[TYPE] 10KSB
[DESCRIPTION] FORM 10-K
<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(X) ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the fiscal year ended October 31, 1998
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
AND 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)
Issuer's telephone number: (616) 946-5868
Securities registered under Section 12(b) of the Exchange Act: NONE
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. YES (X) NO ( )
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements included in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. (X)
The issuer's revenues for its most recent fiscal year were $3,167,000
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the average bid and asked prices of such stock was $14,888,261
as of January 26, 1999.
As of January 26, 1999, the issuer had outstanding 38,507,575 shares of common
stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
<PAGE> 2
VERSUS TECHNOLOGY, INC.
Index to Form 10-KSB
PART I PAGE
Item 1 Description of the Business
Item 2 Description of Property
Item 3 Legal Proceedings
Item 4 Submission of Matters to a Vote of Security Holders
PART II
Item 5 Market for Common Equity and Related Stockholder Matters
Item 6 Management's Discussion and Analysis
Item 7 Financial Statements
Item 8 Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure
PART III
Item 9 Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the
Exchange Act
Item 10 Executive Compensation
Item 11 Security Ownership of Certain Beneficial Owners
and Management
Item 12 Certain Relationships and Related Transactions
Item 13 Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
<PAGE> 3
PART I
ITEM 1 - DESCRIPTION OF THE BUSINESS
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. All Company operations are located in one
facility in Traverse City, Michigan. Versus' primary product is
its Infrared (IR) Locating System.
Versus is a leading innovator in infrared locating technology,
which offers real-time locating and two-way communication
capabilities. The systems, which are currently installed in
hospitals, corporate facilities, government facilities and other
complexes, permit the automatic and accurate registry of essential
management and business processes, and 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 these activities.
(a) Business Development and Principal Products.
Versus Technology, Inc. ("Versus" or the "Company") is a Delaware
corporation originally formed in October 1988 to manufacture and market
Derived Channel Multiplex ("DCX") alarm systems. Intellectual property
and assets (patents, trademarks, etc.) relating to infrared locating
("IR Locating") systems and technology were acquired in 1993, marking
the Company's first entry into this wireless and passive data collection
technology. The DCX business was sold in November 1994 and Company
resources were directed toward developing the potential of the IR
Locating technology.
The Company's primary focus is now the manufacture and distribution of
proprietary software and components to support its IR Locating systems.
The Company also manufactures and distributes a line of Computer Aided
Design/Computer Aided Manufacturing ("CAD/CAM") software used to operate
computer numerically controlled machines mainly in the mold, die and
pattern making industries. This division also supports the design and
installation activities of the IR Locating Division.
In 1996 the Company continued development of the IR Locating technology
and acquired Olmsted Engineering Co. The Company and its Board of
Directors believe this acquisition was critical to the continued
development and success of the IR Locating system due to the long-term
business relationships that had been developed over the years, the solid
name recognition of Olmsted in the industry and the knowledge Olmsted
gained as a consultant to the Company when developing the IR Locating
system. Olmsted was acquired in exchange for 6,379,889 shares of Versus
common stock, plus cash of $65,000, amounting to a purchase price of
$3,255,000 net of related costs. Further development of the IR Locating
technology and working capital requirements were funded from the
$5,201,000 net proceeds of a private placement of 11,335,000 shares at
$.50 per share completed on August 26, 1996.
<PAGE> 4
Effective January 31, 1997, the Company entered into a license agreement
("License Agreement") with Precision Tracking FM, Inc. ("PTFM") for the
Company to become the exclusive licensee of PTFM's patents and other
intellectual property rights related to the IR Technology. The Company
and its Board of Directors believe the exclusive license of PTFM's
patents and other intellectual property was also critical to the
continued development and success of the IR Locating system. Throughout
1997, the Company spent significant efforts and dollars in enhancing the
new IR products made available under the exclusive License Agreement.
Much effort was also expended in developing new supplier relationships
(primarily contract manufacturing). An important aspect of the PTFM
transaction is it included access to an international network of
resellers that the Company has since expanded. This network helped
Versus end fiscal 1998 with an order backlog of $1,177,000 for IR
systems - almost double the sales of its premier product for all of
fiscal 1997.
During fiscal 1998 the Company continued to improve and expand the IR
Locating systems business, completing development of a combined IR/RF
(Radio Frequency) Locating badge (to be available in 1999) and low cost
disposable DataBand (anticipated shipping also in 1999). Versus is the
only infrared manufacturer to supply an infrared badge that is backed by
an RF supervisory signal (patent applied for). This ensures a signal is
sent from the badge even if the line-of-sight to the sensor is blocked
as could happen if a badge were covered inadvertently. The Versus
DataBand wrist badge ("DataBand") was announced in November 1998 and
is scheduled for launch at the Healthcare Information Management System
Society (HIMSS) conference in Atlanta, GA (February 22-25, 1999).
Versus has applied for another patent on its disposable IR/RF DataBand
that will be used initially in healthcare applications. This water-
resistant, disposable and inexpensive badge was developed in response to
healthcare industry requests for an economical badge and will add
considerable efficiency to the procedures for collecting patient
information, billing patient charges and for providing patient location
status. The IR/RF badge and the DataBand pave the way for entry into
the full facility coverage segment of the tracking and locating
technology market. During fiscal 1998, the Company also developed a
voice recognition version of PhoneVision. PhoneVision is another
trademarked product that is sold as an option to the base system to
provide automatic phone forwarding to a person's location. PhoneVision
provides a simple telephone interface to Nightingale's locating data.
The telephone is an obvious choice as an interface to location data
because people are comfortable using it. PhoneVision can operate with
most modern switches or PBX systems and can be configured to
automatically forward calls to a location at the user's request. The
Company also continued to develop and expand its reseller channel and
finished the year with $3,167,000 total revenues - more than double its
$1,524,000 revenues of fiscal 1997.
At the Microsoft Healthcare Users Group (MS-HUG) conference in Orlando,
Florida (October 11-13, 1998), Versus joined a number of other
healthcare information system providers to demonstrate the
interoperability of their systems. Using accepted healthcare
interoperation standards, Versus and nine other healthcare information
system technology providers exchanged real time information generated by
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the Versus IR system. Some of the participants in that demonstration
were HBO & Co., SpaceLabs Medical, Millbrook and KPMG. Another
noteworthy aspect of this demonstration was that the entire network was
set up and interfaced in less than five hours on the conference center
floor.
Also at that MS-HUG show, the Company introduced its IR/RF badge. By
integrating these two technologies and by being the first to market with
this type of badge, the Company believes that Versus will remain a
primary innovator and distributor of IR locating technologies.
(b) Business of the Issuer
The Company currently operates in two business segments:
- data collection and processing ("IR" Locating systems)
- systems design and engineering ("SD&E").
(1) Principal Products and Services
Data Collection and Processing Segment
Infrared Locating System and Technology ("IR Locating")
Infrared 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 technology owned
or licensed by Versus is incorporated in various forms from components
to entire assemblies under the following partial list of trade names:
OWNER OF TRADEMARK TRADEMARK
Versus Technology, Inc. Nightingale Resource Management System
PhoneVision, Versus Information
System ("VIS")
Marquette Medical Systems IntelliMotion Resource Management System
Rauland Borg Responder IV
Responder III+
Dukane Corporation ProCare 6000
Zettler Sentinel 500
Southwestern Bell PALS - Personnel and Asset Location System
TRL Systems Entouch
Versus markets its IR products as "Nightingale" and "Versus Information
System" (VIS), for the medical and non-medical markets respectively.
"PhoneVision" is sold as an option to the base system to provide voice
activated automatic phone forwarding to a person's location. A
lightweight badge (worn by staff or attached to equipment) continuously
emits an infrared light signal encoded with information. Sensors,
<PAGE> 6
mounted throughout a facility, pick up this signal maintaining the
contact between the system and staff and equipment. The emitted
signal's code is matched to the sensor's unique code allowing the
system's software to determine the badge's location, which can then be
graphically portrayed on an ordinary computer monitor.
The software collects, organizes and records information from the
network, becoming a powerful and accurate management tool. The data
recorded by the system can be compiled into any number of reports
describing activity. Custom reports can be created for specific needs,
and for further flexibility the data can be exported for use in a number
of popular database, spreadsheet, and statistical programs. This
information can be imported directly into existing control software
systems of other vendors, providing real-time data on patient, staff and
equipment activities. Other user programmable features of the system
include directed pages, 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 IR products provide a hands-free (also referred to as passive)
personnel and/or equipment locating system designed to locate and manage
assets in medical environments and other professional settings. Once
armed with the location information, the system provides a wide range of
possibilities for the efficient management of critical and expensive
assets. Within the medical market, the system can reduce personnel and
equipment response times, thus reducing overhead expenditures and
increasing asset utilization by locating high cost primary care
providers and equipment.
The Company believes its proprietary position, coupled with low cost
components, has positioned its price well below its two primary
competitors in the IR Locating segment of the medical industry. The
non-specific location provided by Radio Frequency (RF) locating
technology (the major competing technology) limits its use in hospital
information management systems. Unlike IR waves, RF waves will
penetrate through objects, thus making it impossible to pinpoint the
specific locations of people and equipment. Combining RF and IR
provides a full-time supervisory signal even if the IR signal is blocked
due to the badge being covered. Versus' IR product is assembled from a
number of components ranging from off-the-shelf computers to production
line circuit boards, injection molded cases, software and ethernet
concentrators.
Systems Design and Engineering Segment
Under the Olmsted name, the Company sells and maintains the ACUCARV
product line, which consists of a wide range of manufacturing solutions.
ACUCARV is an integrated family of Computer Aided Manufacturing (CAM)
software programs used to operate computer numerically controlled (CNC)
machines, mainly in the mold, die, and pattern making industries.
ACUCARV's competitive advantage is that it instructs a CNC machine to
use circular and linear interpolated toolpaths rather than point-to-
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point toolpaths. (A toolpath is the distance and direction that the
machine moves the cutting tool.) This feature provides a smoother
surface finish and reduces the amount of time it takes to cut a part by
up to 50%. ACUCARV makes this possible because it sends one arc
instruction to the machine. In contrast, a point-to-point system sends
a series of line instructions (that represent an arc) to the machine.
ACUCARV's method of cutting is referred to as "z-level" (contour)
machining, and very few other machining companies currently offer
software that utilizes this method as its primary cutting method.
Olmsted is an authorized dealer of the following third party software,
which it utilizes in conjunction with its own software offerings:
MANUFACTURER PRODUCT
- - ---------------------------------- -----------------------
Baystate Technologies CadKey
DraftPAK
FastSurf
Sterling Numerical Technologies FastNurbs
Autodesk AutoCAD
Mechanical Desktop
Microcompatibles NSEE
LiCom AlphaCAM
In addition to revenues from the sale of ACUCARV 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 hardware and software integration,
complete turnkey systems and contract software consulting and
development. Olmsted is planning a 1999 launch of its first internet
market software.
The principal function of the Company's Cellular Alarm Transport ("CAT")
products is to provide a connected alarm panel with a communication
pathway through the cellular communications network. Generally, the CAT
is used as a cellular backup alarm product in which alarm messages are
transmitted over the cellular network to a telephone switch network used
by the alarm-monitoring agency to receive such data and signals.
(2) Marketing and Distribution
Infrared Locating System and Technology
The Company's primary distribution method for the IR product is through
resellers who install the product. The Company also employs an internal
sales staff that, in addition to supporting reseller efforts, focuses on
sub-acute facilities and single floor units and those facilities with no
major allegiance to a channel reseller. The inside sales force also
follows up potential business in non-healthcare markets. Although the
Company still intends to sell directly to end users, reseller sales are
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expected to contribute the majority of the Company's future IR revenues.
Currently, the healthcare market is primarily targeted for penetration
due to initial successes and existing interest. Other potential markets
for the IR Locating technology are:
Customer Needs Solution
- - -------------------- ------------------------- -----------------------
Manufacturing Just-in-time parts Equipment tags on
Facilities delivery to a production product and spare
line, product inventory parts tracked by the
and major spare parts locating system.
location.
Office Complexes Billing accuracy and File tags, personnel
completeness and staff badges and the locating
tracking and telephone system with intercom and
call transfer. PhoneVision options.
Government Staff and visitor tracking Personnel badges and the
Buildings and access control. locating system with
intercom, PhoneVison
and door lock options.
Prisons Guard security and access Personnel badges and the
control. locating system with
intercom and door lock
options.
Schools Personnel tracking and Personnel badges and
access control. the locating system
with intercom,
PhoneVison and door
lock options.
Systems Design and Engineering Segment
The ACUCARV 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. The Company's
remaining cellular products are marketed through independent
distributors.
(3) New Products or Services
Major and innovative product developments were accomplished during the
past year. The Company expended considerable dollars and efforts to
successfully develop and introduce the new IR/RF badge and the
DataBand.
Versus believes it is the only infrared manufacturer to supply an
infrared badge that is backed by a RF supervisory signal (patent applied
for). This ensures a signal is sent from the badge even if the line-of-
sight to the sensor is blocked as could happen if a badge were covered
inadvertently.
<PAGE> 9
In November, the Company announced its disposable IR/RF DataBand that
will be used initially in healthcare applications. This water-
resistant, disposable and inexpensive badge was developed in response to
healthcare industry requests for an economical badge and will add
considerable efficiency to the procedures for collecting patient
information, billing patient charges and for providing patient location
status.
The DataBand, which will be launched at the Healthcare Information
Management System Society (HIMSS) conference in Atlanta, GA (February
22-25, 1999), was the final hardware component required for Versus'
location technology to cover the full hospital. To achieve successful
integration into full hospital coverage, the Company is in the process
of developing relationships with major resellers of hospital information
systems to overcome potential software integration hurdles. Significant
interoperability between different software systems has already been
achieved and was demonstrated at the Microsoft Healthcare Users Group
conference in October 1998. With other ActiveX members (e.g., HBOC,
Millbrook, KPMG, Careflow), Versus was able to transmit location
messages back to other information systems through the medical computer
programming language known as HL7. At this conference, it was proven
that other system interoperability (sharing of information) is indeed
possible.
During fiscal 1998, the Company also developed a voice recognition
version of PhoneVision. PhoneVision is another trademarked product
that is sold as an option to the base system to provide automatic phone
forwarding to a person's location. PhoneVision provides a simple
telephone interface to Nightingale's locating data. The telephone is
an obvious choice as an interface to location data because people are
comfortable using it. PhoneVision can operate with most modern
switches or PBX systems and can be configured to automatically forward
calls to a location at the user's request. It uses existing telephone
infrastructure and provides benefits not available with pagers and low
power cell phones at a fraction of the cost.
(4) Competitive Business Conditions
There are a small number of competing companies whose products use IR to
track patients and equipment. At the present time, there is no dominant
competitor in the IR market. In addition to Versus, there are two
companies (Executone and Hill-Rom) that have secured strong positions in
the Nurse Call niche.
There are products directly competitive with the Company's IR technology
and other products that perform functions similar to this technology,
including radio frequency ("RF") paging and communication systems,
ultrasound and RF badges, magnetic strip systems and hardwired
communication systems. The Company believes that its infrared
technology is competitive with RF-based and other similar systems. In
some applications these competitive systems may be a cost-effective
alternative. In some cases, such as when the customer only wants to do
one particular thing such as communication, the competitor may offer the
best solution. However, when the customer then considers adding
<PAGE> 10
equipment location, billing capability, communication and access
control, all in one system, Versus' products are superior.
While competition is extensive in the overall SD&E market, competition
within Olmsted's relatively narrow market segment is more limited due to
the specialized and highly technical niche group being served. Olmsted
is a well respected name in this market. Management believes this
market is mature and no significant changes are expected to occur over
the next 10 to 15 years that the Company is not prepared to take
advantage of. Competition for the Company's CAT products comes from
only a few companies. Expected growth of the market, however, may
attract entry by additional organizations with more significant
resources. In addition, there are competing technologies that perform
similar functions.
In each of its markets, the Company seeks to compete primarily on the
basis of the technological features of its products, their cost
effectiveness, system performance, interoperability capabilities, field
experience and service support.
(5) Sources and Availability of Raw Materials
The Company's manufacturing operations for IR and cellular products
consist primarily of the assembly and testing of final products and
subassemblies purchased from other manufacturers. The Company performs
quality tests and checks on components and subassemblies at various
stages of manufacturing. Finished products are thoroughly tested for
all functions.
There are multiple suppliers available for most IR components purchased
by the Company. During fiscal 1997, alternate suppliers were developed
to accommodate larger volumes. During 1998, those relationships were
strengthened and others, including overseas sources for certain
components, were established. The Company does not expect to encounter
any component shortages over the next year.
Olmsted's business in not dependent upon the availability of raw
materials.
(6) Material Customers
The Company currently has five large, and a number of smaller,
resellers. Each reseller has an existing distribution channel and
experience integrating other vendor products within their product line
and bringing that product to market within a short time period.
Resellers with existing international distribution channels are
energetically targeted. A reseller's sales volume of Versus IR products
determines their pricing level. The product is sold on 30-day terms,
and up to a one-year warranty applies to all Versus components sold to
resellers. The reseller network accounted for the Company's existing
$1,177,000 backlog at October 31, 1998 and 95% of the $2,341,000 of IR
revenues for fiscal 1998. Two customers in this group accounted for 57%
of the total Company revenues for fiscal 1998. The reseller network is
presently composed of a number of major nurse call suppliers to the
healthcare industry that have signed agreements with the Company to
acquire its products for use in their nurse call systems. The Company
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negotiates with potential new resellers on an ongoing basis.
In May 1998, the Company and Marquette Medical Systems (a wholly owned
subsidiary of G.E.) ("Marquette") entered an amended agreement under
which Marquette is required to purchase $1,750,000 of the Company's IR
product over a one-year period.
The Company generally does not offer extended payment terms to its
customers and normally adheres to its warranty policy. Consistent with
industry practice, the Company maintains inventory of both components
and finished products that it believes to be sufficient to satisfy
foreseeable short-term customer requirements.
At October 31, 1998 and 1997 respectively, the Company had approximately
$1,177,000 and $736,000 of IR Locating system orders on hand.
Approximately 21% of the Company's revenues for the fiscal year ended
October 31, 1998 were attributable to the Company's SD&E division.
These revenues resulted from a large number of customers, none of which
is considered to be a material customer.
No material portion of the business of the Company is seasonal. No
material portion of the Company's business is subject to re-negotiation
of profits or termination of contracts or subcontracts at the election
of the government.
During the last two years, inflation has not had any significant impact
on the Company's business.
(7) Patents, Trademarks, Licenses and Franchises
The Company holds and licenses several United States patents and/or
trademarks covering IR Locating technologies, ACUCARV software
products and certain cellular technologies. The Company also holds
patents in other countries for these products.
There can be no assurance that the Company's patents will provide the
Company with significant competitive advantages, or that challenges will
not be instituted against the validity or enforceability of any patent
owned or licensed by the Company or, if instituted, that any such
challenge will not be successful. Furthermore, there can be no
assurance that others will not independently develop similar
technologies or duplicate the Company's technology or design around the
patented aspects of the Company's technology. There can be no assurance
that trade secrets will be established, that secrecy obligations will be
honored, or that others will not independently develop superior
technology.
(8) Government Approvals
The Company is currently undergoing FCC certification and testing on its
new IR products. Its Olmsted product lines do not require government
approvals. The Company's CAT products are registered under FCC
regulations and comply with all relevant FCC regulations for commercial
and residential premises.
<PAGE> 12
(9) Government Regulation
The Company does not believe that existing or reasonably foreseeable
governmental regulations will have a material adverse effect upon the
Company's business.
(10) Research and Development
The Company's expenditures for research and development during fiscal
1998 were $338,000. This compares with $440,000 that was expended
during fiscal 1997. The fiscal 1997 expenditures were for technology
transfer from PTFM and further development of the IR technology. During
fiscal 1998, the expenditures were for the development of the IR/RF
badge, the DataBand, system interoperability and PhoneVision voice
recognition.
(11) Environmental Compliance
Compliance with federal, state and local provisions that have been
enacted or adopted to regulate the protection of the environment should
not have a material effect upon the capital expenditures, earnings and
competitive position of the Company. The Company does not expect to
make any material expenditure for environmental control facilities in
either the current fiscal year (fiscal 1999) or the succeeding fiscal
year (fiscal 2000).
(12) Number of Employees
At October 31, 1998, the Company had 36 full-time employees. Of its
full-time employees, 10 were engaged in systems design, manufacturing
and engineering relating to both business segments, 19 in marketing,
sales and sales administration, and 7 in general and administration.
None of the Company's employees are covered by a collective bargaining
agreement. The Company has never experienced any labor disruptions or
work stoppages and considers its employee relations to be good.
(13) Risk Factors
This report contains forward-looking statements based on the Company's
current expectations, assumptions, estimates and projections about the
Company and its industry. These forward-looking statements involve
numerous risks and uncertainties. The Company's actual results could
differ materially from those anticipated in such forward-looking
statements as a result of certain factors, as more fully described in
this section and elsewhere in this report. The Company undertakes no
obligation to update any forward-looking statements for any reason, even
if new information becomes available or other events occur in the
future. In addition to the other information in this Form 10-KSB, the
following risk factors should be considered carefully in evaluating the
Company:
Risks Relating to History of Operating Losses
<PAGE> 13
The Company is subject to risks associated with technology companies,
including losses related to new ventures, uncertainty of revenues,
profitability and the need for additional funding. The Company has a
history of operating losses. The Company incurred a loss of $1,435,000
in the fiscal year ended October 31, 1998. There can be no assurance
that new product sales will be profitable, that existing product sales
will either continue at historical rates or increase, that the Company
will achieve profitable operations, or that new products introduced by
the Company will achieve market acceptance. See "Management's
Discussion and Analysis."
Risks Relating to Future Capital Needs and Uncertainty of Additional
Funding
The Company has expended, and will continue to expend in the future,
substantial funds to complete the research, development, manufacturing
and marketing of its products. Based on its current staffing level and
product development schedule, the Company anticipates that its working
capital and funds anticipated to be derived from operations should be
adequate to satisfy its capital and operating requirements over the
next twelve months. This estimate is based upon the assumptions that
sales meet internal projections. Adequate funds, whether through
financial markets or from other sources, may not be available when
needed or on terms acceptable to the Company. In the event that the
Company is not able to obtain additional funding on a timely basis, the
Company may be required to scale back or eliminate certain or all of
its development, manufacturing or marketing programs or to license
third parties to commercialize products or technologies that the
Company would otherwise seek to develop, manufacture or market itself.
Any of these actions could have a material adverse effect on the
Company's results of operations, in order to satisfy its capital and
operating requirements. See "Management's Discussion and Analysis"
Risks Relating to Emerging Market; Product Concentration
The market for infrared tracking systems is emerging. To date, the
demand for infrared tracking systems has been limited to hospital
markets and, in this market, sales to date have been limited. There
can be no assurance that the market for such products will grow at a
rate sufficient to support the Company's business. The Company expects
that its revenues will become dependent upon IR Locating Systems. A
failure to achieve substantial sales of IR Locating Systems, as a
result of competition, technological change or other factors, would
have a material adverse effect on the Company's results of operations
in the future.
Risks Relating to Litigation
The Company was unsuccessful in defending a claim, brought by a prior
Warrant holder, that it had improperly failed to adjust a warrant
exercise price of now-expired warrants and that the warrant holder was
damaged thereby. This warrant holder held 300,000 warrants and
recovered a judgment for $195,000. Two additional actions have been
filed as class actions on behalf of the remaining holders of 1,933,800
<PAGE> 14
warrants. If the present plaintiffs are as successful as the first
plaintiff, the Company could have an actual exposure exceeding
$1,250,000. See "Legal Proceedings."
Risks Relating to Rapid Technological Change; Reliance on Continued
Product Development
The infrared technology industry in general is characterized by rapidly
changing technology. The Company must continuously update its
existing and planned products to keep them current with changing
technologies and must develop new products to take advantage of new
technologies that could render the Company's existing products
obsolete. The Company's future prospects are highly dependent on its
ability to increase the functionality of its products in a timely
manner and to develop new products that address new technologies and
achieve market acceptance. There can be no assurance that the Company
will be successful in these efforts. If the Company were unable to
develop and introduce such products in a timely manner, due to resource
constraints or technological or other reasons, this inability could
have a material adverse effect on the Company's results of operations.
Due to the uncertainties associated with the Company's emerging
market, there can be no assurance that the Company will be able to
forecast product demand accurately or to respond in a timely manner to
changing technologies and customer requirements.
Risks Relating to Reliance on Third Party Resellers
Until recently, the Company had planned to sell its IR Locating Systems
to the acute care hospital market exclusively through a third party
reseller, Marquette Medical Systems, Inc. (a wholly owned subsidiary of
G.E.). Sales through this reseller have not occurred as planned.
Marquette and the Company have amended their agreement, reducing
Marquette's purchase/sales commitments and changing Marquette's status
to a non-exclusive reseller, and the Company is now also selling its IR
Locating Systems through other channels of distribution. There can be
no assurance, however, that these channels of distribution will
purchase the Company's products or provide them with adequate levels of
support. Any significant reduction in volume due to inadequate levels
of support from resellers or other channels of distribution could have
a material adverse effect on the Company's results of operations.
Risks Relating to Dependence on Key Personnel
The Company has a small core management and development team and the
unexpected loss of any of these individuals would have a material
adverse effect on the Company's business and results of operations.
Gary T. Gaisser (President, Chief Executive Officer and Director) has
an employment contract with the Company which contains a non-
competition covenant in the event of voluntary termination. The
enforceability and scope of this employment agreement are subject to
judicial interpretation and therefore may not be enforceable as
written. At present, there is no key-man insurance in place for any
members of the Company.
<PAGE> 15
Risks Relating to Management of Growth
The Company has recently expanded its core operations. The growth of
the Company's business has placed, and, if sustained, will continue to
place a substantial burden on its managerial, operational, financial
and information systems. In particular, the growth of the Company's
business has required and, if sustained, will continue to require the
employment of additional engineering personnel. There can be no
assurance that the Company will be able to hire employees with the
necessary qualifications. The future success of the Company also
depends upon its ability to attract and retain highly skilled
managerial, sales, marketing and operations personnel. Competition for
such personnel is intense, and there can be no assurance that the
Company will be successful in attracting and retaining such personnel.
There can be no assurance that the Company's management will be able to
manage future expansions, if any, successfully, or that its management,
personnel or systems will be adequate to support the Company's
operations or will be implemented in a cost-effective or timely manner.
The Company's success depends, to a significant extent, on the ability
of its executive officers and other members of senior management to
respond to these challenges effectively. The Company's inability to
manage growth effectively could have a material adverse effect on the
Company's business, results of operations and financial condition.
Risks Relating to Limited Protection of Proprietary Technology
The Company regards its technology as proprietary and attempts to
protect it under applicable patent, copyright and trade secret laws as
well as through contractual restrictions on disclosure, use and
distribution. There can be no assurance that patents will not be
challenged or that trade secrets will remain undisclosed, that its non-
disclosure agreements will not be breached, that there will be adequate
remedies for any such breach, or that the Company's systems, processes
and operations will not be reverse engineered or independently
developed. It may be possible for unauthorized third parties to copy
the Company's products (notwithstanding the existence of any
nondisclosure agreement) or to reverse engineer or obtain and use
information that the Company regards as proprietary. There can be no
assurance that the Company's competitors will not independently develop
technologies that are substantially equivalent or superior to the
Company's technologies. Any access to or use by competitors of the
Company's technology could have a material adverse effect on the
Company. In addition, the Company is not aware of any claims that it
is infringing intellectual property rights of third parties, but there
can be no assurance that the Company will not face a claim that it is
infringing the intellectual property rights of others. There can be no
assurance that the Company will be successful in any resulting
litigation or obtain a license on commercially reasonable terms, if at
all, or will not be prevented from engaging in certain activities.
Defense and prosecution of infringement claims can be expensive and
time consuming, regardless of outcome, and can result in the diversion
of substantial financial management and other resources of the Company.
In addition, the laws of certain countries in which the Company's
products may be distributed do not protect the Company's products and
<PAGE> 16
intellectual rights to the same extent as the laws of the United
States.
Risks Relating to Control by Existing Stockholders; Anti-Takeover
Provisions
The Company's directors and officers taken as a group beneficially own
in the aggregate approximately 21.4% of the Company's outstanding
Common Stock. Certain principal stockholders are directors or
executive officers of the Company. As a result of such ownership,
these stockholders will be able to exercise a degree of control with
respect to matters requiring approval by the stockholders of the
Company, including the election of directors. In addition, certain
provisions of Delaware law could have the effect of making it more
difficult or more expensive for a third party to acquire, or of
discouraging a third party from attempting to acquire, control of the
Company.
Risks Relating to Limited Market for Common Stock; Possible Volatility
of Stock Price
The Common Stock is not currently traded on any exchange or quoted on
the NASDAQ National or NASDAQ Small Cap markets. Trading is presently
conducted through broker dealers on the OTC Bulletin Board. Although
no assurance can be given that such application will be successful or
that an active public market will exist in the future. Factors such as
announcements of the introduction of new or enhanced products by the
Company or its competitors and quarter-to-quarter variations in the
Company's results of operations, as well as market conditions in the
technology and emerging growth company sector, may have a significant
impact on the market price of the Company's shares. Further, the stock
market has experienced volatility that has particularly affected the
market prices of equity securities of many high technology companies
and that often has been unrelated or disproportionate to the operating
performance of such companies. These market fluctuations may adversely
affect the price of the Common Stock.
Risks Relating to Investment in Low-Priced Securities
The market for low-priced securities, securities which typically sell
for less than $5.00 per share, has been the subject of a number of
regulatory developments which increase the regulatory compliance
obligations of companies regularly marketing low-priced securities.
The Common Stock presently trades below $1.00 per share. Thus, it is
less likely that broker-dealers will make a market and/or otherwise
trade in the Company's securities as compared with securities for which
the stock price is in excess of $5.00 per share. This may affect the
breadth of the market for the Common Stock and also affect the price at
which the Common Stock may trade.
<PAGE> 17
Risks Relating to Sales of Common Stock Issuable Upon Exercise of
Options and Warrants and Sales of Other Shares
The Company currently has outstanding stock options to purchase
2,848,230 shares of Common Stock and warrants to purchase 1,718,969
shares of Common Stock. Subsequent to the exercise of such options and
warrants and to the issuance of shares of Common Stock thereunder, such
shares may be offered and sold by the holders thereof subject to the
provisions of Rule 144 under the Securities Act, or pursuant to an
effective registration statement filed by the Company. The sale or
potential sale of these shares of Common Stock could have the effect of
reducing the market price of the Company's Common Stock.
Risk Relating to No Dividends
The Company has never declared or paid dividends on its Common Stock
since its formation. The Company currently does not intend to pay
dividends in the foreseeable future. The payment of dividends, if any,
in the future will be at the discretion of the Board of Directors.
ITEM 2 - DESCRIPTION OF PROPERTY
In December 1996, the Company moved its principal operating facilities
to a building that is owned by Traverse Software Investment, L.L.C.
("TSI"), a limited liability company controlled by the President and
Chief Executive Officer of the Company. Versus and Olmsted are
obligated under two separate five-year lease agreements, which require
aggregate total annual rents of $111,000, increasing 4% annually after
the first year.
ITEM 3 - LEGAL PROCEEDINGS
The following is a summary of the material litigation in which the
Company is currently engaged, or which was settled during the fourth
quarter of fiscal 1998:
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.
<PAGE> 18
Plaintiffs in these nearly identical actions allege that Versus allowed
certain warrants to expire, which the Plaintiffs held, and that the
Plaintiffs 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 settled 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 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. On July 2,
1998, the court denied these motions, without prejudice to their being
resubmitted by the Company at a later date if necessary, after, and if,
the plaintiffs have first met their burden of convincing the Court that
their alleged action should be certified as a class action. Management
and legal counsel believe the Company's defenses will be found to have
merit, thus resulting in no liability of the Company to the plaintiffs.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of fiscal 1998.
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At one time, the Company's common stock was traded in the Small Cap
Market under the trading symbol "VSTI." The Company's stock is not
currently listed, as the Company for a period of time did not meet the
balance sheet requirement of NASD. At present, the Company does not
meet the NASD's minimum per-share price requirements for new listings
and therefore has not been re-listed. The Company intends to apply for
NASDAQ re-listing of its common stock as soon as all of the NASD
requirements are again met. The common stock is currently traded over
the counter by several market makers through the OTC Bulletin Board.
The price ranges presented below represent the high and low bid prices
of the Company's Common Stock during each quarter. Quotations reflect
inter-dealer prices without retail mark-up, markdown or commission and
may not represent actual transactions.
<PAGE> 19
Fiscal Quarter
Ended: 1998 1997
----------------------- ----------------------
High Low High Low
---- --- ---- ---
January 31 1-5/32 15/16 29/32 1/2
April 30 1-1/16 7/16 7/8 7/16
July 31 11/16 3/8 17/32 7/16
October 31 1/2 3/16 1-1/8 15/32
On January 26, 1999, the Company had 346 shareholders of record of its
common stock and the average of the bid and asked prices was $0.455.
To date, the Company has not declared or paid any dividends with respect
to its common stock and the current policy of the Board of Directors is
to retain any earnings to provide for the growth of the Company.
Consequently, no cash dividends are expected to be paid on the common
stock in the foreseeable future.
ITEM 6 - MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis focuses on the significant
factors which affected the Company's consolidated financial statements
during fiscal year 1998, with comparisons to 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 thereto included
elsewhere.
The following table sets forth selected financial data for the
Company for the past two fiscal years:
(in thousands except per share amounts)
Year Ended October 31, 1998 1997
- - ------------------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA:
Revenues $3,167 $1,524
Net loss (1,435) (2,610)
Basic and diluted net loss
per common share (.04) (.07)
Weighted average number of
common shares outstanding 38,026 37,496
BALANCE SHEET DATA:
Working capital $757 $1,655
Total assets 5,543 7,175
Total liabilities 677 1,029
Shareholders' equity 4,866 6,146
<PAGE> 20
OPERATING RESULTS
Fiscal 1998 was another significant year in Versus' growth. Revenues
were more than double fiscal 1997 levels, reseller relationships were
strengthened, the reseller network was expanded, major new products were
developed and introduced and significant improvements to existing
products were completed. In fiscal 1997, the Company emphasized
development of the reseller channel and acquired the IR technology from
PTFM. Fiscal 1998 saw that emphasis shift to product development as the
reseller network grew based on the groundwork laid in fiscal 1997 and
the strength of the competitive advantages available from the new IR
products.
In fiscal 1998 the Company's net loss decreased to $1,435,000 compared
to a net loss of $2,610,000 in fiscal 1997. The reduced loss was the
result of the higher sales volume and improved gross margins,
particularly in the IR products. The gross profit increased by
$1,379,000 composed of $490,000 in margin improvement and $889,000 in
volume related improvement. Fiscal 1997's net loss was primarily
attributable to low revenue levels combined with high operating expense
levels as the Company continued development of its IR product line.
Revenues for fiscal 1998 were $3,167,000 or 108% higher than the fiscal
1997 level of $1,524,000. Infrared revenues were $2,341,000 compared to
$644,000 in fiscal 1997. The reseller network generated $2,220,000 or
95% of fiscal 1998 IR revenues. The balance of IR revenues was
generated from direct sales efforts. In July 1996, the Company had
entered into an Exclusive Marketing Agreement with Marquette Medical
Systems, which gave Marquette exclusive marketing rights to sell the IR
Locating system to any acute-care hospital in the United States. That
agreement obligated Marquette to purchase, over a three-year period, a
certain number of systems. During fiscal 1997 no actual sales
materialized under the agreement, although Marquette did fulfill its
obligation to remit payment for the minimum required number of systems.
As a result of the shortfall in sales through Marquette, the Company
informed Marquette that it no longer had the exclusive rights previously
granted under the Exclusive Marketing Agreement. In May 1998, the
Company and Marquette entered into an Amended Marketing Agreement ("the
Amended Agreement") under which Marquette will purchase $1,750,000 of
the Company's IR products over the ensuing year. Marquette's minimum
obligation under the contract is $140,000 per month. At October 31,
1998 $809,000 of this requirement remained in the Company's backlog.
Systems Design and Engineering ("SD&E") revenues for fiscal 1998 were
$826,000 compared to $880,000 in fiscal 1997. SD&E revenues include
$160,000 and $127,000 in cellular revenues for fiscal 1998 and fiscal
1997 respectively. Decreased revenues from maintenance and ACUCARV
sales accounted for the majority of the overall decrease in SD&E
revenues. In late fiscal 1998, the SD&E sales division was realigned
and the Company hired a sales manager to focus solely on this divisions
products. Combined with new product introductions anticipated for
fiscal 1999, the Company expects a reversal in the reducing trend of
SD&E revenues.
<PAGE> 21
Total cost of revenues as a percentage of revenues for fiscal 1998
decreased to 46% from 78% in fiscal 1997. The decreased cost as a
percentage of revenues reflects spreading the fixed component of
manufacturing costs over a larger revenue base, cost reductions due to
larger volume orders and product improvements. Infrared cost of
revenues decreased to 44% compared to 100% in fiscal 1997 reflecting the
impact of larger volume production runs and the product improvements
referenced above. SD&E cost of revenues as a percentage of revenues
decreased to 52% in fiscal 1998 compared to 59% in fiscal 1997.
Research and development expenditures decreased by approximately
$102,000 or 23% from fiscal 1997 levels. The majority of the Company's
research and development efforts for fiscal 1997 related to the transfer
of technology from PTFM and improvements in the installation methods of
the IR system. Fiscal 1998 expenditures were for development of the
IR/RF badge, DataBand, system platform interoperability and integration
and voice recognition for PhoneVision.
Sales and marketing expense for fiscal 1998 was $1,273,000 compared to
the fiscal 1997 level of $1,225,000. The fiscal 1998 expenditures
reflected increased activity, particularly in the IR product line.
Attendance at major trade shows was emphasized and coordinated with
other increased marketing efforts as the Company continued to develop
its market presence. In the third quarter of fiscal 1998, the Company
increased its inside sales force to adequately service the growth in the
reseller channel and expand it further. In January 1999, the Company
hired an experienced Executive Vice President of Sales and Marketing to
direct its total sales and marketing efforts.
Fiscal 1998 general and administrative costs were $1,589,000 compared to
$1,431,000 for fiscal 1997. As indicated below, fiscal 1997 costs
included a $299,000 favorable adjustment in legal expenses. Fiscal 1998
costs actually decreased $141,000 when this item is considered. Major
factors in the fiscal 1998 general and administrative costs were:
$242,000 in Director and Shareholders' expenses compared to
$198,000 in fiscal 1997. Additional Director expenses
(increased number of Directors), increased investor relations
expenditures (the Company retained a consulting firm to assist
in this area) and additional annual report expenses caused the
increase.
Professional fees were $400,000 in fiscal 1998 compared to
$283,000 in fiscal 1997. The fiscal 1997 expense includes a
$299,000 gain on the settlement of a lawsuit with the Company's
former attorneys. The adjusted expense decrease of $182,000
reflects lower legal fees due to the reduction in the number of
lawsuits the Company was engaged in during 1998 compared to
1997.
Interest income decreased to $52,000 in fiscal 1998 from $150,000 in
fiscal 1997 due to lower interest bearing cash balances.
<PAGE> 22
For federal income tax purposes, the Company has net operating loss
carryforwards. As disclosed in more detail in Note 5 to the
consolidated financial statements, realization of gross deferred income
tax assets at October 31, 1998 is dependent upon generating sufficient
taxable income prior to expiration of the loss carryforwards and such
loss carryforwards are subject to certain tax law limitations. By
recording a 100% valuation allowance against its gross deferred income
tax assets, the Company has not reflected the benefit of net operating
loss carryforward amounts or other deferred income tax assets in its
consolidated financial statements at October 31, 1998.
In fiscal 1998, the Company continued to build on its successes of
fiscal 1997, growing its sales and developing its IR product in
functional and scaleable terms. As the Company enters fiscal 1999, it
believes that the established IR reseller channel and the expanded
inside sales force, directed by the recent changes in management, are
positioned well to capitalize on the many product innovations of fiscal
1998.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1998, the Company relied heavily on cash proceeds
generated from a private placement of its common stock in August 1996
which generated net proceeds to the Company of approximately $5.2
million. In the first six months of fiscal 1998 cash decreased by
$942,000. In the third quarter the cash reduction decreased to $157,000
and in the fourth quarter the decrease was reduced further to $74,000.
The third and fourth quarter expenditures include additional monies
spent on the DataBand for product development and preparation for the
February 1999 launch. During fiscal 1998 the total decrease in cash was
$1,173,000 compared to $3,060,000 in fiscal 1997.
Operations (including working capital) consumed $985,000 in cash in
fiscal 1998 compared to $2,482,000 in fiscal 1997. Increased sales
volumes and improved gross margins were the primary reasons for the
improvement.
The Company invested $63,000 in capital assets during fiscal 1998
compared to $617,000 in the prior year. Fiscal 1998 expenditures were
$38,000 for Property and Equipment and $25,000 for an IR/RF intellectual
property assignment from PTFM. Fiscal 1997 expenditures were primarily
for the PTFM license.
During fiscal 1998 the Company retired $126,000 of the notes payable
compared to $13,000 in fiscal 1997.
Although the Company believes it will generate adequate cash flow to
fund base operations, it is seeking additional funding to accommodate
the anticipated launch of its new products. In connection therewith,
the Company has received letters of commitment (contingent on certain
conditions) from certain investors and a bank for funding to be composed
of a preferred equity investment and a line of credit facility
guaranteed by third party letters of credit. The primary purposes of
this additional funding are working capital and the DataBand product
launch. In the event that the Company is not able to obtain additional
<PAGE> 23
funding on a timely basis, the Company may be required to scale back or
eliminate certain of its development, manufacturing or marketing
programs that the Company would otherwise seek to carry out.
The Company believes the combination of cash balances remaining from the
1996 private placement and the cash expected to be generated during
fiscal 1999 from operations, combined with the anticipated funding, will
be sufficient to meet projected cash needs for operations and new
product developments over the next twelve months.
SIGNIFICANT LIQUIDITY FACTORS:
October 31
----------
1998 1997
---------------------
Current ratio 2.1:1 2.8:1
Quick ratio 1.8:1 2.4:1
YEAR 2000 READINESS DISCLOSURE
The Company 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. The
Company believes there are no material problems if any, in its
infrastructure and facilities but will continue to assess embedded
systems contained in the Company's facilities and other infrastructure
to determine the potential for Y2K problems. The Company presently
believes that, with no modifications to existing software, the Y2K issue
will not pose any operational problems for the Company's software
products, its computer systems or those of its customers relating to the
use of its products.
The Company has not contacted nor received any assurances from vendors,
suppliers or customers as to their state of readiness for Y2K. The
Company believes that current material vendors and suppliers will become
Y2K compliant or that qualified replacement vendors and suppliers can be
easily located. The Company is not currently aware of any Y2K issues
facing its major customers. Management has not fully evaluated the
impact, if any, Y2K problems of its major customers may have on the
Company's future operational results or financial condition.
The Company's components and software products contain no embedded
elements that are date driven. The Company believes it will be able to
correct any Y2K issues that may arise with little expense involved. 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. The Company 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, the Company has not
found it necessary to expend any cash resources on the Y2K issue. No
estimate of the potential costs can be made until a full evaluation of
possible third party issues, if any, has been made.
<PAGE> 24
NEW ACCOUNTING STANDARDS NOT YET ADOPTED
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (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.
In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133 requires companies to
recognize all derivatives contracts as either assets or liabilities in
the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of (1) the
changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk or (2) the earnings effect of the hedged
forecasted transaction. For a derivative not designated as a hedging
instrument, the gain or loss is recognized in income in the period of
change. SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Historically, the Company has not
entered into derivatives contracts either to hedge existing risks or for
speculative purposes. Accordingly, the Company does not expect adoption
of the new standard on November 1, 1999 to affect its financial
statements.
SAFE HARBOR PROVISION
This report 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. The Company undertakes no
obligation to update, amend or clarify forward-looking statements,
whether as a result of new information, future events or otherwise.
<PAGE> 25
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Index to Consolidated Financial Statements
Page
Independent Auditors' Report
Financial Statements
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
<PAGE> 26
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Versus Technology, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheets of Versus
Technology, Inc. and subsidiary as of October 31, 1998 and 1997, and
the related consolidated statements of operations, shareholders'
equity and cash flows for the years then ended. These consolidated
financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Versus Technology, Inc. and subsidiary as of October 31, 1998 and
1997, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting
principles.
/s/ BDO Seidman, LLP
BDO Seidman, LLP
Grand Rapids, Michigan
December 1, 1998
<PAGE> 27
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Balance Sheets
October 31, 1998 and 1997
==============================================================================
October 31,
1998 1997
---------------------------
Assets
Current Assets
Cash and cash equivalents $ 698,000 $ 1,871,000
Accounts receivable (net of allowance for
doubtful accounts of $60,000 and $73,000) 517,000 446,000
Inventories - purchased parts and assemblies 155,000 171,000
Prepaid expenses and other assets 64,000 113,000
---------------------------
Total Current Assets 1,434,000 2,601,000
Property and Equipment
Machinery, equipment and vehicles 231,000 202,000
Furniture and fixtures 49,000 49,000
Leasehold improvements 130,000 121,000
---------------------------
410,000 372,000
Less accumulated depreciation 173,000 89,000
---------------------------
Net Property and Equipment 237,000 283,000
Software Development Costs, net of accumulated
amortization of $163,000 and $87,000 437,000 513,000
Goodwill, net of accumulated amortization of
$338,000 and $182,000 2,157,000 2,001,000
Patents and Other Intangible Assets, net of
accumulated amortization of $556,000 and
$344,000 (Notes 2 and 3) 1,434,000 1,621,000
---------------------------
$ 5,543,000 $ 7,175,000
===========================
<PAGE> 28
==============================================================================
October 31,
1998 1997
---------------------------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 453,000 $ 308,000
Accrued expenses 119,000 159,000
Deferred revenue - customer advance payments 25,000 356,000
Note payable, current portion (Note 3) 80,000 123,000
---------------------------
Total Current Liabilities 677,000 946,000
Note Payable, less current portion (Note 3) - 83,000
---------------------------
Total Liabilities 677,000 1,029,000
Commitments and Contingencies (Notes 5 and 7)
Shareholders' Equity (Notes 2 and 6)
Common stock, $.01 par value; 50,000,000
shares authorized; 38,362,700 and
38,271,579 shares issued and outstanding 384,000 383,000
Additional paid-in capital 33,249,000 33,074,000
Accumulated deficit (28,577,000) (27,142,000)
Unearned compensation (190,000) (169,000)
---------------------------
Total Shareholders' Equity 4,866,000 6,146,000
---------------------------
$ 5,543,000 $ 7,175,000
===========================
See accompanying notes to consolidated financial statements.
<PAGE> 29
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the years ended October 31, 1998 and 1997
==============================================================================
Year ended October 31,
1998 1997
---------------------------
Revenues $ 3,167,000 $ 1,524,000
---------------------------
Operating Expenses (Notes 2 and 7)
Cost of revenues 1,455,000 1,191,000
Research and development 338,000 440,000
Sales and marketing 1,273,000 1,225,000
General and administrative (Note 3) 1,589,000 1,431,000
---------------------------
4,655,000 4,287,000
---------------------------
Loss From Operations (1,488,000) (2,763,000)
---------------------------
Other Income (Expense)
Interest income 52,000 150,000
Interest expense - (5,000)
Other, net 1,000 8,000
---------------------------
53,000 153,000
---------------------------
Net Loss $(1,435,000) $(2,610,000)
===========================
Basic and Diluted Net Loss Per Share $ (.04) $ (.07)
See accompanying notes to consolidated financial statements.
<PAGE> 30
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Statements of Shareholders' Equity
For the years ended October 31, 1998 and 1997
==============================================================================
<TABLE>
<CAPTION>
Additional
Unearned
Paid-in Accumulated
Compensation
Shares Amount Capital Deficit
(Note 6) Total
--------------------------------------------------------
- - ------------------
<S> <C> <C> <C> <C> <C>
<C>
Balance, November 1, 36,543,573 $366,000 $31,910,000 $(24,532,000)
$(223,000) $ 7,521,000
1996
Shares issued for
license of patents
and other
intellectual
property (Note 2) 1,600,000 16,000 984,000 - -
1,000,000
Net shares issued
(repurchased) for
restricted stock
bonus plan (Note 6) (6,994) - (7,000) -
7,000 -
Earned compensation
relating to
restricted stock
bonus plan (Note 6) - - - -
47,000 47,000
Directors' compensation
(Note 6) 135,000 1,000 187,000 - -
188,000
Net loss - - - (2,610,000) -
(2,610,000)
--------------------------------------------------------
- - ------------------
Balance, October 31,
1997 38,271,579 383,000 33,074,000 (27,142,000)
(169,000) 6,146,000
Net shares issued for
restricted stock
bonus plan (Note 6) 91,121 1,000 93,000 -
(93,000) 1,000
Earned compensation
relating to
restricted stock
bonus plan (Note 6) - - - -
72,000 72,000
Directors' compensation
(Note 6) - - 82,000 - -
82,000
Net loss - - - (1,435,000) -
(1,435,000)
--------------------------------------------------------
- - ------------------
Balance, October 31,
1998 38,362,700 $384,000 $33,249,000 $(28,577,000 $
(190,000) $ 4,866,000
--------------------------------------------------------
- - ------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 31
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the years ended October 31, 1998 and 1997
==============================================================================
Year ended October 31,
1998 1997
===========================
Operating Activities
Net loss $(1,435,000) $(2,610,000)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 84,000 72,000
Amortization of intangibles 444,000 405,000
Loss on disposal of equipment - 1,000
Gain on settlement of disputed accounts
and note payable - (299,000)
Change in unearned compensation 72,000 47,000
Directors' compensation 82,000 140,000
Changes in operating assets and
liabilities:
Accounts receivable, net (71,000) (277,000)
Inventories 16,000 (26,000)
Prepaid expenses and other current
assets 49,000 (10,000)
Accounts payable 145,000 (289,000)
Accrued expenses (40,000) 24,000
Deferred revenues - customer advance
payments (331,000) 340,000
---------------------------
Net cash used in operating activities (985,000) (2,482,000)
---------------------------
Investing Activities
Change in note receivable - 36,000
Additions to property and equipment (38,000) (102,000)
Proceeds on sale of equipment - 16,000
Payment for acquisition of license to
intellectual property and associated
costs (25,000) (515,000)
---------------------------
Net cash used in investing activities (63,000) (565,000)
---------------------------
Financing Activities
Payments on note payable (126,000) (13,000)
Sale of common stock 1,000 -
---------------------------
Net cash used in financing activities (125,000) (13,000)
---------------------------
<PAGE> 32
Year ended October 31,
1998 1997
===========================
Net Decrease in Cash and Cash Equivalents $(1,173,000) $(3,060,000)
Cash and Cash Equivalents, at the beginning of
the year 1,871,000 4,931,000
---------------------------
$ 698,000 $ 1,871,000
===========================
Supplemental Cash Flow Information
Cash paid during the year for interest $ - $ 8,000
See accompanying notes to consolidated financial statements.
<PAGE> 33
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
For the years ended October 31, 1998 and 1997
1. Summary of Accounting Policies
Nature of Business
Versus Technology, Inc. (Versus) and its wholly-owned 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.
Data Collection and Processing Segment. Versus develops and markets
products using infrared technology (IR) for the health care industry
and other markets located throughout North America. These products
permit the instantaneous identification and location of people and
equipment and can be used to control access and permit instantaneous
two-way communication.
Systems Design and Engineering Segment. Olmsted writes and maintains
complex software programs for the computer-aided design and computer-
aided manufacturing (CAD/CAM) industry. It sells its own software
under the ACUCARV name, resells third party software, and provides
systems support services throughout North America. Olmsted receives
monthly maintenance and enhancement fees from customers and in turn
provides technical support and semi-annual releases. Versus also
develops, markets and integrates cellular products for the security
industry.
The Company maintains its cash accounts in national banks and does not
consider there to be a significant credit risk arising from cash
deposits in excess of federally insured limits. The Company's
customer base is diverse and the Company does not believe it has a
significant credit risk related to its accounts receivable.
Principles of Consolidation
The consolidated financial statements include the accounts of Versus
and Olmsted. Upon consolidation, all significant intercompany
accounts and transactions are eliminated.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ
from those estimates.
<PAGE> 34
Revenue Recognition
Revenue from IR product sales is recognized when the related goods are
shipped and all significant obligations of the Company have been
satisfied. The Company generally offers 90-day or one year
warranties, depending on the product. Estimated costs to service
products under warranty, which are not significant, are accrued as
sales are incurred.
Revenue from CAD/CAM product sales is recognized when the related
goods are shipped and all significant obligations of the Company have
been satisfied. Revenue from CAD/CAM maintenance and service
contracts is recognized pro rata over the life of the individual
contracts. Revenue from programming services is recognized as
services are provided.
Advance payments received from customers is deferred until all revenue
recognition criteria are satisfied.
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, less accumulated
depreciation. Depreciation is computed principally on the straight-
line method for financial reporting purposes and accelerated methods
for income tax purposes over the following estimated useful lives:
Machinery, equipment and vehicles 3 to 10 years
Furniture and fixtures 3 to 10 years
Leasehold improvements 4 and 5 years
Software Development Costs
Software development costs consist of the estimated fair value of
Olmsted's ACUCARV and related software acquired in August 1996,
less accumulated amortization computed on a straight-line basis over
eight years. Software development costs incurred to ready software
products for sale from the time that technological feasibility has
been established, as evidenced by a detailed working program design,
to the time that the product is available for general release to
customers is capitalized. Such capitalized costs are amortized based
on current and future revenue for each product with an annual minimum
equal to the straight-line amortization over the remaining estimated
economic lives of the products. Costs incurred prior to establishing
technological feasibility and costs incurred subsequent to general
product release to customers are expensed as incurred.
Patents and Other Intangible Assets
Patents and other intangible assets are recorded at cost, less
amortization computed on a straight-line basis over seven to ten
<PAGE> 35
years. Other intangible assets are comprised primarily of the
exclusive right to license PTFM's patents and other intellectual
property rights (Note 2), trademarks, and supplier royalty agreements.
Goodwill and Amortization
Goodwill, representing the cost in excess of net assets acquired in
the August 1996 acquisition of Olmsted, which was accounted for using
the purchase method of accounting, is being amortized on a straight-
line basis over 15 years. Management periodically reviews goodwill
for impairment based upon the projected undiscounted cash flows from
operations to which the goodwill relates. Identified impairments are
measured based on the projected discounted cash flows related to those
operations. Amortization of $156,000 has been recorded for both the
year ended October 31, 1998 and 1997.
Advertising Costs
All advertising costs, amounting to $71,000 and $72,000 for the years
ended October 31, 1998 and 1997, respectively, are expensed in the
period in which they are incurred.
Income Taxes
Deferred income taxes are recognized for the future tax consequences
attributable to "temporary" differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred income tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred income
tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. To the extent
that available evidence about the future raises doubt about the
realization of a deferred income tax asset, a valuation allowance is
established.
Basic and Diluted Earnings (Loss) Per Share
In February 1997, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (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. Basic EPS excludes any
dilutive effects of options, warrants and convertible securities. It
also excludes the dilutive effect of contingently issuable shares
(such as the Company's outstanding restricted stock bonus plan shares
described in Note 6) to the extent those shares have not yet been
vested. Basic EPS is computed by dividing net income (loss) by the
weighted average number of shares outstanding during each year
(excluding the restricted shares not yet vested). Diluted EPS
<PAGE> 36
includes the effects of options, warrants, convertible securities and
contingently issuable shares. SFAS No. 128 is effective for financial
statements issued for periods ended after December 15, 1997, including
interim periods, and requires restatement of previously reported EPS.
For 1998 and 1997, the Company has not included the effects of
options, warrants and contingently issuable shares in its calculation
of diluted EPS due to their anti-dilutive effect. The resulting
weighted average number of shares outstanding for 1998 and 1997 were
38,025,948 and 37,495,640, respectively, for both basic and diluted
EPS calculations. The Company's adoption of SFAS No. 128 during the
year ended October 31, 1998, had no effect on EPS for the years ended
October 31, 1998 and 1997.
Cash and Cash Equivalents
The Company considers all investments with original maturities of
three months or less to be cash equivalents.
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 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.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 requires companies
to recognize all derivatives contracts as either assets or liabilities
in the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a
hedge, the objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of (1) the
changes in the fair value of the hedged asset or liability that are
attributable to the hedged risk or (2) the earnings effect of the
hedged forecasted transaction. For a derivative not designated as a
hedging instrument, the gain or loss is recognized in income in the
period of change. SFAS No. 133 is effective for all fiscal quarters
of fiscal years beginning after June 15, 1999. Historically, the
Company has not entered into derivatives contracts either to hedge
<PAGE> 37
existing risks or for speculative purposes. Accordingly, the Company
does not expect adoption of the new standard on November 1, 1999 to
affect its financial statements.
Reclassifications
Certain reclassifications have been made to 1997 balances to conform
with classifications used in 1998.
2. 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 had previously been a supplier of
infrared components to the Company.
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 (fair
market value of $1.0 million based on the average of the bid and asked
prices on date of acquisition).
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.
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 which ran through January 31, 1998,
the Company was required to reimburse PTFM for expenses incurred in
providing the services covered by the agreement. Total expenses
reimbursed during the years ended October 31, 1998 and 1997, amounted
to $95,000 and $379,000, respectively. Of the $95,000 for 1998,
$70,000 is included in research and development and $25,000 is
included in sales and marketing in the accompanying statement of
operations. Of the $379,000 for 1997, $237,000 is included in
research and development, $110,000 is included in sales and marketing
and $32,000 is included in general and administrative expenses.
3. Notes Payable
During fiscal 1997, the Company disputed certain amounts owed to a law
firm. In late fiscal 1997, a resolution in principal was reached by
the parties and a document evidencing the resolution was executed by
both parties in December 1997. Under the terms of the agreement, the
law firm agreed to reduce the current balance of its claim from
$505,000 to $206,000, to be paid in 20 monthly installments with no
interest. The Company recorded its remaining obligation at $206,000
at December 31, 1997, without imputing interest, which is not
<PAGE> 38
material. The resulting gain, amounting to $299,000, is included in
general and administrative expenses in the accompanying 1997
consolidated statement of operations. The outstanding balance of
$80,000 at December 31, 1998, is due in equal monthly installments of
$10,000. The note is secured by certain patents and intellectual
properties of the Company.
4. Income Taxes
Deferred income taxes result from temporary differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. The tax effects of
temporary differences that give rise to deferred tax assets at October
31, 1998 and 1997 are as follows:
1998 1997
-----------------------------
Net operating loss carryforwards $7,273,000 $6,883,000
Receivables - allowance for
doubtful accounts 20,000 25,000
Inventory 9,000 9,000
Accumulated depreciation (5,000) (12,000)
Intangible assets 48,000 47,000
Accruals and reserves 46,000 151,000
Unearned compensation 92,000 23,000
Other 1,000 -
-----------------------------
Gross deferred income tax
Assets 7,484,000 7,126,000
Less valuation allowance (7,484,000) (7,126,000)
-----------------------------
Net deferred income tax assets
recorded in the consolidated
financial statements $ - $ -
=============================
At October 31, 1998, the Company had available net operating loss
carryforwards for federal income tax reporting purposes of
approximately $21,391,000 which expire through 2013, if not previously
utilized.
The above net operating loss carryforward amounts include amounts
attributable to its wholly-owned subsidiary, Olmsted, which were
carried over to the consolidated group as part of the acquisition of
Olmsted in August 1996. State net operating loss carryforwards of
Versus attributable to a state in which the Company no longer operates
are not included in the net operating loss carryforward amounts. The
utilization of the total operating loss carryforwards of Versus and
Olmsted are subject to significant limitations under the Internal
Revenue Code rules relating to change of ownership.
Due to the recording of the valuation allowance for deferred income
tax assets at October 31, 1998, actual related tax benefits recognized
in the future will be reflected as either a reduction of future income
<PAGE> 39
tax expense or goodwill related to the acquisition of Olmsted. Those
tax benefits will be allocated as follows:
Income tax benefit that would be
reported in the consolidated
statement of operations as a
reduction of income tax expense $ 6,738,000
Recognized as a reduction of
Goodwill 746,000
-----------------
$ 7,484,000
=================
Realization of the gross deferred income tax assets is primarily
dependent upon generating sufficient taxable income prior to
expiration of the loss carryforwards and, as discussed above, the loss
carryforwards are subject to tax law limitations. In assessing the
realizability of deferred income tax assets, management follows the
guidance contained within SFAS No. 109, "Accounting for Income Taxes,"
which requires that deferred income tax assets be reduced by a
valuation allowance if, based on the weight of available evidence, it
is "more likely than not" that some portion or all of the deferred
income tax assets will not be realized. Under the provisions of SFAS
No. 109, forming a conclusion that a valuation allowance is not needed
is difficult when there is negative evidence such as cumulative losses
in recent years and tax law limitations, as discussed above. While it
believes the Company will be profitable in the future, management has
concluded that, following the guidance of SFAS No. 109, it is "more
likely than not" that these deferred income tax assets will not be
realized.
For the years ended October 31, 1998 and 1997, income taxes differed
from the amounts computed by applying the federal statutory rate of
34% to losses before income taxes as follows:
1998 1997
-----------------------------
Computed "expected" tax benefit $ (488,000) $(887,000)
Increase in tax resulting from:
Adjustment to valuation
allowance for deferred
income tax assets relating
to current year losses 406,000 805,000
Nondeductible expenses 82,000 82,000
-----------------------------
$ - $ -
5. Commitments and Contingencies
Employment Contract
The Company has an employment agreement with its President, which
expires on June 30, 2002. The agreement provides for payment of
specified compensation amounts and fringe benefits during the term of
the agreement.
<PAGE> 40
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
<PAGE> 41
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. The plaintiffs further allege their
claims are substantially identical to claims made by a plaintiff in
prior litigation where a judgement of $195,000 was entered against the
Company and upheld on appeal, which involved only 300,000 of the
2,233,800 Class A warrants at issue. 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
had for the 300,000 warrants relating to the prior litigation. The
Court has consolidated the two cases. The Company disputes the
material allegations of the complaints. The Company's legal counsel
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. On July 2, 1998,
the court denied these motions, without prejudice to their being
resubmitted by the Company at a later date, if necessary, after, and
if, the plaintiffs have first met their burden of convincing the Court
that their alleged action should be certified as a class action. In
addition, and separate from the foregoing, the Company is continuing
to pursue on appeal its assertion that the Court does not have
jurisdiction over the Company in this matter. Management and legal
counsel believe the Company's defenses will be found to have merit
thus resulting in no liability of the Company to the plaintiffs.
6. Shareholders' Equity
Authorized Common and Preferred Shares
During fiscal 1998, the Board of Directors adopted, and the
shareholders approved, an amendment to the Company's certificate of
incorporation to (1) increase the number of its authorized shares of
common stock from 50,000,000 to 75,000,000 and to (2) create and
authorize 15,000,000 shares of preferred stock with a par value of
$.01. The amendment was formally signed by the Company's President
and filed with the State of Delaware in November 1998.
Stock Offerings and Issuances
As discussed in Note 2, as of January 31, 1997, the Company acquired
the exclusive license to use PTFM's intellectual property, including
<PAGE> 41
patents, related to infrared locating. A portion of the consideration
was 1.6 million restricted shares of the Company's common stock. The
shares issued contained certain registration rights.
During fiscal 1997, the Company issued 135,000 shares of common stock
to its Directors in lieu of cash for their annual director fees. Of
the total $120,000 value assigned to the shares, $71,000 was charged
to expense in 1997 and $49,000 in 1998.
Stock Registration
In accordance with private placements of its common stock in 1996 and
1995 the Company entered into registration rights agreements with the
purchasers of the stock. Additional restricted common stock was
received by Olmsted shareholders as part of the August 26, 1996
acquisition of Olmsted. As discussed above and in Note 2, restricted
common stock was issued to PTFM to acquire the exclusive license to
use PTFM's intellectual property, including patents, related to
infrared tracking. During fiscal 1998, restricted common stock was
issued in settlement of the indebtedness owed to the holder of a
demand note. During the second quarter of 1997, the Company
registered for resale a portion of these common shares. All of the
net proceeds from the offering registered were received by selling
shareholders. A total of 12,048,000 common shares was offered
pursuant to the prospectus.
Stock Warrants
At October 31, 1998, the Company has outstanding warrants in the
following amounts exercisable through the following dates:
1. Warrants to purchase 95,000 shares at an exercise price of $1.00,
expiring in September 1999, issued to lenders with respect to a
bridge loan extended to the Company in September of 1994;
2. Warrants to purchase 200,000 shares at an exercise price of $0.50,
expiring in June 2000, issued to lenders with respect to a bridge
loan extended to the Company in July of 1995;
3. Warrants to purchase 1,027,244 shares at an exercise price of
$0.20, expiring in September 2000, issued to the private placement
agent in September 1995; and
4. Warrants to purchase 396,725 shares at an exercise price of $.50,
expiring in August 2001, issued to the private placement agent in
August 1996.
Stock Options
The Company's 1996 Employee Incentive Stock Option Plan grants key
employees options to purchase shares of common stock. A total of
2,000,000 shares are authorized for grant under the plan. During
<PAGE> 42
1998, 418,230 options were granted to key employees. The options may
be exercised from one to ten years after the date of grant and are
fully vested after one year. There were no options granted under the
plan during 1997. During 1996, 1,000,000 options were granted to the
Company's President. The options may be exercised from six months to
ten years after the date of the grant, based on a vesting schedule.
Under the vesting schedule, 250,000 options became exercisable in
December 1996 and an additional 250,000 are exercisable each December
for the next three years.
A summary of activity for the Company's 1996 Employee Incentive Stock
Option Plan is as follows:
Year ended October 31,
1998 1997
-------------------- ---------------------
Shares Weighted Weighted
average average
exercise exercise
price Shares price
-------------------------------------------
Options outstanding,
beginning of year 1,000,000 $0.375 1,000,000 $0.375
Granted 418,230 0.614 - -
Exercised - - - -
Expired - - - -
-------------------------------------------
Options outstanding, end of
year 1,418,230 $0.446 1,000,000 $0.375
Options exercisable, end of
year 500,000 $0.375 250,000 $0.375
Options available for grant,
end of year 581,770 1,000,000
========= =========
The Company has issued additional stock options under various
agreements over the past several years. Under two agreements with
former employees, the Company has issued options expiring in 2000 and
2001, respectively, to purchase a total of 200,000 shares at $.50 per
share. All 200,000 options were exercisable at October 31, 1998. As
part of the Olmsted acquisition, options held by Olmsted shareholders
to acquire additional Olmsted common shares were converted to options
to acquire 266,870 of the Company's shares at an exercise price of
$.637 per share. These options expired unexercised during fiscal
1997. The Company also had options outstanding to a former employee
to purchase 3,334 shares at $.84 per share, and 1,000 shares at $1.56
per share, which options expired unexercised during fiscal 1997.
The Company has adopted the disclosure-only provisions of SFAS No.
123, "Accounting for Stock-Based Compensation," relating to its
employee stock option plans. Accordingly, no compensation cost has
been recognized relating to the Company's employee stock option plans.
<PAGE> 43
Compensation cost is recognized relating to the Company's non-employee
Director stock options, as discussed below. Had compensation cost for
the Company's employee stock options been determined based on their
fair values at the grant dates for awards under the plans consistent
with the provisions of SFAS No. 123, the Company's net loss and net
loss per share would have been reduced to the pro forma amounts
indicated below:
1998 1997
------------------------------
Net loss - as reported $ 1,435,000 $ 2,610,000
Net loss - pro forma 1,620,000 2,688,000
Net loss per share - as reported 0.04 0.07
Net loss per share - pro forma 0.04 0.07
The weighted average fair value per option at the date of grant for
options granted under the Company's Employee Incentive Stock Option
Plan during 1998 was $.49. The fair values of the option awards were
estimated using the Black-Scholes option-pricing model with the
following weighted-average assumptions: dividend yield of 0.0%;
expected volatility of 70.38%; risk-free interest rate of 5.63% and
expected life of 10 years.
During 1998, under separate agreements, 528,000 options were awarded
to the Company's Directors. Of the total, 492,000 options were
awarded to non-employee Directors and 36,000 to an employee Director.
The options were awarded for services rendered, become exercisable and
are vested from 10.5 months to one year after date of grant and may be
exercised up to five years from date of grant.
During 1997, under a separate agreement, 100,000 options were awarded
to a non-employee Director. The options were awarded for services
rendered, became exercisable six months after date of grant and may be
exercised up to five years from date of grant.
A summary of activity for the Director stock options is as follows:
Year ended October 31,
1998 1997
-------------------- ---------------------
Weighted Weighted
average average
exercise exercise
Shares price Shares price
-------------------------------------------
Options outstanding,
beginning of year 100,000 $1.031 - $ -
Granted 528,000 0.509 100,000 $ 1.031
Exercised - - - -
Expired - - - -
-------------------------------------------
Options outstanding, end of
year 628,000 $0.592 100,000 $ 1.031
<PAGE> 44
-------------------------------------------
Options exercisable, end of
year 100,000 $1.031 - $ -
For 1998 and 1997, respectively, compensation cost of $82,000 and
$69,000 was recognized relating to the non-employee Director stock
option awards based on the weighted average estimated fair values per
option of $.36 and $.69 at the dates of grant. The fair values of the
option awards were estimated using the Black-Scholes option-pricing
model with the following weighted-average assumptions:
1998 1997
------------------------------
Dividend yield 0.00% 0.00%
Expected volatility 78.15% 78.85%
Risk-free interest rate 6.25% 5.72%
Expected life in years 5 5
The following summarizes information regarding options outstanding at
October 31, 1998 under the 1996 Employee Incentive Stock Option Plan
and Director option agreements:
Weighted
Average Weighted
Range of Number Remaining Average
Exercise Outstanding Contractual Exercise
Prices at 10/31/98 Term (Years) Price
-----------------------------------------------------
1996 Employee Incentive
Stock Option Plan $.21 - $.375 1,014,625 7.6 $0.373
$.629 403,605 9.5 $0.629
----------
1,418,230
==========
Director options $.50 - $.515 528,000 4.6 $0.509
$1.031 100,000 4.0 $1.031
----------
628,000
==========
In early fiscal 1999, the Company granted options to certain employees
to purchase 675,000 shares at a weighted average exercise price of
$.403.
Restricted Stock Bonus Plan
The Company has established the 1996 Incentive Restricted Stock Bonus
Plan and reserved 500,000 common shares for issuance under the plan.
Under the terms of the plan, any employee of the Company or any
subsidiary, except the President and Directors, are eligible to
receive an allocation of bonus shares. Allocations of bonus shares
are recommended by the President and approved and adjusted, if
necessary, by the Board of Directors. Within fifteen days of the
allocation, the employee shall, if he desires to accept the
<PAGE> 45
allocation, pay to the Company an amount equal to the par value of the
allocated bonus shares.
Upon issuance of bonus shares to the employee, he or she will have all
the rights of a shareholder with respect to such shares, including the
right to vote them and to receive all dividends and other related
distributions. Bonus shares may not, however, be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of within
three years after the date of issuance unless they are first offered
by written notice back to the Company. If a recipient's employment is
terminated for any reason during the three-year period, the
termination will be deemed as an offer to the Company to repurchase
the shares at par value as follows: 100% if termination occurs within
one year from date of issuance; 75% if termination occurs within two
years, and 50% if the termination occurs within three years.
Effective October 30, 1996, 253,467 shares were granted and issued in
conjunction with the bonus plan. The market value of the shares
awarded was $226,000. The difference between the market value and the
sales price ($.01 per share) of the shares, amounting to $223,000, was
recorded as unearned compensation and presented as a separate
component of shareholders' equity. Unearned compensation is
considered earned and is amortized to expense over the three-year
vesting period. During 1998 and 1997, respectively, 105,000 and
37,450 additional shares were issued and 13,879 and 44,444 shares were
repurchased upon termination of participating employees. Earned
compensation amounted to $72,000 and $47,000 for the years ended
October 31, 1998 and 1997, respectively.
7. Related Party Transactions
The Company and its wholly-owned subsidiary, Olmsted, lease their
principal operating facilities from an entity which is beneficially
owned by the Company's President. The Company and Olmsted have
entered into separate five-year lease agreements, expiring in 2001,
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. Rent
expense for the years ended October 31, 1998 and 1997 amounted to
$117,000 and $106,000, respectively.
8. Employee Benefit Plan
The Company maintains a 401(k) plan for all of its employees. Under
the plan, the Company contributes $.50 for each dollar contributed by
an employee (subject to Internal Revenue Code limitations) to a
retirement savings account in any year. Company contributions are
limited to a maximum of 3% of the employee's direct compensation for
that year. Participants are fully vested in the 401(k) plan at all
times for those amounts attributable to their own contributions and
vest over a six-year period for Company contributions. The Company's
contributions to the plan were $24,000 and $30,000 for the years ended
October 31, 1998 and 1997, respectively.
<PAGE> 46
9. Noncash Investing and Financing Activities
As discussed in Note 3, in late fiscal 1997, the Company reached an
agreement, in principle, with a former law firm to settle a claim
regarding amounts due the law firm. The Company's recorded obligation
in the form of accounts and notes payable totaling $505,000 were
replaced with a new note payable for $206,000, resulting in a $299,000
gain.
As discussed in Note 2, as of January 31, 1997, 1.6 million restricted
shares of common stock, with a fair market value of $1,000,000, were
issued to PTFM in partial consideration of a license agreement for the
Company to become a licensee of PTFM's patents and other intellectual
property rights related to infrared technology.
10. Business Segment Information and Major Customers
The Company operates in two business segments: data collection and
processing; and systems design and engineering. The data collection
and processing segment includes the Company's infrared products
marketed to the health care industry and other markets. The systems
design and engineering segment includes Computer Aided Design/Computer
Aided Manufacturing (CAD/CAM) and cellular operations. Operated under
the Olmsted name, CAD/CAM operations develop, sell and maintain
programs for use in operating complex machinery. Cellular operations
provide cellular products for the security industry. As part of a
fiscal 1998 operations realignment, cellular operations were
transferred from the data collection and processing segment to the
systems design and engineering segment. Fiscal 1997 segment
information was reclassified to conform with the 1998 presentation.
Net sales, operating income (loss), identifiable assets, capital
expenditures and depreciation and amortization pertaining to the
business segments, as of and for the years ended October 31, 1998 and
1997, are presented below:
1998 1997
---------------------------------
Net Sales
Data collection and processing $ 2,341,000 $ 644,000
Systems design and engineering 826,000 880,000
-------------------------------
$ 3,167,000 $ 1,524,000
===============================
Operating Loss
Data collection and processing $ (721,000) $ (1,631,000)
Systems design and engineering (437,000) (842,000)
-------------------------------
Total operating loss (1,158,000) (2,473,000)
General corporate expenses (330,000) (290,000)
Interest income, net 52,000 145,000
Other income, net 1,000 8,000
-------------------------------
Net loss $ (1,435,000) $ (2,610,000)
===============================
<PAGE> 47
Identifiable Assets
Data collection and processing $ 4,124,000 $ 4,418,000
Systems design and engineering 695,000 785,000
Corporate 724,000 1,972,000
-------------------------------
$ 5,543,000 $ 7,175,000
===============================
1998 1997
---------------------------------
Capital Expenditures
Data collection and processing $ 38,000 $ 102,000
Systems design and engineering - -
-------------------------------
$ 38,000 $ 102,000
===============================
Depreciation and Amortization
Data collection and processing $ 423,000 $ 372,000
Systems design and engineering 105,000 105,000
-------------------------------
$ 528,000 $ 477,000
===============================
Net sales in excess of 10% of the Company's total net sales were
attributable to sales to two and one major customers for the years
ended October 31, 1998 and 1997, respectively. These individual
customers accounted for net sales of approximately $1,281,000 (40%)
and $540,000 (17%) in fiscal year 1998 and $260,000 (17%) in fiscal
year 1997.
ITEM 8 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 9 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Management Age Position(s) with the Company
---------- --- ----------------------------
Gary T. Gaisser 47 Director, President and Chief
Executive Officer
Samuel Davis 67 Chairman of the Board
Julian C. Schroeder 51 Director
David L. Gray 50 Director
Henry J. Tenarvitz 46 Executive Vice President of Operations
Robert Butler 51 Controller and Chief Accounting
Officer
Andrea Beadle 37 Corporate Secretary
<PAGE> 48
Gary T. Gaisser has served as President and Chief Executive Officer of
the Company since January, 1995, and has served as a Director of the
Company since April, 1995. Prior to that, he was President of Olmsted
Engineering Co. ("Olmsted"), now a wholly owned subsidiary of the
Company. Mr. Gaisser had been with Olmsted since 1988.
Samuel Davis has served as a Director of the Company since August, 1997,
and Chairman of the Board since April 24, 1998. Since 1986, he has been
President of Sam Davis & Associates, a management-consulting firm which
specializes in healthcare strategy and organizational change. He is
affiliated with the Delta Consulting Group with whom he served as Senior
Director. Mr. Davis is the former President and CEO of the Mount Sinai
Hospital in New York City. He is Clinical Professor of the School of
Public Health of Columbia University and Distinguished Service Professor
of the Mount Sinai School of Medicine in New York City.
Julian C. Schroeder has served as a Director of the Company since
August, 1994. As of March, 1997, Mr. Schroeder became Director,
International Fixed Income Research, with Schroder & Co., Inc., a
registered broker-dealer. He previously served with BDS Securities,
L.L.C., a registered broker-dealer, and its predecessor, BDS Securities
Corporation, a registered broker-dealer, since 1989, and from 1995 to
March, 1997, served as its President. Mr. Schroeder is also a Director
of Optical Coating Laboratories, a manufacturer of thin-film products.
David L. Gray, CPA, has served as a Director of the Company since April,
1998. He is President and Director of Tortola Enterprises, Inc., a
management consulting firm, and has served in this position since 1986.
In this position, he serves as an advisor to boards of directors and
executive management of a spectrum of operating businesses, both
domestic and international. He previously served as President of Sara
Lee Bakery Company and as President and CEO of Chef Pierre, Inc. Mr.
Gray also serves as a member of the board of directors for a number of
business enterprises and non-profit organizations, including Gordon Food
Service, Inc.
Henry J. Tenarvitz has served as Executive Vice President of Operations
since September 1996. Prior to that, and for more than five years, he
served in a series of positions of increasing responsibility with
Olmsted.
Robert Butler has served as Controller and Chief Accounting Officer of
the Company since April 1997. He previously served as District
Controller with Allied Waste Industries, Inc. from August 1996 to April
1997. From June 1994 until August 1996, he served as Operations and
Marketing Manager for City Environmental Services of Northern Michigan.
From June 1990 to June 1994, Mr. Butler served as Division Manager and
CFO of Tay-Ban Corporation, a subsidiary of Republic Waste Industries,
Inc.
Andrea Beadle has served as Secretary of the Company since February
1997. Since February 1996 she has served as Executive Assistant to the
President and since August 1996 she has also served as Human Resources
Manager. Before that, and for more than five years, she had served as
Records Manager of a law enforcement related agency of government.
<PAGE> 49
Each director serves an annual term of office until the next annual
meeting of shareholders.
Based solely upon a review of Forms 3 and 4 furnished to the Company
pursuant to Rule 16a-3(e) and written statements from directors and
executive officers that no report on Form 5 is due, no reporting person
failed to file reports required under Section 16(a) of the Securities
and Exchange Act of 1934 with respect to the Company's securities.
ITEM 10 - EXECUTIVE COMPENSATION
The following table sets forth the annual compensation paid to the Chief
Executive Officer of the Company during the fiscal years ended October
31, 1998, 1997, and 1996. There were no other executive officers of the
Company who received combined salary and bonuses for the year ended
October 31, 1998, equaling or exceeding $100,000.
SUMMARY COMPENSATION TABLE
Annual Long-Term Compensation
Compensation
Name and Fiscal Salary Bonus Other Annual Securities All Other
Principal Year Compensation Underlying Compensation
Position Options
- - ----------- ------ -------- ----- ------------ ---------- ------------
Gary T. 1998 $147,290 $9,690(1) 36,000 $3,727(5)
Gaisser,
President,
CEO, and
Director
Gary T. 1997 $134,500 $ 200(2) $3,901(5)
Gaisser $7,350(3)
Gary T. 1996 $ 78,000 $ 400(4) 1,000,000
Gaisser
(1) Represents the fair market value of Common Stock received as
compensation for serving as a Director. Fifteen thousand shares were
granted October 31, 1997, representing service dates of May 9, 1997,
through April 24, 1998.
(2) Represents two meetings of Directors at $100 per meeting during
fiscal 1997. The Directors voted to forego the fee for the October
31, 1997, meeting and all future meetings.
(3) Represents the fair market value of Common Stock received as
compensation for serving as a Director. Fifteen thousand shares were
granted December 30, 1996, representing service dates of May 10,
1996, through May 9, 1997.
(4) Represents $100 per meeting of Directors held during fiscal 1996.
(5) Represents the Company's contribution to Mr. Gaisser's 401(k) account
pursuant to the Company's 401(k) Profit Sharing Plan.
<PAGE> 50
Options
The options to purchase 1,000,000 shares, which had been granted to Mr.
Gaisser in 1996, are exercisable at $.375 a share, the fair value of the
stock at grant date. Twenty-five percent of these options became
exercisable on December 4, 1996, and an additional twenty-five percent
become exercisable on each subsequent anniversary thereof. The options
expire on June 4, 2006. Mr. Gaisser has exercised no options. These
1,000,000 options had an estimated value of $145,000 at October 31,
1998, based upon the difference between the option exercise price and
the fair market value of the Company's Common Stock at October 31, 1998.
The options to purchase 36,000 shares, granted to Mr. Gaisser in 1998,
are exercisable at $.515 a share, which is the average of the bid and
asked prices upon the date of grant. The options vest and become
exercisable on April 24, 1999. The options expire on April 24, 2003.
These options had no value at October 31, 1998, based upon the
difference between the option exercise price and the fair market value
of the Company's Common Stock at October 31, 1998.
No options were exercised by any executive officer in fiscal 1998.
Employment Agreement
As of July 1, 1996, the Company and Mr. Gaisser entered into an
Employment Agreement for a term of six years. Mr. Gaisser is employed
at an initial base salary of $130,000 per year and receives a 10% annual
increase during the term of the Employment Agreement. Mr. Gaisser is
entitled to such further increases as shall be determined by the Board
of Directors and is entitled to participate in other compensation and
benefit plans of the Company.
The Employment Agreement may be terminated by the Company for "just
cause," which is defined as "willful misconduct, embezzlement,
conviction of a felony, habitual drunkenness or excessive absenteeism
not related to illness." The Employment Agreement provides that if Mr.
Gaisser is not elected or appointed as President and Chief Executive
Officer or as a member of the Board of Directors, is removed from any
such office, the ownership and control of the Company changes, or if the
principal place of the business is changed to a location more than 20
miles from Traverse City, Michigan without Mr. Gaisser's consent, then
Mr. Gaisser may give notice of termination, effective at the end of the
month in which notice is given. In addition, if Mr. Gaisser concludes
that because of changes in the composition in the Board of Directors or
material changes in its policies because of other events or occurrences
of material fact, he feels he can no longer properly and effectively
discharge his responsibilities, then Mr. Gaisser may resign from his
position upon the giving of sixty (60) days' prior written notice. In
each case, such resignation shall be deemed constructive termination of
Mr. Gaisser's employment by the Company, and Mr. Gaisser shall be
entitled to payment of the remaining amounts payable to him under the
Employment Agreement without any requirement of mitigation of damages.
Except in the event of constructive termination, Mr. Gaisser has agreed
that during the term of the Employment Agreement and for two years
<PAGE> 51
thereafter, he has agreed not to compete with the Company. Upon any
termination, Mr. Gaisser has agreed not to disclose the Company's
confidential information or to solicit any employee of the Company for a
two-year period.
Compensation of Directors
Effective April 24, 1998, each outside Director was awarded an option to
purchase 73,000 shares of the Company's Common Stock annually for
service on the Board from April 24, 1998 through April 23, 1999. Inside
Directors were awarded an option to purchase 36,000 shares annually.
The options vest and become exercisable on April 24, 1999. The exercise
price for all such options is $0.515 per share, the average of the bid
and asked prices upon the date of grant.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
The following table sets forth information as to the Common Stock
beneficially owned (within the meaning of Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) by any person who, as of
January 26, 1999, to the knowledge of the Board of Directors of the
Company, owned beneficially more than 5% of the outstanding Common Stock
of the Company (to date, the Company has not issued any shares of
Preferred Stock):
Name and Address of Amount and Nature of Percentage of Class
Beneficial Owner Beneficial Ownership Outstanding
- - ---------------------- ----------------------- --------------------
Gary T. Gaisser
c/o Versus Technology,
Inc.
2600 Miller Creek Road
Traverse City, MI 49684 6,500,123(1) 16.1%
Anthony B. Low-Beer
c/o Brimberg & Co.
45 Rockefeller Plaza,
Suite 2570
New York, NY 10111 5,602,500(2) 14.5%
William Harris Investors
2 North LaSalle Street,
Suite 400
Chicago, IL 60602 3,370,000(3) 8.8%
(1) This total includes 750,000 shares that are currently acquirable by
Mr. Gaisser upon exercise of an outstanding option issued by the
Company.
(2) As reported on Schedule 13D filed May 7, 1998. Of these shares,
2,160,000 are held in managed accounts over which Mr. Low-Beer shares
dispositive power.
<PAGE> 52
(3) As reported on Schedule 13G filed February 12, 1998.
Security Ownership of Management
The following table sets forth as of January 26, 1999, the beneficial
ownership of the Company's Common Stock by all Directors, nominees and
named executive officers of and by all the Directors, nominees and
executive officers of the Company as a group:
Name of Beneficial Position(s) with Amount and Nature Percentage
Owner the Company(1) of Beneficial of Class
Ownership(1) Outstanding
- - ------------------- ------------------ ----------------- -------------
Gary T. Gaisser President, Chief 6,500,123(2) 16.1%
Executive Officer,
and Director
Samuel Davis Chairman of the 570,000(3) 1.4 %
Board
Julian C. Schroeder Director 552,582(4) 1.4%
David L. Gray Director 55,000 0.1%
All executive
officers and
directors as a
group (7 persons) 7,904,365(5) 20.0%
(1) Each director has sole voting and investment power as to all shares
reflected as beneficially owned by him, except as otherwise noted.
Messrs. Gaisser, Davis, Schroeder, and Gray are all of the Company's
present Directors.
(2) This total includes 750,000 shares that are currently acquirable by
Mr. Gaisser upon exercise of an outstanding option issued by the
Company.
(3) This total includes 100,000 shares that are currently acquirable by
Mr. Davis upon exercise of an outstanding option issued by the
Company.
(4) This total includes 217,582 shares currently acquirable under the
terms of warrants issued by the Company.
(5) This total includes 1,067,582 shares acquirable currently or within
sixty days under outstanding warrants and options.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December, 1996, the Company moved its principal operating facilities
to a building that is owned by Traverse Software Investment, LLC
("TSI"), a limited liability company controlled by Gary T. Gaisser, the
<PAGE> 53
President, Chief Executive Officer and a Director, of the Company.
Versus and Olmsted are obligated under two separate five-year lease
agreements, which initially required aggregate total annual rents of
$111,000, increasing 4% annually after the first year.
In January 1999, the Company received letters of commitment (contingent
on certain conditions being met) for additional financing. The group of
investors contemplating this funding includes:
Gary T. Gaisser President and CEO
Samuel Davis Director
G III L.L.C. David L. Gray, the Managing
Member of G III, is also a
Director of Versus.
ITEM 13 - EXHIBITS AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
(1) Financial statements included in Part II of this report.
(2) Exhibits included in the Exhibit Index on Page.
(b) There were no reports on Form 8-K during the fourth fiscal quarter.
<PAGE> 54
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the issuer has duly caused this Annual
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: January 29, 1999
In accordance with the Exchange Act, this report has been signed
below by the following persons on behalf of the issuer and in the
capacities and on the dates indicated:
/s/ Gary T. Gaisser January 29, 1999
- - -------------------
Gary T. Gaisser
Director
/s/ Samuel Davis January 29, 1999
- - ----------------
Samuel Davis
Director
/s/ Julian C. Schroeder January 29, 1999
- - -----------------------
Julian C. Schroeder
Director
/s/ David L. Gray January 29, 1999
- - -----------------
David L. Gray
Director
<PAGE> 55
EXHIBIT INDEX
2 Agreement and Plan of Merger between Versus Technology, Inc.
and Olmsted Engineering, Inc. (Incorporated by reference to
Exhibit 2 of the Company's Form 8-K dated August 26, 1996)
3(a)(I) Certificate of Incorporation dated October 11, 1988
(Incorporated by reference to Exhibit 3 (a) (i) of the
Company's Form 10-KSB for the year ended October 31, 1995)
3(a)(ii) Certificate of Amendment of Certificate of Incorporation dated
October 25, 1989 (Incorporated by reference to Exhibit 3 (a)
(ii) of the Company's Form 10-KSB for the year ended October
31, 1995)
3(a)(iii) Certificate of Amendment of Certificate of Incorporation dated
December 17, 1993 (Incorporated by reference to Exhibit 3 (a)
(iii) of the Company's Form 10-KSB for the year ended October
31, 1995)
3(a)(iv) Certificate of Amendment of Certificate of Incorporation Dated
June 3, 1996 (Incorporated by reference to Exhibit 3 of the
Company's Form 10-QSB for the quarter ended July 31, 1996)
3(a)(v) Certificate of Amendment of Certificate of Incorporation Dated
November 2, 1998
3(b) By-laws (Incorporated by reference to Exhibit 3 (b) of the
Company's Form 10-KSB for the year ended October 31, 1995)
4(a) 1996 Incentive Restricted Stock Bonus Plan (Incorporated by
reference to Exhibit 4(a) of the Company's Form 10-KSB for the
year ended October 31, 1996)
4(b) Stock Option Agreement with Gary T. Gaisser (Incorporated by
reference to Exhibit 4(b) of the Company's Form 10-KSB for the
year ended October 31, 1996)
4(c) 1996 Employee Incentive Stock Option Plan (Incorporated by
reference to the Company's 1996 Proxy Statement)
4(d) Stock Option Agreement with Samuel Davis - for Director
Services (Incorporated by reference to Exhibit 4(d) of the
Company's Form 10-KSB for the year ended October 31, 1997)
4(e) Stock Option Agreement with Samuel Davis - for Director
Services
4(f) Stock Option Agreement with Gary T. Gaisser - for Director
Services
<PAGE> 56
4(g) Stock Option Agreement with Julian C. Schroeder - for Director
Services
4(h) Stock Option Agreement with David L. Gray - for Director
Services
4(i) Stock Option Agreement with Anthony Low-Beer - for Director
Services
4(j) Stock Option Agreement with Samuel Davis - for Chairman of the
Board Services
10(a) Lease Agreement between Versus Technology, Inc. and Traverse
Software Investment, LLC (Incorporated by reference to Exhibit
10(a) of the Company's Form 10-KSB for the year ended October
31, 1996)
10(b) Lease Agreement between Olmsted Engineering, Co. and Traverse
Software Investment, LLC (Incorporated by reference to Exhibit
10(b) of the Company's Form 10-KSB for the year ended October
31, 1996)
10(c) Exclusive Marketing Agreement between Versus Technology, Inc.
and Marquette Electronics, Inc. (redacted) (Incorporated by
reference to Exhibit 10(c) of the Company's Form 10-KSB for
the year ended October 31, 1996)
10(d) Amended Marketing Agreement between Versus Technology, Inc.
and Marquette Electronics, Inc.
10(e) Employment Agreement with Gary T. Gaisser (Incorporated by
reference to Exhibit 10(d) of the Company's Form 10-KSB for
the year ended October 31, 1996)
10(f) Registration Rights Agreement dated August 26, 1996
(Incorporated by reference to Exhibit 10(e) of the Company's
Form 10-KSB for the year ended October 31, 1996)
10(g) Registration Rights Agreement dated September 15, 1995
(Incorporated by reference to Exhibit 10 (d) of the Company's
Form 10-KSB for the year ended October 31, 1995)
10(h) Registration Rights Agreement dated July 1, 1995 (Incorporated
by reference to Exhibit 10 (e) of the Company's Form 10-KSB
for the year ended October 31, 1995)
10(i) Agreement with Precision Tracking FM, Inc. ("The License
Agreement") effective January 31, 1997 (Incorporated by
reference to Exhibit 10.1 of the Company's Form 8-K filed
February 18, 1997)
<PAGE> 57
10(j) Engineering and License Agreement with Precision Tracking FM,
Inc. ("The Engineering Agreement") effective January 31, 1997
(Incorporated by reference to Exhibit 10.2 of the Company's
Form 8-K filed February 18, 1997)
21 Subsidiary of the Registrant
27 Financial Data Schedule
99 News Releases
<PAGE> 58
EXHIBIT 3 (a) (v)
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE 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 meetings held on December
15, 1997 and February 11, 1998, at each of 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 the
corporation shall have authority to issue is 90,000,000
shares, consisting of 75,000,000 shares of common stock
having a par value of $.01 per share, and 15,000,000 shares
of preferred stock having a par value of $.01 per share. The
stated value applicable to the aggregate of all such shares
is nine hundred thousand dollars ($900,000.00).
The Board of Directors is authorized, subject to limitations
prescribed by law, to provide for the issuance of the shares of
preferred stock in series, and by filing a certificate pursuant to
the applicable law of the State of Delaware, to establish from time
to time the number of shares to be included in each such series,
and to fix the designations, powers, preferences and rights of the
shares of each such series, and any qualifications, limitations or
restrictions thereof. The number of authorized shares of preferred
stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the
holders of a majority of the outstanding shares of common stock,
without a vote of the holders of the preferred stock, or of any
series thereof, unless a vote of any such holders is required
pursuant to the certificate or certificates establishing any series
of preferred stock."
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 April
24, 1998.
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.
<PAGE> 59
IN WITNESS WHEREOF, the corporation has caused this certificate to
be signed by Gary T. Gaisser, its president, and attested by Andrea
Beadle, its corporate secretary, this 2nd day of November, 1998.
VERSUS TECHNOLOGY, INC.
By:
--------------------------
Gary T. Gaisser
ATTEST:
By:
--------------------------
Andrea Beadle
<PAGE> 60
Exhibit 4 (e)
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT, dated effective as of April 24, 1998
between VERSUS TECHNOLOGY, INC., a Delaware Corporation (the
"Corporation"), and Samuel Davis, a current non-employee ("outside")
member of the Board of Directors of the Corporation (hereinafter
"Director").
WITNESSETH:
The Corporation desires, by affording the Director an opportunity
to purchase shares of its Common Stock, $.01 par value, to provide the
Director with incentive compensation to continue to serve on the Board
of Directors of the Corporation and to continue and increase his
efforts in that connection. This Non-Qualified Stock Option Agreement
(this "Agreement") is being entered into pursuant to the determinations
made by the Compensation Committee (the "Committee") of the Board of
Directors of the Corporation (the "Board") on April 24, 1998.
In consideration of the mutual covenants hereinafter set forth and
for other good and valuable consideration, the parties hereto hereby
agree as follows:
1. Grant. The Corporation with the approval and direction of the
Committee irrevocably grants the Director the right and option (the
"Option") to purchase all or any part of an aggregate of 73,000 shares
of Corporation common stock on the terms and conditions herein set
forth. This Option shall be a nontransferable Non-Qualified, Non-
Statutory Stock Option, for which there is no readily ascertainable
fair market value, with the intent that it need not be recognized by
the Director for purposes of federal income taxation until the Option
is exercised.
2. Price. The purchase price of the shares of Corporation common stock
covered by the Option shall be $ .515 per share, which price is not
less than the fair market value of the Corporation common stock on the
effective date hereof.
3. Time of Exercise. The term of the Option shall be for a period of
five (5) years from the date hereof, subject to earlier termination as
provided in this Agreement. Neither the Option nor any rights related
to the Option shall be exercisable for a period of one year from the
date hereof, except as may otherwise be provided in paragraph 5 of
this Agreement.
4. No Transfer. The Option shall not be transferable by the Director
otherwise than by Will or the laws of descent and distribution, and
the Option may be exercised during his lifetime only by the Director.
The Option may not be assigned, transferred (except as aforesaid),
pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the
provisions hereof and the levy of any attachment or similar process
upon the Option shall be null and void ab initio and without effect.
5. Termination. In the event the Director's service as a Director of the
Corporation shall cease or be terminated for any reason other than
death or disability prior to April 24, 1999, this Option shall be null
and void ab initio and the Director shall have no rights hereunder
whatsoever. In the event the Director ceases to serve as a member of
the Board because of the Director's death or disability prior to April
<PAGE> 61
24, 1999, the Option may be exercised by the Director (or the person
then lawfully empowered to act in the Director's place or on his
behalf) at any time within one year after the date of death or
disability. Disability shall mean the inability of the Director, as a
result of his physical or mental incapacity, to render services as a
member of the Board for a continuous period in excess of 3 months, or
the period of time between the incapacity and April 24, 1999,
whichever period of time is longer.
6. Anti-Dilution Adjustments. In the event of any change in the
outstanding common stock of the Corporation by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, split-ups, split-offs,
liquidations or other similar changes in capitalization, or any
distributions to common stockholders of the Corporation other than
cash dividends, the numbers, class and prices of shares covered by
this Option shall be appropriately adjusted by the Committee, whose
determination shall be conclusive; provided, however, that no such
adjustment shall give the Director any additional benefits under the
Option.
7. Corporate Transactions. Notwithstanding the provisions of Paragraph
6, if any "corporate transaction" as defined in Section 1.425-1 of the
Treasury Regulations promulgated under the Internal Revenue Code of
1986 occurs after the date of this Agreement, and in connection with
such corporate transaction, the Corporation and another corporation
enter into an agreement providing for the issuance of substitute stock
options in exchange for the Option or the assumption of the Option, in
either case giving the Director the right to purchase the largest
whole number of shares of Common Stock of the Corporation, or of any
other corporation at the lowest option price permitted by said Section
1.425-1, the Option shall be deemed to provide for the purchase of
such number of shares of Common Stock at such option price as shall be
agreed upon by the Corporation and such other corporation, and the
term "Corporation" herein shall mean the issuer of the stock then
covered by the Option and the term "Common Stock" shall mean such
stock.
8. No Agreement for Continued Service. This Agreement does not confer
upon the Director any right to continue as a member of the Board of
the Corporation, nor does it interfere in any way with the right of
the Corporation to remove the Director from office or the right of the
Director to resign, at any time.
9. Restrictions. The obligation of the Corporation to sell and deliver
shares of Corporation common stock with respect to the Option shall be
subject to (i) all applicable laws, rules, regulations and such
approvals by any governmental agencies as may be required, including
the effectiveness of a Registration Statement under the Securities Act
of 1933, as amended and (ii) the condition that the shares of common
stock to be received upon exercise of the Option shall have been duly
listed, upon official notice of issuance, on a stock exchange (to the
extent that the common stock of the Corporation is then listed on any
such stock exchange). In the event that the shares shall be delivered
otherwise than in accordance with an applicable registration
statement, the Corporation's obligation to deliver the shares is
subject to the further condition that the Director will execute and
deliver to the Corporation an undertaking in form and substance
<PAGE> 62
satisfactory to the Corporation that (i) it is the Director's
intention to acquire and hold such shares for investment and not for
resale or distribution, (ii) the shares will not be sold without
registration or exemption from the requirement of registration under
the Securities Act and (iii) the Director will indemnify the
Corporation for any costs, liabilities and expenses which it may
sustain by reason of any violation of the Securities Act or any other
law regulating the sale or purchase of securities occasioned by any
act on his part with respect to such shares. The Corporation may
require that any certificate or certificates evidencing shares issued
pursuant to this Agreement bear a restrictive legend intended to
effect compliance with the Securities Act or any other applicable
regulatory measures, and stop transfer instructions with respect to
the certificates representing the shares may be given to the transfer
agent.
10. Exercise. Subject to the terms and conditions of this Agreement, the
Option may be exercised only by written notice delivered to the
Corporation at its principal executive offices, attention of the
Corporate Secretary, of intention to exercise such Option and by
making payment of the purchase price of such shares. Such written
notice shall:
(a) state the election to exercise the Option and the number of
shares in respect of which it is being exercised;
(b) be accompanied by a tender of payment of the purchase price
therefor, and
(c) be signed by the person or persons so exercising the Option
and in the event the Option is being exercised by any person
or persons other than the Director, be accompanied by
appropriate proof of the right of such person or persons to
exercise the Option.
As soon as reasonably practicable following such exercise and
payment, a certificate or certificates for the shares as to which the
Option shall have been so exercised, registered in the name of the
person or persons so exercising the Option, shall be issued by the
Corporation and delivered to or upon the order of such person or
persons. Payment in full of the purchase price of said shares shall be
made in cash, by check or (at the Corporation's discretion) by surrender
or delivery to the Corporation of shares of the Corporation's common
stock with a fair market value equal to or less than the Option price,
plus cash equal to any difference. All shares issued as provided herein
will be fully paid and non-assessable. The Director shall not have any
of the rights of a Stockholder with respect to the shares of common
stock subject to the Option until the certificate evidencing such shares
shall be issued to him after the due exercise of the Option.
11. Availability of Shares. The Corporation shall at all times during the
term of the Option reserve and keep available such number of shares of
common stock as will be sufficient to satisfy the requirements of this
Agreement, shall pay all original issue taxes with respect to the
issue of shares pursuant hereto and all other fees and expenses
necessarily incurred by the Corporation in connection therewith and
will from time to time use its best efforts to comply with all laws
and regulations which in the opinion of counsel for the Corporation,
shall be applicable thereto.
12. Fair Market Value. As used herein, the "fair market value" of a share
<PAGE> 63
of common stock shall be the average of the bid and asked price of the
stock as publicly traded on the over the counter market, or if the
stock is listed on a national securities exchange, the closing price
of the stock on the composite tape on the trading day immediately
preceding such given date, or if the stock is neither listed on a
national securities exchange or traded on the over the counter market,
such value as the remaining members of the Board in good faith shall
determine.
13. Governing Law. This Agreement has been entered into and shall be
construed in accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
duly executed and sealed by its duly authorized Officers and the
Director has hereunder set his hand, all as of the day and year first
above written.
ATTEST: VERSUS TECHNOLOGY, INC.
----------------------------- By:-----------------------------
Andrea Beadle, Corporate Secretary Gary T. Gaisser, President
--------------------------------
Samuel Davis, Director
<PAGE> 64
Exhibit 4 (f)
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT, dated effective as of April
24, 1998 between VERSUS TECHNOLOGY, INC., a Delaware Corporation (the
"Corporation"), and Gary T. Gaisser, a current employee ("inside")
member of the Board of Directors of the Corporation (hereinafter
"Director").
WITNESSETH:
The Corporation desires, by affording the Director an opportunity
to purchase shares of its Common Stock, $.01 par value, to provide the
Director with incentive compensation to continue to serve on the Board
of Directors of the Corporation and to continue and increase his
efforts in that connection. This Non-Qualified Stock Option Agreement
(this "Agreement") is being entered into pursuant to the determinations
made by the Compensation Committee (the "Committee") of the Board of
Directors of the Corporation (the "Board") on April 24, 1998.
In consideration of the mutual covenants hereinafter set forth and
for other good and valuable consideration, the parties hereto hereby
agree as follows:
1. Grant. The Corporation with the approval and direction of the
Committee irrevocably grants the Director the right and option (the
"Option") to purchase all or any part of an aggregate of 36,000 shares
of Corporation common stock on the terms and conditions herein set
forth. This Option shall be a nontransferable Non-Qualified, Non-
Statutory Stock Option, for which there is no readily ascertainable
fair market value, with the intent that it need not be recognized by
the Director for purposes of federal income taxation until the Option
is exercised.
2. Price. The purchase price of the shares of Corporation common stock
covered by the Option shall be $ .515 per share, which price is not
less than the fair market value of the Corporation common stock on the
effective date hereof.
3. Time of Exercise. The term of the Option shall be for a period of
five (5) years from the date hereof, subject to earlier termination as
provided in this Agreement. Neither the Option nor any rights related
to the Option shall be exercisable for a period of one year from the
date hereof, except as may otherwise be provided in paragraph 5 of
this Agreement.
4. No Transfer. The Option shall not be transferable by the Director
otherwise than by Will or the laws of descent and distribution, and
the Option may be exercised during his lifetime only by the Director.
The Option may not be assigned, transferred (except as aforesaid),
pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the
provisions hereof and the levy of any attachment or similar process
upon the Option shall be null and void ab initio and without effect.
5. Termination. In the event the Director's service as a Director of the
Corporation shall cease or be terminated for any reason other than
death or disability prior to April 24, 1999, this Option shall be null
and void ab initio and the Director shall have no rights hereunder
whatsoever. In the event the Director ceases to serve as a member of
the Board because of the Director's death or disability prior to April
<PAGE> 65
24, 1999, the Option may be exercised by the Director (or the person
then lawfully empowered to act in the Director's place or on his
behalf) at any time within one year after the date of death or
disability. Disability shall mean the inability of the Director, as a
result of his physical or mental incapacity, to render services as a
member of the Board for a continuous period in excess of 3 months, or
the period of time between the incapacity and April 24, 1999,
whichever period of time is longer.
6. Anti-Dilution Adjustments. In the event of any change in the
outstanding common stock of the Corporation by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, split-ups, split-offs,
liquidations or other similar changes in capitalization, or any
distributions to common stockholders of the Corporation other than
cash dividends, the numbers, class and prices of shares covered by
this Option shall be appropriately adjusted by the Committee, whose
determination shall be conclusive; provided, however, that no such
adjustment shall give the Director any additional benefits under the
Option.
7. Corporate Transactions. Notwithstanding the provisions of Paragraph
6, if any "corporate transaction" as defined in Section 1.425-1 of the
Treasury Regulations promulgated under the Internal Revenue Code of
1986 occurs after the date of this Agreement, and in connection with
such corporate transaction, the Corporation and another corporation
enter into an agreement providing for the issuance of substitute stock
options in exchange for the Option or the assumption of the Option, in
either case giving the Director the right to purchase the largest
whole number of shares of Common Stock of the Corporation, or of any
other corporation at the lowest option price permitted by said Section
1.425-1, the Option shall be deemed to provide for the purchase of
such number of shares of Common Stock at such option price as shall be
agreed upon by the Corporation and such other corporation, and the
term "Corporation" herein shall mean the issuer of the stock then
covered by the Option and the term "Common Stock" shall mean such
stock.
8. No Agreement for Continued Service. This Agreement does not confer
upon the Director any right to continue as a member of the Board of
the Corporation, nor does it interfere in any way with the right of
the Corporation to remove the Director from office or the right of the
Director to resign, at any time.
9. Restrictions. The obligation of the Corporation to sell and deliver
shares of Corporation common stock with respect to the Option shall be
subject to (i) all applicable laws, rules, regulations and such
approvals by any governmental agencies as may be required, including
the effectiveness of a Registration Statement under the Securities Act
of 1933, as amended and (ii) the condition that the shares of common
stock to be received upon exercise of the Option shall have been duly
listed, upon official notice of issuance, on a stock exchange (to the
extent that the common stock of the Corporation is then listed on any
such stock exchange). In the event that the shares shall be delivered
otherwise than in accordance with an applicable registration
statement, the Corporation's obligation to deliver the shares is
subject to the further condition that the Director will execute and
deliver to the Corporation an undertaking in form and substance
satisfactory to the Corporation that (i) it is the Director's
Page 66
intention to acquire and hold such shares for investment and not for
resale or distribution, (ii) the shares will not be sold without
registration or exemption from the requirement of registration under
the Securities Act and (iii) the Director will indemnify the
Corporation for any costs, liabilities and expenses which it may
sustain by reason of any violation of the Securities Act or any other
law regulating the sale or purchase of securities occasioned by any
act on his part with respect to such shares. The Corporation may
require that any certificate or certificates evidencing shares issued
pursuant to this Agreement bear a restrictive legend intended to
effect compliance with the Securities Act or any other applicable
regulatory measures, and stop transfer instructions with respect to
the certificates representing the shares may be given to the transfer
agent.
10. Exercise. Subject to the terms and conditions of this Agreement, the
Option may be exercised only by written notice delivered to the
Corporation at its principal executive offices, attention of the
Corporate Secretary, of intention to exercise such Option and by
making payment of the purchase price of such shares. Such written
notice shall:
(a) state the election to exercise the Option and the number of
shares in respect of which it is being exercised;
(b) be accompanied by a tender of payment of the purchase price
therefor, and
(c) be signed by the person or persons so exercising the Option
and in the event the Option is being exercised by any person
or persons other than the Director, be accompanied by
appropriate proof of the right of such person or persons to
exercise the Option.
As soon as reasonably practicable following such exercise and
payment, a certificate or certificates for the shares as to which the
Option shall have been so exercised, registered in the name of the
person or persons so exercising the Option, shall be issued by the
Corporation and delivered to or upon the order of such person or
persons. Payment in full of the purchase price of said shares shall be
made in cash, by check or (at the Corporation's discretion) by surrender
or delivery to the Corporation of shares of the Corporation's common
stock with a fair market value equal to or less than the Option price,
plus cash equal to any difference. All shares issued as provided herein
will be fully paid and non-assessable. The Director shall not have any
of the rights of a Stockholder with respect to the shares of common
stock subject to the Option until the certificate evidencing such shares
shall be issued to him after the due exercise of the Option.
11. Availability of Shares. The Corporation shall at all times during the
term of the Option reserve and keep available such number of shares of
common stock as will be sufficient to satisfy the requirements of this
Agreement, shall pay all original issue taxes with respect to the
issue of shares pursuant hereto and all other fees and expenses
necessarily incurred by the Corporation in connection therewith and
will from time to time use its best efforts to comply with all laws
and regulations which in the opinion of counsel for the Corporation,
shall be applicable thereto.
12. Fair Market Value. As used herein, the "fair market value" of a share
of common stock shall be the average of the bid and asked price of the
stock as publicly traded on the over the counter market, or if the
<PAGE> 67
stock is listed on a national securities exchange, the closing price
of the stock on the composite tape on the trading day immediately
preceding such given date, or if the stock is neither listed on a
national securities exchange or traded on the over the counter market,
such value as the remaining members of the Board in good faith shall
determine.
13. Governing Law. This Agreement has been entered into and shall be
construed in accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
duly executed and sealed by its duly authorized Officers and the
Director has hereunder set his hand, all as of the day and year first
above written.
ATTEST: VERSUS TECHNOLOGY, INC.
----------------------------
By:-----------------------------
Andrea Beadle, Corporate Secretary Gary T. Gaisser, President
---------------------------------
Gary T. Gaisser, Director
<PAGE> 68
Exhibit 4 (g)
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT, dated effective as of April
24, 1998 between VERSUS TECHNOLOGY, INC., a Delaware Corporation (the
"Corporation"), and Julian C. Schroeder, a current non-employee
("outside") member of the Board of Directors of the Corporation
(hereinafter "Director").
WITNESSETH:
The Corporation desires, by affording the Director an opportunity
to purchase shares of its Common Stock, $.01 par value, to provide the
Director with incentive compensation to continue to serve on the Board
of Directors of the Corporation and to continue and increase his
efforts in that connection. This Non-Qualified Stock Option Agreement
(this "Agreement") is being entered into pursuant to the determinations
made by the Compensation Committee (the "Committee") of the Board of
Directors of the Corporation (the "Board") on April 24, 1998.
In consideration of the mutual covenants hereinafter set forth and
for other good and valuable consideration, the parties hereto hereby
agree as follows:
1. Grant. The Corporation with the approval and direction of the
Committee irrevocably grants the Director the right and option (the
"Option") to purchase all or any part of an aggregate of 73,000 shares
of Corporation common stock on the terms and conditions herein set
forth. This Option shall be a nontransferable Non-Qualified, Non-
Statutory Stock Option, for which there is no readily ascertainable
fair market value, with the intent that it need not be recognized by
the Director for purposes of federal income taxation until the Option
is exercised.
2. Price. The purchase price of the shares of Corporation common stock
covered by the Option shall be $ .515 per share, which price is not
less than the fair market value of the Corporation common stock on the
effective date hereof.
3. Time of Exercise. The term of the Option shall be for a period of
five (5) years from the date hereof, subject to earlier termination as
provided in this Agreement. Neither the Option nor any rights related
to the Option shall be exercisable for a period of one year from the
date hereof, except as may otherwise be provided in paragraph 5 of
this Agreement.
4. No Transfer. The Option shall not be transferable by the Director
otherwise than by Will or the laws of descent and distribution, and
the Option may be exercised during his lifetime only by the Director.
The Option may not be assigned, transferred (except as aforesaid),
pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the
provisions hereof and the levy of any attachment or similar process
upon the Option shall be null and void ab initio and without effect.
5. Termination. In the event the Director's service as a Director of the
Corporation shall cease or be terminated for any reason other than
death or disability prior to April 24, 1999, this Option shall be null
and void ab initio and the Director shall have no rights hereunder
whatsoever. In the event the Director ceases to serve as a member of
the Board because of the Director's death or disability prior to April
<PAGE> 69
24, 1999, the Option may be exercised by the Director (or the person
then lawfully empowered to act in the Director's place or on his
behalf) at any time within one year after the date of death or
disability. Disability shall mean the inability of the Director, as a
result of his physical or mental incapacity, to render services as a
member of the Board for a continuous period in excess of 3 months, or
the period of time between the incapacity and April 24, 1999,
whichever period of time is longer.
6. Anti-Dilution Adjustments. In the event of any change in the
outstanding common stock of the Corporation by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, split-ups, split-offs,
liquidations or other similar changes in capitalization, or any
distributions to common stockholders of the Corporation other than
cash dividends, the numbers, class and prices of shares covered by
this Option shall be appropriately adjusted by the Committee, whose
determination shall be conclusive; provided, however, that no such
adjustment shall give the Director any additional benefits under the
Option.
7. Corporate Transactions. Notwithstanding the provisions of Paragraph
6, if any "corporate transaction" as defined in Section 1.425-1 of the
Treasury Regulations promulgated under the Internal Revenue Code of
1986 occurs after the date of this Agreement, and in connection with
such corporate transaction, the Corporation and another corporation
enter into an agreement providing for the issuance of substitute stock
options in exchange for the Option or the assumption of the Option, in
either case giving the Director the right to purchase the largest
whole number of shares of Common Stock of the Corporation, or of any
other corporation at the lowest option price permitted by said Section
1.425-1, the Option shall be deemed to provide for the purchase of
such number of shares of Common Stock at such option price as shall be
agreed upon by the Corporation and such other corporation, and the
term "Corporation" herein shall mean the issuer of the stock then
covered by the Option and the term "Common Stock" shall mean such
stock.
8. No Agreement for Continued Service. This Agreement does not confer
upon the Director any right to continue as a member of the Board of
the Corporation, nor does it interfere in any way with the right of
the Corporation to remove the Director from office or the right of the
Director to resign, at any time.
9. Restrictions. The obligation of the Corporation to sell and deliver
shares of Corporation common stock with respect to the Option shall be
subject to (i) all applicable laws, rules, regulations and such
approvals by any governmental agencies as may be required, including
the effectiveness of a Registration Statement under the Securities Act
of 1933, as amended and (ii) the condition that the shares of common
stock to be received upon exercise of the Option shall have been duly
listed, upon official notice of issuance, on a stock exchange (to the
extent that the common stock of the Corporation is then listed on any
such stock exchange). In the event that the shares shall be delivered
otherwise than in accordance with an applicable registration
statement, the Corporation's obligation to deliver the shares is
subject to the further condition that the Director will execute and
deliver to the Corporation an undertaking in form and substance
satisfactory to the Corporation that (i) it is the Director's
<PAGE> 70
intention to acquire and hold such shares for investment and not for
resale or distribution, (ii) the shares will not be sold without
registration or exemption from the requirement of registration under
the Securities Act and (iii) the Director will indemnify the
Corporation for any costs, liabilities and expenses which it may
sustain by reason of any violation of the Securities Act or any other
law regulating the sale or purchase of securities occasioned by any
act on his part with respect to such shares. The Corporation may
require that any certificate or certificates evidencing shares issued
pursuant to this Agreement bear a restrictive legend intended to
effect compliance with the Securities Act or any other applicable
regulatory measures, and stop transfer instructions with respect to
the certificates representing the shares may be given to the transfer
agent.
10. Exercise. Subject to the terms and conditions of this Agreement,
the Option may be exercised only by written notice delivered to the
Corporation at its principal executive offices, attention of the
Corporate Secretary, of intention to exercise such Option and by
making payment of the purchase price of such shares. Such written
notice shall:
(a) state the election to exercise the Option and the number of
shares in respect of which it is being exercised;
(b) be accompanied by a tender of payment of the purchase price
therefor, and
(c) be signed by the person or persons so exercising the Option
and in the event the Option is being exercised by any person
or persons other than the Director, be accompanied by
appropriate proof of the right of such person or persons to
exercise the Option.
As soon as reasonably practicable following such exercise and payment,
a certificate or certificates for the shares as to which the Option
shall have been so exercised, registered in the name of the person or
persons so exercising the Option, shall be issued by the Corporation
and delivered to or upon the order of such person or persons. Payment
in full of the purchase price of said shares shall be made in cash, by
check or (at the Corporation's discretion) by surrender or delivery to
the Corporation of shares of the Corporation's common stock with a
fair market value equal to or less than the Option price, plus cash
equal to any difference. All shares issued as provided herein will be
fully paid and non-assessable. The Director shall not have any of
the rights of a Stockholder with respect to the shares of common stock
subject to the Option until the certificate evidencing such shares
shall be issued to him after the due exercise of the Option.
11. Availability of Shares. The Corporation shall at all times during
the term of the Option reserve and keep available such number of
shares of common stock as will be sufficient to satisfy the
requirements of this Agreement, shall pay all original issue taxes
with respect to the issue of shares pursuant hereto and all other fees
and expenses necessarily incurred by the Corporation in connection
therewith and will from time to time use its best efforts to comply
with all laws and regulations which in the opinion of counsel for the
Corporation, shall be applicable thereto.
12. Fair Market Value. As used herein, the "fair market value" of a
share of common stock shall be the average of the bid and asked price
of the stock as publicly traded on the over the counter market, or if
<PAGE> 71
the stock is listed on a national securities exchange, the closing
price of the stock on the composite tape on the trading day
immediately preceding such given date, or if the stock is neither
listed on a national securities exchange or traded on the over the
counter market, such value as the remaining members of the Board in
good faith shall determine.
13. Governing Law. This Agreement has been entered into and shall be
construed in accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
duly executed and sealed by its duly authorized Officers and the
Director has hereunder set his hand, all as of the day and year first
above written.
ATTEST: VERSUS TECHNOLOGY, INC.
------------------------------
By:----------------------------
Andrea Beadle, Corporate Secretary Gary T. Gaisser, President
-----------------------------
Julian C. Schroeder, Director
<PAGE> 72
Exhibit 4 (h)
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT, dated effective as of April
24, 1998 between VERSUS TECHNOLOGY, INC., a Delaware Corporation (the
"Corporation"), and David L. Gray, a current non-employee ("outside")
member of the Board of Directors of the Corporation (hereinafter
"Director").
WITNESSETH:
The Corporation desires, by affording the Director an opportunity
to purchase shares of its Common Stock, $.01 par value, to provide the
Director with incentive compensation to continue to serve on the Board
of Directors of the Corporation and to continue and increase his
efforts in that connection. This Non-Qualified Stock Option Agreement
(this "Agreement") is being entered into pursuant to the determinations
made by the Compensation Committee (the "Committee") of the Board of
Directors of the Corporation (the "Board") on April 24, 1998.
In consideration of the mutual covenants hereinafter set forth and
for other good and valuable consideration, the parties hereto hereby
agree as follows:
1. Grant. The Corporation with the approval and direction of the
Committee irrevocably grants the Director the right and option (the
"Option") to purchase all or any part of an aggregate of 73,000 shares
of Corporation common stock on the terms and conditions herein set
forth. This Option shall be a nontransferable Non-Qualified, Non-
Statutory Stock Option, for which there is no readily ascertainable
fair market value, with the intent that it need not be recognized by
the Director for purposes of federal income taxation until the Option
is exercised.
2. Price. The purchase price of the shares of Corporation common stock
covered by the Option shall be $ .515 per share, which price is not
less than the fair market value of the Corporation common stock on the
effective date hereof.
3. Time of Exercise. The term of the Option shall be for a period of
five (5) years from the date hereof, subject to earlier termination as
provided in this Agreement. Neither the Option nor any rights related
to the Option shall be exercisable for a period of one year from the
date hereof, except as may otherwise be provided in paragraph 5 of
this Agreement.
4. No Transfer. The Option shall not be transferable by the Director
otherwise than by Will or the laws of descent and distribution, and
the Option may be exercised during his lifetime only by the Director.
The Option may not be assigned, transferred (except as aforesaid),
pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the
provisions hereof and the levy of any attachment or similar process
upon the Option shall be null and void ab initio and without effect.
5. Termination. In the event the Director's service as a Director of the
Corporation shall cease or be terminated for any reason other than
death or disability prior to April 24, 1999, this Option shall be null
and void ab initio and the Director shall have no rights hereunder
whatsoever. In the event the Director ceases to serve as a member of
the Board because of the Director's death or disability prior to April
<PAGE> 73
24, 1999, the Option may be exercised by the Director (or the person
then lawfully empowered to act in the Director's place or on his
behalf) at any time within one year after the date of death or
disability. Disability shall mean the inability of the Director, as a
result of his physical or mental incapacity, to render services as a
member of the Board for a continuous period in excess of 3 months, or
the period of time between the incapacity and April 24, 1999,
whichever period of time is longer.
6. Anti-Dilution Adjustments. In the event of any change in the
outstanding common stock of the Corporation by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, split-ups, split-offs,
liquidations or other similar changes in capitalization, or any
distributions to common stockholders of the Corporation other than
cash dividends, the numbers, class and prices of shares covered by
this Option shall be appropriately adjusted by the Committee, whose
determination shall be conclusive; provided, however, that no such
adjustment shall give the Director any additional benefits under the
Option.
7. Corporate Transactions. Notwithstanding the provisions of Paragraph
6, if any "corporate transaction" as defined in Section 1.425-1 of the
Treasury Regulations promulgated under the Internal Revenue Code of
1986 occurs after the date of this Agreement, and in connection with
such corporate transaction, the Corporation and another corporation
enter into an agreement providing for the issuance of substitute stock
options in exchange for the Option or the assumption of the Option, in
either case giving the Director the right to purchase the largest
whole number of shares of Common Stock of the Corporation, or of any
other corporation at the lowest option price permitted by said Section
1.425-1, the Option shall be deemed to provide for the purchase of
such number of shares of Common Stock at such option price as shall be
agreed upon by the Corporation and such other corporation, and the
term "Corporation" herein shall mean the issuer of the stock then
covered by the Option and the term "Common Stock" shall mean such
stock.
8. No Agreement for Continued Service. This Agreement does not confer
upon the Director any right to continue as a member of the Board of
the Corporation, nor does it interfere in any way with the right of
the Corporation to remove the Director from office or the right of the
Director to resign, at any time.
9. Restrictions. The obligation of the Corporation to sell and deliver
shares of Corporation common stock with respect to the Option shall be
subject to (i) all applicable laws, rules, regulations and such
approvals by any governmental agencies as may be required, including
the effectiveness of a Registration Statement under the Securities Act
of 1933, as amended and (ii) the condition that the shares of common
stock to be received upon exercise of the Option shall have been duly
listed, upon official notice of issuance, on a stock exchange (to the
extent that the common stock of the Corporation is then listed on any
such stock exchange). In the event that the shares shall be delivered
otherwise than in accordance with an applicable registration
statement, the Corporation's obligation to deliver the shares is
subject to the further condition that the Director will execute and
deliver to the Corporation an undertaking in form and substance
satisfactory to the Corporation that (i) it is the Director's
<PAGE> 74
intention to acquire and hold such shares for investment and not for
resale or distribution, (ii) the shares will not be sold without
registration or exemption from the requirement of registration under
the Securities Act and (iii) the Director will indemnify the
Corporation for any costs, liabilities and expenses which it may
sustain by reason of any violation of the Securities Act or any other
law regulating the sale or purchase of securities occasioned by any
act on his part with respect to such shares. The Corporation may
require that any certificate or certificates evidencing shares issued
pursuant to this Agreement bear a restrictive legend intended to
effect compliance with the Securities Act or any other applicable
regulatory measures, and stop transfer instructions with respect to
the certificates representing the shares may be given to the transfer
agent.
10. Exercise. Subject to the terms and conditions of this Agreement,
the Option may be exercised only by written notice delivered to the
Corporation at its principal executive offices, attention of the
Corporate Secretary, of intention to exercise such Option and by
making payment of the purchase price of such shares. Such written
notice shall:
(a) state the election to exercise the Option and the number of
shares in respect of which it is being exercised;
(b) be accompanied by a tender of payment of the purchase price
therefor, and
(c) be signed by the person or persons so exercising the Option
and in the event the Option is being exercised by any person
or persons other than the Director, be accompanied by
appropriate proof of the right of such person or persons to
exercise the Option.
As soon as reasonably practicable following such exercise and payment,
a certificate or certificates for the shares as to which the Option
shall have been so exercised, registered in the name of the person or
persons so exercising the Option, shall be issued by the Corporation
and delivered to or upon the order of such person or persons. Payment
in full of the purchase price of said shares shall be made in cash, by
check or (at the Corporation's discretion) by surrender or delivery to
the Corporation of shares of the Corporation's common stock with a
fair market value equal to or less than the Option price, plus cash
equal to any difference. All shares issued as provided herein will be
fully paid and non-assessable. The Director shall not have any of
the rights of a Stockholder with respect to the shares of common stock
subject to the Option until the certificate evidencing such shares
shall be issued to him after the due exercise of the Option.
11. Availability of Shares. The Corporation shall at all times during
the term of the Option reserve and keep available such number of
shares of common stock as will be sufficient to satisfy the
requirements of this Agreement, shall pay all original issue taxes
with respect to the issue of shares pursuant hereto and all other fees
and expenses necessarily incurred by the Corporation in connection
therewith and will from time to time use its best efforts to comply
with all laws and regulations which in the opinion of counsel for the
Corporation, shall be applicable thereto.
12. Fair Market Value. As used herein, the "fair market value" of a
share of common stock shall be the average of the bid and asked price
of the stock as publicly traded on the over the counter market, or if
<PAGE> 75
the stock is listed on a national securities exchange, the closing
price of the stock on the composite tape on the trading day
immediately preceding such given date, or if the stock is neither
listed on a national securities exchange or traded on the over the
counter market, such value as the remaining members of the Board in
good faith shall determine.
13. Governing Law. This Agreement has been entered into and shall be
construed in accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
duly executed and sealed by its duly authorized Officers and the
Director has hereunder set his hand, all as of the day and year first
above written.
ATTEST: VERSUS TECHNOLOGY, INC.
-------------------------------
By:--------------------------------
Andrea Beadle, Corporate Secretary Gary T. Gaisser, President
-----------------------------------
David L. Gray, Director
<PAGE> 76
Exhibit 4 (i)
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT, dated effective as of April
24, 1998 between VERSUS TECHNOLOGY, INC., a Delaware Corporation (the
"Corporation"), and Anthony Low-Beer, a current non-employee ("outside")
member of the Board of Directors of the Corporation (hereinafter
"Director").
WITNESSETH:
The Corporation desires, by affording the Director an opportunity
to purchase shares of its Common Stock, $.01 par value, to provide the
Director with incentive compensation to continue to serve on the Board
of Directors of the Corporation and to continue and increase his
efforts in that connection. This Non-Qualified Stock Option Agreement
(this "Agreement") is being entered into pursuant to the determinations
made by the Compensation Committee (the "Committee") of the Board of
Directors of the Corporation (the "Board") on April 24, 1998.
In consideration of the mutual covenants hereinafter set forth and
for other good and valuable consideration, the parties hereto hereby
agree as follows:
1. Grant. The Corporation with the approval and direction of the
Committee irrevocably grants the Director the right and option (the
"Option") to purchase all or any part of an aggregate of 73,000 shares
of Corporation common stock on the terms and conditions herein set
forth. This Option shall be a nontransferable Non-Qualified, Non-
Statutory Stock Option, for which there is no readily ascertainable
fair market value, with the intent that it need not be recognized by
the Director for purposes of federal income taxation until the Option
is exercised.
2. Price. The purchase price of the shares of Corporation common stock
covered by the Option shall be $ .515 per share, which price is not
less than the fair market value of the Corporation common stock on the
effective date hereof.
3. Time of Exercise. The term of the Option shall be for a period of
five (5) years from the date hereof, subject to earlier termination as
provided in this Agreement. Neither the Option nor any rights related
to the Option shall be exercisable for a period of one year from the
date hereof, except as may otherwise be provided in paragraph 5 of
this Agreement.
4. No Transfer. The Option shall not be transferable by the Director
otherwise than by Will or the laws of descent and distribution, and
the Option may be exercised during his lifetime only by the Director.
The Option may not be assigned, transferred (except as aforesaid),
pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the
provisions hereof and the levy of any attachment or similar process
upon the Option shall be null and void ab initio and without effect.
5. Termination. In the event the Director's service as a Director of the
Corporation shall cease or be terminated for any reason other than
death or disability prior to April 24, 1999, this Option shall be null
and void ab initio and the Director shall have no rights hereunder
whatsoever. In the event the Director ceases to serve as a member of
the Board because of the Director's death or disability prior to April
<PAGE> 77
24, 1999, the Option may be exercised by the Director (or the person
then lawfully empowered to act in the Director's place or on his
behalf) at any time within one year after the date of death or
disability. Disability shall mean the inability of the Director, as a
result of his physical or mental incapacity, to render services as a
member of the Board for a continuous period in excess of 3 months, or
the period of time between the incapacity and April 24, 1999,
whichever period of time is longer.
6. Anti-Dilution Adjustments. In the event of any change in the
outstanding common stock of the Corporation by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, split-ups, split-offs,
liquidations or other similar changes in capitalization, or any
distributions to common stockholders of the Corporation other than
cash dividends, the numbers, class and prices of shares covered by
this Option shall be appropriately adjusted by the Committee, whose
determination shall be conclusive; provided, however, that no such
adjustment shall give the Director any additional benefits under the
Option.
7. Corporate Transactions. Notwithstanding the provisions of Paragraph
6, if any "corporate transaction" as defined in Section 1.425-1 of the
Treasury Regulations promulgated under the Internal Revenue Code of
1986 occurs after the date of this Agreement, and in connection with
such corporate transaction, the Corporation and another corporation
enter into an agreement providing for the issuance of substitute stock
options in exchange for the Option or the assumption of the Option, in
either case giving the Director the right to purchase the largest
whole number of shares of Common Stock of the Corporation, or of any
other corporation at the lowest option price permitted by said Section
1.425-1, the Option shall be deemed to provide for the purchase of
such number of shares of Common Stock at such option price as shall be
agreed upon by the Corporation and such other corporation, and the
term "Corporation" herein shall mean the issuer of the stock then
covered by the Option and the term "Common Stock" shall mean such
stock.
8. No Agreement for Continued Service. This Agreement does not confer
upon the Director any right to continue as a member of the Board of
the Corporation, nor does it interfere in any way with the right of
the Corporation to remove the Director from office or the right of the
Director to resign, at any time.
9. Restrictions. The obligation of the Corporation to sell and deliver
shares of Corporation common stock with respect to the Option shall be
subject to (i) all applicable laws, rules, regulations and such
approvals by any governmental agencies as may be required, including
the effectiveness of a Registration Statement under the Securities Act
of 1933, as amended and (ii) the condition that the shares of common
stock to be received upon exercise of the Option shall have been duly
listed, upon official notice of issuance, on a stock exchange (to the
extent that the common stock of the Corporation is then listed on any
such stock exchange). In the event that the shares shall be delivered
otherwise than in accordance with an applicable registration
statement, the Corporation's obligation to deliver the shares is
subject to the further condition that the Director will execute and
deliver to the Corporation an undertaking in form and substance
satisfactory to the Corporation that (i) it is the Director's
<PAGE> 78
intention to acquire and hold such shares for investment and not for
resale or distribution, (ii) the shares will not be sold without
registration or exemption from the requirement of registration under
the Securities Act and (iii) the Director will indemnify the
Corporation for any costs, liabilities and expenses which it may
sustain by reason of any violation of the Securities Act or any other
law regulating the sale or purchase of securities occasioned by any
act on his part with respect to such shares. The Corporation may
require that any certificate or certificates evidencing shares issued
pursuant to this Agreement bear a restrictive legend intended to
effect compliance with the Securities Act or any other applicable
regulatory measures, and stop transfer instructions with respect to
the certificates representing the shares may be given to the transfer
agent.
10. Exercise. Subject to the terms and conditions of this Agreement, the
Option may be exercised only by written notice delivered to the
Corporation at its principal executive offices, attention of the
Corporate Secretary, of intention to exercise such Option and by
making payment of the purchase price of such shares. Such written
notice shall:
(a) state the election to exercise the Option and the number of
shares in respect of which it is being exercised;
(b) be accompanied by a tender of payment of the purchase price
therefor, and
(c) be signed by the person or persons so exercising the Option
and in the event the Option is being exercised by any person
or persons other than the Director, be accompanied by
appropriate proof of the right of such person or persons to
exercise the Option.
As soon as reasonably practicable following such exercise and payment,
a certificate or certificates for the shares as to which the Option
shall have been so exercised, registered in the name of the person or
persons so exercising the Option, shall be issued by the Corporation
and delivered to or upon the order of such person or persons. Payment
in full of the purchase price of said shares shall be made in cash, by
check or (at the Corporation's discretion) by surrender or delivery to
the Corporation of shares of the Corporation's common stock with a
fair market value equal to or less than the Option price, plus cash
equal to any difference. All shares issued as provided herein will be
fully paid and non-assessable. The Director shall not have any of
the rights of a Stockholder with respect to the shares of common stock
subject to the Option until the certificate evidencing such shares
shall be issued to him after the due exercise of the Option.
11. Availability of Shares. The Corporation shall at all times during
the term of the Option reserve and keep available such number of
shares of common stock as will be sufficient to satisfy the
requirements of this Agreement, shall pay all original issue taxes
with respect to the issue of shares pursuant hereto and all other fees
and expenses necessarily incurred by the Corporation in connection
therewith and will from time to time use its best efforts to comply
with all laws and regulations which in the opinion of counsel for the
Corporation, shall be applicable thereto.
12. Fair Market Value. As used herein, the "fair market value" of a
share of common stock shall be the average of the bid and asked price
of the stock as publicly traded on the over the counter market, or if
<PAGE> 79
the stock is listed on a national securities exchange, the closing
price of the stock on the composite tape on the trading day
immediately preceding such given date, or if the stock is neither
listed on a national securities exchange or traded on the over the
counter market, such value as the remaining members of the Board in
good faith shall determine.
13. Governing Law. This Agreement has been entered into and shall be
construed in accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
duly executed and sealed by its duly authorized Officers and the
Director has hereunder set his hand, all as of the day and year first
above written.
ATTEST: VERSUS TECHNOLOGY, INC.
--------------------------------
By:---------------------------------
Andrea Beadle, Corporate Secretary Gary T. Gaisser, President
------------------------------
Anthony Low-Beer, Director
<PAGE> 80
Exhibit 4 (j)
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT, dated effective as of June
16, 1998 between VERSUS TECHNOLOGY, INC., a Delaware Corporation (the
"Corporation"), and Samuel Davis, a current non-employee ("outside")
member of the Board of Directors of the Corporation (hereinafter
"Director").
WITNESSETH:
The Corporation desires, by affording the Director an opportunity
to purchase shares of its Common Stock, $.01 par value, to provide the
Director with incentive compensation to continue to serve as Chairman of
the Board of Directors of the Corporation and to continue and increase
his efforts in that connection. This Non-Qualified Stock Option
Agreement (this "Agreement") is being entered into pursuant to the
determinations made by the Compensation Committee (the "Committee") of
the Board of Directors of the Corporation (the "Board") on June 16,
1998.
In consideration of the mutual covenants hereinafter set forth and
for other good and valuable consideration, the parties hereto hereby
agree as follows:
1. Grant. The Corporation with the approval and direction of the
Committee irrevocably grants the Director the right and option (the
"Option") to purchase all or any part of an aggregate of 200,000
shares of Corporation common stock on the terms and conditions herein
set forth. This Option shall be a nontransferable Non-Qualified, Non-
Statutory Stock Option, for which there is no readily ascertainable
fair market value, with the intent that it need not be recognized by
the Director for purposes of federal income taxation until the Option
is exercised.
2. Price. The purchase price of the shares of Corporation common stock
covered by the Option shall be $ .50 per share, which price is the
fair market value of the Corporation common stock on the effective
date hereof as set forth in paragraph 12 hereof.
3. Time of Exercise. The term of the Option shall be for a period of
five (5) years from the date hereof, subject to earlier termination as
provided in this Agreement. Neither the Option nor any rights related
to the Option shall be exercisable prior to April 30, 1999, or the
date of the next annual meeting of the Board, whichever date is
earlier, (hereinafter the "Earliest Date of Exercise") except as may
otherwise be provided in paragraph 5 of this Agreement.
4. No Transfer. The Option shall not be transferable by the Director
otherwise than by Will or the laws of descent and distribution, and
the Option may be exercised during his lifetime only by the Director.
The Option may not be assigned, transferred (except as aforesaid),
pledged or hypothecated in any way (whether by operation of law or
otherwise) and shall not be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Option contrary to the
provisions hereof and the levy of any attachment or similar process
upon the Option shall be null and void ab initio and without effect.
5. Termination. In the event the Director's service as a Director of the
Corporation shall cease or be terminated for any reason other than
death or Disability or Change in Control prior to Earliest Date of
Exercise, this Option shall be null and void ab initio and the
<PAGE> 81
Director shall have no rights hereunder whatsoever. In the event
there occurs a Change in Control of the Corporation or in the event
the Director ceases to serve as a member of the Board because of the
Director's death or Disability prior to the Earliest Date of Exercise,
the Option may be exercised by the Director (or the person then
lawfully empowered to act in the Director's place or on his behalf) at
any time within one year after the date of death or Disability, or
immediately (and at any time thereafter within 5 years from June 16,
1998 ) upon the Change in Control. Disability shall mean the
inability of the Director, as a result of his physical or mental
incapacity, to render services as a member of the Board for a
continuous period in excess of 3 months, or the period of time between
the incapacity and the Earliest Date of Exercise, whichever period of
time is longer. Change in Control of the Corporation shall mean a
change in control of a nature that would be required to be reported in
response to Item 5(f) of Schedule 14A promulgated under the Securities
Exchange Act of 1934, as mended ("the Act"); provided that, without
limitation, such a change in control shall be deemed to have occurred
if any "person" (as such term is used in Section 13(d) and 14 (d) of
the Act as in effect on the date hereof, other than the Corporation or
any "person" who on the date hereof is a director or officer of the
Corporation or whose shares of Corporation stock are treated as
"beneficially owned" (as defined in Rule 13d-3 under the Act, as in
effect on the date hereof) by any such director or officer, is or
becomes the beneficial owner, directly or indirectly, of securities of
the Corporation representing 30% or more of the combined voting power
of the Corporation's then outstanding securities.
6. Anti-Dilution Adjustments. In the event of any change in the
outstanding common stock of the Corporation by reason of stock
dividends, stock splits, recapitalizations, mergers, consolidations,
combinations or exchanges of shares, split-ups, split-offs,
liquidations or other similar changes in capitalization, or any
distributions to common stockholders of the Corporation other than
cash dividends, the numbers, class and prices of shares covered by
this Option shall be appropriately adjusted by the Committee, whose
determination shall be conclusive; provided, however, that no such
adjustment shall give the Director any additional benefits under the
Option.
7. Corporate Transactions. Notwithstanding the provisions of Paragraph
6, if any "corporate transaction" as defined in Section 1.425-1 of the
Treasury Regulations promulgated under the Internal Revenue Code of
1986 occurs after the date of this Agreement, and in connection with
such corporate transaction, the Corporation and another corporation
enter into an agreement providing for the issuance of substitute stock
options in exchange for the Option or the assumption of the Option, in
either case giving the Director the right to purchase the largest
whole number of shares of Common Stock of the Corporation, or of any
other corporation at the lowest option price permitted by said Section
1.425-1, the Option shall be deemed to provide for the purchase of
such number of shares of Common Stock at such option price as shall be
agreed upon by the Corporation and such other corporation, and the
term "Corporation" herein shall mean the issuer of the stock then
covered by the Option and the term "Common Stock" shall mean such
stock.
<PAGE> 82
8. No Agreement for Continued Service. This Agreement does not confer
upon the Director any right to continue as a member of the Board of
the Corporation, nor does it interfere in any way with the right of
the Corporation to remove the Director from office or the right of the
Director to resign, at any time.
9. Restrictions. The obligation of the Corporation to sell and deliver
shares of Corporation common stock with respect to the Option shall be
subject to (i) all applicable laws, rules, regulations and such
approvals by any governmental agencies as may be required, including
the effectiveness of a Registration Statement under the Securities Act
of 1933, as amended and (ii) the condition that the shares of common
stock to be received upon exercise of the Option shall have been duly
listed, upon official notice of issuance, on a stock exchange (to the
extent that the common stock of the Corporation is then listed on any
such stock exchange). In the event that the shares shall be delivered
otherwise than in accordance with an applicable registration
statement, the Corporation's obligation to deliver the shares is
subject to the further condition that the Director will execute and
deliver to the Corporation an undertaking in form and substance
satisfactory to the Corporation that (i) it is the Director's
intention to acquire and hold such shares for investment and not for
resale or distribution, (ii) the shares will not be sold without
registration or exemption from the requirement of registration under
the Securities Act and (iii) the Director will indemnify the
Corporation for any costs, liabilities and expenses which it may
sustain by reason of any violation of the Securities Act or any other
law regulating the sale or purchase of securities occasioned by any
act on his part with respect to such shares. The Corporation may
require that any certificate or certificates evidencing shares issued
pursuant to this Agreement bear a restrictive legend intended to
effect compliance with the Securities Act or any other applicable
regulatory measures, and stop transfer instructions with respect to
the certificates representing the shares may be given to the transfer
agent.
10. Exercise. Subject to the terms and conditions of this Agreement, the
Option may be exercised only by written notice delivered to the
Corporation at its principal executive offices, attention of the
Corporate Secretary, of intention to exercise such Option and by
making payment of the purchase price of such shares. Such written
notice shall:
(a) state the election to exercise the Option and the number of
shares in respect of which it is being exercised;
(b) be accompanied by a tender of payment of the purchase price
therefor, and
(c) be signed by the person or persons so exercising the Option
and in the event the Option is being exercised by any person
or persons other than the Director, be accompanied by
appropriate proof of the right of such person or persons to
exercise the Option.
As soon as reasonably practicable following such exercise and
payment, a certificate or certificates for the shares as to which the
Option shall have been so exercised, registered in the name of the
person or persons so exercising the Option, shall be issued by the
Corporation and delivered to or upon the order of such person or
persons. Payment in full of the purchase price of said shares shall
<PAGE> 83
be made in cash, by check or (at the Corporation's discretion) by
surrender or delivery to the Corporation of shares of the
Corporation's common stock with a fair market value equal to or less
than the Option price, plus cash equal to any difference. All shares
issued as provided herein will be fully paid and non-assessable. The
Director shall not have any of the rights of a Stockholder with
respect to the shares of common stock subject to the Option until the
certificate evidencing such shares shall be issued to him after the
due exercise of the Option.
11. Availability of Shares. The Corporation shall at all times during the
term of the Option reserve and keep available such number of shares of
common stock as will be sufficient to satisfy the requirements of this
Agreement, shall pay all original issue taxes with respect to the
issue of shares pursuant hereto and all other fees and expenses
necessarily incurred by the Corporation in connection therewith and
will from time to time use its best efforts to comply with all laws
and regulations which in the opinion of counsel for the Corporation,
shall be applicable thereto.
12. Fair Market Value. As used herein, the "fair market value" of a share
of common stock shall be the average of the bid and asked price of the
stock as publicly traded on the over the counter market, or if the
stock is listed on a national securities exchange, the closing price
of the stock on the composite tape on the trading day applicable to
such given date, or if the stock is neither listed on a national
securities exchange or traded on the over the counter market, such
value as the remaining members of the Board in good faith shall
determine.
13. Governing Law. This Agreement has been entered into and shall be
construed in accordance with the laws of the State of Michigan.
IN WITNESS WHEREOF, the Corporation has caused this Agreement to be
duly executed and sealed by its duly authorized Officers and the
Director has hereunder set his hand, all as of the day and year first
above written.
ATTEST: VERSUS TECHNOLOGY, INC.
---------------------------------
By: ------------------------------
Andrea Beadle, Corporate Secretary Gary T. Gaisser, President
-----------------------------------
Samuel Davis, Director
<PAGE> 84
Exhibit 10 (d)
AMENDED AND RESTATED MARKETING AGREEMENT
This Amended and Restated Marketing Agreement (hereinafter the
"Agreement") is entered into effective as of October 7, 1997 between
Versus Technology, Inc., with principal offices at 2600 Miller Creek Dr.,
Traverse City, MI 49684 (hereinafter "Versus") and Marquette Medical
Systems, Inc., with principal offices at 8200 West Tower Avenue,
Milwaukee, WI 53223 (hereinafter "Marquette").
RECITALS
A. The parties to this Amended and Restated Marketing Agreement were
parties to a document entitled "Exclusive Marketing Agreement,"
dated effective as of June 30, 1996 (hereinafter "the Previous
Agreement"). Differences of opinion have arisen concerning the
parties respective rights and obligations under the Previous
Agreement. The parties now wish to amicably resolve such
differences in accordance with the terms and conditions of this
Amended and Restated Marketing Agreement.
B. It is the intent of the parties that at such time as Marquette has
performed its obligations under this Amended and Restated
Marketing Agreement, or if Versus shall be in substantial breach
of any of its material obligations under this Amended and Restated
Marketing Agreement, any and all claims by Versus related to the
Previous Agreement (except for any already outstanding and unpaid
invoices for goods delivered or services rendered prior to October
7, 1997) shall be conclusively deemed to have been fully
satisfied, discharged, forever barred, and released. It is the
further understanding of the parties, however, that nothing in
this Amended and Restated Marketing Agreement, or the fact of its
having been made in the first place, shall be construed to mean or
imply that either party did or did not have a cognizable legal
claim against the other under or in connection with the Previous
Agreement. The parties are effectuating an accord and
satisfaction of a disputed claim, and the making of such accord
shall be without prejudice to the respective positions of either
party concerning obligations, or the lack thereof, under the
Previous Agreement in the event a party may in the future allege
the accord of this Amended and Restated Marketing Agreement has
not been satisfied.
NOW, THEREFORE, the parties hereby agree that upon completion of mutual
performance as hereinafter set forth the Previous Agreement shall be
deemed to have been superseded, amended and restated to read in its
entirety as follows:
"RECITALS:
A. Versus is engaged in the business of manufacturing, selling,
licensing and supporting an integrated hardware and software product,
commonly known as an infrared tracking system, which is used for various
applications in various markets.
B. Marquette is engaged in the sale and service of various
<PAGE> 85
electronics products used by acute care hospitals and other customers.
C. The parties desire that Marquette shall become a source of
marketing, distribution and supply of Versus Products (as defined herein)
to hospitals in the Market (as defined herein), and that Marquette will
also be granted non-exclusive rights to distribute Products to certain
other markets, all upon the terms and conditions set forth in this Amended
and Restated Marketing Agreement.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL PROMISES CONTAINED
HEREIN, THE PARTIES AGREE AS FOLLOWS:
1. Definitions.
a. The term "Product" or "Products" shall mean the hardware
and related software produced by or for Versus and supplied by Versus to
its customers as a complete infrared tracking system, containing all and
no less than all the components of a "system" as described on Versus'
System Quote Sheet, to be used for personnel and equipment tracking
through the mechanism of reading on a network alarm information from
"Patient Monitoring Equipment," or for other personnel or equipment
tracking applications. Products shall provide high frequency capability
to Marquette at no additional charge to Marquette.
b. The term "Market" shall mean the main headquarters
building of any acute care hospital located in the 50 states of the United
States of America. Specifically excluded from the Market shall be acute
care or subacute care building facilities which are not physically annexed
by "brick and mortar" (or other permanent construction) to the main
headquarters building of an acute care hospital.
c. The term "Marquette Minimum Commitment" shall mean the
purchase by Marquette from Versus of not less than 50 Systems during the
term of this Amended and Restated Marketing Agreement. A System which is
ordered in writing within the term of this Amended and Restated Marketing
Agreement, where the written order authorizes delivery within 30 days
following the end of the term hereof, shall qualify to be counted towards
satisfaction of the Marquette Minimum Commitment.
d. The term "Patient Monitoring Equipment" shall mean: heart
monitors; SPO2 pulse oximeters; respiration monitors; invasive blood
pressure monitors; temperature monitors; and non-invasive blood pressure
monitors.
e. The term "System," as used within the definition of
Marquette Minimum Commitment, shall mean the purchase by Marquette from
Versus of a Product intended for end use by a customer in the Market which
has a System Quote Sheet price of $50,000.00 or more, with the total
number of Systems per single Product transaction being the quotient,
rounded down to the lowest whole number, resulting from the division of
the total System Quote Sheet price for the Product, by $50,000. Example:
the delivery of a Product to a customer which has an aggregate System
Quote Sheet price of $160,000 for that customer transaction would
constitute three Systems; the same would be true for a transaction with a
System Quote Sheet price of $195,000; a transaction with a System Quote
Sheet price of $200,000 would constitute four Systems.
f. The term "System Quote Sheet" shall mean the System
Quote Sheet applicable for the term of this Amended and Restated Marketing
Agreement, a copy of which is attached hereto as Exhibit 1.
g. The "term of this Amended and Restated Marketing
Agreement" shall mean 1 year, commencing July 1, 1997 and ending on June
30, 1998.
<PAGE> 86
2. Appointment of Marquette
a. Subject to the terms and conditions set forth herein, Versus
hereby appoints Marquette, for the term of this Amended and
Restated Marketing Agreement, as Versus's non-exclusive
distributor of Products in the Market; provided, however,
that in order to give Marquette an additional opportunity to
receive the reasonable intended benefits to Marquette from
the investments it has made to date in infrared technology,
Versus agrees that, notwithstanding the non-exclusive nature
of Marquette's status hereunder, Versus will not, during
the term of this Amended and Restated Marketing Agreement,
sell for intended use within the Market any complete
infrared tracking system which is primarily intended to
read on a network alarm information from Patient Monitoring
Equipment, except for sales to or through Marquette;
provided, further, however, Versus retains the right to
itself directly supply such Products to customers in the
Market from time to time through use of Versus' own sales
staff, but only under circumstances when Marquette or its
agents or representatives have not been, and will not have
to be, involved in any phase of the customer specific
marketing, installation, warranty or support of the Product
with the customer, and where Marquette was not the procuring
cause of the transaction with the customer. Versus will
endeavor to give Marquette reasonable notice of and
communication with respect to direct customer transactions
which Versus believes to be covered by this exception.
Further, Versus will not, during the term of this Amended
and Restated Marketing Agreement, license its intellectual
property to any competitor of Marquette operating within
the Market for the field of end use of reading on a network
alarm information from Patient Monitoring Equipment, nor
will Versus within such Market knowingly and specifically
aid or assist others to make, use or sell during the term
of this Amended and Restated Marketing Agreement products
which are primarily designed and intended to read on a
network alarm information from such Patient Monitoring
Equipment.
b. Versus hereby also appoints Marquette, for the term of
this Amended and Restated Marketing Agreement, as a non-
exclusive distributor of Versus infrared tracking systems to
customers in markets other than the Market; provided, however,
such non-exclusive rights in such other markets may be
terminated at the will of Versus at any time, for any reason or
no reason at all, after 30 days advance notice of termination
of non-exclusive rights has been given to Marquette by Versus.
c. Marquette hereby accepts such appointment with respect
to the Market and the other markets, and agrees to use its
best efforts to promote the sale of Products in the Market.
3. Independent Contractors. The relationship of Versus and
Marquette established by this Amended and Restated Marketing Agreement is
that of independent contractors, and nothing contained in this Amended and
Restated Marketing Agreement shall be construed to give either party the
power to direct or control the day-to-day activities of the other, nor
shall it constitute the parties as partners, joint venturers, co-owners or
<PAGE> 87
otherwise as participants in a joint or common undertaking, nor shall it
allow Marquette or Versus to create or assume any obligation on behalf of
the other for any other purpose whatsoever. Marquette acknowledges that it
has not and will not pay any fee to Versus in connection with this Amended
and Restated Marketing Agreement or any prior agreement, understanding or
arrangement between them. In furtherance of the parties' performance
pursuant to this Amended and Restated Marketing Agreement, tangible goods
will be deemed to be sold to, and the pertinent software and applicable
patented or copyrightable or other intellectual property shall be deemed
licensed to, Marquette, it being understood that Marquette may and will
resell the goods to the end user customer, and upon such sale Versus will
be deemed to have granted to such end user a license in perpetuity to use
the software in the manner and for the purposes for which it is designed,
on hardware manufactured or supplied by Versus. After Marquette has
purchased a Product from Versus in accordance with this Amended and
Restated Marketing Agreement, Marquette shall be free to set its own
selling price to the customer in the Market.
4. Terms of Purchase from Versus.
a. Use of Standard Forms. All orders from Marquette to
Versus for Products shall be in writing, requesting a delivery date no
sooner than 30 days from the date of the order and no later than July 31,
1998. All orders shall be subject to the terms and conditions of this
Amended and Restated Marketing Agreement. The parties may use their own
standardized or preprinted forms of purchase order, acknowledgment,
invoices, shipping documents or the like; provided, however, in the event
any terms or conditions which may be stated in any such forms are
inconsistent with this Amended and Restated Marketing Agreement, such
inconsistent terms or conditions shall be of no force or effect between
the parties hereto, and in the event there shall be an inconsistency
between the terms or provisions of a form used by Marquette and the terms
or provisions of a form customarily used by Versus, the terms and
provisions of the Versus form shall be controlling, so long as such Versus
form is not inconsistent with this Amended and Restated Marketing
Agreement.
b. Price. All prices are F.O.B. Traverse City, Michigan.
The quoted price does not include any federal, state or local taxes that
may be applicable to the Product. When Versus has the legal obligation to
collect such taxes, the appropriate amount of tax shall be added to the
invoice directed to Marquette unless Marquette provides Versus with a
valid tax exemption certificate authorized by the appropriate taxing
authority. Except for infrared tracking systems intended for regional
demonstration purposes, as provided in paragraph 8, below, the price to be
paid by Marquette for Products will be 70% of the price stated on the
System Quote Sheet.
c. Terms of Payment to Versus. Versus will promptly submit
an invoice to Marquette for $560,000.00 to cover the advanced payment by
Marquette for 16 Systems. Thereafter, on the first of each month,
beginning on November 1, 1997, Versus will submit additional invoices,
each for $140,000.00, to cover the advanced payment by Marquette for 4
additional Systems per month, except the June 1, 1998 invoice shall be for
$210,000 (6 Systems) so that by the end of the term of this Amended and
Restated Marketing Agreement Marquette shall have purchased and paid for
on a non-refundable basis not less than the Marquette Minimum Commitment
of 50 Systems. As and when Products are actually shipped, any freight,
taxes or other applicable costs will be borne by Marquette pursuant to
<PAGE> 88
supplemental invoices issued at the time of shipment. Marquette will pay
to Versus 100% of all invoice amounts within 30 days of Marquette's
receipt of the invoice, except that the initial invoice for $560,000,
together with any prior invoices for goods or services supplied by Versus
prior to October 7, 1997, shall be paid within 5 days following the mutual
execution and delivery of this Amended and Restated Marketing Agreement.
Acceptance or rejection of Products shipped is to occur within 40 days
after delivery by Versus to the common carrier.
d. Shipping. Versus will use diligent efforts to ship the
Products within the time requested by Marquette in its orders for Product
as given pursuant to subparagraph 4 a., above; provided, however, in the
event Marquette has not released for shipment at least 50 Systems by June
30, 1998, Versus shall have the right to ship on or about such date the
difference between 50 and the number of Systems previously released for
shipment by Marquette during the term of this Amended and Restated
Marketing Agreement. All Products delivered by Versus pursuant to this
Amended and Restated Marketing Agreement shall be reasonably packed for
shipment in Versus's standard shipping cartons, marked for shipment to the
address designated by Marquette, and delivered to Marquette F.O.B.
Traverse City, Michigan. Unless otherwise instructed in writing by
Marquette, Versus will select the carrier. All freight, insurance, and
other shipping expenses, as well as any special packing expenses if any,
shall be borne by Marquette. Marquette shall also bear all applicable
taxes, duties and similar charges that may be assessed against the
Products after delivery to the carrier.
5. Responsibilities. Marquette will be responsible for making or
providing proper customer proposal, quotation, system installation, on-
site system support for hardware, allocated warranty labor (see paragraph
6), and in-service training. Versus will be responsible for making or
providing the necessary floor plan and layout, installation document, and
three sets of necessary manuals per installation (a manual set will
contain a Wiring Installation Guide, a User's Guide and a System Design
Guide). The end user customer will be directed to place all requests for
maintenance, telephone support or warranty support with Marquette, who
will refer such requests to Versus, as appropriate to permit Versus to
perform its duties hereunder.
6. Warranty and Limitation of Liability. Versus makes to
Marquette the Versus standard limited warranty applicable to Versus
Products, the provisions of which are shown on Exhibit 2 attached to this
Amended and Restated Marketing Agreement, except that the warranty period
shall be, instead of 90 days, one year from the date of Marquette's
acceptance or installation, whichever comes first. Marquette shall not
make or pass on to any end user customer or other person any warranty or
representations on behalf of Versus other than, or inconsistent with, the
standard Versus limited warranty as shown on Exhibit 2. Except for the
express limited warranty above stated, Versus makes no other warranties,
express or implied, by statute or otherwise, regarding the Products,
regarding FITNESS FOR ANY PARTICULAR PURPOSE, quality, MERCHANTABILITY, or
otherwise. In no event shall Versus be liable for the cost of procurement
of substitute goods or systems or for any special, consequential or
incidental damages for breach of warranty. This limitation shall apply
notwithstanding any failure of essential purpose of any limited warranty
or remedy. Further, and notwithstanding any of the foregoing, as between
Versus and Marquette, Marquette will be responsible to bear the cost of
any warranty labor, up to a maximum of 3.5% of the System Quote Sheet
<PAGE> 89
Price of the Products supplied to Marquette during the term of this
Amended and Restated Marketing Agreement, and Versus will be responsible
for any reasonable and necessary warranty labor expense in excess of said
3.5%.
7. Versus Software Telephone Support, Maintenance and Enhancement.
Marquette will utilize its best efforts to sell the Versus Support,
Maintenance and Enhancement package. This package will also be discounted
to Marquette at 30% from the applicable System Quote Sheet list price and
Marquette will be free to set its own selling price to the customer.
Versus will be responsible for supplying to the customer all the services
and support set forth in such package.
8. Regional Demonstrations. Between July 1, 1996 and June 30,
1998 Marquette will be able to purchase from Versus up to 5 infrared
tracking systems, for purposes of installing 5 separate regional
demonstration locations, at a special price. The price will be at
Versus's estimated standard cost per system, based upon reasonable full
absorption, reasonable standard volumes, and other cost accounting
principles used by Versus. Regional demonstration purchases will not be
counted towards the Marquette Minimum Commitment.
9. Training. Versus will supply technical sales and marketing
training, two to three days per year, at regional locations selected by
Marquette.
10. Special Situations. In special situations where Marquette needs
on-site technical support from Versus, Versus will supply personnel at no
charge, except that Marquette will pay all travel expenses for those
personnel. Versus will not, however, be obligated to spend more than 30
man days in the aggregate during the term of this Amended and Restated
Marketing Agreement.
11. Private Label. If desired by Marquette, the Versus products
will be sold to Marquette under a private label agreement acceptable to
both parties.
12. Minimum Purchase Commitment of Marquette; Termination of
Agreement. Marquette hereby agrees to purchase from Versus the Marquette
Minimum Commitment during the term of this Amended and Restated Marketing
Agreement. Unless Marquette and Versus have agreed in a writing signed by
both parties on or before March 10, 1998 to extend the term of this
Amended and Restated Marketing Agreement, then the term of this Amended
and Restated Marketing Agreement shall end on June 30, 1998, and each
party will be free to enter such other sales arrangements as it may desire
thereafter.
13. Property Rights and Confidentiality. Marquette agrees that
Versus owns all right, title and interest in all of Versus's patents,
trademarks, trade names, inventions, copyrights, know-how, documentation,
software (including diagnostic software and source code) and trade secrets
relating to the design, manufacture, operation or service of the Products.
The use by Marquette of any of these property rights is authorized only
for the purposes herein set forth, and upon termination of this Amended
and Restated Marketing Agreement for any reason such authorization shall
cease. Marquette acknowledges that by reason of its relationship to
Versus hereunder it will have access to certain information and materials
concerning Versus' business, plans, customers, technology, and products
that are confidential and of substantial value to Versus, which value
would be impaired if such information were disclosed to third parties.
Marquette agrees that it will not use in any way for its own account or
the account of any third party, nor disclose to any third party, any such
<PAGE> 90
confidential information revealed to it by Versus. Marquette shall take
every reasonable precaution to protect the confidentiality of such
information. Marquette shall not publish any technical description of the
Products beyond the description published by Versus. In the event of
termination of this Amended and Restated Marketing Agreement there shall
be no use or disclosure by Marquette of any confidential information of
Versus, and Marquette shall not manufacture or have manufactured any
products utilizing any of Versus' confidential information.
14. Trademarks and Trade Names. During the term of this Amended
and Restated Marketing Agreement Marquette shall have the right to
indicate to the public that it is an authorized distributor of Versus and
to advertise such Products under the trademarks, marks, and trade names
that Versus may adopt from time to time. Except as provided by paragraph
11 of this Amended and Restated Marketing Agreement, Marquette shall not
alter or remove Versus trademarks applied by Versus to the Products,
packages, or other materials contained therein. Nothing herein shall
grant to Marquette any right, title or interest in Versus trademarks. At
no time during or after the term of this Amended and Restated Marketing
Agreement shall Marquette challenge or assist others to challenge Versus
trademarks or the registration thereof or attempt to register any
trademarks, marks or trade names confusingly similar to those of Versus.
All representations of Versus trademarks that Marquette intends to use
shall first be submitted to the appropriate Versus personnel for approval
of design, color, and other details or shall be exact copies of those used
by Versus. If any Versus trademarks are to be used in conjunction with
another trademark on or in relation to the Products, then Versus' mark
shall be presented equally legibly and equally prominently, but
nevertheless separated from the other so that each appears to be a mark in
its own right, distinct from the other mark.
15. Force Majeure. Nonperformance of either party, except for the
making of payments, shall be excused to the extent, and for the period of
time, that performance is rendered impracticable by strike or other labor
difficulties, fire, flood, or other casualty or occurrence which is beyond
the reasonable control of the party whose performance is required.
16. Miscellaneous. This Amended and Restated Marketing Agreement
shall inure to the benefit of and be binding upon the successors and
assigns of the respective parties hereto. This Amended and Restated
Marketing Agreement constitutes and fully integrates the entire
understanding between the parties hereto, and subject to the above
Recitals, is intended to supersede and cancel all prior written or oral
understandings between them dealing with the subject matter hereof. This
Amended and Restated Marketing Agreement may not be changed orally, but
only in writing, signed by the party against whom enforcement of any
waiver, change, amendment, modification, extension or discharge is sought.
No other warranties, representations or covenants exist that are not
herein contained. All notices required or authorized under this Amended
and Restated Marketing Agreement shall be in writing and shall be deemed
to have been duly given on the date of service if served personally on the
party to whom notice is to be given, or the second day after mailing, if
mailed to the party to whom notice is to be given by first class mail,
registered or certified, postage prepaid and addressed to the respective
parties at the addresses set forth above, unless and until a different
address shall be furnished by any party desiring to change such address to
the other party, or if no such address is set forth with respect to any
such party, then by personal delivery or registered or certified mail,
<PAGE> 91
postage prepaid, to the principal office of such party, or alternatively,
the personal residence of such party, all as last known to the party
giving such notice. For each term and pronoun used in this Amended and
Restated Marketing Agreement, the singular number includes the plural
number, and vice versa, and any gender, whether masculine, feminine, or
neuter, includes the other genders, as appropriate and as the context may
reasonably require. The invalidity of any paragraph, provision or part
hereof shall not affect the validity of any other paragraph, provision or
part hereof. This Amended and Restated Marketing Agreement shall be
construed as a whole and in accordance with its fair meaning. Captions,
if any, and organization are for convenience and shall not be used in
construing its meaning. This Amended and Restated Marketing Agreement may
be executed in one or more counterparts, all of which shall constitute one
and the same instrument and each one of which shall be deemed an original.
Each party shall, upon reasonable request, execute and deliver such other
and further documents as may be necessary and proper to effectuate this
Amended and Restated Marketing Agreement. This Amended and Restated
Marketing Agreement shall be interpreted and enforced in accordance with
the laws of the State of Michigan, excluding any conflicts-of-law rule or
law which refers to the laws of another jurisdiction. In the event of
litigation arising under or in connection herewith, each party consents to
the exclusive in personam jurisdiction of the state courts of the State of
Michigan, with venue in Traverse City, Michigan, and the nonprevailing
party agrees to pay the prevailing party's actual attorney's fees and
expenses in connection with any such litigation, in addition to any costs,
remedies or damages the court may award. This Amended and Restated
Marketing Agreement constitutes the jointly bargained agreement of the
parties, and the construction of this Amended and Restated Marketing
Agreement shall not be altered or influenced by the fact or presumption
that one party had a greater or lesser hand in drafting it. Any Recitals
are hereby made a part of this Amended and Restated Marketing Agreement
and all exhibits, attachments, and schedules, if any, attached hereto are
hereby incorporated herein by reference for all applicable purposes. If
the date for performance of any act hereunder falls on a Saturday, Sunday,
or legal holiday, then the time for performance thereof shall be deemed
extended to the next successive business day. Whenever it is provided in
this Amended and Restated Marketing Agreement that days be counted, the
first day to be counted shall be the day following the date on which the
event causing the period to commence occurs. This Amended and Restated
Marketing Agreement is intended solely for the benefit of the parties
hereto and their successors and assigns, and may not be relied
upon or enforced by any third party beneficiary.
IN WITNESS WHEREOF, the parties have mutually executed and delivered
this Amended and Restated Marketing Agreement, effective as of the date
first above written.
Versus Technology, Inc. Marquette Medical Systems, Inc.
By:---------------------------------- By: ----------------------------------
Gary T. Gaisser Gerald Woodard
Its: President Its: Division President - Patient
Monitoring
Date of signature: ______ Date of signature:
<PAGE> 92
EXHIBIT 21
VERSUS TECHNOLOGY, INC.
SUBSIDIARY OF THE REGISTRANT
NAME OF SUBSIDIARY JURISDICTION OF PERCENTAGE OF OWNERSHIP
INCORPORATION
- - ------------------ ------------------ --------------------------
Olmsted Engineering Co. Michigan 100%
<PAGE> 93
EXHIBIT 99 (a)
VERSUS TECHNOLOGY AWARDED GSA SUPPLIER STATUS
TRAVERSE CITY, Michigan, September 23, 1998 - Versus Technology, Inc.
(OTC BB:VSTI) today announced it has become an approved supplier to the
federal government.
The Traverse City, Michigan-based developer and manufacturer of infrared
(IR) locating systems for hospitals, government facilities and other
organizations announced its IR location, data collection and
communication products were selected by the U.S. General Services
Administration (GSA) for inclusion on the Federal Supply Service
Schedule. This facilitates the procurement process for government
agencies interested in the Versus Information System, which identifies
the precise location of personnel and equipment, automatically and
accurately records events on a real-time basis, and provides two-way,
wireless communications throughout a facility.
"The GSA contract makes it easier to sell our Versus Information System
to federal government agencies, a vast and relatively untapped market for
Versus," said Gary Gaisser, Versus Technology president and CEO. "The
opportunities for incremental growth are enormous as we expand beyond our
core hospital market in the private sector to government-related,
healthcare facilities such as our installation at VA Medical Center in
Ann Arbor, Mich. GSA-approved status also opens the door to other
agencies in addition to the Department of Energy, which has installed our
products at its Los Alamos National Laboratories in Los Alamos, New
Mexico."
The Company's inclusion on the GSA Schedule means Versus has met the
screening and certification process established by the General Services
Administration, a central management agency of the U.S. Government that
sets policy in areas such as federal procurement. This makes Versus
eligible for contracting procedures that enable government offices to
purchase the Versus Information System without pursuing formal bidding
processes, saving time and money for the federal government and Versus.
The Company also benefits from best-pricing practices available to
government-approved suppliers.
"Becoming an approved supplier to the federal government is an important
first step in extending the many applications of our IR locating products
to the government market," said Henry J. Tenarvitz, executive vice
president of operations for Versus Technology. "Our recently expanded
sales and marketing team allows us to focus on this market as we continue
to work with our growing number of medical technology resellers to
further penetrate the healthcare market."
Versus Technology, Inc. (http://www.versustech.com) is a leading
innovator in infrared locating technology, which offers real-time
locating 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 and can be used to monitor
the precise location of personnel or equipment for health and safety
<PAGE> 94
purposes, control access to secured areas and automatically record events
associated with these activities.
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.
<PAGE> 95
EXHIBIT 99 (b)
VERSUS TECHNOLOGY RELEASES FIRST OF ITS NEXT GENERATION LOCATING BADGES
New Badge Provides Full Time Supervision
TRAVERSE CITY, Michigan, October 13, 1998 - Versus Technology, Inc.
(OTC BB:VSTI) announced it will introduce the first of its next
generation locating badges today at the Microsoft Healthcare Users
Group (MS-HUG) conference, which runs October 11-13, 1998 in
Orlando, Florida.
The Traverse City, Michigan-based developer and manufacturer of
infrared (IR) location, data collection and communications products
will showcase its new COM badge during a demonstration with HBO and
Company (NASDAQ:HBOC) and six other ActiveX? for Healthcare Pavilion
participant companies. The new COM badge, which combines the
pinpoint accuracy of infrared location with constant supervision,
will be part of a conference-long demonstration of the
interoperability among the various participants' healthcare
information systems (see related release for details).
Versus Technology added a supervisory signal to its patented infrared
location and communications badge, which enables hospitals and other
organizations to identify the precise location of patients, staff or
equipment throughout a facility at all times. The added signal
ensures the transmission of emergency communication features, making
the new tag the most complete and reliable location tool within a
medical facility.
"Hospitals always need to be in touch with patients and staff and
even need to know the location of medical equipment to ensure that an
optimum level of care is provided," said Gary Gaisser, Versus
Technology president and CEO. "Adding a backup, supervisory signal
to our infrared systems means healthcare providers are always in
contact with everyone and everything that is important in the
hospital."
The IR signal, similar to the technology used in remote controls for
televisions, is line of sight, meaning it is bounded by walls and
floors. These parameters enable the IR signal to pinpoint the
precise location of people and equipment. The new supervisory signal
is not constrained by walls and floors or other matter that would
block the line of sight of IR, such as bed covers and clothing. This
makes it the ideal complement to Versus Technology's IR products.
The addition of the supervisory signal also sets the stage for
Versus' second release in the new generation badges, scheduled for
February 1999.
Versus Technology, Inc. (http://www.versustech.com) is a leading
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
<PAGE> 96
processes and can be used to monitor the precise location of personnel
or equipment for health and safety purposes, control access to secured
areas and automatically record events associated with these activities.
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.
<PAGE> 97
EXHIBIT 99 (c)
VERSUS TECHNOLOGY JOINS HEALTHCARE INFORMATION TECHNOLOGY COMPANIES IN
MICROSOFT ACTIVEX PAVILION AT MS-HUG
TRAVERSE CITY, Michigan, October 13, 1998 - Versus Technology, Inc.
(OTC BB:VSTI) will join HBO & Company (Nasdaq:HBOC) and six other
companies in the ActiveX? for Healthcare Pavilion at the Microsoft
Healthcare Users Group's (MS-HUG) conference (October 11-13, 1998 in
Orlando, Fla.) to demonstrate "plug-and-play" interoperability among
their healthcare information systems. Versus will integrate patient
information obtained from its new supervised locating badge into
these systems, demonstrating how these leading healthcare information
companies can work together to improve the efficiency of a hospital.
"We are an important piece of the puzzle in enabling hospitals to
manage their facilities more efficiently," said Henry Tenarvitz,
executive vice president of operations for Versus Technology who also
serves on two planning committees for MS-HUG. "Our location
information, especially when integrated with other data, empowers
hospitals to make decisions with healthcare information that
currently is not available on a real-time basis."
The Traverse City, Mich.-based developer and manufacturer of infrared
(IR) location, data collection and communications products will
demonstrate its new supervised COM badge (see related release), which
enables hospitals to identify the precise location of patients, staff
or equipment throughout a medical facility at all times even if the
IR signal's line of sight is blocked. During the joint
demonstration, patient location information will be integrated with
patient registration, scheduling, billing and other data to show how
a medical facility can fully utilize all of its healthcare
applications.
Versus Technology is dedicated to the free-flowing exchange of its
location information with other healthcare data. The Company's
participation in MS-HUG's ActiveX? for Healthcare is essential to
ensure a common platform exists for healthcare applications and
systems. Hospitals are challenged with trying to coordinate
communication between existing information systems to generate
operating efficiency information that results in comprehensive
patient care. ActiveX? for Healthcare provides this technological
framework, enabling a medical facility to "plug" any application in
with the assurance it will "play" within the existing system.
The annual MS-HUG conference showcases the latest products in
healthcare information technology, a market estimated to grow to $20
billion in 2000 according to Merrill Lynch. Microsoft Healthcare
Users Group is a non-profit organization that sets the standard for
interoperability among healthcare technology applications and
systems. Based in Ann Arbor, Mich., MS-HUG supports Microsoft
ActiveX? technology for healthcare initiatives.
<PAGE> 98
Versus Technology, Inc. (http://www.versustech.com) is a leading
innovator in infrared locating technology, which offers real-time
locating and two-way communication capabilities. The systems, which are
currently installed in hospitals, corporate facilities, government
facilities and other complexes, permit the automatic and accurate
registry of essential management and business processes, and 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 these activities.
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.
<PAGE> 99
EXHIBIT 99 (d)
Versus Technology enters a new frontier of healthcare service
Versus unveils its new DataBand for patient tracking and automatic billing
TRAVERSE CITY, Michigan, November 16, 1998 - Versus Technology, Inc.
(OTC BB: VSTI) announced that it plans to introduce a patient
information device under the trademark DataBand. The device will
communicate the patient's location and thus be able to aid in
scheduling, billing, planning and security. "The U.S. market for the
device is estimated at approximately a half a billion dollars annually,"
stated Gary Gaisser, president and CEO of Versus Technology, "and is
based on Versus' proprietary technology." The DataBand patient
information device will provide facility-wide location of patients and a
wireless data and voice communication link for caregivers. Versus plans
to integrate DataBand with existing hospital administrative systems to
collect and transfer data on each individual patient. Versus expects to
begin marketing of the DataBand product in the 2nd or 3rd quarters of
1999.
Versus Technology, the Traverse City, Michigan-based developer and
manufacturer of proprietary infrared (IR) locating systems has been
working toward the idea of facility-wide patient location and passive
billing of equipment and service charges throughout the past year. "We
overcame our final hurdle at the Microsoft Healthcare Users Group (MS-
HUG) show in October (1998) where our software successfully
interoperated with participating software vendors such as HBOC,
Millbrook, and Careflow via real-time ActiveX HL7 messaging," explained
Henry J. Tenarvitz, executive vice-president of operations for Versus
Technology. "The potential cost savings derived from an automatic
scheduling and billing process are enormous and more importantly, the
patient's safety is also enhanced," continued Tenarvitz.
"The development of this new inexpensive, disposable patient information
wristband is the culmination of Versus' efforts to be on the leading
edge of healthcare information technology," stated Gaisser. Versus
Technology said they have taken a standard patient ID wristband and
inserted their proprietary infrared locating technology into the band.
The DataBand patient information device identifies the precise, real-
time location of patients, allowing designated patients to move freely
throughout the hospital while maintaining a constant link with their
caregivers. The optional mobile call button feature also offers voice
communications capabilities, providing patients with immediate access to
their caregivers.
Another major benefit of the DataBand product is its ability to collect
data on the healthcare services and medical equipment utilized on behalf
of the patient to provide accurate billing charges. The information
recorded will be linked in real time to a facility's record keeping
systems to accurately accrue a patient's use of medical staff, in-room
services and equipment. "Versus Technology's network of resellers and
our hospital customers are obviously excited about the potential for
this new leading edge technology," Tenarvitz concluded. The DataBand
product will make its debut at the Healthcare Information Management
System Society show (HIMSS) in Atlanta, GA, February 22-25, 1999.
<PAGE> 100
Versus Technology, Inc. (http://www.versustech.com) is an innovator
in infrared locating technology, which offers real-time locating
and two-way communication capabilities. Versus Technology's
patented locating systems monitor the precise location of people
and equipment using infrared light, similar to the technology
employed in remote controls for television, and networks of
infrared sensors installed throughout a facility. Small,
lightweight badges worn by patients, personnel and attached to
equipment transmit a code to the sensors to provide real-time
location and other information. The systems, currently in
application in hospitals, corporate facilities, government
facilities and other complexes, locate patients, personnel or
equipment for improved workflow and other purposes.
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.
<PAGE> 101
EXHIBIT 99 (e)
VERSUS TECHNOLOGY REPORTS YEAR END RESULTS
Record Revenues, More Than Double Prior Year
TRAVERSE CITY, Michigan, December 10, 1998 -- Versus Technology, Inc.
(OTC BB:VSTI) announced it more than doubled its prior year revenues
for the fourth quarter and fiscal year ended October 31, 1998. The
Company also generated consistent increases in its top- and bottom-
line results for the seventh consecutive quarter.
The Traverse City, Michigan-based developer and manufacturer of
infrared (IR) location, data collection and communications products
for healthcare and other markets recorded revenues of $3.2 million in
fiscal 1998, an increase of 108 percent over revenues of $1.5 million
posted in the prior fiscal year. In fiscal 1998, the Company narrowed
its net loss to $1.4 million, or $0.04 per share, compared to $2.6
million, or $0.07 per share, in fiscal 1997.
Versus attributed the significant growth in revenues to increased
acceptance and demand for its locating information technology in the
healthcare market. The Company also said its expanded base of
healthcare resellers contributed to the top-line growth.
"We made significant strides in fiscal 1998, a critical year for
Versus," said Gary Gaisser, Versus Technology president and chief
executive officer. "We expanded our sales and marketing efforts,
increased our channels of distribution by adding two resellers, one
national and one international, and expanded the capabilities of our
locating technology. All of these initiatives enabled us to further
penetrate the healthcare market."
In the fourth quarter of fiscal 1998, Versus reported best-ever
revenues of $1.1 million, which is more than double the $532,000
generated in revenues in the same period of fiscal 1997. The Company
recorded a net loss of $155,000, or $0.01 per share, compared with a
net loss of $566,000, or $0.02 per share, in the fiscal 1997 period.
"Since we began focusing on the healthcare market in 1996, we have
consistently raised our revenues and improved our financial results,"
said Gaisser. "We experienced a strong fourth quarter that built on
an already solid year and at year end we have a backlog of $1.2
million, which is nearly double the $700,000 posted at the end of
fiscal 1997."
For fiscal 1998, Versus Technology's gross profit as a percentage
of revenues increased to 54.1 percent, compared with 21.9 percent
in the prior year. Versus attributed the margin improvements to
its significant growth in revenues and its ability to control its
costs relative to these gains.
Versus Technology's total operating expenses declined as a
percentage of sales in fiscal 1998, which is partially
attributable to reduced research and development expenses from the
prior fiscal year. The Company also experienced an 8 percent
<PAGE> 102
increase in selling, general and administrative (SG&A) expenses.
Total 1998 operating expenses below the gross margin line
increased 3 percent over fiscal 1997 levels.
"The financial results highlight only a part of the story of what we
did in the 1998 fiscal year," said Gaisser. "The other side of the
story is what we have done to position Versus for continued growth in
the healthcare information services industry, a market estimated to
grow to $20 billion in the year 2000. We strengthened and expanded
our locating technology, making it a critical component in the overall
information system throughout an entire medical facility, even those
organizations with multiple facilities with multiple sites. We have
also proven our technology's ability to integrate location information
with other data from other healthcare information providers."
Versus introduced radio frequency (RF) to the precise location
capabilities of the Company's infrared technology at Microsoft's
Healthcare Users Group's trade show in October 1998. The new IR/RF
locating badge provides a supervisory signal, enabling healthcare
providers to maintain constant contact with everyone and everything in
a facility at all times. During this show, Versus joined seven other
leading healthcare information providers in a live demonstration of
how patient registration, scheduling and Versus' location information
can work together to improve the efficiency of a hospital or chain of
hospitals.
Versus Technology's infrared locating systems are currently used in a
variety of installations throughout North America, including Cedars-
Sinai Medical Center in Los Angeles, Baylor University Medical Center
in Dallas, VA Medical Center in Ann Arbor, Mich. and Los Alamos
National Laboratories, a high security government facility in New
Mexico.
Versus's proprietary IR location systems are sold through an expanding
network of resellers including Cleocom, Inc., Dukane Corporation,
Marquette Medical Systems (a division of GE Medical), Rauland-Borg
Corporation and Zettler Systems, Inc., which market the products
within their existing monitoring and nurse call registry systems.
Versus Technology, Inc. (http://www.versustech.com) is an innovator in
infrared locating technology, which offers real-time locating and two-
way communication capabilities. Versus Technology's patented locating
systems monitor the precise location of people and equipment using
infrared light, similar to the technology employed in remote controls
for television, and networks of infrared sensors installed throughout a
facility. Small, lightweight badges worn by patients, personnel and
attached to equipment transmit a code to the sensors to provide real-
time location and other information. The systems, currently in
application in hospitals, corporate facilities, government facilities
and other complexes, locate patients, personnel or equipment for
improved workflow and other purposes.
<PAGE> 103
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.
<PAGE> 104
EXHIBIT 99 (f)
VERSUS TECHNOLOGY ANNOUNCES NEW
VICE PRESIDENT OF SALES AND MARKETING
TRAVERSE CITY, Mich., Jan. 12, 1999 -- Versus Technology, Inc. (OTC BB:
VSTI) announced Richard J. Salzer joined the firm, in a newly created
position, as executive vice president of sales and marketing.
The Traverse City, Michigan-based developer and manufacturer of infrared
(IR) location, data collection and communications products for
healthcare and other markets said Salzer's primary responsibilities will
be to create and implement marketing plans to further penetrate the
healthcare information services industry. In addition, Salzer will
direct the sales and marketing staff on working with its healthcare
resellers, Versus' primary channel distribution.
"Rick brings to Versus more than 17 years of sales, marketing, and
executive management experience in healthcare manufacturing,
distribution, and consulting services," said Gary Gaisser, president and
CEO of Versus Technology. "Rick's thorough knowledge of the healthcare
industry and his experience working with healthcare providers will
complement our already aggressive marketing strategies."
"I am looking forward to this new opportunity," said Salzer. "Versus
has impressive, patented technology that can provide tremendous benefits
to healthcare providers. The market for this technology is estimated to
be approximately a billion dollars. With our established product lines
and our soon to be released patient information device, DataBand, we
are in a tremendous position to grow and provide value to our customers
and our shareholders."
"My job will be to work with our team to implement our sales and
marketing plans and to deliver positive results," continued Salzer.
Salzer, 40, comes to Versus Technology from Allegiance Healthcare, an
Illinois based healthcare manufacturer, distributor and provider of cost
reduction and productivity strategies for hospitals and health systems.
He first served as vice president of cost management services and then
as vice president of sales and marketing for Allegiance's consulting and
services group. During Salzer's tenure as sales leader for Allegiance's
Cost Management Services business, sales increased more than 300% per
year for three years.
Prior to Allegiance Healthcare, Salzer spent more than 14 years at
American Hospital Supply and Baxter Healthcare serving most recently as
vice president of corporate marketing. Salzer earned a bachelor's
degree in business administration from the University of Illinois and a
master's degree in management from the Kellogg Graduate School of
Management at Northwestern University.
Versus Technology, Inc. (http://www.versustech.com) is an innovator in
infrared locating technology, which offers real-time locating and two-
way communication capabilities. Versus Technology's patented locating
systems monitor the precise location of people and equipment using
<PAGE>105
infrared light, similar to the technology employed in remote controls
for television, and networks of infrared sensors installed throughout a
facility. Small, lightweight badges worn by patients, personnel and
attached to equipment transmit a code to the sensors to provide real-
time location and other information. The systems, currently in
application in hospitals, corporate facilities, government facilities
and other complexes, locate patients, personnel or equipment for
improved workflow and other purposes.
Safe Harbor Statement:
The information provided in this press release may include 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. Actual results may differ from
such projections and are subject to certain risks including, without
limitation, risks arising from: changes in the rate of growth of the
infrared location industry, increased competition in the industry,
delays in developing and commercializing new products, adequacy of
financing and other factors described in the Company's most recent
annual report on Form 10-K filed with the Securities and Exchange
Commission, which can be reviewed at http://www.sec.gov.
