Nevada
|
95-3954373
|
(State
or Other Jurisdiction of
Incorporation
or Organization)
|
(IRS
Employer
Identification
No.)
|
2445 Winnetka Avenue N. Golden Valley,
MN
|
55427
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Page No. | |||
PART I | 3 | ||
ITEM 1 | FINANCIAL STATEMENTS | 3 | |
ITEM
2
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
14 | |
ITEM 3 | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 17 | |
ITEM 4T | CONTROLS AND PROCEDURES | 17 | |
PART II | 19 | ||
ITEM
1
|
LEGAL
PROCEEDINGS
|
19 | |
ITEM 1A | RISK FACTORS | 19 | |
ITEM 6 | EXHIBITS | 19 | |
SIGNATURES | 19 | ||
December
31,
|
June
30,
|
||||||||||
2009
|
2009
|
||||||||||
ASSETS
|
(Unaudited)
|
||||||||||
Current
Assets:
|
|||||||||||
Cash
|
$
|
14,659
|
|
$
|
50,019
|
||||||
Accounts
receivable, net of allowance of $8,400
|
31,840
|
28,376
|
|||||||||
Notes
receivable
|
10,000
|
--
|
|||||||||
Inventories
|
7,177
|
6,217
|
|||||||||
Prepaid
expenses
|
10,031
|
23,281
|
|||||||||
Employee
advances
|
6,236
|
8,500
|
|||||||||
Total Current
Assets
|
79,943
|
116,393
|
|||||||||
Property
and Equipment, net of accumulated depreciation of $165,115 and
$139,984
|
68,161
|
93,292
|
|||||||||
Patent
costs
|
43,756
|
43,756
|
|||||||||
Total Assets
|
$
|
191,860
|
$
|
253,441
|
|||||||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|||||||||||
Current
Liabilities:
|
|||||||||||
Notes
payable
|
$
|
1,735,085
|
$
|
20,039
|
|||||||
Accounts
payable
|
404,448
|
187,368
|
|||||||||
Accrued
expenses
|
260,735
|
353,161
|
|||||||||
Total Current
Liabilities
|
2,400,268
|
560,568
|
|||||||||
Notes
Payable, net of current portion
|
--
|
885,673
|
|||||||||
Commitments
and Contingencies
|
|||||||||||
Stockholders’
Deficit:
|
|||||||||||
Convertible
preferred stock, par value $1.00; authorized 10,000,000 shares, 276,000
shares of Series H authorized, 1,000 shares issued
|
1,000
|
1,000
|
|||||||||
Common
stock, par value $.01; authorized 20,000,000 shares, 15,860,088 and
16,165,088 shares issued
|
158,601
|
161,651
|
|||||||||
Additional
paid-in capital
|
14,256,792
|
13,943,046
|
|||||||||
Accumulated
deficit
|
(16,624,801
|
)
|
(15,298,497
|
)
|
|||||||
Total Stockholders’
Deficit
|
(
2,208,408
|
)
|
(
1,192,800
|
)
|
|||||||
Total Liabilities and
Stockholders’ Deficit
|
$
|
191,860
|
$
|
253,441
|
Three
months ended December 31,
|
||||||||
2009
|
2008
|
|||||||
License
and other revenue
|
$
|
119,017
|
$
|
268,327
|
||||
Cost
of Sales
|
129,426
|
64,351
|
||||||
Gross
Profit
|
(10,409
|
)
|
203,976
|
|||||
Operating
Expenses:
|
||||||||
Selling, general and
administrative
|
418,535
|
255,058
|
||||||
Research and
development
|
151,976
|
135,277
|
||||||
Total Operating
Expenses
|
570,511
|
390,335
|
||||||
Loss
from Operations
|
(580,920
|
)
|
(186,359
|
)
|
||||
Other
Income(Expense):
|
||||||||
Interest
income
|
--
|
891
|
||||||
Interest
expense
|
(34,923
|
)
|
--
|
|||||
Total
Other Income(Expense)
|
(34,923
|
)
|
891
|
|||||
Net
Loss
|
$
|
(615,843
|
)
|
$
|
(185,468
|
)
|
||
Loss
Per Common Share,
|
||||||||
Basic
and Diluted
|
$
|
(0.04
|
)
|
$
|
(0.01
|
)
|
Weighted
Average Number of Shares Outstanding,
|
||||||||
Basic
and Diluted
|
16,208,131
|
15,115,088
|
Six
months ended December 31,
|
||||||||
2009
|
2008
|
|||||||
License
and other revenue
|
$
|
319,658
|
$
|
700,859
|
||||
Cost
of Sales
|
288,884
|
127,946
|
||||||
Gross
Profit
|
30,774
|
572,913
|
||||||
Operating
Expenses:
|
||||||||
Selling, general and
administrative
|
954,947
|
576,434
|
||||||
Research and
development
|
339,981
|
234,372
|
||||||
Total Operating
Expenses
|
1,294,928
|
810,806
|
||||||
Loss
from Operations
|
(1,264,154
|
)
|
(237,893
|
)
|
||||
Other
Income(Expense):
|
||||||||
Interest
income
|
30
|
1,952
|
||||||
Interest
expense
|
(62,179
|
)
|
--
|
|||||
Total
Other Income(Expense)
|
(62,149
|
)
|
1,952
|
|||||
Net
Loss
|
$
|
(1,326,303
|
)
|
$
|
(235,941
|
)
|
||
Loss
Per Common Share,
|
||||||||
Basic
and Diluted
|
$
|
(0.08
|
)
|
$
|
(0.02
|
)
|
Weighted
Average Number of Shares Outstanding,
|
||||||||
Basic
and Diluted
|
16,245,305
|
15,115,088
|
|
Additional
|
||||||||||||
Preferred
Stock
|
Common
|
Stock |
Paid-in
|
Accumulated
|
|||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
|||||||
Balance,
July 1, 2009
|
1,000
|
$ 1,000
|
16,165,088
|
$ 161,651
|
$
13,943,046
|
$(15,298,497)
|
$ (1,192,800)
|
||||||
Stock
Based Compensation
|
65,446
|
65,446
|
|||||||||||
Shares
Issued for Services
|
175,000
|
1,750
|
173,500
|
175,250
|
|||||||||
Conversion
of Notes Payable
|
70,000
|
700
|
69,300
|
70,000
|
|||||||||
Shares
Returned
|
(550,000)
|
(5,500)
|
5,500
|
-
|
|||||||||
Net
Loss for the Period
|
-
|
-
|
-
|
-
|
-
|
(1,326,303)
|
(1,326,303)
|
||||||
Balance,
December 31, 2009
|
1,000
|
$ 1,000
|
15,860,088
|
$ 158,601
|
$
14,256,792
|
$(16,624,800)
|
$ (2,208,407)
|
||||||
Six
months ended December 31,
|
||||||||
2009
|
2008
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
loss
|
$
|
(1,326,303
|
)
|
$
|
(235,941
|
)
|
||
Adjustments
to reconcile net loss to net cash used by operating
activities:
|
||||||||
Depreciation
|
25,131
|
19,469
|
||||||
Amortization
of debt issuance cost
|
4,090
|
--
|
||||||
Amortization
of discount on notes payable
|
6,633
|
--
|
||||||
Fair
value of stock options issued to employees
|
65,445
|
16,117
|
||||||
Fair
value of stock issued for services
|
137,750
|
22,717
|
||||||
Interest
accrued on notes payable
|
55,190
|
--
|
||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(3,464
|
)
|
10,775
|
|||||
Inventories
|
(960
|
)
|
14,384
|
|||||
Employee advances
|
2,264
|
--
|
||||||
Prepaid expenses
|
13,250
|
(45,000
|
)
|
|||||
Accounts payables and accrued
expenses
|
162,154
|
44,332
|
||||||
Net
cash used by operating activities
|
(858,820
|
)
|
(153,147
|
)
|
||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Purchase
of property and equipment
|
--
|
(9,017
|
)
|
|||||
Issuance
of note receivable
|
(10,000)
|
--
|
||||||
Net
cash used by investing activities
|
(10,000)
|
(9,017)
|
||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds
from notes payable
|
898,460
|
--
|
||||||
Payments
on notes payable
|
(65,000)
|
--
|
||||||
Net
cash provided by financing activities
|
833,460
|
--
|
||||||
NET
DECREASE IN CASH
|
(35,360)
|
(162,164
|
)
|
|||||
CASH
AT BEGINNING OF PERIOD
|
50,019
|
334,702
|
||||||
CASH
AT END OF PERIOD
|
$
|
14,659
|
$
|
172,538
|
||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
||||||||
Cash
paid for interest
|
$
|
355
|
$
|
--
|
||||
NONCASH
ACTIVITIES
|
||||||||
Issuance
of common stock for accrued expenses
|
$
|
37,500
|
$
|
--
|
||||
Issuance
of common stock in repayment of note payable
|
70,000
|
--
|
||||||
D.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
December
31, 2009
|
June
30, 2009
|
||
(UNAUDITED)
|
|||
Convertible
notes payable (includes $472,663 and $449,120, respectively, to related
parties), unsecured, interest at 8%, due September 2010 through
November 2010, net of unamortized discount of $10,474 and $17,108,
respectively, using effective interest rates ranging from 2% to 3%. The
principal and accrued interest are convertible at a conversion price of
$0.30. The principal and interest is due immediately on the event of
default or change of control. The holders also received warrants to
purchase one share of common stock for every $2 of investment. The Company
recorded a $20,981 discount on the notes payable for the value of the
warrants issued. The discount is being amortized over the term of the
notes payable
|
$ 575,335
|
$ 546,564
|
|
Convertible
notes payable to related parties, unsecured, principal and interest are
convertible into common stock at $0.30 to $0.33 per share, interest at 8 %
to 10%, due July to November 2010.
|
444,930
|
339,109
|
|
Convertible
note payable to related party, secured by the Company’s intellectual
property, principal and interest are convertible into common stock at
$0.25 per share subject to board of directors’ approval, interest at 8%
due November 2010.
|
197,860
|
--
|
|
Note
payable to related party, secured by the Company’s intellectual property,
interest at 8% due August 2010
|
388,864
|
--
|
|
Notes
payable to related parties, unsecured, interest at 0% to 8%, due on
demand
|
106,403
|
--
|
|
Note
payable, unsecured, interest at 10%, due January 2010
|
20,170
|
--
|
|
Convertible
note payable, unsecured, principal and interest are convertible into
common stock at $1.00 per share subject to board of directors’ approval,
interest at 8% due November 2009.
|
1,523
|
20,039
|
|
Total
|
1,735,085
|
905,712
|
|
Less:
Current portion
|
1,735,085
|
20,039
|
|
Notes
Payable, less current portion
|
$ --
|
$ 885,673
|
|
Stock
options
|
Number
of
|
Weighted
- Average
|
||||
Shares
|
Exercise
Price
|
||||
Outstanding
at June 30, 2009
|
721,749
|
$0.49
|
|||
Granted
|
97,500
|
$0.38
|
|||
Outstanding
at December 31, 2009
|
819,249
|
$0.48
|
ITEM
1A
|
RISK
FACTORS
|
ITEM
6
|
EXHIBITS
|
31.1
|
CEO
Certification required by Rule 13a14(a)/15d14(a) under the Securities
Exchange Act of 1934.
|
31.2
|
CFO
Certification required by Rule 13a14(a)/15d14(a) under the Securities
Exchange Act of 1934.
|
32.1
|
Veritec,
Inc. Certification of CEO/Executive Chair pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (18 U.S.C.
§1350).
|
32.2
|
Veritec,
Inc. Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002 (18 U.S.C. §1350).
|
|
|
SIGNATURES
|