<PAGE> 1
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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 February 28, 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 March 31, 1997.
Transitional Small Business Disclosure Format. Yes No X
--- ---
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<PAGE> 2
WILSHIRE TECHNOLOGIES, INC.
INDEX TO FORM 10-QSB
<TABLE>
<S> <C>
PART 1 - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of 3
February 28, 1997 and November 30, 1996
Condensed Consolidated Statements of Operations 4
for the Quarters Ended February 28, 1997 and
February 29, 1996
Condensed Consolidated Statements of Cash Flows 5
for the Quarters Ended February 28, 1997 and
February 29, 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 8
or Plan of Operation
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
</TABLE>
2
<PAGE> 3
Wilshire Technologies, Inc.
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
February 28, November 30,
1997 1996
------------- -------------
ASSETS (Unaudited) (Note)
<S> <C> <C>
Current assets:
Cash $ 153,000 $ 189,000
Accounts receivable trade, less allowance for doubtful
accounts of $18,000 and $17,000 at February 28,
1997 and November 30, 1996, respectively 282,000 571,000
Inventories (Note 2) 754,000 591,000
Current portion of note receivable (Note 3) 206,000 204,000
Other current assets 286,000 231,000
------------ ------------
Total current assets 1,681,000 1,786,000
Property and equipment, less accumulated depreciation
of $681,000 and $637,000 at February 28, 1997 and
November 30, 1996, respectively 687,000 723,000
Note receivable from the sale of discontinued business
less current portion (Note 3) 235,000 280,000
Goodwill, less accumulated amortization of $292,000
and $281,000 at February 28, 1997 and November 30,
1996, respectively 450,000 461,000
Patents and trademarks, net 109,000 104,000
------------ ------------
$ 3,162,000 $ 3,354,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $399,000 $393,000
Accrued expenses 379,000 454,000
Interest payable 84,000 31,000
Line of credit (Note 4) 1,750,000 1,500,000
------------ ------------
Total current liabilities 2,612,000 2,378,000
Shareholders' equity (net capital deficiency)
Preferred stock, no par value, 2,000,000 shares authorized
and none issued and outstanding - -
Common stock, no par value, 50,000,000 shares
authorized; 12,943,385 shares issued and
outstanding at February 28, 1997 and
November 30, 1996. 25,857,000 25,857,000
Common stock warrants 275,000 275,000
Accumulated deficit (25,582,000) (25,156,000)
------------ ------------
Total shareholders' equity 550,000 976,000
------------ ------------
$ 3,162,000 $ 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.
3
<PAGE> 4
Wilshire Technologies, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended February 28,
-----------------------------------
1997 1996
--------- ---------
<S> <C> <C>
Continuing operations:
Net sales $ 591,000 $ 838,000
Cost of sales 518,000 764,000
----------- -----------
Gross profit 73,000 74,000
Operating expenses:
Marketing and selling 124,000 129,000
General and administrative 263,000 427,000
Research and development 63,000 93,000
----------- -----------
Total operating expenses 450,000 649,000
----------- -----------
Loss from operations (377,000) (575,000)
Other income - 1,000
Interest income (expense), net (48,000) (83,000)
----------- -----------
Loss before provision
for state income taxes (425,000) (657,000)
Provision for state income taxes - current 1,000 1,000
----------- -----------
Loss from continuing operations (426,000) (658,000)
Gain from discontinued operations (Note 6) - 18,000
----------- -----------
Net loss ($426,000) ($640,000)
=========== ==========
Weighted average shares outstanding 12,943,385 9,592,418
=========== ==========
Loss per share:
Loss from continuing operations ($0.03) ($0.07)
Loss from discontinued operations - -
Net loss per share ($0.03) ($0.07)
=========== ==========
</TABLE>
See accompanying notes.
4
<PAGE> 5
Wilshire Technologies, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Quarters Ended February 28,
---------------------------------
1997 1996
--------- ----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(426,000) $ (640,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 57,000 113,000
Provision for loss on accounts receivable 1,000 (1,000)
Net change in operating assets and liabilities:
(Increase) decrease in accounts receivable 288,000 (22,000)
Increase in inventories (163,000) (75,000)
Increase in other current assets (55,000) (32,000)
Decrease in accounts payable and
accrued expenses (69,000) (331,000)
Increase in interest payable 53,000 116,000
--------- ----------
Net cash used in operating activities (314,000) (872,000)
--------- ----------
INVESTING ACTIVITIES
Purchase of equipment (8,000) --
Proceeds from sale of discontinued operations 43,000 --
Increase in other assets (7,000) (7,000)
--------- ----------
Net cash provided by (used in) investing activities 28,000 (7,000)
--------- ----------
FINANCING ACTIVITIES
Proceeds from line of credit 250,000 1,000,000
--------- ----------
Net cash provided by financing activities 250,000 1,000,000
--------- ----------
NET INCREASE (DECREASE) IN CASH (36,000) 121,000
CASH - BEGINNING OF PERIOD 189,000 18,000
--------- ----------
CASH - END OF PERIOD $ 153,000 $ 139,000
========= ==========
</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.
5
<PAGE> 6
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 ended February 28, 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>
FEBRUARY 28, NOVEMBER 30,
1997 1996
------------ ------------
<S> <C> <C>
Raw materials $109,000 $141,000
Work in process 208,000 175,000
Finished goods 437,000 275,000
-------- --------
$754,000 $591,000
======== ========
</TABLE>
6
<PAGE> 7
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, the principal was due on June 30, 1996 and the interest is 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 extended the termination date of the Agreement 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 June 30, 1996, the Company and Trilon Dominion entered into an Amendment to
the Agreement ("First Amendment") whereby the termination date was changed from
June 30, 1996, to December 31, 1996.
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 can draw 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 only becomes exercisable if
the Company does not pay Trilon Dominion the principal and interest due on June
30, 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, and it expires on September
30, 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.
7
<PAGE> 8
5. COMMITMENTS AND CONTINGENCIES
BREAST IMPLANT LITIGATION
During the first quarter 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 ended February 29, 1996, were $330,000.
The effect on the results of operations from the operations of the WMP division
for the quarter ended February 29, 1996 was $18,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
During the first quarter of 1997, the Company made significant progress on its
production plans for both the contamination control business and the glove
business. The Company's contamination control swab manufacturing equipment was
successfully moved from Texas to the Company's facility in Tijuana, Mexico,
thus lowering production costs. In addition, the developmental glove equipment
moved from the UK to the Tijuana, Mexico, facility in the fourth quarter of
1996 is 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 plans to obtain the financing necessary for
the first full-scale glove production line and place the purchase orders for
that equipment. In addition, the Company expects sales of contamination
control products to improve, especially to Southeast Asian customers.
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.
8
<PAGE> 9
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.
Net Sales decreased by $247,000 (29.5%) to $591,000 in the first quarter of
1997 from $838,000 in the first quarter of 1996. Sales for the first quarter
were adversely affected by an abnormal inventory reduction by a major
distributor of contamination control wipers. The Company expects restocking of
products to normal levels later this year.
GROSS PROFIT
Gross profit decreased by $1,000 to $73,000 in the first quarter of 1997 from
$74,000 in the first quarter of 1996 primarily due to lower sales of
contamination control products offset by reduced costs of the developmental
glove plant. Gross profit margin as a percent of sales increased to 12.4% in
the first quarter of 1997 from 8.8% in the first quarter of 1996. Excluding
the impact of the glove sales and the related cost of sales on gross profit,
the gross profit margin as a percent of sales decreased to 25.5% in the first
quarter of 1997 from 32.5% in the first quarter 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 $169,000 (30.4%) to
$387,000 in the first quarter of 1997 from $556,000 in the first quarter of
1996 primarily due to reductions in personnel and lower legal and audit fees.
RESEARCH AND DEVELOPMENT
Research and development expenses decreased $30,000 (32.3%) to $63,000 in the
first quarter of 1997 from $93,000 in the first quarter of 1996, primarily due
to the divestiture of the Transdermal Products business. As a percentage of
sales, research and development expenses were 10.7% in the first quarter of
1997, compared to 11.1% in the first quarter of 1996.
INTEREST INCOME (EXPENSE), NET
The Company reported lower interest expense in the first quarter of 1997 versus
the same period of 1996 due to reduced debt outstanding. The interest expense
was related primarily to the line of credit due to Trilon Dominion Partners,
LLC. (see Note 4).
INCOME TAXES
For the quarters ended February 28, 1997 and February 29, 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.
9
<PAGE> 10
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 quarter of 1997, the Company has not generated
sufficient cash from operations to fund its working capital requirements. Net
cash used in operating activities was $314,000 in the first quarter of 1997
versus $872,000 in the first quarter of 1996. The decrease in the cash used in
operating activities was primarily due to lower operating expenses and
increased collection of accounts receivable.
Net cash provided by investing activities was $28,000 in the first quarter of
1997, versus net cash used in investing activities of $7,000 in the first
quarter of 1996.
Net cash provided by financing activities was $250,000 in the first quarter of
1997 versus $1,000,000 in the first quarter 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 is payable monthly at a rate of prime plus
3.75%. 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 June 30, 1996, the Company and Trilon Dominion entered into an Amendment to
the Agreement ("First Amendment") whereby the termination date was changed from
June 30, 1996, to December 31, 1996.
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 can draw on the additional credit line upon
achievement of certain milestones. See Note 4 to the financial statements for
details of the Amendments.
In addition to completing the above mentioned transactions, the Company is
attempting to raise additional capital to fund equipment purchases and its
ongoing operations. Trilon Dominion, the Company's largest shareholder with
over 72% of the shares outstanding, has continued to provide financial support
to the Company during 1996 and the first quarter of 1997, and management
believes that Trilon Dominion will continue to support the Company as necessary
through the end of fiscal year 1997.
10
<PAGE> 11
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 herein.
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:
10.91 Second Addendum, dated February 3, 1997, to the
Manufacturing and Supply Agreement dated April 11, 1996
between Advanced Barrier Technologies, Inc. and the
Registrant.
10.92 Bailment Agreement, dated February 3, 1997, between Advanced
Barrier Technologies de Mexico S.A. de C.V., Advanced
Barrier Technologies, Inc. and the Registrant.
10.93 Certificate, dated February 28, 1997, regarding the
dissolution of Wilshire Transdermal Products, Ltd.
(B) REPORTS ON FORM 8-K:
None
11
<PAGE> 12
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: April 11, 1997 By: /s/ James W. Klingler
-------------------------------
James W. Klingler
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
12
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequentially
Number Description Numbered Page
- ------ ----------- -------------
<S> <C> <C>
10.91 Second Addendum, dated February 3, 1997, to the Manufacturing 14
and Supply Agreement dated April 11, 1996 between Advanced
Barrier Technologies, Inc. and the Registrant.
10.92 Bailment Agreement, dated February 3, 1997, between Advanced 20
Barrier Technologies de Mexico S.A. de C.V., Advanced Barrier
Technologies, Inc. and the Registrant.
10.93 Certificate, dated February 28, 1997, regarding the 30
dissolution of Wilshire Transdermal Products, Ltd.
</TABLE>
13
<PAGE> 1
EXHIBIT 10.91
SECOND ADDENDUM TO THE MANUFACTURING AND SUPPLY AGREEMENT
DATED FEBRUARY 3, 1997
This Second Addendum Agreement ("the Second Addendum Agreement") to the
Manufacturing and Supply Agreement ("the Master Agreement") is made effective
on the 3rd day of February, 1997 ("Effective Date") by and between Wilshire
Technologies, Inc. ("WTI"), a California corporation with a place of business
at 5441 Avenida Encinas, Suite A, Carlsbad, California 92008 and Advanced
Barrier Technologies, Inc. ("ABT"), a California corporation with a place of
business at 2120 Las Palmas, Suite F, Carlsbad, CA 92009.
RECITALS
--------
WHEREAS, WTI, a manufacturer and supplier of clean room swabs used for
specialized applications in the electronics industry, and ABT, a manufacturer
with a production facility in Tijuana, Mexico, entered into the Master
Agreement dated April 11, 1996;
NOW THEREFORE, the parties hereto agree to amend certain sections of the Master
Agreement which are hereby superseded by the amended sections as follows:
1.3 WTI Equipment shall mean the special production equipment
listed on Exhibit A of the Master Agreement, the R & D Equipment listed on
Exhibit D of the Addendum Agreement dated July 26, 1996, and the WCC Equipment
listed on Exhibit F of this Second Addendum Agreement attached hereto, owned by
WTI and installed at the Tijuana Facility for the purpose of manufacturing the
Product, and the WCC Product.
1.4 WTI Technology shall mean all inventions, intellectual
property, technical data and know-how of WTI, including any issued patent and
patent applications, and any extensions and reissues thereof, relating to the
method and process of manufacturing breathable polyurethane gloves and clean
room swabs and wipes.
1.5 WCC Product shall mean WTI's proprietary clean room swabs
manufactured and processed by ABT for WTI pursuant to the terms of the
Agreement and this Second Addendum Agreement, as described in Exhibit G.
3.1 WTI shall procure the WTI Equipment at its expense. WTI will
pay the WTI Equipment suppliers directly per the terms agreed between such
suppliers and WTI. WTI will maintain a petty cash fund for purchases of small
parts needed to install the WTI Equipment. WTI will pay ABT to install the WTI
Equipment in the Tijuana Facility in accordance with the terms of payment for
Phase 1 in Exhibit C of the Master Agreement, in Exhibit E to the Addendum
Agreement, and in Exhibit G to this Second Addendum Agreement. All title and
ownership in the WTI Equipment shall be retained by WTI, and ABT shall not
permit any lien or third party claim to be asserted with respect to the WTI
Equipment. Further, ABT shall cooperate with WTI to ensure that all WTI
Equipment is clearly and conspicuously labeled "Property of Wilshire
Technologies, Inc."
1
<PAGE> 2
4.2 The sole and exclusive compensation payable by WTI to ABT for
the Manufacturing Services will be as listed on Exhibit C to the Master
Agreement, Exhibit E to the Addendum Agreement, and Exhibit G to this Second
Addendum Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Second
Addendum Agreement to the Master Agreement to be executed by their duly
authorized representatives.
WILSHIRE TECHNOLOGIES, INC. ADVANCED BARRIER TECHNOLOGIES, INC.
By: /s/ John Van Egmond By: /s/ Ralph M. Sias
--------------------------- ----------------------
John Van Egmond Ralph M. Sias
Title: President & CEO Title: President
------------------------ ---------------------
Date: 3/10/97 Date: 3/27/97
------------------------ ----------------------
2
<PAGE> 3
SECOND ADDENDUM TO THE MANUFACTURING AND SUPPLY AGREEMENT
DATED FEBRUARY 3, 1997
EXHIBIT F
WCC Equipment
-------------
3
<PAGE> 4
SECOND ADDENDUM TO THE MANUFACTURING AND SUPPLY AGREEMENT
DATED FEBRUARY 3, 1997
EXHIBIT G
MANUFACTURING SERVICES PAYMENTS
FOR THE WCC EQUIPMENT
PHASE 1 - PREPARATION OF FACILITY AND INSTALLATION OF EQUIPMENT
Term: From the Effective Date of this Second Addendum Agreement
until the date that the WCC Equipment has operated for one
Shift. A "Shift" is defined as 48 hours per week.
Payments: WTI will pay ABT $2.80 per manhour as reimbursement for the
direct labor costs related to installation of the WCC Equipment
in the Tijuana Facility, according to WTI specifications. ABT
shall pay all rent, insurance, and taxes, and related utilities
as provided in the Master Agreement.
WTI will pay ABT at the rate paid by ABT as reimbursement for
the skilled labor costs (eg. line supervisor, quality control
technician, maintenance technician, engineer, etc.) related to
operating the WCC Equipment in the Tijuana Facility, according
to WTI specifications. WTI will pay all incoming and outgoing
freight related to the WCC Product.
PHASE 2 - PRODUCTION
Term: From the date that the WCC Equipment operates for one Shift
until this Second Addendum Agreement is terminated. A "Shift"
is defined as 48 hours per week.
Payments: WTI will pay ABT $2.80 per manhour as reimbursement for the
direct labor costs related to operating the WCC Equipment in
the Tijuana Facility, according to WTI specifications. ABT
shall pay all rent, insurance, and taxes, and related
utilities as provided in the Master Agreement.
WTI will pay ABT at the rate paid by ABT as reimbursement for
the skilled labor costs (eg. line supervisor, quality control
technician, maintenance technician, engineer, etc.) related to
operating the WCC Equipment in the Tijuana Facility, according
to WTI specifications. WTI will pay all incoming and outgoing
freight related to the WCC Product.
At the conclusion of each production week, ABT shall forward
its invoice for such manufacturing service fees to WTI via
fax. WTI shall pay such invoices on a net 15 day basis from
the date of such invoice.
4
<PAGE> 1
EXHIBIT 10.92
BAILMENT AGREEMENT
THIS BAILMENT AGREEMENT IS MADE EFFECTIVE THIS 3RD DAY OF FEBRUARY, 1997, BY
AND BETWEEN WILSHIRE TECHNOLOGIES, INC. (HEREINAFTER REFERRED TO AS "BAILOR"),
ADVANCED BARRIER TECHNOLOGIES DE MEXICO SA DE CV (HEREINAFTER REFERRED TO AS
"BAILEE"), AND ADVANCED BARRIER TECHNOLOGIES, INC. (HEREINAFTER REFERRED TO AS
"ABT"), EXECUTED BY AND BETWEEN MR. JOHN VAN EGMOND IN REPRESENTATION OF THE
"BAILOR", AND MR. RALPH SIAS IN REPRESENTATION OF THE "BAILEE", AND IN
REPRESENTATION OF ABT, PURSUANT TO THE FOLLOWING RECITALS AND CLAUSES:
RECITALS
I. BAILOR states:
a) That it is a corporation organized and existing under the Laws
of the State of California, with its principal place of
business located at 5441 Avenida Encinas, Suite A, Carlsbad,
California.
b) That it is the owner of the machinery and equipment subject
matter of this Agreement.
c) That it is willing to grant in commodatum to BAILEE the
possession of the machinery, tools, equipment and components
listed in EXHIBIT "A" which is attached to this Agreement,
(HEREINAFTER REFERRED TO AS THE "EQUIPMENT").
II. BAILEE states:
a) That it is a company organized and existing under the laws of
Mexico, with its principal place of business located at
Avenida Ferocarril Km. 14.5, Bodega 9-10, Centro Industrial
Limon Los Pinos, Tijuana, Baja California, Mexico.
1
<PAGE> 2
b) That it is a company devoted to providing manufacturing
services, and that on April 11, 1996, its parent company
executed a MANUFACTURING AND SUPPLY AGREEMENT with BAILOR for
the manufacture of certain products in Mexico.
c) That it wishes to have in commodatum the Equipment referred to
above in order to fulfill the purposes mentioned hereinafter.
IN CONSIDERATION OF THE FOREGOING,
THE PARTIES AGREE ON THE FOLLOWING:
CLAUSES
FIRST.- PURPOSE OF THE AGREEMENT
BAILOR gratuitously grants to BAILEE the use of the Equipment
referred to in EXHIBIT "A" of this Agreement, for the exclusive purpose of
complying with its obligations under the MANUFACTURING AND SUPPLY AGREEMENT
executed by BAILEE's parent company and BAILOR on April 11, 1996, and the
SECOND ADDENDUM TO THE MANUFACTURING AND SUPPLY AGREEMENT dated February 3,
1997. Title and ownership of the Equipment shall at all times remain vested in
BAILOR.
SECOND.- DELIVERY OF EQUIPMENT
BAILOR shall deliver the Equipment to BAILEE in commodatum, at
the times agreed to by the parties. BAILEE hereby expressly acknowledges
receipt of the Equipment listed in EXHIBIT "A". The parties may from time to
time amend the list attached as EXHIBIT "A" so that it may include Equipment
which may be delivered to BAILEE in the future by agreement of the parties.
These will be complete with all their parts, additions and accessories in
operating condition.
2
<PAGE> 3
BAILOR will deliver the Equipment at Coastline de Mexico SA de
CV, C/O Miles & Joffroy, 2675 Customhouse Court, Suite A, San Diego,
California, 92173, United States of America and the BAILEE shall import the
Equipment into Mexico under the temporary importation regime under BAILEE's
manufacturing services. Any item added to the Equipment delivered to the
BAILEE in the terms and conditions herein established shall continue to be
imported on a temporary basis and must be used in the domicile located at
Avenida Ferocarril Km. 14.5, Bodega 9-10, Centro Industrial Limon Los Pinos,
Tijuana, Baja California, Mexico.
BAILEE shall comply with all legal provisions applicable to
the temporary importation of the Equipment and shall provide all the
administrative services necessary to carry out the importation of the Equipment
into Mexico. BAILEE shall appear as the importer of record of the Equipment in
all the paperwork and documents used for such importation into Mexico, however,
it is expressly agreed that BAILOR is and shall continue to be the owner of the
Equipment, thus the commercial invoice to be utilized to import the Equipment
into Mexico shall have a provision stating the following:
"This commercial invoice is issued exclusively for customs purposes in
order to import into Mexico the goods covered by same and therefore does
not transfer the ownership of the goods. In addition, the issuer
reserves itself title over such goods."
BAILEE shall keep in the domicile designated in Recital II a)
herein the permits, licenses and official documentation pertaining to the
importation into Mexico of the Equipment.
BAILOR shall assume the costs of all duties, fees, expenses
and customs brokers' fees, Mexican and American, incurred in importing,
exporting and transporting the Equipment in Mexico pursuant to the terms and
conditions set forth herein.
3
<PAGE> 4
THIRD.- MAINTENANCE EXPENSES
The necessary expenses for the use, maintenance, repair and
preservation of the Equipment hereby given in commodatum will be the exclusive
responsibility of BAILOR.
FOURTH.- LOCATION OF MACHINERY
BAILEE shall maintain the Equipment at its current domicile
and may not remove it from said location without the prior written consent of
BAILOR.
FIFTH.- NO DISPOSITION OR ENCUMBRANCES
BAILEE shall not sell, assign its rights hereunder, or in any
manner encumber, pledge, or otherwise cause a lien on the Equipment. BAILEE
further agrees to protect the Equipment from any and all third party claims and
for such purposes agrees and undertakes to file this Agreement for registration
with the Public Registry of Property of Tijuana, Baja California, Mexico,
within the thirty (30) days following its date of execution.
SIXTH.- USE OF EQUIPMENT
BAILEE promises to use the Equipment only and exclusively for
the purposes for which it was built, and will gear its operations to the
capabilities thereof.
SEVENTH.- PRESERVATION OF EQUIPMENT
ABT covenants and agrees to diligently preserve and maintain
the Equipment in the state in which it is received, excluding wear and tear due
to normal operation.
4
<PAGE> 5
EIGHTH.- LOSS OF EQUIPMENT
BAILEE shall be liable towards BAILOR for the total or partial
loss of the Equipment, as well as for the deterioration suffered thereby,
except for the deterioration deriving from its normal use, even when such is a
result of fortuitous cause or force majeure, until the Equipment is returned to
BAILOR pursuant to the terms of this Agreement.
NINTH.- INSURANCE
BAILOR will contract with an authorized insurance company for an
amount not less than the replacement value, as indicated by BAILOR, covering
the Equipment that is the object of this Agreement, and will name BAILOR as the
beneficiary of such insurance.
TENTH.- RETURN OF EQUIPMENT
BAILEE shall cease using and immediately return the Equipment
to BAILOR when BAILOR so requests it, since no specific duration for the
commodatum has been agreed upon and hereunder. Therefore, pursuant to article
2385 of the Civil Code for the State of Baja California, BAILOR has the right
to demand the return of the Equipment at any time, in which case this agreement
will terminate.
ELEVENTH.- DISCLAIMER OF LIABILITY
BAILOR does not assume any responsibility or commitment
towards BAILEE, or towards any third party, with respect to their personal
property or to their persons, resulting from the possession or use of the
Equipment or from the lack of skill in using them, nor for any other reason
whatsoever. BAILEE agrees to indemnify and hold BAILOR harmless with respect
to any such responsibility, liability or commitment.
5
<PAGE> 6
TWELFTH.- INSPECTION
BAILOR reserves unto itself the right to inspect the Equipment
at any time whatsoever, for the purpose of verifying the correct use and
operation thereof.
THIRTEENTH.- COMPLIANCE WITH LAWS
BAILEE covenants, at its cost, to comply with all laws,
regulations and other legal provisions applicable to the Equipment and to
notify BAILOR immediately, in writing, of any claim, demand, litigation, or any
other lien, that might affect the Equipment.
FOURTEENTH.- EXPENSES
All expenses related to the use, security measures,
maintenance and operation of the Equipment will be borne by BAILOR.
FIFTEENTH.- RECOVERY OF EQUIPMENT
BAILOR will have the right to recover the Equipment at any
time and BAILEE covenants to return it upon request by the BAILOR. All
expenses such as transportation will be the exclusive responsibility of BAILOR.
BAILEE will provide BAILOR full cooperation in dismantling, removing and
exporting the Equipment at any time before, during or after termination of this
Agreement.
SIXTEENTH.- TERM
Unless earlier terminated pursuant to Clause Tenth hereof,
this Agreement will terminate immediately upon receipt by BAILEE of written
notice from BAILOR.
6
<PAGE> 7
SEVENTEENTH.- ARBITRATION
Any and all controversies or disputes between the parties
arising under this Agreement shall be submitted to an arbitrator for final and
binding resolution in accordance with the International Arbitration Rules of
the American Arbitration Association. The site of the arbitration shall be at
San Diego, California and the law of the State of California shall be applied
by the arbitrators.
IN WITNESS WHEREOF, the parties hereto have caused this
Bailment Agreement to be executed by their duly authorized representatives.
BAILOR BAILEE/ABT
/s/ John Van Egmond /s/ Ralph Sias
- -------------------------------- ---------------------------------------
By: Wilshire Technologies, Inc. By: Advanced Barrier Technologies de
Mexico SA de CV
By: Advanced Barrier Technologies, Inc.
Name: John Van Egmond Name: Ralph Sias
WITNESS WITNESS
Wilshire Technologies, Inc. Advanced Barrier Technologies de
Mexico SA de CV
Advanced Barrier Technologies, Inc.
/s/ James W. Klingler /s/ James Mullin
- -------------------------- --------------------------------
7
<PAGE> 8
EXHIBIT A
EQUIPMENT
8
<PAGE> 1
EXHIBIT 10.93
IN THE MATTER OF THE MEMBERS' VOLUNTARY WINDING-UP
WILSHIRE TRANSDERMAL PRODUCTS LTD.
- -------------------------------------------------------------------------------
THIS IS TO CERTIFY that the following documents were filed in the Office of the
Registrar of Companies on the 10th day of February, 1997 viz:
Notice of a Final General Meeting of WILSHIRE TRANSDERMAL PRODUCTS
LTD. as advertised in the Royal Gazette of 31st December, 1996 and the
Liquidator's Minute to the Registrar informing him that the Final General
Meeting of the said Company was held on the 5th day of February, 1997 and a
Resolution was passed thereat dissolving the company.
IN WITNESS WHEREOF I have
hereto set my hand this 28th day of
February, 1997
/S/ SIG
---------------------------------
for ACTING REGISTRAR OF COMPANIES
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-QSB FOR THE QUARTER ENDED FEBRUARY 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-QSB AND THE ACCOMPANYING NOTES THERETO.
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<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 139
<SECURITIES> 0
<RECEIVABLES> 746
<ALLOWANCES> 48
<INVENTORY> 1,160
<CURRENT-ASSETS> 2,288
<PP&E> 1,834
<DEPRECIATION> 977
<TOTAL-ASSETS> 5,351
<CURRENT-LIABILITIES> 2,628
<BONDS> 0
0
0
<COMMON> 25,850
<OTHER-SE> (23,127)
<TOTAL-LIABILITY-AND-EQUITY> 5,351
<SALES> 838
<TOTAL-REVENUES> 838
<CGS> 764
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<OTHER-EXPENSES> (1)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 83
<INCOME-PRETAX> (657)
<INCOME-TAX> 1
<INCOME-CONTINUING> (658)
<DISCONTINUED> 18
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (640)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-QSB FOR THE QUARTER ENDED FEBRUARY 28, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FORM 10-QSB AND THE ACCOMPANYING NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
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<PERIOD-START> DEC-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 153
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<RECEIVABLES> 300
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<COMMON> 25,857
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