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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES
------------ EXCHANGE ACT OF 1934 (No fee required)
For the quarterly period ended December 31, 2000
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- -------- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _______________
Commission file number 0-15113
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VERITEC INC.
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(Exact name of registrant as specified in its charter)
NEVADA
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(State or other jurisdiction of incorporation or organization)
95-3954373
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(IRS Employer Identification Number)
1000 BOONE AVENUE NORTH SUITE 110, GOLDEN VALLEY MN 55427
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(Address of principal executive offices, zip code)
763-525-8470
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 15 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 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
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APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock as of the latest
practicable date. As of December 31, 2000 the company had:
Number of Shares of Common Stock
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6,655,939
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1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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Veritec Inc
Balance Sheets
(unaudited) (unaudited)
December 31, 2000 June 30, 2000
Assets
Current Assets
Cash $ 10,625 $ 3,964
Accounts Receivable 9,537 49,650
Inventory 15,249 44,559
Other 2,900 2,500
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Total Current Assets 38,311 100,673
Fixed Assets 161,610 180,533
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Total Assets $ 199,921 $ 281,206
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Liabilities and Equity
Liabilities
Current Liabilities
Accounts Payable & Accrued Expenses 516,562 447,446
Total Current Liabilities 516,562 447,446
Long Term Liabilities
Secured Note Payable $ - $ 108,366
MG Secured Note 397,374 252,322
Prepayment on Subscription Rec 21,936 18,047
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Total Long Term Liabilities $ 419,310 $ 378,735
Total Liabilities $935,872 $ 826,181
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Equity
Subscription Receivable $ (1,160,477) $ (1,212,049)
Common Stock 66,558 65,306
Additional Paid in Capital 11,547,773 11,431,439
Preferred Stock 366,007 366,007
Retained Earnings (11,172,404) (11,195,678)
Net Income (383,409) -
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Total Equity $ (735,951) $ (544,975)
Total Liabilities and Equity $ 199,921 $ 281,206
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2
Veritec Inc
Statement of Operations
(unaudited) (unaudited)
For the six months ended For the three months ended
31-Dec-00 31-Dec-99 31-Dec-00 31-Dec-99
Revenue $ 125,023 $ 232,652 $ 43,771 $ 186,800
Cost of Sales (51,921) (66,930) (32,612) (63,347)
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Gross Profit $ 73,102 $ 165,722 $ 11,159 $ 123,453
Commissions (4,247) (56,142) (1,760) (42,357)
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Gross Profit after Commissions $ 68,855 $ 109,580 $ 9,399 $ 81,096
Operating Expense
Engineering 79,606 91,788 77,913 48,991
Marketing 8,905 33,408 8,905 29,616
Administrative 335,971 108,508 142,966 57,533
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Total Operating Expense $ 424,482 $ 233,704 $ 229,784 $ 136,140
Net Operating Profit (loss) (355,626) (124,124) (220,385) (55,044)
Financing Expense (27,782) 49,724 (21,167) 20,344
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Net Profit (loss) $(383,409) $ (74,400) $(241,552) $ (34,700)
========= ========== ========= ==========
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Statement of Cash Flow For the six months ending:
(unaudited) (unaudited)
31-Dec-00 31-Dec-99
Cash flow from operating activities
Net Loss $ (383,409) $ (74,400)
Adjustments to reconcile net loss to net cash used by operating activities:
Depreciation & amortization $ 22,162 $ 9,216
(Increase) decrease in assets:
Accounts receivable $ 40,113 $ (62,133)
Inventory 28,580 (7,429)
Increase (decrease) in liabilities
Accounts payable & accrued expenses 51,575 (87,259)
Accrued interest (8,855) 19,969
Deferred compensation 50,000 (279,286)
Commissions payable - 21,868
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Total adjustments $ 183,575 $ (385,054)
Cash flow from investing activities
Purchase of tangible assets (3,238)
Purchase of intangible assets - (200,000)
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Net cash used for investing activities $ (3,238) $ (200,000)
Cash flow from financing activities
Issuance of common stock for debt $ - $ 717,422
Issuance of notes payable 36,686 105,000
Issuance of preferred stock from advances (240,198)
Prepayment on subscriptions receivable 3,889 67,798
Payments on subscriptions receivable 51,573 54,242
Issuance of common stock 117,586 -
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Net cash provided by financing activities $ 209,734 $ 704,264
Increase (decrease) in cash position $ 6,661 $ 44,810
Cash at beginning of period 3,964 3,664
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Cash at end of period $ 10,625 $ 48,474
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Basis of Presentation
The unaudited financial statements presented herein have been prepared
by the Company, without audit, pursuant to the rules and regulations for interim
financial information and the instructions to Form 10-QSB and Regulation S-B.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principals have been omitted. These unaudited consolidated financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Report on Form 10-KSB for the fiscal year ended June
30, 2000. In the opinion of management, the unaudited financial statements
reflect all adjustments (consisting of normal recurring accruals only), which
are necessary to present fairly the consolidated financial position, results of
operations, and changes in cash flow of the company. Operating results for
interim periods are not necessarily indicative of the results which may be
expected for the entire year.
Cash
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Cash balances are maintained in a single financial institution. The
balances from time to time exceed the federally insured limits of $100,000. The
company has experienced no losses in these accounts and believes that it is not
exposed to any significant risk of loss on its cash balances. The cost and fair
market value of any financial instruments held are approximately equal.
Revenues
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Revenues from products and engineering sales are recognized when the
products are shipped and services preformed. Royalties and license fees are
recognized upon completion of the terms of the agreement.
Foreign based revenue accounted for 100% of the revenues earned from
sales of product and royalties during this quarter. All sales were made and
received in United States dollars. There was no currency exchange risk.
Item 2. Management's Discussion and Analysis
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESUTS OF
OPERATIONS.
Notes payable to a group of secured creditors - "The Gant Group"
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On December 1, 2000 the Matthews Group LLC paid the note held by the
Gant Group in full. As a result of this payment the liens held by the Gant Group
have been assigned to the Matthews Group.
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Liquidity and Capital Resources
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Debt owed to the company at December 31, was as follows:
(unaudited) (unaudited) Increase
31-Dec-00 30-June-00 (decrease)
Secured Note Payable $108,366 $ (108,366)
Convertible secured note $397,374 252,322 145,052
Bank overdraft 35,362 (35,362)
Accounts payable & accrued expenses 538,498 430,131 $ 108,367
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Total Liabilities $935,872 $826,181 $ 109,691
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During the period ending December 31, 2000 the company added to its
current liabilities during the period accounting for 99% of the increase in
debt. The remaining increase in liabilities resulted from the restructuring of
the amounts owed to the Gant Group. The additional payables were incurred as
professional services in order to provide litigation and patent protection
services.
The working capital of the company is shown below. The company's
liquidity has declined during the quarter.
31-December-2000 30-June-2000
(unaudited) (unaudited)
Working capital (deficit) $(478,251) $(346,772)
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The company does not expect revenues from operations to be adequate to
meet all costs and expenses of the company for the remainder of the fiscal year.
The company must secure adequate and stable financing to allow it to meet the
selling opportunities that exist. The company is continuing to solicit present
customers, develop future customers, add sufficient staff, and raise additional
investment in order to increase its sales. However, there is no assurance that
any of these efforts will result in additional sales sufficient to generate
adequate revenues to meet the costs and expenses of company operations.
Financial and Operational Outlook
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The royalty from Mitsubishi for sales in Korea and other countries
continued to be received and is expected to bring a constant stream of revenue
into the company on a quarterly basis in the future.
Working models of our scanners have been received and paid for by a
company in North America and Korea. Future sales to these companies are
possible.
Results of Operations
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Comparison of the quarter ending December 31, 2000 with the quarter
ending December 31,1999.
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The Company had revenues of $43,771 in the quarter ended December 31,
2000 as compared with $186,800 during the quarter ending December 31, 1999. The
revenues for the quarter in 2000 were from sales of scanners and royalties. The
revenues from the 1999 quarter were also from scanner sales, engineering sales,
and royalties. The Company is in discussion with several potential customers for
fixed and portable scanner sales but cannot reasonably project future revenues
at this time. Foreign business companies have inquired about licensing the
Company's software for use outside of North America. There is no assurance at
this time that the company can generate sufficient revenue to break even in the
foreseeable future.
Operating expenses increased in the December 31, 2000 quarter as
compared to the 1999 quarter due to an increase in operating activity on the
part of management to complete the sales made in the present fiscal year and to
raise money for on going operations of the business.
Operating expenses for the quarter ending December 31,
Expense category 2000 1999 Inc./(dec)
General & Administrative $142,966 $ 57,533 $85,433
Sales & marketing 8,905 29,616 (20,711)
Engineering, R&D 77,913 48,991 28,922
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Total $229,784 $136,140 $ 93,644
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Engineering, R&D expenses continue to decrease as the Company moves out
of the engineering development phase of its products and into the marketing and
selling phase of its operations.
Sales and marketing expenses decreased due to time spent trying to
attract capital investment in the company.
General and administrative cost increased due to cost of finding
capital, as well as the addition of new employees and professional fees incurred
in for the continued litigation and protection of patents.
Capital Expenditures and Future Commitments
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Capital expenditures in the amount of $3,238 were made during the
period for office and technical equipment. There are no current commitments for
material capital expenditures during the next 6 months. The company believes its
need for additional capital equipment will continue if expected new orders are
placed for its products. The amount of such additional capital required is
uncertain and may be beyond that which is generated from operations.
Factors that may effect future results.
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The Matthews Group LLC continues to make payments of $18,518.52 per
month as required by the subscription agreement. The Matthews Group LLC has,
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from time to time, advanced amounts in addition to the required monthly payment
as needed to finance the continued operations of the company. The company's
marketing, sales, and production program will require additional financing until
the revenue from sales exceeds the cash provided from sales collections and the
payments of $18,518.52 per month. There is no formal commitment on the part of
the Matthews Group LLC or any other person to provide this additional cash.
PART II OTHER INFORMATION
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Item 1. Legal Proceedings.
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As explained more completely in Form 10-KSB filed for the period ending
June 30, 2000 by the company, a shareholder is suing the company and various
individuals alleging actions were taken without proper authority of the
corporation's board of directors and/or contrary to the plan of reorganization
the corporation filed and completed under Chapter 11 of the U.S. Bankruptcy Act.
During this quarter the California court granted the motion to transfer the suit
to the Federal District Court in Minnesota. No further action has been taken on
this suit at the time of this report.
Item 2. Changes in Securities.
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None.
Item 3. Defaults Upon Senior Securities.
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None.
Item 4. Submission of Matters to a Vote of Security Holders.
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No matters were submitted to a vote of security holders during the
period covered by this report.
Item 5. Other Information.
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None.
Item 6. Exhibits and Reports on Form 8-K.
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Form 8-K Filings
Date of Filing Items Reported Financial Statements Filed
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Other Events:
January 31, 2001 Change in Officers None
Refinancing of Secured Note
December 5, 2000 Other Events: None
Change In Officers
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SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Veritec Inc.
Date: February 6, 2000 /s/ Van Tran
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Van Tran - CEO
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