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 July 31, 1999
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-17500
VERSUS TECHNOLOGY, INC.
(Exact name of small business issuer as specified 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: (231) 946-5868
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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 ( )
As of August 31, 1999 the issuer had outstanding 38,495,097 shares
of common stock, par value $.01 per share.
VERSUS TECHNOLOGY, INC.
Index to Form 10-QSB
PART I PAGE
FINANCIAL INFORMATION
Item 1 Financial Statements:
Consolidated Balance Sheets as of July 31, 1999
(Unaudited) and October 31, 1998 3-4
Consolidated Statements of Operations for the
Three and Nine months ended July 31, 1999 and
1998 (Unaudited) 5
Consolidated Statements of Cash Flows for the
Nine months ended July 31, 1999 and 1998(Unaudited) 6-7
Notes to Consolidated Financial Statements 8-10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 11-14
PART II OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds 15
Item 6 Exhibits and Reports on Form 8-K 17
Signatures 18
VERSUS TECHNOLOGY, INC.
Consolidated Balance Sheets
===========================================================================
July 31, 1999 October 31, 1998
(Unaudited)
ASSETS --------------- ---------------
Current Assets
Cash and cash equivalents $ 1,869,000 $ 698,000
Accounts receivable, net of
allowance for doubtful
accounts of $45,000 and
$60,000 613,000 517,000
Inventories - purchased parts
and assemblies 249,000 155,000
Prepaid expenses and other
current assets 62,000 64,000
--------------- ---------------
Total Current Assets 2,793,000 1,434,000
--------------- ---------------
Property and Equipment, net of
accumulated depreciation of
$236,000 and $173,000 227,000 237,000
Software Development Costs, net
of accumulated amortization
of $219,000 and $163,000 381,000 437,000
Goodwill, net of accumulated
amortization of $455,000 and
$338,000 1,884,000 2,001,000
Patents and Other Intangible
Assets, net of accumulated
amortization of $716,000 and
$556,000 1,274,000 1,434,000
Deferred Financing Costs, net of
accumulated amortization of
$0 110,000 -
--------------- ---------------
$ 6,669,000 5,543,000
=============== ===============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities
Accounts payable $ 357,000 $ 453,000
Accrued expenses 107,000 119,000
Deferred revenue - customer
advance payments 20,000 25,000
Note payable - 80,000
-------------- ---------------
Total Current Liabilities 484,000 677,000
-------------- ---------------
Long-Term Liabilities
Long-term debt 2,000,000 -
--------------- ---------------
Total Liabilities 2,484,000 677,000
--------------- ---------------
Shareholders' Equity
Common stock, $.01 par value;
75,000,000 and 50,000,000
shares authorized; 38,495,097
and 38,362,700 shares issued
and outstanding 385,000 384,000
Additional paid-in capital 33,360,000 33,249,000
Accumulated deficit ( 29,444,000 ) ( 28,577,000 )
Unearned compensation ( 116,000 ) ( 190,000 )
--------------- ---------------
Total Shareholders' Equity 4,185,000 4,866,000
-------------- ---------------
$ 6,669,000 5,543,000
=============== ===============
See accompanying notes to consolidated financial statements.
VERSUS TECHNOLOGY, INC.
Consolidated Statements of Operations
(Unaudited)
============================================================================
Three Months Ended July 31, Nine Months Ended July 31,
1999 1998 1999 1998
------------ ------------ ------------ ------------
Revenues $ 859,000 $ 840,000 $ 2,665,000 $ 2,094,000
Operating expenses:
Cost of revenues 357,000 354,000 989,000 994,000
Research and
development 112,000 41,000 389,000 307,000
Sales and marketing 312,000 330,000 991,000 887,000
General and
administrative 358,000 390,000 1,166,000 1,230,000
------------ ------------ ------------ ------------
1,139,000 1,115,000 3,535,000 3,418,000
------------ ------------ ------------ ------------
Loss From Operations ( 280,000 ) ( 275,000 ) ( 870,000 ) ( 1,324,000 )
Other Income (Expense)
Interest income 15,000 10,000 24,000 44,000
Interest expense ( 21,000 ) - ( 21,000 ) -
------------ ------------ ------------ ------------
( 6,000 ) 10,000 3,000 44,000
------------ ------------ ------------ ------------
Net Loss $( 286,000 )$( 265,000 )$( 867,000 )$( 1,280,000 )
============ ============ ============ ============
Basic and Diluted Net
Loss Per Share $( .01 )$( .01 )$( .02 )$( .03 )
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
VERSUS TECHNOLOGY, INC.
Consolidated Statements of Cash Flow
(Unaudited)
============================================================================
Nine Months Ended July 31,
1999 1998
--------------- ---------------
Operating activities
Net Loss $( 867,000 ) $( 1,280,000 )
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and amortization 396,000 360,000
Amortization of unearned
compensation 107,000 86,000
Directors' compensation 78,000 37,000
Changes in operating assets
and liabilities:
Accounts receivable ( 96,000 ) 210,000
Inventories ( 94,000 ) ( 44,000 )
Prepaid expenses and other
current assets 2,000 3,000
Accounts payable ( 96,000 ) ( 140,000 )
Accrued expenses ( 12,000 ) 157,000
Deferred revenues - customer
advance payments ( 5,000 ) ( 336,000 )
Net cash used in operating --------------- ---------------
Activities ( 587,000 ) ( 947,000 )
--------------- ---------------
Investing activities:
Changes in notes receivable - ( 5,000 )
Additions to property and
Equipment ( 53,000 ) ( 37,000 )
Additions to patents and other
Intangible assets - ( 25,000 )
Net cash provided by investing --------------- ---------------
Activities ( 53,000 ) ( 67,000 )
--------------- ---------------
Financing activities:
Issuance of Long-term debt 2,000,000 -
Debt financing costs ( 110,000 ) -
Issuance of common stock 1,000 1,000
Payments on notes payable ( 80,000 ) ( 86,000 )
Net cash used in financing --------------- ---------------
Activities 1,811,000 ( 85,000 )
--------------- ---------------
Net decrease in cash and cash
Equivalents 1,171,000 ( 1,099,000 )
--------------- ---------------
Cash and cash equivalents,
beginning of period 698,000 1,871,000
--------------- ---------------
Cash and cash equivalents, end of
Period $ 1,869,000 $ 772,000
=============== ===============
Supplemental cash flow information
During the first nine months of fiscal 1999, the Company issued
162,450 shares of additional non-vested Employee Incentive
Restricted Stock and repurchased 30,053 shares of similar stock
from terminated employees, all at par value, pursuant to the 1996
Incentive Restricted Stock Bonus Plan. During the same period in
fiscal 1998, 105,000 shares were issued and 5,724 shares were
repurchased. Unearned compensation of $58,000 and $104,000 was
recorded for the stock issued and unearned compensation of
$25,000 and $45,000 related to the repurchased shares was
cancelled during the nine months ended July 31, 1999 and 1998,
respectively.
On April 23, 1999 the Company issued Non Qualified Stock Options
to Directors valued at $0.115 per option for accounting purposes. The
options vest after one year and are exercisable at $0.165 per share.
Directors' compensation expense relating to stock options issued
during 1999 amounted to $78,000 for the nine months ended July 31,
1999.
On April 24, 1998 the Company issued Non Qualified Stock Options to
directors valued at $0.36 per option for accounting purposes. The
options vested after one year and are exercisable at $0.515 per share.
During the nine months ended July 31, 1998, $27,000 was recorded as
earned compensation for the grant of these options. On June 16, 1998,
the Company issued additional Non Qualified Stock Options to the
Chairman of the Board of Directors, valued at $0.36 per option for
accounting purposes. The options vested on April 23, 1999 and are
exercisable at $0.50 per share. During the nine months ended July 31,
1998, $10,000 was recorded as earned compensation for the grant of
these options.
On June 29, 1999 the Board of Directors elected Mr. Samuel Davis as
Chairman of the Board from April 23, 1999 until the next Annual
Meeting of Shareholders and granted Mr. Davis an option to purchase
73,000 shares of the Company's common stock. One half of the option
vests effective October 31, 1999 and the other half effective January 31,
2000. Vesting is contingent on the Company attaining specified financial
performance targets. The option is exercisable over a five-year period
at a price of $0.155 per share, which was the then current fair market
value of the common stock.
See accompanying notes to consolidated financial statements.
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
July 31, 1999
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 (Versus)
contained in the Annual Report on Form 10-KSB for the fiscal year
ended October 31, 1998, as filed with the Securities and Exchange
Commission. The October 31, 1998 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 Versus' 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 July 31, 1999, the results of operations for
the three and nine months ended July 31, 1999 and 1998 and cash flows
for the nine months ended July 31, 1999 and 1998. The results of
operations for the three and nine months ended July 31, 1999 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 Olmsted Engineering Co., its wholly owned subsidiary. Upon
consolidation, all significant intercompany accounts and transactions
are eliminated.
Note 3 Basic and Diluted Earnings (Loss) Per Share
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, warrants, convertible debentures and
the outstanding shares under its Employee Incentive Restricted Stock
Bonus Plan in its calculation of diluted earnings (loss) per share due
to their anti-dilutive effect. The resulting weighted average shares
outstanding were 38,025,106 for the three and nine months ended July
31, 1999 and 1998.
Note 4 New Accounting Standards Not Yet Adopted
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
does not expect to change the Company's operating segment groupings
based on its analysis of the new standard. Results of operations and
financial position will be unaffected by implementation of this
standard.
Note 5 Reclassifications
Certain reclassifications have been made to 1998 balances to conform
to classifications used in 1999.
Note 6 Long Term Debt
Effective May 31, 1999, the Company issued $1,550,000 of it's Prime
Rate Secured Convertible Debentures due April 30, 2004. Between May
31, 1999 and August 18, 1999 the Company issued an additional
$1,450,000 in debentures with like terms resulting in total debentures
outstanding of $3,000,000. Interest is payable quarterly on the first
days of August, November, February and May. Debentures bare interest at
prime which was 73/4% for the period ended July 31, 1999. The Debentures
may be redeemed by the Company at any time after October 31, 2001 or when
the price of the Company's common stock is quoted at $0.50 per share for
14 continuous days subject to minimum average volume tests being met
in the previous 90 days. The debentures may be converted by the
holder at any time at an initial conversion ratio of four shares per
dollar held. The conversion ratio is adjustable for future stock
changes and mergers.
The debentures are secured by a first priority security interest in
the Company's assets.
The debentures are transferable to qualified investors. Shares issued
on conversion will bear a restrictive legend.
The Company also entered into a Registration Rights Agreement relative
to the debentures issued.
In connection with the issuance of the debentures the Company incurred
$110,000 in expenses which have recorded as Deferred Financing Costs.
These costs will be amortized over the life of the debentures.
Note 7 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 $131,000, in accordance with terms
of the lease agreements. Rent expense for the nine months ended
July 31, 1999 and 1998 amounted to $90,000 and $87,000
respectively.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS
AND RESULTS OF OPERATIONS
General
Versus Technology, Inc. ("Versus") and its wholly owned subsidiary,
Olmsted Engineering Co. ("Olmsted"), operate in two business segments:
data collection and processing and systems design and engineering
(CAD/CAM). All operations are located in one facility in Traverse
City, Michigan.
Infrared locating ("IR Locating") systems are the primary product of
Versus. Infrared systems are currently installed in hospitals,
corporate facilities, government facilities and other complexes. The
system automatically and accurately records the location of badged
personnel and equipment and related business information. The system
can be used to monitor the precise location of personnel or equipment
for health and safety purposes, to control access to secured areas and
to automatically record events associated with those activities. The
system consists of compact badges, sensors, 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 and identifies
each badge, collects the information in a database and provides users
with a graphical display of people and equipment locations on an
ordinary computer monitor or in report form. Optional components
allow the use of an ordinary phone switch to automatically "search and
locate" personnel and connect phone callers without human
intervention. This same feature can also be used to locate equipment.
The system can also be supplied with two-way paging, eliminating the
overhead noise usually involved with broadcast paging. The entire
system is based on Versus' patented proprietary technology involving
the transmission and reception of infrared light for use in locating
multiple subjects in several areas.
Versus' primary method of distribution of the IR product is through
resellers who install the product. Although Versus also sells directly
to end users, reseller sales are expected to contribute the majority
of Versus' 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, other applications 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, Versus 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, Versus also receives maintenance and enhancement fees from
its customers who, in turn, receive technical support and periodic
update releases. 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 three- and nine-month periods ended July 31, 1999, with
comparisons to 1998 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.
Results of Operations
Three Months Ended July 31, 1999 and 1998
During the third quarter of 1999, Versus' revenues were ahead of 1998
levels by 2.3%. The 1999 performance is far more important for the
customer base changes than the reported dollar increase. In 1998
Marquette Medical Systems (MMS) accounted for 67% of the third quarter
revenues. In 1999, shipments to MMS were zero and the revenues have
been replaced with additional reseller and direct sales. The Company
also issued $2,000,000 of it's $3,000,000 of convertible debentures
which were fully subscribed by the end of August, 1999. Significant
progress was made and continues to be made in the development of the
Company's disposable patent badge trademarked as the DataBand(tm), and
shipments of the first generation DataBand(tm) are expected in the first
quarter of fiscal 2000. The Company continued its progress to ISO
9001 certification which is now expected to be accomplished by the
second quarter of fiscal 2000.
Third quarter revenues were $859,000 or 2.3% above the fiscal 1998
level of $840,000. Infrared sales of $717,000 were 8% above the same
period fiscal 1998 level of $664,000. The increased revenues resulted
from increased reseller revenues and additional direct sales. Revenues
previously received under the Marquette Medical Systems contract have
been replaced with revenues from a wider and more varied customer
base. CAD/CAM revenues were $142,000 or 19% below the $176,000
revenues generated for the same three-month period in fiscal 1998.
Decreased revenues for third party sales and maintenance were the largest
contributing factors. The Company is continuing a mass marketing
program for its ACU*CARV(r) 2000 product introduced in the second quarter
of fiscal 1999.
Cost of revenues as a percentage of revenues in the third quarter of
fiscal 1999 decreased to 42% from 43% for the same quarter in fiscal
1998.
Research and development expenses at $112,000 were $71,000 or 173%
higher than the $41,000 expended in the three months ended July 31,
1998. 1999 expenses reflect additional costs expended for the
development of the next generation locating badges and the DataBand(tm).
Selling and marketing expenses for the third quarter of fiscal 1999
decreased 5% to $312,000 from the $330,000 expended in the same three
months ended July 31, 1998. A reduction in Cad/Cam sales staff was the
primary reason for the decreased expenses.
General and administrative expenses of $358,000 were 8% below the
$390,000 level for the three months ended July 31, 1998. Decreased
professional fees and directors' expenses were partially offset
by a $60,000 Michigan franchise tax on the increase in authorized
shares.
In the third quarter of fiscal 1999, other income (expense) was
$(6,000) compared to 1998 levels of $10,000. Interest expense on the
convertible debentures exceeded interest income.
Nine Months Ended July 31, 1999 and 1998
Revenues for the first nine months of fiscal 1999 were $2,665,000 or
27% above the fiscal 1998 level of $2,094,000. Infrared sales of
$2,220,000 were 51% above the same period fiscal 1998 level of
$1,466,000. During fiscal 1999, five major new installations and two
major existing site upgrades were accomplished through direct sales
efforts. CAD/CAM revenues were $445,000, 29% below the $628,000
revenues generated for the same nine-month period in fiscal 1998.
Decreased third party sales and maintenance accounted for the lower
CAD/CAM revenue levels.
Cost of revenues as a percentage of revenues in the first nine months
of fiscal 1999 decreased to 37% from 48% for the same period in fiscal
1998. This decrease is attributable to the increased revenue levels
and lower IR component manufacturing costs.
Research and development expenses of $389,000 were $82,000 or 27%
higher than the $307,000 expended in the first nine months of fiscal 1998.
1999 expenses include additional costs expended in the development of
the next generation badges for the locating system and the DataBand(tm).
Selling and marketing expenses for the nine months ended July 31, 1999
increased from $887,000 in the same fiscal period of 1998 to $991,000
or 12% higher. The increased expenses reflect increased sales staff
and recruiting expenses.
General and administrative expenses of $1,166,000 were 5% lower than
the $1,230,000 level for the same period in fiscal 1998. Reduced
professional fees were partially offset by increased franchise taxes
referenced above.
In the first nine months of fiscal 1999, other income, net decreased
$41,000, or 93%, from 1998 levels due to decreased interest earned on
lower cash levels and interest expense incurred on the debentures
issued during the third quarter of fiscal 1999.
Liquidity and Capital Resources
As of July 31, 1999 cash on hand was $1,869,000. During the nine
months ended July 31, 1999, Versus relied on cash proceeds generated
from a private placement of common stock in August 1996 which
generated net proceeds of approximately $5.2 million and the private
placement of $2,000,000 in secured convertible debentures which were
issued by July 31, 1999. An additional $1,000,000 in debentures were
issued in August, 1999.
Operating activities (including working capital) consumed $587,000 in
cash in the first nine months of 1999 compared to $947,000 in the same
period in 1998. Increased sales volumes and higher gross margins were
the primary reasons for the improvement. Versus invested $53,000 in
capital assets (compared to $37,000 in the prior year) and expended
$110,000 in deferred financing costs during the first nine months of
fiscal 1999.
During the first nine months of 1999 the balance of the $80,000 note
payable was retired.
Effective May 31, 1999 the Company issued in a private placement,
secured convertible debentures in the amount of $1,550,000. Included
among the debenture holders were a director of Versus, an officer of
Versus and a limited liability company of which another Versus
director is the managing partner. Since then, additional debentures
with like terms were issued in the amount of $1,450,000 bringing the
total secured convertible debentures outstanding as of August 31, 1999
to $3,000,000. The limited liability company referenced above also
participated in this second round of financing resulting in total
holdings of the debenture for that holder of $1,500,000. The proceeds
of this funding will be used for working capital, expansion of sales
and marketing programs and the DataBand? product launch.
Management believes cash balances remaining will be sufficient to meet
projected cash needs for operations and new product developments over
the next 12 months.
Year 2000 Readiness Disclosure
Versus has conducted a comprehensive review of its internal computer
systems and its products to identify the systems that could be
affected by the Y2K issue and has identified no problem areas. Versus
believes there are no material problems, if any, in its infrastructure
and facilities. Versus presently believes that, with no modifications
to existing software, the Y2K issue will not pose any operational
problems for Versus' software products, its computer systems or those
of its customers relating to the use of its products.
Versus has contacted and received assurances from vendors and
suppliers as to their state of readiness for Y2K. Versus believes
that current material vendors and suppliers are or will become Y2K
compliant or that pre-qualified replacement vendors and suppliers will
be utilized instead. Versus has contacted its major customers and is
not currently aware of any Y2K issues facing them. Management
believes the impact, if any, Y2K problems of its major customers may
have on Versus' future operational results or financial condition will
not be material.
Versus' hardware components contain no embedded elements that are date
driven. Versus conducted in-house testing of its components utilizing
British Standards Institution protocol. Y2K issues identified as a
result of this testing have been corrected. At this time, the
reasonably likely worst-case scenario would be that one of our vendors
would encounter difficulties in production rendering it unable to meet
delivery schedules. Versus may consider increasing inventories
towards the end of 1999 to lessen the possible impact of such an
occurrence.
Because no problems have been identified to date, Versus has not
found it necessary to expend any cash resources on the Y2K issue.
The current estimated total expense for Versus to become Year
2000 ready is $30,000. The $30,000 amount is an estimate of the
total value of internal staff resources that will be required to
accomplish Y2K readiness and added time to rewrite software
involved. The estimate details are:
Staff expenses $20,000
Software enhancement expenses $10,000
Of the $30,000 estimate, $28,000 has been expended as of September 14,
1999.
Safe Harbor Provision
This document may contain forward-looking statements relating to
future events, such as the development of new products, the
commencement of production or the future financial performance of the
Company. These statements fall within the meaning of forward looking
information as defined in 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 and market
growth rates, products and their rate of commercialization, services,
prices and adequacy of financing and other factors described in the
Company's most recent annual report on Form 10-KSB filed with the
Securities and Exchange Commission, which can be reviewed at
http://www.sec.gov. 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 2 Changes in Securities and Use of Proceeds
(c) On June 29, 1999 the Board of Directors elected Mr. Samuel
Davis as Chairman of the Board from April 23, 1999 until the
next Annual Meeting of Shareholders and granted Mr. Davis an
option to purchase 73,000 shares of the Company's common
stock. One half of the option vests effective October 31,
1999 and the other half effective January 31, 2000. Vesting
is contingent on the Company attaining specified financial
performance targets. The option is exercisable over a five-
year period at a price of $0.155 per share, which was the
then current fair market value of the common stock.
Effective May 31, 1999, the Company issued $1,550,000 of it's Prime
Rate Secured Convertible Debentures due April 30, 2004. Between May
31, 1999 and August 18, 1999 the Company issued an additional
$1,450,000 in debentures with like terms resulting in total debentures
outstanding of $3,000,000. Interest is payable quarterly on the first
days of August, November, February and May. The Debentures may be
redeemed by the Company at any time after October 31, 2001 or when the
price of the Company's common stock is quoted at $0.50 per share for
14 continuous days subject to minimum average volume tests being met
in the previous 90 days. The debentures may be converted by the
holder at any time at an initial conversion ratio of four shares per
dollar held. The conversion ratio is adjustable for future stock
changes and mergers.
The debentures are secured by a first priority security interest in
the Company's assets.
The debentures are transferable to qualified investors. Shares issued
on conversion will bear a restrictive legend.
The Company also entered into a Registration Rights Agreement relative
to the debentures issued wherein it agreed:
(a) At any time after six months from the debenture's issue date but
not later than five years from the time any stock is issued on
conversion, to effect a registration under the Securities Act,
provided it receives a written request from Investors owning 50%
or more of the Registrable Securities outstanding at the time as
a result of conversion.
(b) To notify the Investors of any other registrations it intends to
effect (except registrations solely for shares in connection with
an employee benefit plan or a merger or consolidation) allowing
them to "piggy back" on such alternate registration.
(c) Registration expenses will be paid by the Company.
Item 6 - Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
Exhibit 99 (a) Press Release - Versus Technology, Inc. Completes
$3.0 Million Convertible Debenture
Offering
Exhibit 99 (b) Press Release - Versus Technology's Infrared Operating
System integrated into Saint Thomas
Hospital, Nashville, Tennessee
There were no reports on Form 8-K during the nine months ended July
31, 1998.
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 President and Chief
Accounting Officer Executive Officer
(Principal Accounting (Principal Executive
Officer) Officer)
Dated: September 14, 1999
Exhibit 99 (a)
Press Release
VERSUS TECHNOLOGY, INC. COMPLETES $3.0 MILLION CONVERTIBLE
DEBENTURE OFFERING
Versus now pursuing expansion of sales and marketing programs and
selected licensing arrangements with proceeds from the second half of
convertible debenture private placement.
TRAVERSE CITY, Michigan, August 19, 1999 - Versus Technology (OTC
BB:VSTI), reported today it has completed a private placement of a
second $1.5 million in convertible, secured, prime rate debentures,
due April 30, 2004, completing the $3.0 million offering started last
quarter (see release dated 06-08-99). The debentures are convertible
at the rate of four shares of Versus common stock for each $1
invested. "The additional funding will be used to expand our sales
and marketing team. The funds will also be used to finance programs
to pave the way for future licensing arrangements with potential
Versus customers" said Rick Salzer, Executive Vice President, Sales
and Marketing. "Recently, we have received a number of inquiries from
potential customers and competitors regarding possible licensing
arrangements to gain the advantages offered by our wide array of
patents," reported Gary Gaisser, President and CEO. Versus owns, has
exclusive licenses to, or has applied for patent rights covering over
a dozen activities related to infrared tracking and location systems.
Versus earmarked the first $1.5 million in debentures to accelerate
completion of development and the launch of its new DataBand(tm) wrist
badge. "Reaction from customers to prototypes of the DataBand(tm) has
been very encouraging" said Gaisser. "Having made the investment in
new product development with our first round of financing, this second
round will allow us to better service our existing customers and
expand our client base at a much faster rate", said Salzer. "With
the DataBand(tm), our improved infrared/radio frequency (IR/RF) tag and
our equipment identification tags, we can help our customers better
manage their patients, staff, and assets."
Versus Technology, Inc. (http://www.versustech.com/) is a leading
provider of infrared systems and solutions. It has pioneered infrared
technology and associated software for real-time, on-line locating of
people and equipment. Versus' patented locating systems monitor the
precise location of people and equipment using infrared light and
networks of sensors installed throughout a facility. Small and
lightweight badges worn by patients, customers, staff or attached to
equipment transmit unique codes to the sensors. Versus' badges
incorporate radio frequency signals with infrared signals (a patented
feature) allowing the system to constantly monitor a badge location.
Versus systems are currently used to locate patients/customers, staff
or equipment in hospitals, corporate offices, government facilities
and other complexes.
Safe Harbor Provision
This document may contain forward-looking statements relating to
future events, such as the development of new products, the
commencement of production or the future financial performance of the
Company. These statements fall within the meaning of forward-looking
information as defined in 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 and market
growth rates, products and their rate of commercialization, services,
prices and adequacy of financing and other factors described in the
Company's most recent annual report on Form 10-KSB filed with the
Securities and Exchange Commission, which can be reviewed at
(http://www.sec.gov). The Company undertakes no obligation to update,
amend or clarify forward-looking statements, whether as a result of
new information, future events or otherwise.
# # #
Exhibit 99 (b)
Press Release
VERSUS TECHNOLOGY'S INFRARED OPERATING SYSTEM
INTEGRATED INTO SAINT THOMAS HOSPITAL, NASHVILLE, TENNESSEE
Traverse City, Michigan, September 2, 1999, -- Saint Thomas Hospital,
Nashville, Tennessee and Versus Technology (OTC BB: VSTI), Traverse
City, Michigan, announced today that both would be involved in the
development of an infrared operating system designed to locate and
analyze the utilization of medical equipment within the hospital.
"We are using the Versus system to track the movement of about one
thousand pieces of equipment within our facility," said Michael
Landis, Manager of Biomedical Engineering. "With the information this
system provides, we will be able to focus our search efforts and track
down mobile medical equipment that has historically been very
difficult to locate when it is overdue for planned maintenance."
The Versus system will include infrared sensors placed throughout the
hospital and small badges placed on equipment as well as the software
required to monitor the system. "Saint Thomas has chosen the Versus
system to help them be more effective with their preventative
maintenance programs. We also believe that we will be able to better
measure the utilization of critical pieces of medical equipment and
construct a process for better asset management," said Rick Salzer,
Executive Vice President at Versus.
The Versus system has been installed on all seven floors within Saint
Thomas including patient floors and the hospital's operating suites.
Several locations throughout the hospital will have computer monitors
that will continuously update the location of medical equipment making
finding equipment faster and easier. In addition, through the Versus
PhoneVision(tm) capability, Saint Thomas staff members will be able to
use any telephone within the hospital to access a voice activated
system that will also give location information about a specified
piece of equipment.
"Because patients move throughout the facility, healthcare providers,
materials managers, and especially biomedical engineering personnel
spend a lot of time looking for equipment. Our system can help them
reduce the amount of time and the cost associated with those searches
and, over time, show that better utilization of existing equipment
could result in fewer pieces of equipment being required leading to
less capital equipment spending," said Salzer.
Saint Thomas Health Services, a member of the Daughters of Charity
National Health System, is anchored by Saint Thomas Hospital, a not-
for-profit hospital established in Nashville in 1898. Saint Thomas
Health Services offers a wide range of primary care and specialty care
services, including one of the nation's top three programs in
cardiovascular care.
Versus Technology, Inc. is an innovator in infrared locating
technology, which offers real-time locating, data collection and two-
way communication capabilities. The systems, which are currently
installed in hospitals, corporate facilities, government facilities
and other complexes, permit the automatic, accurate registry of
essential management and business processes by monitoring the precise
location of personnel or equipment for health and safety purposes,
controlling access to secure areas, and automatically recording events
associated with these activities.
# # #
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