SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934 FOR THE FISCAL QUARTER
ENDED July 31, 1995
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
Commission File No. 0-17500
VERSUS TECHNOLOGY, INC.
(Exact name of Registrant as specified in its charter)
Delaware 22-2283745
(State or other jurisdiction of (I.R.S. Employer
Incorporation of Organization) Identification Number)
2320 West Aero Park Court
Traverse City, Michigan 49686
(Address of principal executive offices)
616-946-5868
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve
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 .
The aggregate market value of the Common Stock held by
nonaffiliates of the registrant on June 20, 1995 was
approximately $2,340,000.
Number of shares of Common Stock, par value $.01 per share,
outstanding as of July 31, 1995: 4,160,780.
Number of Redeemable Class A Warrants outstanding as of July 31,
1995: 2,233,800.
VERSUS TECHNOLOGY, INC.
Index to
Financial Statements and Schedules
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements:
Balance Sheets as of July 31, 1995
(Unaudited) and October 31, 1994 (Audited) 3-4
Statements of Operations for the three
and nine months ended July 31, 1995 and 1994
(Unaudited) 5-6
Statements of Shareholders' Equity
for the nine months ended July 31, 1995 and
1994 (Unaudited) 7-8
Statements of Cash Flows for the three
and nine months ended July 31, 1995 and 1994
(Unaudited) 9-11
Condensed Notes to Financial Statements 12
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 15
PART II - OTHER INFORMATION 18
Signatures 19
<PAGE>
VERSUS TECHNOLOGY, INC.
Balance Sheets
July 31, October 31,
1995 1994
Assets (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 322,000 $ 64,000
Trade accounts receivable (net
of allowance for doubtful
accounts of $25,000 at July
31, 1995 and $45,000 at
October 31, 1994) 170,000 376,000
Notes receivable - current
(Note 3) - 698,000
Assets held for sale (Note 4) - 872,000
Inventories (Note 5) 246,000 295,000
Prepaid expenses and other
current assets 61,000 47,000
Total current assets 799,000 2,352,000
Property and equipment - net
(Note 6) 99,000 214,000
Deferred charges and other
assets (Note 7) 364,000 517,000
$ 1,262,000 $ 3,083,000
Liabilities and Shareholders' Equity
Current liabilities:
Obligations under capital
leases, current $ - $ 9,000
Accounts payable 721,000 1,197,000
Accrued expenses 344,000 375,000
Deferred revenue - 52,000
Deferred gain - current (Note 3) - 365,000
Note payable - current (Note 8) 550,000 209,000
Total current liabilities 1,615,000 2,207,000
Note payable - long term - 29,000
Total liabilities 1,615,000 2,236,000
Shareholders' equity:
Common stock, $.01 par value,
25,000,000 shares authorized;
4,160,780 shares issued and
outstanding in 1995 and 1994 42,000 42,000
Additional paid-in capital 20,834,000 20,834,000
Accumulated Deficit (21,229,000) (20,029,000)
Total shareholders'
equity 353,000 847,000
$ 1,262,000 $ 3,083,000
See accompanying condensed notes to financial statements.<PAGE>
<TABLE>
VERSUS TECHNOLOGY, INC.
Statement of Operations
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Sales $ 228,000 $ 812,000 $ 788,000 $ 2,689,000
Royalty - - - -
228,000 812,000 788,000 2,689,000
Cost of sales 202,000 494,000 650,000 1,478,000
Gross margin 26,000 318,000 138,000 1,211,000
Expenses:
Research and development 345,000 132,000 675,000 392,000
Sales, general and
administrative 367,000 1,078,000 1,461,000 2,784,000
712,000 1,210,000 2,136,000 3,176,000
Income (loss) from
operations (686,000) (892,000) (1,998,000) (1,965,000)
Other income (expense):
Interest income 1,000 1,000 17,000 12,000
Interest expense (1,000) (2,000) (8,000) (7,000)
Gain on sale of DCX - - 365,000 -
Gain on sale of subsidiary - - 424,000 -
- (1,000) 798,000 5,000
Net income (loss) before
provision for income taxes (686,000) (893,000) (1,200,000) (1,960,000)
Provision (benefit) for income
taxes - 4,000 - 4,000
Net income (loss) $ (686,000) $ (897,000) $ 1,200,000 $(1,964,000)
Net loss per common and common
equivalent share (Note 9):
Primary (.16) (.21) (.29) (.47)
Fully Diluted (.16) (.21) (.29) (.47)
See accompanying condensed notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
VERSUS TECHNOLOGY, INC.
Statement of Shareholders' Equity
(Unaudited)
<CAPTION>
Additional
Nine Months Ended Common Stock Paid-In Accumulated
July 31, 1995 Shares Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C>
Balance, October 31, 1994 4,160,780 $ 42,000 $20,834,000 $(20,029,000) $ 847,000
Shares issued pursuant to
Incentive Stock Option Plan - - - - -
Net income (loss) for the
nine months ended July
31, 1995 - - - (1,200,000) (1,200,000)
Balance, July 31, 1995 4,160,780 $ 42,000 $20,834,000 $(21,229,000) $ (353,000)
Additional
Nine Months Ended Common Stock Paid-In Accumulated
July 31, 1994 Shares Amount Capital Deficit Total
Balance, October 31, 1993 4,155,598 $ 42,000 $20,826,000 $(16,853,000) $ 4,015,000
Shares issued pursuant to
Incentive Stock Option Plan 3,982 - 3,000 - 3,000
Exercise of Class A Warrants 1,200 - 4,000 - 4,000
Costs related to filing of S-2
Registration Statement - - (48,000) - (48,000)
Net income (loss) for the nine
months ended July 31, 1994 (1,964,000) (1,964,000)
Balance, July 31, 1994 4,160,780 $ 42,000 $20,785,000 $(18,817,000) $ 2,010,000
See accompanying condensed notes to financial statements.
/TABLE
<PAGE>
<TABLE>
VERSUS TECHNOLOGY, INC.
Statements of Cash Flow
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (686,000) $ (897,000) $(1,200,000) $(1,964,000)
Adjustments to reconcile net
income (loss) to net cash used
in operating activities:
Depreciation and amortization 57,000 92,000 190,000 263,000
(Gain) loss on disposal of
fixed assets 4,000 - 19,000 -
Discontinuance of patent
applications - - 58,000 -
Gain on sale of DCX - - (424,000) -
Gain on sale of subsidiary - - (365,000) -
(Increase) Decrease in assets
and liabilities:
(Increase) Decrease in accounts
receivable and accounts
receivable - other (29,000) 338,000 206,000 382,000
(Increase) Decrease in
inventories 6,000 32,000 59,000 (306,000)
(Increase) Decrease in prepaid
expenses and other current assets 2,000 (11,000) (14,000) (39,000)
Increase (Decrease) in accounts
payable & other liabilities 43,000 169,000 (419,000) 406,000
Increase (Decrease) in accrued
expenses 77,000 (28,000) (31,000) (188,000)
Increase (Decrease) in deferred
revenue - Customer advance
payments - (42,000) (52,000) 15,000
Total adjustments 160,000 550,000 (773,000) 533,000
Net cash provided by (used in)
operating activities (526,000) (347,000) ( 1,973,000) (1,431,000)
Cash flows from investing activities:
Proceeds from assets held for sale - - 1,255,000 -
Principal Received on Note
Receivable - - 698,000 74,000
(Additions) Deletions to property
and equipment (1,000) 4,000 (15,000) (41,000)
(Additions) Deletions to deferred
charges and other assets - (16,000) (10,000) (40,000)
Net cash provided by (used in)
investing activities (1,000) (12,000) 1,928,000 (7,000)
Cash flows from financing activities:
Payments on obligation under
capital lease - (3,000) (9,000) (9,000)
Issuance of Note Payable 550,000 - 550,000 -
Payment of obligation of Note Payable (33,000) (3,000) (238,000) (7,000)
Issuance of common stock - - - 7,000
S-2 Registration Costs - - - (48,000)
Net cash provided by
financing activities 517,000 (6,000) 303,000 (57,000)
Net increase (decrease) in cash
and cash equivalents (10,000) (365,000) 258,000 (1,495,000)
Cash and cash equivalents, beginning
of period 332,000 522,000 64,000 1,652,000
Cash and cash equivalents,
end of period $ 322,000 $ 157,000 $ 322,000 $ 157,000
Supplemental disclosures of cash
flow information:
Cash paid during the period for
interest $ 4,000 $ 2,000 $ 8,000 $ 7,000
See accompanying condensed notes to financial statements.
/TABLE
<PAGE>
VERSUS TECHNOLOGY, INC.
Condensed Notes to Financial Statements
July 31, 1995
(1) Description of Business
Versus Technology, Inc. (the "Company") designs, markets
and oversees the manufacturing of personnel and equipment
tracking systems for the medical industry as well as data and
security transport equipment. The Company's principal engineering
activities are in solid-state circuit design (with primary
emphasis on microprocessors and digital communications) and in
microprocessor and minicomputer software.
(2) Summary of Significant Accounting Policies
In the opinion of the management of the Company, the
accompanying unaudited consolidated financial statements of the
Company include all adjustments necessary to present fairly the
financial position of the Company, in all material respects, as
of July 31, and the results of operations and cash flows
for the three and nine month periods ended July 31, 1995 and
1994. The results for the three and nine month periods ended
July 31, 1995 and 1994 are not necessarily indicative of the
results to be expected for the full fiscal year.
(3) Sale of Majority-Owned Subsidiary
On July 13, 1992, the Company completed the sale of all of
its capital stock of VTL, and certain other patented technology
owned by the Company, to a newly formed organization headed by
the management of VTL and other investors. The purchase price
was approximately $1,653,000 plus repayment of indebtedness from
VTL to the Company of approximately $647,000. The Company
received $500,000 at closing with the balance deferred in
periodic payments over the next 22 months. Of these deferred
payments $1,250,000 were collateralized by a subordinated lien on
the assets of VTL. In addition, as part of this transaction, the
Company was released from its guarantee obligation under an
$800,000 principal amount term loan obtained by VTL in 1992 and
was obligated to pay closing fees of approximately $260,000 of
which approximately $200,000 was to be paid over a period of
twenty-two months. Such closing fees have been accrued in the
accompanying financial statements. VTL also licensed to the
Company rights in the United States and certain other countries
to use the technology sold to VTL.
The Company has realized a net gain from this transaction
of approximately $1,100,000 (adjusted to reflect actual amount of
cash received). Due to the fact that the common stock and
certain other patented technology was sold to a highly-leveraged
group of investors, the gain was deferred and recognized ratably
as cash was collected. The Company recognized the balance,
$365,000, of this gain in the first quarter of 1995 and none in
1994.
(4) Sale of DCX Product Line
On November 30, 1994, the Company sold the assets, and
certain liabilities related to its Derived Channel Multiplex
product line (DCX). The purchase price was approximately
$1,255,000 all of which was received at closing. The Company
realized a gain of $424,000 on this transaction.
In addition, as part of the terms of the transaction, the
Company received payment of $600,000 which was due to the Company
from the sale of VTL (Note 3). This amount represents the final
settlement of outstanding amounts due the Company ($698,000 as of
October 31, 1994) offset by obligations of the Company for
closing fees ($98,000 as of October 31, 1994).
(5) Inventories
Inventories are summarized as follows:
July 31, October 31,
1995 1994
Raw Materials $ 184,000 $ 189,000
Work in progress 54,000 41,000
Finished goods 8,000 65,000
$ 246,000 $ 295,000
(6) Property and Equipment
Property and equipment are summarized as follows:
July 31, October 31,
1995 1994
Machinery, equipment and
vehicle $ 615,000 $ 916,000
Furniture and fixtures 28,000 124,000
643,000 1,040,000
Less accumulated
depreciation 544,000 826,000
$ 99,000 $ 214,000
(7) Deferred Charges and Other Assets
Deferred charges and other assets are summarized as follows:
July 31, October 31,
1995 1994
Patents and trademarks $ 522,000 $ 571,000
Deferred computer
software costs 97,000 118,000
619,000 689,000
Less accumulated
amortization 255,000 172,000
$ 364,000 $ 517,000
(8) Note Payable
On September 29, 1994, the Company borrowed $200,000 from
five individuals (including three Directors of the Company
totaling $120,000) for operational cash flow purposes. The notes
bear interest at a rate of 8% payable semi-annually and are due
on December 31, 1995. Such amounts were paid in full on December
13, 1994 with the proceeds of the DCX sale (Note 4).
In July 1995, the Company borrowed $550,000 from seven
individuals (including four Directors of the Company totaling
$250,000) for short term financing. The notes bear interest at a
rate of 9% per annum and are payable upon completion of a Private
Placement Memorandum.
(9) Net Income (Loss) per Share
Net income (loss) per share is based upon the weighted
average number of shares outstanding of 4,160,780 for the three
and nine month periods ended July 31, 1995 and July 31, 1994.
The effect of the Company's common stock equivalents (options and
warrants) was antidilutive for all periods.
(10) Subsequent Events
In August 1995, the Company settled its longstanding legal
dispute with Telular Corporation by agreeing not to compete
further with Telular in the CAT-2001 UL product line. As a
result of the settlement, the Company will be turning over its
CAT-2001 inventory to Telular Corporation. This will be a non
cash transaction and will result in an expense increase of
approximately $130,000 and an inventory reduction of
approximately $130,000.<PAGE>
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
General
The Registrant, Versus Technology, Inc. (the "Company")
designs, markets and oversees the manufacturing of personnel and
equipment tracking systems for the medical industry as well as
data and security transport equipment.
The Company provides products and services which address
security needs utilizing a variety of technologies which include
cellular and infrared (and until December 1994 telephone line)
communication services. Additionally, the Company's patented
infrared technology for security and data communication systems
provides entity (people, equipment, etc.) identification, status,
location and tracking capabilities.
Results of Operations
Three Months Ended July 31, 1995 and July 31, 1994
The revenues for the third quarter of fiscal 1995 were 72%
below the corresponding quarter in fiscal 1994. However, the
fiscal 1994 third quarter revenues included shipments of the
Company's Derived Channel Multiplex ("DCX") equipment. The DCX
product line was sold in November 1994.
Cost of sales as a percentage of revenues in the third
quarter of fiscal 1995 increased to 89% from 61% for the same
quarter in fiscal 1994. The gross margin decline in this quarter
is a result of a shift in product mix, caused by the sale of the
DCX product line, toward lower margin cellular products. The
lower margins are also a result of certain fixed costs related to
the DCX product line which had not yet been fully eliminated.
The Company's selling, general and administrative expenses
for the third quarter of fiscal 1995 were $367,000 or
approximately $711,000 below such expenses for the same quarter
in fiscal 1994. This decrease in expenses is a result of the
elimination of costs associated with the DCX product line,
general cost reductions and reduced legal fees.
Research and development expenditures during the third
quarter of fiscal 1995 were $345,000, or $213,000 above such
expenses in the same quarter of fiscal 1994. The accelerated
development efforts being undertaken on the Company's infrared
technology primarily accounts for the increase in these
expenditures.
The Company's third quarter fiscal 1995 net loss of
$686,000 compared to a net loss of $897,000 for the same quarter
in fiscal 1994, reflects the aforementioned items.
Nine Months Ended July 31, 1995 and July 31, 1994
Revenues for the nine months of fiscal 1995 were 71% below
the corresponding period in fiscal 1994. However, the fiscal
1994 revenues of $2,689,000 included shipments of the Company's
Derived Channel Multiplex ("DCX") equipment. The DCX product
line was sold in November 1994.
Cost of sales as a percentage of revenues in the nine
months ended July 31, 1995 increased to 82% from 55% for the
same period in fiscal 1994. The gross margin decline in this
period is a result of a shift in product mix, caused by the sale
of the DCX product line, toward lower margin cellular products.
The lower margins are also a result of certain fixed costs
related to the DCX product line which had not yet been fully
eliminated.
The Company's selling, general and administrative expenses
for the nine months ended July 31, 1995 were $1,461,000 or 48%
below such expenses for the same period in fiscal 1994. This
decrease in expenses is a result of the elimination of costs
associated with the DCX product line, general cost reductions and
reduced legal fees.
Research and development expenditures during the nine
months ended July 31, 1995 were $675,000, or $283,000 above such
expenses in the same period of fiscal 1994. The accelerated
development efforts being undertaken on the Company's infrared
technology primarily accounts for the increase in these
expenditures.
The Company's nine month 1995 net loss of $1,200,000
compares to a net loss of $1,964,000 for the same period in 1994.
However, the fiscal 1995 loss includes gains of $424,000 from the
sale of the DCX product line and the final gain of $365,000 from
the sale of the Company's foreign subsidiary.
Liquidity and Capital Resources
The Company is restructuring its entire business unit to
reduce operating expense and focus its efforts on its newer more
profitable product line. As a result, in July 1995, the Company
relocated its corporate and administrative offices from One
Electronics Drive, Trenton, New Jersey to 2320 West Aero Park
Court, Traverse City, Michigan. The Company employs four
administrative personnel at the Traverse City location and
retains a project engineer and salesman in the Pennsylvania area.
The Company plans to formally launch its infrared
personnel and equipment tracking line in September of 1995, and
be in operation for the fiscal year beginning November 1, 1995.
Additionally, with the settlement of the Telular lawsuit, the
Company can now focus on its two new cellular product lines that
operate outside the highly competitive backup alarm industry; the
Mobile Alarm Protection System and the TVX Cellular Alarm
Terminal.
The Mobile Alarm Protection System (MAPS) is a wireless
mobile security system. It is designed to allow fast
installation, ideal for covert surveillance and temporary
security. Typical installations would include crime scene
security, temporary security, building security and
construction/building site security.
The TVX Cellular Alarm Terminal (TVX CAT) is used to
transmit compressed video signals over the cellular network. A
typical application would be the periodic transmittal of
surveillance video from a bus, or other mobile application.
The Company issued a Private Placement Memorandum in
August 1995, and management believes that cash generated from the
offering will be sufficient for all projected cash needs during
the restructuring period. Management expects to realize sales on
its new product lines commencing in the first quarter of the 1996
fiscal year.
Significant liquidity factors are as follows:
July 31, October 31,
1995 1994
Current ratio .5:1 1.1:1
Quick ratio .3:1 .5:1
The foregoing ratios at July 31, 1995, are primarily the
result of operating results and the cash received and use of
proceeds from the sale of VTL and the DCX product line. As of
July 31, 1995, accounts receivable were lower by $206,000, or
55%, then at October 31, 1994. Inventories reflect a decrease
of $49,000, or 17%, since October 31, 1994. Current liabilities
were reduced by $592,000, or 27%, from October 31, 1994. There
were no material commitments for capital expenditures as of July
31, 1995. The Company also has Federal tax loss carryforwards
available although limited as to amount.
Miscellaneous
The Company believes that new accounting pronouncements,
which have yet to be implemented, will not materially effect the
financial condition or results of operations of the Company.
PART II - OTHER INFORMATION
Item 2 - Changes in Securities
In February 1995, the Board of Directors amended the Class
A Warrants to provide for limited additional exercise rights
after their scheduled expiration date (February 15, 1995) through
the close of business (New York Time) on February 15, 1996, as
follows: After February 15, 1995, upon exercise and payment of
$1.75 cash, holders of Class A Warrants will be issued one share
of Versus common stock for each four Class A Warrants owned of
record on the exercise date.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
VERSUS TECHNOLOGY, INC.
(Registrant)
By:
Gary T. Gaisser
President and Chief Executive Officer
September 20, 1995
