Wismer Martin Puts Local Headquarters Up For Sale Financial Problems Force Company To Milk Equity From Real Estate

Cash-short Wismer Martin has put its Spokane property up for sale, and company officials say they are exploring their options regarding a future location of the software manufacturing operation.

“We are pursuing several alternatives,” Doug Willford, Wismer Martin’s chief financial officer, said Friday. “A sale and a lease-back is one thing we’re looking at.”

In that case, the company would stay right where it is.

But Wismer Martin also has asked the Spokane Economic Development Council to shop the building, which opened in 1987, to out-of-town companies that the EDC is trying to lure to Spokane.

“At this point in time, that (a sale to a tenant that would occupy the building itself) hasn’t occurred,” Willford said. “We don’t have any specific plans for relocating the company at this point in time.”

The company’s headquarters building is on 5.5 acres of land, much of which is undeveloped, at the corner of Highway 2 and Farwell Road north of the city.

At the direction of its bankers, the company is trying to raise capital and reduce debt. As part of that effort, Wismer Martin registered a stock offering of 2 million shares with the federal Securities and Exchange Commission earlier this week.

The 43-page prospectus accompanying the offering states, “The company is currently pursuing the sale of its building in Spokane, Wa., in which the company estimates that it has nearly $1 million in equity.”

Bob Cooper, president of the Economic Development Council, said a company retained by Wismer Martin has supplied the EDC with information about the property so EDC can show it to companies looking at moving to Spokane.

Cooper said his understanding is that Wismer Martin’s plan is to find another site locally.

“I’ve not picked up the sense they are looking at moving (away from Spokane),” Cooper said earlier this week. “I have talked with Mr. Perez about it and he said, ‘We definitely aren’t going anywhere.’ He said they are just looking at it from a financial standpoint, and how best to raise capital.”

Wismer Martin has been struggling financially for the past year. According to the prospectus, as of March 31, “the company has a capital deficit of $1.9 million, negative working capital of $2.5 million and incurred a significant net loss of $1.5 million from operations” for the first three quarters of the current fiscal year.

The company is out of compliance with its credit agreement with Seafirst Bank. It fails to meet the agreement’s minimum tangible net worth requirements, debt-to-equity ratios, and the capital requirements and ratios.

Seafirst has given Wismer Martin until Aug. 31 to raise $1 million in cash and convert $1 million in convertible subordinated debt.

So the company is offering 2 million shares of stock priced at $1.25 per share, to raise money and reduce debt. Half the offering will be allocated to allow holders of convertible subordinated debentures to convert that debt to stock. The company pays more than $200,000 a year in interest on that debt.

The single biggest holder of convertible debt is Ronald L. Holden, Wismer Martin’s majority shareholder, board chairman and chief executive officer.

Holden acquired the debentures in exchange for the sale of another of his companies, California-based Integrated Health Systems Inc., to Wismer Martin. Under the original terms of the sale, Holden would have to convert the debt at $3.23 per share, making it worth a little more than 700,000 shares. But antidilution protection built into the deal allows Holden, under the terms of this stock offering, to convert the debt at the offering price of $1.25. If he converts the entire debt, he would gain 1.5 million shares. He currently holds 4.5 million shares, about 53 percent of the company.

The stock offering will not go ahead unless a minimum $500,000 in stock is sold. The company’s back-up plan if the offering does not produce the $1 million required by Seafirst apparently is to raise cash from the sale of its local property.

“We are looking to flush equity out of the building,” Willford said. “We don’t need to be in the real estate business. We are in the software business …”

The prospectus shows Wismer does not plan to renew a $4,481-a-month lease on office space in Portland. It will, however, continue to lease space at N. 10220 Nevada in Spokane at $1,890 a month; Montlake Terrace space in Seattle at $4,184 a month; and property in La Jolla, Calif., at $6,707 a month.

, DataTimes