<PAGE1>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended January 31, 1999
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-17500
VERSUS TECHNOLOGY, INC.
(Name of Small Business Issuer in its charter)
Delaware 22-2283745
(State of Incorporation) (I. R. S. Employer Identification Number)
2600 Miller Creek Road, Traverse City, Michigan 49684
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (616) 946-5868
Check whether the issuer (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the past twelve months (or for such shorter period that the
registrants required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes ( X ) No ( )
As of March 11, 1999 the issuer had outstanding 38,507,575 shares of
common stock, par value $.01 per share.
Transitional small business disclosure format: Yes ( ) No ( X )
<PAGE2>
VERSUS TECHNOLOGY, INC.
Index to Form 10-QSB
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets as of January 31, 1999 (Unaudited)
and October 31, 1998
Consolidated Statements of Operations for the three months
Ended January 31, 1999 and 1998(Unaudited)
Consolidated Statements of Cash Flows for the three months
ended January 31, 1999 and 1998(Unaudited)
Notes to Consolidated Financial Statements
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations
PART II OTHER INFORMATION
Item 1 Legal Proceedings
Item 2 Changes in Securities and Use of Proceeds
Item 5 Other Information
Item 6 Exhibits and Reports on Form 8-K
Signatures
<PAGE3>
VERSUS TECHNOLOGY, INC.
Consolidated Balance Sheets
(Unaudited)
================================================================
January 31, October 31,
1999 1998
------------- -------------
ASSETS
Current Assets
Cash and cash equivalents $ 459,000 $ 698,000
Accounts receivable, net of
allowance for doubtful accounts
of $64,000 and $60,000 508,000 517,000
Inventories - purchased parts and
assemblies 194,000 155,000
Prepaid expenses and other current
assets 60,000 64,000
------------- -------------
Total Current Assets 1,221,000 1,434,000
------------- -------------
Property and Equipment, net of
accumulated depreciation of
$195,000 and $173,000 217,000 237,000
Software Development Costs net of
accumulated amortization of
$181,000 and $163,000 419,000 437,000
Goodwill, net of accumulated
amortization of $377,000 and
$338,000 1,962,000 2,001,000
Patents and Other Intangible
assets, net of accumulated
amortization of $609,000 and
$556,000 1,381,000 1,434,000
------------- -------------
$ 5,200,000 $ 5,543,000
============= =============
See accompanying notes to consolidated financial statements.
<PAGE4>
VERSUS TECHNOLOGY, INC.
Consolidated Balance Sheets
(Unaudited)
================================================================
January 31, October 31,
1999 1998
------------- -------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current Liabilities
Accounts payable $ 366,000 $ 453,000
Accrued expenses 78,000 119,000
Deferred revenue-customer
advance payments 8,000 25,000
Note payable 50,000 80,000
------------- -------------
Total Liabilities 502,000 677,000
------------- -------------
Shareholders' Equity
Common stock, $.01 par value;
75,000,000 and 50,000,000
shares authorized; 38,507,575
and 38,362,700 shares issued
and outstanding 385,000 384,000
Additional paid-in capital 33,311,000 33,249,000
Accumulated deficit (28,808,000) (28,577,000)
Unearned compensation ( 190,000) ( 190,000)
------------- -------------
Total Shareholders' Equity $ 4,698,000 $ 4,866,000
------------- -------------
$ 5,200,000 $ 5,543,000
============= =============
See accompanying notes to consolidated financial statements.
<PAGE5>
VERSUS TECHNOLOGY, INC.
Consolidated StatementS of Operations
(Unaudited)
===============================================================
Three Months Ended
January 31, January 31,
1999 1998
------------- -------------
Revenues $ 924,000 $ 598,000
Operating Expenses
Cost of revenues 314,000 339,000
Research and development 143,000 105,000
Sales and marketing 305,000 284,000
General and administrative 399,000 448,000
------------- -------------
1,161,000 1,176,000
------------- -------------
Loss From Operations ( 237,000) ( 578,000)
Other Income
Interest income 6,000 21,000
------------- -------------
Net Loss $( 231,000) $( 557,000)
============= =============
Basic and Diluted Net Loss
Per Share $( .01) $( .01)
============= =============
See accompanying notes to consolidated financial statements.
<PAGE6>
VERSUS TECHNOLOGY, INC.
Consolidated Statements of Cash Flow
(Unaudited)
================================================================
Three Months Ended
January 31, January 31,
1999 1998
------------- -------------
Operating activities:
Net Loss $( 231,000) $( 557,000)
Adjustments to reconcile
net loss to net cash used
in operating activities:
Depreciation and
amortization 132,000 119,000
Amortization of unearned
compensation 32,000 24,000
Director Compensation 30,000 -
Changes in operating assets
and liabilities:
Accounts receivable 9,000 156,000
Inventories ( 39,000) 10,000
Prepaid expenses and other
current assets 4,000 41,000
Accounts payable and other
Liabilities ( 87,000) ( 220,000)
Accrued expenses ( 41,000) 181,000
Deferred revenues -
customer advance payments ( 17,000) ( 159,000)
------------- -------------
Net cash used in operating
activities ( 208,000) ( 405,000)
------------- -------------
Investing activities:
Changes in note receivable - 1,000
Additions to property and
equipment ( 2,000) ( 10,000)
------------- -------------
Net cash used in investing
activities ( 2,000) ( 9,000)
------------- -------------
See accompanying notes to consolidated financial statements.
<PAGE7>
Financing activities:
Payments on note payable ( 30,000) ( 36,000)
Issuance of Common Stock 1,000 1,000
------------- -------------
Net cash used in financing
activities ( 29,000) ( 35,000)
------------- -------------
Net increase (decrease) in cash
and cash equivalents ( 239,000) ( 449,000)
Cash and cash equivalents,
beginning of period 698,000 1,871,000
------------- -------------
Cash and cash equivalents,
end of period $ 459,000 $ 1,422,000
============= =============
During the first quarter of fiscal 1999:
Versus issued additional non-vested Employee Incentive Restricted
Stock and repurchased similar stock from terminated employees, all
at par value, pursuant to the 1996 Incentive Restricted Stock Bonus
Plan. Unearned compensation of $44,000 was recorded for the stock
issued and unearned compensation of $12,000 related to the repurchased
shares was cancelled.
See accompanying notes to consolidated financial statements.
<PAGE8>
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
January 31, 1999 (Unaudited)
Note 1 Basis of Presentation
The accompanying unaudited consolidated financial statements, which
are for interim periods, do not include all disclosures provided in
the annual consolidated financial statements. They should be read in
conjunction with the consolidated financial statements and the
footnotes thereto of Versus Technology, Inc. and subsidiary (Versus)
contained in the Annual Report on Form 10KSB for the fiscal year ended
October 31, 1998, as filed with the Securities and Exchange
Commission. The October 31, 1998 balance sheet contained herein was
derived from audited consolidated financial statements, but does not
include all disclosures required by generally accepted accounting
principles as found in Versus' Annual Report on Form 10-KSB referenced
above.
In the opinion of management, the accompanying unaudited consolidated
financial statements include all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the
financial position as of January 31, 1999, the results of operations
for the three months ended January 31, 1999 and 1998 and cash flows
for the three months ended January 31, 1999 and 1998. The results of
operations for the three months ended January 31, 1999 are not
necessarily indicative of the results to be expected for the full
year.
Note 2 Principles of Consolidation
The consolidated financial statements include the accounts of Versus
and Olmsted Engineering Co., its wholly owned subsidiary. Upon
consolidation, all significant intercompany accounts and transactions
are eliminated.
Note 3 Basic and Diluted Earnings (Loss) Per Share
Basic earnings per share is computed based on the weighted average
number of common shares outstanding, excluding contingently issuable
shares (such as the Company's outstanding restricted stock bonus plan
shares). Diluted earnings per share is computed based on the weighted
average number of common shares outstanding plus the effects of
outstanding options, warrants, convertible securities and contingently
issuable shares. We have not included the effects of outstanding
options, warrants, and contingently issuable shares in
<PAGE9>
the calculation of diluted earnings per share because they are anti-
dilutive. The resulting weighted average number of shares outstanding
for the three months ended January 31, 1999 and 1998 are 38,362,700
and 38,338,350, respectively, for both basic and diluted earnings per
share computations.
Note 4 New Accounting Standards Not Yet Adopted
In June 1997, the FASB issued SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", which
Supersedes SFAS No. 14, "Financial Reporting for Segments of a
Business Enterprise". SFAS No. 131 establishes standards for the way
that public companies report information about operating segments in
annual financial statements and requires reporting of selected
information about operating segments in interim financial statements
issued to the public. It also establishes standards for disclosures
regarding products and services, geographic areas and major customers.
SFAS No. 131 defines operating segments as components of a company
about which separate financial information is available that is
evaluated regularly by the chief operating decision maker in deciding
how to allocate resources and in assessing performance. SFAS No. 131
is effective for annual financial statements for periods
beginning after December 15, 1997 and requires comparative
information for earlier years to be restated. SFAS No. 131 is not
applicable to interim financial statements in the initial year of
application but requires quarterly comparative information beginning
in the second year. Management has not completed its review of SFAS
No. 131, but does not anticipate that the adoption of this statement
will have a significant effect on the Company's reported segments.
Note 5 Acquisition of Intellectual Property
As of January 31, 1997, Versus and Precision Tracking FM, Inc.
("PTFM") signed an Agreement ("License Agreement") for Versus 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 Versus.
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 Versus in the technology
transfer and to support Versus in use and development of the
technology.
<PAGE10>
Under the Engineering Agreement, which ran through January 31, 1998,
Versus was required to reimburse PTFM for expenses incurred in
providing the services covered by the agreement. As of January 31,
1998 the Consolidated Financial Statements included $88,000 in accrued
amounts payable on this contract. Of this amount, $36,000 was paid in
March 1998 and the balance was paid in November 1998.
Note 6 Contingencies
Litigation
A suit was filed in November 1996, and a nearly identical suit was
filed in January 1997, against the Company alleging that the Company
allowed certain warrants to expire which the plaintiffs held and that
the plaintiffs were damaged by the warrants' expiration. The
plaintiffs also alleged that the Company breached the warrant
agreement pursuant to which the warrants were issued to the plaintiffs
and claimed 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. Plaintiffs further alleged
their claims were substantially identical to the claims made by a
plaintiff in prior litigation where a judgment 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 believed the Company had 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 consolidated the two cases. The Company
disputed the material allegations of the complaints and filed a motion
to dismiss them. On March 5, 1999 the court granted the Company's
motion and entered an order dismissing the plaintiffs' complaints,
subject to plaintiffs' right to appeal.
Note 7 Shareholders' Equity
Authorized Common and Preferred Shares
On November 2, 1998, Versus filed a Certificate of Amendment of
Certificate of Incorporation with the State of Delaware increasing its
authorized common stock from 50,000,000 to 75,000,000 shares and
creating 15,000,000 shares of authorized preferred stock. To date, no
preferred shares have been issued.
<PAGE11>
Stock Options
Versus' 1996 Employee Incentive Stock Option Plan grants key employees
options to purchase shares of common stock. During the three months
ended January 31, 1999, Versus granted options to certain employees
to purchase 500,000 shares at an exercise price of $0.401 per share.
During the same period, Versus granted a nonqualified option to a
key employee to purchase 175,000 shares at an exercise price of
$0.41 per share.
Restricted Stock Bonus Plan
During the three months ended January 31, 1999 Versus issued an
additional 152,950 and re-purchased 8,075 shares of Versus common
stock issued pursuant to the 1996 Employee Incentive Restricted Stock
Bonus Plan. Net earned compensation for the three months ended
January 31, 1999 amounted to $32,000.
Note 8 Related Party Transactions
Versus and Olmsted its wholly owned subsidiary, lease their
principal operating premises from an entity which is beneficially
owned by the Company's President. Versus and Olmsted have entered
into separate five-year lease agreements calling for aggregate annual
rents of $111,000, increasing 4% annually after the first year.
Versus and Olmsted have made combined nonrefundable contributions to
leasehold improvements amounting to $130,000, in accordance with
terms of the lease agreements. Rent expense for the three months
ended January 31, 1999 and 1998 amounted to $30,000 and $29,000
respectively.
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
Versus Technology, Inc. ("Versus") and its wholly owned subsidiary,
Olmsted Engineering Co. ("Olmsted"), operate in two business segments:
data collection and processing and systems design and engineering.
All operations are located in one facility in Traverse City, Michigan.
<PAGE12>
Infrared locating ("IR Locating") systems are the primary product of
Versus. The systems, which are currently installed in hospitals,
corporate facilities, government facilities and other complexes,
permit the automatic and accurate registry of location and other
business information. The system can be used to monitor the precise
location of personnel or equipment for health and safety purposes, to
control access to secure areas and to automatically record events
associated with those activities. The system consists of compact
badges, sensors, receivers and a central processing computer. Badges
can be attached to people and equipment. Each badge transmits a
unique identifying code, which is received and validated by sensors
located in each room or zone. The signals are sent to the central
processing computer which locates each badge, determines its status
(i.e.: condition, environment, etc.) and provides users with a
graphical display of people and equipment locations on an ordinary
computer monitor. The entire system is based on Versus' patented
proprietary technology involving the transmission and reception of
infrared light for use in locating multiple subjects in several areas.
Versus' primary method of distribution of the IR product is through
resellers who install the product. Although Versus also sells
directly to end users, reseller sales are expected to contribute the
majority of Versus' future IR revenues. Currently, the healthcare
market is primarily targeted for penetration due to the technology's
initial success there and the existing interest that has developed.
In addition to the healthcare market, other applications include high
security facilities (military, governmental, etc.), correctional
institutions (prisons, guard security, etc.) and commercial security
(visitor locating, institutional access control, etc.).
Under the Olmsted name, Versus sells and maintains the ACU-CARV(R)
product line, which consists of a wide range of manufacturing
solutions including software, hardware, support and shop floor
communications networks. ACU-CARV(R) is an integrated family of
Computer Aided Manufacturing ("CAM") software programs used to operate
computer numerically controlled machines mainly in the mold, die, and
pattern making industries. In addition to revenues from the sale of
ACU-CARV(R) products, Versus also receives monthly maintenance and
enhancement fees from its customers who, in turn, receive technical
support and periodic update releases. Versus also develops, markets
and integrates cellular products for the security industry.
During the first quarter of fiscal 1999, Versus continued the roll
<PAGE13>
out of its product improvements developed in 1998. In October 1998,
Versus had demonstrated its system's interoperability at the MS-HUG
show and simultaneously announced the launch of its combined IR/RF
(Radio Frequency) badge. In November, Versus announced its
disposable IR/RF DataBand(TM). 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.
In January 1999, Versus hired an experienced Executive Vice President
of Sales and Marketing to direct its total sales and marketing efforts
and oversee the scheduled product launches.
The following discussion and analysis focuses on the significant
factors which affected Versus' consolidated financial statements
during the first quarter of 1999, with comparisons to the first
quarter of 1998 where appropriate. It also discusses Versus'
liquidity and capital resources. The discussion should be read in
conjunction with the consolidated financial statements and related
notes included elsewhere in this Form 10-QSB.
Results of Operations
Three Months Ended January 31, 1999 and 1998:
First quarter 1999 revenues were $924,000 or 55% higher than the first
quarter 1998 level of $598,000. Infrared revenues of $767,000 were
105% above the same period 1998 level of $374,000 and equal 33% of
the total IR revenues for the entire 1998 fiscal year. CAD/CAM sales
were $157,000 or 30% below the $224,000 revenues generated for the
same three-month period in 1998. The largest decrease occurred in
third party sales.
Cost of revenues as a percentage of revenues in the first quarter of
1999 decreased to 34% from 57% for the same quarter in 1998. This
decrease is attributable to the increased revenue levels, lower IR
component manufacturing costs and the IR sales mix.
Research and development expenses were 36% higher ($143,000 in 1999
compared to $105,000 in 1998) than the three months ended January 31,
1998. The major portion of these expenditures was on development of
the DataBand(TM) in anticipation of its launch in February 1999.
Sales and marketing expenses for the first quarter of 1999 increased
<PAGE14>
to $305,000 or 7% higher than the $284,000 expended during the three
months ended January 31, 1998. 1999 expenses include $29,000 in
professional fees for recruiting the Executive Vice President of Sales
and Marketing.
General and administrative expenses of $399,000 were 11% below the
$448,000 level for the three months ended January 31, 1998. Lower
professional fees were partially offset by higher director and
shareholder expenses. Fiscal 1999 director expenses increased due to
an additional board member (four in 1999 compared to three in
1998). Higher shareholders' expenses are the result of retaining
outside consultants to aid in our investor relations program.
In the first quarter of 1999, other income, net decreased $15,000, or
29%, from 1998 levels due primarily to the decrease in interest earned
on lower cash levels.
Liquidity and Capital Resources
As of January 31, 1999 cash on hand was $459,000. During the three
months ended January 31, 1999, we relied on cash proceeds generated
from a private placement of its common stock in August 1996 which
generated net proceeds of approximately $5.2 million. The total
decrease in cash was $239,000 compared to $449,000 in the same period
in 1998.
Operating activities (including working capital) consumed $208,000 in
cash in the first quarter of 1999 compared to $405,000 in the same
period in 1998. Increased sales volumes and improved gross margins
were the primary reasons for the improvement. We invested $2,000 in
capital assets during the first quarter of 1999 compared to $10,000 in
the prior year.
During the first quarter of 1999 $30,000 of the note payable was
retired compared to $36,000 in 1998. The note is expected to be
satisfied by the year-end.
Although management believes base operating activities are self-
funding, we are seeking additional funding to accommodate the
anticipated launch of new products. In connection therewith, we
are considering proposed funding from various sources. The
proceeds of additional funding will be used for working capital and
the DataBand(TM) product launch. In the event that we are unable to
obtain additional funding on a timely basis, we may be required to
scale back or eliminate certain development, manufacturing or
<PAGE15>
marketing programs that we would otherwise seek to carry out.
Management 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 nine months.
Year 2000 Readiness Disclosure
Versus has conducted a comprehensive review of its internal computer
systems and its products to identify the systems that could be
affected by the Y2K issue and has identified no problem areas. Versus
believes there are no material problems, if any, in its infrastructure
and facilities but will continue to assess embedded systems contained
in Versus' facilities and other infrastructure to determine the
potential for Y2K problems. Versus presently believes that, with no
modifications to existing software, the Y2K issue will not pose any
operational problems for Versus' software products, its computer
systems or those of its customers relating to the use of its products.
Versus has not contacted nor received any assurances from vendors,
suppliers or customers as to their state of readiness for Y2K. Versus
believes that current material vendors and suppliers will become Y2K
compliant or that qualified replacement vendors and suppliers can be
easily located. Versus 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
Versus' future operational results or financial condition.
Versus' components and software products contain no embedded elements
that are date driven. Versus 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. Versus may consider increasing
inventories towards the end of 1999 to lessen the possible impact of
such an occurrence.
Because no problems have been identified to date, Versus has not found
it necessary to expend any cash resources on the Y2K issue. No
estimate of the potential costs can be made until a full evaluation of
possible third party issues, if any, has been made.
<PAGE16>
SAFE HARBOR PROVISION
This document may contain forward-looking statements relating to
future events, such as the development of new products, the
commencement of production or the future financial performance of the
Company. These statements fall within the meaning of forward-looking
information as defined in the Private Securities Litigation Reform Act
of 1995. These statements are subject to a number of important risks
and uncertainties that could cause actual results to differ materially
including, but not limited to, economic, competitive, governmental and
technological factors affecting the Company's markets and market
growth rates, products and their rate of commercialization, services,
prices and adequacy of financing and other factors described in the
Company's most recent annual report on Form 10-KSB filed with the
Securities and Exchange Commission, which can be reviewed at
http://www.sec.gov. The Company undertakes no obligation to update,
amend or clarify forward-looking statements, whether as a result of
new information, future events or otherwise.
PART II OTHER INFORMATION
Item 1 Legal Proceedings
The following is a summary of the material litigation in which Versus
is currently engaged:
Theodore London, et al v. Versus Technology, Inc.
-------------------------------------------------
Complaint filed: November 22, 1996
Court: Supreme Court of the State of New York
Index No.: 96-120758
Principal Parties: Plaintiff, Theodore London,
purportedly on behalf of himself and
others similarly situated; Defendant,
Versus Technology, Inc.
Jack Lazarus, et al v. Versus Technology, Inc.
----------------------------------------------
Complaint filed: January 21, 1997
Court: Supreme Court of the State of New York
Index No.: 97-600295
Principal Parties: Plaintiff, Jack Lazarus, purportedly on
behalf of himself and others
similarly situated; Defendant, Versus
Technology, Inc.
<PAGE17>
A suit was filed in November 1996, and a nearly identical suit
was filed in January 1997, against Versus alleging that Versus
allowed certain warrants to expire which the plaintiffs held and that
the plaintiffs were damaged by the warrants' expiration. The
plaintiffs also alleged that Versus breached the warrant agreement
pursuant to which the warrants were issued to the plaintiffs and
claimed that the sale by Versus of restricted stock in late 1993
required a downward adjustment of the exercise price of the warrants
under the warrant agreement. Plaintiffs further alleged their claims
were substantially identical to the claims made by a plaintiff in
prior litigation where a judgment of $195,000 was entered against
Versus 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 believed Versus had a liability for each of the remaining
warrants identical to the per warrant liability Versus was found to
have for the 300,000 warrants relating to the prior litigation. The
court consolidated the two cases. Versus disputed the material
allegations of the complaints and filed a motion to dismiss them. On
March 5, 1999 the court granted Versus' motion and entered an order
dismissing the plaintiffs' complaints, subject to plaintiffs' right
to appeal.
Item 2 Changes in Securities and Use of Proceeds
(c) On December 4, 1998, the Board of Directors approved the sale of
152,950 shares of Versus common stock to 31 employees under the 1996
Incentive Restricted Stock Bonus Plan (the "Plan") at a price of
$.01 per share. Under the Plan, if, on or before three years from the
date the shares were issued, the employment of the employee by Versus
terminates, the employee must resell all or a percentage of the shares
transferred to Versus for $0.01 per share. These sales were made
pursuant to the exemption afforded by Section 4(2) - Transactions by
an issuer not involving a public offering.
On December 4, 1998, the Board of Directors awarded incentive
Stock options to purchase 500,000 shares of Versus' common stock to
three officers under the 1996 Employee Incentive Stock Option Plan.
The options vest over a five-year period and are exercisable for ten
years from the date of the grant at $0.401 per share, which was the
then current fair market value. These awards were made pursuant to
the exemption afforded by Section 4(2) - Transactions by an issuer not
involving a public offering. These options were granted to the
following officers:
<PAGE18>
Andrea Beadle Corporate Secretary 100,000 shares
Robert Butler Chief Accounting Officer 150,000 shares
Henry Tenarvitz Executive Vice President 250,000 shares
On January 4, 1999, the Board of Directors granted a nonqualified
stock option to purchase 175,000 shares of Versus' common stock to its
Executive Vice President of Sales and Marketing. The options vest
over a five-year period and are exercisable for 10 years from the date
of the grant at $0.410 per share, which was the then current fair
market value. This award was made pursuant to the exemption afforded
by section 4(2) - Transactions by an issuer not involving a public
offering.
Item 5 Other Information
On January 27, 1999 Versus filed a preliminary Proxy Statement.
Proposal two of that Proxy indicated the Board of Directors
unanimously approved, and recommends that shareholders approve an
amendment to the Certificate of Incorporation to effect a one-for ten
reverse split of the capital stock. Management intends to seek
listing of the Common Stock on the NASDAQ system as a Small Cap
security after Shareholder approval of the Reverse Split.
Item 6 Exhibits and Reports on Form 8-K
Exhibit 27 - Financial Data Schedule
There were no reports on Form 8-K during the three months ended
January 31, 1999.
<PAGE19>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
VERSUS TECHNOLOGY, INC.
By: /s/ Robert Butler By: /s/ Gary T. Gaisser
----------------- -------------------
Robert Butler Gary T. Gaisser
Controller and Chief President and Chief
Accounting Officer Executive Officer
(Principal Accounting (Principal Executive
Officer) Officer)
Dated: March 17, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 459,000
<SECURITIES> 0
<RECEIVABLES> 508,000
<ALLOWANCES> 64,000
<INVENTORY> 194,000
<CURRENT-ASSETS> 1,221,000
<PP&E> 217,000
<DEPRECIATION> 195,000
<TOTAL-ASSETS> 5,200,000
<CURRENT-LIABILITIES> 502,000
<BONDS> 0
0
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<COMMON> 385,000
<OTHER-SE> 4,313,000
<TOTAL-LIABILITY-AND-EQUITY> 5,200,000
<SALES> 924,000
<TOTAL-REVENUES> 924,000
<CGS> 314,000
<TOTAL-COSTS> 314,000
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<INCOME-TAX> 0
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (231,000)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
