SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-KSB
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(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended June 30, 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 No. 0-15113
VERITEC INC.
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Exact name of small business issuer in its charter
Nevada 95-3954373
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
1000 Boone Ave North, Golden Valley, MN 55427
----------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (763)525-8470
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Securities registered under Section 12(b) of the Act: None
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Securities registered under Section 12(g) of the Act: Common stock, no par value
--------------------------
Check whether the issuer filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the preceding 12 months (or for such
shorter period that the Company was required to file such reports), and 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 SB is not contained in this form, and no disclosure will be
contained, to the best of Company's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form l0-KSB. [ ]
Revenues for the year ending June 30, 2000 were $1,111,955.
The aggregate market value of the voting stock held by non-affiliates
of the Company, based upon the average bid price of the common stock on
September 15, 2000 was approximately $2,600,000.
Check whether the issuer has filed all documents and reports required
to be filed by Section 12, 13, or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court [ ]Yes [x]No.
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DOCUMENTS INCORPORATED BY REFERENCE
Form 10-KSB for the period ended June 30, 1999 is hereby incorporated by
reference.
THIS DOCUMENT CONSISTS OF, INCLUDING EXHIBIT PAGES.
THE EXHIBIT INDEX IS ON PAGE
VERITEC INC.
FORM 10-KSB
For the fiscal year ended June 30, 2000
Table of Contents
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Page No.
Item 1 Description of Business 3
Item 2 Description of Property 7
Item 3 Legal Proceedings 7
Item 4 Submission of Matters to a vote of Security Holders 7
PART II
Item 5 Market for Common Equity and Related Stockholder Matters 8
Item 6 Management's Discussion and Analysis or Plan of Operations. 8
Item 7 Financial Statements 11
Item 8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 33
PART III
Item 9 Directors, Executive Officers, Promoters and Control 33
Persons; Compliance with Section 16(a) of the Exchange Act
Item 10 Executive Compensation 34
Item 11 Security Ownership of Certain Beneficial Owners and Management 35
Item 12 Certain Relationships and Related Transactions 36
Item 13 Exhibits and Reports 37
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PART I
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Item 1 Description of Business
------------------------------
Development of the Business
---------------------------
Veritec Inc. was incorporated in the State of Nevada on September 8,
1982 for the purpose of developing, marketing and selling a line of
microprocessor-based encoding and decoding system products. The Company was a
development stage enterprise until June 30, 1995 at which time the Company had
product available for sale and therefore was no longer considered in the
development stage.
In 1995 an involuntary proceeding under chapter 7 of the United States
Bankruptcy Code was commenced against Veritec. The proceeding was subsequently
converted to a Chapter 11 proceeding and a plan of reorganization was confirmed
on April 23, 1997. The plan was completed and the trustee was discharged and the
case closed on October 13, 1999. Further information with respect to the
bankruptcy proceeding is set forth in Item 3, pages 2 etc. of the Form 10-KSB
filed by Veritec Inc. for the year ended June 30, 1999 and is incorporated
herein by reference.
The Company is in the development, marketing and sale of a line of
microprocessor-based encoding and decoding system products that utilize its
patented VERICODE(r) symbol technology. The Company's VeriSystem(tm) enables a
manufacturer or distributor to attach unique identifiers or coded symbols
containing binary encoded data, referred to by the Company as a "Vericode
Symbol", to a product which enables automatic identification and collection of
data with respect to the marked product.
In addition to the Vericode Symbol technology and VeriSystem, Veritec also
designs and integrates identification systems that utilize other two-dimensional
and single dimension symbols. Veritec's experience both in marking and image
processing provides the knowledge and experience necessary for successful
implementation of simple to complex automatic identifications projects and
installations.
Early research and development activities
-----------------------------------------
The Company through fiscal 1995 was primarily engaged in research and
development. The Company continues to upgrade the software with advanced image
capturing and decoding features.
The National Aeronautics and Space Administration ("NASA"), through a
contracting party, has conducted in-depth engineering evaluations on the
Company's VeriSystem. The tests performed by Rockwell International, the
contracting agent for NASA, included testing the performance of the Vericode
Symbol in a variety of hostile environmental operating conditions that the
Vericode Symbol may be expected to encounter. These hostile environmental
conditions included validation of the Vericode Symbol's data accuracy and data
density in such conditions as extreme heat and cold, vibration, readability
under solvents and liquids, rotation and distance on a variety of surfaces
including titanium and plastics using a number of marking techniques. The
Vericode Symbol alone was tested and validated under these harsh conditions and
variety of surfaces.
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The Company's products
----------------------
The Vericode Symbol
-------------------
The Vericode symbol is a two-dimensional, high data density, machine
readable symbol that can contain 5-100 times more information than a bar code in
a smaller space. The Vericode Symbol is based on a matrix pattern. The matrix is
made up of data cells, which are light and dark contrasting squares. The matrix
is enclosed within a solid border. The code's solid border is surrounded by a
quiet zone. Its simple structure is the basis for its space efficiency.
The size of the Vericode Symbol is variable and can be increased or
decreased depending on the requirements. It can be configured to fit virtually
any space.
The data density is variable. The same size Vericode Symbol can hold more
or less information within the same area. Barcodes get longer as more
information is added. The data density within the Vericode Symbol is variable
and can be increased or decreased without changing the size of the symbol. For
example, a 1/2 inch Vericode Symbol could contain 10, 28, 56, 72, 100+., etc.
characters. The only limitation to the size and density of the Vericode Symbol
is the resolution of the marking and reading devices.
Orientation of the code for reading is not necessary. In fact, the code
itself can be used to determine orientation. The Vericode Symbol can be read at
and angle of up to forty five degrees from vertical in any direction in
relationship to the reader.
In certain instances the Vericode Symbol has standard levels of Error Detection
and Correction. This means that the code has the ability to be damaged and still
recover the information in many instances. The code can sustain up to 12.5% or
up to 25% damage, depending on the format, and still recover the original
information. Higher levels can be custom formatted. The code will return either
accurate information or no information, but it will not return wrong
information.
The Vericode Symbol offers a high degree of security and the level of this
security can be specified depending on the requirements. For any specific
application or organization, an unique encryption algorithm can be created, so
that only those authorized, can create or read a Vericode Symbol within that
system.
The Vericode Symbol can hold any form of information that can be digitized.
These include: numbers, letters, photos, fingerprints, graphics and biometrics
information. The Vericode Symbol can also be used in conjunction with human
readable information and other one-dimensional and two-dimensional symbologies.
The VeriSystem (F-225 fixed station system)
-------------------------------------------
The Veritec F-225 reading system is a complete system capable of reading
and decoding a variety of two-dimensional (2-D) codes. It features a choice of
CCD (charged-couple device) cameras interfaced to a rack-mounted, computer
system. The modular imaging and decoding software permit the decoding of various
public and private 2-D symbols under various static and dynamic conditions.
The Veritec F-225 consists of several modular elements. Depending upon the
environment and operating conditions, an appropriate CCD video camera is
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selected. This camera is cabled directly to the rack-mounted high performance
computer. The computer is housed in a rugged chassis to permit successful
operation in industrial environments. A variety of modular software programs,
customized for the specific application, are installed in the computer. Advanced
gray-scale image processing and image analysis software result in extremely high
reading reliability.
The F-225 Reading System has been engineered for flexibility. By providing wide
choices in cameras, software and computer components, the F-225 guarantees
optimum performance. Since the F-225 Reading System is flexible by nature,
depending on the application (lighting, environmental conditions, marked
materials contrast, etc.), the price of the system is affected by these factors.
In addition to the F-225, Veritec also offers fixed station readers with fully
integrated electronics.
The Metanetics Handheld Reader
------------------------------
Until recently, there were no handheld symbology readers that made it
practical to read codes from metal and other similar materials and surfaces.
Veritec's advanced image-processing software, which enabled reading from complex
surfaces, was part of its F-225 fixed station reading system. In late 1997,
Veritec made a special agreement with Metanetics Corporation to combine
Veritec's software with the Metanetics handheld reader. The result of this
combination is a highly advanced handheld reader that has the ability to read
from metal and other similar materials and surfaces. This compact, CCD based
reader can be linked directly to a PC, a laptop computer and to a portable data
terminal, which can download the data by batch or by radio frequency
transmission. The reader has built-in logic, which enables the reader to send
ASCII formatted information to the device to which the reader is connected.
Veritaggant Covert Identification System
----------------------------------------
The Company has also developed the Veritaggant Covert Identification
System, which is used to apply covert signatures, known as Veritaggant, to items
for use in later verifying their authenticity. The Veritaggant technology
combines a mixture of minute invisible, non-radioactive trace elements with
manufacturer's plastics, paint, print ribbons, or with the ink used to print
tags, labels, packaging or documents. These chemical compounds can also be
applied in a protective, clear coating directly over items that have already
been printed.
The Company has not actively pursued the Veritaggant business for several
years, however, still has technology and intends to reintroduce it at some
future time.
Manufacturing
-------------
The Company has limited manufacturing and assembling capabilities other
than assembling the components used in its F-225 system. The Company believes
that all components necessary to manufacture and assemble its products are
commercially available from more than one source. For the foreseeable future the
company intends to rely upon other firms for manufacture and assembly of its
products.
Marketing
---------
The Company in now engaging in direct sales to customers, licensing its
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technology in certain industries and/or geographic areas and is establishing
sales representatives in both the United States and international markets.
The Company is currently receiving Royalties from Mitsubishi Corporation on
a non-exclusive license agreement for sales in Korea and Taiwan and on sales to
IBM in conjunction with application of the Vericode Symbol on IBM hard drives
manufactured in several countries. These royalties are paid on a quarterly basis
There can be no assurance that the Company's sales and licensing activities
will be successful or that they will generate significant revenues in the
future.
Engineering, Research and Development
-------------------------------------
The Company incurred $299,404, $128,942, and $210,238 of engineering sales
support, research and development in the fiscal years ending June 30, 2000,
1999, and 1998 respectively. The Company has completed development of its F-225
system and integrating its software into the Metanetic's handheld reader.
Present engineering efforts continue in application engineering in support of
sales, the development of upgraded and more sophisticated systems, interfacing
the VeriSystem with various marking devices and determining the most
advantageous methods of marking customer's parts.
There can be no assurance that the Company's engineering, research and
development activities will result in marketable products or that, if such
products are developed, they will meet with any degree of market acceptance.
Competition
-----------
The "symbology" business in which the Company operates is becoming
intensely competitive. There can be no assurance that the Company will be able
to successfully compete in the "symbology" business.
The Company's Vericode Symbol competes with alternative machine readable
symbologies such as conventional bar code systems, including UPC, EAN Code 3 or
9 and Code 49, and alphanumeric systems such as OCR-A and OCR-B. Competitors
offering these alternative symbologies include numerous label and bar code
printer equipment companies who offer various parts of bar code related systems.
Currently, there are a number of companies developing other forms of two
dimensional machine readable symbologies. Cimetrics and other companies have
introduced symbology similar to that of the Company.
Employees
---------
At the end of the fiscal year June 30, 2000 and at the date hereof the Company
had no employees. Approximately 7 consultants have worked on various projects
for the company during this time period.
A key employee, Mr. Mark Pinson, left the company during the fourth
quarter of the fiscal year that ended June 30, 2000. Negotiations with Mr.
Pinson resulted in an agreement in which Mr. Pinson would complete certain
existing projects, deliver the necessary codes, designs, and working papers
concerning software developed for the company, and train company engineers in
the operation of the software Mr. Pinson developed. In exchange for these
services Mr. Pinson would receive $93,750 plus normal expenses. The continued
cooperation of Mr. Pinson will make the implementation of the company's
technology much easier.
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PATENTS
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The Company has received two patents on its symbology (Numbers
4,924,078 issued in 1990 and number 5,612,524 issued in March 1997) in the
United States. It has application pending on its filing in Europe and has
recently provided information to upgrade that application in conformance with
the U S patent issued in 1997. Subsequent to the end of the fiscal year June 30,
2000, the Company was notified that a European Patent would be issued.
ITEM 2. DESCRIPTION OF PROPERTY
-------------------------------
The Registrant has moved its headquarters to 1000 Boone Avenue North, Suite
110, Golden Valley, MN 55427 and is leasing approximately 2,000 square feet of
office and laboratory space for $2,500 per month on a month to month basis.
ITEM 3. LEGAL PROCEEDINGS
-------------------------
On June 30, 2000 the company was served as a defendant in the matter of
Wolodymyr M. Starosolsky vs. Veritec, Inc, et. al., In the United States
District Court for the Central District of California (Case Number
CV-00-7516DT((Wx))). This suit was brought by a shareholder and former director
of the corporation. The action was brought against the Veritec, and various
individuals claiming that certain corporate 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. The answer to the initial complaint is due October 13, 2000. The
corporation intends to defend this action vigorously.
SEC reporting obligations
-------------------------
The Registrant is subject to the continuing reporting obligations of
the Securities Exchange Act of 1934 (the "1934 Act") which, among other things,
requires the filing of annual and quarterly reports and proxy materials with the
Securities and Exchange Commission (the "SEC"). The Company filed a 10 KSB in
1998 covering the years through June 30, 1997. The Company did not comply with
the filings of 10 QSB's for the periods September 30, 1995, December 31, 1995,
March 31, 1996, September 30, 1996, December 31, 1996, March 31,1997, September
30, 1997, December 31, 1997, March 31, 1998 September 30, 1998, December 31,
1998 and March 31, 1999, on a timely basis as required under the 1934 Act. These
10-QSB filings were made in September 1999. To the Company's knowledge, there is
no current inquiry or investigation pending or threatened by the SEC in
connection with these reporting violations. However, there can be no assurance
that the Company will not be subject to such inquiry or investigation in the
future. An Administrative proceeding by the SEC relating to these filing
deficiencies could result in penalties including among other things, suspension
of trading in the Company's securities, court actions, administrative
proceedings, preclusion from using certain registration forms under the 1933
Act, injunctive relief to prevent future violations and/or criminal prosecution.
The company has timely filed quarterly reports under the 34 act since September
1999.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
------------------------------------------------------------
A shareholders meeting was held on December 20, 1999. At that meeting
Mr. Larry Matthews, Ms. Van Tran, and Mr. Dean Westberg were elected as
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directors of the company. Callahan, Johnston & Associates, LLC. were approved as
auditors of the company. During fiscal years ending 1999, and 1998 no matters
were submitted to a vote of security holders through the solicitation of proxies
or otherwise.
PART II
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ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
-----------------------------------------------------------------
Market information
------------------
The Company's common stock is traded in the over-the-counter market.
Quotations are available on the OTC bulletin board. The OTC Bulletin Board
Symbol for the Company's common stock is "VRTC." The following table sets forth
the range of high and low bid quotes of the Company's common stock per quarter
as provided by the National Quotation Bureau (which reflect inter-dealer prices
without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions). All quoted prices are adjusted for the one for
ten reverse stock split per Plan of Reorganization which was effective on
October 23, 1999.
Common Stock Fiscal 2000 Fiscal 1999
-------------------------------------------------------------------------------
Quarter Ended High Low High Low
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September 30 1.1875 .125 1.68 .62
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December 31 .9375 .25 1.68 .38
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March 31 .71875 .375 .81 .38
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June 30 1.125 .4375 .95 .25
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Shareholders
------------
As of June 15, 1999 there were approximately 850 shareholders of record,
inclusive of those brokerage firms and/or clearing houses holding the Company's
common shares for their clientele (with each such brokerage house and clearing
house being considered as one holder).
Dividend information
--------------------
The Company has not paid or declared any dividends upon its common stock
since its inception and, by reason of its present financial status and its
contemplated financial requirements, does not anticipate paying any dividends in
the foreseeable future.
Item 6 Management Discussion and Analysis or Plan of Operation
---------------------------------------------------------------
Veritec Inc. was incorporated in the state of Nevada on September 8, 1982
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and has been primarily in a development stage through June, 1995. The market for
2-dimensional symbology has been in the formative stage and only in 1996 and
1997 has there been a market of several million dollars in that industry.
Veritec Inc. has lacked the finances to market its products. See Subsequent
Events for information on products and market at the time of filing of this
report.
There were decreases in short term debt during the fiscal year ended June
30, 1999 as shown in the following schedule:
2000 1999
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Secured Notes (Gant Group) $108,366 $198,704
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Notes Payable 45,000
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Accounts Payable & Accrued Expenses 412,803 541,669
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Other 286,964
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Total $808,133 $785,373
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During the fiscal year ended June 30, 2000, the Company had
continuing losses from operations. The Company had working capital deficits in
the amount of $665,622 and $744,246 as of June 30, 2000 and June 30, 1999
respectively. Working capital is an important measure of the company's ability
to meet its short-term obligations.
Results of Operations - June 30, 2000 compared to June 30, 1999.
----------------------------------------------------------------
The Company had revenues of $1,111,955 during the year ended June 30, 2000.
Of this amount, $990,073 was for product sales, $28,785 from engineering
services and $93,097 from royalties. In the fiscal year ended June 30, 1999 the
Company had revenues of $116,348 with $51,745 from product sales, $42,198 from
Engineering services and $22,405 from royalties.
Operating expenses in fiscal 2000 versus 1999 were as follows:
June 30, 2000 June 30, 1999
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General and administrative expenses $ 542,269 $ 299,298
Sales and Marketing 33,017 36,521
Engineering Services and R & D 299,404 128,942
General and Administrative Expenses included corporate legal, primarily
relating to continuing bankruptcy filings and defenses, patent protection,
office facilities and other costs associated with the general business of the
Registrant.
Strategic Restructuring and Operations Plan
-------------------------------------------
The Registrant expects to continue to make a major effort in the
marketing and sales of its products. The Registrant now has both fixed station
and hand held portable non-contact readers that can read off many surfaces
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including metal. Also, the Registrant has expanded its business to include
conventional bar code customers and users of 2-dimensional codes other than just
the Vericode symbol.
Although management believes it is making progress in maintaining itself in
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.
Capital Expenditures and Commitments
------------------------------------
During the fiscal year June 30, 2000, the Registrant made $8,738 in capital
purchases. Other than necessary computer and office equipment needed for its
expanding businesses, the Company has no current commitments for material
capital expenditures in the next 12 months. 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.
Factors that may effect future results
--------------------------------------
A number of uncertainties exist that may effect the Company's future
operating results. These uncertainties include the uncertain general economic
conditions, market acceptance of the Company's products, the Company's ability
to manage expense growth, the success of the implementation of the Plan of
Reorganization.. The continued operation of the company is dependent on
financing promised by the Matthews Group in accordance with the plan of
reorganization. The amount of the receivable from the MG is $1,777,784 and the
amount of the monthly payment is $18,518. There is no assurance that the
Matthews Group will complete the obligations as provided in the plan of
reorganization.
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Item 7 Financial Statements
----------------------------
VERITEC, INC.
FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
Callahan, Johnston & Associates, LLC
Certified Public Accountants and Consultants
INDEPENDENT AUDITORS' REPORT
----------------------------
To The Board of Directors
Veritec Inc.
Golden Valley, Minnesota
We have audited the accompanying balance sheets of Veritec Inc., as of June 30,
2000, 1999 and 1998, and the related statements of operations, stockholders'
equity (deficit) and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these 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 audits 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 of the financial statements provides a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Veritec Inc., as of June 30,
2000, 1999 and 1998, and the results of its operations and its cash flows for
the years then ended in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 2, the Company
incurred a net loss of $443,068 during the year ended June 30, 2000, and, as of
that date, had an excess of liabilities over assets of $544,975. Those
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this matter.
As more fully described in Note 1 to the financial statements, the Company is
subject to possible unasserted claims and litigation. The ultimate outcome of
these matters cannot presently be determined. Accordingly, the financial
statements do not include any adjustments that might result from the outcome of
these uncertainties.
/s/ Callahan, Johnston & Associates, LLC
CALLAHAN, JOHNSTON & ASSOCIATES, LLC
Minneapolis, Minnesota
October 10, 2000
7850 Metro Parkway, Suite 207, Minneapolis, MN 55425
Telephone: (952)858-7207 Fax: (952)858-7202
Email: [email protected]
The accompanying note are an integral part of these financial statements.
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VERITEC, INC.
BALANCE SHEETS
June 30,
--------
ASSETS 2000 1999 1998
------ ----------- ----------- ----------
Current Assets:
Cash $ 3,964 $ 3,664 $ 4,216
Accounts receivable:
Trade 19,650 23,000 -
Other 30,000 - -
Inventories 44,559 14,463 32,718
Prepaids 2,500 - 8,250
----------- ----------- -----------
Total current assets 100,673 41,127 45,184
Furniture and equipment, net 7,200 7,246 14,741
Intangible asset, net 173,333 - -
----------- ----------- -----------
Total assets $ 281,206 $ 48,373 $ 59,925
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Notes payable $ - $ 45,000 $ 25,000
Notes payable (secured) 108,366 198,704 100,529
Convertible note (secured) 252,322 - -
Bank overdraft 35,362 - -
Accounts payable and accrued expenses 412,083 541,669 275,630
Deferred revenue - - 8,500
----------- ----------- -----------
Total current liabilities 808,133 785,373 409,659
Commitments and contingencies - - -
Long-term notes payable (secured) - 87,749 185,924
----------- ----------- -----------
Total liabilities 808,133 873,122 595,583
----------- ----------- -----------
Prepayment on stock and subscription
receivable 18,047 240,198 296,249
----------- ----------- -----------
Stockholders' equity (deficit):
Preferred stock, par value $1.00,
authorized 10,000,000 shares,
275,000 shares of Series H
authorized 366,007 7,273 -
Common stock, par value $.01,
authorized 20,000,000 shares 65,306 35,988 33,088
Subscription receivable (1,212,049) - -
Additional paid in capital 11,431,439 9,644,401 9,436,392
Accumulated deficit (11,195,678) (10,752,609) (10,301,387)
----------- ----------- -----------
Stockholders' equity (deficit) (544,975) (1,064,947) (831,907)
----------- ------------- ------------
Total liabilities and
stockholders' equity
(deficit) $ 281,206 $ 48,373 $ 59,925
======= ============= ===========
The accompanying note are an integral part of these financial statements.
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VERITEC, INC.
STATEMENTS OF OPERATIONS
Years Ended June 30,
--------------------
2000 1999 1998
---------- ---------- -------
Revenues:
Product sales $ 990,073 $ 51,745 $ 98,818
Engineering services 28,785 42,198 13,257
Licenses and royalties 93,097 22,405 17,495
---------- ---------- ----------
Total revenues 1,111,955 116,348 129,570
Cost of sales 329,881 39,298 29,125
---------- ---------- ----------
Gross profit 782,074 77,050 100,445
Sales commissions 257,756 6,190 31,000
Warranty 20,000 - -
---------- ---------- -------
Gross profit - after commissions and
warranty 504,318 70,860 69,445
---------- ---------- ----------
Expenses:
Administration 542,269 299,298 202,685
Sales and marketing 33,017 36,521 83,416
Engineering and R & D 299,404 128,942 210,238
---------- ---------- ----------
Total expenses 874,690 464,761 496,339
---------- ---------- ----------
Income (loss) from operations (370,372) (393,901) (426,894)
---------- ---------- ----------
Other income (expense):
Loss on fixed asset disposals (198) - -
Amortization (26,667) - -
Interest income (expense), net (45,831) (57,321) (34,651)
---------- ---------- ----------
Total other income (expense) (72,696) (57,321) (34,651)
---------- ---------- ----------
Net income (loss) (443,068) (451,222) (461,545)
Other comprehensive income (loss) - - -
---------- ---------- -------
Comprehensive income (loss) $ (443,068) $ (451,222) $ (461,545)
========== ========== ==========
Basic loss per common share $ (.08) $ (.13) $ (.14)
========== ========== ==========
Weighted average common shares
outstanding 5,713,883 3,525,695 3,305,112
========== ========== ==========
The accompanying note are an integral part of these financial statements.
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VERITEC, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JUNE 30, 2000, 1999, AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additional Stockholders'
Preferred Stock Common Stock Subscription Paid in Accumulated Equity
Shares Amount Shares Amount Receivable Capital Deficit (Deficit)
------ ------ ------ ------ ---------- ------- -------- ---------
BALANCE, June 30, 1997 - $ - 3,298,770 $ 32,988 $ - $9,411,440 $(9,839,842) $ (395,414)
Exercise of 10,020
warrants at $2.50 - - 10,021 100 - 24,952 - 25,052
Loss from operations - - - - - - (461,545) (461,545)
-------- ---------- --------- --------- --------- ---------- ----------- -----------
BALANCE, June 30, 1998 - - 3,308,791 33,088 - 9,436,392 (10,301,387) (831,907)
Issuance of Series H
Preferred for cash 30,000 218,182 - - - - - 218,182
Conversion of Series H
Preferred to common (29,000) (210,909) 290,000 2,900 - 208,009 - -
Loss from operations - - - - - - (451,222) (451,222)
-------- ---------- --------- --------- --------- --------- ------------ -----------
BALANCE, June 30, 1999 1,000 7,273 3,598,791 35,988 - 9,644,401 (10,752,609) (1,064,947)
Issuance of Series H
Preferred stock for
subscription and
prepayment on stock 275,000 1,315,359 - - (1,284,750) - - 30,609
Conversion of Series H
Preferred to common (200,000) (956,625) 2,000,000 20,000 - 936,625 - -
Conversion of debt to
common as part of Plan
of Reorganization at
$.80 per share - - 628,031 6,280 - 496,144 - 502,424
</TABLE>
The accompanying note are an integral part of these financial statements.
14
<PAGE>
VERITEC, INC.
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
YEARS ENDED JUNE 30, 2000, 1999, AND 1998
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Additional Stockholders'
Preferred Stock Common Stock Subscription Paid in Accumulated Equity
Shares Amount Shares Amount Receivable Capital Deficit (Deficit)
------ ------ ------ ------ ---------- ------- -------- ---------
Issuance of common for
services at $.80 per share - $ - 87,250 $ 873 $ - $ 68,927 $ - $ 69,800
Issuance of common for
software rights at
$.80 per share - - 187,500 1,875 - 148,125 - 150,000
Exercise of 30 warrants
at $2.50 - - 30 - - 75 - 75
Imputed interest on
subscription receivable - - - - (137,432) 137,432 - -
Payment on subscription
receivable - - - - 210,132 - - 210,132
Loss from operations - - - - - - (443,068) (443,068)
Adjustment to outstanding
shares to agree to stock
transfer agent records - - 29,010 290 - (290) - -
-------- ---------- --------- --------- ------------ ----------- ------------- -----------
BALANCE, June 30, 2000 76,000 $ 366,077 6,530,612 $ 65,306 $(1,212,049) $11,431,439 $(11,195,678) $ (544,975)
======= ========== ========= ========= =========== =========== ============= ===========
</TABLE>
The accompanying note are an integral part of these financial statements.
15
<PAGE>
VERITEC, INC.
STATEMENTS OF CASH FLOW
Years Ended June 30,
--------------------
2000 1999 1998
--------- --------- --------
Cash flow from operating activities:
Net loss $(443,068) $ (451,222) $ (461,545)
Adjustments to reconcile net loss to
net cash from operating activities:
Depreciation and amortization 35,253 6,350 6,328
Issuance of stock for services 69,800 - -
Write off of obsolete equipment 198 1,145 -
Inventory valuation allowance 5,000 - -
(Increase) decrease in assets:
Accounts receivable (26,650) (23,000) -
Inventory (35,096) 18,255 (8,055)
Prepaid expenses (2,500) 8,250 3,300
Increase (decrease) in liabilities:
Bank overdraft 35,362 - -
Accounts payable and accrued expenses 179,923 266,039 152,915
Deferred revenue - (8,500) 8,500
-------- --------- --------
Net cash used by operating activities (181,778) (182,683) (298,557)
--------- ----------- --------
Cash flow from investing activities:
Purchase of equipment (8,738) - (4,500)
Purchase of intangible asset (50,000) - -
--------- --------- -------
Net cash used by investing activities (58,738) - (4,500)
--------- --------- -------
Cash flow from financing activities:
Proceeds from stock issuance,
subscription receivable, and
prepayment on stock 240,816 162,131 291,781
Proceeds from notes payable - 20,000 25,000
Payments on secured notes payable - - (78,060)
--------- --------- ---------
Net cash provided by financing 240,816 182,131 238,721
activities --------- --------- ---------
Increase (decrease) in cash position 300 (552) (64,336)
Cash at beginning of year 3,664 4,216 68,552
--------- --------- ---------
Cash at end of year $ 3,964 $ 3,664 $ 4,216
========= ========= =========
The accompanying note are an integral part of these financial statements.
16
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER INFORMATION
Business
--------
Veritec Inc. (the "Company") was incorporated in Nevada on September 8, 1982.
The Company is primarily engaged in development, marketing and sales of a line
of microprocessor-based encoding and decoding system products that utilize its
patented Vericode Symbol technology. The Company's VeriSystem enables a
manufacturer or distributor to attach unique identifiers or coded symbols
containing binary encoded data to a product which enables automatic
identification and collection of data. The Company has also developed its
Veritaggant Covert Identification System, which enables the application of a
label or tag to a product for subsequent verification of its authenticity. The
Veritaggant Covert Identification System is not currently being marketed by the
Company.
Cash Equivalents
----------------
For purposes of reporting cash flows, cash equivalents include investment
instruments purchased with a maturity of three months or less. There were no
cash equivalents in 2000, 1999 or 1998.
Inventories
-----------
Inventories are valued at the lower of cost (first in, first out) or market.
Furniture and Equipment
-----------------------
Furniture and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets,
ranging from three years for computer related assets and five years for
remaining assets. When assets are retired or otherwise disposed of, the cost and
related accumulated depreciation are removed from the accounts and the resulting
gain or loss is recognized in income for the period. The cost of maintenance and
repairs is expensed as incurred; significant renewals and betterments are
capitalized. Deduction is made for retirements resulting from renewals and
betterments.
Revenue Recognition
-------------------
Revenues from products sales and engineering are recognized when products are
shipped or services are performed. License fee is recognized upon completion of
all required terms under the agreement.
Royalties are recognized as earned. To date these royalties have been earned in
a foreign currency. The Company records these revenues in U. S. dollars at
the exchange rate in effect at the date of remittance. Accordingly, the Company
has historically not been susceptible to translations gains or losses.
17
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER
INFORMATION (Continued)
Research and Development
------------------------
Research and development costs are charged to expense as incurred.
Intangible Asset
----------------
On October 12, 1999, the Company purchased certain software, source code,
documentation, manuals and other written material for $50,000 and 187,500 shares
of restricted common stock valued at $.80 per share. The Company has recorded
this purchased software at cost, $200,000, and amortizing it over 10 years using
the straight-line method.
Computer Software Costs
-----------------------
Pursuant to Statement of Financial Accounting Standards ("SFAS") No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise
Marketed," issued by the Financial Accounting Standards Board, the Company is to
capitalize certain software development and production costs once technological
feasibility has been achieved. Software development costs incurred prior to
achieving technological feasibility were expensed as incurred.
Management determined that technological feasibility occurred at the time the
Company's software was available for general release to customers. Accordingly,
no computer software development costs have been capitalized in the accompanying
financial statements. In accordance with SFAS No. 86, costs of software
maintenance and customer support since the software became available for general
release have been charged to expense as incurred.
Amounts expensed for ongoing software maintenance in the accompanying financial
statements are as follows:
1998 $ 60,000
1999 $ 40,000
2000 $ 44,000
Long-Lived Assets
-----------------
In accordance with SFAS 121, Accounting For The Impairment Of Long-Lived Assets
And For Long-Lived Assets To Be Disposed Of, the Company reviews its long-lived
assets and intangibles related to those assets periodically to determine
potential impairment by comparing the carrying value of the long-lived assets
outstanding with estimated future cash flows expected to result from the use of
the assets, including cash flows from disposition. Should the sum of the
expected future cash flows be less than the carrying value, the Company would
recognize an impairment loss. An impairment loss would be measured by comparing
the amount by which the carrying value exceeds the fair value of the long-lived
assets and intangibles. Management determined that an impairment of long-lived
assets existed at June 30, 2000. See Note 2.
18
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER
INFORMATION (Continued)
Earnings (Loss) Per Share
-------------------------
The Company has implemented SFAS 128: Earnings Per Share. SFASB 128 replaces the
presentation of primary EPS. Basic EPS excludes dilution and is computed by
dividing net income by the weighted-average number of common shares outstanding
for the year. Diluted EPS reflects the potential dilution from conversion of
Series H preferred stock or the exercise of options and/or warrants, and is
computed using the treasury stock method. Under the treasury stock method stock
options are assumed to have been exercised at the beginning of the period if the
exercise price exceeds the average market price during the period. The
computation of diluted EPS does not assume conversion, exercise or contingent
issuance of securities that would have an antidilutive effect on the calculation
of earnings per share.
Weighted
Shares Days Average
Dates Outstanding Outstanding Outstanding Shares
----------------- ----------- ----------- ----------
7/1/97 to 6/30/98 3,298,770 365 3,298,770
11/12/97 to 6/30/98 10,021 31 6,342
---------
Fiscal year 1998 3,305,112
---------
7/1/98 to 6/30/99 3,308,791 365 3,308,791
10/1/98 to 6/30/99 290,000 273 216,904
---------
Fiscal year 1999 3,525,695
---------
7/1/99 to 6/30/00 3,598,791 365 3,598,791
9/30/99 to 6/30/00 2,000,000 273 1,495,890
10/22/99 to 6/30/00 896,736 251 616,660
1/27/00 to 6/30/00 6,000 154 2,532
5/12/00 to 6/30/00 75 49 10
---------
Fiscal year 2000 5,713,883
---------
Stock-Based Consideration
-------------------------
The Company has applied the fair value-based method of accounting for employee
and non-employee stock-based consideration and/or compensation in accordance
with FASB Statement 123.
19
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER
INFORMATION (Continued)
Financial Instruments
---------------------
Financial instruments consist of the following:
Short-Term Assets and Liabilities: The fair value of cash and cash
equivalents, accounts receivable, accounts payable and accrued expenses and
short-term debt approximate their carrying values due to the short-term
nature of these financial instruments.
Subscription Receivable: The carrying value of the subscription receivable
is estimated to approximate its fair value as a result of the 10% interest
rate used for imputing interest. No quoted market value is available for
this instrument.
Concentrations, Risks and Uncertainties
---------------------------------------
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 reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates
Cash Concentrations
-------------------
The Company maintains its cash balances at one financial institution. At
times, the balances may exceed federally insured limits of $100,000. The
Company has not experienced any losses in such accounts and believes it is
not exposed to any significant credit risk on its cash balances. The fair
market value of these financial instruments approximates cost.
Accounts Receivable
-------------------
The Company sells to domestic and foreign companies. The Company grants
uncollateralized credit to customers, but requires deposits on unique
orders. Management deemed all accounts receivable collectible and did not
provide for an allowance for doubtful accounts. The trade accounts
receivable at June 30, 2000 was from one customer. This receivable was
collected subsequent to year end.
Subscription Receivable
-----------------------
The Company's largest asset (presented as a contra equity amount in the
accompanying financial statements) is the subscription receivable from The
Matthews Group (see Note 10: Stockholders' Equity (Deficit); Subscription
Receivable). This subscription receivable is secured by a pledge of
properties controlled by a principal of The Matthews Group. The Company has
not perfected a security interest in the pledged properties and
accordingly, this note is unsecured.
20
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER
INFORMATION (Continued)
Concentrations, Risks and Uncertainties (Continued)
---------------------------------------
Subscription Receivable (Continued)
-----------------------
Management has deemed this receivable to be fully collectible. Due to
uncertainties in the collection process, however, it is at least reasonably
possible that management's estimate will change during the next year. That
amount, if any, cannot be estimated.
Major Customers
---------------
One major customer accounted for 89% of revenues in fiscal year 2000.
Four major customers accounted for 75% of revenues in fiscal year 1999.
Three major customers accounted for 82% of revenues in the fiscal year 1998
One major customer accounted for 80% of revenues during the combined period
of fiscal years 2000, 1999 and 1998.
Foreign Revenues
----------------
Foreign revenues accounted for 97% of the Company's revenues in 2000.
Inventories
-----------
The estimated loss that management believes is probable is included in the
inventory valuation allowance. Due to uncertainties, however, it is at
least reasonably possible that management's estimate will change during the
next year. That amount cannot be estimated.
Financing Concentration
-----------------------
The Company is dependent on The Matthews Group to meet operating needs (see
Notes 2 and 10) and to make payments on the secured note (see Note 8).
Unasserted Claims and Disputed Liabilities
------------------------------------------
The Company is subject to possible unasserted and asserted claims as
described in Note 14. Management is of the opinion that these unasserted
and asserted claims are without merit and that settlement, if any, will not
have a material effect on the Company's financial position. Nevertheless,
it is at least reasonably possible that claims will be pursued. The
ultimate outcome of these claims, if pursued, cannot presently be
determined.
Litigation
----------
A shareholder and former director of the Company has brought suit against
the Company and certain individuals and entities claiming that certain
corporate actions were taken:
21
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND OTHER
INFORMATION (Continued)
Concentrations, Risks and Uncertainties (Continued)
---------------------------------------
Litigation (Continued)
----------
* Without proper authority of the Company's Board of Directors, and/or
* Contrary to the Company's Plan of Reorganization filed and completed
under Chapter 11 of the U.S. Bankruptcy Act.
The Company intends to vigorously defend this action. The Company and legal
counsel feel that the likelihood of an unfavorable outcome is minimal. No
estimate can be made at this time of the amount of potential loss should
the Company not prevail in this matter.
Income Taxes
------------
The Company has implemented SFAS 109: Accounting for Income Taxes. Deferred
taxes are provided on a liability method whereby deferred tax assets are
recognized for deductible temporary differences and operating loss and tax
credit carryforwards and deferred tax liabilities are recognized for
taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases.
Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all
of the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment. See Note 13.
Reclassifications
-----------------
Certain reclassifications have been made to the 1999 and 1998 financial
statements to conform to the 2000 presentation. These reclassifications
had no net income effect.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As shown in accompanying financial statements,
the Company incurred a net loss of $443,068 during the year ended June 30, 2000,
and has lost $11,195,678 from inception to June 30, 2000. At June 30, 2000, the
Company had a $665,622 working capital deficiency and a stockholders' deficit of
$544,975. As described more fully in Note 8, the Company is unable to make
required payments on its secured notes payable. These notes payable are secured
by the Company's patents. Those conditions raise substantial doubt about the
Company's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of this
uncertainty.
22
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
In September 1999, The Matthews Group committed to:
* Invest the $2,000,000 in assets required under the Plan of Reorganization
(see Note 10: Stockholders' Equity (Deficit); Subscription Receivable),
* Pay the delinquent amounts due under the secured note (see Note 8), and
* Finance the operations of the Company.
To date The Matthews Group has funded $240,741 under the subscription receivable
and made prepayments on the subscription receivable of $18,047 to assist the
Company in meeting its cash flow needs. The Matthews Group has further made
payments of $252,322 on the secured notes to prevent the secured note holders
from foreclosing (see Note 8). The Matthews Group has indicated it will continue
to meet its obligation under the subscription receivable (see Note 10). The
Matthews Group has further indicated it will continue to fund additional amounts
into the Company as needed.
The Company's management is aggressively pursuing new sales opportunities for
the Company. The Company's management is also investigating potential
acquisitions that are felt to increase the Company's viability. Management is
hopeful it will be successful in these efforts and that the Company will
continue as a going concern which will allow it to realize assets and settle
liabilities in the normal course of operations.
NOTE 3 - CHAPTER 11/CHAPTER 7 BANKRUPTCY
At June 30, 1999, the Company was in Chapter 7 of the U.S. Bankruptcy Code. On
September 1, 1999, the Bankruptcy Judge approved a motion to reconvert the
Company to Chapter 11 from Chapter 7 and allowed the Company to proceed in
Chapter 11 under the original Confirmed Plan of Reorganization.
The Reorganization Plan included the following major items:
1. Transfer of a majority of the Registrants debt to equity, (done in fiscal
year 1997).
2. Investment of $2,000,000 in assets or asset equivalents into the Registrant
in exchange for 275,000 shares of a new Series H Preferred Shares class of
stock.
3. Changes in Directors and Management.
4. A one for ten reverse stock split for both common and preferred
stockholders. All preferred stock and formerly restricted common stock
changed to free trading common stock. (Done in fiscal year 1997).
5. Issuance of 300,000 shares of common stock as guaranty (done in fiscal year
1997).
In September 1999, The Matthews Group committed to invest the $2,000,000 in
assets required under the Plan of Reorganization (see Note 10: Stockholders'
Equity (Deficit); Subscription Receivable).
On October 21, 1999, the Bankruptcy Court issued its final decree and the
Company emerged from bankruptcy. The Court also granted the Company's motion to
allow the exchange of Post Confirmation debt for restricted stock at $.80 per
common share.
A suit has been filed against the Company and others that among other matters
relates to the Matthew Group's commitments to the Company under the Plan of
reorganization (see Note 1: Concentrations, Risks and Uncertainties;
Litigation).
23
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 4 - INVENTORIES
Inventories consist of the following:
2000 1999 1998
--------- --------- -------
Raw materials and subassemblies $ 6,046 $ 14,463 $ 22,798
Work-in-process - - 9,920
Finished goods 43,513 - -
--------- --------- ------
Inventories, at cost 49,559 14,463 32,718
Less: valuation allowance (5,000) - -
------ --------- ------
Inventories, net $ 44,559 $ 14,463 $ 32,718
========= ========= =========
NOTE 5 - FURNITURE AND EQUIPMENT
Furniture and equipment consists of the following:
2000 1999 1998
--------- --------- -------
Furniture and equipment, at cost $ 38,306 $ 102,478 $ 113,147
Less: accumulated depreciation (31,106) (95,232) (98,406)
--------- --------- ---------
Furniture and equipment, net $ 7,200 $ 7,246 $ 14,741
========= ========= =========
Depreciation expense was $8,586 in 2000, $6,350 in 1999 and $6,328 in 1998.
24
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
2000 1999 1998
--------- --------- --------
Accounts payable $ 371,837 $ 134,764 $ 66,751
Accrued interest 16,974 60,262 25,442
Deferred compensation 34,333 301,406 107,700
Commissions payable - 2,500 5,000
Accrued warranty 20,000 - -
Other accruals 1,336 - -
Administrative costs per Plan
of Reorganization - 42,737 70,737
--------- -------- ---------
$ 444,480 $ 541,669 $ 275,630
========= ========= =========
NOTE 7 - NOTES PAYABLE
Notes payable were due to two parties who loaned the Company money on ninety-day
notes in order for the Company to retain its engineering consultant during a
cash flow shortage during its bankruptcy filing. These parties were issued
restricted common stock for the amounts of principal and interest due them when
the Company emerged from bankruptcy in October 1999.
NOTE 8 - NOTES PAYABLE (SECURED)/CONVERTIBLE NOTE (SECURED)
The holders of these notes payable (secured) are collectively called "The Gant
Group" in the Plan of Reorganization. At June 30, 1995 the principal amount of
these notes was $265,400. Interest on these notes at that date amounted to
$18,783. During 1995 additional interest accrued and the balance at June 30,
1996, including both principal and interest amounted to $321,339. The holders of
these notes had secured a lien on the patents of the Registrant with filings
with the U. S. Patent Office and therefore claimed title to all patents of the
Registrant. Due to the Registrant being delinquent in payment of interest on the
notes, the Gant Group brought action against the Registrant for payment of both
principal and interest. The suit was transferred to the Bankruptcy Court and
settlement with the Gant Group was a part of the Plan of Reorganization. The
Gant Group was issued an interest bearing ten percent per annum note, secured by
the assets of the Company secured with UCC1 filings. The total amount of
settlement due the Gant Group and approved in this Plan of Reorganization,
including principal, interest and legal fees amounted to $364,513. $60,000 of
this amount was to be paid in cash with the balance due in quarterly payments
over a four year period. The $60,000 was paid in July 1997 and the first
installment payment for the October 1, 1997 was made.
Subsequent payments due under this agreement were not made and the Gant Group
made a motion that was granted and the Company's Chapter 11 was converted to
Chapter 7 (see Note 3). On September 1, 1999, The Matthews Group made a payment
of $182,346 to the Gant Group to cure the existing default to the Gant Group.
The Matthews Group has since made five quarterly payments to the Gant Group of
25
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 8 - NOTES PAYABLE (SECURED)/CONVERTIBLE NOTE (SECURED) (Continued)
$23,325, including the October 1, 2000 installment. The Matthews Group has
further represented that it is its intent to make the three remaining $23,325
installments to the Gant Group as they came due January 1, 2001, April 1, 2001
and July 1, 2001.
The Matthews Group did not pay this obligation on behalf of the Company, rather
it acquired the Gant Group's interest in these secured notes. The Matthews Group
is to receive a convertible note for either cash payment on Veritec common stock
at $.10 per share, at their sole option, for amounts paid by The Matthews Group
on the Gant Group notes.
Payments by The Matthews Group to the Gant Group through June 30, 2000, are as
follows:
Principal $ 178,087
Interest 69,235
Legal fees 5,000
---------
Total convertible note -
secured $ 252,322
=========
Through June 30, 2000 the ownership of the secured notes was:
Gant Group secured notes $ 108,366
The Matthews Group convertible
secured note 252,322
$ 360,688
Interest on the underlying secured notes owned by The Matthews Group subsequent
to their payment of such amounts to the Gant Group have accrued to their benefit
and is reflected as such in the accompanying financial statements.
These convertible notes are reflected as current in the accompanying financial
statements pending clarification of the terms of convertible note.
NOTE 9 - PREPAYMENT ON STOCK/PREPAYMENT ON SUBSCRIPTION RECEIVABLE
The following parties have invested money into the Company in anticipation of
receiving stock for their investments or as prepayment on the subscription
receivable:
2000 1999 1998
--------- --------- ------
The Matthews Group $ 18,047 $ 45,081 $ -
Wolodymyr Starosolsky,
a Director of the Registrant - 96,000 89,000
Glen Verner - 5,000 5,000
HOMETREND/HEALTH KINETICS - 94,117 202,249
--------- --------- ---------
Total $ 18,047 $ 240,198 $ 296,249
========= ========= =========
26
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 9 - PREPAYMENT ON STOCK/PREPAYMENT ON SUBSCRIPTION RECEIVABLE (continued)
Prepayments at June 30, 1999 and 1998 were all settled through issuances of
equity or applied as payments on the subscription receivable (see Note 10:
Stockholders' Equity (Deficit); Subscription Receivable). It is assumed the
prepayment at June 30, 2000 will also ultimately be applied against the
subscription receivable.
NOTE 10 - STOCKHOLDERS' EQUITY (DEFICIT)
Preferred Stock
---------------
The Articles of Incorporation of the Company authorize 10,000,000 shares of
preferred stock with a par value of $1.00 per share. The Board of Directors is
authorized to determine any number of series into which shares of preferred
stock may be divided and to determine the rights, preferences, privileges and
restrictions granted to any series of the preferred stock.
As part of the Plan of Reorganization, a new Series H Convertible Preferred
Stock was authorized. The Plan called for the Registrant to issue 275,000 shares
of restricted Series H Convertible Preferred Stock in exchange for assets of
$2,000,000 being invested into the Company. Each share of Series H Convertible
Preferred Stock is convertible into 10 restricted shares of the Company's common
stock at the option of the holder.
On September 17, 1998, HOMETREND received 30,000 shares of Series H Convertible
Preferred stock for an investment of $218,182. The number of shares and the
dollar amounts are proportional to the 275,000 shares for $2,000,000 in the
Plan. On November 30, 1998, HOMETREND exercised the conversion privilege and
converted the 29,000 preferred shares to 290,000 shares of common stock. Since
HOMETREND invested the $218,182 into the Registrant in May and June 1997, the
restriction has been lifted on these new common shares.
In September 1999, The Matthews Group received 275,000 shares of Series H
Convertible Preferred stock in exchange for a promissory note in the amount of
$2,000,000 (see Note 10 Stockholders' Equity (Deficit); Subscription
Receivable). The Matthews Group exercised the conversion privilege and converted
200,000 preferred shares to 2,000,000 restricted shares of the Company's common
stock.
Common Stock
------------
In October 1999, the Company issued 628,031 shares of restricted common stock in
settlement of $502,424 of post confirmation debt at $.80 per share.
In Fiscal year 1998, 10,021 "A" warrants were exercised at $2.50 per share. In
fiscal year 2000, 75 "A" warrants were exercised at $2.50 per share.
27
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 10 - STOCKHOLDERS' EQUITY (DEFICIT) (Continued)
Subscription Receivable
-----------------------
In September 1999, the Company accepted a commitment from The Matthews Group,
LLC to fund the $2,000,000 required under the Plan of Reorganization (see Note
10 - Stockholders' Equity (Deficit); Preferred Stock). This funding is in the
form of a promissory note that calls for 108 monthly payments to the Company of
$18,518.52. These payments are non interest bearing and are secured by a pledge
of properties controlled by a principal of The Matthews Group. The Company has
not perfected a security interest in the pledged properties and accordingly,
this note is unsecured.
The present value of the subscription receivable, using a ten percent interest
factor, is as follows:
Future
Dollar Imputed Present
Amount Interest Value
------------- ----------- -----------
At inception $2,000,000 $ (684,641) $1,315,359
Imputed interest through
June 30, 2000 - 137,431 137,431
Subscription payments
through June 30, 2000 (240,741) - (240,741)
---------- ---------- ---------
At June 30, 2000 $1,759,259 $ (547,210) $1,212,049
========== =========== ==========
Imputed interest on the subscription is excluded from operating results and is
instead credited directly to additional paid-in capital.
The Matthews Group has made prepayments toward this subscription receivable (see
Note 9).
Common Stock Purchase Warrants
------------------------------
A summary of the various warrants provided for under the Plan of Reorganization
is as follows:
"A" warrants; extended expiration date August 5, 2001
"B" warrants; extended expiration date August 5, 2002
"C" warrants; extended expiration date August 5, 2003
The Board of Directors has extended the expiration dates of these warrants and
may extend them before these extended expiration dates.
Each "A" warrant authorizes the holder to purchase one share of non-restricted
new common stock of the Registrant at $2.50 per share.
If the "A" warrant is not exercised, then the "A" warrant expires, and the "B"
and "C" warrants of the Warrant Unit terminates.
28
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
The "B" warrant authorizes the purchase of non-restricted new common stock of
the Registrant at $5.00 per share and is exercisable for one year after the
termination date of the "A" warrant.
The "C" warrant authorizes the purchase of non-restricted new common stock of
the Registrant at $7.00 per share and is exercisable one year after the
termination date of the "B" warrants.
NOTE 11 - LEASE
The Company leases its office facilities under a month-to-month operating lease
calling for payments of $2,500 per month.
Rent expense was $20,374 in 2000.
NOTE 12 - RELATED PARTY TRANSACTIONS
The Matthews Group is the Company's largest stockholder. Related party
transactions with The Matthews Group are as follows:
* Convertible Note - Secured (see Note 8). Related party interest on this note
has been accrued at $16,974 in the accompanying financial statements.
This estimate could change based upon formalization of the terms of the
convertible note - secured.
* Prepayment on Subscription Receivable (see Note 9).
* Subscription Receivable (see Note 10: Stockholders' Equity (Deficit);
Subscription Receivable).
The Company's President was paid $11,000 for use of an office in her home in
2000.
A principal of The Matthews Group provided factoring to the Company in 2000.
The Company paid factoring fees totaling $15,000 in 2000 on a $100,000 ninety-
day note and a $100,000 sixty-day note.
NOTE 13 - INCOME TAXES
Income taxes consisted of the following at June 30,
2000 1999 1998
------------ ----------- -------
Current:
Federal $ - $ - $ -
State - - -
State minimum fee (100) (800) (800)
Deferred:
Federal - - -
State - - -
----------- ----------- --------
Income tax benefit (expense) $ (100) $ (800) $ (800)
========== =========== ========
29
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 13 - INCOME TAXES (Continued)
The tax effects of net operating loss carryforwards gives rise to a significant
deferred tax asset. FASB 109 requires that deferred tax assets be reduced by a
valuation allowance if it is more likely than not that some portion or all of
the deferred tax asset will not be realized.
2000 1999 1998
------------ ----------- -------
Gross deferred tax asset
relating to net operating
loss carryforwards $ 3,506,000 $ 3,339,000 $ 3,224,000
Valuation allowance (3,506,000) (3,339,000) (3,224,000)
Net deferred tax asset - - -
Deferred tax liability - - -
----------- ----------- -----------
Net deferred tax asset
(liability) $ - $ - $ -
=========== =========== ===========
At June 30, 2000, the Company has net operating loss carryforwards available to
offset future taxable income as follows:
States
------
Year Federal California Minnesota
---- ------- ---------- ---------
2001 $ 13,000 $ 457,000 $ -
2002 314,000 301,000 -
2003 913,000 480,000 -
2004 829,000 451,000 -
2005 643,000 - -
2006 452,000 - -
2007 657,000 - -
2008 979,000 - -
2009 1,410,000 - -
2010 1,227,000 - -
2011 457,000 - -
2012 301,000 - -
2013 480,000 - -
2014 451,000 - -
2015 298,000 - 298,000
---------- ---------- ----------
$9,424,000 $1,689,000 $ 298,000
========== ========== ==========
NOTE 14 - UNASSERTED CLAIMS AND DISPUTED LIABILITIES
30
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
During its bankruptcy the Company has sought an investment group to assist it in
funding the $2,000,000 called for under the Plan of Reorganization approved by
the Bankruptcy Court on May 2, 1997. In the intervening years various investment
groups attempted to help the Company fund this required investment. Partial
fundings received from these investment groups were settled through stock
issuances by the Company. One of these former investment groups has made claims
totaling $166,697 against the Company, $90,980 in cash and $75,717 in stock
(94,646 shares at $.80 per share), but has not pursued legal action relating to
these claims. It is possible that other investment groups will assert claims
against the Company regarding: the levels of their funding; the Company's
termination of their funding commitments; or for expenses incurred while they
were assisting the Company.
Management believes it has appropriately reflected the activity with these
investment groups in the accompanying financial statements. Management further
feels these claims were settled in the bankruptcy. Due to uncertainties,
however, it is at least reasonably possible that claims will be asserted and/or
pursued. The ultimate outcome of these claims, if asserted and/or pursued,
cannot presently be determined.
Two individuals have made claims totaling $76,674 against the Company, but have
not pursued legal action relating to these claims. Management feels these claims
are without merit and/or that these claims were settled by or are barred by the
Company's bankruptcy. Due to uncertainties, however, it is at least reasonably
possible that claims will be asserted. The ultimate outcome of these claims, if
pursued, cannot presently be determined.
NOTE 15 - SUPPLEMENTAL CASH FLOW INFORMATION
2000 1999 1998
--------- --------- ---------
Cash paid for:
Interest $ - $ 22,500 $ 7,613
========= ========= =========
Income taxes $ 4,000 $ - $ -
========= ========= =========
Summary of Noncash Activity:
In fiscal year 2000, under its Plan of Reorganization, the Company settled
$502,424 of notes payable, accounts payable and accrued expenses through the
issuance of 628,031 shares of common stock valued at $.80 per share.
In fiscal year 2000, the Company issued 81,250 shares of common stock to its
President at $.80 per share in settlement of $65,000 of compensation.
In fiscal year 2000, the Company issued 6,000 shares of its common stock to a
consultant at $.80 per share in settlement of $4,800 of services.
In October 1999, the Company issued 187,500 shares of its common stock at $.80
per share to acquire software rights (see Note 1 - Intangible Asset).
31
<PAGE>
VERITEC, INC.
NOTES TO THE FINANCIAL STATEMENTS
YEARS ENDED JUNE 30, 2000, 1999 AND 1998
NOTE 16 - SUBSEQUENT EVENTS
Factoring terms with a principal of The Matthews Group were changed in fiscal
year 2001 to provide interest at 10% per annum. Subsequent to June 30, 2000,
the Company has borrowed $101,000 from this related party under these terms.
In March 2000, the Company entered into a letter of intent to acquire Group One
Label, Inc. for 200,000 shares of common stock. This purchase was contingent on
completion of a private placement. The private placement was not completed and
the letter of intent expired July 1, 2000. Independent of the letter of intent
The Matthews Group has provided interim financing to Group One Label, Inc.
Although the letter of intent has expired, the Company may still pursue this
acquisition.
32
<PAGE>
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
-------------------------------------------------
Directors, Executive Officers, Promoters and Control Persons
------------------------------------------------------------
The members of the present Board of Directors and Officers are:
Name Office Age
-------------------------------------------------------------------------------
Mr. Larry Matthews Director 72
-------------------------------------------------------------------------------
Mr. Dean Westberg Director 69
-------------------------------------------------------------------------------
Ms. Van Tran Director, CEO, Treasurer, 55
Secretary
-------------------------------------------------------------------------------
Mr. Carl Anselmo Interim President 53
-------------------------------------------------------------------------------
Each director will serve until the next annual meeting of
shareholders, or until their respective successors have been elected and duly
qualified. Directors serve one-year terms. The board of directors appoints
officers. There are no family relationships between any director or officer.
Carl S. Anselmo was appointed Interim President of Veritec Inc June 8, 2000
Mr. Anselmo is Manager of Programs at Hughes Communications Inc. His position is
one of a senior level manager of technical teams that develop communication
systems for high capacity data streams used in connection with earth orbiting
satellites.
Mr. Anselmo holds a Masters of Science degree in Electrical
Engineering from the University of Southern California and a Bachelors of
Science in Engineering from UCLA.
He was a co-founder of Veritec Inc. and an inventor of the concept
of the Vericode. He holds several United States and international patents in
connection with the Vericode technology.
Larry Matthews was appointed as Acting President and Chief Executive
Officer and Director on January 28, 1999, in conjunction with a plan from "The
Matthews Group" to evaluate and possibly fund the Registrant out of Bankruptcy.
Mr. Matthews has been a consultant for Vendtronics LLC (was formerly
Chairman/Co-owner, sold to FEC) from 1994 to the present time. From 1984 to 1993
he was Co-founder, Director and Vice President-Engineering of ZYTEC Corporation.
In prior years he was Vice-President Operations at Control Data, Design Engineer
at UNIVAC and Design Engineer at Mpls./Moline/Case. Mr. Matthews currently is on
the Board of Directors of Artesyn Technologies (merger of Computer
33
<PAGE>
Products/ZYTEC), Pioneer Software Development, Solar Attic and Third Wave
Systems companies.
Ms. Van Thuy Tran, has been President of Asia Consulting and Trading Company, a
company dealing with trade in the Pacific Rim countries, since 1994. She is the
co-founder of Circle of Love, providing mission works in Vietnam. She is also
the founder of Equal Partners, Inc., a construction and building company in
Minnesota. Ms. Van Tran has a Medical Degree in Hematology and worked in the
medical field for over 17 years. For the last twenty years, she has been an
entrepreneur involved in building businesses, providing opportunity for the
minority and creating solutions for distressed situations.
Mr. Dean W. Westberg was with 3M for 37 years, most of that time as
a Photographic Chemist. At 3M he did factory scale-up of introductory
photographic and printing products, Quality Control and Technical Service work;
and he spent much time in trouble shooting for 3M. After retiring from 3M he
expanded his education in International Law and foreign trade. He became
involved with various start up companies in establishing trading relations
between the United States and Asia. He is currently establishing a company to
link small businesses in Mexico and the United States with larger North American
companies.
Mr. Westberg has a B.S. from Hamline University in Chemistry and
Mathematics. He has studied at University of St. Thomas with specialties in
International Finance, International Marketing, and Law.
None of the Directors and Executive Officers have filed Form 3
required to be filed in Section 16(a) of the Exchange Act as a result of their
election as directors on December 20, 1999. Delinquent reports are expected to
be filed by October 30, 2000.
Committee and Board Meetings
----------------------------
The Registrant had no standing audit, nominating or compensation committees
of its Board or committees performing similar functions during fiscal 1999. The
Directors have regularly communicated to discuss the Company's affairs and also
have held formal periodic board meetings to transact and approve appropriate
business. Directors have received no compensation or expenses for attending
Board Meetings. The following are the dates of the Board meetings and attendance
of the Directors:
Directors did not receive any director's fees for the above meetings.
ITEM 10. EXECUTIVE COMPENSATION
-------------------------------
Mark Pinson, Vice President for Engineering, until June 16, 2000, received
compensation in the amount of $112,500 for the fiscal year ending June 30, 2000.
The total compensation paid to all executive officers as a group (5
persons) was $177,000.
Bonuses
------- No cash bonuses were paid by the Registrant to any executive
officer during the year ended June 30, 2000.
34
<PAGE>
Compensation pursuant to plans including pension, stock option, and stock
--------------------------------------------------------------------------------
appreciation rights plans.
-------------------------
At June 30, 1999, the Registrant did not have any stock appreciation
rights plans, phantom stock plans, or any other incentive or compensation plan
or arrangement pursuant to which benefits, remuneration, value, or compensation
was or is to be granted, awarded, entered, set aside, or accrued for the benefit
of any executive officer of the Company.
Termination of Employment and change of control arrangement
--------------------------------------------------------------
During the year ended June 30, 2000, Mr. Jack Dahl and Mr. Mark
Pinson left the company. No officer, director, or principal shareholder of the
Registrant either received or is to receive any remuneration as a result of
either: (I) the termination of such person's employment whether by resignation,
termination of such person's employment, whether by resignation, retirement, or
otherwise; (ii) a change of control of the Registrant or a change in such
individual's responsibilities following a change in control of the Company.
ITEM 11 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------
The following table sets forth, as of June 30, 2000 certain information
with respect to all shareholders known by the Registrant to be beneficial owners
of more than 5% of its outstanding Common Stock, all directors, and all officers
and directors of the Registrant as a group:
-----------------------------------------------------------------
Name & Address Number of Shares Percent of Shares
-----------------------------------------------------------------
Common Common
(see * below)
-----------------------------------------------------------------
Van Tran 1,377,870 21%
1430 Orkla Drive
Golden Valley MN 55427
-----------------------------------------------------------------
Larry Johanns 1,296,737 20%
1120 Mechanics St.
Osage IA 50461
-----------------------------------------------------------------
The Matthews Group LLC 2,593,474 40%
1430 Orkla Drive
Golden Valley MN 55427
-----------------------------------------------------------------
*Includes shares of common stock that my be issued upon conversion of Series H
Preferred Stock which may be converted at any time. Conversion may take place
as follows: Ms. Van Tran, 375,000 shares; Mr. Larry Johanns, 375,000 shares;
Matthews Group LLC, 750,000 shares.
35
<PAGE>
ITEM 12. CERTAIN TRANSACTIONS
-----------------------------
In September 1999 the Company accepted a commitment from The Matthews
Group, LLC to fund the $2,000,000 required under the Plan of Reorganization.
This funding is in the form of a promissory note that calls for 108 monthly
payments to the Company of $18,518.52. These payments are non interest bearing
and are secured by a pledge of properties controlled by a principal of The
Matthews Group. The Company has not perfected a security interest in the pledged
properties and accordingly, this note is unsecured.
Subscription receivable and notes from Matthews Group.
------------------------------------------------------
The Matthews Group paid the Gant Group $182,345.87 to bring the note
between the Gant Group and the Registrant up to date on both principal and
interest. The Matthews Group has also committed to the Gant Group that it will
make the remaining payments on the note. The Registrant owes the Matthews Group
the amounts paid to the Gant Group and will owe any additional amounts paid by
the Matthews Group on the notes. The Matthews Group, LLC has taken a secondary
position to the Gant Group in the Company's patents which are the collateral for
the note to the Gant Group. Upon payment in full to the Gant Group, the Matthews
Group will have a first position in this collateral until this obligation is
repaid to the Matthews Group.
The Registrant has adopted a policy that any transactions between the
Company and Directors, officers or entities of which they are also Officers or
directors or in which they have a financial interest, will only be on terms
consistent with industry Standards and approved by a majority of the
disinterested directors of the Company's Board and based upon a determination
that these transactions are on terms no less favorable to the Company than those
which could be obtained by unaffiliated third parties. This policy could be
terminated in the future. The Articles of Incorporation of the Company provides
that no such transactions by the Registrant shall be either void or voidable
solely because of such relationship or interest of directors or officers or
solely because such directors are present at the meeting of the Board or a
committee thereof which approves such transaction or solely because their votes
are counted for such purpose. In addition, interested Directors may be counted
in determining the presence of a quorum at a meeting of the Board or a committee
thereof which approves such a transaction.
The following are transactions considered by the Registrant to be
significant of disclosure pursuant to Regulation 228.404 of Regulation S-B:
Related party transactions
--------------------------
The Matthews Group is the Company's largest stockholder. Related party
transactions with The Matthews Group are as follows:
* Convertible Note - Secured (see Report of Auditors Note 8). Related party
interest on this note has been accrued at $16,974 in the accompanying
financial statements. This estimate could change based upon formalization
of the terms of the convertible note - secured.
* Prepayment on Subscription Receivable (see Report of Auditors Note 9).
* Subscription Receivable (see Report of Auditors Note 10: Stockholders'
Equity (Deficit); Subscription Receivable).
36
<PAGE>
The Company's President was paid $11,000 for use of an office in her home in
2000.
A principal of The Matthews Group provided factoring to the Company in 2000.
The Company paid factoring fees totaling $15,000 in 2000 on a $100,000 ninety-
day note and a $100,000 sixty-day note.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
------------------------------------------
Exhibits
Page No.
--------
Reference is made to the Exhibit Index contained in this
Annual Report on Form 10-KSB 41
A copy of any of the exhibits listed or referred to above will be furnished
at a reasonable cost to any person who was a shareholder of the Company on July
1, 1998, upon receipt from any such person of a written request for any such
exhibit. Such request should be sent to the Company with the attention directed
to the Corporate Secretary.
Reports of Form 8-K
-------------------
The Company has filed the following Reports of Form 8-K during the year
ended June 30, 1999 and subsequently through the date of this report:
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(D) of the Exchange Act,
the Company has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Company and in the capacities and on the
dates indicated.
VERITEC INC.
/s/ Van Tran
---------------------------------
Van Tran, Chief Executive Officer
37
<PAGE>
Signature Title Date
/s/ Ms. Van Tran Chief Executive Officer,
Treasurer, Secretary
-----------------------------------------------------------------------------
/s/ Mr. Carl Anselmo President
-----------------------------------------------------------------------------
/s/ Mr.Larry Matthews Chairman of the Board of Directors
-----------------------------------------------------------------------------
/s/ Mr. Dean Westburg Member of the Board
-----------------------------------------------------------------------------
/s/ Mr. Charles HunterMann Chief Financial Officer
-----------------------------------------------------------------------------
EXHIBIT INDEX
June 30, 2000
Exhibits
--------
Page No.
Item No. Description of Document (footnote)
-------- ----------------------- ---------
There were no 8-K filings during the fiscal years ended June 30, 2000,
1999, 1998, 1997.
38
