Wismer Martin’s Financial Viability Questioned Unpaid Bills Suggest Software Company May Be Having Money Problems

With his company’s financial viability being questioned both from within and without, Wismer Martin’s chief executive officer is apparently preparing an infusion of cash that will pull the company back from the brink.

Ron Holden, the Spokane-based software company’s board chairman and chief executive officer, again defended the company’s fiscal health Friday in the aftermath of several resignations of key executives earlier in the week.

The most recent resignation was that of Bev Hatch, Wismer Martin’s vice president of product development, who left the company Thursday.

“The shareholders of Wismer Martin own an exciting business staffed with great employees residing in a fine community,” Holden said Friday in a telephone interview from his offices in Detroit.

“Unfortunately,” he added, “certain nabobs of negativism are apparently being fueled by a certain element of a disgruntled departed management group.

“But I believe they will have lost interest after next Tuesday’s board meeting.”

Evidence of Wismer Martin’s financial problems has accumulated during the past week.

One of the resigned executives, Michael J. Magliaro, vice president of health care information networks, said in a resignation letter Thursday, “The weak financial condition of Wismer Martin places it in a position of not being able to pass due diligence for present and prospective (health information network) customers.

“The survival of Wismer Martin is, in my opinion, doubtful.”

Magliaro would not comment on the resignation letter Friday.

The company has apparently failed to pay a number of its bills over a period of months.

Wismer Martin’s Seattle office received notice on March 10 from US West Cellular that its cellular service would be canceled within 10 days unless its bill was settled, according to documents obtained by The Spokesman-Review.

The accounting department of Cavanaugh’s Inn at the Park confirmed Friday that Wismer Martin had an outstanding bill there of $7,000 going back to January.

And sources within the company say that auditors from Seafirst Bank, which holds Wismer Martin’s line of credit, were going over company records there Thursday and Friday.

Holden’s critics say the only thing that can save the company at this point is an infusion of a large amount of cash.

Holden said Wednesday one of the things he “brought to the table” at Wismer Martin was the ability to raise cash quickly.

“It’s something I’ve done in the past and would continue to do in the future,” Holden said. “I don’t know if it’s necessary at this point.”

When asked Friday about such an impending infusion of cash, Holden said, “I don’t want to get into that because I don’t want to jump announcements that should be made at a board meeting.”

The next board meeting, and the company’s annual meeting, is set for 1 p.m. Tuesday in Spokane.

Holden continued to defend Wismer Martin’s financial viability. He said any unpaid bills are the result of “normal cash management procedures” due to “the seasonality of the business. I know of nothing unusual that is happening.”

Stan Hatch became president and chief executive officer of Wismer Martin, which specializes in software for physicians’ offices and health care networks, in 1990. Under his guidance, the company reached its highest profitability, earning $600,000 on sales of $11.5 million in fiscal 1994.

The company earned only $41,000 in the first quarter of 1995, though, and then lost a record $700,000 in the second quarter, ended Dec. 31.

Holden bought into the company in 1991. His holding company, National HealthTech Inc., acquired 52 percent of Wismer Martin. Then in 1993, National HealthTech was acquired by a Texas company, but neither Wismer Martin, nor San Diego-based Integrated Health Systems Inc., was included in the deal. Holden remained majority shareholder in both companies.

IHS is a company that also sells health care management software packages, but specializes in hospitals rather than individual practices.

In 1993, Wismer Martin acquired National HealthTech, paying Holden $2.5 million in convertible debentures.

In January, Holden announced that he was replacing Hatch as CEO. Hatch resigned from the board of directors, but retained the title of president. On Wednesday, Hatch announced his departure from the company. Holden is Wismer Martin’s largest shareholder, with 52 percent of the stock. Hatch is the secondlargest shareholder, with about 10 percent of the stock.

“Ron said he wanted a new management team, and Ron has the right to do that,” Hatch said Thursday. “I own 1 million shares of stock. Assuming that Ron is correct, and he can do a more effective job in increasing the value of every share of stock, then it’s certainly in my best interest to get out of his way.”

Hatch would not comment on the financial condition of the company.

The crux of the disagreement between the former and present management groups, though, seems to center on IHS, which has suffered heavy losses since its acquisition by Wismer Martin.

Two IHS executives, John Perez and Doug Willford, have taken over day-to-day management of Wismer Martin. Willford is chief financial officer and Holden says Perez will be named Wismer Martin’s “number two man,” under Holden.

Magliaro’s resignation letter indicates that IHS losses have drained Wismer Martin of cash, and questions Perez’s management of that company.

Last December, Bob Wilson, then Wismer Martin’s chief financial officer, expressed his concerns about IHS in a letter to Wismer Martin’s board.

“IHS is projected to consume over $1 million of Wismer’s cash and borrowing base by February 1995,” Wilson wrote.

Wilson, who has since been assigned to other duties at Wismer Martin, would not comment Friday on his letter to the board of directors.

Holden acknowledged Friday that IHS has been “a contributing factor” to Wismer Martin’s losses. But he asserts that overstaffing, a top-heavy management group and the inability to close contracts with major new health care information network customers are also significant contributing factors. And that’s why a change in management was made.

“The new guys have only been in the saddle here since the beginning of January,” Holden said. “The financial results up through Dec. 31 were the responsibility of the old management group.”

All the other criticisms and concerns being expressed now, Holden added, amount to “nothing more simple, or more complex, than we had an old management group there, and the board decided to make a change. Now it appears that a certain element of that old group is unhappy.

“I’m sorry. We wish them well. But the interests of the shareholders, the continuing employees and the community must take precedence.”