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Rule 424(b)(3)
File No: 333-45028
PROSPECTUS
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3,648,788 SHARES
VERSO TECHNOLOGIES, INC.
(F/K/A ELTRAX SYSTEMS, INC.)
COMMON STOCK
This prospectus covers the sale of up to 3,648,788 shares of Verso Technologies,
Inc. common stock by certain stockholders. We will not receive any proceeds from
the sale of the shares by the stockholders.
Our common stock is listed on the Nasdaq National Market System under the symbol
"VRSO." The last reported sale price of the common stock as reported on the
Nasdaq National Market System on October 4, 2000, was $4.50 per share.
The selling stockholders, directly or through agents, brokers or dealers
designated from time to time, may sell the shares of our common stock offered
hereby from time to time on terms to be determined at the time of sale. See
"Plan of Distribution."
We have agreed to bear all expenses of registration of our common stock offered
hereby under federal and state securities laws.
On September 29, 2000, we merged with Cereus Technology Partners, Inc.
("Cereus"). Also on September 29, 2000, we announced that we had entered into an
agreement to sell our domestic lodging business and international hospitality
operations.
SEE "RISK FACTORS" ON PAGE 6 FOR CERTAIN FACTORS RELATING TO AN INVESTMENT IN
THE SHARES.
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These securities have not been approved or disapproved by the
Securities and Exchange Commission or any state securities
commission nor has the Securities and Exchange Commission
or any state securities commission passed upon the
accuracy or adequacy of this prospectus. Any
representation to the contrary is a
criminal offense.
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The date of this Prospectus is October 4, 2000.
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NOTE REGARDING FORWARD-LOOKING STATEMENTS
CERTAIN STATEMENTS CONTAINED IN THIS DOCUMENT OR INCORPORATED HEREIN BY
REFERENCE THAT ARE NOT STATEMENTS OF HISTORICAL FACTS ARE "FORWARD-LOOKING
STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT
OF 1995. THE WORDS "BELIEVE," "EXPECT," "ANTICIPATE," "INTEND," "WILL" AND
SIMILAR EXPRESSIONS ARE EXAMPLES OF WORDS THAT IDENTIFY FORWARD-LOOKING
STATEMENTS. FORWARD-LOOKING STATEMENTS INCLUDE, WITHOUT LIMITATION, STATEMENTS
REGARDING OUR FUTURE FINANCIAL POSITION, BUSINESS STRATEGY AND EXPECTED COST
SAVINGS. THESE FORWARD-LOOKING STATEMENTS ARE BASED ON OUR CURRENT BELIEFS, AS
WELL AS ASSUMPTIONS WE HAVE MADE BASED UPON INFORMATION CURRENTLY AVAILABLE TO
US.
EACH FORWARD-LOOKING STATEMENT REFLECTS OUR CURRENT VIEW OF FUTURE
EVENTS AND IS SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM ANY RESULTS EXPRESSED OR IMPLIED BY OUR
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THE RESULTS EXPRESSED OR IMPLIED BY ANY FORWARD-LOOKING
STATEMENTS INCLUDE:
- OUR ABILITY TO SUCCESSFULLY PENETRATE THE NETWORK, APPLICATION AND ASP
MARKETS;
- OUR ABILITY TO EXPAND OUR MARKET FOR EXISTING PRODUCTS AND SERVICES;
AND
- OUR ABILITY TO SUCCESSFULLY ACCESS THE CAPITAL MARKETS TO FUND THE
GROWTH OF OUR BUSINESS;
- OUR ABILITY TO CONTINUE TO SUCCESSFULLY MARKET EXISTING PRODUCTS AND
SERVICES, WHICH MAY BE ADVERSELY IMPACTED BY COMPETITION;
- OUR ABILITY TO SUCCESSFULLY DEVELOP AND MARKET NEW PRODUCTS AND
SERVICES;
- THE EFFECTS OF OUR ACCOUNTING POLICIES AND GENERAL CHANGES IN GENERALLY
ACCEPTED ACCOUNTING PRACTICES;
- GENERAL ECONOMIC AND BUSINESS CONDITIONS;
- OUR ABILITY TO FUND CONTINUING OPERATING LOSSES AND CAPITAL
REQUIREMENTS;
- OUR ABILITY TO DISPOSE OF OUR HOSPITALITY SERVICES GROUP;
- TRENDS FOR THE CONTINUED GROWTH OF THE BUSINESS OF VERSO;
- OUR ABILITY TO ENHANCE REVENUE AND EARNINGS GROWTH;
- OUR ABILITY TO INTEGRATE OUR BUSINESS WITH PRIOR AND SUBSEQUENT MERGERS
AND ACQUISITIONS;
- OTHER FACTORS DISCLOSED IN THE SECTION ENTITLED RISK FACTORS BELOW AND
IN OUR OTHER FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
ALL SUBSEQUENT FORWARD-LOOKING STATEMENTS RELATING TO THE MATTERS DESCRIBED IN
THIS DOCUMENT AND ATTRIBUTABLE TO US OR TO PERSONS ACTING ON OUR BEHALF ARE
EXPRESSLY QUALIFIED IN THEIR ENTIRETY BY SUCH FACTORS. WE HAVE NO OBLIGATION TO
PUBLICLY UPDATE OR REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT NEW
INFORMATION, FUTURE EVENTS, OR OTHERWISE, EXCEPT AS REQUIRED BY APPLICABLE
FEDERAL SECURITIES LAWS, AND WE CAUTION YOU NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that Verso
Technologies, Inc., a Minnesota corporation, filed with the Securities and
Exchange Commission utilizing a "shelf" registration process. Under this shelf
process, the selling stockholders may, from time to time, sell the common stock
described in this prospectus. We may prepare a prospectus supplement at any time
to add, update or change information contained in this prospectus. Except for
those instances in which a specific date is referenced, the information in this
prospectus is accurate as of October 4, 2000. You should read both this
prospectus and any prospectus supplement together with additional information
described under the heading "Where You Can Find More Information".
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We believe that we have included or incorporated by reference all
information material to investors in this prospectus, but certain details that
may be important for specific investment purposes have not been included. To see
more detail, you should read the exhibits filed with or incorporated by
reference into the registration statement.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports and other information
with the Securities and Exchange Commission. You may read and copy any document
we file at the SEC's public reference room at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the following regional offices of the SEC: 7
World Trade Center, Thirteenth Floor, New York, NY 10048 and 500 West Madison
Street, Suite 1400, Chicago, IL 60661. Please call the SEC at 1-800-SEC-0330 for
further information on the operation of the SEC's public reference rooms. Our
SEC filings are also available to the public over the Internet at the SEC's web
site at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the following documents we filed with the SEC and our
future filings with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 until all of the securities are sold:
1. Our Annual Report on Form 10-K for the year ended December 31,
1999, filed with the SEC on March 27, 2000.
2. Amendment number 1 to our Annual Report on Form 10-K for the
year ended December 31, 1999, filed with the SEC on April 28,
2000.
3. The description of our common stock contained in our
Registration Statement on Form 8-A (file no. 0-22190).
4. Our Current Report on Form 8-K, containing a report of
unscheduled material events with respect to the corporation,
filed with the SEC on July 28, 2000.
5. Our Current Report on Form 8-K, containing restated audited
financial statements, filed with the SEC on August 28, 2000.
6. Our Current Report on Form 8-K, containing a copy of the joint
proxy statement/prospectus sent to stockholders in connection
with the merger with Cereus, filed with the SEC on August 30,
2000.
7. Our Current Report on Form 8-K, announcing completion of the
merger with Cereus, filed with the SEC on October 2, 2000.
8. Our Quarterly Report on Form 10-Q for the quarter ended March
31, 2000, filed with the SEC on May 15, 2000.
9. Our Quarterly Report on Form 10-Q for the quarter ended June
30, 2000, filed with the SEC on August 14, 2000.
You may request a copy of these filings at no cost, by writing or calling us at
the following address:
Verso Technologies, Inc.
400 Galleria Parkway
Suite 300
Atlanta, Georgia 30339
Attn: Corporate Secretary
You should rely only on the information incorporated by reference or provided in
this prospectus and any supplement. We have not authorized anyone else to
provide you with different information.
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THE COMPANY
Verso Technologies, Inc., a Minnesota corporation, is a global provider
of outsourced information technology ("IT") solutions. We operate through two
separate business units: the technology services group and the hospitality
services group. The technology services group provides technology solutions,
customer care services and acts as an application service provider ("ASP"). The
hospitality services group provides enterprise information solutions for the
global hospitality industry.
As of July 19, 2000, our board of directors determined to dispose of
our hospitality services group. As a result of this decision, commencing with
the second quarter, we began reporting the historical operations of the
hospitality services group as a discontinued operation. On September 29, 2000,
we announced that we had entered into an agreement to sell our domestic lodging
business and international hospitality operations.
On September 29, 2000 we merged with Cereus.
Our headquarters are located at 400 Galleria Parkway, Suite 300,
Atlanta, GA 30339 and our telephone number is (770) 612-3500. We maintain a
worldwide web address at www.verso.com.
TECHNOLOGY SERVICES GROUP
The technology services group is a provider of outsourced Internet-and
network-based applications and services to over 3,000 clients. Our clients are
typically small-and medium-sized enterprises with revenue of $50 million to $1
billion where outsourced IT solutions provide a cost-effective alternative to
developing and maintaining internal technology infrastructures. The technology
services group is comprised of three divisions:
- TECHNOLOGY SOLUTIONS. We provide comprehensive solutions, such
as strategic assessment, application and network design,
custom application development and integration, network
management, support and maintenance that enable our clients to
more effectively communicate and manage information.
- CUSTOMER CARE SOLUTIONS. We simplify the technical support
functions of our clients by providing 24x7 help desk support
and training and installation services for the solutions that
we have developed and implemented.
- APPLICATION SERVICE PROVIDER (ASP). We provide our clients
with application outsourcing and remote delivery of
applications that lower total technology-related costs and
infrastructure requirements. Our existing core competencies
within the IT outsourcing marketplace and large customer base
have allowed us to more rapidly introduce our ASP offerings.
OUR SOLUTION AND ITS BENEFITS
We have developed our product and service offerings based on our
propriety Plan, Build, Run(SM) methodology, which offers clients rapid delivery
of comprehensive solutions for the effective deployment of e-business or other
technology-related initiatives. Our solutions provide clients with the following
benefits:
- ABILITY TO FOCUS ON CORE COMPETENCIES. Our solutions allow
small-and medium-sized companies to focus on their core
business competencies by outsourcing all or a portion of their
IT needs. Many of our clients do not have the resources to
maintain internal personnel with the advanced skills required
in today's IT environment.
- ACCESS TO COMPREHENSIVE IT FUNCTIONS. We provide services
across the entire IT spectrum from consulting to
implementation to maintenance. We believe the option of a
single-source for IT outsourcing is especially appealing to
our clients who often lack the time and resources to
coordinate a multi-party effort. Additionally, we provide our
clients access to specific, high-level IT expertise which
would normally be handled by an IT generalist.
- ENHANCED RELIABILITY FOR KEY BUSINESS APPLICATIONS. Many of
our clients choose to
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outsource their key business applications. Any service
interruption involving key applications such as e-mail,
hosting, customer care and network administration can be
operationally debilitating and costly. Our solutions offer a
guaranteed level of performance, which provides clients with
the reliability they require from their key business
applications.
OUR MARKET OPPORTUNITY
We believe we are positioned to take advantage of a number of key
trends in today's IT marketplace, including the emergence of the ASP market,
continued growth of network services management and increased emphasis by
organizations on customer care. Dataquest estimates that the ASP market will
grow to $22.7 billion in 2003, representing a compound annual growth rate (CAGR)
of 90.7%. The U.S. network services market is estimated by the GartnerGroup to
grow to $70.6 billion by 2003. In addition, IDC estimates that the global market
for outsourcing of customer relationship management services, of which customer
care outsourcing is a subset, will grow at a CAGR of 18.6% from $24.8 billion in
1998 to $58.3 billion in 2003.
OUR STRATEGY
Based on these current trends, we intend to focus most of our product
development and marketing skills on promoting and growing the technology
services group, especially the ASP division. Our objective is to become the
leading provider of outsourced Internet-and network-based solutions to small-and
medium-sized businesses. Our strategy for achieving this objective is as
follows:
- EXPAND SERVICE OFFERINGS. As a total solution provider of
outsourced IT services for small-to medium-sized clients, we
intend to continue to expand our service offerings within all
segments of the technology services group to capture a larger
percentage of our clients' IT budgets.
- OFFER NEW ASP PRODUCTS. We intend to continue to align
ourselves with other types of application developers and also
to continue to develop proprietary applications where
applicable.
- MARKET OUR ASP PRODUCTS TO OUR EXISTING CLIENT BASE. We intend
to continue to target our large, existing client base for
additional ASP revenue opportunities.
- EXPAND STRATEGIC ALLIANCES. We intend to expand strategic
relationships with various manufacturers of networking
hardware, software developers and vertical industry
specialists in order to broaden our client base.
- FOCUS ON VERTICAL MARKETS. We intend to focus on specific
vertical markets, including, but not limited to: (i)
communications; (ii) retail; (iii) education; (iv)
manufacturing; and (v) healthcare. These are vertical markets
in which we have significant prior experience deploying IT
solutions.
HOSPITALITY SERVICES GROUP
The hospitality services group designs, manufactures, markets and
services enterprise information products and services for the global hospitality
industry. These products and services consist of application-specific software
and hardware systems, supplemented by training, installation, maintenance and
call center support services. The hospitality services group concentrates on
three major areas: restaurant solutions, lodging solutions and energy management
solutions. In addition to our software enterprise products and services and
hardware products, we offer a wide variety of support services and products for
our hotel and restaurant information systems. In addition, we offer training,
installation, call center support and maintenance contracts for all hospitality
products. We are currently in the process of disposing of the hospitality
services group.
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RISK FACTORS
You should carefully consider the following risk factors as well as other
information included in this document. If any of the following risks or
uncertainties actually occur, our business, financial condition and results of
operations could be materially adversely affected. In that event, the trading
price of our common stock could decline.
RISKS RELATED TO OUR BUSINESS
Our stockholders are subject to the following risks related to our
business.
WE MAY BE UNABLE TO MEET OUR FUTURE WORKING CAPITAL REQUIREMENTS.
At June 30, 2000, we had a negative working capital position (excess of
current liabilities over current assets) of $5.2 million. Our net cash position
(deficit), defined as the sum of cash, cash equivalents and short-term
investments less short term borrowings and long-term debt, was $(17.3 million)
at June 30, 2000, compared to $(9.9 million) at December 31, 1999.
Commencing in the second quarter, due to greater losses than
anticipated in the second quarter and the resultant shortage of available cash,
we have not made timely payments to all of our trade and other creditors. As of
June 30, 2000, we had payables which were more than 30 days past due in the
amount of approximately $4.9 million relating to continuing operations. We have
negotiated deferred payment terms with most of these creditors.
On September 29, 2000, we completed the merger with Cereus. During the
third quarter prior to the merger, Cereus raised approximately $16.3 million in
proceeds from a private placement and received $3.6 million in proceeds from the
exercise of options and $960,000 in proceeds from an investment by a strategic
partner. As a result of the merger, we have access to those proceeds. In
addition, we will receive another $3.0 million in proceeds on October 6, 2000
from the sale of convertible debentures.
We expect to meet our short-term working capital needs with the
proceeds from these transactions, borrowings under the bank facility and the
proceeds from the sale of all or a portion of the hospitality services group. We
cannot meet our working capital needs without the borrowings under the bank
facility and the proceeds from the sale of at least a portion of the hospitality
services group. Our ability to access those capital sources is contingent on
events, most of which are outside our control. For example, we have entered into
an agreement for the sale of our domestic lodging and international hospitality
business and are in discussions for the sale of one of our subsidiaries,
Squirrel Systems, Inc. However, the consummation of the sale of the domestic
lodging and international hospitality business is contingent on the satisfaction
of customary conditions. Similarly, the completion of the sale of Squirrel
Systems is contingent on the negotiation and execution of a definitive
agreement, the completion of due diligence and other matters customary in
transactions of that sort. While we expect to be able to close both of these
transactions, there can be no assurance that either or both of the transactions
will close.
Finally, our ability to access the bank facility is contingent
on our compliance with the financial and other covenants and terms of that
facility. If we are in violation of the bank facility, or do not have sufficient
eligible accounts receivable to support the level of borrowings we need, we will
be unable to draw on the facility.
If we do not have access to any one of these sources of capital through
the remainder of the 2000 fiscal year, then our ability to continue to operate
may be jeopardized. In this event, we would be forced to seek working capital
from other sources to fund delinquent accounts payable and meet ongoing trade
obligations. However, there can be no assurance that other financing sources
will be available to meet our needs at that time.
Even if we are is able to meet our short-term capital needs from the
capital sources described above, our ability to meet our long-term capital needs
will be subject to factors outside of our control. Specifically, unless the
price of our common stock increases significantly so that holders of our
convertible debt are likely to convert such debt into common stock, we will be
required to restructure that debt or raise additional equity capital to fund
such debt repayment beginning in June 2001. The principal amount of the
convertible debt outstanding at October 4, 2000 was $4.0 million. After giving
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effect to the issuance of the additional convertible debentures on October 6,
2000, we will have $7.0 million of convertible debt outstanding. While we
believe that we will be able to fund such debt repayments when they become due,
there can be no assurance that we will be able to meet our long-term capital
needs.
WE HAVE A HISTORY OF LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.
We have a history of net losses, including a net loss of $31.6 million
for the six months ended June 30, 2000 and a net loss of $9.8 million for the
year ended December 31, 1999. Further, executing our new business strategy and
expanding our services will require significant additional capital and other
expenditures. Accordingly, we may continue to generate net losses in the future,
and we may never become profitable.
OUR FUTURE RESULTS OF OPERATIONS ARE UNCERTAIN BECAUSE WE ARE SIGNIFICANTLY
REFOCUSING OUR BUSINESS.
We believe that the technology services and ASP markets will grow
significantly over the next five years. As a result, we are refocusing our
business efforts to devote our energy and resources to promote and develop the
technology services group as a full service provider, particularly its ASP
offerings. As part of this process, we are pursuing the disposition of our
hospitality services group. As such, we have begun accounting for the
hospitality services group as a discontinued operation and our historical
results of operations, which are the result of our old business strategy, may
not give you an accurate indication of how we will perform in the future.
OUR SUCCESS DEPENDS ON THE ACCEPTANCE AND INCREASED USE OF BOTH INTERNET-BASED
BUSINESS SOFTWARE SOLUTIONS AND OUR NEW PRODUCTS AND SERVICES, AND WE CANNOT BE
SURE THAT THIS WILL HAPPEN.
Our new business model depends in large part on the adoption of
Internet-based business software solutions by our target market of middle market
commercial users. Our business could suffer dramatically if Internet-based
software solutions are not accepted or are not perceived to be effective. The
market for Internet services, private network management solutions and widely
distributed Internet-enabled packaged application software has only recently
begun to develop, and we believe many of our potential customers are not aware
of the benefit of the outsourced solutions we provide.
The growth of Internet-based business software solutions could also be limited
by:
- concerns over transaction security and user privacy;
- inadequate network infrastructure for the Internet; and
- inconsistent performance of the Internet.
We cannot be certain that commercial customers will accept and employ
Internet-based software solutions or that this market will grow at the rate we
expect. If this market does not grow or grows more slowly than our predictions
our financial condition and results of operations would be adversely affected.
Additionally, many of our products and services are based on new or
improved technologies that have not previously been available. We will have to
overcome the difficulties inherent in the introduction of new or improved
technologies to the market, including our ability to demonstrate to customers
the technical capabilities and the value of these new technologies, and there is
no assurance that we can do so successfully. Lack of market acceptance of our
products and services would adversely affect our business.
WE MAY NOT BE ABLE TO DELIVER OUR SERVICES IF THIRD PARTIES DO NOT PROVIDE US
WITH KEY COMPONENTS OF OUR INFRASTRUCTURE.
We depend on other companies such as software vendors and equipment
manufacturers to supply us with key components of the computer and
telecommunications equipment and the telecommunications services that we use to
provide our application hosting services. A disruption in our ability to provide
hosting services could prevent us from maintaining the required standards of
service, which would cause us to incur contractual penalties, and would harm our
business. Additionally, if any of our significant software vendors stop making
their products available to us or choose to compete against us, our business
would be harmed. Moreover, our success depends upon the continued popularity of
the product offerings of these vendors and on our ability to establish
relationships with new vendors in the future. If
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we are unable to obtain packaged applications from these or comparable vendors
or if our vendors choose to compete with us or the popularity of their products
declines, our ability to customize, implement or host packaged software
applications may be adversely affected.
IF WE ARE UNABLE TO EFFICIENTLY INTEGRATE AND OPERATE RECENT ACQUISITIONS, OUR
BUSINESS WOULD BE HARMED.
During the last few years, we have merged with or acquired numerous
companies. The rapid growth associated with these acquisitions and the
difficulties we have experienced in integrating these businesses has placed, and
will continue to place, a significant strain on our systems, controls and
managerial resources. Our management has expended, and expects to continue to
expend, significant time and effort in integrating the operations of the
businesses we acquired and in expanding our systems and controls to these
acquired businesses. If we do not accomplish these tasks, our results of
operations and financial condition may be materially and adversely affected.
OUR GROWTH COULD BE LIMITED IF WE ARE UNABLE TO ATTRACT AND RETAIN QUALIFIED
PERSONNEL.
We believe that our success depends largely on our ability to attract
and retain highly skilled and qualified technical, managerial and marketing
personnel. Competition for this personnel in the information technology services
industry is intense. The inability to hire or retain qualified personnel could
hinder our ability to implement our business strategy and harm our business.
THE MARKETS WE SERVE ARE HIGHLY COMPETITIVE AND MANY OF OUR COMPETITORS HAVE
MUCH GREATER RESOURCES.
Competition in the information technology services industry is intense
and is expected to increase. Many of our competitors have substantially greater
financial, technical and marketing resources, larger customer bases, longer
operating histories, greater name recognition and more established relationships
in the industry than we do. Additionally, there are relatively few barriers to
entry in our business that would prevent new competitors from entering our
industry. We may not be able to compete effectively and, if we do not, our
financial condition and results of operations may be materially and adversely
affected.
OUR SUCCESS DEPENDS ON OUR ABILITY TO KEEP UP WITH RAPID TECHNOLOGICAL
DEVELOPMENTS AND EVOLVING INDUSTRY STANDARDS.
The Internet is characterized by rapidly changing technology, evolving
industry standards, and frequent new service and product announcements,
introductions and enhancements. Our future success will depend on our ability to
adapt our services to rapidly changing technologies and evolving industry
standards, to continually improve the performance, features and reliability of
our services and to insure the continued compatibility of our services with
products, services and architectures offered by various vendors or any
prevailing standard. If we do not keep up with those changes, our business may
suffer.
INTELLECTUAL PROPERTY INFRINGEMENT CLAIMS AGAINST US, EVEN WITHOUT MERIT, COULD
REQUIRE US TO ENTER INTO COSTLY LICENSES OR DEPRIVE US OF TECHNOLOGY WE REQUIRE.
Our industry is technology intensive. As the number of software
products in our target markets increases and the functionality of these products
further overlap, third parties may claim that the technology we develop or
license infringes their proprietary rights. Any infringement claims, even
without merit, could require us to enter into costly royalty or licensing
agreements to avoid service implementation delays. If successful, a claim of
product infringement could deprive us of the technology we require altogether.
Any of these outcomes could harm our business.
FAILURE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD HAVE A MATERIAL
ADVERSE EFFECT ON OUR BUSINESS.
Our success depends in part upon the protection of our proprietary
application software and hardware products. We have taken steps that we believe
are adequate to establish, protect and enforce our intellectual property rights.
However, we cannot assure you that these efforts to safeguard and maintain our
proprietary rights will be successful.
Furthermore, the laws of many foreign countries in which we do business
do not protect intellectual property rights to the same extent or in the same
manner as do the laws of the United States.
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Although we have implemented and will continue to implement protective measures
in those countries, these efforts may also not be successful. Additionally, even
if our U.S. and international efforts are successful, our competitors may
independently develop non-infringing technologies that are substantially similar
or superior to our technologies.
WE DERIVE A SIGNIFICANT PORTION OF OUR REVENUE FROM INTERNATIONAL OPERATIONS.
Our international operations represented approximately 13.3% and 18.5%
of our total revenue for the six months ended June 30, 2000 and year ended
December 31, 1999, respectively. The largest portion of this international
revenue is generated in the Pacific Rim Region, which represented approximately
3.9% and 7.4% of our total revenue for the quarter ended June 30, 2000 and year
ended December 31, 1999, respectively. Ongoing business in international markets
subjects us to a wide variety of risks, including:
- unexpected changes in legal and regulatory requirements;
- new tariffs or other barriers to certain international markets;
- difficulties in staffing and managing foreign operations;
- regional economic factors including recessions, hyperinflation or other
adverse economic developments;
- longer payment cycles and greater difficulty in collecting accounts
receivable;
- the possibility of expropriation;
- limitations on the repatriation of investment income, capital stock and
other assets;
- unstable political environments;
- potentially adverse tax consequences; and
- gains and losses on foreign currency conversion.
LEGAL UNCERTAINTIES AND GOVERNMENT REGULATION COULD ADD ADDITIONAL COSTS TO
DOING BUSINESS ON THE INTERNET AND COULD LIMIT OUR CLIENTS' USE OF THE INTERNET.
The laws governing the Internet remain largely unsettled. It may take
years to determine whether and how existing laws, such as those governing
intellectual property, privacy, libel, taxation and the need to qualify to do
business in a particular state, apply to the Internet. This legal uncertainty
could slow the growth in Internet use and decrease the acceptance of the
Internet as a commercial medium, which could harm our business.
In response to this legal uncertainty and the growing use of the
Internet, laws and regulations directly applicable to communications or commerce
over the Internet are becoming more prevalent. The adoption or modification of
laws or regulations relating to the Internet and Internet-based businesses could
harm our business.
OUR STOCK PRICE HAS BEEN VOLATILE.
The stock market in general, and the market for technology and
Internet-related companies in particular, has recently experienced extreme
volatility that has often been unrelated to the operating performance of
particular companies. During the year ended December 31, 1999, the per share
sales price of our common stock on the Nasdaq National Market System has
fluctuated from a low of $3.125 to a high of $9.50. We believe that the
volatility of our stock price does not necessarily relate to our performance and
is broadly consistent with volatility experienced in our industry. Prices for
our common stock are determined in the marketplace and may be influenced by many
factors including factors that are beyond our control, such as prevailing market
conditions, changes in earnings estimates by industry research analysts, and
general economic, industry and market conditions. In addition, in order to
respond to competitive developments, we may from time to time make pricing,
service or marketing decisions that could harm our business. Also, our operating
results in one or more future quarters may fall below the expectations of
securities analysts and investors. In either case, the trading
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price of our common stock would likely decline.
WE HAVE NOT PAID ANY DIVIDENDS IN THE PAST AND DO NOT EXPECT TO PAY ANY
DIVIDENDS IN THE FORESEEABLE FUTURE.
We have never paid dividends on our common stock and do not anticipate
paying cash dividends in the foreseeable future. We intend to retain any
earnings to finance the development of our business and, consequently, may never
pay cash dividends. Our bank line of credit prohibits the payment of dividends.
RISKS RELATED TO OUR BUSINESS AFTER THE MERGER
Given that the merger with Cereus has been consummated, our
stockholders will be subject to the following risks in addition to the ones set
forth above.
CEREUS IS A DEVELOPMENT STAGE COMPANY AND HAS A LIMITED OPERATING HISTORY.
Cereus has only a limited operating history in its e-business and B2B
technology business, and its prospects must be evaluated with a view to the
risks encountered by a company in an early stage of development, particularly in
light of the uncertainties relating to the new and evolving markets in which
Cereus intends to operate and the acceptance of Cereus's business model. In
addition, Cereus's limited operating history in its e-business and B2B
technology business makes the prediction of its future operating results
difficult or impossible.
CEREUS HAS A HISTORY OF LOSSES AND THE COMBINED COMPANY MAY NOT BE PROFITABLE IN
THE FUTURE.
Cereus had a net loss of $18.6 million for the six months ended June
30, 2000 and a net loss of $7.2 million for the year ended December 31, 1999.
Further, executing the combined company's business strategy and expanding its
services will require significant additional capital and other expenditures.
Accordingly, we anticipate continuing to generate net losses in the future.
THE COMBINED COMPANY WILL DEPEND ON KEY PERSONNEL.
The combined company is highly dependent on the services of several key
executive officers and technical employees, many of whom could be difficult to
replace and the loss of any of whom could have a material adverse effect on its
business, financial condition and results of operations. The combined company
has entered into executive employment agreements with each of its Chief
Executive Officer, Chief Operating Officer and Chief Financial Officer. In
addition, the combined company will need to hire additional skilled personnel to
support the continued growth of its business. The market for skilled personnel,
especially those with the technical abilities required by the combined company,
is currently very competitive, and the combined company must compete with much
larger companies with significantly greater resources to attract and retain such
personnel. In addition, the senior officers of the combined company after the
merger have worked together for less than one year. There can be no assurance
that they will function successfully as a management team to implement the
combined company's strategy.
WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE OUR OPERATIONS.
The merger involves the integration of two companies that have
previously operated independently. The difficulties of combining the companies'
operations include integrating personnel with diverse business backgrounds and
combining different corporate cultures. The process of integrating operations
could cause an interruption of, or loss of momentum in, the activities of one or
more of the combined company's businesses and the loss of key personnel. The
diversion of management's attention and any delays or difficulties encountered
in connection with the merger and the integration of the two companies'
operations could have an adverse effect on the business, results of operations
or financial condition of the combined company.
WE WILL INCUR SIGNIFICANT MERGER-RELATED AND INTEGRATION-RELATED EXPENSES.
Merger-related transaction costs will be recorded as a component of the
consideration paid for Cereus. These merger-related transaction costs consist
principally of charges related to investment banking fees, professional
services, registration and other regulatory costs, and are expected to be
approximately $1,223,000. Additional fees and costs may be incurred in
connection with the sale of
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equity or assets necessary to satisfy a condition to consummation of the merger.
In addition, we expect to incur pre-tax charges to operations to reflect costs
associated with combining the operations of the two companies. These charges
will be determined and recorded after the merger. Additional unanticipated
expenses may be incurred in the integration of our businesses. Although we
expect that the elimination of duplicative expenses as well as the realization
of other efficiencies related to the integration of the businesses may result in
cost savings, we cannot assure you that these benefits will be achieved in the
near term or at all.
SELLING STOCKHOLDERS
The selling stockholders may use this prospectus for the resale of
shares of our common stock being registered hereunder, although no selling
stockholder is obligated to sell any such shares. Of the 3,648,788 shares of
common stock offered by this prospectus, 180,000 shares were issued to selling
stockholders in a private placement on June 30, 2000, up to 175,000 shares are
issuable to selling stockholders in exchange for services rendered to us,
377,116 shares are issuable upon exercise of certain warrants and up to
2,916,672 shares are issuable upon the conversion of certain convertible
debentures. The selling stockholders who hold warrants and convertible
debentures are not required to exercise the warrants for, or convert the
debentures into, shares of common stock. None of the selling stockholders is an
affiliate of Verso.
The following table sets forth certain information regarding the
selling stockholders and the shares of common stock beneficially owned by each
of them. All information contained in the table is as of August 28, 2000. We are
not able to estimate the amount of shares that will be held by the selling
stockholders after the completion of this offering because those selling
stockholders may offer all or some of the shares and because there currently are
no agreements, arrangements or understandings with respect to the sale of any of
their shares. The following table assumes that all of the shares being
registered will be sold.
<TABLE>
<CAPTION>
Shares Beneficially
Shares of Common Completion of Owned After
Stock Beneficially Number of the Offering (2)(3)
Owned Prior to the Shares -------------------
Selling Stockholder Offering (1) Being Offered Number Percent
------------ ------------- ------ -------
<S> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
PNC Bank, National Association 12,532(4) 12,532(4) 0 *
-----------------------------------------------------------------------------------------------------------------
Mark Tesio 78,750(5) 78,750(5) 0 *
-----------------------------------------------------------------------------------------------------------------
Scott F. Koch 38,500(6) 38,500(6) 0 *
-----------------------------------------------------------------------------------------------------------------
H. David Coherd 38,500(7) 38,500(7) 0 *
-----------------------------------------------------------------------------------------------------------------
Robert L. Rosenstein 19,250(8) 19,250(8) 0 *
-----------------------------------------------------------------------------------------------------------------
Bay Harbor Investments, Inc. 1,640,628(9) 1,640,628(9) 0 *
-----------------------------------------------------------------------------------------------------------------
Strong River Investments, Inc. 1,640,628(9) 1,640,628(9) 0 *
-----------------------------------------------------------------------------------------------------------------
E.piphany, Inc. 180,000 180,000 0 *
-----------------------------------------------------------------------------------------------------------------
TOTAL 3,648,788 3,648,788 0 *
-----------------------------------------------------------------------------------------------------------------
</TABLE>
* Less than 1% of the outstanding shares of common stock.
(1) The number set forth in this column is the number of shares of common
stock held by each such selling stockholder and/or the number of shares of
common stock that would be received upon an exercise of warrants or
debentures held by each such selling stockholder that are exercisable
within 60 days of the date of this prospectus.
(2) Assumes that all shares of common stock being offered and registered
hereunder are sold, although no selling stockholder is obligated to sell
any such shares.
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<PAGE> 12
(3) Based upon 26,093,109 shares of common stock outstanding as of August 21,
2000.
(4) Shares of common stock issuable upon exercise of warrants.
(5) Includes 22,500 shares issued on July 27, 2000, plus an additional 15,000
shares we are obligated to issue to such selling stockholder if certain
events outside of the selling stockholder's control occur and 41,250
shares which we are obligated to issue, but which may not be issued,
pursuant to an adjustment formula.
(6) Includes 11,000 shares issued on July 27, 2000, plus an additional 7,335
shares we are obligated to issue to such selling stockholder if certain
events outside of the selling stockholder's control occur and 20,165
shares which we are obligated to issue, but which may not be issued,
pursuant to an adjustment formula.
(7) Includes 11,000 shares issued on July 27, 2000, plus an additional 7,335
shares we are obligated to issue to such selling stockholder if certain
events outside of the selling stockholder's control occur and 20,165
shares which we are obligated to issue, but which may not be issued,
pursuant to an adjustment formula.
(8) Includes 5,500 shares issued on July 27, 2000, plus an additional 3,667
shares we are obligated to issue to such selling stockholder if certain
events outside of the selling stockholder's control occur and 10,083
shares which we are obligated to issue, but which may not be issued,
pursuant to an adjustment formula.
(9) Includes 182,292 shares of common stock issuable upon exercise of warrants
and 1,458,336 shares to be issued upon conversion of convertible
debentures.
This prospectus also covers any additional shares of common stock that become
issuable in connection with the shares being registered by reason of any stock
dividend, stock split, recapitalization or other similar transaction effected
without receipt of consideration which results in an increase in the number of
our outstanding shares of common stock.
USE OF PROCEEDS
We will not receive any of the proceeds of any sale by the selling
stockholders.
PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, assignees and
successors-in-interest may, from time to time, sell any or all of their shares
of common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. These sales may be at fixed or
negotiated prices. The selling stockholders may use any one or more of the
following methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- short sales;
- broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted pursuant to applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act of 1933, if available, rather than under this prospectus.
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<PAGE> 13
The selling stockholders may also engage in short sales against the
box, puts and calls and other transactions in our securities or derivatives of
our securities and may sell or deliver shares in connection with these trades.
The selling stockholders may pledge their shares to their brokers under the
margin provisions of customer agreements. If a selling stockholder defaults on a
margin loan, the broker may, from time to time, offer and sell the pledged
shares.
Broker-dealers engaged by the selling stockholders may arrange for
other brokers-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from the selling stockholders (or, if any broker-dealer
acts as agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling stockholders do not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling stockholders and any broker-dealers or agents that are
involved in selling the shares may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933 in connection with such sales. In such
event, any commissions received by such broker-dealers or agents and any profit
on the resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
The Company is required to pay all fees and expenses incident to the
registration of the shares, including fees and disbursements of counsel to
certain of the selling stockholders. The Company has agreed to indemnify the
selling stockholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.
LEGAL MATTERS
The legality of the common stock offered hereby will be passed upon by
Jaffe, Raitt, Heuer & Weiss, Professional Corporation, Detroit, Michigan. As of
August 29, 2000, certain shareholders of Jaffe, Raitt, Heuer & Weiss, P.C.
beneficially owned approximately 94,050 shares of our common stock.
EXPERTS
The financial statements incorporated in this registration statement by
reference to our Current Report on Form 8-K filed with the Commission on August
28, 2000 have been incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in auditing and accounting. The audited consolidated
balance sheet of Sulcus Hospitality Technologies Corp. as of December 31, 1998
and the related consolidated statements of operations, stockholders' equity and
cash flows for each of the two years in the period ended December 31, 1998 (not
presented separately in our financial statements) have been incorporated in
reliance on the report of Crowe Chizek and Company, LLP, independent
accountants, given on the authority of that firm as experts in auditing and
accounting.
The financial statements of Cereus and subsidiaries at December 31,
1999, and for the year ended December 31, 1999, have been incorporated in this
registration statement by reference to our Current Report on Form 8-K filed with
the Commission on August 30, 2000 have been included herein in reliance upon the
report of KPMG, LLP, independent certified public accountants, incorporated
herein by reference, and upon the authority of said firm as experts in
accounting and auditing.
The financial statements of Cereus and subsidiaries at December 31,
1998, and for the year ended December 31, 1998, have been incorporated in this
registration statement by reference to our Current Report on Form 8-K filed with
the Commission on August 30, 2000 have been included herein in reliance upon the
report of Moore Stephens Frost, PLC, independent certified public accountants,
incorporated herein by reference, and upon the authority of said firm as experts
in accounting and auditing.
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<PAGE> 14
No dealer, salesperson or other individual has been authorized to give any
information or to make any representations not contained or incorporated by
reference in this prospectus in connection with any offering to be made by the
prospectus. If given or made, such information or representations must not be
relied upon as having been authorized by Verso. This prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the
Securities, in any jurisdiction where, or to any person to whom, it is unlawful
to make such offer or solicitation. Neither the delivery of this prospectus nor
any offer or sale made hereunder shall, under any circumstance, create an
implication that there has been no change in the facts set forth in this
prospectus or in the affairs of Verso since the date hereof.
TABLE OF CONTENTS
PROSPECTUS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ABOUT THIS
PROSPECTUS.....................................................2
WHERE YOU CAN FIND
MORE INFORMATION...............................................3
THE COMPANY........................................................4
RISK FACTORS.......................................................6
SELLING STOCKHOLDERS..............................................11
USE OF PROCEEDS...................................................12
PLAN OF DISTRIBUTION..............................................12
LEGAL MATTERS.....................................................13
EXPERTS...........................................................13
</TABLE>
3,648,788 SHARES
VERSO TECHNOLOGIES, INC.
(F/K/A ELTRAX SYSTEMS, INC.)
COMMON STOCK
--------------
PROSPECTUS
--------------
OCTOBER 4, 2000
Page 14
