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, 1996
( ) 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 .
Number of shares of Common Stock, par value $.01 per share,
outstanding as of August 26, 1996: 36,245,697, assuming issuance
of all shares pursuant to the acquisition by merger described
herein, and assuming no exercise of any dissenters' rights.
VERSUS TECHNOLOGY, INC.
Index to
Financial Statements and Schedules
Pages
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements:
Balance Sheets as of July 31, 1996
(Unaudited) and October 31, 1995 (Audited)
Statements of Operations for the three
and nine months ended July 31, 1996 and
1995 (Unaudited)
Statements of Shareholders' Equity
for the nine months ended July 31, 1996
and 1995 (Unaudited)
Statements of Cash Flows for the three
and nine months ended July 31, 1996 and
1995 (Unaudited)
Condensed Notes to Financial Statements
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Item 2 - Changes in Securities
Item 4 - Submission of Matters to a Vote of
Security Holders
Item 5 - Other Matters
Item 6 - Exhibits and Reports on Form 8-K
Signatures
VERSUS TECHNOLOGY, INC.
Balance Sheets
July 31, October 31,
1996 1995
Assets (Unaudited) (Audited)
Current assets:
Cash and cash equivalents $ 223,000 $ 1,998,000
Cash held for appeal (Note 5) 207,000 -
Trade accounts receivable (net
of allowance for doubtful
accounts of $25,000 at
July 31, 1996 and $25,000 at
October 31, 1995) 67,000 88,000
Assets held for sale (Part II
Item 1) 3,000 3,000
Inventories (Note 6) 45,000 11,000
Prepaid expenses and other
current assets 114,000 79,000
Total current assets 659,000 2,179,000
Property and equipment - net
(Note 7) 65,000 3,000
Deferred charges and other
assets (Note 8) 273,000 253,000
$ 997,000 $ 2,435,000
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable 287,000 508,000
Accrued expenses 377,000 395,000
Deferred revenue - 9,000
Other liabilities (Note 9) 4,000 -
Note payable - current (Note 10) 50,000 110,000
Total current liabilities 718,000 1,022,000
Note payable - long term (Note 10) 339,000 339,000
Total liabilities 1,057,000 1,361,000
Shareholders' equity:
Common stock, $.01 par value,
50,000,000 shares authorized
July 31, 1996 and 25,000,000
shares authorized October 31,
1995; 18,910,697 shares issued
and outstanding on July 31,
1996 and October 31,1995; 189,000 190,000
Additional paid-in capital 23,484,000* 23,410,000
Accumulated deficit (23,733,000) (22,526,000)
Total shareholders'
equity (60,000) 1,074,000
$ 997,000 $ 2,435,000
Commitments & Contingencies
See accompanying condensed notes to financial statements.
*Rounding differences on audited financial statements: Common
shares 189,000; Accumulated deficit (22,525,000) and on second
quarter financial statements; Additional paid in capital
(23,410,000).
<TABLE> VERSUS TECHNOLOGY, INC.
Statements of Operations (Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Sales $ 67,000 $ 228,000 $ 160,000 $ 788,000
Cost of sales 60,000 202,000 124,000 650,000
Gross margin 7,000 26,000 36,000 138,000
Expenses:
Research and development 123,000 345,000 415,000 675,000
Sales, general, and administrative 279,000 367,000 838,000 1,461,000
402,000 712,000 1,253,000 2,136,000
Income (Loss) from operations (395,000) (686,000) (1,217,000) (1,998,000)
Other income (expense):
Interest income 5,000 1,000 41,000 17,000
Interest expense ( 16,000) ( 1,000) ( 32,000) ( 8,000)
Other income 1,000
Gain on debt settlement - - 28,000 -
Loss on debt settlement - - ( 29,000) -
Gain on sale of subsidiary - - - 424,000
Gain on sale of DCX - - - 365,000
11,000 - 9,000 798,000
Net income (loss) before
provision for income taxes (406,000) (686,000) (1,208,000) ( 798,000)
Provision (benefit) for income taxes - - - _ -____
Net income (loss) $(406,000) $(686,000) $(1,208,000) $(1,200,000)
Net income (loss) per common and
common equivalent share (Note 11) ( .02) ( .16) ( .06 ) ( .29)
See accompanying condensed notes to financial statements.
</TAB`LE>
</TABLE>
<TABLE>
VERSUS TECHNOLOGY, INC.
Statements of Shareholders' Equity (Unaudited)
Common Common Treasury Additional
Nine Months Ended Stock Shares Shares Paid-In Accumulated
July 31, 1996 Shares Amount Amount Capital Deficit Total
<S> <C> <C> <C> <C> <C> <C>
Balance, October
31, 1995 18,910,697 *$ 190,000 $ - $23,410,000 * $(22,526,000) $1,074,000
Issuance of common
stock: 425,000 4,000 155,000 159,000
Shares purchased a
Treasury Shares ( 425,000) ( 85,000) - ( 85,000)
Retirement of
Treasury Shares ( 4,000) 85,000 ( 81,000)
Net loss for the
nine months ended
July 31, 1996 ( 1,208,000)( 1,208,000)
Balance,
July 31, 1996 18,910,697 $189,000 $ - *$23,484,000 $(23,733,000) $( 60,000)
Common Common Treasury Additional
Nine Months Ended Stock Shares Shares Paid-In Accumulated
July 31, 1995 Shares Amount Amount Capital Deficit Total
Balance, October
31, 1994 $ 4,160,780 $ 42,000 $ - $20,834,000 $(20,029,000) $ 847,000
Issuance of common
stock:
Shares issued pursuant
to Incentive Stock
Option Plan
Net 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)
*Rounding differences on audited financial statements: Common shares 189,000; Accumulated deficit
(22,525,000) and on second quarter financial statements; Additional paid-in capital (23,410,000).
See accompanying condensed notes to financial statements.
</TABLE>
<TABLE> VERSUS TECHNOLOGY, INC.
Statements of Cash Flow
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
July 31, July 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Cash flows from operating
activities:
Net Income (loss) $( 406,000) $( 686,000) $(1,208,000) $( 1,200,000)
Adjustments to reconcile
net income (loss) to net
cash used in operating
activities:
Depreciation and amortization 17,000 57,000 49,000 190,000
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 and decrease in assets
and liabilities:
(Increase) decrease in accounts
receivable and accounts
receivable - other ( 19,000) ( 29,000) 56,000 206,000
Increase (decrease) in
inventories ( 1,000) 6,000 ( 33,000) 59,000
Increase (decrease) in prepaid
expenses and other current
assets 28,000 2,000 ( 70,000) ( 14,000)
Increase (decrease) in
accounts payable and other
liabilities ( 52,000) 43,000 ( 222,000) ( 419,000)
Increase (decrease) in accrued
expenses 5,000 77,000 ( 18,000) ( 31,000)
Increase (decrease) in deferred
revenues--customer advance
payments ( - ) ( - ) ( 9,000) ( 52,000)
Total adjustments ( 22,000) 160,000 ( 247,000) ( 773,000)
Net cash provided by (used
in) operating activities ( 428,000) ( 526,000) (1,455,000) (1,973,000)
Cash flows from investing activities:
Proceeds from assets held for
sale - - - 1,255,000
Principal received on notes
receivable - - - 698,000
Additions to property and
equipment ( 6,000) ( 1,000) ( 72,000) ( 15,000)
Additions to deferred charges
and other assets - - -
Additions to prepaid royalties - ( 59,000) ( 10,000)
Net cash provided by (used
in) investing activities ( 6,000) ( 1,000) ( 131,000) 1,928,000
Cash flows from financing activities:
Payments on obligation under
capital lease - - - ( 9,000)
Issuance of notes payable 550,000 550,000
Payments on notes payable ( 24,000) ( 33,000) ( 60,000) ( 238,000)
Issuance of other liability 18,000
Payments on other liability ( 3,000) ( 14,000)
Issuance of common stock 159,000 159,000
Issuance of treasury stock ( - ) - ( 85,000) -____
Net cash provided by (used
in) financing activities 132,000 517,000 18,000 303,000
Net increase (decrease) in cash
and cash equivalents ( 302,000) ( 10,000) (1,568,000) 258,000
Cash and cash equivalents,
beginning of period 732,000 332,000 1,998,000 64,000
Cash and cash equivalents,
end of period $ 430,000 $ 322,000 $ 430,000 $ 322,000
Supplemental disclosures of
cash flow information:
Cash paid during the year for
interest $ 16,000 $ 4,000 $ 32,000 $ 8,000
Supplemental disclosures of
non-cash investing and financing
activities:
During fiscal 1995,
approximately $449,000 of accounts
payable were re-negotiated to a
note payable.
During second quarter of 1996,
$18,000 of accounts payable was
re-negotiated to an other liability,
a non-interest bearing monthly
installment payment with an initial
down payment of $11,000.
Retirement of treasury stock: On
June 7, 1996, the company retired
its 425,000 shares of treasury stock.
See accompanying condensed notes to financial statements.
</TABLE>
VERSUS TECHNOLOGY, INC.
Condensed Notes to Financial Statements
July 31, 1996
(1) Description of Business
Versus Technology, Inc. (the "Company") has two lines of
business, the infrared (IR) tracking system and a cellular line.
The Company sees its future in the business of IR tracking systems
and software development. The infrared tracking system permits the
instantaneous identification and tracking of the location of people
and equipment and can be used to control access and permit
instantaneous two-way communication. The Company believes that this
technology will have a wide range of applications. The system is
based on the Company's patented proprietary technology involving the
transmission and reception of infrared light for use in tracking
multiple subjects in several areas. During the fiscal year 1995,
the Company significantly downsized its manufacturing operations,
moved its headquarters and principal operating facilities, ceased
production and distribution of a significant product line, and
focused development efforts on infrared product technology. Primary
engineering activities include software design, development,
hardware development and integration, testing, system integration
installation, maintenance, support, and training. The Company
commenced formal marketing of its system on August 1, 1995. The
first market being addressed by the Company is the medical industry.
Several demonstration systems, however, were already in place and
operating with high levels of customer satisfaction. There have
been only limited sales to date.
The Company also manufactures and distributes a number of
cellular products for data transmission and cellular alarm
transport. The Company's products can handle the sending of alert
notices, such as alarm reporting for fire, burglar, health,
security, and other alert communication requirements. The Company's
CAT products manufacturing began in late 1993. As a result of the
settlement of a patent infringement suit during the fourth quarter
of the 1995 fiscal year, the greater portion of the CAT products
sold by Versus at the beginning of fiscal 1995 have now been
discontinued.
On September 29, 1995, the Company completed a Private
Placement of 14,674,917 shares of its common stock to accredited
investors at $0.20 per share. After payment of bridge loans, the
net proceeds of $2,428,050 are being used to develop the IR tracking
business and for general operating expenses.
Subsequent to the third quarter of fiscal 1996, the Company
completed a Private Placement with net proceeds of approximately 5.2
million and with an exchange of common stock, acquired Olmsted
Engineering Co. as a wholly owned subsidiary. See Part II, Item 5
Other Matters.
(2) Summary of Significant Accounting Policies
In the opinion of the management of the Company, the
accompanying unaudited 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, 1996, and
the results of operations and cash flows for the three month periods
ended July 31, 1996 and 1995. The results for the three month
periods ended July 31, 1996 and 1995, are not necessarily indicative
of the results to be expected for the full fiscal year.
Inventories:
Inventories are stated at the lower of cost (first-in, first-
out method) or market.
Property and equipment:
Property and equipment are carried at cost and depreciated
over estimated useful lives, principally on the straight-line method
for financial reporting purposes and accelerated methods for income
tax purposes.
The estimated useful lives used for determination of
depreciation and amortization for financial reporting purposes are:
machinery and equipment--3 to 10 years; furniture and fixtures--3 to
10 years.
Revenue recognition:
Revenue from product sales is recognized when the related
goods are shipped and all significant obligations of the Company
have been satisfied. The Company generally offers a 90-day warranty
on its products. Costs incurred to service products under warranty,
which have not been significant, are charged to operations when
incurred.
Deferred revenue--customer advance payments:
Revenue from advanced payments received from customers is
deferred until all revenue recognition criteria are satisfied.
Intangible assets:
Patents and trademarks are recorded at cost and are amortized
using the straight-line method over seven years.
Statements of cash flows:
For the purpose of the statements of cash flows, the Company
considers all investments with a maturity of three months or less at
date of purchase to be cash equivalents.
(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 22 months. 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 the first quarter fiscal 1995.
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 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) Cash Held for Appeal
On March 22, 1996, $205,000 was moved to an attorney held
interest-bearing account to secure payment of the judgment on
appeal.
(6) Inventories
Inventories are summarized as follows:
July 31, October 31,
1996 1995
Raw Materials $ 33,000 $ 11,000
Work in progress 6,000 41,000
Finished goods 26,000 65,000
Inventory reserve ( 20,000) -
$ 45,000 $ 11,000
(7) Property and Equipment
Property and equipment are summarized as follows:
July 31, October 31,
1996 1995
Machinery, equipment and
vehicle $ 186,000 $ 114,000
Furniture and fixtures 25,000 25,000
211,000 139,000
Less accumulated
depreciation 146,000 136,000
$ 65,000 $ 3,000
Substantially all of the Company's property and equipment
related to the discontinued cellular activities were sold or written
down to net realizable value as a result of the Telular litigation
settlement on fiscal year ended 1995 (see Part II, Item 1) and the
move of headquarters and principal operations to Michigan.
Additions made to equipment in third quarter 1996 were primarily
comprised of computer equipment.
(8) Deferred Charges and Other Assets
Deferred charges and other assets are summarized as follows:
July 31, October 31,
1996 1995
Patents and trademarks $ 366,000 $ 365,000
Deferred computer
software costs 59,000 -
425,000 365,000
Less accumulated
amortization 152,000 112,000
$ 273,000 $ 253,000
(9) Other Liabilities
On April 17, 1996, the Company entered an agreement
renegotiating accounts payable to one of its law firms for $18,000,
to be paid with an initial payment of $11,000 and seven monthly non-
interest bearing installments of $1,000 each commencing May 17,
1996, and continuing until $7,000 has been paid in full.
The future amounts due under the aforementioned agreement are
as follows:
1996 $ 4,000
(10) Note Payable
On August 1, 1995, the Company signed a note payable,
renegotiating accounts payable to one of its law firms for $449,000.
The note bears interest at a floating annual rate and requires 13
monthly installments of $10,000 which commenced on December 1, 1995,
and a balloon payment for the entire remaining principal balance on
January 1, 1997. An adjustment to principal for year to date
interest portion of payments was made in third quarter financial
statements. The note is secured by certain patents of the Company.
The future amounts due under the aforementioned loan are as follows:
1996 $ 50,000
1997 339,000
$ 389,000
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 bore
interest at a rate of 8%, payable semi-annually and were due on
December 31, 1995. Such amounts were paid in full as of October 31,
1995.
(11) Net Income (Loss) per Share
Net income (loss) per share is based upon the weighted
average number of shares outstanding of 18,733,614 and 4,160,780 for
the three months ended July 31, 1996, and July 31, 1995,
respectively, and 18,710,003 and 4,160,780 for the nine months ended
July 31, 1996, and July 31, 1995, respectively. The effect of the
Company's common stock equivalents (options and warrants) was anti-
dilutive for both periods.
(12) Relocation
The Company closed its New Jersey location in September,
1995, and moved all operations of the Company to the Traverse City,
Michigan, office location. All related costs of this relocation,
including the write down of non-essential fixed assets to net
realizable value, have been recognized in the accompanying financial
statements.
(13) Related Parties
The President and Chief Executive Officer of the Company is
also a member of the Board of Directors and a stockholder of Olmsted
Engineering.
Olmsted Engineering provided a number of resources to Versus
Technology, Inc. for the fiscal year ended October 31, 1995,
including research and development, pass-through billings, use of
office space and development of a business plan, and marketing
support.
The Company believes services provided by Olmsted have been
negotiated at arm's length at the fair value of goods and services
received. The Company is currently maintaining its headquarters and
principal operating facilities at the business location of Olmsted,
free of rent charges through February, 1996, and began paying rent
of $3,000 per month under a Rental Agreement with Olmsted
Engineering.
On January 26, 1996, the Company entered into an agreement to
lease building space from an officer of the Company. The term of
the lease commitment is 5 years, at an amount of $4,750 per month.
The start date of the lease term has not been determined, as the
building construction has not been completed.
Olmsted is the principal consultant to Versus on IR Tracking.
On April 20, 1995, the Corporation entered into a Consultancy
Agreement with Olmsted, which is principally owned by the Company's
President and Chief Executive Officer, Gary T. Gaisser. The
Agreement ran for a one-year period, commencing on April 20, 1995.
Under this Agreement, the consultant received an annual fee of
$144,000, payable monthly. They were further entitled to a fee at
the rate of $90 an hour for man hours in excess of 100 hours each
month.
The Consultancy Agreement made effective as of April 20,
1995, between the Company and Olmsted Engineering Company had an
initial term of one year, from April 20, 1995, to April 20, 1996.
Effective November 1, 1995, the contract was amended to provide
significant savings to the Company.
On May 9, 1996, Olmsted Engineering Co. agreed to extend the
term of the Consultancy Agreement, as amended November 1, 1995, from
April 20, 1996, to April 19, 1997.
Subsequent to the third quarter of fiscal 1996,the Company completed
a private placement with net proceeds of approximately 5.2 million
and acquired Olmsted Engineering, Co., as a wholly owned subsidiary.
See Part II, Item 5 Other Matters.
(14) Loss/Gain on Debt Settlement
Loss on debt settlement for first quarter fiscal 1996
consisted of the final tender of payment to Telular on a judgment
related to patent infringement (see Part II, Item 1) and negotiated
payment and resolution of a disputed lease obligation for lease of a
copier.
Gain on debt settlement for second quarter fiscal 1996
consisted of a re-negotiation of a payable to a reduced monthly
installment agreement, gains on debt settlement, and an adjustment
to accounts receivable for an amount already written off. Losses in
second quarter of fiscal 1996 included an adjustment for advanced
payments earned.
There were no gains or losses on debt settlement in third
quarter of fiscal 1996.
(15) Subsequent event-Acquisition of wholly owned subsidiary
Subsequent to the end of the third quarter of fiscal 1996, on
August 26, 1996, a wholly-owned, subsidiary of the Registrant was
merged into Olmsted Engineering Co., a Michigan Corporation
(Olmsted). The corporation resulting from the merger will
continue to do business under the name Olmsted Engineering Co.
The Registrant will issue to shareholders of Olmsted in
exchange for their shares a net consideration of 6,000,000 shares of
the Registrant's common stock.
Olmsted is in the business of developing and marketing various
software products used mainly in the mold, die, and pattern making
industries. Prior to the merger, Gary T. Gaisser, the president of
the Registrant, owned a majority of all classes of stock of Olmsted.
Olmsted has served as a research and development consultant to the
Registrant since 1993, and leases office space to the Registrant on
a temporary basis. The Registrant intends that the corporation
resulting from the merger continue the business of Olmsted.
The occurrence of the merger was conditioned, inter alia, on
the Registrant's raising at lease $4,500,000 net of commissions
through a private placement of its common stock. As of the date of
the merger, the Registrant closed the sale of 11,335,000 shares of
common stock in a private offering to accredited investors at a
price of $.50 per share. Proceeds to the Registrant, net of
commissions and expenses, amounted to approximately $5,200,000.
Upon conclusion of the private placement and the merger, 30,245,697
shares of the Registrant's common stock were outstanding and
6,000,000 additional shares were issuable in connection with the
merger (subject to the exercise, if any, of dissenters' rights of
Olmsted shareholders), for a total of 36,245,697 shares of common
stock currently outstanding or issuable in connection with the
merger. These events have also been reported in a form 8-K filed by
the Registrant with respect to events occurring August 26, 1996.
Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS
General
The Registrant, Versus Technology, Inc. (the "Company")
designs, manufactures, and markets data and security transport
equipment. The Company has progressively reduced its losses per
share from (.29) per share for the 9 months ended July 31, 1995
compared to (.06) for the 9 months ended July 31, 1996.
In connection with the move of the Company's headquarters and
principal operations to Traverse City, Michigan, the Company has now
refocused itself as a manufacturer of infrared tracking systems and
specifically cellular products. With the acquisition of Olmsted
Engineering, subsequent to third quarter of fiscal 1996, the
Company will also continue Olmsted business focus in software
development. See Note 15, Subsequent event/Acquisition of wholly
owned subsidiary.
Versus Technology, Inc. has entered an exclusive marketing
agreement with a market leader in sales of systems used for
monitoring of vital patient physiological parameters for the
distribution of the Traverse Tracking System in acute care
hospitals. See Part II, Item 5.
The Company's strategy going forward will be to meaningfully
expand sales of medical tracking and monitoring systems, develop a
portfolio of service contracts with third parties, develop sales in
the medical and health fields, and to pursue other markets. The
Company intends to enter the governmental, professional, and
manufacturing markets with its infrared technology products.
Results of Operations
Three Months Ended July 31, 1996 and July 31, 1995
Total revenues for the third quarter of fiscal 1996 of
$67,000 were $161,000 or 71% below the corresponding quarter in
fiscal 1995. This decrease in revenues is primarily due to the
discontinuance of certain cellular product sales. The Company is
continuing its development of infrared product sales and expects
this product line to be the Company's primary focus in fiscal 1996.
Cost of sales as a percentage of revenues in the third
quarter of fiscal 1996 remained at 89% the same as the same quarter
in fiscal 1995. As the infrared product line begins to expand, the
cost of sales is considerably less than that of the cellular
product.
The Company's selling, general, and administrative expenses
for the third quarter of fiscal 1996 were $278,000 or 24% lower than
in the third quarter of fiscal 1995. This decrease was primarily
due to the Company's downsizing of its operations in addition to
cost reductions associated with the move of its headquarters and
principal operations to Michigan.
Research and development expenses for the third quarter of
fiscal 1996 were $123,000 or 64% below these same expenses of
$345,000 for the third quarter in fiscal 1995. The completion of
initial development of the infrared product accounts for the
decrease in these expenditures.
In the third quarter of fiscal 1996, other income and expense
decreased $12,000, from third quarter 1995 levels. This decrease
was due to increase in interest income of $5,000, increase in
interest expense of $17,000.
The Company's third quarter of fiscal 1996 net loss of
$(406,000)or (.02) per share compared to a net loss of $(686,000) or
(.16) per share in the third quarter of fiscal 1995 is primarily due
to a decrease in revenues due to the change in the product mix from
primarily cellular to development of the infrared system, the move
from Trenton, New Jersey, to Traverse City, Michigan, and a general
reduction of selling and administrative expenses in the third
quarter of fiscal 1996.
Nine Months Ended July 31, 1996 and July 31, 1995
Revenues for the nine months ended July 31, 1996, of fiscal
1996 were $160,000 or 82% or $628,000 below the corresponding period
of fiscal 1995, with revenues of $788,000. This decrease in
revenues is due primarily to recognition of revenues in the nine
months ended July 31, 1995, from the sale of DCX, nine months'
fiscal 1996 revenues reflecting non-DCX revenues, discontinuation of
the CAT product line, and change in product mix including beginning
stage revenues for sale of infrared products.
Cost of sales as a percentage of revenues in the nine months
ended July 31, 1996, decreased to 77% from 82% for the same period
in fiscal 1995. The gross margin decline is caused by the decline
in revenues due to the discontinuation of the CAT Product line and
the beginning stage revenues for the sale of infrared products.
The Company's selling, general, and administrative expenses
for the nine months ended July 31, 1996, were $838,000 or
approximately 43% or $623,000 below such expenses for the same
period in fiscal 1995. This decrease in expenses is a result of the
move from Trenton, New Jersey, to Traverse City, Michigan, as well
as an overall downsizing of operations and the shift from
manufacturing to assembly of product.
Research and development expenditures during the nine months
ended July 31, 1996, were $415,000 or 39% or $260,000 below such
expenses in the same period of fiscal 1995. The completion of
initial development of infrared technology primarily accounts for
the decrease in these expenditures.
The Company's nine month 1996 net loss of $(1,208,000)
compares to a net loss of $(798,000) for the same period in 1995.
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
During the three (3) months ended July 31, 1996, the Company
relied primarily on cash generated from operations and a private
placement of common stock. On September 29, 1995, the Company
completed a Private Placement which generated net proceeds to the
Company of approximately $2.7 million dollars. The Company used
$550,000 of the proceeds to repay certain notes payable, and the
remainder will be used for working capital. Subsequent to the close
of the third quarter of fiscal 1996, the company completed a private
placement generating net proceeds of approximately $5.2 million
dollars. These proceeds will be used for working capital.
Significant liquidity factors are as follows:
July 31, October 31,
1996 1995
Current ratio .9:1 2.1:1
Quick ratio .7:1 2.0:1
The foregoing ratios at July 31, 1996, are primarily the
result of operating results. As of July 31, 1996, net accounts
receivable were lower by $56,000 or 42% than at October 31, 1995.
Inventories of 45,000 reflect an increase of $34,000 or over
inventory of 11,000 on October 31, 1995. Current liabilities were
reduced by $307,000 or 30% from October 31, 1995. The Company also
has Federal tax loss carry-forwards available, although limited as
to amount.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Calvert et al. V. Gary T. Gaisser and Olmsted Engineering Co.
Complaint Filed May 29, 1996
Court: Circuit Court for the County of Grand Traverse, Michigan
Index No. 96-14,861
This action, recently filed, alleges that in connection with a
private offering in 1994, Olmsted and Mr. Gaisser had reneged upon
an oral promise allegedly made in connection with the plaintiffs'
purchase of common stock. Plaintiffs allege that Mr. Gaisser
promised that the holders of Olmsted Preferred Stock (Mr. Gaisser is
the principal, but not sole holder, of Preferred Stock Olmsted)
would cancel all of their preferred stock in consideration of the
investment being made, so that the plaintiffs would own
approximately 19% of Olmsted after they invest(and have options to
purchase an equal amount of shares). These shareholders, in fact,
will receive 4% of the proceeds of the Merger and will have options
to purchase an equal amount of shares until December. Olmsted and
Mr. Gaisser have denied that any such representation was ever made
and have asserted that the purchasers were well aware of the
existence of the Preferred Stock at the time of their purchase. The
Company intends to defend this claim, which became an obligation of
a Versus subsidiary after the a Merger.
This a litigation involves the newly acquired subsidiary, and
predates Olmsted's acquisition by the Registrant.
Item 2 - Changes in Securities
Pursuant to the Employee Stock Option Plan which was approved
by the Company's shareholders on May 10, 1996, and which was
adopted, ratified, and confirmed by the Company's Board of
Directors, Gary T. Gaisser was granted an option to acquire from the
Company 1,000,000 shares of the common stock of the Company, $.01
par value per share, at a price of $.375 per share, which price was,
as of the time of the grant of the option, the current fair market
value of such shares.
Item 4 - Submission of Matters to a Vote of Security Holders
The 1996 Annual Meeting of Shareholders of Versus Technology,
Inc. was held on Friday, May 10. The following directors were
elected at the meeting: Julian C. Schroeder, Gary T. Gaisser, and
Elliot G. Eisenberg.
Julian C. Schroeder and Gary T. Gaisser's term of office
continued after the meeting; Elliot G. Eisenberg, a nominee, was
elected for an initial term.
Other matters submitted to a vote at the Annual Meeting of
Shareholders included:
Vote to adopt the 1996 Incentive Stock Option Plan
(Proposition 2) and the approval of an Amendment to the Company's
Certificate of Incorporation to increase the number of authorized
common shares from 25,000,000 to 50,000,000 shares (Proposition 3).
Total shares voted were 11,176,767. The tabulation of votes
was as follows:
Total shares voted: 11,176,767
Total percentage voted: 59.100
Votes for pct Votes Votes Unvoted
Against Abstained
Director #1 10,978,267 58 198,500
Director #2 10,978,267 58 198,500
Director #3 10,978,267 58 198,500
Proposition #2 9,189,482 48 318,040 27,800 1,641,445
Proposition #3 10,882,147 57 257,170 34,050 3,400
All directors and nominees up for election were elected, and
Proposition 2 and Proposition 3 were passed.
Item 5 - Other Matters
Subsequent to the end of the third quarter of fiscal 1996, on
August 26, 1996, a wholly-owned, subsidiary of the Registrant was
merged into Olmsted Engineering Co., a Michigan Corporation
(Olmsted). The corporation resulting from the merger will
continue to do business under the name Olmsted Engineering Co.
The Registrant will issue to shareholders of Olmsted in
exchange for their shares a net consideration of 6,000,000 shares of
the Registrant`s common stock.
Olmsted is in the business of developing and marketing various
software products used mainly in the mold, die, and pattern making
industries. Prior to the merger, Gary T. Gaisser, the president of
the Registrant, owned a majority of all classes of stock of Olmsted.
Olmsted has served as a research and development consultant to the
Registrant since 1993, and leases office space to the Registrant on
a temporary basis. The Registrant intends that the corporation
resulting from the merger continue the business of Olmsted.
The occurrence of the merger was conditioned, inter alia, on
the Registrant`s raising at lease $4,500,000 net of commissions
through a private placement of its common stock. As of the date of
the merger, the Registrant closed the sale of 11,335,000 shares of
common stock in a private offering to accredited investors at a
price of $.50 per share. Proceeds to the Registrant, net of
commissions and expenses, amounted to approximately $5,200,000.
Upon conclusion of the private placement and the merger, 30,245,697
shares of the Registrant`s common stock were outstanding and
6,000,000 additional shares were issuable in connection with the
merger (subject to the exercise, if any, of dissenters` rights of
Olmsted shareholders), for a total of 36,245,697 shares of common
stock currently outstanding or issuable in connection with the
merger. These events have also been reported in a form 8-K filed by
the Registrant with respect to events occurring August 26, 1996.
During the third quarter of fiscal 1996, the Company entered
into an exclusive marketing agreement with Marquette Medical Systems
of Milwaukee, Wisconsin for the distribution of the Traverse
Tracking system in acute care hospitals. Under the terms of the
agreement, Marquette receives the exclusive rights to distribute and
supply the Versus` infrared tracking system for personnel and
equipment tracking to acute care hospitals located in the United
States. In return, Versus receives a minimum annual commitment to
purchase systems per contract year.
Marquette Medical Systems is a leading designer &
manufacturer of medical electronic equipment and clinical
information systems for the diagnosis and monitoring of patients
requiring critical care. Marquette Medical Systems is also a world
market leader in computerized electrocardiographic equipment and
related supplies and is also a market leader in sales of systems
used for monitoring of vital patient physiological parameters.
Marquette Medical Systems had more than $500 million in world wide
sales of medical monitoring equipment last year.
In Part II, Item 5, Other matters of the April 30, 1996 10QSB,
the Company noted as a subsequent event, its sale of 425,000
treasury shares to a private investor. These 425,000 treasury shares
were retired and 425,000 common shares were issued to a private
investor in the third quarter of fiscal 1996.
Item 6 - Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this report:
Exhibits
3 ( i ) Certificate of Amendment of Certificate of
Incorporation.
99 Press Release regarding Exclusive Marketing
Agreement with Marquette Electronics, Inc.
(b) Reports on Form 8-K during the third fiscal quarter:
Subsequent to the close of the third quarter, a report on form
8K was filed with respect to the acquisition by merger of Olmsted
Engineering Co., and the private placement of securities which
events occurred on August 26, 1996. The following financial
statements will be filed by amendment to the Form 8K: Audited
balance sheets, statements of income and cash flows and changes in
stockholders` equity for fiscal 1995 for Olmsted Engineering, Co.,
and pro forma consolidated balance sheet and pro forma consolidated
statement of operations for the combined companies for fiscal 1995.
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
Gary T. Gaisser
President and Chief Executive Officer
By:DEBRA A. BOYER
Debra A. Boyer
Chief Financial Officer and
Principal Accounting Officer
September 12, 1996
EXHIBIT - 3.(i)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATION OF INCORPORATION
VERSUS TECHNOLOGY, INC., a corporation organized and existing by
virtue of the General Corporation Law of the State of Delaware, DOES
HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation, by the
vote of a majority of the Directors present at a meeting held on
January 26, 1996, at which a quorum was present, adopted resolutions
proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation and directed its
consideration by the stockholders:
RESOLVED, that the Certificate of Incorporation of the
Corporation be amended by changing Article 4, thereof so that, as
amended, said Article shall be and read as follows:
4. Number of Shares. The aggregate number of shares is
50,000,000 shares, par value $.01 per share. The stated value
applicable thereto is five hundred thousand dollars ($500,000.00).
SECOND: That the aforesaid amendment was adopted by the
affirmative vote of a majority of the votes cast by all stockholders
of said corporation entitled to vote thereon at a meeting of the
stockholders of the corporation duly called and held upon notice in
accordance with the provisions of Section 222 of the General
Corporation Law of the State of Delaware, at which a quorum was
present, on May 10, 1996.
THIRD: That the aforesaid amendment was duly adopted in
accordance with the applicable provisions of Section 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, the corporation has caused this certificate
to be signed by Gary T. Gaisser, its President, and attested by
Debra Boyer, its Secretary, this third day of June, 1996.
VERSUS TECHNOLOGY, INC.
By:GARY T. GAISSER
Gary T. Gaisser
ATTEST:
By: DEBRA BOYER
Debra Boyer
EXHIBIT - 99
PRESS RELEASE REGARDING EXCLUSINVE MARKETING AGREEMENT WITH
MARQUETTE ELECTRONICS, INC.
N E W S R E L E A S E
Versus Technology, Inc. Enters into Exclusive Marketing Agreement
with Marquette Medical Systems
TRAVERSE CITY, Mich., August 16/PRNewswire/--Versus Technology, Inc.
(Nasdaq Bulletin Board: VSTI) announced:
Two Midwest companies have combined forces to market infrared tracking
systems to acute care hospitals. Versus Technology, Inc. announced
today that it has entered into an Exclusive Marketing Agreement
with Marquette Medical Systems, of Milwaukee, Wisconsin.
Under the terms of the agreement, Marquette receives the exclusive rights
to distribute and supply Versus's infrared tracking system for personnel
and equipment tracking to acute care hospitals located in the United
States. In return, Versus receives a minimum annual commitment to
purchase per contract year.
"This agreement gives us a solid relationship with a market leader in the
health care field," remarked Versus's President, Gary Gaisser. "We are
working together on a broad range of product developments."
Versus is a producer of infrared tracking systems and related wireless
products. Its Personnel and Equipment Tracking (PET) System (now referred
to as the Traverse Tracking System) is used in hospitals to locate
physicians, caregivers, patients, and equipment on computer floor plans.
Marquette Medical Systems is a leading designer and manufacturer of medical
electronic equipment and clinical information systems for the diagnosis and
monitoring of patients requiring critical care. The company is a world
market leader in computerized electrocardiographic equipment and related
supplies and is also one of the market leaders in sales of systems used for
monitoring of vital patient physiological parameters.
Versus Technology, Inc. of Traverse City, MI is an acknowledged leader in
infrared tracking systems and portable security products. Call
(616) 946-5868 or FAX (616) 946-6775.
- -0- 8/16/96
/CONTACT: Gary T. Gaisser, 616-946-5868, of Versus Technology, Inc./(VSTI)
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