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UNITED STATES
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 September 30, 2001
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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)
1163 Kruse St., WEST ST. PAUL MN 55118
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(Address of principal executive offices, zip code)
651-552-9215
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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 September 30, 2001 the company had:
Number of Shares of Common Stock
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6,595,849
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1
PART I. FINANCIAL INFORMATION
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Item 1. Financial Statements
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VERITEC INC
BALANCE SHEETS
(unaudited)
30-Sep-01 30-Jun-01
Assets
Current Assets
Cash $ 5,141 $ 4,405
Receivables 17,364 3,758
Inventories - -
Prepaids 663 9,792
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Total Current Assets 23,168 17,955
Fixed Assets (net) 15,742 17,740
Intangible assets (net) 123,337 133,336
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Total Assets $ 162,247 $ 169,031
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LIABILITIES & SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Notes payable $ $ 25,000
Notes Payable (secured) - -
Convertible note (secured) 397,374 397,374
Bank overdraft - -
Accounts payable & accrued expenses 146,558 298,148
Disputed payables 217,702 217,702
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Total current liabilities 761,634 938,224
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Prepayment on stock & subscription receivable 214,122 219,678
Stockholders' equity (deficit)
Preferred stock, par value $1.00, authorized 366,007 366,007
10,000,000 shares, 275,000 shares of Series
H authorized
Common stock, par value $.01, authorized 66,958 66,958
20,000,000 shares
Subscription receivable (1,078,139) (1,106,271)
Additional paid in capital 11,640,902 11,613,478
Accumulated deficit (11,809,237) (11,929,043)
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Stockholders' equity (deficit) (813,509) (988,871)
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Total liabilities & stockholders' equity $ 162,247 $ 169,031
(deficit) ============ =============
See Notes To Financial Statements
2
VERITEC INC
STATEMENTS OF OPERATIONS
(unaudited)
For the quarter ending
30-Sep-01 30-Sep-00
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Revenues
Total Revenues $ 268,738 $ 79,854
Cost of Sales - 19,349
Gross Profit 268,738 60,505
Sales commissions - 2,488
Gross profit after commissions & 268,738 58,017
warranty
Expenses:
Administration $ 88,402 $ 192,891
Sales & Marketing 3,816 -
Engineering & R&D 46,265 1,692
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Total Expenses 138,483 194,583
Gain (loss) from operations 130,255 (136,566)
Other Income (expense)
Interest income (expense) net (10,449) (1,713)
Total other income (expense) (10,449) (1,713)
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Net Income (loss) $ 119,806 $ (138,279)
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Earning (loss) per share $.02 ($.02)
See Notes To Financial Statements
3
VERITEC INC
STATEMENTS OF CASH FLOWS
(unaudited)
For the quarter ending
30-Sep-01 30-Sep-00
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Cash flow from operating activities
Net income (loss) $119,806 $ (138,279)
Adjustments to reconcile net income (loss) to net cash from operating
activities
Depreciation and amortization 11,997 9,956
(Increase) decrease in assets
Receivables (13,606) (34,704)
Inventories - (11,403)
Prepaids 9,129
(8,000)
Increase (decrease) in liabilities (25,000) -
Accounts payable & accrued expenses (151,590) 149,718
Changes in secured liabilities - 3,212
Bank overdraft - (30,168)
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Net cash used by operating activities (49,264) (59,668)
Cash flow from financing activities
Prepayment on subscription receivable (5,556) 4,444
Subscription receivable and related 55,556 55,525
imputed interest
Net cash provided by financing activities 50,000 59,969
Net cash increase for period 736 301
Cash at beginning of the period 4,405 3,964
rounding - (1)
Cash at the end of the period $ 5,141 $ 4,264
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See Notes To Financial Statements
Basis of Presentation
The unaudited financial statements presented herein have been prepared
by us, 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 our Report on Form 10-KSB for the fiscal year ended June 30, 2001.
In the opinion of our 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 our company. Operating results for interim periods
are not necessarily indicative of the results which may be expected for the
entire year.
4
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 50% of the revenues earned from
sales of product and royalties during this quarter. All sales of products for
the quarter were 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.
Convertible note (secured)
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On December 7th, 2000, The Mathews Group completed their "step-in-shoe"
acquisition of the Gant Group promissory note, which was secured by our patents.
The $397,374 note bears 10% interest, and is due on demand for either cash, or
is convertible into Veritec common stock at $0.10 per share. Conversion is
solely at the option of the Mathews Group.
Liquidity and Capital Resources
Debt owed by us at September 30, 2001 was as follows
(unaudited) (unaudited) increase
30-Sep-01 30-Jun-01 (decrease)
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Convertible note (secured) $ 397,374 $ 397,374 -
Accounts payable & accrued expenses 364,260 515,850 151,590
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Total liabilities $ 761,634 $ 913,224 $ 151,590
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Our working capital of the company is shown below.
30-Sep-01 30-Jun-01
(unaudited) (unaudited)
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Working capital (deficit) $ (520,764) $ (702,567)
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5
Financial and Operational Outlook
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Revenues for the quarter ended September 30, 2001, $268,738. These revenues were
for VeriCode(R) readers, software, and royalties from Mitsubishi.
We do not expect revenues from operations to be adequate to meet all of our
costs and expenses for the remainder of the fiscal year. We must secure adequate
and stable financing to allow us to meet the selling opportunities that exist.
We are continuing to solicit present customers, develop future customers, add
sufficient staff, and raise additional investment in order to increase our
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 operations.
In August 2001 we moved our engineering offices from Golden Valley MN to West
Saint Paul, MN. Our main telephone number is 651-552-9215.
Results of Operations
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Revenues for the quarter ended September 30, 2001, $268,738, were significantly
higher than revenues of $81,252 for the same quarter ending in 2000. This
represents a 231% increase. This increase reflected increased use of our
VeriCode(R) readers in the LCD manufacturing business. Purchases in this
industry fluctuate as new factories are opened, so there can be no assurance
that such sales levels can be maintained. Notably the cost of sales decreased
from 24% of revenue in the quarter ended September 30, 2000 to 0% for the most
recent quarter. This significant improvement reflects our goal to concentrate on
selling software rather than hardware.
Operating expenses decreased for the quarter ended September 30, 2001,
to $140,483. This represents a 23% decrease from the same quarter in 2000. This
decrease includes a significant decrease in general and administrative expenses,
which were high in 2000 due to expenses associated with transferring our
business from California to Minnesota. Engineering expenses were higher in the
current quarter, reflecting the fact that in the quarter ending September 30,
2000 we were in transition and not engaged in product development. We also pay
less rent in our new engineering offices than in the same quarter of 2000. We
have also converted to full-time engineering staff instead of employing
consultants. Engineering and development staff costs were recorded as general
and administrative expenses in 2000, and for 2001 are now classified as
engineering R&D.
For the Quarter Ending September 30,
Expense category 2001 2000 Increase/(decrease)
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General and Administrative $ 88,402 $ 192,891 $(104,489)
Sales and marketing 3,816 - 3,816
Engineering, R&D 48,265 1,692 46,573
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$ 140,483 $ 194,583 $ (54,100)
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6
Capital Expenditures and Future Commitments
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No capital expenditures were made during the period for office
equipment. There are no current commitments for material capital expenditures
during the next 9 months. 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 continues to make payments of $18,518.52 per month
as required by the subscription agreement. The Matthews Group has, from time to
time, advanced amounts in addition to the required monthly payment as needed to
finance our continued operations. We will require financing in excess of the
Matthews Group's commitment until revenue increases sufficiently to cover our
expenses. There is no formal commitment on the part of the Matthews Group or any
other person to provide additional cash.
PART II OTHER INFORMATION
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Item 1. Legal Proceedings.
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As explained more completely in our Form 10-KSB filed for the period
ending June 30, 2001, 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. Subsequent to the end
of the period represented by this Form 10-QSB an answer was filed and motions
submitted to dismiss this action. Results of these answers and motions are
pending at this time.
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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None.
7
SIGNATURES
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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.
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Date: Nov 13 2001 /s/ Van Tran
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Van Tran - CEO
Date: Nov 13 2001 /s/ Jerry Fors
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Jerry Fors - CFO
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