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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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
For the quarterly period ended December 31, 1995
-------------------
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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
--------------------------------
(IRS Employer Identification Number)
16461 SHERMAN WAY, #125, VAN NUYS, CA. 91406
-----------------------------------------------
(Address of principal executive offices, zip code)
(818) 782-4500
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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 13 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 No X
--- ---
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 January 31, 1996 the Company had 2,085,600 shares of
common stock, 1,000 shares of Series Z preferred stock, 56,318 shares of Series
B preferred stock, 300,000 shares of Series D preferred stock and 17,103 shares
of Series E preferred stock issued and outstanding. The preferred stock series
in the aggregate have the equivalent of 2,281,510 common votes.
This document consists of 13 pages.
The Exhibit index is on page 13.
1
<PAGE>
PART 1. FINANCIAL INFORMATION
ITEM 1. Financial Statements
VERITEC INC.
BALANCE SHEET
(Unaudited)
December 31,
1995
----
ASSETS
Current Assets:
Cash 1,102
Inventories 23,147
-------
Total current assets 24,249
Intangible asset 22,500
Furniture and equipment, net 39,572
Note and interest receivable from officer 276,785
Deposits 1,270
-----
364,376
=======
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIENCY):
Current Liabilities:
Convertible subordinated notes payable 412,500
Notes payable 199,699
Notes payable (secured) 265,400
Accounts payable and accrued expenses 548,661
Accrued Interest 371,461
Deferred compensation 709,396
Deferred revenue 120,000
-------
Total current liabilities 2,627,117
Secured convertible notes payable 686,183
Junior subordinated convertible notes 1,726,442
---------
Total liabilities 5,039,742
---------
Shareholdrs' equity (deficiency)
Preferred stock 386,881
Common stock; $.01 par value, authorized 20,000,000 shares
2,085,600 shares issued and outstanding 183,164
Additional paid in capital 4,104,721
Accumulated deficit -9,350,132
----------
Net shareholders' equity (deficiency) -4,675,366
----------
364,376
=======
See Accompanying Notes to Financial Statements
2
<PAGE>
VERITEC INC.
STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<S> <C> <C> <C> <C>
For the three months ended For the six months ended
December 31, December 31,
1995 1994 1995 1994
---- ---- ---- ----
Revenues 84,505 5,250 124,242 8,000
Cost of Sales 56,638 - 88,428 -
------ ----- ------ -----
Gross profit 27,867 5,250 35,814 8,000
------ ----- ------ -----
Expenses:
General and administrative 16,711 115,147 44,883 236,955
Sales and Marketing 30,413 65,318 75,405 127,764
Engineering, research and
development 39,173 119,228 75,203 273,776
------ ------- ------ -------
86,297 299,693 195,491 638,495
------ ------- ------- -------
Gain (Loss) from operations -58,430 -294,443 -159,677 -630,495
Interest expense, net 53,894 49,794 108,699 96,863
------ ------ ------- ------
Net loss -112,324 -344,237 -268,376 -727,358
======== ======== ======== ========
Net loss per common share -0.05 -0.17 -0.13 -0.37
===== ===== ===== =====
Weighted average common shares 2,085,600 1,971,155 2,085,600 1,971,155
outstanding ========= ========= ========= =========
</TABLE>
See Accompanying Notes to the Financial Statements
3
<PAGE>
VERITEC INC.
STATEMENTS OF
CASH FLOWS
(Unaudited)
For the six months ended December 31,
1995 1994
---- ----
Cash flow from operating activities:
Net loss -268,376 -727,358
-------- --------
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization 22,050 25,193
Common stock issued for payment of services - 450
Preferred stock issued in payment of services - 300,000
Notes and interest receivable from Officer -6,436 -263,912
(Increase) decrease in assets:
Inventory 2,310 -
Prepaid expenses 2,850 12,456
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 30,819 -16,481
Deferred compensation 83,386 162,689
Deferred revenue - 9,393
Accrued interest 115,135 81,456
------- ------
Total adjustments 250,114 311,244
------- -------
Net cash used by operating activities -18,262 -416,114
------- --------
Cash flow from investing activities:
Purchase of equipment - -5,022
------- ------
Net cash used for investing activities - -5,022
------- ------
Cash flow from financing activities:
Issuance of convertible notes payable - -90,000
Issuance of notes payable 7,500 30,000
Issuance of preferred stock 1,045 73,421
Issuance of secured convertible notes payable 10,455 293,182
Issuance of subordinated convertible notes - 104,760
------ -------
Net cash provided by financing activities 19,000 411,363
------ -------
Increase (decrease) in cash position 738 -9,773
Cash at beginning of period 364 11,299
--- ------
Cash at end of period 1,102 1,526
===== =====
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest - -
Income taxes - -
See Accompanying Notes to the Financial Statements
4
<PAGE>
VERITEC INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1995
(unaudited)
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
- ---------------------------
Veritec Inc. (the "Company") was incorporated in Nevada on September 8,
1982. The Company is primarily engaged in development, marketing and sale of a
line of microprocessor-based encoding and decoding system products that utilize
its patented Vericode Symbol technology. The Company's VeriSystem(tm) enables a
manufacturer or distributor to use unique identifiers or coded symbols con-
taining binary encoded data with a product. The VeriSystem(tm) enables automatic
identification and collection of a greater amount of data than conventional bar
codes.
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 Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1997. In the opinion of management, the unaudited consolidated
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.
Per Share Computation
- ---------------------
Loss per share is based upon the weighted average number of shares of
common stock outstanding during the respective periods.
Reverse Split
- -------------
On May 9, 1994, the Board of Directors approved a one-for-ten "reverse
stock split" of its outstanding common stock. On January 23, 1995, the Company's
shareholders ratified this reverse stock split at its annual meeting. The shares
outstanding and per share data in the current period financial statements
reflect this reverse stock split.
5
<PAGE>
NOTE 2 - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 1995 is comprised of the following:
Equipment $ 271,559
Furniture and fixtures 60,773
-----------------
332,332
Less accumulated depreciation and amortization 292,760
-----------------
$ 39,572
=================
NOTE 3 - COMMITMENTS AND CONTINGENCIES
Contingencies
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BANKRUPTCY - On October 16, 1995, the Company received notice that three
creditors had petitioned the court to place the Company in Chapter 7 bankruptcy.
The Company is attempting to satisfy the demands of these creditors and have
them withdraw their petition.. The Company will file a motion with the Court to
convert the Chapter 7 to a Chapter 11 if the Bankruptcy Court grants the
petition of these creditors.
See Management Discussion and Analysis section on this Form 10-QSB, which
is incorporated herein by reference.
The Company has numerous commitments and contingent liabilities which are
discussed in the 1994 Form 10-KSB, the June 30, 1997 KSB and elsewhere in the
Management Discussion and Analysis section of this Form 10-QSB, which are
incorporated herein by reference.
Pending Litigation
- ------------------
With the current Bankruptcy situation, all creditors, stockholders, etc.,
are put on hold until such time as the Company is either put into Chapter 7,
liquidated under Chapter 7 or converted to Chapter 11. If the Company is put
into chapter 7 and unable to have the Chapter 7 converted to Chapter 11, then a
liquidation of assets will occur, however, if the Company is put into Chapter 7
and allowed to convert to a Chapter 11 then a Reorganization Plan must be
proposed to take care of the creditors and stockholders. The Company is
currently a party to several material pending legal proceedings. These legal
issues will also be included in the proposed plan of reorganization.
Default with West America Securities Corp.
- ------------------------------------------
In May 1994, the Board of Directors committed to issue West America
Securities Corp. ("West America"), a Los Angeles-based broker/dealer, 400,000
shares of common stock for services rendered. During the quarter ending
September 30, 1994, West America agreed to cancel this consulting agreement.
However, the Company is in default of certain provisions of this cancellation,
primarily the repayment by the Company to West America and their referrals, of
certain funds, aggregating approximately $50,000, which were invested in the
Company by these respective parties. Three of the parties involved with the
"West America" group were the parties that petitioned the court to place the
Company in Chapter 7 Bankruptcy.
6
<PAGE>
NOTE 4 - GOING CONCERN AND MANAGEMENT'S PLANS
Management is of the opinion that if the Company is put into Chapter 7 that
it will be able to have the Chapter 7 converted to a Chapter 11 Bankruptcy. In
order to do so it will be necessary to have an agreement with the current
creditors and stockholders of the company. Also, a major funder must be located
to assist in funding a Plan of Reorganization. At January 31, 1996, no funder
has agreed to participate with the Company in a restructuring or reorganizing
plan.
The accompanying quarterly unaudited financial statements have been
prepared contemplating continuation of the Company as a going concern. Although
the Company has received very little additional funding during the six months
ended December 31, 1995 and subsequent to the quarter-end, as discussed in the
following paragraph, the Company has sustained continuing operating losses since
inception and is expected to also lose money this fiscal year and to use
substantial amounts of working capital in its operations. At December 31, 1995,
current liabilities continued to exceed current assets by $2,602,868 and certain
notes and trade accounts payable continued to be in default. This situation
continued to exist as of February 13, 1996. Also, as of December 31, 1995, the
Company had only approximately $1,100 in cash, no additional funds were
available under any existing bank lines and no form of investor commitments to
lend or invest. In addition, no unsecured assets exist which could serve as
collateral for borrowing and the Company is in default on notes payable.
NOTE 5 - SUBSEQUENT EVENTS
Agreement with holders of Notes Payable with Warrants
- -----------------------------------------------------
As discussed in the 1994 Form 10-KSB, the Company has outstanding an
aggregate of $265,400 of notes payable with three common stock purchase warrants
attached for each $10.00 loaned. These "Notes Payable with Warrants" bear
interest at 7% per annum payable annually and mature on various dates from June
1995 to June 1997. The noteholders filed a collateral security interest with the
U.S. Patent Office. At the end of the prior quarter, these notes were in default
due to non-payment of accrued interest which was originally due June 30, 1994.
In December 1994, the noteholders brought action against the Company in the
Superior Court of California for the County of Riverside (case no. 257856) (the
"Action") to foreclose on its alleged security and to sell the patents at public
sale for payment of the amounts due under the Notes Payable with Warrants.
On January 20, 1995, the Company entered into an agreement with the
noteholders wherein the noteholders caused the Action to be dismissed without
prejudice. As consideration for this dismissal, the Company admitted the amount
and validity of the debt and the Security Agreement, and that it has no
affirmative defenses, offsets or counterclaims to the noteholders claims. If the
Note obligation, as defined in the Agreement, is not paid in full on or before
October 1, 1995, the noteholders may cause the Action to be filed against the
Company.
On or about October 10, 1995, the Gant Group filed a Complaint for default
under the Security Agreement for a judicial foreclosure of the Patents. The
complaint was captioned, Richard A. Gant Agent, v. Veritec, Inc., et al., Case
No. 272019 in the Superior Court of the State of California, County of
Riverside. However, on October 1, 1995, as an alternative, the Company had been
given an election to pay the accrued interest and one-half of the principal
obligation of the notes and could then extend the balance of payment to April
21, 1996.
7
<PAGE>
At October 31, 1995, there was no action by the Company on this proposed
agreement with the Gant Group and Management expects the matter to be resolved
either in the Supreme Court of Bankruptcy proceedings
If the court resolution is to allow the Gant Group to obtain the Company's
patents, then it will put the Company in jeopardy as the patents are the basis
of the Company's technology and are an essential ingredient of future operating
success.
NOTE 6 - PROFORMA PRESENTATION OF SHAREHOLDERS' VOTING EQUITY
Since the Company is currently in a possible Chapter 7 proceeding and
expects to have it converted to a Chapter 11 Bankruptcy, the position of
stockholders in a Plan of Reorganization has not yet been determined. Until the
Bankruptcy Court Judge rules on the Chapter 7 petition, the authorized shares of
both the common stockholders and preferred stockholders are as follows:
The Company has issued and outstanding several Series of preferred stock
with certain voting rights that result in material dilutive voting rights of the
Company's common shareholders (see further discussion of the Series of preferred
stock and their respective rights in the 1994 Form 10-KSB.) The following table
reflects the effect of the issuance of these Series of preferred shares on the
voting control of the Company's common shareholders, as a class, as of February
15, 1995:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Before issuance of After issuance of
the Preferred shares the Preferred shares
--------------------------------------- ---------------------------------------
shares votes % shares votes %
------ ----- - ------ ----- -
Common shareholders, as a
class, one vote per share 2,085,600 100% 2,085,600 2,085,600 47.2%
Series B preferred
share-holders, as a
class, 20 votes per share - - - 56,318 1,126,360 26.6%
Series D preferred
share-holders, as a
class, one vote per share - - - 300,000 300,000 6.7%
Series E preferred
share-holders, as a
class, 50 votes per share - - - 17,103 855,150 19.5%
============= ========= ============ =========
2,085,600 100% 4,442,110 100%
============= ========= ============ =========
</TABLE>
PART I. FINANCIAL INFORMATION
ITEM 2. Management' Discussion and Analysis
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
8
<PAGE>
Liquidity and Capital Resources - December 31, 1995 compared to June 30, 1995.
- -------------------------------
During the six months ended December 31, 1995, the Company received cash
from revenues totaling $124,242. These revenues were derived primarily from
engineering services. The Company's primary source of cash during the quarter
and six month periods continued to be from revenues. Only $18,000 was received
from the Bridge Group financing sources during the six months ended December 31,
1995. Unless the Company achieves significant cash flow from sales and revenues,
the Bridge Financing Facility may still be unlikely to provide sufficient
funding for the Company to survive. Since the filing of the petition to put the
Company into Chapter 7 Bankruptcy, there has been only $8,000 invested by the
Bridge Group. In addition, outside of the Bridge Financing Facility, it is
unlikely that the Company will be able to obtain new longer term capital. In
such case, the Company may have no option but to seek protection of the
bankruptcy courts.
Increases in debt obligations of the company, primarily in Accrued Interest
and Deferred Compensation, are shown in the following schedule, during the six
month period ending December 31, 1995:
<TABLE>
<S> <C> <C> <C>
Debt category Dec. 31, 1995 June 30, 1995 Incr./(Decr.)
---------------- ---------------- -----------------
Convertible subordinated notes payable $ 412,500 412,500 $
-
Notes payable 199,699 192,199 7,500
Notes payable with warrants 265,400 265,400 -
Accounts payable and accrued expenses 548,661 517,842 30,819
Accrued interest 371,461 256,326 115,135
Deferred compensation 709,396 626,010 83,386
Deferred revenue 120,000 120,000 -
Secured convertible notes payable 686,183 675,728 10,445
Junior subordinated convertible notes 1,726,442 1,726,442 -
================ ================ =================
$ 5,039,742 $ 4,792,447 $ 247,295
================ ================ =================
</TABLE>
During the quarter ending December 31, 1995, the Company's liquidity
continued to deteriorate due in part to continuing losses from operations. The
Company's liquidity (working capital) is reflected in the table below which
shows comparative working capital as of December 31, 1994 and June 30, 1994.
Dec. 31, 1995 June 30, 1995
------------- -------------
Working capital (deficit) $ (2,602,868) $ (2,364,456)
As reflected by its working capital deficiency, the Company is totally
unable to meet its short-term obligations on a current basis without the
continuing financing provided under the Bridge Financing Facility. The Company
is, and has been since April 1994, totally relying on new Bridge Financing loans
to finance its operations and has been unable to, and would not expect to in the
near future, address any of its delinquent obligations. The total Bridge
Financing Facility originally structured was up to $1,000,000 and has now been
increased to up to $1,500,000. Although over $686,000 has been received under
the Bridge Financing Facility (through December 31, 1995), only nominal funds
9
<PAGE>
have been received since September 1, 1994. As a result, the Company has been
unable to regularly meet its payroll obligations during that time and deferred
compensation to certain key officers has increased substantially since June 30,
1995. With the recent filing of the petition to put the company into Bankruptcy,
even the Bridge Group is hesitant to provide additional funding into the
Company.
The Company is in dire financial condition. Even if the total amount
approved under the Bridge Financing Facility was received, which is very
uncertain, this funding is not sufficient, nor is it intended, to provide funds
for the Company to address its delinquent obligations. The Company intends to
negotiate its delinquent obligations for consideration other than cash payments.
This may cause litigation, judgments and even an involuntary bankruptcy
proceeding. If the Company has no funds to provide a basis for a Chapter 11
reorganization, it may be forced to liquidate.
Financial and Operational Outlook
- ---------------------------------
Although there is no assurance that the Company will generate any material
revenues or cash flows from operations in the next fiscal year, management
believes the Company has prospects for generating such revenues. Several
developments occurred during the year which the Company believes have increased
that potential. Discussions are ongoing with Mitsubishi Corporation in Japan
regarding a license agreement or other type of relationship with them. Also,
discussions are currently taking place with an Air force base for use of the
Company's engineering services and products for inventory control at their base.
At December 31, 1995 and continuing through the date of the filing of this
report, the Company continued to have an extremely serious insolvency problem.
Although management believes it is making progress in maintaining itself in the
face of its severe financial problems, there is no assurance that the Company
will be successful in holding off aggressive collection action or litigation.
Further, the Company may incur additional unexpected costs to defend itself
against any such claims or allegations that may be filed against it.
Results of Operations - The six months ended December 31, 1995 compared to
---------------------
and six months ended December 31, 1994.
The Company had revenues of $124,242 during the six months ended December
31, 1995. The revenues for this period was primarily from engineering services.
This compares to revenues of $8,000 the six months ended December 31, 1994,
which was derived from engineering services and from the sale of products. The
increase in revenues for the 1995 period was due to an increase in engineering
services provided by former employees working on a contract with an Aerospace
company on an experimental use of the Vericode Symbol on aircraft fueling in
flight. The Company is in discussions with several potential customers for
systems sales but cannot project future revenues, if any, at this time. The
Company is also in the discussion stage of potential licensing or partnering for
product or industry segment opportunities with several companies. Because of its
cash flow and liquidity problems, there are no assurances that the Company can
ever generate revenues.
Operating expenses of the Company were reduced considerably during the six
months ended December 31, 1995 compared to the six months ended December 31,
1994 due to an decrease in the number of employees in each category of expense.
10
<PAGE>
<TABLE>
<S> <C> <C> <C>
For the six months ended
Expense category Dec. 31, 1995 Dec. 31, 1994 Incr./(Decr.)
---------------- ---------------- -----------------
General and administrative $ 44,883 $ 236,955 $ (192,072)
Marketing and advertising 75,405 127,764 (52,359)
Engineering, research and development 75,203 273,776 (198,573)
================ ================ =================
$ 195,491 $ 638,495 $ (443,004)
================ ================ =================
</TABLE>
Due to the Company's financial inability to pay employees, the former
employees in the engineering department left the Company and formed their own
engineering services company. This group has continued to perform services for
Veritec on a contract basis. There is one employee in Administration and one
Sales person presently working in the Company at December 1, 1995.
Capital Expenditures and Commitments
- ------------------------------------
During the six months ended December 31, 19950, the Company had no
purchases of capital equipment.. The Company believes its need for additional
capital equipment will continue because of the need to develop and expand its
business. The amount of such additional capital required is uncertain and may be
beyond that generated from operations. There can be no assurance that the
Company will be able to obtain any such capital on satisfactory terms.
Factors that may effect future results
- --------------------------------------
A number of uncertainties exist that may effect the Company's future
operating results. These uncertainties include the petition by certain creditors
to put the company into Bankruptcy and uncertain general economic conditions,
market acceptance of the Company's products, the Company's ability to manage
expense growth, resolve its financial problems and acquire long-term funding.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Creditors filing for Chapter 7 Bankruptcy
- -----------------------------------------
BANKRUPTCY - On October 16, 1995, the Company received notice that three
creditors had petitioned the court to place the Company in Chapter 7 bankruptcy.
The Company is attempting to satisfy the demands of these creditors and have
them withdraw their petition.. The Company will file a motion with the Court to
convert the Chapter 7 to a Chapter 11 if the Bankruptcy Court grants the
petition.
There is no assurance that the Company will have the financial means to
substantiate a conversion from Chapter 7 to Chapter 11 proceedings.
Lawsuit by holders of Notes Payable with Warrants and subsequent agreement
- --------------------------------------------------------------------------
As discussed in the 1994 Form 10-KSB, the Company has outstanding an
aggregate of $265,400 of notes payable with three common stock purchase warrants
11
<PAGE>
attached for each $10.00 loaned. These "Notes Payable with Warrants" bear
interest at 7% per annum payable annually and mature on various dates from June
1995 to June 1997. The noteholders filed a collateral security interest with the
U.S. Patent Office. At the end of the prior quarter, these notes were in default
due to non-payment of accrued interest which was originally due June 30, 1994.
In December 1994, the noteholders brought action against the Company in the
Superior Court of California for the County of Riverside (case no. 257856) (the
"Action") to foreclose on its alleged security and to sell the patents at public
sale for payment of the amounts due under the Notes Payable with Warrants.
On January 20, 1995, the Company entered into an agreement with the
noteholders wherein the noteholders caused the Action to be dismissed without
prejudice. As consideration for this dismissal, the Company admitted the amount
and validity of the debt and the Security Agreement, and that it has no
affirmative defenses, offsets or counterclaims to the noteholders claims. If the
Note obligation, as defined in the Agreement, was not paid in full on or before
October 1, 1995, the noteholders could cause Action to be filed against the
Company.
On or about October 10, 1995, the Gant Group filed a Complaint for default
under the Security Agreement for a judicial foreclosure of the Patents. The
complaint was captioned, Richard A. Gant Agent, v. Veritec, Inc., et al., Case
No. 272019 in the Superior Court of the State of California, County of
Riverside. However, on October 1, 1995, as an alternative, the Company had been
given an election to pay the accrued interest and one-half of the principal
obligation of the notes and could then extend the balance of payment to April
21, 1996.
At January 1, 1996, there was no action by the Company on this proposed
agreement with the Gant Group and Management expects the matter to be resolved
either in the Supreme Court or Bankruptcy proceedings Management expects the
Bankruptcy Court will take jurisdiction of the case in the event the Company is
in either Chapter 7 or Chapter 11.
If the court resolution is to allow the Gant Group to obtain the Company's
patents, then it will put the Company in jeopardy as the patents are the basis
of the Company's technology and are an essential ingredient of future operating
success.
Possible unasserted claims
- --------------------------
The Company believes that it may be subject to certain, as yet unasserted,
claims and assessments surroundings several events and circumstances including,
among other matters, employees for unpaid compensation; collection agencies
related to unpaid vendors and/or claims from other third parties, creditors or
shareholders.
In May 1994, the Board of Directors committed to issue West America
Securities Corp. ("West America"), a Los Angeles-based broker/dealer, 400,000
shares of common stock for services rendered. During the December 31, 1994
quarter, West America agreed to cancel this consulting agreement. However, the
Company is in default of certain provisions of this cancellation, primarily the
repayment by the Company to West America and their referrals, of certain funds,
aggregating approximately $50,000, which were invested in the Company by these
respective parties. Three of the Creditors in the West America Group were the
ones petitioning to put the Company into Chapter 7 Bankruptcy.
ITEM 2. CHANGES IN SECURITIES.
12
<PAGE>
On May 9, 1994, the Board of Directors approved a one-for-ten "reverse
stock split" of its outstanding common stock. On January 23, 1995, the Company's
shareholders ratified this reverse stock split at its annual meeting. The shares
outstanding and per share data in the current period financial statements
reflect this reverse stock split.
ITEM 3. DEFAULT UPON SENIOR SECURITIES. Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. None
ITEM 5. OTHER INFORMATION. None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits: None
(b) Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VERITEC INC.
--------------------
(Registrant)
Date: August 15, 1999
--------------------------------
By:________________________
Jack E. Dahl
Chief Financial Officer
and Chief Accounting Officer
13
