--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
--------------------------------------------------------------------------------
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
------- ACT OF 1934 (No fee required)
For the quarterly period ended September 30, 2000
------------------
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
-------- EXCHANGE ACT OF 1934
For the transition period from to
---------- ------------
Commission file number 0-15113
-------
VERITEC INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
NEVADA
-------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
95-3954373
___________________________________
(IRS Employer Identification Number)
1000 BOONE AVENUE NORTH SUITE 110, GOLDEN VALLEY MN 55427
---------------------------------------------------------
(Address of principal executive offices, zip code)
763-525-8470
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 15 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports); and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock as of the latest
practicable date. As of September 30, 2000 the company had:
Number of Shares of Common Stock
------------------------------------------------------
6,530,612
------------------------------------------------------
1
<PAGE>
PART I. FINANCIAL INFORMATION
-----------------------------
Item 1. Financial Statements
---------------------------- VERITEC INC
BALANCE SHEET
(unaudited)
30-Sep-00 30-Jun-00
Assets
Current Assets
Cash $ 4,264 $ 3,964
Receivables 84,354 49,650
Inventories 55,962 44,559
Prepaids 10,500 2,500
------------- -------------
Total Current Assets $ 155,080 $ 100,673
Fixed Assets (net) $ 7,244 7,200
Intangible assets (net) 163,333 173,333
------------- ------------
Total Assets $ 325,657 $ 281,206
============= ============
LIABILITIES & SHAREHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Notes payable
Notes Payable (secured) $88,252 $ 108,366
Convertible note (secured) 275,647 252,322
Bank overdraft 5,194 35,362
Accounts payable & accrued expenses $ 561,801 412,083
------------- ------------
Total current liabilities $ 930,894 $ 808,133
------------- ------------
Prepayment on stock & subscription $ 22,492 $ 18,047
receivable
Stockholders' equity (deficit)
Preferred stock, par value $1.00, $ 366,007 $ 366,007
authorized 10,000,000 shares, 275,000
shares of Series H authorized
Common stock, par value $.01, 65,306 65,306
authorized 20,000,000 shares
Subscription receivable (1,186,584) (1,212,049)
Additional paid in capital 11,461,499 11,431,439
Accumulated deficit (11,333,956) (11,195,678)
Stockholders' equity (deficit) (627,729) (544,975)
------------- ------------
Total liabilities & stockholders' equity $ 325,657 $ 281,205
(deficit) ============= ============
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
VERITEC INC
STATEMENT OF OPERATIONS
(unaudited)
For the quarter ending
30-Sep-00 30-Sep-99
Revenues
Total Revenues $ 79,854 $ 45,852
Cost of Sales 19,349 3,583
------------ ----------
Gross Profit $ 60,505 $ 42,269
Sales commissions $ 2,488 $ 13,785
------------ ----------
Gross profit after commissions & $ 58,017 $ 28,484
warranty
Expenses:
Administration $ 192,891 $ 50,975
Sales & Marketing
- 3,792
Engineering & R&D 1,692 42,797
------------ ----------
Total Expenses $ 194,583 $ 97,564
Gain (loss) from operations $ (136,566) $ (69,080)
Other Income (expense)
Interest income (expense) net $ (1,713) $ 29,380
Total other income (expense) $ (1,713) $ 29,380
------------- ----------
Net Income (loss) $ (138,279) $ (39,700)
============ ==========
Earning (loss) per share ($.02) ($.01)
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
VERITEC INC
STATEMENT OF CASH FLOWS
For the quarter ending September 30,
(unaudited) (unaudited)
2000 1999
Cash flow from operating activities
Net loss $ (138,279) $ (39,700)
Adjustments to reconcile net loss to net cash from operating activities
Depreciation and amortization $ 9,956 $ 1,275
(Increase) decrease in assets
Receivables (34,704) 23,000
Inventories (11,403) (11,816)
Prepaids (8,000)
-
Increase (decrease) in liabilities
-
Accounts payable & accrued expenses 149,718 (31,062)
Changes in secured liabilities 3,212
Bank overdraft (30,168) -
------------- -------------
Net cash used by opening activities $ (59,668) $ (58,303)
Cash flow from financing activities
Prepayment on subscription receivable $ 4,444 $ 37,273
Subscription receivable 25,465 (1,284,750)
Issuance of preferred stock 1,315,359
Added paid in capital 30,060.0 -
------------ -------------
Net cash provided by financing activities $ 59,969 $ 67,882
Net cash increase for period $ 301 $ 9,579
Cash at beginning of the period 3,964 3,664
rounding (1) -
------------ -------------
Cash at the end of the period $ 4,264 $ 13,243
============ =============
Basis of Presentation
The unaudited financial statements presented herein have been prepared by
the Company, without audit, pursuant to the rules and regulations for interim
financial information and the instructions to Form 10-QSB and Regulation S-B.
Accordingly, certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principals have been omitted. These unaudited consolidated financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Report on Form 10-KSB for the fiscal year ended June
30, 2000. In the opinion of management, the unaudited financial statements
reflect all adjustments (consisting of normal recurring accruals only), which
are necessary to present fairly the consolidated financial position, results of
operations, and changes in cash flow of the company. Operating results for
interim periods are not necessarily indicative of the results which may be
expected for the entire year.
4
<PAGE>
Cash
----
Cash balances are maintained in a single financial institution. The
balances from time to time exceed the federally insured limits of $100,000.
The company has experienced no losses in these accounts and believes that it
is not exposed to any significant
risk of loss on its cash balances. The cost and fair market value of any
financial instruments held are approximately equal.
Revenues
--------
Revenues from products and engineering sales are recognized when the
products are shipped and services preformed. Royalties and license fees are
recognized upon completion of the terms of the agreement.
Foreign based revenue accounted for 100% of the revenues earned from sales
of product and royalties during this quarter. All sales were made and received
in United States dollars. There was no currency exchange risk.
Item 2. Management's Discussion and Analysis
---------------------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESUTS OF
OPERATIONS.
Notes payable to a group of secured creditors - "The Gant Group"
----------------------------------------------------------------
As discussed more completely in NOTE 8 -- NOTES PAYABLE
(SECURED)/CONVERTIBLE NOTE (SECURED) found in the auditor's report in the Form
10-KSB filed by the company for the period ending June 30, 2000, the Mathews
Group has been making principal and interest payments to the Gant Group for a
note from the company held by the Gant Group. Payments on this note are current.
Liquidity and Capital Resources
-------------------------------
Debt owed by the Company at September 30, 2000 was as follows
(unaudited) (unaudited) increase
30-Sep-00 30-Jun-00 (decrease)
Notes Payable (secured) $ 85,040 $ 108,366 $ (23,326)
Convertible note (secured) 275,647 252,322 23,325
Bank overdraft 5,194 35,362 (30,168)
Accounts payable & accrued expenses $ 565,013 $ 412,083 152,930
---------- ---------- ---------
Total liabilities $ 930,894 $ 808,133 $ 122,761
=========== ========== =========
During the period ending September 30, 2000 the company added to its
accounts payable during the period accounting for 49% of the increase in
debt. The company took on these additional payables to record the additional
costs for professional services.
5
<PAGE>
The working capital of the company is shown below. The company's liquidity
has declined during the quarter.
30-Sep-00 30-Jun-00
(unaudited) (unaudited)
Working capital (deficit) $ (415,127) $ (346,772)
=============== ===============
The company does not expect revenues from operations to be adequate to meet
all costs and expenses of the company for the remainder of the fiscal year. The
company must secure adequate and stable financing to allow it to meet the
selling opportunities that exist. The company is continuing to solicit present
customers, develop future customers, add sufficient staff, and raise additional
investment in order to increase its sales. However, there is no assurance that
any of these efforts will result in additional sales sufficient to generate
adequate revenues to meet the costs and expenses of company operations.
Financial and Operational Outlook
---------------------------------
The company received orders for its programmable hand scanners in the
amount of $44,000 from foreign customers during the quarter. These scanners were
completed and delivered during the quarter.
The royalty from Mitsubishi for sales in Korea and other countries
continued to be received and is expected to bring a constant stream of revenue
into the company on a quarterly basis in the future.
Working models of our scanners have been received and paid for by a company
in North America and Korea. Future sales to these companies are possible.
Results of Operations
---------------------
Comparison of the quarter ending September 30, 2000 with
the quarter ending September 30, 1999.
The Company had revenues of $79,854 in the quarter ended September 30,
2000, as compared with $45,852 during the quarter ending September 30, 1999. The
revenues for the quarter in 2000 were from sales of scanners and royalties. The
revenues from the 1999 quarter were also from scanner sales, engineering sales,
and royalties. The Company is in discussion with several potential customers for
fixed and portable scanner sales but cannot reasonably project future revenues
at this time. Foreign business companies have inquired about licensing the
Company's software for use outside of North America. There is no assurance at
this time that the company can generate sufficient revenue to break even in the
foreseeable future.
Operating expenses increased in the September 2000 quarter as compared to
the 1999 quarter due to an increase in operating activity on the part of
management to complete the sales made in the year ended June 30, 2000 and to
raise money for on going operations of the business.
(unaudited) For the Quarter Ending September 30,
Expense category 2000 1999 Inc/(dec)
---- ---- ---------
General and Administrative $ 192,891 $ 50,975 $141,916
Sales and marketing $ - $ 3,792 $ (3,792)
Engineering, R&D $ 1,692 $ 42,797 $(41,105)
------------ ------------ --------
$ 194,583 $ 97,564 $ 97,019
============ ============ ========
6
<PAGE>
Engineering, R&D expenses decreased because the Company is moving out
of the engineering development phase of its products and into the marketing and
selling phase of its operations.
Sales and marketing expenses decreased due to time spent trying to
attract capital investment in the company.
Capital Expenditures and Future Commitments
-------------------------------------------
Capital expenditures amounting to $3,238.00 were made during the period
for office equipment. There are no current commitments for material capital
expenditures during the next 9 months. The company believes its need for
additional capital equipment will continue if expected new orders are placed for
its products. The amount of such additional capital required is uncertain and
may be beyond that which is generated from operations.
Factors that may effect future results.
---------------------------------------
The Matthews Group continues to make payments of $18,518.52 per month
as required by the subscription agreement. The Matthews Group has, from time to
time, advanced amounts in addition to the required monthly payment as needed to
finance the continued operations of the company. The company's marketing, sales,
and production program will require additional financing until the revenue from
sales exceeds the cash provided from sales collections and the payments of
$18,518.52 per month. There is no formal commitment on the part of the Matthews
Group or any other person to provide this additional cash.
PART II OTHER INFORMATION
-------------------------
Item 1. Legal Proceedings.
---------------------------
As explained more completely in Form 10-KSB filed for the period ending
June 30, 2000 by the company, a shareholder is suing the company and various
individuals alleging actions were taken without proper authority of the
corporation's board of directors and/or contrary to the plan of reorganization
the corporation filed and completed under Chapter 11 of the U.S. Bankruptcy Act.
Subsequent to the end of the period represented by this Form 10-QSB an answer
was filed and motions submitted to dismiss this action. Results of these answers
and motions are pending at this time.
Item 2. Changes in Securities.
-------------------------------
None.
Item 3. Defaults Upon Senior Securities.
-----------------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders.
-------------------------------------------------------------
No matters were submitted to a vote of security holders during the
period covered by this report.
7
<PAGE>
Item 5. Other Information.
---------------------------
None.
Item 6. Exhibits and Reports on Form 8-K.
------------------------------------------
None.
8
<PAGE>
SIGNATURES
In accordance with requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Veritec Inc.
-------------------------
Date: Nov 3 2000 /s/ Van Tran
--------------------------------- -----------------------
Van Tran - CEO
Date: Nov 3 2000 /s/ Charles HunterMann
--------------------------------- -----------------------
Charles HunterMann - CFO
9
