<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JANUARY 31, 1998
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-17500
VERSUS TECHNOLOGY, INC.
(Name of Small Business Issuer in its charter)
Delaware 22-2283745
(State of Incorporation) (I. R. S. Employer Identification Number)
2600 Miller Creek Road, Traverse City, Michigan 49684
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (616) 946-5868
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past
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
January 31, 1998: 38,362,875.
Transitional small business disclosure format: Yes ( ) No ( X )
<PAGE> 2
VERSUS TECHNOLOGY, INC.
INDEX TO FORM 10-QSB
<TABLE>
<S> <C> <C>
PAGE
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets as of January 31, 1998
(Unaudited) and October 31, 1997 3
Consolidated Statements of Operations for the three
months ended January 31, 1998 and 1997 (Unaudited) 5
Consolidated Statements of Cash Flows for the three
months ended January 31, 1998 and 1997 (Unaudited) 6
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
PART II OTHER INFORMATION
Item 1 Legal Proceedings 13
Item 6 Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
<PAGE) 3
VERSUS TECHNOLOGY, INC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
January 31, 1998 October 31, 1997
-------------------------------------
<S> <C> <C>
ASSETS
====================================
Current Assets
--------------
Cash and cash equivalents $ 1,422,000 $ 1,871,000
Accounts receivable, net of allowance
for doubtful accounts of $62,000 and
$52,000 275,000 431,000
Notes receivable, net 14,000 15,000
Inventories - purchased parts and
assemblies 161,000 171,000
Prepaid expenses and other current assets 72,000 113,000
-------------------------------------
TOTAL CURRENT ASSETS 1,944,000 2,601,000
-------------------------------------
PROPERTY AND EQUIPMENT net of accumulated
depreciation of $107,000 and $89,000 275,000 283,000
SOFTWARE DEVELOPMENT COSTS net of
accumulated amortization of $106,000
and $87,000 494,000 513,000
GOODWILL, net of accumulated amortization
of $221,000 and $182,000 2,118,000 2,157,000
PATENTS AND INTANGIBLE ASSETS net of
accumulated amortization of $387,000
and $344,000 1,578,000 1,621,000
-------------------------------------
$ 6,409,000 $ 7,175,000
======================================
</TABLE>
<PAGE> 4
VERSUS TECHNOLOGY, INC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
January 31, 1998 October 31, 1997
-------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
====================================
CURRENT LIABILITIES
-------------------
Accounts payable $ 88,000 $ 308,000
Accrued expenses 340,000 159,000
Deferred revenue-customer advance
payments 197,000 356,000
Note payable - current portion 120,000 123,000
--------------------------------------
TOTAL CURRENT LIABILITIES 745,000 946,000
--------------------------------------
Note payable, less current portion 50,000 83,000
--------------------------------------
Total Liabilities 795,000 1,029,000
--------------------------------------
SHAREHOLDERS' EQUITY
--------------------
Common stock, $.01 par value; 50,000,000
shares authorized; 38,362,875 and
38,271,579 shares issued and
outstanding 384,000 383,000
Additional paid-in capital 33,171,000 33,074,000
Accumulated deficit (27,699,000) (27,142,000)
Unearned compensation (242,000) (169,000)
--------------------------------------
TOTAL SHAREHOLDERS' EQUITY 5,614,000 6,146,000
--------------------------------------
$ 6,409,000 $ 7,175,000
======================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
VERSUS TECHNOLOGY, INC.
Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended January 31,
1998 1997
-------------------------------------
<S> <C> <C>
Revenues $ 598,000 $ 391,000
Operating Expenses
Cost of revenues 339,000 313,000
Research and development 105,000 98,000
Sales and marketing 284,000 161,000
General and administrative 448,000 247,000
-------------------------------------
1,176,000 819,000
-------------------------------------
Loss From Operations (578,000) (428,000)
-------------------------------------
Other Income (Expense)
Interest income 21,000 46,000
Interest expense - (5,000)
Other, net) - (7,000)
-------------------------------------
21,000 34,000
-------------------------------------
Net Loss $ (557,000) $ (394,000)
=====================================
Basic and Diluted Net Loss Per Share $ (.01) $ (.01)
=====================================
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 6
VERSUS TECHNOLOGY, INC.
Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended January 31,
1998 1997
-------------------------------------
<S> <C> <C>
Operating activities:
Net Loss $ (557,000) $ (394,000)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and Amortization 119,000 85,000
Amortization of unearned Compensation 24,000 13,000
Loss on sale of equipment - 7,000
Changes in operating assets and
liabilities:
Accounts receivable 156,000 (169,000)
Inventories 10,000 8,000
Prepaid expenses and other current
assets 41,000 22,000
Accounts payable and other
liabilities (220,000) (288,000)
Accrued expenses 181,000 ( 47,000)
Deferred revenues-customer advance
payments (159,000) ( 15,000)
-------------------------------------
Net cash used in operating activities (405,000) (778,000)
-------------------------------------
Investing activities:
Changes in note receivable 1,000 ( 1,000)
Payment of costs associated with
acquisition of license to
intellectual property - ( 10,000)
Additions to property and Equipment ( 10,000) ( 58,000)
Proceeds from sale of Equipment - 8,000
-------------------------------------
Net cash used in investing activities ( 9,000) ( 61,000)
-------------------------------------
</TABLE>
<PAGE> 7
VERSUS TECHNOLOGY, INC.
Consolidated Statements of Cash Flow
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended January 31,
1998 1997
-------------------------------------
<S> <C> <C>
Financing activities
Payments on notes payable ( 36,000) ( 23,000)
Issuance of Common Stock 1,000 -
-------------------------------------
Net cash used in financing activities ( 35,000) ( 23,000)
-------------------------------------
Net increase (decrease) in cash and
cash equivalents (449,000) (862,000)
Cash and cash equivalents, beginning
of period 1,871,000 4,931,000
-------------------------------------
Cash and cash equivalents, end of period $ 1,422,000 $ 4,069,000
=====================================
Supplemental disclosures of cash
flow information
Cash paid during the quarter
for interest $ - $ 5,000
=====================================
</TABLE>
See accompanying notes to consolidated financial statements.
During the first quarter of fiscal 1998:
The Company issued additional non-vested Employee Incentive Restricted
Stock and repurchased similar stock from terminated employees, all at par
value, pursuant to the 1996 Incentive Restricted Stock Bonus Plan. Unearned
compensation of $102,000 was recorded for the stock issued and unearned
compensation of $5,000 related to the repurchased shares was cancelled.
<PAGE> 8
VERSUS TECHNOLOGY, INC.
Notes to Consolidated Financial Statements
January 31, 1998 (Unaudited)
Note 1 Basis of Presentation
The accompanying unaudited consolidated financial statements, which are
for interim periods, do not include all disclosures provided in the annual
consolidated financial statements. They should be read in conjunction with the
consolidated financial statements and the footnotes thereto of Versus
Technology, Inc. and subsidiary (the Company) contained in the Annual Report on
Form 10-KSB for the fiscal year ended October 31, 1997, as filed with the
Securities and Exchange Commission. The October 31, 1997 balance sheet
contained herein was derived from audited consolidated financial statements,
but does not include all disclosures required by generally accepted accounting
principles as found in the Company's Annual Report on Form 10-KSB referenced
above.
In the opinion of Management, the accompanying unaudited consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly the financial position as of
January 31, 1998, the results of operations for the three months ended January
31, 1998 and 1997 and cash flows for the three months ended January 31, 1998
and 1997. The results of operations for the three months ended January 31,
1998 are not necessarily indicative of the results to be expected for the full
year.
Note 2 Principles of Consolidation
The consolidated financial statements include the accounts of Versus and
the accounts of Olmsted Engineering Co., its wholly owned subsidiary, since the
date of acquisition (August 26, 1996). Upon consolidation, all significant
intercompany accounts and transactions are eliminated.
Note 3 Basic and Diluted Earnings (Loss) Per Share
In February 1997, the FASB issued SFAS No. 128, Earnings Per Share. SFAS
No. 128 simplifies the standards for computing earnings per share (EPS) and
makes them comparable to international EPS standards. The statement requires
the presentation of both "basic" and "diluted" EPS on the face of the statement
of operations with a supplementary reconciliation of the numerators and
denominators used in the calculations. SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods; earlier application was not permitted. Implementation of SFAS No. 128
had no effect on EPS for the three months ended January 31, 1998 and 1997.
Basic earnings (loss) per share is based on the weighted average number
of shares of common stock outstanding. The Company has not included the
effects of options and warrants in its calculation of diluted earnings (loss)
per share due to their anti-dilutive effect. The resulting weighted average
shares outstanding were 38,338,350 and 36,550,700 for the three months ended
January 31, 1998 and 1997, respectively.
<PAGE> 9
Note 4 New Accounting Standards
In June 1997, the FASB issued SFAS No. 131, Disclosures about Segments of
an Enterprise and Related Information, which supersedes SFAS No. 14, Financial
Reporting for Segments of a Business Enterprise. SFAS No. 131 establishes
standards for the way that public companies report information about operating
segments in annual financial statements and requires reporting of selected
information about operating segments in interim financial statements issued to
the public. It also establishes standards for disclosures regarding products
and services, geographic areas and major customers. SFAS No. 131 defines
operating segments as components of a company about which separate financial
information is available that is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in assessing
performance. SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997 and requires comparative information for
earlier years to be restated. Management has not fully evaluated the impact,
if any, this standard may have on future financial statement disclosures.
Results of operations and financial position, however, will be unaffected by
implementation of this standard.
Reclassifications
Certain reclassifications have been made to 1997 balances to conform to
classifications used in 1998.
Note 5 Acquisition of Intellectual Property
As of January 31, 1997, the Company and Precision Tracking FM, Inc.
("PTFM") signed an Agreement ("License Agreement") for the Company to become
the exclusive licensee of PTFM's patents and other intellectual property rights
related to infrared locating technology for ten years, and nonexclusive
thereafter. PTFM has previously been a supplier of infrared components to the
Company. The Company contracts for the manufacture of these component parts
and assembly of final components.
In consideration of the License Agreement, based on negotiations between the
parties, the Company agreed to pay $500,000 in cash and 1.6 million restricted
shares of the Company's common stock (valued at $1.0 million for accounting
purposes; the restrictions on these shares lapsed on October 1, 1997).
Concurrent with executing the License Agreement, a short-term (one-year)
Engineering and License Agreement ("Engineering Agreement") was entered into by
the parties to assist the Company in the technology transfer and to support the
Company in use and development of the technology.
Under the Engineering Agreement, the Company was required to reimburse
PTFM $480,000 for expenses incurred in providing the services covered by the
agreement. The Company's obligation under the agreement ended in January 1998,
and at January 31, 1998, the Consolidated Financial Statements include $88,000
in accrued amounts payable on this contract. Of this amount, $36,000 was paid
in March 1998, and the balance of $52,000 will be paid to PTFM upon delivery
of certain documentation related to component assemblies.
<PAGE> 10
The total amount capitalized at January 31, 1997, and being amortized
over the 10-year exclusivity period of the agreement, amounted to $1,540,000,
including costs of the transaction.
Note 6 Contingencies
Litigation
A suit was filed in November 1996, and a nearly identical suit was filed
in January 1997, against the Company alleging that the Company allowed certain
warrants to expire which the plaintiffs held and that the plaintiffs were
damaged by the warrants' expiration. The plaintiffs also allege that the
Company breached the warrant agreement pursuant to which the warrants were
issued to the plaintiffs and claim that the sale by the Company of restricted
stock in late 1993 required a downward adjustment of the exercise price of the
warrants under the warrant agreement. Each sole named plaintiff alleges this
action should be tried as a class action, and alleges he is an appropriate
representative of the class. Plaintiffs further allege their claims are
substantially identical to the claims made by the plaintiff in the Special
Situations Fund III litigation which was concluded in fiscal 1996. In that
action, which involved only 300,000 of the 2,233,800 Class A warrants at issue,
a judgment of approximately $195,000 was awarded against the Company by the
trial court and upheld on appeal. Apparently the plaintiffs in this action
believe the Company has a liability for each of the remaining warrants
identical to the per warrant liability the Company was found to have for the
300,000 warrants relating to the Special Situations Fund III litigation. The
court has consolidated the two cases. The Company disputes the material
allegations of the complaints. The Company's legal counsel has filed a motion
to dismiss the complaints on the grounds that the plaintiffs were not warrant
holders on the date of the alleged breach of the warrant agreement and to
dismiss the action as being without merit because the plaintiffs have not
alleged and cannot prove that they or other warrant holders suffered any
damages. Management and legal counsel believe the Company's defense will be
found to have merit thus resulting in no liability of the Company to the
plaintiffs.
Note 7 Restricted Stock Bonus Plan
During the three months ended January 31, 1998 the Company issued an
additional 97,000 and re-purchased 5,724 shares of the Company's common stock
issued pursuant to the 1996 Employee Incentive Restricted Stock Bonus Plan.
Net earned compensation for the three months ended January 31, 1998 amounted to
$24,000.
Note 8 Related Party Transactions
The Company and Olmsted moved their principal operating facilities in
December 1996 to a building, which is beneficially owned by the Company's
President. The Company and Olmsted have entered into separate five-year lease
agreements calling for aggregate annual rents of $111,000, increasing 4%
annually after the first year. The Company and Olmsted have made combined
nonrefundable contributions to leasehold improvements amounting to $121,000, in
accordance with terms of the lease agreements.
<PAGE> 11
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
General
Versus Technology, Inc. ("Versus") and its whollyowned subsidiary,
Olmsted Engineering Co. ("Olmsted"), collectively referred to as "the Company"
operate in two business segments: data collection and processing; and systems
design and engineering. All Company operations are located in one facility in
Traverse City, Michigan.
Infrared locating ("IR Locating") systems are the primary product of the
Company. The IR Locating system can be used to monitor and locate people and
equipment and/or control access to secured areas. The system consists of
compact badges, sensors and receivers and a central processing computer.
Badges can be attached to people and equipment. Each badge transmits a unique
identifying code, which is received and validated by sensors located in each
room or zone. The signals are sent to the central processing computer which
locates each badge, determines its status (i.e., condition, environment, etc.)
and provides users with a graphical display of people and equipment locations
on an ordinary computer monitor. Other user programmable features include
directed pages, sequenced and time dictated "hunting" of substitute
individuals, telephone call forwarding, equipment usage logs, and door
openings/closings. Two-way communication is possible by the addition of
ordinary speaker components. The entire system is based on the Company's
patented proprietary technology involving the transmission and reception of
infrared light for use in locating multiple subjects in several areas.
The Company's primary method of distribution of the IR product is through
resellers who install the product. Although the Company also sells directly to
end users, reseller sales are expected to contribute the majority of the
Company's future IR revenues. Currently, the healthcare market is primarily
targeted for penetration due to the technology's initial success there and the
existing interest that has developed. In addition to the healthcare market,
applications being explored include high security facilities (military,
governmental, etc.), correctional institutions (prisons, guard security, etc.)
and commercial security (visitor locating, institutional access control,
etc.).
Under the Olmsted name, the Company sells and maintains the ACU-CARV(r)
product line, which consists of a wide range of manufacturing solutions
including software, hardware, support and shop floor communications networks.
ACU-CARV(r) is an integrated family of Computer Aided Manufacturing ("CAM")
software programs used to operate computer numerically controlled machines
mainly in the mold, die and pattern making industries. In addition to revenues
from the sale of ACU-CARV(r) products, the Company also receives monthly
maintenance and enhancement fees from its customers who, in turn, receive
technical support and periodic update releases. Olmsted also provides
programming services, hardware and software integration, complete turnkey
systems and contract software consulting and development.
The ACU-CARV(r) product line is marketed to both existing users of the
products and potential new customers through direct sales efforts. The Company
also markets CAD/CAM software for third parties. This marketing relationship
gives Olmsted (and thus Versus) access to over 600,000 architects and
<PAGE> 12
contractors worldwide which could provide additional marketing opportunities
for the Company's IR products.
Versus also develops, markets and integrates cellular products for the
security industry.
The following discussion and analysis focuses on the significant factors
which affected the Company's consolidated financial statements during the first
quarter of fiscal 1998, with comparisons to the first quarter of fiscal 1997
where appropriate. It also discusses the Company's liquidity and capital
resources. The discussion should be read in conjunction with the consolidated
financial statements and related notes included elsewhere in this Form 10-QSB.
The Consolidated Statements of Operations for the three months ended January
31, 1998 and 1997 utilize a new format that presents the results of operations
in a manner consistent with comparable companies in the industry.
Results of Operations
Three Months Ended January 31, 1998 and 1997
During the first quarter of fiscal 1998 the Company continued to develop
the IR reseller channel expanding its network into Canada. CAD/CAM revenues
and margins benefited from the introduction of the ACU-CARV(r) for Windows(r)
product. The efforts expended in fiscal 1997 to develop contract
manufacturers for IR components are being demonstrated in quality and timely
delivery of product and lower costs. To better focus efforts in fiscal 1998
the Company realigned staff in late 1997 establishing separate IR and CAD/CAM
sales groups and splitting the previous engineering group into separate
development and manufacturing divisions. The efforts expended contributed to a
revenue growth to 153% of the revenue level for the same quarter in fiscal
1997.
First quarter revenues were $598,000 or 153% of the fiscal 1997 level of
$391,000. Infrared sales of $374,00 were 212% of the same period fiscal 1997
level of $176,000 and equal 58% of the total IR revenues for the entire 1997
fiscal year. The increased sales came from the reseller network (48%) and the
balance from direct and Marquette Medical Systems sales. CAD/CAM sales were
$224,000 or 104% of the $215,000 revenues generated for the same three-month
period in fiscal 1997.
Cost of revenues as a percentage of revenues in the first quarter of
fiscal 1998 decreased to 56% from 80% for the same quarter in fiscal 1997.
This decrease is attributable to the increased revenue levels and lower IR
component manufacturing costs as larger production runs allow more economical
order quantities.
Research and development expenses were slightly higher ($105,000 v.
$98,000) than the three months ended January 31, 1997. The major portion of
these expenditures was on IR system development and enhancement.
Selling and marketing expenses for the first quarter of fiscal 1998
increased to $284,000 or 77% higher than the three months ended January 31,
1998. The increased expenses reflect increased sales staff and stepped up
marketing efforts.
<PAGE> 13
General and administrative expenses of $448,000 were 81% above the
$247,000 level for the three months ended January 31, 1997. Major factors in
the increase were higher professional fees and the inclusion of PTFM
administrative charges in the 1998 results.
In the first quarter of fiscal 1998, other income, net decreased $13,000,
or 39%, from 1997 levels due primarily to the decrease in interest earned on
lower cash levels.
Liquidity and Capital Resources
During the three months ended January 31, 1998, the Company relied on
cash balances from the 1996 private placement offering which generated net
proceeds of $5.2 million. The Company believes that the combination of its
existing working capital and cash generated from operations should be
sufficient to meet projected cash needs over the next nine-(9) months.
SAFE HARBOR PROVISION
This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are subject
to a number of important risks and uncertainties that could cause actual
results to differ materially including, but not limited to, economic,
competitive, governmental and technological factors affecting the Company's
markets, products, services and prices. The Company undertakes no obligation
to update, amend or clarify forward-looking statements, whether as a result of
new information, future events or otherwise.
PART II OTHER INFORMATION
Item 1 Legal Proceedings
The following is a summary of the material litigation in which the
Company is currently engaged:
Theodore London, et al v. Versus Technology, Inc.
Complaint filed: November 22, 1996
Court: Supreme Court of the State of New York
Index No.: 96-120758
Principal Parties: Plaintiff, Theodore London, purportedly on behalf
of himself and others similarly situated;
Defendant, Versus Technology, Inc.
Jack Lazarus, et al v. Versus Technology, Inc.
Complaint filed: January 21, 1997
Court: Supreme Court of the State of New York
Index No.: 97-600295
Principal Parties: Plaintiff, Jack Lazarus, purportedly on behalf of
himself and others similarly situated; Defendant,
Versus Technology, Inc.
Plaintiffs in these nearly identical actions allege that Versus allowed
certain warrants to expire, which the Plaintiffs held, and that the Plaintiffs
<PAGE> 14
were damaged by the warrants' expiration. Plaintiffs also allege that the
Company breached the Warrant Agreement pursuant to which the warrants were
issued to Plaintiffs and claim that the sale by the Company of restricted stock
in late 1993 required a downward adjustment of the exercise price of the
warrants under the Warrant Agreement. The Plaintiffs allege this action should
be tried as a class action, and allege they are appropriate representatives of
the class. Plaintiffs further allege their claims are substantially identical
to the claims made by the plaintiff in the Special Situations Fund III
litigation which was concluded in fiscal 1996. In that action, which involved
only 300,000 of the 2,233,800 Class A warrants at issue, a judgment of
approximately $195,000 was awarded against the Company by the trial court and
upheld on appeal. Apparently the plaintiffs in this action believe the Company
has a liability for each of the remaining warrants identical to the per warrant
liability the Company was found to have for the 300,000 warrants relating to
the Special Situations Fund III litigation. The court has consolidated the two
cases. The Company disputes the material allegations of the Complaints and
intends to vigorously defend itself against this matter. The Company's legal
counsel has filed a motion to dismiss the complaint on the grounds that the
plaintiffs were not warrant holders on the date of the alleged breach of the
warrant agreement and on the further grounds that the plaintiffs have not
alleged, and cannot prove, that they or other warrant holders suffered any
damages. Management and legal counsel believe the Company's defense will be
found to have merit thus resulting in no liability of the Company to the
plaintiffs.
Item 6 Exhibits and Reports on Form 8-K
(a) The following documents are filed as part of this report:
Exhibit 11 - Statement Re: Computation of Per Share Earnings
Exhibit 27 - Financial Data Schedule
(b) There were no reports on Form 8-K during the first quarter of fiscal
1998.
<PAGE> 15
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.
By: /s/ Robert Butler By: /s/ Gary T. Gaisser
----------------- -------------------
Robert Butler Gary T. Gaisser
Controller and Chief Accounting President and Chief Executive
Officer (Principal Accounting Officer (Principal Executive
Officer) Officer)
Dated: March 17, 1998
<PAGE> 16
EXHIBIT 11
VERSUS TECHNOLOGY, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
For the Three Months Ended January 31,
1998 1997
---------------------------------------------
<S> <C> <C>
BASIC AND DILUTED LOSS PER SHARE:
Net loss $ (557,000) $ (394,000)
Calculation of weighted average
common shares outstanding:
Outstanding common shares at
the beginning of the period 38,271,599 36,543,573
Impact of issuance of shares
to acquire intellectual
property from Precision
Tracking FM, Inc. - 17,391
Net issuance/re-purchase of
shares under 1996 Employee
Incentive Restricted Stock
Bonus Plan 66,751 (10,264)
----------------------------------------------
Total weighted average
common shares 38,338,350 36,550,700
==============================================
Basic and Diluted Loss Per Share $(.01) $(.01)
==============================================
</TABLE>
NOTE: The weighted average effect of dilutive potential common stock (i.e.,
options and warrants outstanding) was anti-dilutive for both fiscal 1998 and
fiscal 1997 and, therefore, was not considered in the above calculation.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 1,422,000
<SECURITIES> 0
<RECEIVABLES> 289,000
<ALLOWANCES> 62,000
<INVENTORY> 161,000
<CURRENT-ASSETS> 1,944,000
<PP&E> 275,000
<DEPRECIATION> 107,000
<TOTAL-ASSETS> 6,409,000
<CURRENT-LIABILITIES> 745,000
<BONDS> 0
0
0
<COMMON> 384,000
<OTHER-SE> 5,230,000
<TOTAL-LIABILITY-AND-EQUITY> 6,409,000
<SALES> 598,000
<TOTAL-REVENUES> 598,000
<CGS> 339,000
<TOTAL-COSTS> 339,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (557,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (557,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (557,000)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
