8-K:
None
13
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SIGNATURES
In accordance with requirements of the Securities Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
WILSHIRE TECHNOLOGIES, INC.
Dated: July 9, 1997 By: /s/ James W. Klingler
-----------------------
James W. Klingler
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
14
<PAGE> 15
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
- ------ ----------- -------------
<S> <C> <C>
10.94 Distributor Agreement, dated March 5, 1997, between
Armstrong Industrial Corporation and the Registrant. 16
10.95 Third Amendment, dated April 15, 1997, to Credit
Agreement and to Grid Promissory Note dated January 5,
1996 between Trilon Dominion Partners LLC, and the Registrant. 30
10.96 Agreement related to Gloves, dated April 29, 1997,
between Innovative Technologies Ltd. and the Registrant 35
27 Financial Data Schedule
</TABLE>
15
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EXHIBIT 10.94
WILSHIRE TECHNOLOGIES, INC.
DISTRIBUTOR AGREEMENT
This Distributor Agreement ("this Agreement") is made effective and entered
into this 5th day of March, 1996 ("Effective Date") by and between WILSHIRE
TECHNOLOGIES, INC. with a principal place of business at 5441 Avenida Encinas,
Suite A, Carlsbad, California 92008 ("WTI").
and
ARMSTRONG INDUSTRIAL CORPORATION, ("AIC") a corporation organized and existing
under the laws of Singapore with its head office and principal place of business
at 7 Gul Lane, Singapore, 629406 ("DISTRIBUTOR").
1. APPOINTMENT AND ACCEPTANCE.
1.1 WTI hereby appoints DISTRIBUTOR on an exclusive basis to purchase and
resell the Products in the Territory. DISTRIBUTOR accepts this appointment on
the terms and conditions set forth herein and obligates itself to the
requirements of this Agreement.
1.2 The term "Products" shall mean the WTI products listed on Exhibit A
attached hereto. WTI reserves the right to delete discontinued Products upon
thirty (30) days prior written notice to DISTRIBUTOR. If a Product is
discontinued, WTI will fill any outstanding orders placed by the DISTRIBUTOR
before discontinuation notice. WTI will accept returns for credit of
discontinued Products which the DISTRIBUTOR has in stock at the date of the
discontinuation notice.
1.3 The term "Territory" shall mean the geographic area defined on Exhibit
B attached hereto. DISTRIBUTOR shall not reexport the Products from the
territory without the express written authorization of WTI.
2. SPLIT SALES COMMISSION/ACCOUNT EXCEPTIONS
It may be the case that certain accounts will require the involvement of a party
other than appointed distributor to service the business. Distributor and WTI
will discuss the issue of territorial commissions when this unique situation
arises.
3. DISTRIBUTOR'S REPRESENTATIONS.
In order to induce WTI to enter into this agreement DISTRIBUTOR, and its
undersigned officer, warrant and represent that:
3.1 DISTRIBUTOR is a corporate entity duly organized and in good standing,
and will remain in compliance with all applicable laws in the Territory.
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3.2 DISTRIBUTOR is and will remain an independent contractor with respect
to its relationship with WTI. DISTRIBUTOR agrees that WTI has granted it no
authority to make changes to WTI's terms and conditions of sale, to extend WTI
warranties or, in general , to enter into contracts or make quotations on behalf
of or to bind WTI in any transactions with DISTRIBUTOR's customers or any
governmental agencies or third parties. No relationship of employment shall
arise between WTI and DISTRIBUTOR, or between WTI or any employee or
representative of DISTRIBUTOR. DISTRIBUTOR is at all times acting for its own
account, and at its own expense.
4. TERMS.
4.1 Subject to the provisions of Section 14 below, the term of this
agreement shall be for one (1) year, commencing on the Effective Date, unless
renewed as provided in Section 4.2 below.
4.2 This Agreement shall continue in full force and effect for one or more
successive one (1) year renewal periods, at the option of both parties, unless
terminated for Just Cause as defined in Section 14.1 of this Agreement. Exhibit
C will be revised annually as provided in Section 7.3.
4.3 If either party wishes to not renew this agreement, then such party
must give at least sixty (60) days notice before the expiration date of the
agreement. If no such notice is given, the agreement will automatically renew
for one year.
5. PRICES AND TERMS.
5.1 The Product prices and discounts to the DISTRIBUTOR shall be those
listed in the attached price list in Exhibit E. The prices quoted are exclusive
of any national, state or local sales, use, value added or other taxes, customs
duties, or similar tariffs and fees which shall be the responsibility of
DISTRIBUTOR. In the event that WTI is required to pay any such taxes, duties or
fees, such items will be added to the invoice to be paid by DISTRIBUTOR.
5.2 WTI may change the prices of the Products from time to time upon sixty
(60) days prior written notice to DISTRIBUTOR. DISTRIBUTOR shall submit a list
of outstanding quotations to WTI at time of price change and WTI shall use its
best efforts to price protect such quotations for a period not to exceed three
(3) months from the effective date of the price change (provided that WTI will
price protect any product releases made under blanket purchase orders previously
accepted by WTI).
5.3 All payment shall be made in United States dollars. Unless otherwise
agreed by WTI in writing, terms of payment for all international sale
transactions shall be by irrevocable letter of credit acceptable to WTI, due 60
days after the date of shipment; or sight draft due on receipt of goods; or open
account due 30 days after the date of shipment/invoice.
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6. WTI OBLIGATIONS.
WTI will, during the term of this Agreement:
6.1 Provide training for a reasonable number of DISTRIBUTOR'S
representatives in the application, use, and sale of the Products. DISTRIBUTOR
agrees to pay all expenses of its representatives to attend such training
sessions, including salaries and transportation;
6.2 Render periodic assistance to DISTRIBUTOR on technical and sales
problems;
6.3 Invoice DISTRIBUTOR for each Product sold on the day it is shipped or
in accordance with the terms of the accepted order; and
6.4 Participate in trade shows, open houses or exhibits in the Territory as
WTI/DISTIBUTOR deems appropriate in their discretion.
6.5 Prepare and provide to the DISTRIBUTOR, at WTI's expense, product
specifications, product information bulletins, testing/stability certification
and any other information required for initial product registration and
maintaining registration compliance.
6.6 WTI will use its best efforts to ensure that goods ordered will be
shipped to DISTRIBUTOR within 30 days from WTI's receipt of a purchase order
issued for Products included in the forecast referenced in Section 8.1. If WTI
cannot deliver the Products referenced above within 60 days, WTI will pay any
air freight/courier charges to expedite the shipment of the Products.
7. DISTRIBUTOR OBLIGATIONS.
In order to induce WTI to enter into this Agreement, and as a condition of
this continuation in force, DISTRIBUTOR agrees that it shall;
7.1 Actively use its best efforts to promote and penetrate the market for
the Products in the Territory;
7.2 Maintain adequate premises and facilities within the Territory, at its
own expense, from which to inventory, demonstrate and sell the Products;
7.3 Sell the annual minimum purchase quota and/or revenue quota of Products
agreed between DISTRIBUTOR and WTI and as set forth on Exhibit C attached
hereto; such quota to be revised annually by mutual consultation of the parties
at least 60 days prior to the renewal of this agreement under Section 4.2.
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7.4 Employ an adequate number of capable personnel to engage in the sale of
the Products as described in Exhibit D;
7.5 Require its sales personnel from time to time, as may be mutually
agreeable, to visit WTI's facility (or other facility designated by WTI) at
DISTRIBUTOR's expense, for the purpose of developing expertise in the
application, capabilities, competitive advantages, and use of the Products;
7.6 Promote the Products in trade shows, or exhibitions, including mailing
of promotional literature to prospective customers;
7.7 Cooperate with WTI in obtaining marketing and competitive data;
7.8 Submit to WTI regular quarterly status reports reflecting sales
activities and anticipated requirements of customers in the Territory in a
format to be provided by WTI.
7.9 Upon execution of this Agreement, purchase the initial inventory of
$450,000 with delivery over a three (3) month period and thereafter maintain a 2
month inventory of the Products to meet customer requirements;
7.10 Shall submit purchase orders for product(s) to WTI in writing by mail,
courier, or telefax, which shall set forth (a) an identification of product(s)
ordered, (b) quantity, (c) requested delivery dates and (d) shipping
instructions and shipping address. Delivery dates requested in any purchase
order must be at least thirty (30) days from the date of receipt by WTI of such
purchase order.
7.11 Not undertake to represent, distribute, or otherwise handle products
which are in competition with the Products; and
7.12 Furnish WTI copies of DISTRIBUTOR's Annual Financial reports for WTI's
reference.
7.13 Obtain, at DISTRIBUTOR'S expense, all needed import permits and
applicable exemptions from customs duties needed to import the product(s).
8. FORECASTS/PURCHASE ORDERS.
8.1 During the first week of each month, DISTRIBUTOR shall forward to WTI a
three (3) month rolling forecast of Product purchases designating the quantities
of each model of the Products which DISTRIBUTOR intends to sell in this period.
In addition, DISTRIBUTOR will provide WTI with a quarterly forecast for the
period of six (6) months for each of the Products.
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8.2 Any purchase orders issued by DISTRIBUTOR are subject to acceptance by
WTI and will not be deemed accepted until a written confirmation has been
dispatched by WTI.
9. DELIVERY/TITLE/RISK OF LOSS.
9.1 Delivery of all Products ordered by DISTRIBUTOR for domestic shipment
shall be made FOB point of shipment (e.g., WTI's Carlsbad, California facility).
Delivery of all Products ordered by DISTRIBUTOR for international shipment shall
be made EX Works (e.g., WTI's Carlsbad, California facility). ICC Incoterms
(1990 editions) shall apply to all international shipments, except insofar as
these Incoterms may be inconsistent with the terms of this Agreement.
9.2 Risk of loss to the Products shall pass to DISTRIBUTOR at the point of
shipment (e.g., WTI's Carlsbad, California facility).
9.3 All Products ordered pursuant to accepted purchase orders will be
scheduled for delivery in accordance with WTI's then current and normal delivery
times. WTI shall not be responsible for failure to deliver or comply with any
provision of this Agreement if such non-performance is due to causes beyond its
reasonable control such as, but not limited to, acts of God, fire or explosions,
civil and labor disturbances or delays in transportation. In such event, the
time for performance hereunder shall be extended by the period of time
attributable to the delay.
10. PRODUCT WARRANTY.
10.1 DISTRIBUTOR understands and acknowledges that this Product Warranty is
made to DISTRIBUTOR only and shall not be passed through to DISTRIBUTOR's
customer.
10.2 WTI warrants the Products to be free from defects in material and
workmanship until the expiration date on the Product.
10.3 The sole responsibility of WTI under the foregoing warranty shall be
limited, at its option, to the repair or replacement of defective Products
returned by DISTRIBUTOR to WTI, at WTI's expense.
10.4 All WTI warranties hereunder are conditioned upon proper storage,
handling and use of the Products in the application for which they are intended.
10.5 THE FOREGOING WARRANTY IS EXCLUSIVE AND IN LIEU OF ALL OTHER
WARRANTIES OR CONDITIONS, EXPRESS OR IMPLIED (INCLUDING ANY WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE). REPAIR OR REPLACEMENT IN
THE MANNER PROVIDED ABOVE SHALL BE THE SOLE AND EXCLUSIVE REMEDY OF
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PURCHASER FOR BREACH OF WARRANTY AND SHALL CONSTITUTE FULFILLMENT OF ALL
LIABILITIES OF WTI WITH RESPECT TO THE QUALITY AND PERFORMANCE OF THE PRODUCTS.
10.6 In no event shall WTI's liability to DISTRIBUTOR, whether in contract
or in tort (including negligence and strict liability), exceed the price of the
Product from which such liability arises.
11. COMPLIANCE WITH LAWS IN THE TERRITORY.
DISTRIBUTOR and WTI shall strictly comply with all applicable laws, rules,
regulations and other governmental requirements governing the manufacture,
packaging, labeling, distribution and sale of the Products in the Territory.
Such compliance shall include, but shall not be limited to, the following:
11.1 DISTRIBUTOR shall keep WTI informed of the particular requirements
imposed on such products by the laws and regulations of the Territory;
11.2 DISTRIBUTOR shall distribute, promote and sell the Products only for
the uses and applications approved by WTI and as permitted under the applicable
laws and regulations in the Territory;
11.3 DISTRIBUTOR shall comply with any recalls of the Products initiated by
WTI or governmental authorities; and
11.4 DISTRIBUTOR shall promptly disclose to WTI all reports, data and other
information received by DISTRIBUTOR relating to the unfavorable (including
physiological or psychological) effects or toxicity of the Products. WTI will
promptly address all reports received and reply in writing to DISTRIBUTOR.
12. WTI'S PROPRIETARY INFORMATION AND RIGHTS.
12.1 Each party acknowledges and understands that all information disclosed
by one party to the other not generally known concerning WTI and DISTRIBUTOR and
the Products, including but not limited to a party's organization and business
affairs, customer lists, sales information, operating procedures and practices,
technical data, designs, know-how, trade secrets, and processes (the
"Proprietary Information"), whether owned by such party or licensed by such
party from third parties, is subject to valuable proprietary interest of the
disclosing party, and that the receiving party is under an obligation to
maintain the confidentiality of such Proprietary Information. Without limiting
the generality of the foregoing obligations, the receiving party agrees that for
the term of this Agreement and thereafter until such time as the Proprietary
Information is in the public domain, such receiving party will (i) not disclose,
publish or disseminate any Proprietary Information, (ii) not use any Proprietary
Information for its own account, (iii) not authorize any other person to
disclose, publish or disseminate the Proprietary
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Information, and (iv) treat all Proprietary Information in a confidential
manner, including appropriate marking and secure storage of written Proprietary
Information.
12.2 During the term of this Agreement, DISTRIBUTOR is authorized to use
WTI trademarks for the Products in connection with DISTRIBUTOR's advertisement,
promotion and distribution of the Products in the Territory. DISTRIBUTOR
acknowledges that WTI owns and retains all patents, trademarks, copyrights and
other proprietary rights in the Products, and agrees that it will not at any
time during or after the termination of this Agreement assert or claim any
interest in or take any action which may adversely affect the validity or
enforceability of any patent, trademark, trade name, trade secret, copyright, or
logo belonging to or licensed to WTI.
12.3 DISTRIBUTOR agrees to use reasonable efforts to protect WTI's
proprietary rights and to cooperate in WTI's efforts to protect its proprietary
rights. DISTRIBUTOR agrees to notify WTI of any known or suspected breach of
WTI's proprietary rights and to cooperate with WTI without making any charge
therefore in any action by WTI to investigate or remedy an infringement of such
rights.
12.4 Neither DISTRIBUTOR nor its employees and agents, shall, without WTI's
prior consent, alter any of the Products or remove, alert, obliterate or mar any
notice or legend of WTI's patent, copyright, trademarks or trade secrets.
13. INFRINGEMENT INDEMNIFICATION.
13.1 WTI shall defend any claim, suit or proceeding brought against
DISTRIBUTOR so far as it is based on a claim that the use, transfer or resale of
any Products delivered hereunder constitutes an infringement of a patent,
trademark or copyright registered in the United States, so long as WTI is
notified promptly in writing by the DISTRIBUTOR of any such action and given
full authority, information and assistance at WTI's expense for the defense of
any such claim or proceedings. WTI shall pay all damages and cost awarded
against the DISTRIBUTOR but shall not be responsible for any settlement made
without its consent. In the event of final judgment which prohibits the
DISTRIBUTOR or the DISTRIBUTOR's customers from continued use of any Products by
reason of infringement of such patent, trademark or copyright, WTI may, at its
sole option and at its expense, obtain the rights to continued use of any such
Product, replace or modify such Product so that it is no longer infringing.
13.2 WTI shall have no liability to the DISTRIBUTOR under any provisions of
this Section 12 if any patent, trademark or copyright infringement or claim
thereof is based upon the use of Products delivered hereunder in connection or
in combination with equipment or devices not delivered by WTI or use of any such
Product in a manner for which the same was not designed.
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14. TERMINATION.
14.1 WTI/DISTRIBUTOR may terminate this Agreement at any time prior to the
expiration of its stated term upon the occurrence of any of the following
events, each of which is expressly declared to be "Just Cause" for termination
of this Agreement:
14.1.1 DISTRIBUTOR defaults in any payment due WTI for Products purchased
under this Agreement and such default continues unremedied for a period of
fifteen (15) days following WTI's notice to default;
14.1.2 DISTRIBUTOR fails to meet the annual minimum quota agreed to and set
forth in Exhibit C;
14.1.3 DISTRIBUTOR/WTI fails to preform any other material obligation,
warranty, duty or responsibility under the Agreement, and such failure or
default continues unremedied for a period of (30) following WTI's notice.
14.1.4 DISTRIBUTOR/WTI becomes insolvent; proceedings are instituted by or
against it in bankruptcy, insolvency, reorganization or dissolution; or it makes
an assignment for the benefit of creditors; or
14.1.5 DISTRIBUTOR/WTI is merged, consolidated, or substantially changes
the nature or character of its business, or substantially changes its management
ownership or principals.
14.2 Upon termination hereby by either party:
14.2.1 All sums due to either party from the other shall be promptly paid;
14.2.2 DISTRIBUTOR orders received and accepted by WTI prior to termination
of this Agreement shall be fulfilled in accordance with their terms;
14.2.3 All property belonging to one party but in the custody of the other
shall be returned;
14.2.4 DISTRIBUTOR shall cease all display, advertising and use of WTI
tradenames, trademarks, logos and designations, except uses on the Products
which remain in DISTRIBUTOR's possession; and
14.2.5 WTI shall have the option to repurchase any or all of the Products
in DISTRIBUTOR inventory which are new and unused at net price paid originally
by DISTRIBUTOR.
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15. GOVERNING LAW.
The place of the making and execution of this Agreement, and the location
of WTI shall be Carlsbad, California, U.S.A. Accordingly, the parties agree that
the law of the State of California (except for the body of law known as
conflicts of law and excluding any applicable provisions of the United Nations
Convention for the International Sale of Goods) shall govern the interpretation,
enforcement and performance of this Agreement. WTI and DISTRIBUTOR each
expressly waive and disavow any rights that may accrue under any other body of
law.
16. LIMITATION OF LIABILITY.
Neither WTI nor DISTRIBUTOR shall be liable to the other, or to
DISTRIBUTOR's customers, for any special, indirect, or consequential damages,
including but not limited to loss of profits, loss of business opportunities, or
loss of business investment.
17. INDEMNIFICATION.
DISTRIBUTOR agrees to indemnify and hold WTI harmless from any costs,
claims, damages, losses, liabilities or expenses (including reasonable
attorney's fees) asserted by any third party resulting from DISTRIBUTOR's breach
of this Agreement, inaccurate representation or warranty made by DISTRIBUTOR, or
failure to conform to local laws and regulations.
18. ASSIGNMENT.
Neither party may assign any of the rights or obligations set forth in this
Agreement without the prior written consent of the other, provided that WTI
shall have the right to assign any portion of the Agreement to its subsidiaries
and affiliated companies.
19. NOTICES.
All notices and demands under this Agreement shall be in writing and shall
be served by personal service or by mail at the address of the receiving party
first stated in this Agreement (or such different address as may be designated
by such party to the other in writing). All notices or demands by mail shall be
by facsimile, or by certified or registered airmail, return-receipt requested,
and shall be deemed complete upon receipt.
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20. INTEGRATED AGREEMENT.
This Agreement (and attached Exhibits) constitutes the entire understanding
and agreement between WTI and DISTRIBUTOR and terminates and supersedes all
prior formal or informal understandings. Should any Section of this Agreement be
held unenforceable by a court of law or other tribunal having jurisdiction over
both parties, WTI or DISTRIBUTOR may elect to terminate this Agreement.
21. LANGUAGE AND ORIGINALS.
This Agreement has been written in the English language. It may be
translated, for convenience, into other languages. However, in case of error or
disagreement, the executed English language version shall prevail.
This Agreement shall be executed in three (3) original copies, one for each
party, and one that DISTRIBUTOR can use for registration purposes as needed.
Entered into in Carlsbad, California, U.S.A.
WILSHIRE TECHNOLOGIES, INC. ARMSTRONG INDUSTRIAL CORP.
BY: /s/ John Van Egmond BY: /s/ Anthony Ang
------------------------------ ------------------------------
TITLE: President & CEO TITLE: Executive Director
--------------------------- ---------------------------
DATE: March 5, 1997 DATE: April 2, 1997
---------------------------- ----------------------------
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DISTRIBUTOR AGREEMENT
BETWEEN WTI AND ARMSTRONG INDUSTRIAL CORP.
EXHIBIT A
The Products
Exclusive distribution of all Wilshire Contamination Control products that
pertain to the Disk Drive market with the exception of DuraCLEAN gloves, which
shall be distributed on a non-exclusive basis.
EFFECTIVE DATE: March 5, 1997
WTI: /s/ John Van Egmond
------------------------
AIC: /s/ Anthong Ang
------------------------
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DISTRIBUTOR AGREEMENT
BETWEEN WTI AND ARMSTRONG INDUSTRIAL CORP.
EXHIBIT B
The Territory / Market
The Disk Drive market in the countries of Singapore, Thailand, Malaysia and
Indonesia.
EFFECTIVE DATE: March 5, 1997
WTI: /s/ John Van Egmond
------------------------
AIC: /s/ Anthony Ang
------------------------
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DISTRIBUTOR AGREEMENT
BETWEEN WTI AND ARMSTRONG INDUSTRIAL CORP.
EXHIBIT C
Annual Minimum Purchases
U.S. $ 1,500,000 for calendar year 1997.
PERIOD COVERED BY QUOTA: ________________
WTI: /s/ John Van Egmond
------------------------
AIC: /s/ Anthong Ang
------------------------
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DISTRIBUTOR AGREEMENT
BETWEEN WTI AND ARMSTRONG INDUSTRIAL CORP.
EXHIBIT D
Dedicated Sales Staff
On or before April 1, 1997 DISTRIBUTOR must dedicate a qualified Sales Engineer
to the sales of WTI products.
WTI would like to approve this individual and will commit to training this
person in both the U.S. and Territory according to the following schedule.
WTI will commit to at least eight (8) trips to the countries covered in the
agreement to support the DISTRIBUTOR personnel.
WTI will dedicate two (2) weeks of training time for DISTRIBUTOR personnel in
the U.S.
EFFECTIVE DATE: March 5, 1997
WTI: /s/ John Van Egmond
------------------------
AIC: /s/ Anthong Ang
------------------------
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EXHIBIT 10.95
THIRD AMENDMENT TO
CREDIT AGREEMENT
This Third Amendment to the Credit Agreement ("Third Amendment") is made
and entered into as of April 15, 1997, by and between Trilon Dominion Partners
L.L.C. ("Trilon Dominion") and Wilshire Technologies, Inc. ("Borrower").
W I T N E S S E T H
WHEREAS, the parties hereto have entered into a Credit Agreement dated as
of January 5, 1996 (the "Agreement"); the Amendment to the Credit Agreement
("First Amendment") as of June 30, 1996; and the Second Amendment to the Credit
Agreement ("Second Amendment") dated September 30, 1996;
WHEREAS, the parties hereto wish to further amend the Agreement as set
forth in this Third Amendment;
NOW THEREFORE, in consideration of the above premises and the mutual
covenants and agreements herein, the parties agree as follows:
1. Amendment.
1.1 Section 1.1 of the Agreement is hereby amended by replacing the phrase
"not exceeding $1,000,000" in the fifth line of such section with the phrase
"not exceeding $3,000,000" .
1.2 Section 1.4 of the Agreement is hereby amended to read as follows:
Warrant and Springing Warrant. In consideration of the Lender's providing the
Commitment dated January 5, 1996, the Commitment as amended by the Second
Amendment dated September 30, 1996, and the Commitment as amended by the Third
Amendment dated April 15, 1997, the Borrower hereby agrees to issue to the
Lender (i) three warrants in the form of Exhibit B attached hereto (the
"Warrant") each to
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purchase 100,000 shares of common stock of the Borrower, no par value per share
(the "Common Stock"), at an exercise price per share equal to the closing price
per share of Common Stock on January 5, 1996 for the first warrant, on September
30, 1996 for the second warrant, and on April 15, 1997 for the third warrant,
exercisable from the date hereof through January 5, 2001 for the first warrant,
through September 30, 2001 for the second warrant and through April 15, 2002 for
the third warrant; and (ii) three springing warrants in the form of Exhibit C
attached hereto (the "Springing Warrant") each to purchase 25,000 shares of
Common Stock, exercisable in the event that the principal and interest on the
Note (as defined in Section 1.5 of the Agreement) shall not be paid in full on
or before June 30, 1996 for the first Springing Warrant, on or before June 30,
1997 for the second Springing Warrant, and on or before December 31, 1997 for
the third Springing Warrant.
1.3 Section 1.5 of the Agreement is hereby amended by replacing the phrase
"not to exceed $1,000,000" in the fifth line of such section with the phrase
"not to exceed $3,000,000".
1.4 Section 1.7 of the Agreement is hereby amended by replacing the phrase,
"or, (ii) December 31, 1996" in the fifth line of such section with the phrase,
"or, (ii) December 31, 1997".
1.5 Except as specifically set forth in this Amendment the Agreement and
all other documents and agreements entered into in connection with the Agreement
including without limitation the Warrants and Springing Warrants shall remain
unchanged and in full force and effect.
2. Governing Law. Except as otherwise expressly provided, this Amendment
shall be governed and construed in accordance with the laws of the State of
Delaware applicable to contracts made in such State and without regard to
conflicts of law doctrines.
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3. Counterparts. This Amendment may be executed in one or more counterparts
and by different parties in separate counterparts. All of such counterparts
shall constitute one and the same agreement and shall become effective when one
or more counterparts have been signed by each party and delivered to the other
party.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be duly
executed and delivered as of the day and year first written above.
THE BORROWER: WILSHIRE TECHNOLOGIES, INC.
By: /s/ James W. Klingler
--------------------------
Name: James W. Klingler
Title: Chief Financial Officer
THE LENDER: TRILON DOMINION PARTNERS, L.L.C.
By: /s/ William P. Gendron
--------------------------
Name: William P. Gendron
Title: Treasurer
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THIRD AMENDMENT TO
GRID PROMISSORY NOTE
This Third Amendment to the Grid Promissory Note ("Note") issued pursuant
to the Credit Agreement ("Third Amendment") is made and entered into as of April
15, 1997, by and between Trilon Dominion Partners L.L.C. ("Trilon Dominion") and
Wilshire Technologies, Inc. ("Borrower").
W I T N E S S E T H
WHEREAS, the parties hereto have entered into a Credit Agreement dated as
of January 5, 1996 (the "Agreement"), the Amendment to the Grid Promissory Note
("First Amendment") as of June 30, 1996, and the Second Amendment to the Credit
Agreement ("Second Amendment") as of September 30, 1996: and pursuant to the
Agreement Note was issued.
WHEREAS, the parties hereto wish to further amend the Note as set forth in
this Third Amendment;
NOW THEREFORE, in consideration of the above premises and the mutual
covenants and agreements herein, the parties agree as follows:
1. Amendment.
1.1 Section 1 of the Note is hereby amended by replacing the phrase,
"principal sum of ONE MILLION DOLLARS ($1,000,000):" in the sixth line of such
section with the phrase, "principal sum of THREE MILLION DOLLARS ($3,000,000)".
1.2 Section 4 of the Note is hereby amended by replacing the phrase, "or
(ii) December 31, 1996" in the fifth line of such section with the phrase, "or
(ii) December 31, 1997".
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1.3 Except as specifically set forth in this Third Amendment the Agreement
and all other documents and agreements entered into in connection with the
Agreement shall remain unchanged and in full force and effect.
2. Governing Law. Except as otherwise expressly provided, this Third
Amendment shall be governed and construed in accordance with the laws of the
State of Delaware applicable to contracts made in such State and without regard
to conflicts of law doctrines.
3. Counterparts. This Third Amendment may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts shall constitute one and the same agreement and shall become
effective when one or more counterparts have been signed by each party and
delivered to the other party.
IN WITNESS WHEREOF, the parties have caused this Third Amendment to be duly
executed and delivered as of the day and year first written above.
THE BORROWER: WILSHIRE TECHNOLOGIES, INC.
By: /s/ James W. Klingler
--------------------------
Name: James W. Klingler
Title: Chief Financial Officer
THE LENDER: TRILON DOMINION PARTNERS, L.L.C.
By: /s/ William P. Gendron
--------------------------
Name: William P. Gendron
Title: Treasurer
<PAGE> 1
EXHIBIT 10.96
THIS AGREEMENT is made the 29th day of April 1997 BETWEEN:
(1) WILSHIRE TECHNOLOGIES INC., whose principal office is at 5441 Avenida
Encinas, Suite A, Carlsbad, CA 92008, United States of America
("Wilshire");
(2) INNOVATIVE TECHNOLOGIES LIMITED, whose registered offices is at Road Three,
Winsford Industrial Estate, Cheshire CW7 3PD, England ("IT"); and
(3) INNOVATIVE TECHNOLOGIES GROUP PLC, whose registered office is also at Road
Three, Winsford Industrial Estate aforesaid ("IT PLC").
WHEREAS:
(A) IT and Wilshire entered into (i) a Product Development and License
Agreement for Gloves on 20 June 1993 ("the Glove License") and (ii) a
supplemental Agreement dated 18 April 1995 ("the Supplemental Agreement")
in respect of certain modifications and other matters concerning the Glove
License.
(B) The Glove License as modified by the Supplemental Agreement is referred to
in this Agreement as "the Glove Agreement".
(C) IT and Wilshire have reached agreement on the following terms for the
purpose of termination of the Glove Agreement.
(D) IT PLC is entering into this Agreement to confirm its separate agreement to
the terms being accepted by IT.
IT IS HEREBY AGREED as follows:-
1. DEFINITIONS
Terms used in this Agreement will have the same meanings as given to them
in Clause 1 of the Glove License.
2. TERMINATION
2.1 In consideration of the parties' respective obligations in this
Agreement the parties agree that the Glove Agreement is hereby
terminated with immediate effect and IT and IT PLC each acknowledges
that it has and shall have no claim against Wilshire, and Wilshire
acknowledges that it has and shall have no claim against IT or IT PLC,
arising out of such
<PAGE> 2
termination or any breach or default in respect of any of the
provisions of the Glove Agreement.
2.2 Accordingly each of IT and IT PLC hereby waives and releases Wilshire,
and Wilshire hereby waives and releases IT and IT PLC, from any claims
proceedings or demands whatsoever of any nature, whether or not
accrued at the date of this Agreement, arising out of or in connection
with the Glove Agreement. This Agreement constitutes full and final
settlement of any rights or claims whatsoever which any party hereto
may have arising out or in connection with the Glove Agreement.
2.3 Without affecting the generality of Clause 2.2, IT and IT PLC agree
that the said waiver and release by IT and IT PLC will include and
will terminate and cancel all obligations to pay royalties under any
provision of the Glove License, whether minimum royalties or other
royalties and whether such royalties are due or not at the date of
this Agreement. Accordingly, and without affecting the generality of
the previous sentence, Wilshire will not be liable for any royalties
should it decide to sell (rather than dispose of or use) any Licensed
Products within its residual inventories of Licensed Products already
manufactured at the date of this Agreement Provided that Wilshire
shall on the expire of six (6) months following the date of this
Agreement have disposed of all residual stocks of the Licensed
Products.
2.4 IT and Wilshire hereby acknowledge that during the course of the Glove
Agreement they have had access to and have been entrusted with
information that is secret and confidential as defined in Clause 1 of
the Glove Agreement as "Confidential Information" and that disclosure
of such information (whether directly or indirectly) to actual or
potential competitors of Wilshire or IT or their associates
respectively could place it or them a serious competitive disadvantage
and could do serious damage (whether financial or otherwise) to its or
their business. Each of Wilshire and IT accordingly agrees that for a
period of five (5) years from the date of this Agreement it will keep
secret and not disclose either directly or indirectly to any third
party nor use for its own purposes, and will use its reasonable
endeavors to prohibit any unauthorized disclosure of, any Confidential
Information provided to it by IT or Wilshire (as the case may be) save
that the above provisions of this Clause 2.4 shall not apply to any
information which: -
2.4.1 is as the date of this Agreement or at any time after the
date of this Agreement comes into the public domain other
than through breach of this Clause 2.4 by Wilshire or its
employees or contractors or by IT or its employees or
contractors; or
<PAGE> 3
2.4.2 can be shown by Wilshire to the reasonable satisfaction of
IT to have been known by Wilshire before disclosure to IT by
Wilshire, and vice versa; or
2.4.3 Subsequently comes lawfully into the possession of Wilshire
or IT from a third party.
3. GENERAL
3.1 This Agreement supersedes all prior agreements, understandings and
communications between any of the parties hereto whether oral or in
writing in relation to the Glove Agreement or its termination.
3.2 This Agreement shall be governed by and construed in accordance with
English Law.
3.3 This Agreement may be in any number of counterparts each of which when
executed and delivered shall be an original but all the counterparts
together shall constitute one and the same instrument.
AS WITNESS the hands of the duly authorized representatives of each of Wilshire,
IT and IT PLC the day and year first above written.
SIGNED by John Van Egmond )
)
on behalf of WILSHIRE TECHNOLOGIES INC. )
SIGNED by Simon A. Dixon )
)
on behalf of INNOVATIVE TECHNOLOGIES LIMITED )
SIGNED by D. K. Gilding )
)
on behalf of INNOVATIVE TECHNOLOGIES GROUP PLC )
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-QSB FOR THE QUARTER ENDED MAY 31, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO FORM 10-QSB AND THE ACCOMPANYING
NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> NOV-30-1997 NOV-30-1997
<PERIOD-START> DEC-01-1996 DEC-01-1996
<PERIOD-END> MAY-31-1997 MAY-31-1997
<CASH> 72 72
<SECURITIES> 0 0
<RECEIVABLES> 603 603
<ALLOWANCES> 20 20
<INVENTORY> 1,129 1,129
<CURRENT-ASSETS> 2,231 2,231
<PP&E> 1,407 1,407
<DEPRECIATION> 724 724
<TOTAL-ASSETS> 3,654 3,654
<CURRENT-LIABILITIES> 3,491 3,491
<BONDS> 0 0
<COMMON> 25,857 25,857
0 0
0 0
<OTHER-SE> 25,694 25,694
<TOTAL-LIABILITY-AND-EQUITY> 3,654 3,654
<SALES> 1,000 1,591
<TOTAL-REVENUES> 1,000 1,591
<CGS> 693 1,211
<TOTAL-COSTS> 1,316 2,284
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 71 119
<INCOME-PRETAX> (387) (812)
<INCOME-TAX> 0 1
<INCOME-CONTINUING> (387) (813)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (387) (813)
<EPS-PRIMARY> (0.03) (0.06)
<EPS-DILUTED> (0.03) (0.06)
</TABLE>
