Versus Technology, Inc. ("Versus" or the "Company") announced revenues of $1,191,000 for the fiscal quarter ended July 31, 2006, compared to $1,606,000 for the same period in 2005. Revenues of $3,635,000 reported for the nine months ended July 31, 2006, were down 1% from $3,687,000 of revenues reported for the same period in 2005.
Versus reported a net loss of $1,468,000 for its third quarter compared to a net loss of $60,000 for the same period in 2005. The Company reported a net loss of $2,232,000 for the nine months ended July 31, 2006, compared to a net loss of $837,000 reported for the same period in 2005. The increase in the reported net losses for the periods was largely attributable to the third quarter write off of the remaining debt discount on the Company's Series B Convertible Debentures which resulted from the redemption of those debentures during the quarter, as discussed below. Losses reported for the three month and nine month periods ended July 31, 2006, would have been $94,000 and $593,000, respectively, without those non-cash charges.
On March 31, 2006, management gave notice that the Company was exercising its right to redeem all outstanding Series B Secured Convertible Debentures. The redemptions were completed June 23, 2006. As a result of agreements with certain Debenture holders and a capital commitment made by a member of the Company's Board of Directors, 100% of the Debentures were converted into common stock in keeping with the Debenture terms. Accordingly, the Company extinguished its long-term debt without drawing down its cash reserves.
For additional information, please refer to the attached unaudited consolidated financial statements.
Versus Technology, Inc. (Pink Sheets: VSTI.PK) (http://www.versustech.com ) (Versus) is the leader in the development and sale of context-aware systems used for the management of patient flow and medical assets and to improve caregiver/patient communications in medical and long-term care facilities. Versus also supplies Active RFID/IR tags and readers that make locating systems more precise, security systems more intelligent, data collection routines automatic, and asset management systems more efficient. 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 information. By monitoring the precise location of personnel or equipment and automatically recording events associated with their locations, the systems offer real-time asset and staff locating, automatic data collection, access/egress control, and a passive source of location data that facilitates scheduling and communication interfaces. Versus' proprietary locating systems are sold primarily through an expanding network of resellers and dealers.
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. The Company undertakes no obligation to update, amend, or clarify forward-looking statements, whether because of new information, future events, or otherwise.
Report of Management
The accompanying consolidated balance sheets of Versus Technology, Inc. and Subsidiary as of July 31, 2006, and October 31, 2005, and the related consolidated statements of operations and cash flows for the periods ended July 31, 2006 and 2005, have been prepared by management.
Management has elected to omit substantially all of the footnote disclosures required by accounting principles generally accepted in the United States. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the Company's financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters.
The reader should refer to the Versus Technology, Inc. 2005 Annual Report which is available at http://www.versustech.com/pages/annual_reports.aspx for further details regarding the Company's financial position at October 31, 2005.
Richard W. Ebersole
Chief Financial Officer
August 28, 2006
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
July 31, October 31,
2006 2005
Assets
Current Assets
Cash and cash equivalents $976,000 $1,682,000
Accounts receivable (net of allowance for
doubtful accounts of $35,000 and $0) 972,000 1,503,000
Inventories - purchased parts and
assemblies 709,000 282,000
Prepaid expenses and other assets 94,000 62,000
Total Current Assets 2,751,000 3,529,000
Property and Equipment
Machinery and equipment 329,000 298,000
Furniture and fixtures 81,000 76,000
Leasehold improvements 158,000 157,000
568,000 531,000
Less accumulated depreciation 503,000 484,000
Net Property and Equipment 65,000 47,000
Goodwill 1,533,000 1,533,000
Patents and Other Intangible Assets, net
of accumulated amortization of
$1,909,000 and $1,787,000 81,000 203,000
Deferred Financing Costs, net of
accumulated amortization of $127,000
and $124,000 7,000 10,000
Other non-current assets 114,000 109,000
$4,551,000 $5,431,000
See accompanying report of management.
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Balance Sheets
(Unaudited)
July 31, October 31,
2006 2005
Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable $436,000 $655,000
Accrued expenses 298,000 328,000
Deferred revenue - customer advance payments 37,000 123,000
Total Current Liabilities 771,000 1,106,000
Long-Term Debt
Series B Convertible Debentures -- 3,036,000
Total Liabilities 771,000 4,142,000
Commitments and Contingencies
Shareholders' Equity
Common stock $0.01 par value; 120,000,000
and 75,000,000 shares authorized; 84,173,325
and 45,734,325 shares issued and outstanding 842,000 457,000
Additional paid-in capital 41,555,000 37,218,000
Accumulated deficit (38,617,000) (36,386,000)
Total Shareholders' Equity 3,780,000 1,289,000
$4,551,000 $5,431,000
See accompanying report of management.
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
2006 2005 2006 2005
Revenues $1,191,000 $1,606,000 $3,635,000 $3,687,000
Operating Expenses
Cost of revenues 443,000 706,000 1,364,000 1,522,000
Research and
development 170,000 160,000 501,000 527,000
Sales and marketing 428,000 347,000 1,256,000 1,204,000
General and
administrative 260,000 277,000 936,000 780,000
1,301,000 1,490,000 4,057,000 4,033,000
Income (loss) From
Operations (110,000) 116,000 (422,000) (346,000)
Other Income (Expense)
Interest income 15,000 10,000 39,000 31,000
Interest expense -- (91,000) (216,000) (258,000)
Interest expense,
accretion of debt
discount (1,374,000) (98,000) (1,639,000) (260,000)
Net foreign currency
transaction gain
(loss) 1,000 3,000 6,000 (4,000)
(1,358,000) (176,000) (1,810,000) (491,000)
Net Loss $(1,468,000) $(60,000) $(2,232,000) $(837,000)
Basic and Diluted Net
Loss Per Share $(0.02) $(--) $(0.03) $(0.02)
See accompanying report of management.
VERSUS TECHNOLOGY, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
For the nine months ended
July 31,
2006 2005
Operating Activities
Net loss $(2,232,000) $(837,000)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
Depreciation 19,000 17,000
Amortization of intangibles 125,000 125,000
Interest expense, accretion of debt discount 1,639,000 260,000
Changes in operating assets and liabilities:
Accounts receivable, net 526,000 325,000
Inventories (427,000) (86,000)
Prepaid expenses and other current assets (32,000) 4,000
Accounts payable (219,000) 170,000
Accrued expenses (30,000) (52,000)
Deferred revenues - customer advance payments (86,000) (77,000)
Net cash used in operating activities (717,000) (151,000)
Investing Activities
Additions to property and equipment (37,000) (25,000)
Net cash used in investing activities (37,000) (25,000)
Financing Activities
Issuance of common stock 48,000 --
Repayment of long-term debt -- (75,000)
Net cash provided by (used in) financing
activities 48,000 (75,000)
Net Decrease in Cash and Cash Equivalents (706,000) (251,000)
Cash and Cash Equivalents, at the beginning
of the period 1,682,000 1,616,000
Cash and Cash Equivalents, at the end
of the period $976,000 $1,365,000
Non-Cash Financing Activities
Issuance of common stock $4,675,000 $--
Repayment of long-term debt (4,675,000) --
$-- $--
Supplemental Cash Flow Information
Cash paid during the period for interest $202,000 $239,000
See accompanying report of management.