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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended November 30, 1999.
[ ] 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.
(Name of small business issuer in its charter)
CALIFORNIA 33-0433823
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5861 EDISON PLACE
CARLSBAD, CALIFORNIA 92008
(Address of principal executive offices)
(760) 929-7200
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock, no
par value -
Quoted on the
OTC Bulletin
Board
(Title of Class)
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 [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ X ]
The issuer's revenues for its most recent fiscal year were $2,691,000.
The aggregate market value of the voting stock held by non-affiliates of
the registrant on February 15, 2000 was approximately $1.3 million.
The number of shares outstanding of the registrant's only class of
Common Stock, no par value, was 12,953,385 on February 15, 2000.
Transitional Small Business Disclosure Format. Yes [ ] No [X]
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WILSHIRE TECHNOLOGIES, INC.
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Annual Report on Form 10-KSB - November 30, 1999
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PART I PAGE
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Item 1. Description of Business 2
Item 2. Description of Property 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 6
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PART II
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Item 5. Market for Common Equity and Related Stockholder Matters 7
Item 6. Management's Discussion and Analysis or Plan of Operation 7
Item 7. Financial Statements 11
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 26
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Part III
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Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 27
Item 10. Executive Compensation 27
Item 11. Security Ownership of Certain Beneficial Owners and Management 27
Item 12. Certain Relationships and Related Transactions 27
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Part IV
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Item 13. Exhibits, List and Reports on Form 8-K 27
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
THE COMPANY
Wilshire Technologies, Inc. (the "Company"), incorporated in California on
October 17, 1990, develops, manufactures and markets engineered polymer products
for industrial clean room use. The Company, based in Carlsbad, California,
markets its products through its Wilshire Contamination Control Division, and
manufactures certain of its products in its wholly-owned subsidiary, Wilshire
International de Mexico S.A. de C.V. During 1996, the Company divested its
Medical Products and Transdermal Products divisions, and has since focused
primarily on products used in industrial clean rooms, such as gloves and
contamination control products.
MARKET OVERVIEW
The need for extraordinary cleanliness in various manufacturing and
high-technology processes has resulted in a requirement for products to be
manufactured in Class 1, 10 and 100 clean rooms. A "clean room" is an
environment in which particulate fluid and biological contaminants are monitored
and controlled. In the microelectronics, semiconductor and aerospace industries,
clean rooms are essential to the manufacturing process to prevent minute
particles from contaminating sensitive and expensive products. In the
pharmaceutical, biotechnology and medical device industries, clean rooms are
used to reduce the level of particulate and biological contamination
("bioburden") or to ensure the sterility and pyrogen-free nature of products.
Clean rooms are classified according to the allowable level of particulate
contamination per cubic foot. A "Class I " clean room may have just one particle
of more than 0.5 microns per cubic foot.
The Company uses engineered materials and proprietary polyurethane formulations
to produce products specifically for the requirements of Class I, 10 and 100
clean rooms. For these clean rooms, the particulate compliance requirements are
extremely stringent, and the total cost of disposables represents only a small
percentage of the total cost of the customer's manufactured product. Clean room
users are generally willing to pay premium prices for products which reduce
particulate contamination, thereby reducing labor costs and increasing the
yields of their manufactured products. Disposable supplies used in clean rooms
consist predominantly of garments, gloves, swabs and wipers. Traditionally, most
clean room suppliers have adapted existing products from other applications,
e.g., medical, which may have inherent limitations. The Company intends to
satisfy the needs of clean room operators with advanced products designed and
manufactured specifically for clean room use.
PRODUCTS
The Company specializes in the development, manufacture and marketing of
disposable cleaning and contamination control products for use in clean rooms.
The Company markets swabs, wipers and other disposable products used to help
reduce particulate contamination in the semiconductor, disk drive and
microelectronics industry clean rooms, which help to increase the yield and
effectiveness of the manufactured products. The Company also manufactures and
markets a proprietary synthetic glove for use in clean rooms in both the
electronics and medical industries. All of the Company's products are sold under
its brand names, including UltraSORB(R) and UltraSOLV(R) for wipers and swabs,
and DuraCLEAN(R) and PolyDERM(TM) for gloves. The Company has received three
patents on hydrophilic foam articles and cleaning methods for clean rooms
including all UltraSOLV(R) and UltraSORB(R) products.
WIPERS. Clean room personnel use wipers for many applications, including the
cleaning of manufacturing and processing equipment and production components,
the decontamination of work surfaces and the removal of solvent or acid spills.
The most important considerations in the selection of the proper wiper are the
level of potential contamination contributed by the wiper, the wiper's
absorbency and its cost. Since no wiper material is best for all purposes, the
Company markets a variety of clean room wipers made of polyester and
polyurethane, covering a wide range of characteristics, under its various brand
names such as UltraSORB(R), UltraSOLV(R) and PolyClean(R).
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Management believes that UltraSORB(R) is the first polyurethane foam wiper that
is hydrophilic. i.e., able to absorb water and other aqueous solutions. These
wipers provide the highly-absorbent, particle-trapping performance and
abrasion-resistance of the UltraSORB(R) material at a price competitive with
that of other foam wipers. Both the UltraSORB(R) and UltraSOLV(R) wipers are
processed and packaged using proprietary methods in a Class 10 clean room to
ensure that the wipers have an initial low-particulate level.
SWABS. The Company markets a broad range of clean room swabs fabricated from
various materials including polyurethane foam. Swabs are used to clean surface
areas when a wiper is too large or when a wiper would add more particulate
contamination than a swab. The important considerations in swab selection are
the level of particulate contamination, absorbency and cost. Although cotton
swabs dominate the market due to lower cost and higher absorbency, cotton tends
to degenerate during use, thereby increasing the likelihood of contaminating the
clean room and the materials being produced in the clean room. Typically, users
in Class I and 10 clean rooms purchase synthetic swabs because their
non-shedding, non-friable nature offers superior cleanliness, while users in
Class 100-10,000 clean rooms purchase significantly more cotton swabs due to
their lower cost and higher absorbency.
To meet the demand for an absorbent, clean, synthetic swab, the Company has
developed a line of swabs fabricated from its UltraSOLV(R) polyurethane
material. Similar to the UltraSOLV(R) wiper, the UltraSOLV(R) swab is the first
polyurethane-foam swab that is hydrophilic and meets Class 1 and Class 10
specifications. UltraSOLV(R) has an open cellular structure which is
highly-absorbent and has excellent particle trapping capability. Also, because
of its abrasion resistance, the UltraSOLV(R) material does not generate
particulate contamination during use.
SCRUBPADS. In 1998 the Company began commercial shipments of its UltraSOLV(R)
ScrubPADs which provide a clean replacement for commercial abrasive pads
constructed of tangled fibers frequently used in wet-clean procedures for
process equipment used in the semiconductor, disk media, magnetic head and flat
panel display industries. Highly cleaned and uniform silicon carbide grit is
bonded to an inter-liner that attaches to UltraSOLV(R) foam, providing uniform
abrasion and controlled moisture release for thorough removal of hardened
residues without scoring. UltraSOLV(R) ScrubPADs have been designed to reduce
cleaning times, pump-down times and contamination levels of wet-clean
procedures.
GLOVES. Most of the gloves purchased in the United States for use in Class 1, 10
and 100 clean rooms are latex or polyvinyl chloride ("PVC") medical gloves
post-processed to be cleaner than the typical hospital or surgeon's glove.
Latex-based and PVC-based gloves have several disadvantages: (1) the gloves are
prone to deterioration during use, thereby generating excessive particulate
contamination; (2) the gloves are not breathable; and (3) users may suffer from
latex sensitivity.
The Company has developed the DuraCLEAN(R) clean room glove composed of a
proprietary polyurethane material which the Company believes addresses these
problems. The Company believes that its polyurethane gloves are superior to
latex gloves in many ways, yet will be less expensive to manufacture than other
non-latex gloves. For semiconductor markets, the added benefit of the glove's
electrostatic dissipative (ESD) properties is a great advantage. Also, the
gloves have the lowest total non-volatile residues and total organic carbon
levels in the industry. Although these gloves are premium priced, management
believes they are cost effective for clean room users because they can be worn
longer and changed less frequently than less expensive latex gloves. The Company
has been testing these gloves with several major semiconductor customers The
Company's first full-scale glove production line began operation in the first
quarter of 1999.
PATENTS, LICENSES AND PROPRIETARY RIGHTS
The Company has received three patents on various products. The Company will
apply for additional patents where deemed appropriate.
The Company also relies upon trade secrets, technical know-how and continuing
technological innovation to develop and maintain its competitive position. The
Company typically requires its employees and consultants to execute appropriate
confidentiality and assignment of inventions agreements in connection with their
employment or consulting relationships with the Company.
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No assurance can be given that competitors will not independently develop
substantially equivalent or superior proprietary materials and techniques or
otherwise gain access to the Company's proprietary technology, or that the
Company can meaningfully protect its rights in unpatented proprietary
technology.
TECHNOLOGY
Many of the Company's current products use polymers, particularly polyurethane.
Polyurethane is a versatile synthetic material which can be produced to exhibit
a wide range of characteristics. By varying the underlying molecular structure
and manufacturing methods, polyurethane materials may be created with varying
degrees of absorbency, moisture vapor transfer, flexibility, elasticity,
structural integrity and stability. Polyurethane may also be fabricated with a
variety of techniques, including injection, extrusion or blow molding, which
allows easy variation of the physical form of products.
MANUFACTURING
The Company purchases UltraSORB(R) and UltraSOLV(R), the breathable, hydrophilic
polyurethane foams currently used in its swabs and wipers, from Time Release
Sciences, Inc. Management believes that it can secure an alternative source of
supply if required. Further, Management believes that satisfactory substitutes
can be developed, over time, for use in its UltraSORB(R) and UltraSOLV(R)
products should the foam cease to be available.
Certain of the Company's products are made for the Company by Advanced Materials
Group, Inc. ("Advanced Materials"). Although the Company expects to encounter no
difficulties in obtaining products from Advanced Materials, it believes that it
could manufacture those products itself or have them manufactured by any of a
number of other foam fabricators. The foam products industry has several major
fabrication suppliers, one of which is Advanced Materials. Because competition
among these companies is intense, the prices charged by Advanced Materials to
the Company must be competitive.
The Company manufactures the DuraCLEAN(R) gloves on its own equipment, using a
proprietary process in its leased facility in Tijuana, Mexico. The Company
purchases the polymer for the gloves from The Polymer Technology Group, Inc.
under the terms of an exclusive supply agreement. Certain processes required to
finish the product are performed in Mexico by Advanced Barrier Technologies,
Inc. in accordance with Company procedures.
Raw Materials. The materials that the Company uses, such as polypropylene,
polyurethane, plastic and metal, are generally available from multiple sources.
The Company has not experienced difficulty in obtaining raw materials.
Quality Assurance. Under the Company's quality assurance program, visual,
dimensional and functional inspections are performed and recorded on all raw
materials and finished goods based on product specifications as governed by the
Device Master Record. Additionally, Statistical Process Control and other Total
Quality Management methods are used in the manufacturing process.
SALES, MARKETING AND DISTRIBUTION
The Company's swabs, wipers, gloves and other specialty products are marketed
directly to end-users through a limited number of internal sales personnel and
are sold through international, national and regional distributors. During 1999
the Company sold approximately 42% of its products through VWR Scientific
Products and approximately 9% of its products through international
distributors.
COMPETITION
The Company is engaged in rapidly-evolving and highly-competitive fields. Many
major clean room companies in the United States and abroad currently produce and
will seek to develop competitive products. Competition from contamination
control manufacturers and others is intense and expected to increase. Many of
these companies have substantially greater capital resources and facilities, and
more experience in marketing and distributing products than the Company. In
addition, many of these companies employ large research and development staffs,
while the Company has traditionally had a small research and development budget.
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The Company believes the clean room market has a large number of competitors,
some of which, such as Johnson & Johnson are much larger than the Company. Other
competitors include Texwipe, Berkshire Corporation, Contec Inc., Coventry
Manufacturing Co., Kimberly Clark Corp., and Baxter International.
A number of major corporations manufacture and sell latex and non-latex gloves
to the clean room markets. These include Baxter International, Smith and Nephew
Perry, and Ansell Edmont.
EMPLOYEES
As of November 30, 1999, the Company had 13 full-time employees, of whom 6 were
employed in manufacturing and shipping, 3 in sales and marketing, and 4 in
administration.
ITEM 2. DESCRIPTION OF PROPERTY.
In August 1997, the Company completed a five-year Lease Agreement with Messrs.
Frank Naliboff and Nathan Morton for a 25,500 square-foot office and warehouse
facility in Carlsbad, California. Under the terms of the lease, the Company will
pay rent of $17,500 per month for the first year, beginning January 1, 1998 with
annual rent increases of $500 per month in each of the following four years. The
lease expires on December 31, 2002 and can be renewed by mutual agreement of the
parties.
In November 1997, the Company completed a five-year Lease Agreement with Mr.
Rafael Mizrachi for a 23,500 square foot manufacturing facility and a 15,000
square foot adjacent lot in Tijuana, Mexico. Under the terms of the lease, the
Company will pay rent of $10,000 per month for the first year beginning January
1, 1998, with annual rent adjustments for the San Diego area Consumer Price
Index. The lease expires on December 31, 2002 and can be renewed by mutual
agreement of the parties.
In December, 1998, the Company completed two sublease agreements, one with
Software of the Month Club, Inc ("SOMC"), and the other with Intecon Systems,
Inc. ("Intecon") for space in the Company's leased facility in Carlsbad,
California. The SOMC sublease is for 7,170 square feet for 24 months beginning
January 1, 1999 at a monthly rent of $3,872, subject to annual rent adjustments,
plus utilities. The Intecon sublease, beginning February 1, 1999, was amended on
February 1, 2000 to 2,085 square feet for 6 months at a monthly rent of $1,126,
plus utilities. Both subleases can be renewed by mutual agreement of the
parties.
ITEM 3. LEGAL PROCEEDINGS
BREAST IMPLANT LITIGATION
The Company and its alleged predecessor company, Wilshire Foam Products, Inc.
("Wilshire Foam"), have been named as defendants in hundreds of bodily injury
lawsuits involving breast implants pending in Alabama, Arizona, California,
Connecticut, District of Columbia, Florida, Georgia, Idaho, Illinois, Indiana,
Kansas, Louisiana, Michigan, Mississippi, Missouri, Nevada, New Jersey, New
Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South
Carolina, Tennessee, Texas, Utah and Washington, and in a federal multi-district
litigation ("MDL") venued in Birmingham, Alabama. These suits seek compensatory
and punitive damages under a variety of legal theories. The allegations against
Wilshire Foam concern the use by some implant manufacturers of polyurethane
products purportedly supplied by Wilshire Foam which were apparently
incorporated into the implants and placed in the plaintiffs' bodies. Plaintiffs
allege that they have suffered adverse effects of having polyurethane in their
bodies, in addition to the alleged adverse effects of silicone and other
components of the implants.
The Company believes it has several layers of protection from exposure in these
cases. First, the Company and Wilshire Foam carried insurance. Second, recent
developments in the MDL and in related negotiations have resulted in the
probable resolution of most of the pending and possible future claims against
the Company. Third, there are a great number of co-defendants, some of which are
large corporations with significant resources, that may be required to
contribute to any award or indemnify the Company. Fourth, the Company has
asserted a number of legal defenses in the lawsuits as described below. Fifth,
these claims relate to products sold prior to the acquisition of Wilshire Foam,
in which product liabilities were expressly not assumed and the Company was
indemnified by the shareholders of Wilshire Foam. In many, if not most of the
cases, the Company believes it did not sell any product to the implant
manufacturers in question or during the
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relevant time period. The Company has been dismissed by approximately 2000
plaintiffs because it was shown that a Wilshire Foam product was not involved or
in connection with a related resolution of the case. This litigation is
discussed fully in Note 5 of the notes to the financial statements, which is
hereby incorporated by reference.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company solicited proxies pursuant to Regulation 14 under the Securities
Exchange Act (Proxy Statement dated April 6, 1999) for the Annual Meeting of
Shareholders held on May 26, 1999. The only matter submitted to the shareholders
was the election of five directors. There was no solicitation in opposition to
management's nominees for directors, listed in the Proxy Statement. The number
of shares entitled to vote at the meeting was 12,943,385. Of these 12,708,983
were represented. All nominees were elected by the affirmative vote of
12,673,781 shares.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock was initially quoted on NASDAQ under the trading
symbol "WITE". On March 9, 1993, the Company began trading on the American Stock
Exchange ("AMEX") under the trading symbol "WIL". On December 19, 1996, the AMEX
filed an application to delist the Company's common stock from the AMEX because
the Company had not met certain financial guidelines necessary for continued
listing. The final day of trading was Friday, January 17, 1997. On Monday,
January 20, 1997, the Company's common stock was quoted and traded on the OTC
Bulletin Board ("OTCBB") under the symbol "WILK". On February 15, 2000 there
were approximately 118 holders of record of the Company's Common Stock and in
excess of 500 beneficial holders. The Company has not paid any cash dividends on
its Common Stock and does not anticipate paying cash dividends in the
foreseeable future.
The following table sets forth by fiscal quarters the high and low daily closing
sales prices quoted for one share of the Company's Common Stock on the OTCBB for
FY 1998 and FY1999.
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FY1998 HIGH LOW
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First Quarter 11/16 5/16
Second Quarter 19/32 9/32
Third Quarter 21/32 7/32
Fourth Quarter 11/16 9/32
FY1999
First Quarter 9/16 3/10
Second Quarter 17/20 5/16
Third Quarter 5/8 3/10
Fourth Quarter 17/32 3/16
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL STATEMENTS.
OVERVIEW
During the first six months of fiscal 1999, the Company completed the start-up
phase of its new glove production line in the Company's leased plant facility in
Tijuana, Mexico and began production of the Company's DuraCLEAN(R) polyurethane
gloves. During the last two quarters of fiscal 1999, the Company introduced the
DuraCLEAN(R) polyurethane glove to the US market and expanded its international
selling efforts for the glove.
The Company also implemented product improvement projects and expanded its sales
organization during the fiscal year 1999. The Company expanded its sales
organization by forming a national sales organization of technical field
specialists and forming partnerships with key distributors. In February 1999,
the Company entered into an exclusive distribution agreement with VWR Scientific
Corporation, granting VWR exclusive U.S. distribution of the Company's
UltraSOLV(R) polyurethane chamber cleaning products.
On February 7, 2000, the Company (the "Seller") signed a non-binding Letter of
Intent with Foamex Asia Co. Ltd. (the "Buyer"), an affiliate of Foamex
International (FMXI: NASDAQ), for the sale of certain assets and selected
liabilities of the Company's Wilshire Contamination Control Division (the
"Division).
The transaction is subject to the execution of a definitive agreement, which the
Company anticipates will contain other closing conditions and requirements to
satisfactorily complete the transfer of assets.
The final purchase price for the assets will be based upon a percentage of
Foamex future sales of contamination control products over a multi-year
contractual period. Management is unable to anticipate or predict with accuracy
the total purchase price to be paid for the assets.
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In addition to the sale of assets, the Buyer and Seller intend to negotiate an
agreement for post-closing joint sales and marketing efforts and sharing of
certain technology, equipment and personnel during the contractual period.
Since no cash is due at closing, the Company will record the sale of the assets
as a receivable (based upon the net book value of the assets transferred). All
payments of purchase price will be applied against the receivable, with no
recognition of gain, until the receivable is extinguished.
Foamex International is an international developer, manufacturer and supplier of
high-quality foam, including key materials utilized in Contamination Control
environments. Foamex Asia Co. Ltd., located in Singapore, Thailand, is currently
a major supplier of specialty foam products to the Asian market.
Steve Scibelli, President of Foamex Asia Co. Ltd., served as Chief Executive
Officer of Wilshire Technologies from 1994 until 1996. Mr. Scibelli currently
owns 96,073 shares of Company stock and holds an option to purchase 200,000
shares of Company stock, at a purchase price of $0.625 per share, until April
17, 2000 when the options expire. In addition, the Company is contingently
obligated to pay certain other benefits to Mr. Scibelli.
The Company believes that the proposed transactions are in its best interests
because of the likelihood of increased gross profit from the contamination
control business over the next three years, coupled with the ability to better
focus its efforts on the polyurethane glove business during that period.
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 Annual Report on Form 10-KSB for
the year ended November 30, 1996, which is herein incorporated by reference.
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
The Company markets 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 $1,155,000 (30.0%) to $2,691,000 for 1999 as compared to
$3,846,000 for 1998. The decrease in sales for the fiscal year was primarily
attributable to the loss of the Company's largest roller customer as well as the
loss of the Company's largest consumer of UltraSORB(TM) wipers in the last half
of fiscal year 1998.
GROSS PROFIT
For 1999, the Company recognized a gross loss of $860,000 as compared to a gross
profit of $551,000 for the comparable period in 1998. Although the Company's
contamination control product division maintained positive gross profits for the
fiscal year, the overall decrease in profits from year to year were attributable
to the significant start-up costs associated with the glove manufacturing Plant
located in Tijuana, Mexico. Excluding the impact of the glove sales and cost of
sales on gross profit, the gross profit margin as a percentage of sales was
34.3% in 1999, and 31.4% in 1998.
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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 increased by $235,000 (11%) to
$2,429,000 in 1999 from $2,194,000 in 1998. The primary reasons for the
increases were additions in headcount in executive management as well as in
sales, increased travel associated with the introduction of the Company's
DuraCLEAN(R) polyurethane glove, and administrative costs associated with the
start-up of the glove's manufacturing operation in Tijuana, Mexico.
RESEARCH AND DEVELOPMENT
Research and development expenses decreased $13,000 (7%) to $176,000 in 1999
from $189,000 in 1998 primarily due to decreased project expenses. As a
percentage of sales, research and development expenses were 6.5% in 1999,
compared to 4.9% in 1998.
INTEREST INCOME (EXPENSE), NET
Net interest expense increased by $347,000 to $1,218,000 in 1999 from $871,000
in 1998 due to increased debt outstanding. The interest expense was related
primarily to the line of credit with Trilon Dominion Partners, LLC ("Trilon
Dominion") (see Note 3 to notes to the consolidated financial statements).
INCOME TAXES
For the fiscal years ended November 30, 1999 and 1998, 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 1999 and 1998.
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 1998 and 1999, the Company has not generated sufficient cash from
operations to fund its working capital requirements. Net cash used in operating
activities was $2,957,000 for FY99 versus net cash used in operating activities
of $2,428,000 for the comparable period in 1998. The net cash used for FY99 was
primarily due to an increase in losses in 1999 associated with the start-up
costs of the new glove manufacturing Plant.
Net cash used in investing activities was $451,000 for 1999, versus net cash
used in investing activities of $2,324,000 for 1998. The higher investing
activities in the prior year were due to major purchases of glove production
equipment that occurred during 1998.
Net cash provided by financing activities was $3,533,000 for 1999 versus
$4,657,000 for 1998. The debt financing in both years was obtained from Trilon
Dominion Partners, LLC. The details of the debt financing are provided in Note 3
to the consolidated financial statements.
On March 31, 1998, the Company and Trilon Dominion completed an Amended and
Restated Credit Agreement and Revolving Line of Credit (the "Amended Agreement")
which included principal of $4,000,000 from a previous agreement, $750,000 from
Demand Notes, accrued interest and management fees of $543,297 on the Agreement
and Demand Notes, and a new credit line commitment of $2,200,000. Under the
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terms of the Amended Agreement, the principal of $7,493,297 was due on December
31, 1998, and interest was payable quarterly at an annual rate of 11.5%. From
March 1998 to November 1998, the Company issued Demand notes totaling $930,000
at an interest rate of 11.5% under the credit line agreement.
In December of 1998, the Company amended the credit line agreement to extend the
terms to January 31, 2000, which was further extended to June 30, 2000 in a
December 31, 1999 amendment to the credit line agreement. In fiscal 1999, the
Company issued demand notes totaling $3,510,000 under the line of credit
agreement and capitalized debt issuance costs of $18,000. Of the notes issued in
fiscal 1999, $2,010,000 of notes bear interest at a rate of 11.5% annually; the
remaining $1,500,000 of demand notes bear interest at a rate of prime plus 3%
(11.5% at November 30, 1999).
As of February 10, 2000, the Company has used its current credit facilities and
anticipates continuing negative cash flow through at least the first half of
fiscal year 2000. Trilon Dominion, the Company's largest shareholder with over
72% of the shares outstanding, has continued to provide financial support to the
Company during 1999, and management believes that Trilon Dominion will continue
to support the Company as necessary through the end of fiscal year 2000.
IMPACT OF YEAR 2000
In prior years, the Company discussed the nature and progress of its plans to
become Year 2000 ready. In late 1999, the Company completed its remediation and
testing of systems. As a result of those planning and implementation efforts,
the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company
expensed approximately $60,000 during 1999 in connection with remediating its
systems. The Company is not aware of any material problems resulting from Year
2000 issues, either with its products, its internal systems, or the products and
services of third parties. The Company will continue to monitor its mission
critical computer applications and those of its suppliers and vendors throughout
the year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
10
<PAGE> 12
ITEM 7. FINANCIAL STATEMENTS.
Index to Consolidated Financial Statements
Years ended November 30, 1999 and 1998
Index
<TABLE>
<S> <C>
Report of Ernst & Young LLP, Independent Auditors......................................12
Audited Financial Statements
Consolidated Balance Sheets............................................................13
Consolidated Statements of Operations..................................................14
Consolidated Statements of Shareholders' Equity (Net Capital Deficiency)...............15
Consolidated Statements of Cash Flows..................................................16
Notes to Consolidated Financial Statements.............................................17
</TABLE>
11
<PAGE> 13
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors
Wilshire Technologies, Inc.
We have audited the accompanying balance sheets of Wilshire Technologies, Inc.
as of November 30, 1999 and 1998, and the related statements of operations,
stockholders' equity (net capital deficiency), and cash flows for each of the
two years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wilshire Technologies, Inc. at
November 30, 1999 and 1998, and the results of its operations and its cash flows
for each of the two years then ended, in conformity with accounting principles
generally accepted in the United States.
ERNST & YOUNG LLP
San Diego, California
January 11, 2000
12
<PAGE> 14
WILSHIRE TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, November 30,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 167,000 $ 42,000
Accounts receivable trade, less allowance for doubtful
accounts of $7,000 at Nov 30, 1999
and $5,000 at November 30, 1998, respectively 305,000 310,000
Inventories 1,222,000 1,228,000
Note receivable 0 127,000
Other current assets 313,000 246,000
------------ ------------
Total current assets 2,007,000 1,953,000
Property and equipment, less accumulated depreciation 3,436,000 3,565,000
Goodwill, less accumulated amortization of $407,000
and $365,000 at November 30, 1999 and November 30,
1998, respectively 335,000 377,000
Patents and trademarks, net 125,000 116,000
------------ ------------
$ 5,903,000 $ 6,011,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
Current liabilities:
Accounts payable $ 260,000 $ 412,000
Accrued expenses 418,000 416,000
Interest payable 1,758,000 578,000
Line of credit 11,935,000 8,407,000
------------ ------------
Total current liabilities 14,371,000 9,813,000
Commitments (Note 5) -- --
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; 12,953,385 shares and
12,943,385 shares issued and outstanding
at November 30, 1999 and at November 30,1998
respectively 25,912,000 25,907,000
Common stock warrants 387,000 370,000
Accumulated deficit (34,767,000) (30,079,000)
------------ ------------
Total shareholders' equity (net capital deficiency) (8,468,000) (3,802,000)
------------ ------------
$ 5,903,000 $ 6,011,000
============ ============
</TABLE>
See accompanying notes.
13
<PAGE> 15
WILSHIRE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended November 30,
-------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Net sales $ 2,691,000 $ 3,846,000
Cost of sales 3,551,000 3,295,000
------------ ------------
Gross profit (loss) (860,000) 551,000
Operating expenses:
Marketing and selling 674,000 553,000
General and administrative 1,755,000 1,641,000
Research and development 176,000 189,000
------------ ------------
Total operating expenses 2,605,000 2,383,000
------------ ------------
Loss from operations (3,465,000) (1,832,000)
Other income (expense) (4,000) 3,000
Interest expense, net (1,218,000) (871,000)
------------ ------------
Loss before provision
for state income taxes (4,687,000) (2,700,000)
Provision for state income taxes - current 1,000 1,000
------------ ------------
Net loss $ (4,688,000) $ (2,701,000)
Weighted average shares outstanding 12,949,000 12,943,000
============ ============
Basic and diluted loss per share $ (0.36) $ (0.21)
============ ============
</TABLE>
See accompanying notes.
14
<PAGE> 16
WILSHIRE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
YEARS ENDED NOVEMBER 30, 1999 AND 1998
<TABLE>
<CAPTION>
Common stock
Common stock warrants and options
--------------------------- --------------------------- Accumulated
Shares Amount Warrants Amount deficit Total
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balances - November 30, 1997 12,943,385 $ 25,907,000 3,350,000 $ 301,000 ($27,378,000) ($ 1,170,000)
Issuance of warrants
and options -- -- 790,000 69,000 -- 69,000
Net loss -- -- -- -- (2,701,000) (2,701,000)
------------ ------------ ------------ ------------ ------------ ------------
Balances - November 30, 1998 12,943,385 25,907,000 4,140,000 370,000 (30,079,000) (3,802,000)
Exercise of stock options 10,000 5,000 -- -- -- 5,000
Issuance of warrants -- -- 250,000 17,000 -- 17,000
Net loss -- -- -- -- (4,688,000) (4,688,000)
------------ ------------ ------------ ------------ ------------ ------------
Balances - November 30, 1999 12,953,385 $ 25,912,000 4,390,000 $ 387,000 ($34,767,000) ($ 8,468,000)
============ ============ ============ ============ ============ ============
</TABLE>
See accompanying notes.
15
<PAGE> 17
WILSHIRE TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended November 30,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $(4,688,000) $(2,701,000)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 740,000 275,000
Warrants and options issued to suppliers 23,000
Warrants issued to majority shareholder 17,000 46,000
Provision for loss on accounts receivable 2,000
Net change in operating assets and liabilities:
Decrease in accounts receivable 3,000 25,000
(Increase) decrease in inventories 6,000 (191,000)
(Increase) decrease in other current assets (67,000) 16,000
Decrease in accounts payable and
accrued expenses (150,000) (169,000)
Increase in interest payable 1,180,000 248,000
----------- -----------
Net cash used in operating activities (2,957,000) (2,428,000)
----------- -----------
INVESTING ACTIVITIES
Purchase of equipment (543,000) (2,497,000)
Decrease in note receivable 127,000 182,000
Increase in other assets (35,000) (9,000)
----------- -----------
Net cash used in investing activities (451,000) (2,324,000)
----------- -----------
FINANCING ACTIVITIES
Proceeds from line of credit 3,528,000 4,673,000
Exercise of Stock Options 5,000 --
Debt issue costs, net -- (16,000)
----------- -----------
Net cash provided by financing activities 3,533,000 4,657,000
----------- -----------
NET INCREASE (DECREASE) IN CASH 125,000 (95,000)
CASH - BEGINNING OF PERIOD 42,000 137,000
----------- -----------
CASH - END OF PERIOD $ 167,000 $ 42,000
=========== ===========
</TABLE>
See accompanying notes.
16
<PAGE> 18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION
Wilshire Technologies, Inc. (the "Company") operates in one business segment,
which is to develop, manufacture and market engineered polymer products for
industrial clean room use. The Company, based in Carlsbad, California, markets
its products through its Wilshire Contamination Control Division, and
manufactures certain of its products in its wholly-owned Mexican subsidiary,
Wilshire International de Mexico S.A. de C.V.
BASIS OF PRESENTATION
The Company has incurred substantial losses since its inception in 1990, and has
relied on working capital provided by Trilon Dominion (previously Dominion
Capital, Inc.) in the form of both debt and equity to fund its operations. The
Company is attempting to raise additional capital to fund its ongoing operations
and capital requirements, and management believes that Trilon Dominion will
continue to support the Company as necessary through the end of fiscal year
2000.
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiary. Significant intercompany amounts and transactions
have been eliminated.
INVENTORIES
Inventories are stated at the lower of first in, first out cost or market.
REVENUE RECOGNITION
Sales are recognized when the product is shipped and customer acceptance is
received pursuant to applicable customer contracts or purchase orders.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
about the future that affect the amounts reported in the financial statements
and disclosures made in the accompanying notes to the financial statements. The
actual results could differ from those estimates.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are being depreciated on a
straight-line basis over their estimated useful lives, which range from three to
seven years. Property and equipment under capital leases are amortized over the
life of the asset or the term of the lease, whichever is shorter.
INTANGIBLE ASSETS
Goodwill is being amortized over 17 years. For each of the years ended November
30, 1999 and 1998, amortization was $42,000.
CONCENTRATION OF CREDIT RISK
Sales to a national distributor accounted for 42% and 33% of total sales during
1999 and 1998, respectively. Otherwise, the Company's customers are dispersed
across different industries and geographic locations. The Company reviews a
potential customer's credit history before extending credit. The Company
establishes an allowance for doubtful accounts based upon factors surrounding
the credit risk of specific customers, historical trends and other information.
Management does not believe significant credit risks exist.
17
<PAGE> 19
LOSS PER SHARE
Net loss per common share in fiscal 1999 and 1998 was computed using the
weighted average number of common shares outstanding during the period which
excludes all common equivalent shares (options and warrants to purchase common
stock) since they are antidilutive.
STOCK-BASED COMPENSATION
As permitted by Statement of Financial Accounting Standards No. 123, the Company
has elected to follow Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related Interpretations ("APB 25"), in accounting
for its employee stock options. Under APB 25, when the exercise price of the
Company's employee stock options is not less than the fair value of the
underlying stock on the date of grant, no compensation expense is recognized.
COMPREHENSIVE INCOME (LOSS)
Effective December 1, 1998, the Company adopted SFAS 130, "Reporting
Comprehensive Income". SFAS 130 established new rules for the reporting and
display of comprehensive income (loss) and its components. The Company's
comprehensive loss is the same as its net loss for all periods presented.
SEGMENT INFORMATION
Effective December 1, 1998, the Company adopted SFAS 131,"Disclosures about
Segments of an Enterprise and Related Information". SFAS 131 establishes
standards for reporting information about operating segments in annual financial
statements and requires disclosure of selected information about operating
segments to stockholders. The statement also establishes standards for related
disclosures about products and services, geographic areas and customer
concentration. Under SFAS 131, operating segments are determined consistent with
the way that management organizes and evaluates financial information internally
for making operating decisions and assessing performance. The Company believes
it operates in one business and operating segment, which is to develop,
manufacture and market engineered polymer products for industrial clean room
use.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities", which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities. In May 1999, the FASB voted to delay the effective date of SFAS 133
by one year, meaning the Company will be required to adopt this standard in
fiscal 2001. The Company has not used any derivative instruments to date.
Management does not anticipate that the adoption of this new standard will have
significant effect on the financial position or results of operations of the
Company.
2. FINANCIAL STATEMENTS INFORMATION
Inventories consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
--------------------------------
1999 1998
---------- ----------
<S> <C> <C>
Raw materials $ 479,000 $ 604,000
Work in process 233,000 239,000
Finished goods 510,000 385,000
---------- ----------
$1,222,000 $1,228,000
========== ==========
</TABLE>
18
<PAGE> 20
Property and equipment consist of the following:
<TABLE>
<CAPTION>
NOVEMBER 30,
----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Machinery and equipment $ 4,552,000 $ 4,007,000
Furniture and office equipment 324,000 372,000
Leasehold improvements 163,000 144,000
Construction in progress 28,000 --
----------- -----------
5,067,000 4,523,000
Less accumulated depreciation and amortization (1,631,000) (958,000)
----------- -----------
$ 3,436,000 $ 3,565,000
=========== ===========
</TABLE>
3. LINE OF CREDIT
On March 31, 1998, the Company and Trilon Dominion completed an Amended and
Restated Credit Agreement and Revolving Line of Credit (the "Amended Agreement")
which included principal of $4,000,000 from a previous agreement, $750,000 from
Demand Notes, accrued interest and management fees of $543,297 on the Agreement
and Demand Notes, and a new credit line commitment of $2,200,000. Under the
terms of the Amended Agreement, the principal of $7,493,297 was due on December
31, 1998, and interest was payable quarterly at an annual rate of 11.5%. From
March 1998 to November 1998, the Company issued Demand notes totaling $930,000
at an interest rate of 11.5% under the credit line agreement.
In December of 1998, the Company amended the credit line agreement to extend the
terms to January 31, 2000, which was further extended to June 30, 2000 in a
December 31, 1999 amendment to the credit line agreement. In fiscal 1999, the
Company issued demand notes totaling $3,510,000 under the line of credit
agreement and capitalized debt issuance costs of $18,000. Of the notes issued in
fiscal 1999, $2,010,000 of notes bear interest at a rate of 11.5% annually; the
remaining $1,500,000 of demand notes bear interest at a rate of prime plus 3%
(11.5% at November 30, 1999).
4. INCOME TAXES
At November 30, 1999, the Company had federal net operating loss carryforwards
of approximately $2,533,000, which will begin to expire in 2006 unless
previously utilized. In addition, the Company had California and Texas net
operating loss carryforwards of approximately $6,697,000 which began to expire
in 2000 (approximately $8,540,000 expired in 1999). The Company also has federal
and California tax credit carryforwards of approximately $79,000 and $27,000
respectively, which will begin to expire in 2009, unless previously utilized.
As a result of ownership changes that occurred in February 1993 from a private
placement of common stock and in January 1996 from the exchange of common stock
for the outstanding debt and accrued interest, the Company's federal net
operating loss carryforwards will be subject to an annual limitation regarding
utilization against taxable income in future periods. The Company estimates that
approximately $6,800,000 of its federal net operating loss carry forward will be
unavailable for future tax benefit. Accordingly, the federal tax net operating
loss carry forward has been reduced, including the related deferred tax asset.
19
<PAGE> 21
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts for income tax purposes. Due to the uncertainty
surrounding future realization of favorable tax attributes, a valuation
allowance was recorded against deferred tax assets. Significant components of
the Company's deferred tax assets and liabilities for federal and state income
taxes are as follows:
<TABLE>
<CAPTION>
YEARS ENDED NOVEMBER 30
1999 1998
------------ ------------
<S> <C> <C>
Deferred tax assets:
Installment Sale $ 1,050,000 $ 1,058,000
Warrants 112,000 113,000
Accrued liabilities 54,000 25,000
Inventory reserves 62,000 140,000
Other 201,000 213,000
Net operating loss carryforwards 9,251,000 10,112,000
------------ ------------
Total deferred assets 10,730,000 11,661,000
Valuation allowance for deferred assets (10,320,000) (11,626,000)
------------ ------------
Net deferred tax assets 410,000 35,000
Deferred tax liabilities:
Depreciation and amortization (410,000) (35,000)
------------ ------------
Net deferred tax asset (liability) $ -- $ --
============ ============
</TABLE>
5. COMMITMENTS AND CONTINGENCIES
BREAST IMPLANT LITIGATION
The Company and its alleged predecessor company, Wilshire Foam, have been named
as defendants in thousands of bodily injury lawsuits involving breast implants
pending in Alabama, Arizona, California, Colorado, Connecticut, District of
Columbia, Florida, Georgia, Idaho, Illinois, Indiana, Kansas, Louisiana,
Massachusetts, Michigan, Mississippi, Missouri, Nevada, New Jersey, New Mexico,
New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, South Carolina,
Tennessee, Texas, Utah and Washington, and in a federal multi-district
litigation ("MDL") venued in Birmingham, Alabama. These suits seek compensatory
and punitive damages under a variety of legal theories. The allegations against
Wilshire Foam concern the use by some implant manufacturers of polyurethane
products purportedly supplied by Wilshire Foam which were apparently
incorporated into the implants and placed in the plaintiffs' bodies. Plaintiffs
allege that they have suffered adverse effects of having polyurethane in their
bodies, in addition to the alleged adverse effects of silicone and other
components of the implants.
The Company believes it has several layers of protection from exposure in these
cases. First, as described in greater detail below, the Company and Wilshire
Foam carried insurance. Second, also discussed below, recent developments in the
MDL and in related negotiations have resulted in the probable resolution of most
of the pending and possible future claims against the Company. Third, there are
a great number of co-defendants, some of which are large corporations with
significant resources, that may be required to contribute to any award or
indemnify the Company. Fourth, the Company has asserted a number of legal
defenses in the lawsuits as described below. Fifth, these claims relate to
products sold prior to the acquisition of Wilshire Foam, in which product
liabilities were expressly not assumed and the Company was indemnified by the
shareholders of Wilshire Foam. In many, if not most of the cases, the Company
believes it did not sell any product to the implant manufacturers in question or
during the relevant time period. The Company has been dismissed by approximately
2,400 plaintiffs because it was shown that a Wilshire Foam product was not
involved or in connection with a related resolution of the case.
20
<PAGE> 22
Management believes the Company is adequately covered by insurance for these
suits under one or more commercial general liability ("CGL") and excess
liability insurance policies. Between 1974 and 1980, Fireman's Fund Insurance
Company provided the CGL coverage; from 1980 through 1987, affiliates of the
Chubb Group provided both CGL and excess coverage. The CGL policies for
1987-1992 were underwritten by Allstate Insurance Company affiliates; excess
coverage for those years has been provided by Fireman's Fund. While Wilshire
Foam's greatest number of relevant sales appear to have taken place during the
early to mid-1980's, there appears to be over $100 million in combined potential
insurance coverage for the Company and/or Wilshire Foam during and after that
time period. To date, all of the claims have been tendered to the insurance
carriers, who have accepted defense of the litigation, subject to customary
reservations of rights. No assurance can be given that any future lawsuits will
be accepted by carriers. The cost of defense of the suits is generally not
applied toward the policy limits. The Company and its insurers are exploring
additional excess coverage which appears to have been in place during the 1970's
until 1980.
Many of the lawsuits have only recently been filed, and therefore all of the
facts and circumstances surrounding the various allegations have yet to be
determined. Consequently, it is difficult to predict the ultimate outcome and
extent of the Company's involvement. Nevertheless, the Company presently
believes that numerous legal defenses to potential liability exist, including,
but not limited to, the absence of causation, lack of identification, fault of
others, absence of defect, superseding cause, the component manufacturer
defense, statutes of limitations, the absence of successor liability, learned
intermediary, contribution and indemnity, and has in fact included these
defenses in its answers to the lawsuits. As with any litigation, there is a risk
of adverse judgments against the Company. The Company is actively cooperating
with its insurers and counsel in the defense of these lawsuits.
Previously, a number of defendants, including the Company, entered into a global
settlement agreement ("Global Settlement") in the MDL. Under the terms of the
Global Settlement, the Company would be required to contribute $8 million to the
global settlement fund, which the Company's insurers have agreed to pay. The
judge presiding over the MDL approved the Global Settlement and found it to be
fair; however, in September of 1995 that judge announced that the Global
Settlement is under funded, in part due to an unexpected number of registrants
and other reasons. The Company understands that efforts to resurrect or replace
the Global Settlement are ongoing but that the Global Settlement may not become
effective. The Company is to be a released party in the current draft of the
replacement for the Global Settlement without any additional funding
requirements from the Company or its insurers.
Separately, the Company has reached agreement with Medical Engineering
Corporation and Bristol-Myers Squibb ("MEC"), whereby, in essence, MEC has
agreed to indemnify the Company in all cases where a plaintiff, whose implant is
within MEC's chain of distribution, opts out of the Global Settlement. The MEC
indemnification also covers Wilshire for plaintiffs who opted into the Global
Settlement in the event that the Global Settlement does not become effective, so
that the Company remains protected in most cases even if the Global Settlement
cannot be resurrected. The Company's insurers have funded the initial amount the
Company agreed to pay to MEC in consideration of MEC's providing such
indemnification, and have agreed to pay the balance which would become due to
MEC if the Global Settlement does not become effective. These funding payments
reduced the limits of coverage under various CGL policies, but none of these
payments or funding commitments exhausted or will exhaust any of the policies'
limits or reached any excess policy.
The Company believes that the indemnification by MEC, with or without the Global
Settlement, would eliminate the great majority of implant-related cases pending
against the Company. However, even if the Global Settlement is finally approved,
cases will remain pending against the Company involving plaintiffs who opt out
of the Global Settlement and whose implants are outside of the MEC chain of
distribution and hence not covered by the MEC indemnification.
CONTINGENT LIABILITIES RELATED TO THE SALE OF THE GENERAL FOAM DIVISION
The Company remains contingently liable for certain deferred compensation due
through 2025 aggregating $1,238,000 in connection with the sale of the general
foam division to Advanced Materials effective on November 30, 1992.
21
<PAGE> 23
LEASE COMMITMENTS
The following is a schedule of the future minimum rental payments, net of future
sublease rental income, required under operating leases which have remaining non
cancelable lease terms in excess of one year at November 30, 1999:
<TABLE>
<S> <C>
1999 $ 311,000
2000 341,500
2001 237,000
2002 233,500
2003 19,500
----------
Total minimum payments $1,143,000
==========
</TABLE>
Rent expense was $359,000 and $461,000 for the years ended November 30, 1999 and
1998, respectively. During 1999, the Company received $48,000 of sublease rental
income.
6. SHAREHOLDERS' EQUITY (NET CAPITAL DEFICIENCY)
PREFERRED STOCK
On December 3, 1992, 2,000,000 shares of undesignated Preferred Stock were
authorized. The Board of Directors is authorized to provide for the issuance of
the undesignated Preferred Stock in one or more series, to establish from time
to time the number of shares to be included in each series, to fix or alter the
rights, preferences and privileges of the shares of each wholly unissued series
and any restrictions thereon, and to increase or decrease the number of shares
of any series.
COMMON STOCK WARRANTS
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%. 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 and Trilon Dominion amended the
Agreement to extend 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 of $1.75 per
share, and it expires on January 5, 2001.
The Agreement was amended further on September 30, 1996, April 15, 1997, and
September 19, 1997. Each amendment increased the credit line by $1,000,000, up
to a total of $4,000,000 and extended the termination date to June 30, 1998.
Trilon Dominion received a warrant to purchase 100,000 shares at the market
price with each credit line increase, and a warrant to purchase 25,000 shares at
the market price with each termination date extension. Warrants for 225,000
shares were issued in each of fiscal years 1996 and 1997. The Company recorded
the estimated fair value of the warrants issued to Trilon Dominion in fiscal
year 1997 at $0.07 per underlying common share and recorded a corresponding
charge to interest expense of $16,000 in fiscal 1997.
On September 18, 1997, the Company completed a Development and Supply Agreement
for glove polymer with PTG Medical LLC, an affiliate of Polymer Technology
Group, Inc. Under that Agreement, the Company issued a five-year warrant for
100,000 shares of common stock at an exercise price of $1.09, which was $0.25
above the average market price for the five days prior to the date of the
Agreement.
22
<PAGE> 24
On November 25, 1997 the Company completed a Lease Agreement for a manufacturing
facility in Tijuana, Mexico with Mr. Rafael Mizrachi. Under that Agreement, the
Company issued a five-year warrant for 50,000 shares of common stock at an
exercise price of $0.60, which was the market price on the date of the
Agreement.
The Company recorded the estimated fair value of the warrants issued to PTG
Medical LLC and Mr. Rafael Mizrachi in fiscal year 1997 at $0.07 per underlying
common share and recorded a corresponding charge to earnings of $10,000 in
fiscal 1997.
On December 31, 1997 and on June 30, 1998 warrants issued to Trilon Dominion,
each to purchase 25,000 shares, became exercisable at the respective market
prices of $0.47 and $0.34 per share. The Company recorded the estimated fair
value of these warrants in fiscal year 1998 at $0.07 per underlying common share
and recorded a corresponding charge to interest expense of $3,500 in fiscal year
1998.
On March 31, 1998 the Company and Trilon Dominion completed an Amended and
Restated Credit Agreement and Revolving Line of Credit (the "Amended Agreement")
which included the principal of $4,000,000 from the previous Agreement and
Amendments, the principal of $750,000 from the three Demand Notes, the accrued
interest and management fees of $543,297 on the Agreement and Notes, and a new
credit line commitment of $2,200,000. Under the terms of the Amended Agreement,
the principal of $7,493,297 was due on December 31, 1998, and the interest was
payable quarterly at an annual rate of 11.5%. In connection with the Amended
Agreement, the Company paid Trilon $100,000 for debt issuance costs and issued
Trilon Dominion a five-year warrant that entitles Trilon Dominion to purchase
650,000 shares of the Company's authorized but unissued common stock at an
exercise price of $0.41 per share, subject to adjustment to protect against
dilution. The warrant is exercisable immediately and expires on March 31, 2003.
The Company recorded the estimated fair value of the warrant to purchase 650,000
shares as a debt issuance cost in the second quarter of fiscal year 1998 at
$0.07 per underlying common share. Also, under the terms of the Amended
Agreement, the Company issued Trilon Dominion a second five-year warrant which
became exercisable on December 31, 1998 when the Company and Trilon Dominion
agreed to extend the termination date of the Amended Agreement from December 31,
1998 to January 31, 2000. The second warrant entitles Trilon Dominion to
purchase 250,000 shares of the Company's authorized but unissued common stock at
an exercise price of $0.42 per underlying common share and expires on March 31,
2003. On December 31, 1999, the Company and Trilon Dominion agreed to extend the
due date of the principal and interest from January 31, 2000 to June 30, 2000.
STOCK OPTIONS
On April 27, 1992, the Company's Board of Directors approved a stock option plan
for 150,000 options ("the 1992 Plan") and on December 1, 1993, approved a second
stock option plan for 250,000 options ("the 1993 Plan"). On December 6, 1994,
the Board of Directors approved a third stock option plan ("the 1995 Plan") for
options on 500,000 shares, which was subsequently amended to increase the number
of shares that may be issued under such plan to 1,750,000 shares. As of November
30, 1999, the following options were outstanding under each respective Stock
Option Plan: none under the 1992 Plan, 14,000 under the 1993 Plan, and 1,521,000
under the 1995 Plan. In addition, there were 280,000 options outstanding which
were not issued under any of the above-mentioned Plans.
Under the Plans, the Company may grant incentive stock options ("ISOs"), as
defined under the Internal Revenue Code or nonqualified stock options ("NQOs").
Options may be granted at not less than 100% of the fair market value on the
date of grant for ISOs. The option period cannot exceed 10 years from the date
an option is granted or five years in the case in which an option is granted to
a 10% shareholder of both classes of stock at the time the option is granted.
Generally, if an optionee's employment is terminated, all unvested options
granted to such employee under the Plans shall terminate and may no longer be
exercised.
On October 7, 1998 the Board of Directors approved six grants of stock options
on a total of 670,000 shares under the 1995 Plan at the market price on the
respective date of each grant. Two of these six grants, on a total of 90,000
shares, were issued to outside consultants of the Company and were recorded in
fiscal year 1998 at their estimated fair value of $19,000 with a corresponding
charge to administrative expense.
23
<PAGE> 25
A summary of stock option activity is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number Exercise
of Shares Price Per Share
----------- -----------------
<S> <C> <C>
Outstanding at November 30, 1997 1,175,500 1.10
Granted ............................. 688,000 0.49
Canceled ............................ (198,500) 1.16
----------
Outstanding at November 30, 1998 1,665,000 0.84
Granted ............................. 427,500 0.34
Canceled ............................ (277,500) 0.61
----------
1,815,000
==========
</TABLE>
As of November 30, 1999, 455,000 shares are available for future grant under the
Stock Option Plans.
Following is a further breakdown of the options outstanding as of November 30,
1999:
<TABLE>
<CAPTION>
Weighted
Weighted Average
Average Weighted Exercise
Range of Remaining Average Price of
Exercise Options Life Exercise Options Options
Prices Outstanding in Years Price Exercisable Exercisable
----------- ----------- ---------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$0.30 250,000 8.71 $ 0.30 116,668 $ 0.30
0.34 8,000 4.58 0.34 8,000 0.34
0.35 112,500 9.38 0.35 37,499 0.35
0.38 5,000 8.57 0.38 3,333 0.38
0.39 50,000 9.20 0.39 16,667 0.39
0.48 120,000 8.50 0.48 96,666 0.48
0.50 530,000 8.55 0.50 135,000 0.50
0.63 502,500 1.92 0.63 502,500 0.63
0.75 136,000 5.28 0.75 129,334 0.75
0.84 6,000 3.58 0.84 6,000 0.84
0.88 15,000 5.93 0.88 15,000 0.88
6.00 80,000 2.84 6.00 80,000 6.00
- --------------- --------- --------- --------- --------- ---------
$0.30-6.00 1,815,000 6.25 $ 0.76 1,146,667 $ 0.95
=============== ========= ========= ========= ========= =========
</TABLE>
Adjusted proforma information regarding net loss is required by SFAS 123 and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of SFAS 123. The fair value for these options was
estimated at the date of grant using the Black Scholes method for option pricing
with the following assumptions for 1999 and 1998: a risk free interest rate of
5.88%, a dividend yield of 0%, a weighted-average expected life of the option of
three years and expected volatility of 60 percent.
24
<PAGE> 26
For purposes of adjusted proforma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period. The Company's adjusted
proforma information is as follows:
<TABLE>
<CAPTION>
Years Ended November 30,
1999 1998
----------- -----------
<S> <C> <C>
Adjusted proforma net loss .................. $(4,763,820) $(2,944,000)
Adjusted proforma net loss per share ........ $ (0.37) $ (0.23)
</TABLE>
The weighted average fair value of options granted during 1998 and 1999 was
$0.73 and $0.22, respectively.
At November 30, 1999, 6,660,000, shares were reserved for the issuance of
options and warrants.
7. RELATED PARTY TRANSACTIONS
On November 30, 1999, the Company had short-term debt outstanding to Trilon
Dominion of $11,933,000 plus accrued interest (see Note 3). In addition, Trilon
Dominion owned 9,416,430 shares, or 72.8%, of the Company's common stock and
warrants entitling it to purchase an additional 1,150,000 shares (before
dilution adjustments). Mr. Ronald Cantwell, who is President of Trilon Dominion,
has been a director and Chairman of the Board of the Company since December 6,
1996.
8. SUBSEQUENT EVENTS (Unaudited)
ON February 7, 2000, the Company (the "Seller") signed a non-binding Letter of
Intent with Foamex Asia Co. Ltd. (the "Buyer"), an affiliate of Foamex
International (FMXI: NASDAQ), for the sale of certain assets and selected
liabilities of the Company's Wilshire Contamination Control Division (the
"Division).
The transaction is subject to the execution of a definitive agreement, which the
Company anticipates will contain other closing conditions and requirements to
satisfactorily complete the transfer of assets.
The final purchase price for the assets will be based upon a percentage of
Foamex future sales of contamination control products over a multi-year
contractual period. Management is unable to anticipate or predict with accuracy
the total purchase price to be paid for the assets.
In addition to the sale of assets, the Buyer and Seller intend to negotiate an
agreement for post-closing joint sales and marketing efforts and sharing of
certain technology, equipment and personnel during the contractual period.
Since no cash is due at closing, the Company will record the sale of the assets
as a receivable (based upon the net book value of the assets transferred). All
payments of purchase price will be applied against the receivable, with no
recognition of gain, until the receivable is extinguished.
Foamex International is an international developer, manufacturer and supplier of
high-quality foam, including key materials utilized in Contamination Control
environments. Foamex Asia Co. Ltd., located in Singapore, Thailand, is currently
a major supplier of specialty foam products to the Asian market.
Steve Scibelli, President of Foamex Asia Co. Ltd., served as Chief Executive
Officer of Wilshire Technologies from 1994 until 1996. Mr. Scibelli currently
owns 96,073 shares of Company stock and holds an option to purchase 200,000
shares of Company stock, at a purchase price of $0.625 per share, until April
17, 2000 when the options expire. In addition, the Company is contingently
obligated to pay certain other benefits to Mr. Scibelli.
The Company believes that the proposed transactions are in its best interests
because of the likelihood of increased gross profit from the contamination
control business over the next three years, coupled with the ability to better
focus its efforts on the polyurethane glove business during that period.
25
<PAGE> 27
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
26
<PAGE> 28
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information required in this Item is incorporated herein by reference to the
Company's Proxy Statement dated March 24, 2000
ITEM 10. EXECUTIVE COMPENSATION.
The information required in this Item is incorporated herein by reference to the
Company's Proxy Statement dated March 24, 2000
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required in this Item is incorporated herein by reference to the
Company's Proxy Statement dated March 24, 2000
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required in this Item is incorporated herein by reference to the
Company's Proxy Statement dated March 24, 2000
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
<TABLE>
<S> <C>
10.1 Settlement Agreement dated November 23, 1993 between the Company
and Wilshire Advanced Materials, Inc. ("Advanced Materials").
(1)
10.2 Asset Purchase Agreement dated November 23, 1993, between the
Company and Advanced Materials (forms of bill of sale and
assignment, secured promissory note, amended and restated
secured subordinated promissory note, and amendment to security
agreement attached thereto). (1)
10.3 Maturity Date Extension to Secured Promissory Note dated January
24, 1994 between the Company and Advanced Materials. (1)
10.4 Amendment to Manufacturers Sales Representative Agreement dated
January 27, 1994 between the Company and Professional Health
Sales, Inc. (1)
10.5 Mutual Release to terminate Joint Venture Agreement dated August
2, 1993 between the Company and Tillotson Healthcare
Corporation. (1)
10.6 Release by the Company to terminate License and Sales Agreement
dated August 1, 1993 between the Company and Tyndale
Plains-Hunter, Ltd. ("TPH"). (1)
10.7 Release by the Company to terminate Evaluation Agreement dated
August 19, 1993 between the Company and TPH. (1)
10.8 Release by the TPH to terminate License and Sales Agreement
dated August 23, 1993 between the Company and TPH. (1)
10.9 Release by the TPH to terminate Evaluation Agreement dated
August 23, 1993 between the Company and TPH. (1)
10.10 Product Development and License Agreement dated May 25, 1993
between the Company and Innovative Technologies Limited ("IT").
(1)
</TABLE>
27
<PAGE> 29
<TABLE>
<S> <C>
10.11 Product Development and License Agreement for Gloves dated June
20, 1993 between the Company and IT. (1)
10.12 Amendment to Joint Venture Agreement dated January 5, 1994
between the Company and Intelligent Pharmaceuticals Corporation.
(1)
10.13 Lease Agreement dated January 14, 1993 among the Company,
Ridgecrest Properties, R and B Properties and Hindry West
Development. (1)
10.14 Lease Amendment dated June 30, 1993 among the Company,
Ridgecrest Properties, R and B Properties and Hindry West
Development. (1)
10.15 International Distribution Agreement dated July 16, 1993 between
WTP and B&R Consulting Limited, Inc. (1)
10.16 International Distribution Agreement dated August 11, 1993
between WTP and Dagal, Inc. (1)
10.17 International Distribution Agreement dated January 3, 1994
between WTP and Windsor Group, Ltd. (1)
10.18 First Amendment to Credit and Security Agreement dated January
11, 1994 between the Company and City National Bank ("CNB"). (1)
10.19 Revolving Credit Note dated January 11, 1994 between the Company
and CNB. (1)
10.20 Equipment Acquisition Note dated January 11, 1994 between the
Company and CNB. (1)
10.21 Credit Agreement dated May 13, 1994 between the Company and
Dominion. (2)
10.22 Warrant to Purchase Common Stock of Company dated May 13, 1994.
(3)
10.23 Security Agreement dated May 13, 1994 between the Registrant and
Dominion. (4)
10.24 Promissory Note in the principal amount of $5,000,000 dated May
13, 1994 made by the Registrant to the order of Dominion. (5)
10.25 Fairness Opinion dated November 24, 1993 regarding the sale by
the Company of certain assets related to WMP's OEM private-label
business to Advanced Materials prepared for the Company by
Laidlaw Holdings, Inc. (6)
10.26 Settlement Agreement and Release dated November 1, 1994 between
Coating Sciences, Inc. and the Registrant. (7)
10.27 Settlement Agreement dated May 12, 1994 between Time Release
Sciences, Inc. and the Registrant. (7)
10.28 Amendment thereto dated September 17, 1994. (7)
10.29 Agreement dated as of January 16, 1995 among Medical Engineering
Corporation, Wilshire Advanced Materials, Inc. and the
Registrant, concerning breast implant claims. (7)
10.30 Stipulation of Partial Settlement dated as of October 26, 1994
in re Wilshire Technologies Securities Litigation Master File
94-0400-B (AJB), United States District Court for the Southern
District of California among the Registrant and the
Representative Plaintiffs named therein, exclusive of the
exhibits thereto. (7)
</TABLE>
28
<PAGE> 30
<TABLE>
<S> <C>
10.31 Articles of Incorporation. (8)
10.32 Credit Agreement dated November 18, 1994 between the Registrant
and Dominion Capital, Inc., including form of Warrant and form
of Note. (9)
10.33 First Amendment, dated December 30, 1994 to such Credit
Agreement, including form of Promissory Note. (10)
10.34 Second Amendment, dated February 14, 1995, to such Credit
Agreement, including form of Promissory Note. (11)
10.35 1995 Stock Option Plan. (12)
10.36 Form of Non-Qualified Stock Option Agreement. (13)
10.37 Third Amendment, dated May 23, 1995, to the Credit Agreement
dated November 18, 1994 between the Registrant and Dominion
Capital, Inc. (14)
10.38 Agreement between the Registrant and Dominion Capital, Inc.
dated June 29, 1995, on payment of interest. (15)
10.39 Second Amendment dated May 17, 1995, to the Settlement Agreement
dated May 12, 1994 between Time Release Sciences, Inc. and the
Registrant. (16)
10.40 Letter Agreement dated June 29, 1995 between Dominion Capital,
Inc. ("Dominion") and the Registrant notifying Registrant of
Dominion's intent to transfer certain securities to Venture
Capital Equities, LLC (the "LLC"). (17)
10.41 Agreement dated June 30, 1995 among Dominion, the LLC and the
Registrant referred to in the preceding Letter Agreement with
the following Exhibits: (a) Lender Assignment and Assumption
Agreement dated June 30, 1995. (b) Grid Promissory Note dated
May 23, 1995. (c) Assignment of Warrant by Dominion to the LLC.
(18)
10.42 Amendment dated June 30, 1995 to Warrant Agreement dated May 13,
1994 between Wilshire and Dominion. (19)
10.43 Advice by Dominion and the LLC to the Registrant of the transfer
of the securities by Dominion to the LLC and of the proposed
name change of the LLC to Trilon Dominion Partners, LLC. (20)
10.44 Bylaw Amendment, effective July 31, 1995, fixing exact number of
directors at five. (21)
10.45 Registrant's Bylaws as in effect on October 9, 1995. (22)
10.46 Letter dated May 12, 1995 by Ministry of Health of the Republic
of Mexico granting Sanitary Registration No. 245M95 SSA for the
appetite suppressant ("TrimPatch(TM)"). (23)
10.47 English translation of Exhibit 10.7. (24)
10.48 Employment Agreement dated August 31, 1995 and effective April
17, 1995 between the Registrant and Mr. Stephen P. Scibelli, Jr.
(25)
10.49 Amendment to Asset Purchase Agreement, dated May 19, 1995
between the Registrant and Wilshire Advanced Materials, Inc.
(26)
</TABLE>
29
<PAGE> 31
<TABLE>
<S> <C>
10.50 Form of stock option granted on September 16, 1994 to directors
Black, Davis, Landry and Widder. (27)
10.51 Form of stock option granted on December 6, 1994 to director
William J. Hopke. (28)
10.52 Form of stock option granted on April 17, 1995 to directors
Black, Davis, Hopke, Landry and Widder. (29)
10.53 Form of stock option granted on September 16, 1994 to Mr.
Stephen P. Scibelli, Jr. (30)
10.54 Form of stock option granted on April 17, 1995 to Mr. Stephen P.
Scibelli, Jr. (31)
10.55 Technology and Peripheral Technology Rights Agreement dated June
30, 1995, among the Registrant, James A. Eisenstock, and Mikki
Rossin, relating to Bloodstopper products. (32)
10.56 Fourth Amendment, dated September 1, 1995, to the Credit
Agreement dated November 18, 1994 between the Registrant and
Trilon Dominion Partners, LLC. (33)
10.57 Industrial Sublease Agreement dated August 31, 1995 between the
Registrant and Advanced Materials, Inc. (34)
10.58 Fifth Amendment dated as of November 1, 1995 to the Credit
Agreement dated November 18, 1994 (the "Credit Agreement")
between the Registrant and Trilon Dominion Partners LLC
("Trilon"). (35)
10.59 Sixth Amendment dated as of December 5, 1995 to the
above-mentioned Credit Agreement. (36)
10.60 Exchange Agreement dated as of January 5, 1996 between the
Registrant and Trilon. (37)
10.61 Credit Agreement (the "Trilon Agreement") dated January 5, 1996
between the Registrant and Trilon, exclusive of certain
schedules. (38)
10.62 Grid Promissory Note for not to exceed $1,000,000 to evidence
borrowings under the Trilon Agreement. (39)
10.63 Amendment No. 1 dated January 5, 1996 to Security Agreement
dated May 13, 1995 which secures borrowings under the Trilon
Agreement. (40)
10.64 Warrant dated January 5, 1996 to purchase 100,000 shares of the
Registrant's Common Stock, issued to Trilon pursuant to the
Trilon Agreement. (41)
10.65 Springing Warrant dated January 5, 1996 to purchase 25,000
shares of the Registrant's Common Stock, issued to Trilon
pursuant to the Trilon Agreement. (42)
10.66 Consulting Agreement dated January 5, 1996 between the
Registrant and Trilon. (43)
10.67 Form of Stock Option granted on December 12, 1995 to Mr. James
W. Klingler. (44)
10.68 Agreement of Purchase and Sale of Joint Venture Interest and
Terminating Joint Venture, between the Company and Intelligent
Pharmaceuticals Corporation, dated November 1, 1995. (45)
10.69 Employment Agreement, dated October 3, 1994 between the Company
and James W. Klingler. (45)
</TABLE>
30
<PAGE> 32
<TABLE>
<S> <C>
10.70 Employment Agreement, dated August 15, 1995 between the Company
and David R. Byck. (45)
10.71 Bylaw Amendment adopted February 19, 1996. (45)
10.72 Bylaws as in effect on February 20, 1996. (45)
10.73 Principal/Agent Agreement dated March 13, 1996 between
Intelligent Pharmaceuticals Corporation and the Registrant. (46)
10.74 Manufacturing and Supply Agreement dated April 11, 1996, between
Advanced Barrier Technologies, Inc., and the Registrant. (47)
10.75 Agreement dated April 15, 1996, between Dagal, Inc., and the
Registrant. (47)
10.76 Agreement related to Wound Care Products, dated April 18, 1996,
between Innovative Technologies Ltd. and the Registrant. (47)
10.77 Agreement related to Gloves, dated April 18, 1996, between
Innovative Technologies Ltd. and the Registrant. (47)
10.78 Finder Agreement dated May 1, 1996, between Innovative Research
Associates, inc., and the Registrant. (47)
10.79 Product Rights Transfer Agreement, dated May 24, 1996, between
Advanced Materials, inc., and the Registrant. (47)
10.80 Release Agreement dated July 3, 1996, between Advanced
Materials, Inc., and the Registrant. (47)
10.81 Purchase of Assets and Assumption of Sublease Agreement with
certain Exhibits dated June 30, 1996, between Acacia
Laboratories, inc., (dba Horizon Medical, Inc.,) and the
Registrant. (47)
10.82 Amendment dated June 30, 1996, to Credit Agreement and Grid
Promissory Note dated January 5, 1996, between Trilon Dominion
Partners, LLC, and the Registrant. (47)
10.83 Addendum Agreement dated July 26, 1996 to the Manufacturing and
Supply Agreement dated April 11, 1996 between Advanced Barrier
Technologies, Inc. and the Registrant. (48)
10.84 Bailment Agreement dated September 6, 1996 between Coastline de
Mexico S.A. de C.V., Advanced Barrier Technologies, Inc. and the
Registrant. (48)
10.85 Offer of Settlement of Wilshire Technologies, Inc. dated August
5, 1996 to the U.S. Securities and Exchange Commission. (48)
10.86 Order Instituting Proceedings Pursuant to Section 21C of the
Securities Exchange Act of 1934, Making Findings and Imposing a
Cease and desist Order, dated September 24, 1996 entered by the
U.S. Securities and Exchange Commission against the Registrant.
(48)
10.87 Agreement of Purchase and Sale of TrimPatch(TM) Business and
Assets dated September 30, 1996 between Intelligent
Pharmaceuticals Corporation and the Registrant. (48)
10.88 Restated Articles of Incorporation filed in the office of the
Secretary of State of California on May 24, 1996. (49)
</TABLE>
31
<PAGE> 33
<TABLE>
<S> <C>
10.89 Certificate of Amendment of Articles of Incorporation filed in
the office of the Secretary of State of California on June 10,
1996. (50)
10.90 Second Amendment dated September 30, 1996 to Credit Agreement
and Grid Promissory Note dated January 5, 1996, between Trilon
Dominion Partners, LLC, and the Registrant. (51)
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. (52)
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. (52)
10.93 Certificate, dated February 28, 1997, regarding the dissolution
of Wilshire Transdermal Products, Ltd. (52)
10.94 Distributor Agreement, dated March 5, 1997, between Armstrong
Industrial Corporation and the Registrant. (53)
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. (53)
10.96 Agreement related to Gloves, dated April 29, 1997, between
Innovative Technologies Ltd. and the Registrant. (53)
10.97 Equipment Supply Agreement, dated July 28, 1997, between ACC
Automation Company and the Registrant. (54)
10.98 Settlement Agreement, Mutual Release, and Injunction, dated July
31, 1997, between Powell Products, Inc. and the Registrant. (54)
10.99 Equipment Supply Agreement, dated September 16, 1997, between
the Vara International Division of Calgon Carbon Corporation and
the Registrant. (54)
10.100 Development and Supply Agreement, dated September 18, 1997,
between PTG Medical LLC and the Registrant. (54)
10.101 Fourth Amendment, dated September 19, 1997, to Credit Agreement
and to Grid Promissory Note dated January 5, 1996 between Trilon
Dominion Partners LLC, and the Registrant. (54)
10.102 Lease Agreement dated August 30, 1997 between the Registrant and
Messrs. Frank Naliboff and Nathan Morton. (55)
10.103 Lease Agreement dated November 25, 1997 among the Registrant,
Wilshire International de Mexico S.A. de C.V., and Mr. Rafael
Mizrachi. (55)
10.104 Warrant Agreement, dated November 24, 1997, between the
Registrant and American Stock Transfer and Trust Company. (55)
10.105 Employment Agreement, dated January 1, 1998 between the
Registrant and Mr. John Van Egmond. (55)
10.106 Demand Note, dated January 7, 1998, between the Registrant and
Trilon Dominion Partners, L.L.C. (55)
10.107 Demand Note dated February 17, 1998, between the Registrant and
Trilon Dominion Partners, L.L.C. (55)
</TABLE>
32
<PAGE> 34
<TABLE>
<S> <C>
10.108 Articles of Incorporation and by-laws granted May 9, 1997 and
recorded May 22, 1997 of Wilshire International de Mexico, S.A.
de C.V. (55)
10.109 Management Services Agreement dated October 8, 1997 among
Wilshire International de Mexico S.A. de C.V., Tecnicas
Mexicanas de Ensamble, S.A. de C.V., and Made in Mexico, Inc.
(55)
10.110 Assembly (Maquila) Agreement and Commodatum Agreement dated
February 3, 1998, between the Registrant and Wilshire
International de Mexico S.A. de C.V. (55)
10.111 Demand Note dated March 10, 1998 between the Registrant and
Trilon Dominion Partners, L.L.C. (56)
10.112 Amended and Restated Credit Agreement and Revolving Line of
Credit (the "Amended Agreement") dated March 31, 1998 between
the Registrant and Trilon Dominion Partners, L.L.C., exclusive
of certain schedules. (56)
10.113 Warrant dated March 31, 1998 to purchase 650,000 shares of the
Registrant's Common Stock, issued to Trilon Dominion Partners,
L.L.C. pursuant to the Amended Agreement. (56)
10.114 Springing Warrant dated March 31, 1998 to purchase 250,000
shares of the Registrant's Common Stock, issued to Trilon
Dominion Partners, L.L.C. pursuant to the Amended Agreement.
(56)
10.115 Grid Promissory Note dated March 31, 1998 between the Registrant
and Trilon Dominion Partners L.L.C. issued under the Amended
Agreement. (56)
10.116 Employment Agreement dated May 18, 1998 between the Registrant
and Mr. Paul Fennell. (57)
10.117 Sales Representative Agreement dated June 1, 1998 between the
Registrant and Exxustech, Inc. (57)
10.118 Exclusive Product Supply Agreement dated July 28, 1998 between
the Registrant and Time Release Sciences, Inc. (57)
10.119 Independent Consultant Agreement dated August 5, 1998 between
the Registrant and Percura, Inc. (57)
10.120 Employment Agreement dated August 17, 1998 between the
Registrant and Mr. Kevin Mulvihill. (57)
10.121 Demand Note dated August 5, 1998 between the Registrant and
Trilon Dominion Partners, L.L.C. (57)
10.122 Demand Note dated September 1, 1998 between the Registrant and
Trilon Dominion Partners, L.L.C. (57)
10.123 Demand Note dated October 1, 1998 between the Registrant and
Trilon Dominion Partners, L.L.C. (57)
10.124 Distributor Agreement dated October 15, 1998 between the
Registrant and Foamex Asia Company, Ltd. (58)
</TABLE>
33
<PAGE> 35
<TABLE>
<S> <C>
10.125 Demand Note dated November 2, 1998 between the Registrant and
Trilon Dominion Partners, L.L.C. (58)
10.126 Demand Note dated December 1, 1998 between the Registrant and
Trilon Dominion Partners, L.L.C. (58)
10.127 Demand Note dated January 4, 1999 between the Registrant and
Trilon Dominion Partners, L.L.C. (58)
10.128 Demand Note dated February 1, 1999 between the Registrant and
Trilon Dominion Partners, L.L.C. (58)
10.129 Amendment dated December 31, 1998, to the Amended Agreement
dated March 31, 1998 between the Registrant and Trilon Dominion
Partners, L.L.C. (58)
10.130 Sublease Agreement dated December 9, 1998 between the Registrant
and Software of the Month Club, Inc. (58)
10.131 Sublease Agreement dated December 14, 1998 between the
Registrant and Intecon Systems, Inc. (58)
10.132 Distributor Agreement, dated January 1, 1999, between the
Registrant and VWR Scientific Products Corporation. (58)
10.133 Demand Note dated February 23, 1999 between the Registrant and
Trilon Dominion Partners, L.L.C. (59)
10.134 Employment Agreement dated February 8, 1999 between the
Registrant and Ms. Kathleen Terry. (59)
10.135 Demand Note dated April 1, 1999 between the Registrant and
Trilon Dominion Partners, L.L.C. (59)
10.136 Form of stock option granted on May 18,1998 to Mr. Paul
Fennell. (59)
10.137 Form of stock option granted on August 17,1998 to Mr. Kevin
Mulvihill. (59)
10.138 Form of stock option granted on February 8, 1999 to Ms. Kathleen
Terry. (59)
10.139 Demand Note dated April 23, 1999 between the Registrant and
Trilon Dominion Partners, L.L.C. (60)
10.140 Demand Note dated May 6, 1999 between the Registrant and Trilon
Dominion Partners, L.L.C. (60)
10.141 Demand Note dated June 7, 1999 between the Registrant and Trilon
Dominion Partners, L.L.C. (60)
10.142 Demand Note dated July 5, 1999 between the Registrant and Trilon
Dominion Partners, L.L.C. (60)
10.143 Form of stock option granted on April 15, 1999 to Mr. Paul
Fennell. (60)
10.144 Form of stock option granted on April 15, 1999 to Mr. Dan
Jennings. (60)
10.145 Form of stock option granted on April 15, 1999 to Mr. Shawn
Roberts. (60)
</TABLE>
34
<PAGE> 36
<TABLE>
<S> <C>
10.146 Form of stock option granted on May 12, 1999 to Mr. Lee Jared.
(60)
10.147 Form of stock option granted on May 12, 1999 to Mr. Ben Zarza.
(60)
10.148 Form of stock option granted on April 15, 1999 to Ms. Grace
Reasoner. (60)
10.149 Demand Note dated August 9, 1999 between the Registrant and
Trilon Dominion Partners, L.L.C. (61)
10.150 Demand Note dated September 2, 1999 between the Registrant and
Trilon Dominion Partners, L.L.C. (61)
10.151 Demand Note dated October 1, 1999 between the Registrant and
Trilon Dominion Partners, L.L.C. (61)
10.152 Form of stock option granted on August 13, 1999 to Mr. Paul
Fennell. (61)
10.153 Form of stock option granted on August 13, 1999 to Ms. Kathleen
Terry. (61)
10.154 Form of stock option granted on August 13, 1999 to Mr. Charles
Black. (61)
10.155 Form of stock option granted on August 13, 1999 to Mr. Joe
Davis. (61)
10.156 Form of stock option granted on August 13, 1999 to Mr. Ralph
Whitworth. (61)
10.157 Form of stock option granted on August 13, 1999 to Mr. John Van
Egmond. (61)
10.158 Demand Note dated November 2, 1999 between the Registrant and
Trilon Dominion Partners, L.L.C.
10.159 Demand Note dated December 3, 1999 between the Registrant and
Trilon Dominion. Partners, L.L.C.
10.160 Amendment dated December 31, 1999, to the Amended Agreement
dated March 31, 1998 between the Registrant and Trilon Dominion
Partners, L.L.C.
10.161 Demand Note dated February 1, 2000 between the Registrant and
Trilon Dominion Partners, L.L.C.
10.162 Letter of Intent to purchase Assets of Wilshire Contamination
Control Division by Foamex Asia. Co. Ltd.
21 Subsidiaries of the Registrant. (55)
27 Financial Data Schedule.
99 Risks and Uncertainties in Forward-Looking Statements. (51)
</TABLE>
- ----------
35
<PAGE> 37
NOTE: Certain of the Exhibits listed above are incorporated herein by
reference to other documents previously filed with the
Commission as follows:
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
--------- ----------------- -----------
<S> <C> <C>
1 Incorporated to the
identically numbered Exhibit
to Form 10-KSB for fiscal 1993
2 Form 8-K dated May 23, 1994
(the "1994 8-K") 1
3 1994 8-K 4
4 1994 8-K 2
5 1994 8-K 3
6 Form 10-KSB for fiscal 1993 28
7 Incorporated to the
identically numbered Exhibit
in Form 10-KSB for fiscal 1994
(the "1994 KSB")
8 1994 KSB 3(i)
9 1994 KSB 4(a)
10 1994 KSB 4(b)
11 1994 KSB 4(c)
12 1994 KSB 4(d)
13 1994 KSB 4(e)
</TABLE>
36
<PAGE> 38
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
--------- ----------------- -----------
<S> <C> <C>
14 Form 10-QSB dated July 12,
1995 (the "July 1995 QSB") 10.1
15 July 1995 QSB 10.2
16 July 1995 QSB 10.3
17 Form 10-QSB dated October 10,
1995 (the "October 1995 QSB") 10.1
18 October 1995 QSB 10.2
19 Form 8-K dated August 7, 1995 2
20 October 1995 QSB 10.4
21 October 1995 QSB 10.5
22 October 1995 QSB 10.6
23 October 1995 QSB 10.7
24 October 1995 QSB 10.8
25 October 1995 QSB 10.9
26 October 1995 QSB 10.10
27 October 1995 QSB 10.11
28 October 1995 QSB 10.12
29 October 1995 QSB 10.13
30 October 1995 QSB 10.14
31 October 1995 QSB 10.15
32 October 1995 QSB 10.16
33 October 1995 QSB 10.17
34 October 1995 QSB 10.18
35 Form 8-K dated January 10,
1996 (the "January, 1996 8-K") 1
36 January, 1996 8-K 2
</TABLE>
37
<PAGE> 39
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
--------- ----------------- -----------
<S> <C> <C>
37 January, 1996 8-K 3
38 January, 1996 8-K 4
39 January, 1996 8-K 5
40 January, 1996 8-K 6
41 January, 1996 8-K 7
42 January, 1996 8-K 8
43 January, 1996 8-K 9
44 January, 1996 8-K 10
45 Incorporated to the
identically numbered Exhibit
in Form 10-KSB for fiscal 1995
46 Incorporated to the
identically numbered Exhibit
in Form 10-QSB dated April 10,
1996
47 Incorporated to the
identically numbered Exhibit
in Form 10-QSB dated July 10,
1996
48 Incorporated to the
identically numbered Exhibit
in Form 10-QSB dated October
11, 1996
49 Form 8-K dated May 24, 1996
(the "May, 1996 8-K") 3 (i) (a)
50 May, 1996 8-K 3 (i) (b)
51 Incorporated to the
identically numbered Exhibit
in Form 10-KSB dated February
24, 1997.
52 Incorporated to the
identically numbered Exhibit
in Form 10-QSB dated April 11,
1997.
</TABLE>
38
<PAGE> 40
<TABLE>
<CAPTION>
Exhibit
Document to which Designation
Note Cross Reference in such
Reference is Made Document
--------- ----------------- -----------
<S> <C> <C>
53 Incorporated to the
identically numbered Exhibit
in Form 10-QSB dated July 9,
1997
54 Incorporated to the
identically numbered Exhibit
in Form 10-QSB dated October
10, 1997.
55 Incorporated to the
identically numbered Exhibit
in Form 10-KSB dated February
25, 1998.
56 Incorporated to the
identically numbered Exhibit
in Form 10-QSB dated April 10,
1998.
57 Incorporated to the
identically numbered Exhibit
in Form 10-QSB dated October
12, 1998.
58 Incorporated to the
identically numbered Exhibit
in Form 10-KSB for fiscal year
1999 (the "1999" KSB).
59 Incorporated to the
identically numbered Exhibit
in Form 10-QSB dated April 7,
1999.
60 Incorporated to the
identically numbered Exhibit
in Form 10-QSB dated July 12,
1999.
61 Incorporated to the
identically numbered Exhibit
in Form 10-QSB dated October
15, 1999.
</TABLE>
(b) REPORTS ON FORM 8-K.
None
39
<PAGE> 41
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WILSHIRE TECHNOLOGIES, INC.
Dated: February 23, 2000 By: /s/ Kevin T. Mulvihill
---------------------------------
Kevin T. Mulvihill,
President and Chief Executive Officer
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Ronald W. Cantwell Director and
- ------------------------------------ Chairman of the Board February 23, 2000
Ronald W. Cantwell
/s/ Kevin T. Mulvihill President and Chief Executive Officer
- ------------------------------------ (Principal Executive Officer) February 23, 2000
Kevin T. Mulvihill
/s/ Kathleen E. Terry Chief Financial Officer,
- ------------------------------------ Treasurer and Secretary February 23, 2000
Kathleen E. Terry (Principal Financial Officer and
Principal Accounting Officer)
/s/ Charles H. Black
- ------------------------------------
Charles H. Black Director February 23, 2000
/s/ Joe E. Davis
- ------------------------------------
Joe E. Davis Director February 23, 2000
/s/ John Van Egmond
- ------------------------------------
John Van Egmond Director February 23, 2000
</TABLE>
40
<PAGE> 42
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
10.158 Demand Note dated November 2, 1999 between the Registrant
and Trilon Dominion Partners, L.L.C.
10.159 Demand Note dated December 3, 1999 between the Registrant
and Trilon Dominion Partners, L.L.C.
10.160 Amendment dated December 31, 1999, to the Amended Agreement
dated March 31, 1998 between the Registrant and Trilon
Dominion Partners, L.L.C.
10.161 Demand Note dated February 1, 2000 between the Registrant
and Trilon Dominion Partners, L.L.C.
10.162 Letter of Intent to Purchase Assets of Wilshire
Contamination Control division by Foamex Asia Co. Ltd.
27 Financial Data Schedule.
</TABLE>
41
<PAGE> 1
EXHIBIT 10.158
DEMAND NOTE
$300,000.00 New York, New York
November 2, 1999
FOR VALUE RECEIVED, the undersigned, Wilshire Technologies, Inc. a
California corporation (hereinafter referred to as "Borrower"), hereby
unconditionally PROMISES TO PAY to the order to TRILON DOMINION PARTNERS, LLC, a
Delaware limited liability company ("Lender"), at 245 Park Avenue, 28th Floor,
New York, NY 10167, or at such other place as the holder of this Demand Note may
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of Three
Hundred Thousand and 00/100, DOLLARS ($300,000.00), together with interest on
the unpaid principal amount of this Demand Note outstanding from time to time
from the date hereof, at a rate per annum equal to the Prime rate of interest
plus 3.0%, or the highest rate permitted by law, whichever shall be less.
The principal amount of the indebtedness evidenced hereby shall be
payable on demand. Interest thereon shall be paid when principal is paid from
the date hereof until such principal amount is paid in full at such interest
rate as specified above. Following failure to pay on demand, Borrower agrees to
pay interest on any overdue payment of principal at a rate per annum equal to
the stated interest rate plus 5%, or the highest rate permitted by law,
whichever shall be less. All interest calculations shall be computed on the
basis of a 360 day year.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
Borrower shall have no right to make any off-set against or deduct from
any payment due under this Demand Note.
Principal and interest may be prepaid at any time without penalty.
This Demand Note may not be changed orally, but only by an agreement in
writing and signed by the party against whom enforcement of such change is
sought.
All covenants of Borrower in this Demand Note and all rights of the
holder under this Demand Note shall bind Borrower and its successors and
assigns, and all such covenants and rights shall inure to the benefit of the
holder of this Demand Note and its successors and assigns.
This Demand Note has been delivered and accepted at New York, New York
and shall be interpreted, governed by, and construed in accordance with, the
laws of the State of New York.
Wilshire Technologies, Inc.
By : /s/ Kathleen E. Terry
----------------------------
Name: Kathleen E. Terry
Title: Chief Financial Officer
<PAGE> 1
EXHIBIT 10.159
DEMAND NOTE
$250,000.00 New York, New York
December 3, 2000
FOR VALUE RECEIVED, the undersigned, Wilshire Technologies, Inc. a
California corporation (hereinafter referred to as "Borrower"), hereby
unconditionally PROMISES TO PAY to the order to TRILON DOMINION PARTNERS, LLC, a
Delaware limited liability company ("Lender"), at 245 Park Avenue, 28th Floor,
New York, NY 10167, or at such other place as the holder of this Demand Note may
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of Two Hundred
Fifty Thousand and 00/100, DOLLARS ($250,000.00), together with interest on the
unpaid principal amount of this Demand Note outstanding from time to time from
the date hereof, at a rate per annum equal to the Prime rate of interest plus
3.0%, or the highest rate permitted by law, whichever shall be less.
The principal amount of the indebtedness evidenced hereby shall be
payable on demand. Interest thereon shall be paid when principal is paid from
the date hereof until such principal amount is paid in full at such interest
rate as specified above. Following failure to pay on demand, Borrower agrees to
pay interest on any overdue payment of principal at a rate per annum equal to
the stated interest rate plus 5%, or the highest rate permitted by law,
whichever shall be less. All interest calculations shall be computed on the
basis of a 360 day year.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
Borrower shall have no right to make any off-set against or deduct from
any payment due under this Demand Note.
Principal and interest may be prepaid at any time without penalty.
This Demand Note may not be changed orally, but only by an agreement in
writing and signed by the party against whom enforcement of such change is
sought.
All covenants of Borrower in this Demand Note and all rights of the
holder under this Demand Note shall bind Borrower and its successors and
assigns, and all such covenants and rights shall inure to the benefit of the
holder of this Demand Note and its successors and assigns.
This Demand Note has been delivered and accepted at New York, New York
and shall be interpreted, governed by, and construed in accordance with, the
laws of the State of New York.
Wilshire Technologies, Inc.
By : /s/ Kathleen E. Terry
------------------------------
Name: Kathleen E. Terry
Title: Chief Financial Officer
<PAGE> 1
EXHIBIT 10.160
AMENDMENT TO
AMENDED AND RESTATED CREDIT AGREEMENT
This Amendment to the Amended and Restated Credit Agreement
("Amendment") is made and entered into as of December 31, 1999, 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 an Amended and Restated
Credit Agreement dated as of March 31, 1998 (the "Agreement"); and
WHEREAS, the parties hereto wish to further amend the Agreement as set
forth in this Amendment;
NOW THEREFORE, in consideration of the above premises and the mutual
covenants and agreements herein, the parties agree as follows:
1. Amendment. Section 1.6 of the Agreement is hereby amended by
replacing the phrase, "or, (ii) January 31, 2000" in the second line of such
section with the phrase, "or, (ii) June 30, 2000". 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.
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.
<PAGE> 2
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first written above.
THE BORROWER: WILSHIRE TECHNOLOGIES, INC.
By: /s/ Kathleen E. Terry
--------------------------------
Name: Kathleen E. Terry
Title: Chief Financial Officer
THE LENDER: TRILON DOMINION PARTNERS, L.L.C.
By: /s/ Ronald W. Cantwell
--------------------------------
Name: Ronald W. Cantwell
Title: President
2
<PAGE> 3
AMENDMENT TO
GRID PROMISSORY NOTE
This Amendment to the Grid Promissory Note ("Note") issued pursuant to
the Amended and Restated Credit Agreement ("Amendment") is made and entered into
as of December 31, 1999, 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 an Amended and Restated
Credit Agreement dated as of March 31, 1998 (the "Agreement") and pursuant to
the Agreement the Note was issued;
WHEREAS, the parties hereto wish to further amend the Note as set forth
in this Amendment;
NOW THEREFORE, in consideration of the above premises and the mutual
covenants and agreements herein, the parties agree as follows:
1. Amendment. Section 4 of the Note is hereby amended by replacing the
phrase, "or (ii) January 31, 2000" in the second line of such section with the
phrase, "or (ii) June 30, 2000". Except as specifically set forth in this
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 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 Amendment may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts shall constitute one
3
<PAGE> 4
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 Agreement to be duly
executed and delivered as of the day and year first written above.
THE BORROWER: WILSHIRE TECHNOLOGIES, INC.
By: /s/ Kathleen E. Terry
-------------------------------
Name: Kathleen E Terry
Title: Chief Financial Officer
THE LENDER: TRILON DOMINION PARTNERS, L.L.C.
By: /s/ Ronald W. Cantwell
-------------------------------
Name: Ronald W. Cantwell
Title: President
4
<PAGE> 1
EXHIBIT 10.161
DEMAND NOTE
$200,000.00 New York, New York
February 1, 2000
FOR VALUE RECEIVED, the undersigned, Wilshire Technologies, Inc. a
California corporation (hereinafter referred to as "Borrower"), hereby
unconditionally PROMISES TO PAY to the order to TRILON DOMINION PARTNERS, LLC, a
Delaware limited liability company ("Lender"), at 245 Park Avenue, 28th Floor,
New York, NY 10167, or at such other place as the holder of this Demand Note may
designate from time to time in writing, in lawful money of the United States of
America and in immediately available funds, the principal amount of Two Hundred
Thousand and 00/100, DOLLARS ($200,000.00), together with interest on the unpaid
principal amount of this Demand Note outstanding from time to time from the date
hereof, at a rate per annum equal to the Prime rate of interest plus 3.0%, or
the highest rate permitted by law, whichever shall be less.
The principal amount of the indebtedness evidenced hereby shall be
payable on demand. Interest thereon shall be paid when principal is paid from
the date hereof until such principal amount is paid in full at such interest
rate as specified above. Following failure to pay on demand, Borrower agrees to
pay interest on any overdue payment of principal at a rate per annum equal to
the stated interest rate plus 5%, or the highest rate permitted by law,
whichever shall be less. All interest calculations shall be computed on the
basis of a 360 day year.
Demand, presentment, protest and notice of nonpayment and protest are
hereby waived by Borrower.
Borrower shall have no right to make any off-set against or deduct from
any payment due under this Demand Note.
Principal and interest may be prepaid at any time without penalty.
This Demand Note may not be changed orally, but only by an agreement in
writing and signed by the party against whom enforcement of such change is
sought.
All covenants of Borrower in this Demand Note and all rights of the
holder under this Demand Note shall bind Borrower and its successors and
assigns, and all such covenants and rights shall inure to the benefit of the
holder of this Demand Note and its successors and assigns.
This Demand Note has been delivered and accepted at New York, New York
and shall be interpreted, governed by, and construed in accordance with, the
laws of the State of New York.
Wilshire Technologies, Inc.
By : /s/ Kathleen E. Terry
------------------------------
Name: Kathleen E. Terry
Title: Chief Financial Officer
<PAGE> 1
EXHIBIT 10.162
January 31, 2000
Wilshire Technologies, Inc.
5 861 Edison Place
Carlsbad, CA 92008
Re: Proposal to Purchase Assets of Wilshire Contamination Control Division
Gentlemen:
This letter sets forth the proposed terms and conditions for an agreement
among (i) WCCD Acquisition Corp., a _____________________________________ and a
wholly-owned subsidiary of Foamex Asia Co. Ltd., and Foamex Asia Co., Ltd., a
_____________________________________, (collectively, the "Buyer"), and (ii)
Wilshire Technologies, Inc., a California corporation (the "Seller") with
respect to the acquisition by the Buyer of substantially all of the Seller's
assets in its Wilshire Contamination Control Division (the "Division"), on the
terms set forth below:
1. Structure. Effective February 15, 2000 (the "Closing Date"; it being
understood that the closing may occur on such other date not later than 90 days
after the Seller' s execution of this Letter (the "Termination Date") when all
of the conditions to Closing have been satisfied), the Seller will sell and
convey to the Buyer good and marketable title, free and clear of any liens,
claims or interests of others, to all of the Seller's assets related to the
Division, as listed in Attachment I to this Letter. Assets included on
Attachment 1 consisting of raw material, work in progress and finished goods
inventories of the Division are valued at approximately $____________ at the
date of this letter. Such inventories will be relieved and replenished between
this date and the Closing Date in a manner consistent with Wilshire's ordinary
business practices as provided in section 11.
2. Treatment of Liabilities. The Buyer will assume only those liabilities
arising after the Closing Date under contracts specified in Attachment 1 (the
"Assumed Contracts"), and the Buyer will not assume any other liabilities of the
Seller of any nature, and whether known or unknown, absolute or contingent
(including without limitation all accounts payable, accrued liabilities and
employee-related and retirement plan liabilities). The Buyer may elect to
require the seller to comply with applicable "bulk sales" laws assuming such
provisions of the California law are applicable to assets transferred pursuant
to this Letter.
<PAGE> 2
3. Purchase Price
a. The purchase price of the Assets (the "Purchase Price") will be paid
in the form' of quarterly royalty payments payable within 60 days of the
end of each quarter for which such payments are due. The royalty will be
calculated on all swab, wiper, roller and similar contamination control
products sold by Buyer.
i. Year One. 20% of U.S. sales based on collected amounts plus 5.0%
of all other sales based on collected amounts. If, in year one,
operating cash flows (to be defined) are not sufficient to fully pay
the calculated royalty, such deficiency amount will be deferred and
paid in year two, ratably by quarter or as year two operating cash
flows, if greater, allow.
ii. Year two. 18% of U.S. sales based on collected amounts plus 8%
of all other sales based on collected amounts.
iii. Year Three. 16% of U.S. sales based on collected amounts plus
8% of all other sales based on collected amounts.
All royalty payments will commence at closing and cease twelve quarters after
the beginning of the first quarter (three month period) in which sales to which
sales to which such royalty applies aggregate $750,000. Such twelve quarter
period shall constitute the "Basic Royalty Period." Royalty payments will be
collateralized by Seller's assets transferred to Buyer pursuant to item 1 of
this Letter. There will be no cap on the amount of the royalty. Taxes, including
income or withholding taxes, if any, payable on royalties received by the Seller
will be the responsibility of the Seller. Notwithstanding that, Buyer and Seller
agree to negotiate terms of the definitive agreement in a tax effective manner
for both parties.
b. To the extent that the Buyer has not paid the Seller at least an
aggregate of $2.5 million in royalties on sales during the twelve
quarter Basic Royalty Period, such Basic Royalty Period shall be
extended for 4 additional quarters or until an aggregate amount of $2.5
million in royalties has been paid to the Seller. Additional royalties
for such extended period shall be calculated based on rates for year
three, as described in section 3 (a) (iii) above.
c. In order to ensure the calculation of royalty payments, the Buyer
will provide the Seller with unaudited quarterly balance sheets and
statements of income within 60 days after each quarter end for each
quarterly royalty period certified by the Buyer's Chief Financial
Officer, which financial statements shall be prepared in accordance with
generally accepted accounting principles applied consistently during the
periods covered thereby and shall be complete and correct and present
fairly the financial condition of the Buyer at the dates of said
statements and the results of its operations for the periods covered
thereby. In addition, the Buyer will provide the Seller with reasonable
access at any time to confirm the calculation of royalty payments. In
the event of a dispute with respect to the calculation of royalty
payments, Buyer and Seller will select a mutually acceptable CPA firm to
review the calculations. Adjustments, if any, proposed by the CPA firm
based on such review will be paid or refunded, as appropriate, without
dispute, within 5
<PAGE> 3
working days. The fees of the CPA firm for such review will be borne by
the party making the payment for the adjustment of the royalty. If,
after completion of its review, no adjustment is proposed by the CPA
firm, the party initially requesting the review will be responsible for
such fees.
4. Buyer will expend approximately $900,000 for assets to be devoted to the
production of contamination control products. A tentative listing of such
equipment is listed at Attachment 2 and within 30 days of execution of this
Letter, a finalized listing will be provided to Seller.
5. Employees. Issues relating to employees will be mutually agreed upon at a
later date.
6. Allocation of Purchase Price. If it is determined an explicit allocation
is required to be stipulated in the definitive agreement, Purchase Price shall
be allocated among the Assets as mutually agreed, in a tax effective manner.
7. Definitive Agreement; Conditions to Closing. Subject to the final
sentence of Section 8 below, the parties shall negotiate in good faith to arrive
at a mutually acceptable definitive agreement for approval, execution and
delivery on or before the Termination Date. The definitive agreement shall
contain customary representations and warranties. Execution of a definitive
agreement will be subject to (i) due diligence being satisfactory to the Seller
and Buyer, (ii) the Buyer obtaining on terms satisfactory to Buyer all permits,
licenses and other legal requirements necessary to operate the business, (iii)
the Buyer securing on terms satisfactory to the Buyer employment arrangements
with such of the Seller's employees as the Buyer deems desirable, (iv) the
consent on terms satisfactory to the Buyer to the assignment to the Buyer of all
Assumed Contracts, (v) the accuracy and completeness of all disclosures made to
the Buyer by or on behalf of the Seller and to the Seller by or on behalf of the
Buyer, (vi) the absence of any material adverse change in the Buyer's or
Seller's business, operations, assets or prospects.
8. Access. The Seller shall provide to the Buyer and its agents, attorneys,
consultants, accountants, investment bankers, lenders and employees
(collectively "Representatives") reasonable access to the Seller's facilities,
detailed asset lists, vendor and payable records, books and records and shall
cause the Seller's employees, vendors, suppliers, accountants, and other agents
and representatives of the Seller to cooperate fully with the Buyer and its
Representatives in connection with the Buyer's due diligence investigation of
the Seller and the Seller's assets, contracts, liabilities, operations, records,
business and other aspects of the Seller. The Buyer or Seller shall be under no
obligation to continue with its due diligence investigation or negotiations
regarding the definitive agreement if, at any time, the results of its due
diligence investigation are not satisfactory to the Buyer or Seller for any
reason in its sole discretion. Buyer or Seller will promptly inform the other
party if it determines it will not proceed with the transaction and such notice
will accelerate the Termination Date.
9. Use of Information. All information provided to the Buyer under Section 8
which is proprietary to the Seller and not generally available in the industry
(the "Information") will be used solely for the purpose of evaluating the
possible acquisition
<PAGE> 4
by the Buyer and the Buyer and its Representatives will keep all Information
confidential, except that the Buyer may disclose Information to its
Representatives who need to know Information for the purpose of evaluating the
possible acquisition. If the transactions contemplated by this Letter are not
consummated, the Buyer promptly will return to the Seller all copies of the
Information in its possession.
10. Exclusive Dealings. From the date of this Letter through 5:00 p.m. on
the Termination Date, the Seller shall not, directly or indirectly, through any
other person or entity or otherwise, solicit or entertain offers from, negotiate
with or in any manner encourage, discuss, accept or consider any proposal of any
other person or entity relating to the acquisition of all or any part of the
contamination control assets utilized in the operation of the Division.
11. Conduct of Business. Until a definitive agreement has been duly executed
and delivered by all of the parties or this letter has been terminated pursuant
to Section 14 below, the Seller shall conduct the operations of the Division
only in the ordinary course of business. Without limiting the foregoing, the
Seller will not (a) dispose of any fixed assets of the Division with a value in
excess of $10,000, (b) conduct its business in any manner other than its usual
and ordinary course of business, without the Buyer's prior written consent. The
Seller will also furnish the Buyer with unaudited monthly balance sheets and
statements of income for the Division within 45 days after each month and for
each month ending after the date of this Letter, certified by the Chief
Financial Officer, which financial statement shall be prepared in accordance
with generally accepted accounting principles applied consistently during the
periods covered thereby and shall be complete and correct and present fairly the
financial condition of the Seller at the dates of said statements and the
results of its operations for the periods covered thereby.
12. Disclosure. Except as and to the extent required by law or to enforce or
defend rights or obligations under this Letter, without the prior written
consent of the Buyer and the Seller, no party to this Letter shall, and each
shall direct its Representatives not to, directly or indirectly, make any public
comment, statement or communication with respect to, or otherwise publicly
disclose or permit the public disclosure of the existence of discussions
regarding a possible transaction between the parties or any of the terms,
conditions or other aspects of the transaction proposed in this Letter. It is
anticipated Seller, as a public corporation, will be required to disclose the
signing of this Letter.
13. Costs. Each party shall be responsible for and bear all of its or his
own costs and expenses (including any intermediary's, investment banker's,
broker's or finder's fees) incurred in connection with the proposed
transactions, including without limitation expenses of its Representatives,
incurred at any time in connection with pursuing or consummating the proposed
transaction.
14. Termination This Letter may be terminated as described in paragraph 7 or
(a)by written agreement by the Buyer and Seller or (b) upon written notice by
the Buyer or Seller to the other that the Definitive Agreement has not been
executed by the Termination Date. Upon termination of this Letter, the parties
shall have no further obligations hereunder, except as stated in sections
9,10,11,12,13,14 and 15, which shall survive any such termination.
<PAGE> 5
15. Nature of this Letter. This Letter is only for the purpose of setting
forth the present understanding of the parties with respect to the transactions
contemplated hereby, and no party shall be under any legal obligation or have
any liability to any other party with respect to the transactions contemplated
hereby until a fully integrated, definitive purchase agreement and other related
documents, are prepared, authorized, executed and delivered by and among all
parties hereto and until all conditions which may be set forth in the definitive
agreement and such other agreements shall have been met. Notwithstanding the
foregoing, the obligations of the parties set forth in Sections 9, 1 0, 11, 12,
13, 14 and 15 shall be valid, binding and continuing obligations of the parties.
16. The definitive agreement will include mutually acceptable provisions
which will preclude the Seller from disclosing knowledge, know-how, trade
secrets or similar information specific to the operation of the Division to
outside parties.
17. This Letter and the definitive purchase agreement shall be governed by
California law and each the Buyer and Seller will be responsible for fees of its
respective attorneys.
If the foregoing is acceptable, please sign and date this Letter in the space
provided below to confirm the mutual agreements set forth herein and return a
copy to the undersigned,
Very truly yours,
WCCD Acquisition Corp.
By:
-------------------------------------
, President
-------------------------
Foamex Asia Co., Ltd.
By: /S/ Pichit Nithivasin
-------------------------------------
Pichit Nithivasin , CEO
-------------------------------
Acknowledged and agreed to:
Wilshire Technologies, Inc.
By: /S/ Ronald W. Cantwell
--------------------------------
Name: Ronald W. Cantwell
------------------------------
Title: Chairman
-----------------------------
Date: 1/31/2000
-----------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FORM 10-KSB FOR THE PERIOD ENDED NOVEMBER 30, 1999 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH (B)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1999
<PERIOD-START> DEC-01-1998
<PERIOD-END> NOV-30-1999
<CASH> 167
<SECURITIES> 0
<RECEIVABLES> 305
<ALLOWANCES> 7
<INVENTORY> 1,222
<CURRENT-ASSETS> 2,007
<PP&E> 3,436
<DEPRECIATION> 407
<TOTAL-ASSETS> 5,903
<CURRENT-LIABILITIES> 14,371
<BONDS> 0
0
0
<COMMON> 25,912
<OTHER-SE> (34,767)
<TOTAL-LIABILITY-AND-EQUITY> 5,903
<SALES> 2,691
<TOTAL-REVENUES> 2,691
<CGS> 3,551
<TOTAL-COSTS> 6,156
<OTHER-EXPENSES> 4
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,218
<INCOME-PRETAX> (4,687)
<INCOME-TAX> 1
<INCOME-CONTINUING> (4,688)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,688)
<EPS-BASIC> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
