<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 2000
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from _________ to _________
Commission file number 0-22190
----------
VERSO TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
MINNESOTA 41-1484525
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
</TABLE>
400 Galleria Parkway, Suite 300, Atlanta, GA 30339
(Address of principal executive offices)
(678) 589-3500
(Issuer's telephone number)
----------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ].
Shares of the Registrant's Common Stock, par value $.01 per share, outstanding
as of November 10, 2000: 48,201,753.
<PAGE> 2
VERSO TECHNOLOGIES, INC.
FORM 10-Q
INDEX
Part I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
<S> <C>
Page No.
--------
Item 1.
Condensed Consolidated Balance Sheets as of September 30, 2000 and
December 31, 1999................................................ 2
Condensed Consolidated Statements of Operations for the three months
and for the nine months ended September 30, 2000 and 1999........ 3
Condensed Consolidated Statements of Cash Flows for the nine months
ended September 30, 2000 and 1999................................ 4
Notes to the Condensed Consolidated Financial Statements........... 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.............................................. 12
Item 3. Quantitative and Qualitative Disclosures about Market Risk......... 20
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 21
Item 2. Changes in Securities and Use of Proceeds.......................... 21
Item 6. Exhibits and Reports on Form 8-K................................... 21
Signature Page.............................................................. 23
Exhibit Index............................................................... 24
</TABLE>
<PAGE> 3
PART I-ITEM 1: FINANCIAL STATEMENTS
VERSO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
2000 1999
------------- ------------
<S> <C> <C>
ASSETS:
Current assets:
Cash $ 21,215,184 $ --
Accounts receivable, net 19,948,095 18,053,692
Inventories, principally finished goods 1,056,055 933,497
Other current assets 4,611,107 952,291
Net assets of discontinued operations 15,219,763 22,954,595
------------- ------------
Total current assets 62,050,204 42,894,075
Furniture and equipment, net 9,286,539 3,991,653
Intangibles, net 122,095,258 9,168,385
------------- ------------
Total assets $ 193,432,001 $ 56,054,113
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current liabilities:
Line of credit $ 4,950,597 $ 9,468,882
Convertible subordinated debentures, net of discount 3,513,867 --
Accounts payable 20,550,700 9,360,813
Accrued compensation 2,824,071 1,880,876
Accrued expenses 5,700,243 3,733,730
Unearned revenue and customer deposits 3,666,112 4,283,039
Current portion of long-term debt 479,204 389,587
------------- ------------
Total current liabilities 41,684,794 29,116,927
Long-term debt 40,912 54,068
------------- ------------
Total liabilities 41,725,706 29,170,995
Shareholders' equity:
Common stock, $.01 par value, 100,000,000 shares authorized;
48,163,041 and 23,808,415 shares issued and outstanding 481,647 238,086
Additional paid-in capital 245,361,064 75,678,836
Accumulated deficit (87,251,407) (49,033,804)
Deferred compensation (6,885,009) --
------------- ------------
Total shareholders' equity 151,706,295 26,883,118
Total liabilities and shareholders' equity $ 193,432,001 $ 56,054,113
============= ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
2
<PAGE> 4
VERSO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue $ 16,075,238 $ 16,460,022 $ 51,872,879 $ 45,467,642
Cost of revenue 12,720,128 12,995,308 42,216,952 34,139,792
------------ ------------ ------------ ------------
Gross profit 3,355,110 3,464,714 9,655,927 11,327,850
Operating expenses:
Sales, general and administrative 7,488,256 4,932,800 27,636,082 13,525,409
Depreciation 437,748 66,708 1,185,109 511,135
Amortization of intangibles 351,090 350,942 1,053,270 1,052,826
Loss on asset abandonment 1,176,715 -- 1,218,343 --
Reorganization costs -- 606,900 1,500,000 4,631,900
Transaction costs -- -- -- 2,288,379
------------ ------------ ------------ ------------
Total operating expenses 9,453,809 5,957,350 32,592,804 22,009,649
------------ ------------ ------------ ------------
Operating loss from continuing operations (6,098,699) (2,492,636) (22,936,877) (10,681,799)
Interest expense, net (545,174) (80,695) (833,113) (216,485)
Loss from continuing operations ------------ ------------ ------------ ------------
before income taxes (6,643,873) (2,573,331) (23,769,990) (10,898,284)
Income tax benefit -- -- -- 132,098
------------ ------------ ------------ ------------
Loss from continuing operations (6,643,873) (2,573,331) (23,769,990) (10,766,186)
------------ ------------ ------------ ------------
Discontinued operations:
Income (loss) from discontinued
operations, net of income taxes -- 257,211 (3,947,613) 2,582,716
Estimated loss on disposal of discontinued
operations, net of income taxes -- -- (10,500,000) --
------------ ------------ ------------ ------------
Total discontinued operations, net of income taxes -- 257,211 (14,447,613) 2,582,716
------------ ------------ ------------ ------------
Net loss $ (6,643,873) $ (2,316,120) $(38,217,603) $ (8,183,470)
============ ============ ============ ============
Net loss per common share
- basic and diluted:
Loss from continuing operations $ (0.25) $ (0.11) $ (0.94) $ (0.45)
Income (loss) from discontinued operations -- 0.01 (0.15) 0.10
Loss on disposal of discontinued operations -- -- (0.42) --
------------ ------------ ------------ ------------
Net loss per common share
- basic and diluted $ (0.25) $ (0.10) $ (1.51) $ (0.35)
============ ============ ============ ============
Weighted average shares outstanding
- basic and diluted 26,543,554 23,728,204 25,282,722 23,715,633
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
3
<PAGE> 5
VERSO TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
2000 1999
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Continuing operations:
Net loss from continuing operations $(23,769,990) $(10,766,186)
Adjustments to reconcile net loss from continuing operations to net
cash used in continuing operating activities:
Reorganization costs 1,500,000 --
Amortization of intangibles 1,053,270 1,052,826
Depreciation 1,185,109 511,135
Loss on asset abandonment 1,218,343 --
Other 102,315 22,737
Changes in current operating items:
Accounts receivable, net (276,595) (3,998,043)
Inventories (122,558) 73,154
Other current assets (951,247) 600,540
Accounts payable 9,614,845 2,455,996
Accrued compensation 943,195 687,582
Accrued expenses (1,417,415) 332,284
Unearned revenue and customer deposits (616,927) (190,914)
------------ ------------
Net cash used in continuing operating activities (11,537,654) (9,218,889)
------------ ------------
Discontinued operations:
(Loss) income from discontinued operations (14,447,613) 2,582,716
Estimated loss on disposal of discontinued operations 10,500,000
Adjustment to reconcile (loss) income from discontinued operations
to net cash (used in) provided by discontinued operating activities (274,675) 3,599,969
------------ ------------
Net cash (used in) provided by discontinued operating activities (4,222,288) 6,182,685
------------ ------------
Net cash used in operating activities (15,759,942) (3,036,204)
------------ ------------
INVESTING ACTIVITIES:
Continuing operations:
Net cash used in investing activities for continuing operations -
Purchases of furniture and equipment, net (6,773,888) (373,388)
Purchase of Cereus Technology Partners, Inc., net of cash acquired (1,888,309) --
------------ ------------
Net cash used in investing activities for continuing operations (8,662,197) (373,388)
Discontinued operations:
Software development costs capitalized (2,196,496) (1,250,398)
Purchases of furniture and equipment, net (202,069) (1,098,519)
------------ ------------
Net cash used in investing activities for discontinued operations (2,398,565) (2,348,917)
------------ ------------
Net cash used in investing activities (11,060,762) (2,722,305)
------------ ------------
FINANCING ACTIVITIES:
Continuing operations:
Payments on long-term debt (373,158) (1,680,295)
Borrowings (payments) on credit line, net (4,518,285) 1,495,130
Proceeds from issuance of convertible subordinated debenture, net 3,730,000 --
Advance from Cereus Technology Partners, Inc. 10,170,421 --
Proceeds from issuances of common stock, net 17,901,726 97,183
Payments issued in lieu of fractional shares -- (6,901)
------------ ------------
Net cash provided by (used in) financing activities
for continuing operations 26,910,704 (94,883)
------------ ------------
Discontinued operations:
Net cash used in financing activities for discontinued operations -
Payments on long-term debt (90,000) (190,357)
------------ ------------
Net cash provided by (used in) financing activities 26,820,704 (285,240)
------------ ------------
Decrease in cash and cash equivalents -- (6,043,749)
------------ ------------
CASH AND CASH EQUIVALENTS:
Beginning of period -- 6,082,438
Cash acquired in purchase of Cereus 21,215,184 --
------------ ------------
End of period $ 21,215,184 $ 38,689
============ ============
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
4
<PAGE> 6
VERSO TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2000
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared by Verso Technologies, Inc., (formerly known as
Eltrax Systems, Inc.) - (the "Company" or "Verso") in accordance with
generally accepted accounting principles, pursuant to the rules and
regulations of the Securities and Exchange Commission. Pursuant to such
rules and regulations, certain financial information and footnote
disclosures normally included in the financial statements have been
condensed or omitted.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all necessary adjustments,
consisting only of those of a recurring nature, and disclosures to
present fairly the Company's financial position as of September 30,
2000, and its results of operations and cash flows for the periods
ended September 30, 2000 and 1999. The condensed consolidated financial
statements include the accounts of Verso and its subsidiaries,
including Sulcus Hospitality Technologies Corp. and subsidiaries
("Sulcus"), and Windward Technology Group, Inc. ("Windward"), which
merged with the Company in the first quarter of 1999 in transactions
accounted for as poolings-of-interests, and Cereus Technology Partners,
Inc. ("Cereus") and its subsidiaries, which merged with the Company on
September 29, 2000 in a transaction accounted for as a purchase.
Significant intercompany transactions have been eliminated. Certain
prior year amounts in the consolidated financial statements and notes
have been reclassified to conform with the current year presentation.
These reclassifications had no effect on previously reported net income
(loss) or shareholders' equity.
The year-end condensed consolidated balance sheet was derived primarily
from audited consolidated financial statements, but does not include
all disclosures required by generally accepted accounting principles.
For further information, refer to the restated consolidated financial
statements and footnotes thereto included in the Company's current
report on Form 8-K dated July 19, 2000.
2. MERGER WITH CEREUS TECHNOLOGY PARTNERS, INC.
On September 29, 2000, the Company acquired by means of a triangular
merger all of the outstanding capital stock of Cereus. The purchase
consideration was approximately $135.7 million, consisting of
21,866,600 shares of the Company's common stock with a fair value of
$106.6 million, assumed options and warrants to acquire 21,421,354
shares of the Company's common stock with exercise prices ranging from
$.51 to $10.14 per share (estimated fair value of $37.4 million using
the Black-Scholes option pricing model) and acquisition costs of
approximately $1.9 million, reduced by $10.2 million advanced by Cereus
prior to closing.
5
<PAGE> 7
VERSO TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
September 30, 2000
2. MERGER WITH CEREUS TECHNOLOGY PARTNERS, INC., Continued
The acquisition was treated as a purchase for accounting purposes, and
accordingly, the assets and liabilities were recorded at their fair
value at the date of the acquisition. The excess of the purchase price
over the estimated fair value of net assets acquired totaled
approximately $114 million and was allocated to goodwill. The goodwill
is being amortized over three years.
In accordance with the terms of the merger agreement, Cereus was to
provide to the Company a bridge facility of up to $10.0 million. The
bridge facility accrued interest at 2% over prime and the Company
recorded interest expense of approximately $261,000 in the three months
ended September 30, 2000.
The following unaudited pro forma information presents the results of
continuing operations of the Company as if the acquisition of Cereus
had taken place on January 1, 1999, excluding loss on asset
abandonment, reorganization costs and transaction costs (in thousands,
except per share amounts):
<TABLE>
<CAPTION>
Nine months ended September 30,
------------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Revenues $ 56,751,235 $ 45,467,642
Net loss from continuing operations $(52,522,038) $(31,554,066)
Net loss from continuing operations
per common share
-basic and diluted $ (0.97) $ (0.64)
Weighted average shares outstanding
-basic and diluted 54,149,322 48,998,355
</TABLE>
3. DISCONTINUED OPERATIONS
On July 19, 2000, the Company's board of directors formally determined
to dispose of its Hospitality Services Group ("HSG"). The Company
expects to sell HSG during fiscal year 2000. HSG is reported as a
discontinued operation, and the condensed consolidated financial
statements have been reclassified to segregate the net assets and
operating results of the business segment.
The estimated loss recorded during the nine months ended September 30,
2000 on the sale of HSG was $10.5 million, which included a reduction
in asset values of approximately $4.2 million and a provision for
anticipated closing costs and operating losses until disposal of
approximately $6.3 million.
6
<PAGE> 8
VERSO TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
September 30, 2000
3. DISCONTINUED OPERATIONS, Continued
The loss on the sale of HSG of $10.5 million was based, in part, on
estimates of the proceeds expected to be realized on the sale. The
amounts the Company may ultimately realize could differ materially in
the near term from the amounts assumed in arriving at the loss on
disposal of the discontinued operations. Summary operating results of
the discontinued operations (in thousands) are as follows:
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue $ 10,176 $ 16,749 $ 34,482 $ 49,660
Gross profit 3,352 8,109 13,518 23,539
Operating (loss) income (2,665) 402 (6,021) 3,010
Interest expense (451) (85) (786) (251)
Loss on disposal of assets -- (88) --
Income tax expense (4) (60) (171) (176)
-------- -------- -------- --------
(Loss) income from
discontinued operations $ (3,120) $ 257 $ (7,066) $ 2,583
======== ======== ======== ========
</TABLE>
Net assets held for sale (in thousands) are as follows:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------ -----------
<S> <C> <C>
Current assets $ 13,766 $ 21,304
Furniture and equipment, net 1,747 2,714
Capitalized software, net 9,165 8,370
Intangibles, net 6,692 7,533
Current liabilities (9,483) (17,602)
Reserve for loss on sale and operating losses (7,380) --
Accumulated other comprehensive loss 713 636
-------- --------
Net assets of discontinued operations $ 15,220 $ 22,955
======== ========
</TABLE>
7
<PAGE> 9
VERSO TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
September 30, 2000
3. DISCONTINUED OPERATIONS, Continued
On September 28, 2000, the Company signed a definitive agreement to
sell its domestic lodging systems business and its international
hospitality operations for $10.0 million in cash and the assumption of
liabilities of the businesses acquired. The lodging business and
international hospitality operations are components of HSG. The Company
closed on the domestic lodging systems business and two of its seven
international hospitality businesses in October 2000 and received $8.5
million. The parties expect to close the remainder of the transaction
in the fourth quarter of 2000.
On October 27, 2000, the Company executed a definitive stock purchase
agreement to sell its restaurant solutions business for approximately
$10.8 million. The transaction includes the sale of Squirrel Systems,
Inc and Squirrel Systems of Canada Ltd., which are components of HSG.
In exchange for the cash, the purchaser will receive all of the
outstanding shares of equity securities of both Squirrel subsidiaries.
The parties expect the transaction to close in the fourth quarter of
2000.
4. LOAN FACILITY WITH PNC BANK, NATIONAL ASSOCIATION
The Company was not in compliance with the financial covenants in its
loan facility with PNC Bank, National Association ("PNC Bank") in the
first, second and third quarters. The Company received waivers of this
non-compliance for each of these quarters. The Company is currently in
negotiations to modify the financial covenants to reflect the planned
disposition of all of HSG and the revised operating plans for the
Company, which would include the operations of Cereus. As of November
14, 2000, the Company has no borrowings under the credit facility.
8
<PAGE> 10
VERSO TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
September 30, 2000
5. CONVERTIBLE SUBORDINATED DEBENTURES
On July 27, 2000, the Company entered into an agreement with two
investors to issue $7.0 million of its 5% convertible subordinated
debentures. The debentures carry warrants to purchase 364,584 shares of
the Company's common stock at an exercise price of $5.03 per share. The
debentures are convertible into the Company's common stock at a
conversion price that is adjustable each month and is equal to the
lesser of (a) the conversion price in effect on the first day of such
month or (b) the average per share market price of the Company's common
stock for the last ten trading days of the prior month. Currently, the
conversion price is $4.80 per share, and that price will adjust on
December 1, 2000 to a conversion price equal to the lesser of (a) $4.80
or (b) the average per share market price of the Company's common stock
for the last ten trading days of November 2000. The debentures also
have certain put and call features. Concurrent with the execution of
the agreement, $4.0 million was funded by the investors. An additional
$3.0 million was funded on October 6, 2000. Of the total amount funded,
$4.0 million of the debentures are due on July 26, 2001 and $3.0
million of the debentures are due on October 5, 2001. The debentures
have been discounted to reflect the fair value of the warrants issued
using the Black-Scholes option pricing method. The unamortized discount
totaled approximately $486,000 at September 30, 2000. In addition, the
Company paid certain private placement fees and attorney's fees in
connection with the sale of the debentures totaling $270,000 through
September 30, 2000. The fees are being amortized to interest expense
over the term of the debentures.
6. PRIVATE PLACEMENT
On March 29, 2000, the Company sold 1,194,532 shares of its common
stock to accredited investors in a private placement for net proceeds
of approximately $13.0 million.
On June 29, 2000, the Company sold 180,000 shares of its common stock
to an accredited investor in a private placement for net proceeds of
$990,000.
7. OTHER RECENT EVENTS
The Company decided to replace certain internal use software products
in the fourth quarter of 2000 and has recorded a loss on asset
abandonment for those software products no longer to be utilized of
approximately $1.2 million during the third quarter. The Company
expects to record additional accelerated amortization charges in the
fourth quarter totaling approximately $800,000 for the balance of the
software products to be abandoned in that quarter.
In addition, in the second quarter, the Company announced that as part
of its effort to improve operational efficiencies and financial
performance, it had reorganized operations and eliminated approximately
100 positions held by employees, as well as most positions held by
contract professionals. As a result of these actions, the Company
recorded restructuring costs of approximately $1.5 million during the
three months ended June 30, 2000.
9
<PAGE> 11
VERSO TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
September 30, 2000
8. SUBSEQUENT EVENT
On November 3, 2000, the Company signed a definitive merger agreement
for the acquisition of MessageClick, Inc. ("MessageClick").
MessageClick is a business-to-business application service provider
that provides integrated voice and data messaging services. In the
merger, the Company will issue an estimated 1.4 million shares of its
common stock, warrants to purchase approximately 180,000 shares of its
common stock, and assume an estimated $4.5 million in liabilities in
exchange for all the outstanding capital stock of MessageClick. The
purchase price is subject to adjustment if the Company receives certain
investment commitments no later than December 31, 2000 and /or if
MessageClick meets certain performance targets for the year ending
December 31, 2001. The Company provided MessageClick with bridge
financing in the amount of $2.0 million.
To fund this purchase the Company will issue $4.5 million of its 7.5%
convertible subordinated debentures with a five-year maturity. In
addition, the Company will issue warrants to purchase up to 1.0 million
shares of common stock at an exercise price of $7.50 per share. The
debenture and warrant purchase transaction will close simultaneously
with the merger closing.
The MessageClick acquisition will be accounted for as a purchase, and
the expected closing in November 2000 is subject to the receipt of the
approval of MessageClick's stockholders and certain creditor
agreements, the consent of the Company's primary lender, the
consummation of the sale of the 7.5% convertible subordinated
debentures and warrants and other customary closing conditions.
9. LITIGATION
The Company is involved in claims and proceedings, which are routine
and which in the aggregate are not deemed material to the Company's
business or financial affairs.
10
<PAGE> 12
VERSO TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
September 30, 2000
10. CASH FLOW DATA
Supplemental cash flow information is as follows:
<TABLE>
<CAPTION>
Nine months ended September 30,
--------------------------------------
2000 1999
------------ ------------
<S> <C> <C>
Non cash investing and financing activities:
Issued 21,866,600 shares of common stock
in exchange for the net assets of Cereus
Technology Partners, Inc. $143,991,366
Issuance of warrants in exchange for services 50,000 $ 18,000
Issuance of stock in exchange for services 200,000 4,965
Liabilities assumed in conjunction with the
acquisition of Cereus Technology Partners, Inc.:
Fair value of assets acquired 150,295,194
Consideration paid 145,879,675
------------
Liabilities assumed $ 4,415,519
============
Supplemental disclosure of cash flow information:
Interest paid $ 1,564,762 $542,547
============ ========
Income taxes paid $ 173,043 $176,070
============ ========
</TABLE>
11
<PAGE> 13
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Certain statements in this Form 10-Q and in future filings by the Company with
the Securities and Exchange Commission and in the Company's written and oral
statements 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 dispose of the remainder of our hospitality services
group;
- trends for the continued growth of our business;
- our ability to successfully access the capital markets to fund the
growth of our business;
- our ability to enhance revenue and earnings growth;
- our ability to continue to successfully market existing products and
services, which may be adversely impacted by competition;
- our ability to integrate the businesses acquired by us to date and any
other businesses subsequently acquired;
- our ability to successfully develop and market new products and
services;
- our ability to expand our market for existing products and services;
- the effects of our accounting policies and general changes in generally
accepted accounting practices;
- our ability to fund continuing operating losses and capital
requirements;
- general economic and business conditions; and
- other factors disclosed in our Form 10-K for the year ended December
31, 1999, our Registration Statement on Form S-4 relating to our merger
with Cereus and in our other filings with the Securities and Exchange
Commission.
12
<PAGE> 14
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.
GENERAL
On September 29, 2000, Verso Technologies, Inc. ("Verso" or the "Company")
acquired Cereus Technology Partners, Inc. and subsidiaries ("Cereus") in a
transaction accounted for as a purchase. The Company's consolidated results of
operations do not include any results of operations of Cereus.
The Company historically operated through two separate business units: the
Technology Services Group ("TSG") and the Hospitality Services Group ("HSG"). On
July 19, 2000, the Company's board of directors formally determined to dispose
of HSG. HSG is reported as a discontinued operation and the condensed
consolidated financial statements have been reclassified to segregate the net
assets and operating results of this business segment. TSG operations, as well
as corporate operations are reflected in continuing operations. During the nine
months ended September 30, 2000, the Company recorded an estimated loss on
disposal of discontinued operations of approximately $10.5 million, which
included an estimate of future operating losses of $4.0 million, in connection
with the anticipated disposal of HSG.
The Company decided to replace certain internal use software products in the
fourth quarter of 2000 and has recorded a loss on asset abandonment for those
software products no longer to be utilized of approximately $1.2 million during
the third quarter. The Company expects to record additional accelerated
amortization charges in the fourth quarter totaling approximately $800,000 for
the balance of the software products to be abandoned in that quarter.
In addition, in the second quarter, the Company announced that it had begun to
reorganize its operations to improve the Company's operational efficiency and
financial performance. The Company eliminated approximately 100 positions held
by employees, as well as most positions held by contract professionals. This
reduction in force, along with other cost reduction initiatives, is expected to
achieve approximately $12.0 million in annualized cash savings. As a result of
these actions, the Company recorded a restructuring charge of approximately $1.5
million during the three months ended June 30, 2000.
In 1999, the Company acquired two businesses in transactions accounted for as
poolings-of-interests, and recorded non-recurring merger-related transaction and
reorganization costs totaling $6.9 million.
The Company believes such events significantly affect the comparability of the
Company's results of operations from year to year. You should read the following
discussion of our results of operations and financial condition in conjunction
with our condensed consolidated financial statements and related notes thereto.
13
<PAGE> 15
CONSOLIDATED RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2000, COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1999
For the three months ended September 30, 2000, the Company's net loss totaled
$6.6 million or $.25 per share, compared with net loss of $2.3 million and $.10
per share, for the same period of 1999.
Continuing Operations
Excluding the loss on asset abandonment totaling approximately $1.2 million, the
net loss from continuing operations for the three months ended September 30,
2000, totaled approximately $5.5 million. Excluding one-time reorganization
costs totaling $607,000, the loss from continuing operations for the three
months ended September 30, 1999, totaled approximately $2.0 million.
Total revenue was $16.1 million in the three months ended September 30, 2000, a
decrease of 2.3% from the same period of 1999. Gross profit decreased by
approximately $110,000 in the three months ended September 30, 2000, and was
20.9% of revenue compared with 21.0% in the same period of 1999.
Total operating expenses for the three months ended September 30, 2000, were
$8.2 million, an increase of $2.9 million from the same period of 1999,
excluding the loss on asset abandonment and reorganization costs. The increase
in operating expenses resulted primarily from increased personnel and related
costs, including increased personnel and related costs incurred in connection
with the Company's investment in its Application Services Provider ("ASP")
initiatives and increased marketing, and increased finance, human resources and
administrative costs related to promoting and supporting the Company's new
strategic direction. As a percent of revenue, total operating expenses,
excluding the asset impairment charge and reorganization costs were 51.5% during
the three months ended September 30, 2000, up from 32.5% in the same period of
1999.
Discontinued Operations
Income from discontinued operations was $257,000 in the three months ended
September 30, 1999. The results for the three months ended September 30, 2000
were included in the estimated loss from discontinued operations recorded during
the three months ended June 30, 2000.
NINE MONTHS ENDED SEPTEMBER 30, 2000, COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1999
For the nine months ended September 30, 2000, the Company's net loss totaled
$38.2 million or $1.51 per share, compared with a net loss of $8.2 million and
$.35 per share, for the same period of 1999.
Continuing Operations
Excluding one-time reorganization costs totaling $1.5 million, the loss on asset
abandonment totaling approximately $1.2 million, the net loss from continuing
operations for the nine months ended September 30, 2000, totaled approximately
$21.1 million. Excluding one-time reorganization and transaction costs totaling
$6.9 million, the loss from continuing operations for the nine months ended
September 30, 1999, totaled approximately $3.8 million.
Total revenue was $51.9 million in the nine months ended September 30, 2000, an
increase of 14.1% from the same period of 1999. Gross profit decreased by
$1.7 million in the nine months ended September 30, 2000, and was 18.6% of
revenue. The gross profit margin in the nine months ended September 30, 2000,
was negatively affected by a write-down of obsolete inventory of approximately
$1.0 million. Excluding this one-time charge, gross profit decreased $672,000 in
the nine months ended September 30, 2000, and was
14
<PAGE> 16
20.5% of revenue, compared with 24.9% in the same period of 1999. The decreased
gross profit percentage in the nine months ended September 30, 2000, when
compared to September 30, 1999, resulted from reduced margins for hardware and
software sales and lower margins on service revenue.
Total operating expenses, excluding the loss on asset abandonment and
reorganization and transaction costs for the nine months ended September 30,
2000, were $29.9 million, an increase of $14.8 million from the same period of
1999. The increase in operating expenses resulted primarily from increased
personnel and related costs, including increased personnel and related costs
incurred in connection with the Company's investment in its ASP initiatives and
increased marketing, and increased finance, human resources and administrative
costs related to promoting and supporting the Company's new strategic direction.
As a percent of revenue, total operating expenses, excluding the asset
impairment charge and reorganization and transaction costs were 57.6% during the
nine months ended September 30, 2000, up from 33.2% in the same period of 1999.
Discontinued Operations
Loss from discontinued operations was $3.9 million in the nine months ended
September 30, 2000 compared to income of $2.6 million for the same period in
1999. The loss is due primarily to decreased sales of hardware and software
products. The Company recorded an estimated loss on disposal of discontinued
operations of $10.5 million during the second quarter of 2000. The estimated
loss included a reduction in asset values of approximately $4.2 million and a
provision for anticipated closing costs and operating losses until disposal of
approximately $6.3 million. The results of the three months ended September 30,
2000 were included in the estimated loss on discontinued operations recorded
during the second quarter of 2000.
15
<PAGE> 17
LIQUIDITY AND CAPITAL RESOURCES
SUMMARY
Liquidity is the measurement of the Company's ability to have adequate cash or
access to cash at all times in order to meet financial obligations when due as
well as to fund corporate expansion and other activities. Historically, the
Company has met its liquidity requirements through a combination of working
capital provided by operating activities, debt from third party lenders and
issuances of equity securities.
At September 30, 2000, the Company had a positive working capital position
(excess of current assets over current liabilities) of $20.4 million. The
Company's net cash position, defined as the sum of cash, cash equivalents and
short-term investments less short term borrowings and long-term debt, was $12.2
million at September 30, 2000, compared to $(9.9 million) at December 31, 1999.
CASH FLOW
Cash used in operating activities during the nine months ended September 30,
2000 totaled approximately $15.8 million. Cash used in continuing operations in
the nine months ended September 30, 2000 totaled approximately $11.6 million
while cash used in discontinued operations in the nine months ended September
30, 2000 totaled approximately $4.2 million. The Company's use of cash in
continuing operations during 2000 resulted primarily from a net loss from
continuing operations of $23.8 million and was offset primarily by non-cash
charges for depreciation and amortization of $2.2 million, a loss on asset
abandonment of $1.2 million and reorganization costs of $1.5 million, and cash
provided by operating items of approximately $7.2 million. The use of cash in
discontinued operations during 2000 resulted primarily from a net loss from
discontinued operations of approximately $14.4 million and was offset primarily
by an accrual for the estimated loss on the disposal of the discontinued
operations of $10.5 million and cash used in operating activities of
approximately $300,000.
Cash used in operating activities during the nine months ended September 30,
1999 totaled approximately $3.0 million. Cash used in continuing operations in
the nine months ended September 30, 1999 totaled approximately $9.2 million
while cash provided by discontinued operations in the nine months ended
September 30, 1999 totaled approximately $6.2 million. The Company's use of cash
in continuing operations during 1999 resulted primarily from a net loss from
continuing operations of $10.8 million and was offset primarily by non-cash
charges for depreciation and amortization of $1.6 million. The cash provided by
discontinued operations during 1999 resulted primarily from a net income from
discontinued operations of approximately $2.6 million and cash provided by
operating activities of approximately $3.6 million.
The Company used cash in investing activities in the nine months ended September
30, 2000, of approximately $11.1 million, compared to $2.7 million for the same
period in 1999. For continuing operations, the Company spent approximately $6.8
million and $373,000 on purchases of furniture and equipment during 2000 and
1999, respectively. For discontinued operations, the Company spent approximately
$2.2 million and $1.3 million on software development costs during 2000 and
1999, respectively, and approximately $202,000 and $1.1 million on purchases of
furniture and equipment during the same periods, respectively.
16
<PAGE> 18
Cash provided by financing activities totaled approximately $26.8 million in the
nine months ended September 30, 2000, compared to cash used in financing
activities of approximately $285,000 for the same period in 1999. Proceeds from
the issuance of common stock totaling approximately $17.9 million, funding of a
5% convertible subordinated debenture of $4.0 million, net of financing costs of
$270,000, and an advance from Cereus of $10.2 million were offset by reductions
of the Company's credit line totaling approximately $4.5 million, and payments
on long-term debt totaling $463,000. During 1999, payments of long-term debt
totaled approximately $1.9 million, and were offset by borrowings on the credit
line of approximately $1.5 million and proceeds from issuances of common stock
of approximately $97,000.
On March 14, 2000, the Company obtained a $20.0 million asset-based revolving
credit facility with PNC Bank. The facility is secured by substantially all of
the assets of the Company. The availability under the facility at the closing
was approximately $14.6 million. At September 30, 2000, the Company had
approximately $5.0 million outstanding under the PNC facility. In addition, in
the first quarter of fiscal year 2000, William P. O'Reilly, chairman of the
Board, made a bridge loan to the Company in the amount of $2.6 million, the
proceeds of which were used for the Company's short term working capital needs.
The Company used $7.5 million of the proceeds of the PNC facility to repay the
old facility in full, $2.6 million to repay the bridge loan to Mr. O'Reilly and
approximately $900,000 to repay other third party debt.
The Company borrowed $10.2 million from Cereus prior to closing of the merger.
The loan was convertible into common stock of the Company and bore interest at
prime plus 2.0%. The loan was converted upon the closing of the merger.
On July 27, 2000, the Company entered into an agreement with two investors to
issue $7.0 million of its 5% convertible subordinated debentures. The debentures
carry warrants to purchase 364,584 shares of common stock at an exercise price
of $5.03 per share. The debentures are convertible into the Company's common
stock at a conversion price that is adjustable each month and is equal to the
lesser of (a) the conversion price in effect on the first day of such month or
(b) the average per share market price of the Company's common stock for the
last ten trading days of the prior month. Currently, the conversion price is
$4.80 per share, and that price will adjust on December 1, 2000 to a conversion
price equal to the lesser of (a) $4.80 or (b) the average per share market
price of the Company's common stock for the last ten trading days of November
2000. The debentures also have certain put and call features. Concurrent with
the execution of the agreement, $4.0 million was funded by the investor. An
additional $3.0 million was funded on October 6, 2000. Of the total amount
funded, $4.0 million of the debentures are due on July 26, 2001, and $3.0
million of the debentures are due on October 5, 2001.
The Company was not in compliance with the financial covenants in its loan
facility with PNC Bank in the first, second and third quarters. The Company
received waivers of this non-compliance for each of these quarters. The Company
is currently in negotiations to modify the financial covenants to reflect the
planned disposition of all of HSG and the revised operating plans for the
Company, which would include the operations of Cereus. As of November 14, 2000,
the Company has no borrowings under the credit facility.
17
<PAGE> 19
On June 29, 2000 the Company announced that as part of its effort to prepare for
the merger with Cereus, it had reorganized operations and eliminated
approximately 100 positions held by employees, as well as most positions held by
contract professionals. As a result of these actions, the Company recorded
restructuring costs of approximately $1.5 million in the second quarter. The
Company expects the reduction in force, along with other cost reduction
initiatives implemented in the second quarter, will result in approximately
$12.0 million in annualized cash savings.
On March 29, 2000 and June 29, 2000, the Company sold 1,194,532 shares of common
stock and 180,000 shares of common stock, respectively, in private placements
for net proceeds of $13.0 million and $990,000, respectively.
SHORT-TERM AND LONG-TERM LIQUIDITY
At September 30, 2000, the Company had $20.4 million in working capital
including $21.2 million in cash, $5.0 million in borrowings under its line of
credit and $20.6 million in accounts payable. Commencing in the second quarter
and continuing until funds were available from the Cereus merger, the Company
did not made timely payments to all of its trade and other creditors. In
October, shortly after the Cereus merger closed, all undisputed trade payables
were brought current. As of November 10, 2000, the Company had cash of $13.0
million, no amounts drawn on its line of credit and $4.9 million in accounts
payable. Cash available at September 30, 2000, cash received in October from the
Company's closing on its domestic lodging systems business and two of its seven
international hospitality businesses totaling $8.5 million and the $3.0 million
received from the issuance of its 5% convertible subordinated debentures were
used to pay off the line of credit and significantly reduce accounts payable.
Additional cash will be needed to fund the operations of MessageClick, Inc.
("MessageClick"), an acquisition that is expected to close in the fourth quarter
of 2000. At the closing of the transaction, the Company will have raised $9.0
million to fund the expected cash requirements of MessageClick ($2.0 million of
which the Company has funded MessageClick to date); $4.5 million of Cereus's
September private placement was designated for such purposes, and $4.5 million
will be raised through the issuance by the Company of its 7.5% convertible
subordinated debentures with a five year maturity which will close
simultaneously with the merger closing. Liabilities to be assumed in this
transaction are approximately $4.5 million
The Company expects to meet its short-term needs from available cash, borrowings
under the PNC facility, and the proceeds from the sale of the remainder of HSG.
The Company's ability to access the PNC facility is contingent on its compliance
with the financial and other covenants and terms of that facility. If the
Company is in violation of the PNC facility, or does not have sufficient
eligible accounts receivable to support the level of borrowings it needs, the
Company will be unable to draw on the facility. The Company has entered into a
definitive agreement to sell its domestic lodging systems business and its
international hospitality operations for $10.0 million in cash. The Company
closed on the domestic lodging systems business and two of its seven
international hospitality businesses in October 2000 and received $8.5 million.
The Company expects to receive the remaining $1.5 million in the fourth quarter.
On October 27, 2000, the Company executed a definitive stock purchase agreement
to sell its restaurant solutions business for approximately $10.8 million. The
transaction includes the sale of Squirrel Systems, Inc. and Squirrel Systems of
Canada Ltd., which are components of HSG. In exchange for the cash, the
purchasers will receive all of the outstanding shares of stock of both Squirrel
subsidiaries. The parties expect the transaction to close in the fourth quarter
of 2000. While the Company expects to be able to close both of these
transactions, there can be no assurance that either or both of the transactions
will close.
18
<PAGE> 20
The Company's ability to meet its long-term capital needs may be subject to
factors outside its control. Specifically, unless the price of the Company's
common stock increases so that holders of the Company's convertible debt are
likely to convert such debt into common stock, the Company will be required to
restructure that debt or use available cash, if any, or borrowings under our
line of credit, if available, to repay such debt beginning in July 2001. The
principal amount of the convertible debt outstanding at November 10, 2000 was
$7.0 million. There can be no assurance that these financing sources or other
sources will be available to meet the Company's needs at that time.
19
<PAGE> 21
ITEM 2: Quantitative and Qualitative Disclosures about Market Risk
Market Risk
The Company is exposed to various market risks, including changes in foreign
currency exchange rates and interest rates. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as foreign
currency exchange and interest rates. The Company does not enter into
derivatives or other financial instruments for trading or speculative purposes.
The Company has also not entered into financial instruments to manage and reduce
the impact of changes in foreign currency exchange rates and interest rates. The
Company may enter into such transactions in the future.
Interest Rate Risks
The Company's debt at September 30, 2000, primarily carries interest rates which
vary with the "prime rate". Accordingly, any increases in the "prime rate" will
reduce the Company's earnings. A 1.0% increase in the prime rate on the
Company's $5.0 million of bank debt at September 30, 2000 would result in an
annual expense increase of approximately $50,000.
Foreign Currency Risks
At September 30, 2000 the Company had foreign currency denominated assets and
liabilities included in net assets of discontinued operations of approximately
$7.7 million and $2.7 million, respectively.
20
<PAGE> 22
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any legal proceedings other than ordinary
routine proceedings incidental to its business. The Company does not
expect these legal proceedings, either individually or in the
aggregate, to have a material adverse effect on the Company's business,
results of operations or liquidity.
Item 2. Changes in Securities
On September 29, 2000, the Company amended its Articles of
Incorporation to increase the Company's authorized shares of common
stock from 50,000,000 shares of common stock to 100,000,000 shares of
common stock.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The annual meeting of stockholders of the Company was held on September
29, 2000, and the following matters were voted on at that meeting:
1. A proposal to approve the Second Amended and Restated
Agreement and Plan of Merger, dated July 27, 2000, among the
Company, Solemn Acquisition Corporation and Cereus Technology
Partners, Inc. and the transactions it contemplates. The
results were as follows:
15,052,759 FOR 37,555 AGAINST 30,491 ABSTAIN
2. A proposal to approve an amendment to the Company's articles
of incorporation to increase the authorized common stock from
50,000,000 shares to 100,000,000 shares, par value $.01 per
share. The results were as follows:
14,796,847 FOR 267,174 AGAINST 56,784 ABSTAIN
3. A proposal to approve an amendment to the Company's articles
of incorporation to change the Company's name to Verso
Technologies, Inc. The results were as follows:
14,982,836 FOR 89,663 AGAINST 48,306 ABSTAIN
21
<PAGE> 23
4. A proposal to elect five nominees to the Company's board of
directors to serve until the earlier of the expiration of
their terms or the consummation of the merger with Cereus. The
results were as follows:
<TABLE>
<CAPTION>
AUTHORITY
DIRECTOR FOR WITHHELD
------------------------------- ----------------- ------------------
<S> <C> <C>
James C. Barnard 23,511,792 108,671
Patrick J. Dirk 23,524,520 95,943
William P. O'Reilly 23,335,655 284,808
Stephen E. Raville 23,430,816 189,647
William G. Taylor 23,544,520 75,943
</TABLE>
5. A proposal to adopt the Company's 1999 Employee Stock Purchase
Plan. The results were as follows:
14,700,436 FOR 277,161 AGAINST 143,208 ABSTAIN
Each of the foregoing proposals was set forth and described in the
Notice of Annual Meeting and Joint Proxy Statement/Prospectus of the
Company dated August 30, 2000, filed with the Commission as part of the
Company's Registration Statement on Form S-4 (No. 333-43224).
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
See Exhibit Index appearing elsewhere herein, which is
incorporated by reference.
(b) Reports on Form 8-K.
The Company filed three reports on Form 8-K during the quarter
ended September 30, 2000.
1. The first report was dated July 27, 2000 and reported
under Item 5 (Other Events) that the Company had (i)
issued a press release announcing its preliminary
second quarter results and that it would begin
reporting its hospitality segment as discontinued
operations and (ii) closed the sale of $4.0 million
of its convertible subordinated debentures.
2. The second report was dated July 19, 2000 and
included in Item 7 (Financial Statements and
Exhibits) restated financial statements, restated
Management's Discussion and Analysis of Financial
Condition and Results of Operation and revised Risk
Factors.
3. The third report was dated August 30, 2000 and
reported under Item 5 (Other Events) that the Company
had mailed to its shareholders the joint proxy
statement/prospectus soliciting proxies for the
merger with Cereus.
22
<PAGE> 24
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
VERSO TECHNOLOGIES, INC.
Date: November 13, 2000 /s/ Juliet M. Reising
-------------------------------------------
Executive Vice President and Chief Financial
Officer
(duly authorized signatory and
Principal Financial and Accounting Officer)
23
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
EXHIBIT NUMBER ITEM METHOD OF FILING
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10.1 Second Amended and Restated Registration Rights Agreement dated as of Filed herewith
August 31, 2000 between the Registrant and Cereus Technology Partners,
Inc.
----------------------------------------------------------------------------------------------------------------------
10.2 Second Amended and Restated Non-Negotiable Subordinated Convertible Filed herewith
Promissory Note dated August 31, 2000 by the Registrant in favor of
Cereus Technology Partners, Inc.
----------------------------------------------------------------------------------------------------------------------
10.3 Amendment No. 2 to Bridge Loan and Security Agreement dated as of Filed herewith
August 31, 2000 between the Registrant and Cereus Technology Partners,
Inc.
----------------------------------------------------------------------------------------------------------------------
10.4 Executive Employment Agreement dated as of September 29, 2000 between Filed herewith
the Registrant and Steven A. Odom.
----------------------------------------------------------------------------------------------------------------------
10.5 Executive Employment Agreement dated as of September 29, 2000 between Filed herewith
the Registrant and James M. Logsdon.
----------------------------------------------------------------------------------------------------------------------
10.6 Executive Employment Agreement dated as of September 29, 2000 between Filed herewith
the Registrant and Juliet M. Reising.
----------------------------------------------------------------------------------------------------------------------
10.7 Warrant to purchase 1,750,000 shares of Common Stock of the Registrant Filed herewith
dated September 29, 2000, issued to Steven A. Odom.
----------------------------------------------------------------------------------------------------------------------
10.8 Warrant to purchase 875,000 shares of Common Stock of the Registrant Filed herewith
dated September 29, 2000, issued to James M. Logsdon.
----------------------------------------------------------------------------------------------------------------------
10.9 Warrant to purchase 665,000 shares of Common Stock of the Registrant Filed herewith
dated September 29, 2000, issued to Juliet M. Reising.
----------------------------------------------------------------------------------------------------------------------
10.10 Warrant to purchase 300,000 shares of Common Stock of Cereus Filed herewith
Technology Partners, Inc. dated August 21, 2000, issued to Steven A.
Odom.
----------------------------------------------------------------------------------------------------------------------
10.11 Warrant to purchase 100,000 shares of Common Stock of Cereus Filed herewith
Technology Partners, Inc. dated August 21, 2000, issued to James M.
Logsdon.
----------------------------------------------------------------------------------------------------------------------
10.12 Warrant to purchase 350,000 shares of Common Stock of Cereus Filed herewith
Technology Partners, Inc. dated August 21, 2000, issued to Juliet M.
Reising.
----------------------------------------------------------------------------------------------------------------------
10.13 Warrant to purchase 250,000 shares of Common Stock of Cereus Filed herewith
Technology Partners, Inc. dated August 21, 2000, issued to Juliet M.
Reising.
----------------------------------------------------------------------------------------------------------------------
10.14 Warrant to purchase 50,000 shares of Common Stock of Cereus Technology Filed herewith
Partners, Inc. dated August 21, 2000, issued to Peter Pamplin.
----------------------------------------------------------------------------------------------------------------------
10.15 Stock Purchase Agreement dated as of October 26, 2000 between Squirrel Filed herewith
Systems, Inc., a wholly owned subsidiary of the Registrant, Squirrel
Systems of Canada Ltd., and SQS Acquisitions Inc. (Exhibits and
schedules to this agreement have been omitted; the Registrant agrees
to furnish supplementally to the Commission, upon request, a copy of
these exhibits and schedules).
----------------------------------------------------------------------------------------------------------------------
10.16 Agreement for the Purchase and Sale of Assets between AremisSoft Filed herewith
Corporation, the Registrant and Eltrax Hospitality Group, Inc. dated
as of September 28, 2000. (Exhibits and schedules to this agreement
have been omitted; the Registrant agrees to furnish supplementally to
the Commission, upon request, a copy of these exhibits and schedules).
----------------------------------------------------------------------------------------------------------------------
27 Financial Data Schedule (for SEC use only) Filed herewith
----------------------------------------------------------------------------------------------------------------------
</TABLE>
24
