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, 1999
( ) 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: (231) 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 $3,297,000.
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 $3,740,532 as of January 12, 2000.
As of January 12, 2000, the issuer had outstanding 38,556,421 shares of
common stock.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Transitional small business disclosure format: Yes_____ No__X__
VERSUS TECHNOLOGY, INC.
Index to Form 10-KSB
PART I
Item 1 Description of 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
PART I
ITEM 1 - DESCRIPTION OF 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
operations are located in one facility in Traverse City, Michigan.
Versus' primary products are: infrared locating systems, passive data
collection systems, radio frequency supervisory systems, asset locating
systems and portal detection systems. Versus' 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 by monitoring the
precise location of personnel or equipment and automatically recording
events associated with their locations.
(a) Business Development and Principal Products.
Versus Technology, Inc. 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 Versus' 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. Versus' primary
focus is now the manufacture and distribution of proprietary
software and components to support its IR Locating systems.
During 1998 Versus completed development of a combined IR/RF (Radio
Frequency) locating badge. In October 1998, Versus successfully
demonstrated the interoperability of its system with nine other
healthcare information technology providers at the Microsoft Healthcare
Users Group (MS-HUG) conference. At the same show Versus also introduced
its IR/RF badge. Versus is the only infrared manufacturer to supply an
infrared badge that is backed by an RF supervisory signal (there is a
patent pending on the combination badge). This dual signaling badge
ensures a signal sent by the badge is received even if the line-
of-sight to the sensor is blocked as could happen if a badge were
covered. Versus also developed a voice recognition version of
PhoneVision(tm), another trademarked product that is sold as an option to
the base system to provide automatic phone forwarding to a person's
location. PhoneVision(tm) provides a simple telephone interface to
Nightingale(tm)'s locating data. PhoneVision(tm) 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. During
1998, Versus also expanded its reseller channel and finished the year
with $3,167,000 in total revenues - more than double its $1,524,000
revenues of fiscal 1997.
During fiscal 1999, Versus introduced a number of new products and
improvements to its existing products. In May 1999, ACU*CARV(r) 2000, the
latest version of its CAD/CAM software product was released. Later in
the year, Versus introduced its Room Ready, Hand Washing Compliance,
Eagle Eye(tm)and Perimeter Alarm Sentinel (PAS) products - all based on
its IR/RF locating technology.
* Room Ready shows a room as clean on a central monitoring station
until a non-staff person uses it. When a staff person finishes
preparing the room he/she presses a button to alert the main station
that the room is ready. The room shows as clean on the monitoring
station screen(s) providing a facility wide view of available clean
rooms at a central location. The availability of this information
allows staff to minimize their time consumed in physically checking
room status and also can increase room utilization rates through
more efficient scheduling. The room status can also be signaled by
a code emitted from the appropriate employee's badge.
* The Hand Washing Compliance product records the activation of soap
dispensers in conjunction with staff. ID badges provide evidence of
compliance with sterility rules common to the healthcare and food
service industries.
* Eagle Eye(tm) is an asset monitoring system that makes intelligent
decisions regarding personnel and/or assets as they enter or leave an
area.
* PAS is a sensor-based system that allows the Versus badge to recognize
when it has breached a perimeter. That event could then signal the
system to take an action such as emitting an alarm (audible or silent)
or activating a door lock. PAS will provide the security and health
care industries with a useful tool in managing patients and assets.
The Room Ready, Hand Washing Compliance, Eagle Eye(tm)and PAS products
utilize Versus' patented IR/RF technologies and were developed in
response to specific customer requests.
Throughout the last half of fiscal 1999, Versus also expended
considerable resources on the development of its Application Specific
Integrated Circuit (ASIC) chip. Versus anticipates the ASIC chip, which
will be manufactured for Versus, will improve both the design and
performance of all Versus' badge offerings.
During fiscal 1999, Versus also further expanded its customer base,
decreasing its reliance on major single customers as was the case in
prior years.
(b) Business of the Issuer
Versus currently operates in two business segments:
* data collection and processing ("IR" Locating systems)
* systems design and engineering
(1) Principal Products and Services
Data Collection and Processing Segment
Infrared Locating System and Technology ("IR Locating")
Infrared technology based systems are the primary products of Versus. The
IR/RF based systems can be used to monitor and locate people and
equipment, control access to secured areas passively and record
information regarding these events and activities. The technology owned
or licensed by Versus is incorporated in various forms from components to
entire assemblies in nurse call and asset control systems under the
following partial list of trade names:
OWNER OF TRADEMARK TRADEMARK
- ------------------------ ----------------------------------------------
Versus Technology, Inc. Nightingale(tm) Resource Management System
PhoneVision(tm) Versus Information System
("VIS(tm)")
Eagle Eye(tm)
Rauland Borg Responder IV(r)
Responder III+
Dukane Corporation ProCare(r) 6000
Zettler Sentinel 500
Southwestern Bell PALS - Personnel and Asset Location System
West Com WestCalls(r) Odyseey Plus
WestCalls(r) Endeavor
Versus markets its IR products as "Nightingale(tm)", "Versus Information
System" (VIS(tm)) and Eagle Eye(tm) for the medical, non-medical and
security markets respectively. "PhoneVision(tm)" 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) emits an infrared light signal encoded with information.
Sensors, mounted throughout a facility, pick up this signal maintaining
the contact between the system and staff and/or 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 Versus'
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 and personnel 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. The system can reduce personnel and equipment
response times, thus reducing overhead expenditures and increase asset
utilization by locating high cost personnel and equipment and provide
needed facility scheduling information.
The system's sophisticated software can also make intelligent decisions
regarding personnel and/or assets as they enter or leave an area,
providing the Company with a unique feature previously unavailable in the
security industry.
Versus 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 information management
systems that require precise location data. 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, Versus sells and maintains the ACU*CARV(r)
product line, which consists of a wide range of manufacturing solutions.
ACU*CARV(r) 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.
Olmsted is also an authorized dealer of AutoCAD(r)and Mechanical
Desktop(r) software produced by Autodesk.
ACU*CARV(r)'s competitive advantage is that it instructs a CNC machine to
use circular and linear interpolated toolpaths rather than point-to-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
percent. ACU*CARV(r) 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.
ACU*CARV(r)'s method of cutting is referred to as "z-level"
(contour) machining, and few other companies currently offer software
that utilizes this method as its primary cutting method.
In addition to revenues from the sale of ACU*CARV(r) products, Versus
also receives maintenance and enhancement fees from its customers who, in
turn, receive technical support and periodic update releases. Olmsted
also provides hardware and software integration, complete turnkey systems
and software consulting and development.
Versus also makes and sells Cellular Alarm Transport ("CAT") products
whose principal function 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 an alarm-monitoring agency to receive such data
and signals.
(2) Marketing and Distribution
Infrared Locating System and Technology
Versus' primary distribution method for the IR product is through
resellers who install the product. Versus also employs an internal sales
staff who, 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 Versus
still intends to sell 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 initial successes and existing interest. The recent introduction
of the Company's Eagle Eye(tm) product provides an entry point into the
security market. Eagle Eye(tm) was first introduced by Checkpoint
Systems' Access Control Products Group at the Annual ASIS Show in Las
Vegas in September 1999. The Radio Frequency Identification (RFID)
industry is estimated at $1 billion annually. Other potential markets
for the IR and IR/RF Locating technology are:
Customer Needs Solution
- -------------- ---------------------------- --------------------------
Manufacturing Just-in-time component Equipment tags on
Facilities delivery to a production line, components, product and
product inventory, control spare parts tracked by the
and major spare parts location. locating system.
Office Billing accuracy and File tags, personnel
Complexes completeness, staff badges and the locating
tracking and telephone call system with intercom and
transfer. PhoneVision(tm) options.
Government Staff & visitor tracking Personnel badges and the
Buildings and access control. locating system with
intercom, PhoneVison(tm)
and door lock options.
Food Service Hand Washing Compliance Personnel badges, the
Monitoring. locating system and
unique
soap dispensers.
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 the
access control. locating system with
intercom, PhoneVison(tm)
and door lock options.
Systems Design and Engineering Segment
The ACU*CARV(r) product line is marketed to both existing users of the
products and potential new customers through direct sales efforts and
mailings of trial/demo CD's. Versus also markets CAD/CAM software for
third parties. Versus' cellular products are marketed through
independent distributors.
(3) New Products or Services
In November 1998, Versus announced its disposable IR/RF DataBand(tm) 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 providing patient location status. The DataBand(tm)
was the final hardware component required for Versus' location technology
to cover the full hospital. Commercialization of the DataBand(tm) is
linked to development of Versus' Application Specific Integrated Circuit
(ASIC) chip. Versus expects initial shipments of the DataBand(tm) in the
year 2000.
In the last half of fiscal 1999, Versus introduced a number of IR/RF
technology based products and product enhancements. The major
innovations were a Room Ready product, a Hand Washing Compliance product,
Versus' initial security market offering known as Eagle Eye(tm) and PAS.
The Room Ready product is an add-on to the basic IR locating system. When
a room (hospital, clinic or hotel) is cleaned, the cleaning staff
member's badge activates a status code at monitoring stations as the
staff member leaves the room. The room is then shown as ready until it
is used again by a patient or guest at which time a different signal
activates the appropriate status code at the monitoring station.
The Hand Washing Compliance product uses the IR locating system to sense
a staff member's presence at a hand washing station (hospital or food
service establishment). When the employee activates the hand washing
station, a signal is received by the system software and the event is
recorded in the database.
Eagle Eye(tm) is an asset monitoring system that makes intelligent
decisions regarding personnel and/or assets as they enter or leave an
area. When a person wearing a badge and a badged asset approach a
sensory location (such as a door), the sensor receives unique signals from
each badge. The system's software determines if the badges are
allowed to pass the location together and either allows them to pass or
emits a status signal (and could refuse to open doors if
door-lock equipped) to the appropriate security location.
PAS is a sentinel that allows the Versus badge to recognize when it has
breached a defined perimeter. That event triggers an alarm condition that
requires further staff action or prevents the person or asset from
further egress.
In May, Versus released ACU*CARV(r) 2000, the Systems Design and
Engineering segment's premier product.
(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 positions in the
nurse call niche.
There are products directly competitive with Versus 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. Versus 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 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 equipment location,
billing capability, communication and access control all in one system,
Versus' products are superior.
While competition is extensive in the overall CAD/CAM 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 Versus is not prepared to take advantage of.
Competition for Versus' 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, Versus 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
Versus' manufacturing operations for IR and cellular products consist
primarily of the assembly and testing of final products and subassemblies
purchased from other manufacturers. Versus 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 Versus. Versus 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
Versus currently has four large, and a number of smaller, resellers.
Each reseller has an existing distribution channel and experience
integrating other vendor products within its product line and bringing
those products 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 its 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 60% of the Company's existing $180,000 backlog at October
31, 1999 and 81% of the $2,718,000 of IR revenues for fiscal 1999. Four
customers in this group accounted for 60% of Versus' total revenues
in fiscal 1999 compared to two customers accounting 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 Versus to acquire its products
for use in their nurse call systems. Versus negotiates with potential
new resellers on an ongoing basis.
In May 1998, Versus and Marquette Medical Systems (a wholly owned
subsidiary of General Electric) ("Marquette") entered an amended
agreement under which Marquette was required to purchase $1,750,000 of
Versus' IR product over a one-year period. At October 31, 1998 $809,000
of this requirement was included in Versus' backlog. Marquette fulfilled
its obligation under that contract in April of 1999.
Versus does not offer extended payment terms to its customers and
normally adheres to its warranty policy. Consistent with industry
practice, Versus maintains inventory of both components and finished
products that it believes to be sufficient to satisfy foreseeable short-
term customer requirements.
At October 31, 1999 and 1998 respectively, Versus had backlogs of
approximately $180,000 and $1,177,000 (1998 includes the $809,000 for
Marquette Medical Systems).
Approximately 18% of Versus' revenues for the fiscal year ended October
31, 1999 were attributable to the Systems Design and Engineering segment.
These revenues resulted from a large number of customers, none of which
is considered to be a material customer.
No material portion of Versus' business is seasonal. No material portion
of Versus' 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 Versus' business.
(7) Patents, Trademarks, Licenses and Franchises
Versus holds and licenses several United States patents and/or trademarks
covering IR Locating technologies, ACU*CARV(r) software products and
certain cellular technologies. Versus also holds patents in other
countries for these products.
There can be no assurance that Versus' patents will provide significant
competitive advantages, or that challenges will not be instituted against
the validity or enforceability of any patent owned or licensed by Versus
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 Versus' technology or design
around the patented aspects of Versus' 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
Versus undergoes FCC certification and testing on its new IR products on
an ongoing basis. Its Olmsted product lines do not require government
approvals. CAT products are registered and comply with all relevant FCC
regulations for commercial and residential premises.
(9) Government Regulation
Versus does not believe that existing or reasonably foreseeable
governmental regulations will have a material adverse effect upon its
business.
(10) Research and Development
Versus expenditures for research and development during fiscal 1999 were
$614,000. This compares with $408,000 that was expended during fiscal
1998. The fiscal 1998 expenditures were for the development of the IR/RF
badge, the DataBand(tm), system interoperability and PhoneVision(tm)
voice recognition. During fiscal 1999, funds were expended on new badges,
the DataBand(tm), ACU*CARV(r) 2000, Room Ready, Hand Washing Compliance,
PAS and the ASIC chip development.
(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 Versus. Versus does not expect to make any
material expenditure or environmental control facilities in either the
current fiscal year (fiscal 2000) for the succeeding fiscal year (fiscal
2001).
(12) Number of Employees
At October 31, 1999, Versus had 34 full-time employees. Of its full-time
employees, 12 were engaged in systems design, manufacturing and
engineering relating to both business segments, 17 in marketing, sales
and sales administration, and 5 in general and administration.
None of Versus' employees is 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 Versus' current
expectations, assumptions, estimates and projections about Versus and its
industry. These forward-looking statements involve numerous risks and
uncertainties. Versus' 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. Versus 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 Versus:
Risks Relating to History of Operating Losses
Versus is subject to risks associated with technology companies,
including losses related to new ventures, uncertainty of revenues,
profitability and the need for additional funding. Versus has a history
of operating losses. Versus incurred a loss of $1,413,000 in the fiscal
year ended October 31, 1999. 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 Versus will achieve
profitable operations, or that new products introduced by Versus
will achieve market acceptance. See "Management's Discussion and
Analysis."
Risks Relating to Future Capital Needs and Uncertainty of Additional
Funding
Versus 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, Versus anticipates that its working capital
and funds anticipated to be derived from sales 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 Versus. In the event that Versus is not able to
obtain additional funding on a timely basis, Versus 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 Versus would otherwise seek to develop,
manufacture or market itself. Any of these actions could have a material
adverse effect on Versus' results of operations.
Risks Relating to Emerging Market; Product Concentration
The market for infrared tracking systems is emerging. Although systems
have been installed in multiple industry applications, to date the demand
for infrared tracking systems has been primarily 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 Versus' business. Versus 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 Versus' results of operations in the future.
Risks Relating to Rapid Technological Change; Reliance on Continued
Product Development
The infrared technology industry in general is characterized by rapidly
changing technology. Versus 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 Versus' existing products obsolete. Versus' 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 Versus will be successful in these
efforts. If Versus 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 Versus'
results of operations. Due to the uncertainties associated with Versus'
emerging market, there can be no assurance that Versus 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
Versus sells its IR Locating Systems through resellers and direct sales
channels. There can be no assurance, however, that these channels of
distribution will purchase Versus' 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 Versus' results of operations.
Risks Relating to Dependence on Key Personnel
Versus has a small core management and development team and the
unexpected loss of any of these individuals would have a material adverse
effect on Versus' business and results of operations. Gary T. Gaisser
(President, Chief Executive Officer and Director) has an employment
contract with Versus 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 management.
Risks Relating to Management of Growth
Versus has recently expanded its core operations. The growth Versus'
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 Versus' business has
required and, if sustained, will continue to require the employment of
additional engineering personnel. There can be no assurance that Versus
will be able to hire employees with the necessary qualifications. The
future success of Versus 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 Versus will be successful in attracting and retaining
such personnel. There can be no assurance that Versus' management will
be able to manage future expansions, if any, successfully, or that its
management, personnel or systems will be adequate to support Versus'
operations or will be implemented in a cost-effective or timely manner.
Versus' 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. If Versus is unable to manage growth
effectively, such inability could have a material adverse effect on
Versus' business, results of operations and financial condition.
Risks Relating to Limited Protection of Proprietary Technology
Versus 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 Versus' systems, processes and operations will not be
reverse engineered or independently developed. It may be possible for
unauthorized third parties to copy Versus' products (notwithstanding the
existence of any nondisclosure agreement) or to reverse engineer or
obtain and use information that Versus regards as proprietary. There can
be no assurance that Versus' competitors will not independently develop
technologies that are substantially equivalent or superior to Versus'
technologies. Any access to or use by competitors of Versus' technology
could have a material adverse effect on Versus. In addition, Versus
is not aware of any claims that it is infringing intellectual property
rights of third parties, but there can be no assurance that Versus will
not face a claim that it is infringing the intellectual property rights
of others. There can be no assurance that Versus 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
Versus. In addition, the laws of certain countries in which Versus'
products may be distributed do not protect Versus' products and
intellectual rights to the same extent as the laws of the United States.
Risks Relating to Control by Existing Stockholders; Anti-Takeover
Provisions
Versus' directors and officers collectively beneficially own in the
aggregate approximately 33.5% of Versus' outstanding Common Stock.
Certain principal stockholders are directors or executive officers of
Versus. 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 Versus, 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 Versus.
Risks Relating to Limited Market for Common Stock; Possible Volatility of
Stock Price
Versus' 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. 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 Versus or its competitors
and quarter-to-quarter variations in Versus' 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 Versus'
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 Versus'
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.
Risks Relating to Sales of Common Stock Issuable Upon Exercise of Options
and Warrants and Sales of Other Shares
Versus currently has outstanding 85 stock options to purchase an
aggregate 3,726,205 shares of Common Stock and 30 warrant agreements to
purchase an aggregate 1,623,969 shares of Common Stock. Versus also has
outstanding 17 debentures convertible into 12,000,000 shares of Common
Stock. Subsequent to the exercise of such options, warrants or
conversion privileges 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 Versus. The
sale or potential sale of these shares of Common Stock could have
the effect of reducing the market price of Versus' Common Stock.
Risk Relating to No Dividends
Versus has never declared or paid dividends on its Common Stock since its
formation. Versus 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
Versus is not presently engaged in any legal proceeding.
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 1999.
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
At one time, Versus' common stock was traded on the Small Cap Market
under the trading symbol "VSTI." Versus' stock is not currently listed,
as Versus does not meet the NASD's minimum requirements for new listings
Versus 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
Versus' Common Stock during each quarter. Quotations reflect inter-
dealer prices without retail mark-up, markdown or commission and may not
represent actual transactions.
Fiscal Quarter
Ended: 1999 1998
---------------------- ----------------------
High Low High Low
January 31 15/32 1/4 1-5/32 15/16
April 30 35/64 9/64 1-1/16 7/16
July 31 11/32 10/64 11/16 3/8
October 31 13/64 7/64 1/2 3/16
On January 12, 2000, Versus had 321 shareholders of record of its common
stock and the average of the bid and asked prices was $0.165.
To date, Versus 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 Versus. 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 Versus' consolidated financial statements during fiscal year
1999, with comparisons to fiscal 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
thereto included elsewhere.
The following table sets forth selected financial data for Versus for the
past two fiscal years:
(in thousands except per share amounts)
Year Ended October 31, 1999 1998
- ----------------------------------------------------------------------
STATEMENT OF OPERATIONS DATA:
Revenues $ 3,297 $ 3,167
Net loss (1,413) (1,435)
Basic and diluted net loss
per common share ( .04) ( .04)
Weighted average number of
common shares outstanding 38,031 38,026
BALANCE SHEET DATA:
Working capital $ 2,706 $ 757
Total assets 7,434 5,543
Total liabilities 3,753 677
Shareholders' equity 3,681 4,866
OPERATING RESULTS
Certain reclassifications have been made to 1998 balances to conform to
classifications used in 1999.
Fiscal 1999 was a year of change for Versus.
While revenues approximated those of fiscal 1998, the customer base was
expanded reducing Versus' reliance on individual customers as was the
case in prior years. Four new products were launched and development of
Versus' Application Specific Integrated Circuit (ASIC) chip has
progressed significantly. The ASIC chip will improve both the
design and performance of all Versus' badge offerings. Versus expects
initial shipment of product incorporating this technology in 2000.
In fiscal 1999 Versus net loss decreased to $1,413,000 compared to a net
loss of $1,435,000 in fiscal 1998. The reduced loss was the result of
improved gross margins and lower general and administrative costs. The
gross profit increased by $119,000 composed of $40,000 in margin
improvement and $79,000 volume related improvement.
Revenues for fiscal 1999 were $3,297,000 or 4% higher than the fiscal
1998 level of $3,167,000. Versus attributed the low growth in revenues to
individual healthcare customer facility budget constraints due to Y2K
concerns and added budgetary pressures caused by funding cutbacks
attributed to the Medicare spending cuts in the Balanced Budget
Amendment. Infrared revenues were $2,718,000 compared to $2,341,000 in
fiscal 1998. The reseller network generated $2,203,000 or 81% of fiscal
1999 IR revenues. The balance of IR revenues was generated from direct
sales efforts. In May 1998, Versus and Marquette Medical Systems entered
into an Amended Marketing Agreement ("the Amended Agreement") under which
Marquette purchased $1,750,000 of Versus' IR products over the ensuing
year. Shipments under this now expired agreement were $825,600 and
$924,400 in fiscal 1999 and fiscal 1998, respectively. The following
table indicates total IR sales by source for 1999 and 1998:
1999 1998
---------------------------------
Marquette related $ 825,600 $ 1,280,600
Other Customers 1,892,400 1,060,400
---------------------------------
Total IR $ 2,718,000 $ 2,341,000
=================================
Systems Design and Engineering revenues for fiscal 1999 were $579,000
compared to $826,000 in fiscal 1998. Systems Design and Engineering
revenues include $187,000 and $160,000 in cellular revenues for fiscal
1999 and fiscal 1998, respectively. Decreased revenues from maintenance
and third-party sales related to CAD/CAM operations, accounted for the
majority of the overall decrease in Systems Design and Engineering
revenues. New CAD/CAM product introductions and the full impact of the
May 1999 release of ACU*CARV(r) 2000, the latest version of Versus'
CAD/CAM software product, are expected to reverse the trend of decreasing
Systems Design and Engineering revenues.
Total cost of revenues as a
percentage of revenues for fiscal 1999 decreased to 45% from 46% in
fiscal 1998. The decreased cost as a percentage of revenues reflects
cost reductions due to product improvements. Infrared cost of revenues
as a percentage of revenues was 40% in fiscal 1999 and 1998. System
Design and Engineering cost of revenues as a percentage of revenues was
68% in fiscal 1999 and 64% in fiscal 1998.
Research and development expenditures increased by $206,000 or 50% from
fiscal 1998 levels. Fiscal 1998 expenditures were for development of the
IR/RF badge, DataBand(tm), system interoperability and voice recognition
for PhoneVision(tm). Fiscal 1999 expenditures were for development of new
badges, DataBand(tm), ACU*CARV(r) 2000 and the ASIC chip.
Sales and marketing expense for fiscal 1999 was $1,368,000 compared to
the fiscal 1998 level of $1,367,000. Plans to pursue direct sales more
aggressively have been curtailed and Versus' efforts will be directed at
supporting its reseller channels in fiscal 2000.
Fiscal 1999 general and administrative costs were $1,218,000 compared to
$1,408,000 for fiscal 1998. Director compensation and board meeting
expenses decreased $39,000, professional fees decreased $123,000 and
insurance expenses decreased $51,000. Partially offsetting these
decreases was a one-time $60,000 franchise tax related to the increase in
authorized capital stock in November 1998.
Interest income increased to $56,000 in fiscal 1999 from $52,000 in
fiscal 1998 due to higher interest bearing cash balances. Interest
expense was $83,000 in fiscal 1999 due to the issuance of the debentures
in the last half of 1999.
For federal income tax purposes, Versus has net operating loss
carryforwards. As disclosed in more detail in Note 3 to the consolidated
financial statements, realization of gross deferred income tax assets at
October 31, 1999 is dependent upon generating sufficient taxable income
prior to expiration of the loss carryforwards. By recording a 100%
valuation allowance against its gross deferred income tax assets, Versus
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, 1999.
In fiscal 1998 Versus grew its sales and developed its IR product in
functional and scaleable terms. In fiscal 1999, efforts were
concentrated on reducing reliance on single major customers by expanding
the customer base and on developing the ASIC chip. Versus begins fiscal
2000 with a sales effort focused on its reseller channel that generated
the successes experienced in fiscal 1997 and 1998. Versus expects its
ASIC chip will be incorporated into product offerings improving margins
even further.
LIQUIDITY AND CAPITAL RESOURCES
In early fiscal 1999, Versus relied 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 1999 cash decreased by $291,000 as Versus curtailed
expenditures to conserve cash.
Operations (including working capital) consumed $817,000 in cash in
fiscal 1999 compared to $985,000 in fiscal 1998. Improved gross margins and
lower general and administrative costs offset additional research and
development and sales and marketing expenditures.
Versus invested $299,000 in property and equipment in 1999 compared to
$38,000 in 1998. The primary increase in 1999 expenditures related to
$232,000 incurred to produce the masks (i.e., tooling) necessary for
production of the ASIC chip. An estimated $115,000 of remaining
capitalizable costs are expected to be incurred in early fiscal 2000 to
complete the masks. As indicated earlier, Versus expects initial
shipment of product incorporating the ASIC chip in 2000.
Investing expenditures for 1998 includes $25,000 for an IR/RF
intellectual property assignment from a third party.
During fiscal 1999 Versus retired $80,000 of the notes payable compared
to $126,000 in fiscal 1998.
Effective May 31, 1999 Versus issued $1,550,000 in Prime Rate Secured
Convertible Debentures. Between June 1 and August 18, 1999, an
additional $1,450,000 of these debentures were issued. The debentures
are due April 30, 2004 and bear interest at prime payable quarterly on
the first days of August, November, February and May. The proceeds of
this funding will be used for working capital, expansion of sales and
marketing programs, product development and product launches. Included
among the debenture holders were a director of Versus and a limited
liability company of which another director is the managing
partner. The limited liability company referenced above subscribed to
$1,500,000 of the total debentures issued.
In connection with the issuance of the debentures, Versus incurred
$108,000 in expenses which have been recorded as Deferred Financing
Costs. These costs will be amortized over the life of the debentures.
Versus believes the combination of cash balances remaining from the 1999
funding and the cash expected to be generated during fiscal 2000 from
sales will be sufficient to meet projected cash needs for operations and
new product developments over the next twelve months.
SIGNIFICANT LIQUIDITY FACTORS:
October 31
1999 1998
----------------------
Current ratio 4.6:1 2.1:1
Quick ratio 3.9:1 1.8:1
YEAR 2000 READINESS DISCLOSURE
Versus experienced no Y2K problems at the turn of the century and does
not anticipate any future material problems related to Y2K.
Versus estimates that its total cost related to Y2K, representing an
allocation of internal staff costs to accomplish Y2K readiness and
rewrite affected software, was approximately $30,000.
NEW ACCOUNTING STANDARDS
During fiscal 1999 Versus adopted Statement of Financial Accounting
Standards (SFAS) No. 131, Disclosures about Segments of an Enterprise and
Related Information. This statement, which supersedes SFAS No. 14,
Financial Reporting for Segments of a Business Enterprise, 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. Versus'
reportable segment groupings did not change and results of operations and
financial position were unaffected by implementation of SFAS No. 131.
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 Versus. 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 Versus' markets and market growth rates, products and their
rate of commercialization, services, prices and adequacy of financing and
other factors described in Part I, Item 1 (13). Versus undertakes no
obligation to update, amend or clarify forward-looking statements,
whether as a result of new information, future events or otherwise.
ITEM 7 - FINANCIAL STATEMENTS
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Index to Consolidated Financial Statements
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
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, 1999 and 1998, 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 Versus' 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, 1999 and 1998,
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 3, 1999
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Balance Sheets
October 31, 1999 and 1998
October 31,
1999 1998
------------- -------------
Assets (Note 2)
Current Assets
Cash and cash equivalents $ 2,395,000 $ 698,000
Accounts receivable (net of allowance
for doubtful accounts of $28,000 and
$60,000) 564,000 517,000
Inventories - purchased parts and
Assemblies 402,000 155,000
Prepaid expenses and other assets 98,000 64,000
------------- -------------
Total Current Assets 3,459,000 1,434,000
------------- -------------
Property and Equipment
Machinery, equipment and vehicles 282,000 231,000
Furniture and fixtures 57,000 49,000
Leasehold improvements 138,000 130,000
Construction-in-process - tooling 232,000 -
------------- -------------
709,000 410,000
Less accumulated depreciation 259,000 173,000
------------- -------------
Net Property and Equipment 450,000 237,000
------------- -------------
Software Development Costs, net of
accumulated amortization of $238,000
and $163,000 362,000 437,000
Goodwill, net of accumulated
amortization of $494,000 and $338,000 1,845,000 2,001,000
Patents and Other Intangible Assets,
net of accumulated amortization of
$769,000 and $556,000 1,221,000 1,434,000
Deferred Financing Costs, net of
accumulated amortization of $11,000
(Note 2) 97,000 -
------------- -------------
$ 7,434,000 $ 5,543,000
============= =============
See accompanying notes to consolidated financial statements.
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Balance Sheets
October 31, 1999 and 1998
October 31,
1999 1998
------------- -------------
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $ 500,000 $ 453,000
Accrued expenses 204,000 119,000
Deferred revenue - customer
advance payments 49,000 25,000
Note payable - 80,000
------------- -------------
Total Current Liabilities 753,000 677,000
Long-Term Debt (Note 2) 3,000,000 -
------------- -------------
Total Liabilities 3,753,000 677,000
Commitments and Contingencies
(Notes 4 and 6)
Shareholders' Equity (Note 5)
Common stock, $.01 par value;
75,000,000 and 50,000,000
shares authorized; 38,510,671
and 38,362,700 shares
issued and outstanding 385,000 384,000
Additional paid-in capital 33,367,000 33,249,000
Accumulated deficit (29,990,000) (28,577,000)
Unearned compensation ( 81,000) ( 190,000)
------------- -------------
Total Shareholders' Equity 3,681,000 4,866,000
------------- -------------
$ 7,434,000 $ 5,543,000
============= =============
See accompanying notes to consolidated financial statements.
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Statements of Operations
For the years ended October 31, 1999 and 1998
For the year ended October 31,
1999 1998
------------- -------------
Revenues $ 3,297,000 $ 3,167,000
------------- -------------
Operating Expenses (Note 6)
Cost of revenues 1,483,000 1,472,000
Research and development 614,000 408,000
Sales and marketing 1,368,000 1,367,000
General and administrative 1,218,000 1,408,000
------------- -------------
4,683,000 4,655,000
------------- -------------
Loss From Operations ( 1,386,000) ( 1,488,000)
------------- -------------
Other Income (Expense)
Interest income 56,000 52,000
Interest expense ( 83,000) -
Other, net - 1,000
------------- -------------
( 27,000) 53,000
------------- -------------
Net Loss $( 1,413,000) $( 1,435,000)
============= =============
Basic and Diluted Net Loss Per Share $( .04) $( .04)
============= =============
See accompanying notes to consolidated financial statements
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Statements of Shareholders' Equity
For the years ended October 31, 1999 and 1998
<TABLE>
<CAPTION>
Additional Unearned
Paid-in Accumulated Compensation
Shares Amount Capital Deficit (Note 5) Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, November 1, 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 5) 91,121 1,000 93,000 - ( 93,000) 1,000
Earned compensation
relating to restricted
stock bonus plan
(Note 5) - - - - 72,000 72,000
Directors' compensation
(Note 5) - - 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
Net shares issued for
restricted stock bonus
plan (Note 5) 147,971 1,000 31,000 - ( 31,000) 1,000
Earned compensation
relating to restricted
stock bonus plan
(Note 5) - - - - 140,000 140,000
Directors' compensation
(Note 5) - - 87,000 - - 87,000
Net loss - - - ( 1,413,000) - ( 1,413,000)
--------------------------------------------------------------------
Balance, October 31, 1999 38,510,671 $385,000 $33,367,000 $(29,990,000) $( 81,000)$ 3,681,000
====================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
For the years ended October 31, 1999 and 1998
Year ended October 31,
1999 1998
------------- -------------
Operating Activities
Net loss $( 1,413,000) $( 1,435,000)
Adjustments to reconcile net loss to
Net cash used in operating
activities:
Depreciation 86,000 84,000
Amortization of intangibles 455,000 444,000
Restricted stock compensation 140,000 72,000
Directors' compensation 87,000 82,000
Changes in operating assets and
liabilities:
Accounts receivable, net ( 47,000) ( 71,000)
Inventories ( 247,000) 16,000
Prepaid expenses and other current
Assets ( 34,000) 49,000
Accounts payable 47,000 145,000
Accrued expenses 85,000 ( 40,000)
Deferred revenues - customer
advance payments 24,000 ( 331,000)
------------- -------------
Net cash used in operating activities ( 817,000) ( 985,000)
------------- -------------
Investing Activities
Additions to property and equipment ( 299,000) ( 38,000)
Payment for acquisition of license to
intellectual property and associated
costs - ( 25,000)
------------- -------------
Net cash used in investing activities ( 299,000) ( 63,000)
------------- -------------
Financing Activities
Issuance of long-term debt 3,000,000 -
Debt financing costs incurred ( 108,000) -
Payments on note payable ( 80,000) ( 126,000)
Sale of common stock 1,000 1,000
------------- -------------
Net cash provided by (used in) financing
activities 2,813,000 ( 125,000)
------------- -------------
Net Increase (Decrease) in Cash and Cash
equivalents $ 1,697,000 $( 1,173,000)
Cash and Cash Equivalents, at the
beginning of the year 698,000 1,871,000
------------- -------------
Cash and Cash Equivalents, at the end
of the year $ 2,395,000 $ 698,000
============= =============
Supplemental Cash Flow Information
Cash paid during the year for
interest $ 21,000 $ -
See accompanying notes to consolidated financial statements.
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
For the years ended October 31, 1999 and 1998
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 "Versus" operate
in two business segments: data collection and processing; and systems design
and engineering. All Versus 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. Versus' primary products
are infrared locating systems, passive data collection systems, radio
frequency supervisory systems, asset locating systems and portal detection
systems. These products permit the instantaneous
identification and location of people and equipment and
can be used to control access, record events associated with those
activities 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 ACU*CARV(r) name, resells third-party software, and provides systems
support services throughout North America. Olmsted receives maintenance
and enhancement fees from customers and in turn provides technical
support and periodic releases. Versus also develops, markets and
integrates cellular products for the security industry.
Versus 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. Versus' customer base is diverse
and Versus 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.
Revenue Recognition
Revenue from IR product sales is recognized when the related goods are
shipped and all significant obligations of Versus have been satisfied.
Versus generally offers 90-day or one year warranties, depending on the
product. Accordingly, Versus provides, by a current charge to selling
expense, an amount it estimates will be needed to cover future warranty
obligations for products sold. Total warranty costs were $17,000 in
1999. Warranty costs in 1998 were not significant.
Revenue from CAD/CAM and cellular product sales is recognized when the
related goods are shipped and all significant obligations of Versus 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 are 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 a straight-line
basis 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
Costs to produce tooling for use by foundries to fabricate microchips
are capitalized and amortized on a straight-line basis over the
shorter of the related product life cycle or six years.
Software Development Costs
Software development costs consist of the estimated fair value of
Olmsted's ACU*CARV(r) 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.
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
for both the years ended October 31, 1999 and 1998.
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
years. Other intangible assets are comprised primarily of the
exclusive right to license a third party's patents and other
intellectual property rights related to infrared technology for ten
years (and nonexclusive thereafter), trademarks and supplier royalty
agreements.
Deferred Financing Costs
In connection with the issuance of the Debentures discussed in Note 2,
Versus incurred $108,000 in expenses that were recorded as
Deferred Financing Costs. These costs are being amortized on a
straight-line basis over five years, the life of the debentures.
Advertising Costs
All advertising costs, amounting to $39,000 and $71,000 for the years
ended October 31, 1999 and 1998, 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
Basic earnings per share (EPS) is computed by dividing net income (loss)
by the weighted average number of shares outstanding during each period.
Basic EPS excludes any dilutive effects of options, warrants and
convertible securities. It also excludes the dilutive effect of
contingently issuable shares (such as Versus' outstanding restricted
stock bonus plan shares described in Note 5) to the extent those shares
have not yet been vested. Diluted EPS includes the effects of options,
warrants, convertible securities and contingently issuable shares. For
1999 and 1998, Versus has not included the effects of options, warrants,
convertible securities 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 1999 and 1998
were 38,031,427 and 38,025,948, respectively, for both basic and diluted
EPS calculations.
Cash and Cash Equivalents
Versus considers all investments with original maturities of three months
or less to be cash equivalents.
New Accounting Standards
During fiscal 1999, Versus adopted Statement of Financial Accounting
Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise
and Related Information." This Statement, which supersedes SFAS No. 14,
"Financial Reporting for Segments of a Business Enterprise," 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. Versus'
reportable segment groupings did not change and results of operations and
financial position were unaffected by implementation of SFAS No. 131.
Additional information required to be disclosed by SFAS No. 131 is
included in Note 8.
Reclassifications
Certain reclassifications have been made to 1998 balances to conform
with classifications used in 1999.
2. Long-Term Debt
During fiscal 1999, in private placement transactions, Versus issued
$3,000,000 of its Prime Rate Secured Convertible Debentures (Debentures)
that are due April 30, 2004. Interest is payable quarterly on the first
days of August, November, February and May. The Debentures bear interest
at prime, which was 8.5% at October 31, 1999. Versus may redeem the
Debentures at any time, without penalty or premium, after the earlier of
(1) October 31, 2001 or (2) when the price of Versus' common stock is
quoted at or above $.50 per share for 14 continuous days, subject to
minimum average volume tests being met in the previous 90 days
and subject to Versus determining that it is probable that it qualifies
to be admitted for quotation on the NASDAQ Small Cap Market.
The holders may convert the Debentures to Versus' common stock at any
time prior to redemption at an initial conversion ratio of four shares
per dollar held. The conversion price of the Debentures was higher than
the market value of the related common stock on the dates the Debentures
were issued. The conversion ratio is adjustable for future stock changes
and mergers. The Debentures are secured by a first priority security
interest in all of Versus' assets and are transferable to qualified
investors. Shares issued upon conversion of the Debentures bear a
restrictive legend.
Versus entered into a Registration Rights Agreement relative to the
Debentures issued wherein it agreed: (1) at any time after six months
from the Debenture's issue date but not later than five years from the
time any stock is issued on conversion, to effect a registration under
the Securities Act, provided it receives a written request from investors
owning 50% or more of the registrable securities outstanding at the time
as a result of conversion; (2) to notify the investors of any other
registrations it intends to effect (except registrations solely for
shares in connection with an employee benefit plan or a merger or
consolidation) allowing them to "piggy back" on such alternate
registration; and (3) registration expenses will be paid by Versus.
3. 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, 1999 and 1998 are as follows:
1999 1998
-----------------------------
Net operating loss
carryforwards $ 3,392,000 $ 3,142,000
Receivables - allowance for
doubtful accounts 10,000 20,000
Inventory 12,000 9,000
Accumulated depreciation 5,000 ( 5,000)
Intangible assets 57,000 48,000
Accruals and reserves 22,000 46,000
Unearned compensation 115,000 92,000
Other - 1,000
-----------------------------
Gross deferred income tax
assets 3,613,000 3,353,000
Less valuation allowance (3,613,000) (3,353,000)
-----------------------------
Net deferred income tax
assets recorded in the
consolidated financial
statements $ - $ -
At October 31, 1999, after consideration of the limitations under the
Internal Revenue Code rules relating to change of ownership, Versus had
available net operating loss carryforwards for federal income tax
reporting purposes of approximately $9,977,000. These net operating loss
carryforwards expire as follows, if not previously utilized: $406,000 in
2000, 2001, 2002 and 2003; $218,000 in 2004; $232,000 in 2005; $218,000
in 2006; $298,000 in 2007; $218,000 in 2008; $237,000 in 2009; $378,000
in 2010; $2,230,000 in 2011; $1,877,000 in 2012; $1,305,000 in 2018; and
$1,142,000 in 2019.
The above net operating loss carryforward amounts include amounts
attributable to Versus' wholly owned subsidiary, Olmsted, which were
carried over to the consolidated group as part of the acquisition of
Olmsted in August 1996.
Due to the recording of the valuation allowance for deferred income tax
assets at October 31, 1999, actual related tax benefits recognized in the
future will be reflected as either a reduction of future income 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 $ 3,304,000
Recognized as a reduction of
goodwill 309,000
------------
$ 3,613,000
============
Realization of the gross deferred income tax assets is primarily
dependent upon generating sufficient taxable income prior to expiration
of the loss carryforwards. 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. While it
believes Versus 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, 1999 and 1998, income taxes differed from
the amounts computed by applying the federal statutory rate of 34% to
losses before income taxes as follows:
1999 1998
-----------------------
Computed "expected" tax benefit $(480,000) $(488,000)
Increase in tax resulting from:
Adjustment to valuation
allowance for deferred
income tax assets relating
to current year losses 398,000 406,000
Nondeductible expenses 82,000 82,000
-----------------------
$ - $ -
=======================
4. Commitments and Contingencies
Employment Contract
Versus 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.
5. Shareholders' Equity
Authorized Common and Preferred Shares
During fiscal 1999, shareholders approved an amendment to Versus'
certificate of incorporation to effect a 1-for-10 reverse stock split.
It is the intent of the Board of Directors to approve the filing of the
amendment and proceed with the reverse stock split when Versus otherwise
qualifies for quotation on the NASDAQ Small Cap Market.
During fiscal 1998, the Board of Directors adopted, and the shareholders
approved, an amendment to Versus' 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 Versus' President and filed with the State of Delaware in
November 1998. No preferred stock has been issued. The rights and
privileges to be attributed to the preferred stock will be determined
prior to the issuance of any preferred shares.
Stock Issuances
During fiscal 1997, Versus issued 135,000 unregistered 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.
In early fiscal 2000, Versus issued 50,000 shares of common stock to an
independent sales agent. These shares are not registered and may not be
sold except pursuant to an effective registration, or pursuant to a duly
available exemption from such registration requirements. Versus also
issued the independent sales agent a non-transferable option to require
Versus to repurchase the shares on May 1, 2000 for $0.50 per share,
provided the Independent Sales Agent Agreement is in full force and the
independent sales agent is not in default of the agreement.
Stock Warrants
At October 31, 1999, Versus has outstanding warrants in the following
amounts exercisable through the following dates:
1. 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 Versus in July of 1995;
2. Warrants to purchase 1,027,244 shares at an exercise price of $0.20,
expiring in September 2000, issued to a private placement agent in
September 1995; and
2. Warrants to purchase 396,725 shares at an exercise price of $.50,
expiring in August 2001, issued to a private placement agent in August
1996.
Stock Options
Versus' 1996 Employee Incentive Stock Option Plan (1996 Employee 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 1999
and 1998, 544,125 and 418,230 options, respectively, were granted to key
employees. The options may be exercised from one to ten years after the
date of grant and fully vest between one and five years after issuance.
There were no options granted under the plan during 1997. During 1996,
1,000,000 options were granted to Versus' President. These 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 become
exercisable each December for the next three years.
During fiscal 1999, the shareholders approved the 1999 Employee Incentive
Stock Option Plan (1999 Employee Plan). The terms of the 1999 Employee
Plan are the same as the terms of the 1996 Employee Plan except that all
Versus personnel may participate. A total of 3,200,000 shares are
authorized for grant under the 1999 Employee Plan. During 1999 123,860
options were granted to employees under this plan.
A summary of activity for Versus' 1999 and 1996 Employee Plans is as
follows:
Year ended October 31,
1999 1998
-------------------- ----------------------
Weighted Weighted
average average
exercise exercise
Shares price Shares price
----------------------------------------------
Options outstanding,
beginning of year 1,418,230 $ 0.446 1,000,000 $ 0.375
Granted 667,985 0.343 418,230 0.614
Exercised - - - -
Expired - - - -
----------------------------------------------
Options outstanding, end
of year 2,086,215 $ 0.413 1,418,230 $ 0.446
==============================================
Options exercisable, end
of year 1,156,530 $ 0.463 500,000 $ 0.375
==============================================
Options available for
grant, end of year 3,113,785 581,770
========= =========
During 1999, the Board of Directors approved an Executive Officer Profit
Sharing and Incentive Compensation Plan (Executive Plan). Under the
Executive Plan, which is effective November 1, 1999 and has a three-year
term, bonuses will be awarded to executives if certain company financial
performance targets are met. The awards will be paid in the form of cash
and stock options. To the extent feasible, stock options awarded under
the Executive Plan will be issued pursuant to the 1999 Employee Plan.
Versus has issued additional stock options under various agreements over
the past several years. During 1999, under a separate agreement, Versus
issued an option on 175,000 shares to an executive of Versus. The option
included an exercise price of $0.41 and a five-year vesting period.
Twenty percent (35,000 shares) of the option vested on January 4, 2000.
Subsequent to year-end, the executive left the employment of Versus and
the vested portion of the option is exercisable up to 90 days after
termination of employment. Under two agreements with former employees in
prior years, Versus 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, 1999.
Versus 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 expense has been recognized
relating to Versus' employee stock option plans. Through October 31,
1999, compensation cost has been recognized relating to Versus' non-
employee Director stock options, as discussed below. Had compensation
cost for Versus' 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, Versus' net loss and net loss per share
would have been increased to the pro forma amounts indicated below:
1999 1998
---------------------------
Net loss - as reported $1,413,000 $1,435,000
Net loss - pro forma 1,646,000 1,620,000
Net loss per share - as reported 0.04 0.04
Net loss per share - pro forma 0.04 0.04
===========================
The weighted average fair value per option at the date of grant for
options granted under the Versus' 1999 and 1996 Employee Plans
during 1999 and 1998 was $.29 and $.49, respectively. The fair values
of the option awards were estimated using the Black-Scholes option-
pricing model with the following weighted-average assumptions:
1999 1998
---------------------------
Dividend yield 0.00% 0.00%
Expected volatility 79.99% 70.38%
Risk-free interest rate 5.15% 5.63%
Expected life in years 10 10
===========================
During 1999, under separate agreements, 328,000 options were awarded to
Versus' Directors. Of the total, 292,000 options were awarded to non-
employee Directors and 36,000 to an employee Director. The options were
awarded for services rendered, become exercisable and vest
one year after date of grant and may be exercised up to five
years from date of grant. In addition to the options that were issued to
Directors, Versus reserved 73,000 shares for an option that may be issued
to a non-employee Director if certain earnings targets are achieved. At
October 31, 1999 the targets were not met and the number of shares
reserved was reduced to 36,500.
During 1998, under separate agreements, 528,000 options were awarded to
Versus' 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.
A summary of activity for the Director stock options is as follows:
Year ended October 31,
1999 1998
--------------------------------------------
Weighted Weighted
average average
exercise exercise
Shares price Shares price
---------------------------------------------
Options outstanding,
beginning of year 628,000 $ 0.592 100,000 $ 1.031
Granted 328,000 0.165 528,000 0.509
Exercised - - - -
Expired/terminated ( 73,000) 0.515 - -
----------------------------------------------
Options outstanding,
end of year 883,000 $ 0.429 628,000 $ 0.592
==============================================
Options exercisable,
end of year 555,000 $ 0.603 100,000 $ 1.031
==============================================
For 1999 and 1998, respectively, compensation cost of $87,000 and
$82,000 was recognized relating to the non-employee Director stock
option awards based on the weighted average estimated fair values per
option of $.11 and $.36 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:
1999 1998
-----------------------
Dividend yield 0.00% 0.00%
Expected volatility 83.85% 78.15%
Risk-free interest rate 5.22% 6.25%
Expected life in years 5 5
======================
In accordance with existing accounting pronouncements and guidance
provided by SEC staff, Versus has historically recorded the fair value of
options issued to non-employee Directors as compensation expense. In
March 1999, the Financial Accounting Standards Board (FASB) issued its
Exposure Draft, "Interpretation of Opinion 25 - Accounting for Certain
Transactions Involving Stock Compensation," which confirmed Versus'
accounting method. In August 1999, the FASB reversed its position on the
subject. Under the revised proposed Interpretation, which
is expected to be issued during the first quarter of calendar 2000,
options issued to non-employee Directors will receive the same accounting
treatment permitted for employee options under SFAS No. 123. Assuming
the Interpretation is issued as revised, Versus will change its
accounting method such that no compensation expense will be recognized
relating to options granted to its non-employee Directors.
The following summarizes information regarding options outstanding at
October 31, 1999 under the 1999 and 1996 Employee Plans and Director
option agreements:
Weighted
Average Weighted
Range of Number Remaining Average
Exercise Outstanding Contractual Exercise
Prices at 10/31/99 Term (Years) Price
------------------------------------------------
1999 and 1996
Employee Plans $0.170-0.375 1,182,610 7.0 $0.344
0.401-0.629 903,605 8.8 0.500
---------
2,086,215
=========
Director options $0.155-0.165 328,000 4.5 $0.165
0.500-0.515 455,000 2.0 0.508
1.031 100,000 3.0 1.031
---------
883,000
=========
In early fiscal 2000, Versus granted options to certain employees
to purchase 536,000 shares at a weighted average exercise price of
$0.117 under the 1999 Employee Plan.
Restricted Stock Bonus Plan
Versus 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 Versus 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/she desires to accept the allocation, pay to Versus 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 Versus. If a recipient's employment is terminated for any
reason during the three-year period, the termination will
be deemed as an offer to Versus 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
$226,000. The difference between the market value and the sales price
($.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 1999 and
1998, respectively, 169,375 and 105,000 additional shares were issued and
21,404 and 13,879 shares were repurchased upon termination of
participating employees. Earned compensation amounted to $140,000 and
$72,000 for the years ended October 31, 1999 and 1998,
respectively. When shares are repurchased, Versus eliminates the
remaining unearned compensation related to the restricted shares,
reverses the amortization that was previously recorded as compensation
expense, reduces the common shares outstanding and the carrying amount of
shares outstanding by the number of shares repurchased and the par value
of such shares, respectively. The difference between the amount paid to
repurchase the shares and the par value of such shares is recorded as a
reduction to additional paid-in capital. To date, Versus has not
repurchased any shares at a value above the par value.
6. Related Party Transactions
Versus and Olmsted lease their principal operating facilities from an
entity which is beneficially owned by Versus' President. Versus 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. Versus 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, 1999 and 1998 amounted to $122,000 and
$117,000, respectively.
7. Employee Benefit Plan
Versus maintains a 401(k) plan for all of its employees. Under the plan,
Versus contributes $.50 for each dollar contributed by an employee
(subject to Internal Revenue Code limitations) to a retirement savings
account in any year. Versus' 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 Versus contributions. Versus' contributions to the plan were $24,000
for the years ended October 31, 1999 and 1998.
8. Business Segment Information and Major Customers
Versus operates in two business segments: data collection and processing;
and systems design and engineering. These business segments have been
identified based on Versus' organization around major product lines. The
data collection and processing segment includes Versus' infrared locating
systems, passive data collection systems, radio frequency supervisory
systems, asset locating systems and portal detection systems. These
products are marketed to the health care industry, security 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.
Versus evaluates performance and allocates resources based on pretax
segment gross margins. The accounting policies of the reportable
segments are the same as those described in the summary of accounting
policies included in Note 1, except that only direct costs are included
in the computation of segment gross margin for purposes of evaluating
segment performance (i.e., indirect costs, such as manufacturing overhead
and depreciation and amortization, are excluded from this segment gross
margin computation). All assets, other than cash and deferred financing
costs, are attributed to each segment based on specific identification.
Cash and deferred financing costs are not viewed as attributable to a
particular segment. Cash is treated as available for use by
both segments, as needed. Deferred financing costs, incurred in
obtaining an additional source of cash, is likewise not allocable to a
particular segment.
1999 1998
--------------------------
Revenues
Data collection and processing $ 2,718,000 $ 2,341,000
Systems design and engineering 579,000 826,000
--------------------------
Consolidated total revenues $3,297,000 $ 3,167,000
==========================
Cost of Revenues
Data collection and processing $( 740,000) $ (561,000)
Systems design and engineering ( 326,000) (430,000)
--------------------------
Total segment cost of revenues (1,066,000) ( 991,000)
Indirect costs:
Depreciation and amortization ( 299,000) ( 299,000)
Lease expense ( 33,000) ( 20,000)
Insurance expense ( 22,000) ( 23,000)
Warranty expense ( 17,000) ( 1,000)
Other ( 46,000) ( 138,000)
--------------------------
Consolidated total cost of
Revenues $(1,483,000) $(1,472,000)
==========================
Segment Gross Margin
Data collection and processing $ 1,978,000 $ 1,780,000
Systems design and engineering 253,000 396,000
--------------------------
Total segment gross margin $ 2,231,000 $ 2,176,000
==========================
Assets
Data collection and processing $ 4,370,000 $ 4,150,000
Systems design and engineering 572,000 695,000
--------------------------
Total segment assets 4,942,000 4,845,000
Cash and net deferred financing
Costs 2,492,000 698,000
--------------------------
Consolidated total assets $ 7,434,000 $ 5,543,000
==========================
Capital Expenditures
Data collection and processing $ 298,000 $ 38,000
Systems design and engineering 1,000 -
==========================
Consolidated capital
expenditures $ 299,000 $ 38,000
==========================
Revenues in excess of 10% of Versus' total revenues were attributable to
sales to three and two major customers for the years ended October 31,
1999 and 1998, respectively. These individual customers accounted for
revenues of approximately $826,000 (25%), $467,000 (14%) and $370,000
(11%) in fiscal year 1999 and $1,281,000 (40%) and $540,000 (17%) in
fiscal year 1998. These revenues were all related to the data collection
and processing segment.
Reportable Geographic Information
1999 1998
-----------------------
Revenues
United States $3,246,000 $3,149,000
Canada 51,000 18,000
-----------------------
$3,297,000 $3,167,000
Revenues are attributable to countries based on the location of the
reseller for products sold by resellers and by location of the
customer if the products are sold directly by Versus.
All long-lived assets of Versus are located in the United States.
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 48 Director, President and Chief Executive
Officer
Samuel Davis 68 Chairman of the Board
Julian C. Schroeder 52 Director
David L. Gray 51 Director
James D. Ross, Esq. 51 Director
Henry J. Tenarvitz 47 Chief Operating Officer
Robert Butler 52 Controller and Chief Accounting Officer
Andrea Beadle 38 Corporate Secretary
Gary T. Gaisser has served as President and Chief Executive Officer of
Versus since January, 1995, and has served as a Director of Versus since
April, 1995. Prior to that, he was President of Olmsted Engineering Co.
("Olmsted"), now a wholly owned subsidiary of Versus. Mr. Gaisser had
been with Olmsted since 1988.
Samuel Davis has served as a Director of Versus 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 Versus 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 Versus 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.
James D Ross, Esq. has served as a Director of Versus since April, 1999.
He is currently in the private practice of law and is licensed in
Kentucky and Michigan. Prior to that and since 1998 he was the Managing
Director for Financial Investment Management Group, Capital Management
(Traverse City, Michigan) a major shareholder of Versus. From 1995 to
1998 Mr. Ross was Executive Vice President of Aegon, USA. Mr. Ross also
serves as a member of the board of directors for a number of business
enterprises and non-profit organizations, including Net-Direct.
Henry J. Tenarvitz has served as Chief Operating Officer since November
1999 and 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
Versus 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.
Andrea Beadle has served as Corporate Secretary of Versus 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.
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 Versus 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 Versus during the fiscal years ended October 31,
1999, 1998, and 1997. There were no other executive officers of Versus
who received combined salary and bonuses for the year ended October 31,
1999, 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. 1999 $161,959 36,000 $3,644 (4)
Gaisser,
President,
CEO, and
Director
Gary T. 1998 $147,290 $9,690 (1) 36,000 $3,727 (4)
Gaisser
Gary T. 1997 $134,500 $ 200 (2) $3,901 (4)
Gaisser $7,350 (3)
(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,
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 Versus' contribution to Mr. Gaisser's 401(k) account
pursuant to Versus' 401(k) Profit Sharing Plan.
Options
An option to purchase 1,000,000 shares, which had been granted to Mr.
Gaisser in 1996, is exercisable at $.375 a share, the fair value of the
stock at grant date. The option expires on June 4, 2006. Mr. Gaisser
has exercised no part of the option. The 1,000,000 share option had no
value at October 31, 1999, based upon the difference between the option
exercise price and the fair market value of Versus' Common Stock at
October 31, 1999.
An option to purchase 36,000 shares, granted to Mr. Gaisser in 1998, is
exercisable at $.515 a share, which is the fair market value of the
Common Stock upon the date of grant. The option expires on April 24, 2003.
This option had no value at October 31, 1999, based upon the
difference between the option exercise price and the fair market value of
Versus' Common Stock at October 31, 1999.
An option to purchase 36,000 shares, granted to Mr. Gaisser in 1999, is
exercisable at $.165 a share, which is the fair market value of the
Common Stock upon the date of grant. The option vests and becomes
exercisable on April 23, 2000. The option expires on April 23, 2004. The
option had no value at October 31, 1999, based upon the difference
between the option exercise price and the fair market value of Versus'
Common Stock at October 31, 1999.
No options were exercised by any executive officer in fiscal 1999.
Employment Agreement
As of July 1, 1996, Versus 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
Versus.
The Employment Agreement may be terminated by Versus 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 Versus 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 Versus, 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 during the term of the
Employment Agreement and for two years thereafter, Mr. Gaisser has agreed
not to compete with Versus. Upon any termination, Mr. Gaisser has agreed
not to disclose Versus' confidential information or to solicit any
employee of Versus for a two-year period.
Compensation of Directors
Effective April 23, 1999, each outside Director was awarded an option to
purchase 73,000 shares of Versus' Common Stock for service on the Board
from April 23, 1999 through April 23, 2000. Inside Directors were
awarded an option to purchase 36,000 shares. The options vest and become
exercisable on April 23, 2000. The exercise price for all such options
is $0.165 per share, the fair market value of the Common Stock 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 19,
2000, to the knowledge of the Board of Directors of Versus, owned
beneficially more than 5% of the outstanding Common Stock of Versus (to
date, Versus has not issued any shares of Preferred Stock):
Name and Address of Amount and Nature of Percentage of Class
Beneficial Ownership Beneficial Ownership Outstanding
- -----------------------------------------------------------------------------
Gary T. Gaisser 6,786,123 (1) 17.1%
c/o Versus Technology, Inc.
2600 Miller Creek Road
Traverse City, MI 49684
David L. Gray 6,123,000 (2) 13.7%
c/o Versus Technology, Inc.
2600 Miller Creek Road
Traverse City, MI 49684
William Harris Investors 3,390,000 (3) 8.8%
2 North LaSalle Street,
Suite 400
Chicago, IL 60602
Financial & Investment 2,974,766 (4) 7.7%
Management Group, Ltd.
417 St. Joseph Street
PO Box 40
Suttons Bay, MI 49682
(1) This total includes 1,036,000 shares that are currently acquirable
by Mr. Gaisser upon exercise of outstanding options issued by
Versus.
(2) Of these shares, 6,000,000 are acquirable on conversion of
debentures held by a limited liability company of which Mr. Gray is
the Managing Director and 73,000 are currently acquirable by Mr.
Gray upon exercise of outstanding options issued by Versus.
(3) As reported on Schedule 13G filed February 16, 1999
(4) As reported on schedule 13G filed May 27, 1999.
Security Ownership of Management
The following table sets forth as of January 12, 2000, the beneficial ownership
of Versus' 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 6,786,123 (2) 17.1%
Executive Officer,
and Director
David L. Gray Director 6,123,000 (3) 13.7%
Samuel Davis Chairman of the 1,393,000 (4) 3.5%
Board
Julian C. Schroeder Director 600,582 (5) 1.5%
James D. Ross, Esq. Director 375,000 1.0%
All executive 15,886,530 (6) 33.7%
officers and
directors as a
group (8 persons)
(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, Gray and Ross are all of the
Company's present Directors.
(2) This total includes 1,036,000 shares that are currently acquirable
by Mr. Gaisser upon exercise of outstanding options issued by
Versus.
(3) This total includes 73,000 shares that are currently acquirable by
Mr. Gray upon exercise of outstanding options issued by Versus and
6,000,000 shares currently acquirable on conversion of outstanding
debentures held by a limited liability company of which Mr. Gray is
the Managing Director.
(4) This total includes 373,000 shares currently acquirable by Mr.
Davis upon the exercise of outstanding options issued by Versus and
400,000 shares currently acquirable on conversion of outstanding
debentures held by Mr. Davis.
(5) This total includes 192,582 shares currently acquirable under the
terms of warrants issued by Versus and 73,000 shares that are
currently acquirable by Mr.Schroeder upon exercise of outstanding
options issued by Versus.
(6) This total includes 8,519,172 shares acquirable currently or within
sixty days under outstanding warrants, options and convertible
debentures.
ITEM 12 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December, 1996, Versus 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 President,
Chief Executive Officer and a Director, of Versus. 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.
Between May 31, 1999 and August 18, 1999 Versus issued $3,000,000 in
Prime Rate Secured Convertible Debentures, due April 30, 2004. Of the
total debentures issued, $1,500,000 were purchased by a limited liability
company, of which Mr. David L. Gray, a director of Versus is the managing
member. An additional $100,000 were purchased by Mr. Samuel Davis the
Company's Chairman of the Board.
The Board of Directors retained Duff and Phelps, LLC as an independent
financial advisor to provide an opinion on the debenture transaction.
Duff and Phelps concluded that "...it is our opinion that as of May 5,
1999, the price and terms of the Debentures were fair and reasonable to
Versus' shareholders from a financial point of view".
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 Item 7, of this report.
(2) Exhibits included in the Exhibit Index on Page XX.
(b) There were no reports on Form 8-K during the fourth fiscal quarter.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant 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: January 19, 2000
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities
and on the dates indicated:
/s/ GARY T. GAISSER January 19, 2000
- -----------------------
Gary T. Gaisser
Director
/s/ SAMUEL DAVIS January 19, 2000
- -----------------------
Samuel Davis
Director
/s/ JULIAN C. SCHROEDER January 19, 2000
- -----------------------
Julian C. Schroeder
Director
/s/ DAVID L. GRAY January 19, 2000
- -----------------------
David L. Gray
Director
/s/ JAMES D. ROSS, ESQ. January 19, 2000
- -----------------------
James D. Ross
Director
EXHIBIT INDEX
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 (Incorporated by reference to Exhibit 3 (a) (v) of
the Company's Form 10-KSB for the year ended October 31, 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) Form of Versus Technology, Inc. Prime Rate Secured Convertible
Debenture (Incorporated by reference to Exhibit 4(k) of the Company's
Form 10-QSB for the Quarter Ended April 30, 1999)
10(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)
10(b) 1996 Employee Incentive Stock Option Plan (Incorporated by reference
to the Company's 1996 Proxy Statement)
10(c) Employee Incentive Stock Option Plan (Incorporated by reference to
the Company's 1999 Proxy Statement)
10(d) 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(e) 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(f) 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(g) 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)
10(h) 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)
10(i) 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)
10(j) Stock Option Agreement with Samuel Davis - for Chairman of the Board
Services (Incorporated by reference to Exhibit 4(j) of the Company's
Form 10-KSB for the year ended October 31, 1998)
10(k) Form of Stock Option Agreement with Gary T. Gaisser, Julian C.
Schroeder, David L. Gray and Samuel Davis - for Director Services for
the one year period commencing April 24, 1998
10(l) Form of Stock Option Agreement with Gary T. Gaisser, Julian C.
Schroeder, David L. Gray, Samuel Davis and James D. Ross - for
Director Services for the one year period commencing April 23, 1999
10(m) Registration Rights Agreement (Incorporated by reference to Exhibit
4(l) of the Company's Form 10-QSB for the Quarter Ended April 30,
1999)
10(n) Form of 1999 Executive Officer Profit Sharing and Incentive
Compensation Plan for Gary T. Gaisser, Henry J. Tenarvitz, Robert
Butler and Andrea Beadle
21 Subsidiary of the Registrant
27 Financial Data Schedule
27(a) Restated Financial Data Schedule for the Year Ended October 31, 1998
28 Press Releases
Exhibit 10(k)
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______________ 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 _____ 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 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 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 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
-----------------------------
Director
Exhibit 10(m)
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS NON-QUALIFIED STOCK OPTION AGREEMENT, dated effective as of April 23, 1999
between VERSUS TECHNOLOGY, INC., a Delaware Corporation (the "Corporation"),
and ________ 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 23, 1999.
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 ____ 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 $ .165 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 23, 2000 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 23, 2000, 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 23, 2000, 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 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 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
--------------------------------
Director
Exhibit 10(n)
VERSUS TECHNOLOGY, INC.
1999 EXECUTIVE OFFICER PROFIT SHARING AND
INCENTIVE COMPENSATION PLAN FOR _____________
The following Versus Technology, Inc. ("Company") executive officer profit
sharing and incentive compensation plan for ___________ ("Employee") has been
established by the Company's Board of Directors. The plan set forth below shall
be in addition to any other salary, fringe benefit plan, stock option plan,
restricted stock plan or other form of compensation made available by the
Company to Employee; provided, however, the compensation planned under this
document is intended to supersede and cancel any executory rights or
expectations of the Company and the Employee as stated in any prior written
understandings between them to the extent that any such prior understandings
dealt with plans for the granting of stock options or profit sharing to the
Employee. This profit sharing and incentive compensation plan does not create
any contract of employment, and does not alter Employee's status as an "at
will" employee. The Board of Directors retains the right to alter, amend, or
rescind and cancel altogether all or any part of this 1999 Executive Officer
Profit Sharing and Incentive Compensation Plan at any time in its sole and
unfettered discretion.
Subject to the foregoing, this 1999 Executive Officer Profit Sharing and
Incentive Compensation Plan For _____________ ("this Plan") is established as
follows:
1. Duration of Plan. This Plan will commence November 1, 1999 and shall end
October 31, 2002.
2. EBITDA. The term "EBITDA" shall mean, for each fiscal year, the Company's
earnings before interest expense, taxes, depreciation and amortization and
other non-cash items, as determined by the Company's independent certified
public accountants. Quarterly reports of EBITDA, subject to year-end
adjustments, shall be as determined by the Company's Controller and President.
3. Eligible Employees. As of the date of adoption of this Plan the term
"Eligible Employees" shall mean the President, the Executive Vice President -
Operations, the Executive Vice President - Sales and Marketing, the Controller
and Chief Accounting Officer, and the Corporate Secretary. Additional Eligible
Employees may be added, in the discretion of the Company's President, as
ratified by the Board of Directors. In such event, the percentage sub-
allocations referenced in paragraph 5, and such other matters as may be
appropriate, will be adjusted as the President, in his sole and unfettered
discretion, may determine. To receive any award pursuant to this Plan, the
Eligible Employee must be a current full-time employee of the Company at the
time of the making of the award and at the time set for delivery of the award
(in the form of a cash payment or in the form of a fully executed and delivered
Stock Option Agreement, as the case may be) unless employment ceased due to the
death or long term disability of the employee, or unless there has occurred a
"Change in Control," as defined in the form of Stock Option Agreement to be
used in connection with the granting of stock options under the 1999 Employee
Incentive Stock Option Plan, a copy of which is attached hereto and
incorporated herein by reference. Awards made, but which become not
deliverable due to cessation of employment, shall be deemed to have lapsed.
No awards may be earned by or made to an Eligible Employee with respect to any
fiscal quarter of the Company in which the Eligible Employee was not a full-
time employee of the Company for all of such fiscal quarter.
4. Gross Allocation to Profit Sharing Plan. For each fiscal quarter in which
the Company has achieved sales for the quarter of more than $1,300,000 and less
than $3,250,000, a dollar amount of 12% of the EBITDA for such quarter shall be
allocated to making profit sharing awards under this Plan; and if the Company
has achieved sales for the quarter of $3,250,000 or more and less than
$5,000,000, a dollar amount of 15% of the EBITDA for such quarter shall be
allocated to making profit sharing awards under this Plan; and if the Company
has achieved sales for the quarter of $5,000,000 or more, a dollar amount of
18% of the EBITDA for such quarter shall be allocated to making profit sharing
awards under this Plan. (The above allocations, as applicable, are hereinafter
referred to as "the Gross Allocation"). 62.5% of the Gross Allocation will be
allocated to Eligible Employees in the form of stock options (the "Gross Stock
Option Allocation"), with the specific amounts of stock options going to each
Eligible Employee being determined pursuant to paragraphs 5 and 6 below.
37.5% of the Gross Allocation will be awarded to Eligible Employees in cash
(the "Gross Cash Allocation"), with the specific amounts of cash going to each
Eligible Employee being determined pursuant to paragraphs 5 and 6 below. There
shall be no Gross Allocation made with respect to any fiscal quarter commenced
after October 31, 2000 if the sales for the immediately preceding quarter were
less than the incentive target sales applicable to such immediately preceding
quarter, as set forth in the following table.
Quarter Ended Target Sales
------------- ------------
10-31-00 $1,778,700
01-31-01 $2,042,300
04-30-01 $2,186,500
07-31-01 $2,317,100
10-31-01 $2,668,000
01-31-02 $2,887,700
04-30-02 $3,091,600
07-31-02 $3,276,200
10-31-02 $3,772,400
5. Awards to Eligible Employees.
a. Payments from Gross Cash Allocation. Out of the Gross Cash Allocation
_____% thereof will be awarded to Employee. Delivery of a cash award will be
made one year after the end of the fiscal quarter for which it is earned,
subject to the other terms and conditions of this Plan.
b. Awards from Gross Stock Option Allocation - Out of the Gross Stock Option
allocation ____% thereof will be awarded to Employee. To the extent feasible,
all stock options awarded under this Plan will be Incentive Stock Options, to
be issued pursuant to the Versus Technology, Inc. 1999 Employee Incentive Stock
Option Plan, as approved by the Company's shareholders on April 23, 1999. In
the event an option is granted outside such 1999 Employee Incentive Stock
Option Plan, the terms thereof, together with the terms of the form of Stock
Option Agreement applicable thereto, will be used as a guideline, wherever
practicable, in determining option exercise prices, administrative provisions,
time and manner of exercise, holding periods, and the like.
6. Determination of Number of Options to be Awarded. The number of stock
options to be awarded to Employee under this Plan shall be the quotient of the
following computation: the dollar amount determined in accordance with
paragraph 5.b. of this Plan will be the dividend; and the divisor shall be the
higher of (a) the fair market value of a share of the Company's common stock on
the last day of the applicable fiscal quarter, as determined by the terms of
the 1999 Employee Incentive Stock Option Plan, or (b) $.25.
Approved: Date:
---------------------------- ---------------
Gary T. Gaisser, President
Date:
---------------------------- ---------------
Employee
Exhibit 21
VERSUS TECHNOLOGY, INC.
SUBSIDIARY OF THE REGISTRANT
JURISDICTION OF
NAME OF SUBSIDIARY INCORPORATION PERCENTAGE OF OWNERSHIP
- ---------------------- ------------------ ------------------------
Olmsted Engineering Co. Michigan 100%
Exhibit 28(a)
Press Release
VERSUS TECHNOLOGY REPORTS RECORD SALES AT ANNUAL SHAREHOLDER'S MEETING
Shareholders Elect Board Members, Approve Reverse Stock Split and Approve
Employee Stock Option Plan
Traverse City, Michigan, April 28, 1999 - - Versus Technology (OTC BB: VSTI),
at its Annual Meeting of Shareholders, reported record revenues for Fiscal 1998
and for the first quarter of Fiscal 1999. Revenue growth of 108% over the
previous year propelled Versus to a total of $3.2 million in revenue for fiscal
1998. First quarter 1999 revenue was $924,000, a 55% increase over first
quarter 1998. "Our record 1998 performance followed by a record first quarter,
underscores our focus on our overall company strategies of continued growth,
commitment to research and development, and enhancement of our product
applications," said Gary Gaisser, President and Chief Executive Officer.
Increased revenue combined with lower manufacturing costs drove a decrease in
total costs of revenues from 78% in fiscal 1997 to 46% in fiscal 1998. Versus
is a Traverse City, Michigan based developer and manufacturer of infrared (IR)
location, data collection and communication products for healthcare and other
industries.
Shareholders elected Samuel Davis, Julian Schroeder, David Gray and Gary
Gaisser to the Board of Directors. Davis is former President and CEO of Mt.
Sinai Hospital in New York City and is currently President of Sam Davis and
Associates. Schroeder is a Director, International Fixed Income Research, with
Schroder & Co., Inc, a registered broker-dealer. Gray is President of Tortola
Enterprises, Inc., a consulting firm that provides business management services
to a diverse group of domestic and international operating businesses.
As part of the Company's commitment to strengthening the leadership of its
Board of Directors, James D. Ross, J.D. was appointed to the Board. "We are
pleased to have Mr. Ross on the Board. His expertise in business
development, risk management, corporate strategy and his extensive board level
experience will prove to be quite an asset," stated Gaisser. Ross is currently
the Managing Director for FIMG, Capital Management, (Traverse City, Michigan)
a major shareholder of Versus. Previously, Ross was the Executive Vice
President of Aegon, USA, one of the top ten insurers worldwide with over $100
billion in assets.
Versus also announced the approval of a ten-for-one reverse stock split to be
implemented at a time to be chosen at the discretion of management. Although
there can be no assurance that a listing will occur, increasing the price of
the Common Stock is one requirement for the Company to have the Common Stock
listed on the NASDAQ Small Cap Market, which the Company believes would offer
advantages to Shareholders. "Versus' management now has the option to affect
this reverse split when it believes the split will support the strategic goals
of the Company," said Davis, Chairman of the Board of the Directors.
Shareholders also approved the 1999 Employee Incentive Stock Option Plan
authorizing the use of stock options to provide incentives to eligible
employees of the Company. "We are pleased to be able to offer this incentive
to our employees so they continue to promote the best interest of the Company
and enhance its long-term performance," stated Gaisser. "It's a powerful tool
to use to encourage valuable employees to join or remain with the Company."
During the information session, Versus indicated planned revenue growth will be
generated by the new, patented infrared (IR) and radio frequency (RF) locating
products that were showcased at the annual meeting. The IR/RF Com badge and
the innovative DataBand(tm), a disposable patient ID band, combine both
infrared and radio frequency technologies for patient and staff location to
provide a mobile communication link between patients and caregivers.
"Research and Development has been a primary focus for Versus," stated Henry
Tenarvitz, Executive Vice President of Operations. "It has enabled the
development of our new products that will enhance staff and equipment
utilization and aid in improving patient care."
Versus plans to continue with its strategic initiatives to integrate with other
healthcare information and technology providers and to expand into new
applications. "We plan to use our patented technologies, additional
applications, and an increased number of resellers to sustain our quarter-to-
quarter growth," stated Rick Salzer, Executive Vice President of Sales and
Marketing. "With all of the financial and labor pressures the healthcare
industry must deal with, we believe this market is in need of the types of
improvements the application of our technologies can provide."
Versus Technology, Inc. (http://www.versustech.com) is a leading provider of
infrared applications and systems. It has pioneered infrared technology for
real-time, on-line locating of people and equipment. Versus Technology's
patented locating systems monitor the precise location of people and equipment
using infrared light 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 press release may contain forward-looking statements relating to future
events, such as the development of new products, the commencement of production
or the future financial performance of the Company. These statements fall
within the meaning of forward-looking information as defined in the Private
Securities Litigation Reform Act of 1995. These statements are subject to a
number of important risks and uncertainties that could cause actual results to
differ materially including, but not limited to, economic, competitive,
governmental and technological factors affecting the Company's markets and
market growth rates, products and their rate of commercialization, services,
prices and adequacy of financing and other factors described in the Company's
most recent annual report on Form 10-KSB filed with the Securities and Exchange
Commission, which can be reviewed at http://www.sec.gov. The Company
undertakes no obligation to update, amend or clarify forward-looking
statements, whether as a result of new information, future events or otherwise.
Exhibit 28 (b)
Press Release
VERSUS TECHNOLOGY ISSUES $1.5 MILLION IN CONVERTIBLE DEBENTURES
Funding to be used for new product launch
Traverse City, Michigan, June 8, 1999 -- Versus Technology (OTC BB: VSTI),
reported today it has completed a private placement of $1.5 million in
convertible debentures to a number of investors. "The completion of this
transaction provides us with the necessary funds to complete development of our
DataBand(tm) (see release dated November 16, 1998) and accelerate its launch,"
said Gary Gaisser, President and Chief Executive Officer.
The innovative DataBand(tm), which is currently in the prototype phase, is a
disposable patient ID band, combining both infrared and radio frequency
technologies for patient location to provide a mobile communication and
information link between patients and caregivers. "Development of the
DataBand(tm) has been a primary focus for Versus," stated Henry Tenarvitz,
Executive Vice President of Operations. "The next step is to engineer post
prototype modifications and software enhancements that will allow us to bring
the DataBand(tm) to commercial realization." Combined with the
interoperability of the Versus Information System's open platform, the
DataBand(tm) is designed to automatically and accurately provide location data
to drive existing facility-wide billing and scheduling systems.
In addition to using the added funds for product development, Versus also
expects to expand its marketing programs to ensure awareness of all its
products and, in particular, the new DataBand(tm). "Versus is ready to
capitalize on its leadership position in locating technology," stated Rick
Salzer, Executive Vice President of Sales and Marketing. "Our unique set of
capabilities puts us in a position to provide our customers with tools to
access and use information that goes well beyond determining the location of an
individual or a piece of equipment. We can use location information to create
applications that help in asset management, security, improved patient care,
and much more."
Versus Technology, Inc. (http://www.versustech.com) is a leading provider of
infrared applications and systems. It has pioneered infrared technology and
the associated software for real-time, on-line locating of people and
equipment.
Versus Technology's patented locating systems monitor the precise location of
people and equipment using infrared light 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. Versus 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 press release may contain forward-looking statements relating to future
events, such as the development of new products, the commencement of production
or the future financial performance of the Company. These statements fall
within the meaning of forward-looking information as defined in the Private
Securities Litigation Reform Act of 1995. These statements are subject to a
number of important risks and uncertainties that could cause actual results to
differ materially including, but not limited to, economic, competitive,
governmental and technological factors affecting the Company's markets and
market growth rates, products and their rate of commercialization, services,
prices and adequacy of financing and other factors described in the Company's
most recent annual report on Form 10-KSB filed with the Securities and Exchange
Commission, which can be reviewed at http://www.sec.gov. The Company
undertakes no obligation to update, amend or clarify forward-looking
statements, whether as a result of new information, future events or otherwise.
Exhibit 28 (c)
Press Release
VERSUS TECHNOLOGY, INC. COMPLETES $3.0 MILLION CONVERTIBLE DEBENTURE OFFERING
Versus now pursuing expansion of sales and marketing programs and selected
licensing arrangements with proceeds from the second half of convertible
debenture private placement.
TRAVERSE CITY, Michigan, August 19, 1999 - Versus Technology (OTC BB:VSTI),
reported today it has completed a private placement of a second $1.5 million in
convertible, secured, prime rate debentures, due April 30, 2004, completing the
$3.0 million offering started last quarter (see release dated 06-08-99). The
debentures are convertible at the rate of four shares of Versus common stock
for each $1 invested. "The additional funding will be used to expand our sales
and marketing team. The funds will also be used to finance programs to pave
the way for future licensing arrangements with potential Versus customers" said
Rick Salzer, Executive Vice President, Sales and Marketing. "Recently, we have
received a number of inquiries from potential customers and competitors
regarding possible licensing arrangements to gain the advantages offered by our
wide array of patents," reported Gary Gaisser, President and CEO. Versus owns,
has exclusive licenses to, or has applied for patent rights covering over a
dozen activities related to infrared tracking and location systems.
Versus earmarked the first $1.5 million in debentures to accelerate completion
of development and the launch of its new DataBand(tm) wrist badge. "Reaction
from customers to prototypes of the DataBand(tm) has been very encouraging"
said Gaisser. "Having made the investment in new product development with our
first round of financing, this second round will allow us to better service our
existing customers and expand our client base at a much faster rate", said
Salzer. "With the DataBand(tm), our improved infrared/radio frequency (IR/RF)
tag and our equipment identification tags, we can help our customers better
manage their patients, staff, and assets."
Versus Technology, Inc. (http://www.versustech.com/) is a leading provider of
infrared systems and solutions. It has pioneered infrared technology and
associated software for real-time, on-line locating of people and equipment.
Versus' patented locating systems monitor the precise location of people and
equipment using infrared light and networks of sensors installed throughout a
facility. Small and lightweight badges worn by patients, customers, staff or
attached to equipment transmit unique codes to the sensors. Versus' badges
incorporate radio frequency signals with infrared signals (a patented feature)
allowing the system to constantly monitor a badge location. Versus systems are
currently used to locate patients/customers, staff or equipment in hospitals,
corporate offices, government facilities and other complexes.
Safe Harbor Provision
This document may contain forward-looking statements relating to future events,
such as the development of new products, the commencement of production or the
future financial performance of the Company. These statements fall within the
meaning of forward-looking information as defined in the Private Securities
Litigation Reform Act of 1995. These statements are subject to a number of
important risks and uncertainties that could cause actual results to differ
materially including, but not limited to, economic, competitive, governmental
and technological factors affecting the Company's markets and market growth
rates, products and their rate of commercialization, services, prices and
adequacy of financing and other factors described in the Company's most recent
annual report on Form 10-KSB filed with the Securities and Exchange Commission,
which can be reviewed at (http://www.sec.gov). The Company undertakes no
obligation to update, amend or clarify forward-looking statements, whether as a
result of new information, future events or otherwise.
Exhibit 28 (d)
Press Release
VERSUS TECHNOLOGY'S INFRARED OPERATING SYSTEM
INTEGRATED INTO SAINT THOMAS HOSPITAL, NASHVILLE, TENNESSEE
Traverse City, Michigan, September 2, 1999, -- Saint Thomas Hospital,
Nashville, Tennessee and Versus Technology (OTC BB: VSTI), Traverse City,
Michigan, announced today that both would be involved in the development of an
infrared operating system designed to locate and analyze the utilization of
medical equipment within the hospital.
"We are using the Versus system to track the movement of about one thousand
pieces of equipment within our facility," said Michael Landis, Manager of
Biomedical Engineering. "With the information this system provides, we will be
able to focus our search efforts and track down mobile medical equipment that
has historically been very difficult to locate when it is overdue for planned
maintenance."
The Versus system will include infrared sensors placed throughout the hospital
and small badges placed on equipment as well as the software required to
monitor the system. "Saint Thomas has chosen the Versus system to help them be
more effective with their preventative maintenance programs. We also believe
that we will be able to better measure the utilization of critical pieces of
medical equipment and construct a process for better asset management," said
Rick Salzer, Executive Vice President at Versus.
The Versus system has been installed on all seven floors within Saint Thomas
including patient floors and the hospital's operating suites. Several
locations throughout the hospital will have computer monitors that will
continuously update the location of medical equipment making finding equipment
faster and easier. In addition, through the Versus PhoneVision(tm) capability,
Saint Thomas staff members will be able to use any telephone within the
hospital to access a voice activated system that will also give location
information about a specified piece of equipment.
"Because patients move throughout the facility, healthcare providers, materials
managers, and especially biomedical engineering personnel spend a lot of time
looking for equipment. Our system can help them reduce the amount of time and
the cost associated with those searches and, over time, show that better
utilization of existing equipment could result in fewer pieces of equipment
being required leading to less capital equipment spending," said Salzer.
Saint Thomas Health Services, a member of the Daughters of Charity National
Health System, is anchored by Saint Thomas Hospital, a not-for-profit hospital
established in Nashville in 1898. Saint Thomas Health Services offers a wide
range of primary care and specialty care services, including one of the
nation's top three programs in cardiovascular care.
Versus Technology, Inc. is an innovator in infrared locating technology, which
offers real-time locating, data collection and two-way communication
capabilities. The systems, which are currently installed in hospitals,
corporate facilities, government facilities and other complexes, permit the
automatic, accurate registry of essential management and business processes by
monitoring the precise location of personnel or equipment for health and safety
purposes, controlling access to secure areas, and automatically recording
events associated with these activities.
Exhibit 28(e)
Press Release
Eagle Eye(tm) Asset Management
Versus provides an intelligent controller for matching assets with personnel
Traverse City, MI - September 16, 1999 - Versus Technology, Inc. (OTC BB: VSTI)
announced today the introduction of a flexible, open architecture asset
management, asset tracking and asset accountability system, Eagle Eye(tm).
Eagle Eye's(tm) ability to make intelligent decisions regarding personnel
and/or assets as they enter or leave an area fills the need the Radio Frequency
Identification (RFID) industry has been seeking for years.
Eagle Eye(tm) breaks new ground in the RFID industry from an administrative and
security perspective by integrating disparate security systems into a more
robust and intelligent RFID security platform, thus maximizing the customer's
investment in tracking technology. Eagle Eye(tm) also monitors the flow of
personnel and assets on a real-time basis or over any previous time period.
These features provide administrative and security personnel with an historical
perspective of portable asset usage, traffic patterns, and building usage.
While current RFID technologies provide knowledge of the location of equipment,
such as laptop computers, books, files, pallets, vehicles, etc., Eagle Eye(tm)
Asset Management lets the customer manage those assets by assigning rules for
removal and use by appropriate employees via their RFID access control cards.
The RFID market size is estimated at nearly $1 billion this year.
Built upon the highly successful Versus Nightingale(tm) system used to track
hospital equipment, medical personnel and patients, Eagle Eye(tm) provides the
powerful database necessary to track and manage thousands of items used by
hundreds of individuals. Eagle Eye(tm) assigns devices such as an embedded
RFID tag in a laptop computer to one individual. It can also assign a single
device with an RFID tag to multiple individuals as well as assigning rules such
as time-of-use. In a very robust form, Eagle Eye(tm) can assign many RFID
tagged devices to many individuals using existing access control cards.
"A lot of focus has been upon development of a cost-effective, reliable RFID
tag," states Gary Gaisser, President of Versus Technology. "However, very
little has been done to provide the end user with a management solution for
using those tags. Eagle Eye(tm) Asset Management fills that need." "Theft
prevention is a
common topic of management, and Eagle Eye(tm) will meet the requirements of
customers who want to know who has any one of their 5,000 laptops," continued
Gaisser. "We have a request from one customer who needs to know if the newly
purchased laptops are being taken home by the proper employee, Eagle Eye(tm)
will tell them."
The first public showing of Eagle Eye(tm) will be by Checkpoint Systems Access
Control Products Group (ACPG), booth 49, at the Annual ASIS International
Seminar and Exhibits, Las Vegas, Nevada, September 27 - 29, 1999. Checkpoint
Systems, Inc. (NYSE:CKP) is a leading developer of paper thin RFID tags.
Versus Technology, Inc. (http://www.versustech.com) is an innovator in infrared
locating technology, which offers real-time locating, data collection and two-
way communication capabilities. The systems, which are currently installed in
hospitals, corporate facilities, government facilities and other complexes,
permit the automatic, accurate registry of essential management and business
processes by monitoring the precise location of personnel or equipment for
health and safety purposes, controlling access to secure areas, and
automatically recording events associated with these activities.
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.
Exhibit 28(f)
Press Release
VERSUS TECHNOLOGY REPORTS FOURTH QUARTER RESULTS
Revenues lower due to Y2K and Balanced Budget Act
Traverse City, Michigan December 17, 1999 -- Versus Technology, Inc. (OTC BB:
VSTI) announced revenues for the year ended October 31, 1999 approximated
revenues recorded for the fiscal year ended October 31, 1998. Fourth quarter
revenues for 1999 finished lower than the same period in 1998 due primarily to
a one time contract with a large customer in 1998 that has since expired.
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 $3,297,000 in fiscal 1999, an increase of 4
percent over revenues of $3,167,000 posted in the prior fiscal year. In fiscal
1999, the Company reduced its net loss to $1,414,000 compared with $1,435,000
in fiscal 1998. The loss per share was $0.04 in both years.
Versus attributed the low growth in revenues to individual healthcare customer
facility budget restraints due to Y2K concerns and added budgetary pressures
caused by funding cutbacks attributed to the Medicare spending cuts in the
Balanced Budget Amendment. The Company anticipated these revenue pressures
early in the year and took steps to diversify its revenue base thus avoiding
the revenue decreases experienced by other healthcare market suppliers.
"We made major changes in fiscal 1999," said Gary Gaisser, Versus Technology
president and chief executive officer, "We expanded our customer base, added
resellers, introduced new product offerings and enhanced the capabilities of
our locating technology. All of these initiatives enabled us to further
penetrate the healthcare market and reduce our reliance on major customers, as
was the case in prior years. In response to the lower business levels, we
realigned our sales and marketing efforts to place more emphasis on our
reseller distribution channel. Spending programs have been adjusted to focus
on the reseller channel rather than the more expensive direct sales channel
which we were pursuing in the last three quarters of fiscal 1999."
In the fourth quarter of fiscal 1999, Versus reported revenues of $632,000,
down from the $1,074,000 generated in the same period of fiscal 1998. Fourth
quarter 1998 revenues included $523,000 on a one time contract with a large
customer that has since expired. The Company recorded a net loss of $547,000,
or $0.01 per share, compared with a net loss of $155,000, or $0.01 per share,
in the fiscal 1998 period. Increased research & development and interest
expenses combined with the lower sales volume caused the increased loss in
fiscal 1999.
"In addition to diversifying our customer base in the healthcare market, we
also developed specialized applications in other industries," said Gaisser.
"In the third quarter we introduced a hand washing monitoring application which
will be marketed to the food service and healthcare industries. That was
followed by the fourth quarter introduction of our first security industry
offering called Eagle Eye(tm)". Eagle Eye(tm) is an asset monitoring system
that makes intelligent decisions regarding personnel and/or assets as they
enter or leave an area. It fills a need the Radio Frequency Identification
(RFID) industry has been facing for years. The first public showing of Eagle
Eye(tm) was by Checkpoint Systems' Access Control Products Group, at the Annual
ASIS International Seminar and Exhibits show in Las Vegas in September 1999.
Checkpoint Systems, Inc. (NYSE: CKP) is a leading developer of paper thin RFID
tags. The RFID industry is estimated at $1 billion annually, of which asset
management is a major growing segment.
For fiscal 1999, Versus Technology's percentage of cost of revenues to revenues
decreased to 40 percent, compared with 46 percent in the prior year. Versus
attributed the improvements to its ability to control costs and engineering
improvements in components and manufacturing processes. "We continually strive
to improve our processes and refine our product designs," said Henry Tenarvitz
who was recently appointed as the Company's chief operating officer. "In
addition to introducing three new badge designs we also developed new
applications for our IR/RF technology. A significant step in Versus' growth is
about to be accomplished as the efforts of the past two years will result in
ISO certification in early 2000. We also expect to introduce our first
products using our recently developed Application Specific Integrated Circuit
(ASIC) chip. The ASIC chip development alone is a major event in Versus'
history. It will improve both design and performance of all Versus badge
offerings."
Versus' total operating expenses declined as a percentage of sales in fiscal
1999, in spite of increased research and development expenses. The Company
experienced a 7 percent increase in selling and marketing expenses while
general and administrative expenses were lower than fiscal 1998. Total 1999
operating expenses excluding cost of revenues increased 5 percent over fiscal
1998 levels.
Versus Technology, Inc. (http://www.versustech.com) is an innovator in infrared
locating technology, which offers real-time locating, data collection and two-
way communication capabilities. The systems, which are currently installed in
a variety of facilities throughout North America, including Cedars-Sinai
Medical Center in Los Angeles, East Metro Endoscopy Center in Minneapolis, VA
Medical Center in Ann Arbor, and Los Alamos National Laboratories in New
Mexico, permit the automatic, accurate registry of essential management and
business processes by monitoring the precise location of personnel or equipment
and automatically recording events associated with their locations. Versus'
proprietary IR location systems are sold primarily through an expanding network
of resellers including Dukane Corporation, Rauland-Borg Corporation, Zettler
Systems, Inc. and West Com, which market the products within their existing
monitoring and nurse call registry systems. Versus is represented in Canada by
Sololabe Intelligent Systems, an independent sales agent.
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
because of new information, future events or otherwise.
VERSUS TECHNOLOGY, INC.
Consolidated Statements of Operations
Three Months Ended October 31, Year Ended October 31,
-------------------------------- -------------------------
1999 1998 1999 1998
------------- ------------- ------------- -------------
Revenues $ 632,000 $ 1,074,000 $ 3,297,000 $ 3,167,000
Operating expenses:
Cost of revenues 325,000 546,000 1,314,000 1,460,000
Research and
Development 225,000 102,000 614,000 403,000
Sales and marketing 452,000 438,000 1,443,000 1,349,000
General and
Administrative 146,000 151,000 1,312,000 1,443,000
------------- ------------- ------------- -------------
1,148,000 1,237,000 4,683,000 4,655,000
------------- ------------- ------------- -------------
Loss From Operations ( 516,000) ( 163,000) ( 1,386,000) ( 1,488,000)
Other Income (Expense)
Interest income 31,000 8,000 56,000 52,000
Interest expense ( 62,000) - ( 84,000) -
Other - - - 1,000
------------- ------------- ------------- -------------
( 31,000) 8,000 ( 28,000) 53,000
------------- ------------- ------------- -------------
Net Loss $( 547,000) $( 155,000) $( 1,414,000) $( 1,435,000)
============= ============= ============= =============
Basic and Diluted
Net Loss Per Share $( .01 ) $( .01 ) $( .04 ) $( .04 )
============= ============= ============= =============
See accompanying notes.
(Certain reclassifications have been made to 1998 balances to conform to
classifications used in 1999.)
Notes to three months comparison:
1. 1999 revenues were generated by a broader base of customers than the 1998
revenues. In 1998, one customer accounted for $523,000 of total revenues
compared to no revenues for that same customer in 1999. 1999 revenues are
actually 15% above 1998 levels after factoring the sales to that customer out
of the 1998 results.
2. Research and development costs in 1999 reflect additional expenditures for
development of an Application Specific Integrated Circuit (ASIC) chip and new
badges.
3. Increased sales and marketing salaries were partially offset by reduced
spending on advertising and trade shows.
4. General and administrative costs decreased due to lower Directors'
compensation, insurance and recruiting expenses.
Notes to year to date comparison:
1. 1999 revenues are up 4%. IR revenues were $2,718,000, up 16% over 1998
levels.
2. The cost of revenues as a percentage of revenues decreased from 46% to 40%.
Lower IR component costs generated the cost of revenue percentage improvement.
3. Increased sales and marketing expenses reflect additional sales staff
expenses.
4. General and administrative expenses decreased due to lower Directors'
compensation, professional fees and insurance expenses.
Please refer to the most recent filings with the Securities and Exchange
Commission for additional details.
Exhibit 99 (g)
Press Release
VERSUS TECHNOLOGY APPOINTS COO
Henry J. Tenarvitz, appointed as Chief Operating Officer
Traverse City, Michigan January 4, 2000 -- The Board of Directors of Versus
Technology, Inc. (OTC BB: VSTI) appointed Henry J. Tenarvitz as Chief Operating
Officer (COO). Tenarvitz's appointment coincides with his 14th anniversary
with the Company. Tenarvitz will be responsible for managing the day-to-day
operations of the sales and marketing groups for its Healthcare division as
well as overseeing the planning of the Company's development projects.
Versus Technology, Inc. is a Traverse City, Michigan-based developer and
manufacturer of infrared (IR) location, data collection and communication
products for healthcare and security applications. During Tenarvitz's tenure,
he has been responsible for the development of the successful Versus
Information System (VIS) product line sold through a network of worldwide
healthcare manufacturers. He has been involved in the strategic development
plans for the Company's intellectual property and has continually directed the
sales efforts of the Computer Aided Manufacturing (CAM) software product -
ACU*CARV(r).
"Henry has been instrumental to the growth of Versus and its subsidiary Olmsted
Engineering Co.," said Gary Gaisser, president and CEO of Versus Technology.
"His thorough knowledge of our product lines, manufacturing plans and
experience in developing sales and marketing distribution channels provides
Versus with the vision and skill to further grow Versus into a worldwide leader
in locating technologies."
Tenarvitz is originally from Menominee, Michigan. He attended Michigan State
University and Northwestern Michigan College studying Mechanical Engineering
and Software Engineering.
Versus Technology, Inc. (http://www.versustech.com) is an innovator in infrared
locating technology, which offers real-time locating, data collection and two-
way communication capabilities. The systems, which are currently installed in
a variety of facilities throughout North America, including Cedars-Sinai
Medical Center in Los Angeles, East Metro Endoscopy Center in Minneapolis, VA
Medical Center in Ann Arbor, and Los Alamos National Laboratories in New
Mexico, permit the automatic, accurate registry of essential management and
business processes by monitoring the precise location of personnel or equipment
and automatically recording events associated with their locations. Versus'
proprietary IR location systems are sold primarily through an expanding network
of resellers including Dukane Corporation, Rauland-Borg Corporation, Zettler
Systems, Inc. and West Com, which market the products within their existing
monitoring and nurse call registry systems. Versus is represented in Canada by
Sololabe Intelligent Systems, an independent sales agent.
Exhibit 99 (h)
Press Release
VERSUS TECHNOLOGY ENTERS SECURITY PRODUCTS MARKET
Appoints long time industry expert, John Hunepohl Director of Sales for Division
Traverse City, Michigan January 13, 2000 -- Versus Technology, Inc. (OTC BB:
VSTI) announced the organization of a Security Products Division to complement
its established healthcare products group. Appointed to the newly created
position of Director of Sales, Security Products Division is John Hunepohl, a
30-year veteran of the security industry. Prior to joining Versus, Hunepohl
was National Sales Manager for the Access Control Products Group of Checkpoint
Systems, Inc. (NYSE: CKP)
"John brings to Versus more than thirty years of sales, marketing, and
executive management experience in security manufacturing, distribution, and
consulting services," said Gary Gaisser, president and CEO of Versus
Technology. "John's thorough knowledge of the security industry and his
experience in developing sales and marketing distribution channels provides
Versus with the industry specific knowledge necessary to grow this division at
an aggressive pace."
Hunepohl's primary responsibilities will be to implement marketing plans
offering the Versus IR (infrared) locating product line to the security
industry and positioning Versus' recently launched Eagle Eye(tm) Asset Tracking
and Management system as the product of choice among security experts. As part
of its strategic plan, Versus will build on the successful concept showing of
Eagle Eye(tm) at the 1999 American Society of Industrial Security show with a
product release at the March 2000 International Security Conference ISC West in
Las Vegas.
Versus also plans to expand its reseller channel for the Versus Information
System and IR location, data collection and communications products to include
selected security industry OEM's and dealers. "This is an excellent
opportunity for the security industry," said Hunepohl. "Versus has impressive,
patented technology that can provide tremendous benefits for real time location
of people and assets. While others are still in development, Versus offers a
solution today."
Versus Technology, Inc. (http://www.versustech.com) is an innovator in infrared
locating systems, passive data collection systems, radio frequency supervisory
systems, asset locating systems and portal detection systems. Versus systems,
are currently installed in a variety of facilities throughout North America,
including Cedars-Sinai Medical Center in Los Angeles, East Metro Endoscopy
Center in Minneapolis, VA Medical Center in Ann Arbor, and Los Alamos National
Laboratories in New Mexico. The systems offer real-time asset and staff
locating, automatic data collection, ingress/egress control and two-way
communication capabilities while permitting the automatic, accurate registry of
essential management and business information by monitoring the precise
location of personnel or equipment and automatically recording events
associated with their locations. Versus' proprietary IR location systems are
sold primarily through an expanding network of resellers including Dukane
Corporation, Rauland-Borg Corporation, Zettler Systems, Inc. and West Com,
which market the products within their existing monitoring and nurse call
registry systems. Versus is represented in Canada by Sololabe Intelligent
Systems, an independent sales agent.
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
because of new information, future events or otherwise.
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