**U.S.
        SECURITIES AND EXCHANGE COMMISSION**
 Washington,
        D.C. 20549
  **FORM
        10-QSB**
  (Mark
        One)
  **x
        QUARTERLY REPORT
        PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES**
 **EXCHANGE
        ACT OF 1934**
  For
        the
        Quarterly period ended March 31, 2007
  **o
        TRANSITION REPORT UNDER
        SECTION 13 OR 15(d) OF THE EXCHANGE ACT**
  For
        the
        transition period from ______________ to ______________
  *Commission
        file number 000-28195*
  **VERSADIAL,
        INC.**
 (Exact
        name of small business issuer as specified in its charter)
  Nevada
                
                11-3535204(State
                    or other jurisdiction of
                
                (State
                    or I.R.S. Employerincorporation
                    of organization)
                
                Identification
                    Number)
  305
        Madison Avenue, Suite 4510, New York, New York 10165
 (Address
        of principal executive offices)
  212-986-0886
 (Issuer’s
        telephone number including area code)
  Indicate
        by check mark whether the registrant (1) has filed all reports required to
        be
        filed by Section 13 or 15(d) of the Exchange Act during the preceding 12
        months
        (or for such shorter period that the registrants were required to file such
        reports) and (2) has been subject to such filing requirements for the past
        90
        days.
  Yes
x No
o
  Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12B-2 of the Exchange Act).
  Yes
oNo
x
  **APPLICABLE
        ONLY TO CORPORATE ISSUERS**
  Indicate
        the number of shares outstanding of each of the issuer’s class of common stock,
        as of the latest practicable date: 13,539,470 shares of common stock, par
        value
        $0.0001 per share, as of May 21, 2007.
  
 
  **VERSADIAL,
        INC.**
 FORM
        10-QSB
 QUARTERLY
        REPORT
 For
        the Nine Months Ended March 31, 2007
 
 TABLE
        OF CONTENTS
  Part
                    I - Financial InformationItem
                    1. Consolidated Financial Statements:Consolidated
                    Balance Sheet
                
                1Consolidated
                    Statements of Operations
                
                2Consolidated
                    Statements of Cash Flows
                
                3-4Notes
                    to Consolidated Financial Statements
                
                5-15Item
                    2. Management’s Discussion and Analysis of Financial Condition and Results
                    of Operations
                
                16-21Item
                    3. Controls and Procedures
                
                22Part
                    II. - Other Information
                
                23-24Signatures
                
                25Exhibit
                    31Exhibit
                    32
  
 **Item
          1. Financial Statements**
 **VERSADIAL,
            INC.**
  **CONSOLIDATED
          BALANCE SHEET**
  **March
                    31,****2007****(unaudited)****ASSETS****Current
                    assets**Cash
                
                $
                133,305Due
                    from affiliates
                
                
                36,382Accounts
                    receivable
                
                
                336,531Inventories
                
                
                649,266Prepaid
                    expenses and other current assets
                
                
                160,304Total
                    current assets
                
                
                1,315,788**Property
                    and equipment,**net
                
                
                3,220,496**Other
                    assets**Deferred
                    financing costs
                
                
                653,742Security
                    deposit
                
                
                34,155Total
                    other assets
                
                
                687,897$
                5,224,181**LIABILITIES
                    AND STOCKHOLDERS' DEFICIT****Current
                    liabilities**Notes
                    and interest payable, net of debt discount of $411,928
                
                $
                2,156,075Notes
                    and interest payable, related parties
                
                
                1,479,487Interest
                    payable on convertible note
                
                
                487,500Due
                    to licensor
                
                
                415,274Accounts
                    payable and accrued expenses
                
                
                1,046,291Due
                    to related parties
                
                
                197,067Customer
                    deposits
                
                
                18,911Total
                    current liabilities
                
                
                5,800,605**Long-term
                    liabilities**Convertible
                    note and interest payable, net of debt discount of
                    $472,177
                
                
                7,408,288Customer
                    advance
                
                
                700,000Derivative
                    financial instruments
                
                
                1,559,711Sublease
                    security deposit, affiliate
                
                
                6,8309,674,829**Commitments
                    and contingencies****Stockholders'
                    deficit**Preferred
                    stock, $.0001 par value, 2 million shares authorized,zero
                    issued and outstandingCommon
                    stock, $.0001 par value, 35 million shares authorized,13,539,470
                    issued and outstanding
                
                
                1,354Additional
                    paid-in-capital
                
                
                1,488,881Accumulated
                    deficit
                
                
                (11,741,488
                )Total
                    stockholders' deficit
                
                
                (10,251,253
                )$
                5,224,181
  *See
            accompanying condensed notes to consolidated financial
            statements*
  1
  **VERSADIAL,
            INC.**
  **CONSOLIDATED
            STATEMENTS OF OPERATIONS**
  **Nine
                      Months Ended**
                  
                  **Three
                      Months Ended****March
                      31,**
                  
                  **March
                      31,****2007**
                  
                  **2006**
                  
                  **2007**
                  
                  **2006****(unaudited)**
                  
                  **(unaudited)**
                  
                  **(unaudited)**
                  
                  **(unaudited)****Net
                      revenues**
                  
                  $
                  1,168,356
                  
                  $
                  182,115
                  
                  $
                  727,386
                  
                  $
                  124,695**Cost
                      of revenues**Direct
                      costs
                  
                  
                  1,100,748
                  
                  
                  143,865
                  
                  
                  687,057
                  
                  
                  95,366Indirect
                      costs
                  
                  
                  516,880
                  
                  
                  330,662
                  
                  
                  201,008
                  
                  
                  143,7811,617,628
                  
                  
                  474,527
                  
                  
                  888,065
                  
                  
                  239,147**Gross
                      margin**
                  
                  
                  (449,272
                  )
                  
                  (292,412
                  )
                  
                  (160,679
                  )
                  
                  (114,452
                  )**Operating
                      expenses**General
                      and administrative
                  
                  
                  2,313,071
                  
                  
                  1,435,917
                  
                  
                  829,362
                  
                  
                  592,512**Loss
                      from operations**
                  
                  
                  (2,762,343
                  )
                  
                  (1,728,329
                  )
                  
                  (990,041
                  )
                  
                  (706,964
                  )**Other
                      income (expenses)**Sublease
                      income, affiliates
                  
                  
                  5,400
                  
                  
                  73,440
                  
                  
                  (13,848
                  )
                  
                  24,480Interest
                      expense
                  
                  
                  (958,512
                  )
                  
                  (166,064
                  )
                  
                  (372,206
                  )
                  
                  (78,561
                  )Interest
                      expense, related parties
                  
                  
                  (79,245
                  )
                  
                  (112,333
                  )
                  
                  (23,371
                  )
                  
                  (36,861
                  )Amortization
                      of debt discount
                  
                  
                  (573,036
                  )
                  
                  -
                  
                  
                  (311,533
                  )
                  
                  -Amortization
                      of financing costs
                  
                  
                  (340,384
                  )
                  
                  (55,697
                  )
                  
                  (181,548
                  )
                  
                  (15,411
                  )Loss
                      on derivative financial instruments
                  
                  
                  (102,570
                  )
                  
                  -
                  
                  
                  (58,434
                  )
                  
                  -Gain
                      (loss) on foreign currency exchange
                  
                  
                  (43,472
                  )
                  
                  1,754
                  
                  
                  (21,969
                  )
                  
                  (545
                  )(2,091,819
                  )
                  
                  (258,900
                  )
                  
                  (982,909
                  )
                  
                  (106,898
                  )**Net
                      loss**
                  
                  $
                  (4,854,162
                  )
                  $
                  (1,987,229
                  )
                  $
                  (1,972,950
                  )
                  $
                  (813,862
                  )**Weighted
                      average common shares outstanding**Basic
                  
                  
                  13,005,263
                  
                  
                  10,662,173
                  
                  
                  13,539,470
                  
                  
                  10,662,173Diluted
                  
                  
                  14,240,614
                  
                  
                  11,377,319
                  
                  
                  14,455,603
                  
                  
                  11,377,319**Loss
                      per common share**Basic
                      and Diluted
                  
                  $
                  (0.373
                  )
                  $
                  (0.186
                  )
                  $
                  (0.146
                  )
                  $
                  (0.076
                  )
  *See
            accompanying condensed notes to consolidated financial
            statements*
  2
  **VERSADIAL,
            INC.**
  **CONSOLIDATED
            STATEMENTS OF CASH FLOWS**
  **Nine
                      Months Ended****March
                      31,****2007**
                  
                  **2006****(unaudited)**
                  
                  **(unaudited)****Cash
                      flows from operating activities**Net
                      loss
                  
                  $
                  (4,854,162
                  )
                  $
                  (1,987,229
                  )Adjustments
                      to reconcile net loss to net cashused
                      in operating activities:Depreciation
                      and amortization
                  
                  
                  274,299
                  
                  
                  182,197Amortization
                      of debt discount
                  
                  
                  573,036
                  
                  
                  -Amortization
                      of financing costs
                  
                  
                  340,384
                  
                  
                  55,697Loss
                      on derivative financial instruments
                  
                  
                  102,570
                  
                  
                  -Changes
                      in operating assets and liabilities:Due
                      from affiliates
                  
                  
                  15,126
                  
                  
                  (81,561
                  )Accounts
                      receivable
                  
                  
                  (228,152
                  )
                  
                  (69,094
                  )Inventories
                  
                  
                  (535,371
                  )
                  
                  (32,065
                  )Prepaid
                      expenses and other current assets
                  
                  
                  (109,868
                  )
                  
                  (40,837
                  )Due
                      to licensor
                  
                  
                  135,200
                  
                  
                  138,621Accounts
                      payable and accrued expenses
                  
                  
                  536,485
                  
                  
                  (75,414
                  )Due
                      to related parties
                  
                  
                  37,885
                  
                  
                  63,750Customer
                      deposits
                  
                  
                  (10,618
                  )
                  
                  1,200Interest
                      payable
                  
                  
                  1,105,076
                  
                  
                  233,735**Net
                      cash used in operating activities**
                  
                  
                  (2,618,110
                  )
                  
                  (1,611,000
                  )**Cash
                      flows from investing activities**Purchase
                      of equipment
                  
                  
                  (2,533,079
                  )
                  
                  (430,506
                  )Payments
                      for merger costs
                  
                  
                  (142,919
                  )Net
                      cash acquired from merger
                  
                  
                  95**Net
                      cash used in investing activities**
                  
                  
                  (2,675,903
                  )
                  
                  (430,506
                  )**Cash
                      flows from financing activities**Proceeds
                      from issuance of convertible notes
                  
                  
                  1,706,846
                  
                  
                  450,000Proceeds
                      from issuance of notes
                  
                  
                  2,450,000
                  
                  
                  2,350,000Proceeds
                      from customer advance
                  
                  
                  700,000Payment
                      on notes payable to related parties
                  
                  
                  (30,000
                  )Payments
                      for financing costs
                  
                  
                  (267,702
                  )
                  
                  (62,500
                  )Distributions
                      to investors
                  
                  
                  (49,122
                  )Payments
                      on equipment lease
                  
                  
                  
                  
                  
                  (84,437
                  )**Net
                      cash provided by financing activities**
                  
                  
                  4,510,022
                  
                  
                  2,653,063**Net
                      (decrease) increase in cash**
                  
                  
                  (783,991
                  )
                  
                  611,557**Cash,
                      beginning of period**
                  
                  
                  917,296
                  
                  
                  55,244**Cash,
                      end of period**
                  
                  $
                  133,305
                  
                  $
                  666,801
  *See
            accompanying condensed notes to consolidated financial
            statements*
  3
  **VERSADIAL,
            INC.**
 **CONSOLIDATED
              STATEMENTS OF CASH FLOWS (CONTINUED)**
  **Nine
                      Months Ended****March
                      31,****2007**
                  
                  **2006****(unaudited)**
                  
                  **(unaudited)****Supplemental
                      disclosure of cash flow information,**cash
                      paid during the period for interest
                  
                  $
                  464,592
                  
                  $
                  50,359**Supplemental
                      disclosure of non-cash investing and financing,****activities:**Convertible
                      debentures converted to common stock
                  
                  $
                  1,200,000
                  
                  $
                  -Debt
                      discount related to convertible note and secured line of
                      credit
                  
                  $
                  1,457,141
                  
                  $
                  -Accounts
                      payable converted into promissory note
                  
                  $
                  -
                  
                  $
                  104,284Shares
                      formerly subject to redemption converted to common stock
                  
                  $
                  887,403
                  
                  $
                  -Reclassification
                      of deferred financing cost payable to equity
                  
                  $
                  42,588
                  
                  $
                  -Issuance
                      of Mellon convertible notes
                  
                  $
                  7,500,000Payments
                      made directly to debtholders
                  
                  
                  (4,517,154
                  )Merger
                      and financing costs
                  
                  
                  (1,026,000
                  )Payment
                      made directly to licensor
                  
                  
                  (250,000
                  )Net
                      proceeds received
                  
                  $
                  1,706,846
 *See
            accompanying condensed notes to consolidated financial
            statements*
  4
  **VERSADIAL,
        INC.**
 **NOTES
        TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS**
 **MARCH
        31, 2007**
 
 **Note
        1. ORGANIZATION AND BASIS OF PRESENTATION**
 
 **Organization
        and Nature of Operations**
 
 Versadial,
        Inc. (hereinafter referred to as the “Registrant” or “Versadial” or the
“Company”), was originally incorporated in Nevada under the name
        Carsunlimited.com, Inc. (“CARS”) on March 7, 2000. CARS, a publicly traded
        corporation, prior to August 9, 2006, was a development stage company with
        limited operations and revenues and only nominal assets. Its intended purpose
        was to offer users the ability to search a database that contained products
        and
        information about the Automobile industry, new and used car sales (classified
        ads), as well as automotive products such as extended warranty information
        and
        anti-theft body part marking. On March 2, 2007, CARS changed its name to
        Versadial to capitalize on the awareness of its trademarked name for its
        products in the marketplace as described below.
 
 On
        August
        9, 2006, the Registrant executed an Agreement and Plan of Merger (“Merger
        Agreement”) with Pump Acquisition Corp. (“PAC”), a wholly-owned subsidiary of
        the Registrant , Innopump, Inc. D/B/A Versadial (“Innopump”), a Nevada
        corporation which was formed on April 1, 2005, and certain Innopump
        stockholders. Pursuant to the Merger Agreement, the Registrant issued 12,625,243
        shares of its common stock to shareholders of Innopump in consideration of
        Innopump merging with and into PAC and becoming a wholly-owned subsidiary
        of the
        Registrant (“Merger”). The Registrant, prior to the Merger, is sometimes
        referred to herein as OLDCO .The Merger is more fully described in Note 3.
        As a
        result of the merger, Innopump became a majority-owned subsidiary of OLDCO
        and
        the holders of Innopump common stock and debt acquired a majority interest
        of
        OLDCO. The accounting of this transaction differs from its legal form, as
        Innopump is considered the accounting acquirer and OLDCO the acquired entity.
        The transaction has been accounted for as a reverse acquisition under the
        purchase method of accounting, whereby the assets of OLDCO were revalued
        and the
        purchase price allocated to those assets acquired and liabilities assumed.
        Innopump’s historical financial statements were carried forward subsequent to
        the merger as those of the combined entity (hereinafter referred to as
“NEWCO”).
 
 The
        Company is engaged in the manufacture of a dispenser that enables the user
        to
        blend two liquids in varying proportions. The dispensers are manufactured
        in
        Germany and are currently being utilized in the food, suncare, skincare,
        and
        cosmetic industries.
 
 On
        May
        25, 2005, Innopump acquired all of the assets and assumed certain liabilities
        of
        Sea Change Group, LLC (“SCG”), a privately held New York Limited Liability
        Company formed in 1999. This transaction between Innopump and SCG, which
        were
        entities under common control, was accounted for in a manner similar to a
        pooling of interests whereby the assets and liabilities of SCG were transferred
        to Innopump at historical amounts. Prior to the merger with OLDCO, the financial
        statements of Innopump were prepared as if the transaction had occurred at
        the
        beginning of the period presented, and present the financial data of previously
        separate entities.
  **Basis
        of Presentation**
 
 NEWCO’s
        fiscal year ends on June 30, and therefore references to fiscal 2006 and
        2005
        refer to the fiscal years ended June 30, 2006 and June 30, 2005, respectively.
        OLDCO’s fiscal year end was December 31, which was changed to June 30 to conform
        to the year end of Innopump, the accounting acquirer.
 
 The
        accompanying condensed consolidated financial statements of the Company reflect
        the historical results of the predecessor entity, Innopump, prior to August
        9,
        2006 and the consolidated results of operations of NEWCO subsequent to the
        acquisition date of August 9, 2006.
 
 The
        common stock and per share information in the consolidated financial information
        and related notes have been retroactively adjusted to give effect to the
        reverse
        merger on August 9, 2006 and to give effect to the one for forty-five reverse
        stock split that became effective on March 2, 2007 (see Note 8).
 
 The
        accompanying unaudited consolidated financial statements have been prepared
        in
        accordance with generally accepted accounting principles for interim financial
        statements and with the instructions to Form l0-QSB and Item 310(b) of
        Regulation S-B. Accordingly, they do not include all the information and
        disclosures required for annual financial statements. These financial statements
        should be read in conjunction with the financial statements and related
        footnotes for the year ended December 31, 2005 of OLDCO, included in the
        Annual
        Report filed on Form l0-KSB for the year then ended. These financial statements
        should also be read in conjunction with Form 8-K of Versadial filed on August
        11, 2006 and Form 8-K/A of Versadial filed on October 13, 2006 with the SEC,
        which include the audited financial statements of Innopump for the years
        ended
        June 30, 2006 and 2005. These statements reflect all adjustments which are
        of a
        normal recurring nature and which, in the opinion of management, are necessary
        for a fair statement of the results for the fiscal nine months ended March
        31,
        2007 and 2006. The results of operations for the first nine months of fiscal
        2007 are not necessarily indicative of the results to be expected for the
        full
        year.
 
 5
 
 **Note
        2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
 
 **Principles
        of Consolidation**
 
 In
        December 2003, the Financial Accounting Standards Board (“FASB”) revised FASB
        Interpretation 46, “Consolidation of Variable Interest Entities” (FIN 46r”). FIN
        46r requires certain variable interest entities (“VIE”) to be consolidated by
        the primary beneficiary entity if the equity investors in the entity do not
        have
        the characteristics of a controlling financial interest or do not have
        sufficient equity at risk for the entity to finance its activities without
        additional subordinated financial support from other parties.
 
 The
        Company is the primary beneficiary of SCG under FIN 46r. SCG, as a result
        of the
        business acquisition described in Note 1, is no longer an operating entity
        and
        is dependent on the Company for all of its income consisting of future royalties
        and license fees. The Company consolidated the results of SCG’s operations for
        the nine months ended March 31, 2007, consisting of approximately $37,000
        in net
        income derived from an aggregate of $183,000 in license and royalty fees
        from
        the Company, net of interest and other operating expenses. SCG’s assets at March
        31, 2007 approximated $146,000 consisting mainly of cash, sublease income
        receivable, royalties receivable from the Company and a security deposit
        on a
        lease. SCG’s liabilities at March 31, 2007 approximated $1,505,000 consisting
        primarily of loans due to partners which were not assumed by the Company
        as part
        of the business acquisition described in Note 1. These assets and liabilities
        are included in the consolidated financial statements.
 
 The
        consolidated financial statements include the accounts of the Company and
        SCG.
        All intercompany transactions and balances have been eliminated in
        consolidation.
 
 **Inventories**
 
 Inventories
        consist principally of parts and are stated at cost on the first-in, first-out
        basis, which does not exceed market value. Finished goods are assembled per
        customer specifications and shipped upon completion.
 
 **Revenue
        Recognition**
 
 Revenues
        are generally recognized at the time of shipment. The Company requires deposits
        from certain customers which are recorded as current liabilities until the
        time
        of shipment. All shipments are picked up by the customers freight forwarders
        and
        are F.O.B. from the Company’s manufacturer. The Company bears no economic risk
        for goods damaged or lost in transit.
 
 **Impairment
        of Long-Lived Assets**
 
 Certain
        long-lived assets of the Company are reviewed at least quarterly to determine
        whether there are indications that their carrying value has become impaired,
        pursuant to guidance established in SFAS No. 144, “Accounting for the Impairment
        or Disposal of Long-Lived Assets”. Management considers assets to be impaired if
        the carrying value exceeds the future projected cash flows from related
        operations (undiscounted and without interest charges). If impairment is
        deemed
        to exist, the assets will be written down to fair value. Management also
        reevaluates the periods of amortization to determine whether subsequent events
        and circumstances warrant revised estimates of useful lives. As of March
        31,
        2007, management expects these assets to be fully recoverable.
 
 **Foreign
        Currency Transactions**
  The
        Company complies with SFAS No. 52 “Foreign Operations and Currency Translation”.
        All foreign currency transaction gains and losses are included in the Company’s
        net income (loss) in the period the exchange rate changes.
  6




**Fair
      Value of Financial Instruments**





The
      fair
      value of the Company’s assets and liabilities, which qualify as financial
      instruments under SFAS No. 107, “Disclosures About Fair Value of Financial
      Instruments,” approximate the carrying amounts presented in the consolidated
      balance sheet.





**Derivative
      Financial Instruments**





The
      Company accounts for non-hedging contracts that are indexed to, and potentially
      settled in, its own common stock in accordance with the provisions of EITF
      No.
      00-19, “Accounting for Derivative Financial Instruments Indexed to, and
      Potentially Settled in, a Company’s Own Stock”. These non -hedging contracts
      accounted for in accordance with EITF No. 00-19 include freestanding warrants
      and options to purchase the Company’s common stock as well as embedded
      conversion features that have been bifurcated from the host financing contract
      in accordance with the requirements of SFAS No. 133, “Accounting for Derivative
      Instruments and Hedging Activities”. Under certain circumstances that could
      require the Company to settle these equity items in cash or stock, and without
      regard to probability, EITF 00-19 could require the classification of all or
      part of the item as a liability and the adjustment of that reclassified amount
      to fair value at each reporting date, with such adjustments reflected in the
      Company’s consolidated statements of operations.





**Use
      of Estimates**





The
      preparation of financial statements in conformity with accounting principles
      generally accepted in the United States of America 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 the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates.




**Note
      3. MERGER AGREEMENT**





On
      August
      9, 2006, OLDCO executed an Agreement and Plan of Merger (“Merger Agreement”)
      with Pump Acquisition Corp., a wholly-owned subsidiary of OLDCO (“PAC”),
      Innopump, and certain Innopump stockholders. Pursuant to the Merger Agreement,
      the Company issued 12,625,243 shares of its common stock to shareholders of
      Innopump in consideration of Innopump merging with and into PAC and becoming
      a
      wholly-owned subsidiary of OLDCO (“Merger”). Holders of Innopump convertible
      notes, warrants and options received equivalent amount of notes, warrants and
      options convertible or exercisable into that number of the Registrant common
      stock had they converted or exercised immediately prior to the closing.





The
      Merger Agreement required OLDCO to issue to the Innopump stockholders
      approximately 43.333 shares of common stock for each share of Innopump common
      stock outstanding at the closing date of August 9, 2006. At the closing, there
      were 262,500 outstanding shares of Innopump common stock plus 28,792 shares
      issued on conversion of certain debt for a total of 291,292 shares which
      resulted in the issuance of 12,625,243 shares (rounded up for fractional shares)
      of common stock and resulted in OLDCO stockholders retaining approximately
      6.75%
      (914,227 shares rounded up for fractional shares) of the outstanding stock
      and
      Innopump stockholders receiving approximately 93.25% of the outstanding stock
      on
      a pre-diluted basis.





The
      parties’ completion of the transactions contemplated under the Merger Agreement
      were subject to the satisfaction of certain contingencies including, without
      limitation, requisite approvals and consents and that OLDCO shall have no less
      than $7,500,000 in cash or cash equivalents and no more than $80,000 in
      liabilities immediately prior to closing (see Note 5). These conditions were
      deemed satisfied at the closing.





NEWCO
      incurred merger costs of approximately $503,000, which were charged to equity,
      consisting of approximately a $350,000 advisory fee payable to the investment
      banker and $153,000 in legal fees. The investment banker agreed to defer payment
      of $175,000 of the advisory fee until February 2007. The deferred portion of
      the
      fee was paid on February 9, 2007 pursuant to the agreement with the investment
      banker. All other fees were paid at or subsequent to the closing.





7





The
      following supplemental pro forma information is presented to illustrate the
      effects of the acquisition of Innopump on the historical operating results
      for
      the nine and three months ended March 31, 2007 and 2006 as if the acquisition
      had occurred at the beginning of the respective period:





Nine
                Months Ended
            
            Three
                Months EndedMarch,
                31
            
            March,
                312007
            
            2006
            
            2007
            
            2006Revenues
            
            $
            1,168,356
            
            $
            182,115
            
            $
            727,386
            
            $
            124,695Net
                loss
            
            $
            (4,948,238
            )
            $
            (3,015,475
            )
            $
            (1,972,950
            )
            $
            (935,481
            )Net
                loss per share
            
            $
            (0.365
            )
            $
            (0.223
            )
            $
            (0.146
            )
            $
            (0.069
            )





The
      above
      unaudited pro forma condensed financial information is presented for
      illustrative purposes only and is not necessarily indicative of the condensed
      consolidated results of operations that actually would have been realized had
      Innopump and OLDCO been a combined company during the specified
      periods.





**Note
      4. GOING CONCERN**





The
      accompanying financial statements have been prepared in conformity with
      accounting principles generally accepted in the United States of America, which
      contemplate continuation of the Company as a going concern. At March 31, 2007,
      the Company has incurred cumulative losses of approximately $11.7 million since
      inception and $4.9 million for the nine months ended March 31, 2007. The Company
      has a working capital deficit of approximately $4.5 million and a stockholders’
deficit of approximately $10.3 million as of March 31, 2007.





On
      August
      9, 2006, concurrent with the merger, OLDCO sold 10% senior redeemable
      convertible debt (“Convertible Debt”) in the principal amount of $7.5 million to
      Mellon HBV Master U.S. Event Driven Fund, L.P. and Mellon HBV Master Global
      Event Driven Fund, L.P. (now known as Fursa Master Global Event Driven Fund,
      LP,
      and referred to herein as the “Investor”). The note bears interest at 10% per
      annum and is due on February 9, 2009 (see Note 5). The proceeds were first
      used
      to pay approximately $1 million in financing and legal fees, $4.5 million in
      current notes payable and accrued interest and $250,000 in other current
      obligations which became due on the date of the merger. The Company received
      net
      proceeds of approximately $1.7 million, which management used for working
      capital needs.





At
      June
      30, 2006, the Company had approximately $7.1 million in current notes payable
      and accrued interest. On August 9, 2006, prior to the reverse merger with OLDCO,
      the Company converted $1.2 million of these notes into common stock. As noted
      above, the Company repaid approximately $4.5 million with the proceeds from
      the
      $7.5 million financing. At March 31, 2007, current notes payable of
      approximately $1.5 million are primarily due to shareholders which management
      believes will be extended prior to maturity (see Note 10). The balance of
      current notes payable of approximately $2.6 million (gross of amortizable debt
      discount) are due on February 1, 2008 (see Note 5).





On
      September 29, 2006, the Company received $700,000 from a customer in the
      consumer products industry in exchange for the Company’s undertaking to deliver
      pre-production samples of a specially designed dual chamber dispensing pump
      and
      to fund pre-production tooling and mold expenses. The Company had no obligation
      to repay the advance, if the samples did not satisfy the customer’s
      requirements. In May, 2007, the customer approved the pre-production samples
      and
      on May 14, 2007 advanced the Company an additional $1.0 million to fund
      pre-production tooling and mold expenses. The $1.7 million advance will be
      applied against future revenues as a credit against shipments commencing six
      months after the date of the first shipment and based on repayment at a rate
      of
      a certain amount per piece for all products shipped. In the event of a default
      by the Company, the customer may, at its discretion, recover the remaining
      amount of the advance as a credit against other product purchases from the
      Company or will be due from the Company under the terms of a promissory note
      to
      be issued at the time of default (see Notes 7 and 10). Management anticipates
      that the Company will enter into an exclusive supply relationship with this
      customer for a term in excess of one year.




On
      February 1, 2007 the Company entered into a Secured Line Of Credit Agreement
      (“Credit Agreement”) with Fursa Alternative Strategies, LLC (referred to herein
      as the “Lender”), which acts as the investment advisor to the Investor, allowing
      the Company to draw upon a $3.0 million line of credit with a Maturity Date
      of 1
      year from the date of the Credit Agreement, which may be extended for an
      additional 3 months. The per annum base Interest Rate applicable in each month
      that advances are drawn down or outstanding pursuant to the Credit Agreement
      is
      equal to the three month LIBOR rate as published on the first date of such
      month
      in the “Money Rates” section of The Wall Street Journal (rounded up or down to
      the nearest one-sixteenth of one percent) plus 700 basis points (7.0%). Upon
      a
      default under the terms of the Note, the Interest Rate would increase by 4%.
      In
      addition, on the maturity date, the Company shall pay the Lender a
      non-refundable fee equal to .75% on the average monthly undrawn portion of
      the
      Maximum Amount of the line of credit ($3.0 million). At March 31, 2007, the
      Company had utilized $2.45 million of the available line of credit. (see Note
      5).





8




Management
      recognizes that the Company must generate additional revenue and sufficient
      gross profits to achieve profitable operations. Management’s plans to increase
      revenues include the continued building of its customer base and product line
      as
      well as commencing production at a domestic manufacturing facility in the United
      States and entering into a supply agreement with a customer in the consumer
      products industry as related to the manufacture of a new size dispenser (see
      Notes 7, 9 and 10). Management believes that the capital received as a result
      of
      the above transactions and the credit available under the secured line of credit
      may not be sufficient to purchase the necessary capital equipment needed to
      expand its product line and increase production capacity during the next twelve
      months and that additional debt or equity financing may be required.





There
      can
      be no assurance that the Company will be successful in building its customer
      base and product line or that the available capital will be sufficient to fund
      current operations and the necessary capital expenditures until such time that
      the revenues increase. If the Company is unsuccessful in building its customer
      base or is unable to obtain additional financing, if necessary, on terms
      favorable to the Company there could be a material adverse effect on the
      financial position, results of operations and cash flows of the Company. The
      accompanying financial statements do not include any adjustments that might
      be
      necessary if the Company is unable to continue as a going
      concern.


**Note
              5.**
            **CONVERTIBLE
                DEBT, SECURED LINE OF CREDIT AND DERIVATIVE FINANCIAL****INSTRUMENTS**





**Convertible
      Debt**





On
      August
      9, 2006, concurrent with the merger closing, OLDCO sold 10% senior redeemable
      convertible debt (“Convertible Debt”) in the principal amount of $7.5 million to
      Mellon HBV Master U.S. Event Driven Fund, L.P. and Mellon HBV Master Global
      Event Driven Fund, L.P. Fund  (now
      known as Fursa Master Global Event Driven Fund, LP, and referred to herein
      as
      the “Investor”) under the terms of a Securities Purchase Agreement in exchange
      for $7.5 million in cash. Interest accrues at 10% per annum, payable in cash
      or
      payable in kind (“PIK”) at the holders’ option, on the one year anniversary of
      the date of issuance with respect to the first year of accrued interest and
      quarterly in arrears thereafter. Any interest not paid when due will accrue
      and
      will be added to the principal in determining the number of shares of Common
      Stock issuable upon conversion of the Convertible Debt. The Convertible Debt
      matures 30 months after the date of issuance (“Maturity Date”). The holder does
      not have the option to prepay the Convertible Debt prior to the Maturity Date
      and must redeem 100% of the Convertible Debt, unless earlier converted, for
      an
      amount equal to 120% ($9.0 million) of the outstanding principal plus accrued
      but unpaid interest, on the Maturity Date. The proceeds from the Convertible
      Debt were used for working capital, capital expenditures, mandatory debt
      repayment, and general corporate purposes. Interest expense for the nine and
      three months ended March 31, 2007 approximated $868,000 and $332,000 consisting
      of approximately $487,000 and $188,000 currently due on August 9, 2007 and
      $381,000 and $144,000 due upon maturity calculated using the effective interest
      method for the 20% premium due at maturity, respectively.





The
      Convertible Debt is convertible into shares of the Company’s common stock at the
      fully diluted, post-reverse merger valuation at Closing of $16 million. The
      price per share is equal to $16 million divided by the number of outstanding
      shares (13,596,998) of the post reverse-merger on a fully-diluted basis
      (“Original Purchase Price”). This conversion price of approximately $1.17675 per
      share would result in the issuance of approximately 6.4 million shares upon
      conversion of the debt and is subject to weighted-average, anti-dilution
      protection on all subsequent financings by the Company.





In
      addition, the Investor received warrants (“Investor Warrants”) aggregating 22%
      of the shares issuable on conversion to purchase 1,402,153 shares of common
      stock at an exercise price of approximately $1.17675 per share. The Investor
      Warrants have a five (5) year term which were valued at the grant date at
      approximately $635,000. The fair value was calculated using the Black-Scholes
      model with an expected volatility of 40% and a risk free interest rate of 4.91%.





The
      debt
      discount will be charged to operations over the life of the underlying debt
      with
      a corresponding increase to the Convertible Debt. For the nine and three months
      ended March 31, 2007, approximately $163,000 and $63,000 were charged to
      operations as debt discount costs for these warrants, respectively.





The
      Company signed a Registration Rights Agreement with the Investor on August
      9,
      2006 whereby the Company is obligated to register the resale of its shares
      of
      common stock issuable upon the exercise of the Investor Warrants and have the
      registration statement declared effective by the Securities and Exchange
      Commission on or prior to February 5, 2007, which date was extended by amendment
      to June 15, 2007. If the registration statement is not declared effective within
      the time frame described, or if the registration is suspended, the Company
      will
      be obligated to issue additional warrants (“Liquidated Damages Warrants”) to the
      Investor. Initially, the Company will be obligated to issue to the Investor
      2%
      of the number of shares of common stock issuable to the Investor upon conversion
      of the Convertible Debt or approximately 127,000 shares. In addition, for each
      full thirty (30) day period after the date that the registration statement
      has
      not been declared effective, the Company is obligated to issue to the Investor
      warrants exercisable for a number of shares of common stock equal to 2% percent
      of the number of shares of common stock issuable to the Investor.





9


The
      agreement also requires the Company to meet certain requirements such as
      effecting a reverse stock split and redomiciling in Delaware.





On
      November 10, 2006, the Investor agreed to amend the original agreement in
      regards to certain requirements of the Company. The Investor agreed to extend
      the requirement for the Company to effect a reverse stock split from fourteen
      (14) days after the closing until December 31, 2006 and to extend the
      requirement of the Company to domicile in Delaware from within forty five (45)
      days of the closing until December 31, 2006. The Investor also agreed to extend
      the requirement for the Company to file a Registration Statement from ninety
      (90) days after the closing until December 31, 2006 and extended the requirement
      to have the Registration Statement effective from one hundred eighty (180)
      days
      after the closing until March 31, 2007. These requirements were not met by
      December 31, 2006.





On
      February 15, 2007, the Investor agreed to an additional amendment to the
      original agreement in regards to these requirements. The Investor agreed to
      extend the requirement for the Company to effect a reverse stock split from
      fourteen (14) days after the closing until March 16, 2007 and to extend the
      requirement of the Company to domicile in Delaware from within forty five (45)
      days of the closing until within forty five (45) days following demand at any
      time commencing on the first anniversary of the Closing Date and ending on
      the
      third anniversary of the Closing Date. The Investor also agreed to extend the
      requirement for the Company to file a Registration Statement from ninety (90)
      days after the closing until March 16, 2007 and extended the requirement to have
      the Registration Statement effective from one hundred eighty (180) days after
      the closing until June 15, 2007. On March 2, 2007, the Registrant changed its
      corporate name to Versadial, Inc., and effected a one for forty-five reverse
      stock split. On March 16, 2007, the Company filed the required Registration
      Statement with the SEC.





Financing
      fees in connection with this debt approximated $840,000 which are being
      amortized over the term of the convertible debt. For the nine and three months
      ended March 31, 2007, the amortization of financing costs approximated $224,000
      and $84,000, respectively.





On
      October 17, 2006, the Company issued additional warrants to purchase an
      aggregate of 318,672 shares of the Company’s common stock to the Investor at an
      exercise price of approximately $1.17675 per share. The warrants expire on
      August 9, 2011. These warrants were issued in exchange for the Investor deleting
      a provision in the original Securities Purchase Agreement whereby the Investor
      would be granted additional future warrants based on the Company not meeting
      certain earnings targets (the “EBIDTA Shortfall Warrants”). The warrants were
      valued at the grant date at approximately $161,000. The fair value was
      calculated using the Black-Scholes model with an expected volatility of 42%
      and
      a risk free interest rate of 4.70%. In addition, the Investor was granted the
      right to receive potential further additional warrants to purchase an aggregate
      of 318,672 shares of the Company’s common stock at an exercise price of $1.17675
      per share if the Company did not pass the testing requirements of a prospective
      customer by March 31, 2007. On March 31, 2007, these warrants were issued as
      the
      testing requirements were not met until May 2007. This customer advanced the
      Company $700,000 in September 2006 and an additional $1.0 million in May 2007
      (see Notes 7 and 10). These warrants will expire on August 9, 2011. These
      warrants were valued at the grant date at approximately $166,000. The fair
      value
      was calculated using the Black-Scholes model with an expected volatility of
      41%
      and a risk free interest rate of 4.50%. The value of the additional warrants
      were treated as debt discount expense.




**Secured
      Line of Credit**





On
      February 1, 2007 the Company entered into a Secured Line Of Credit Agreement
      (“Credit Agreement”) with Fursa Alternative Strategies, LLC (referred to herein
      as the “Lender”), which acts as the investment advisor to the Investor ,
      allowing the Company to draw upon a $3.0 million line of credit with a Maturity
      Date of 1 year from the date of the Credit Agreement, which may be extended
      for
      an additional 3 months. The per annum base Interest Rate applicable in each
      month that advances are drawn down or outstanding pursuant to the Credit
      Agreement is equal to the three month LIBOR rate as published on the first
      date
      of such month in the “Money Rates” section of The Wall Street Journal (rounded
      up or down to the nearest one-sixteenth of one percent) plus 700 basis points
      (7.0%). Upon a default under the terms of the Note, the Interest Rate would
      increase by 4%. In addition, on the maturity date, the Company shall pay the
      Lender a non-refundable fee equal to .75% on the average monthly undrawn portion
      of the Maximum Amount of the line of credit ($3.0 million). At March 31, 2007,
      the Company had drawn an aggregate of $2,450,000 of the available line which
      is
      included in current notes payable. **** Interest
      expense for the nine and three months ended March 31, 2007 approximated $38,000.
      Accrued interest payable aggregated $1,391 at March 31, 2007.





10


In
      conjunction with the Credit Agreement, the Company granted warrants to each
      of
      Lender and Prospero Capital, LLC (formerly known as Sagamore Hill Capital,
      LLC),
      an affiliate of the Lender (“Prospero”), to purchase respectively, one million
      eighty four thousand four hundred and forty two (1,084,543) shares of the
      Company’s common stock (the “Warrants”). The Warrants are exercisable for five
      years from the date of issuance at an initial exercise price equal to $2.475
      per
      share subject to adjustment under certain events.





In
      the
      event that the Company did not secure certain purchase order(s) on or prior
      to
      March 31, 2007, the applicable Interest Rate after such date would increase
      by
      2% and the Company would issue to each of the Lender and Prospero additional
      warrants (collectively, the “Additional Warrants”) to purchase shares of the
      Company’s common stock representing in aggregate 1,084,543 shares at an initial
      strike price of $2.475 per share subject to adjustment under certain events,
      exercisable for five years from the date of issuance. Where Company does secure
      such purchase orders on or prior to June 30, 2007, 25% of the total number
      of
      initial Warrants issued shall be automatically redeemed by the Company for
      no
      additional consideration. Upon the expiration or termination of the credit
      facility under the Agreement, whichever occurs first, the Company has the option
      to purchase 25% of the total number of initial Warrants issued at an aggregate
      purchase price of $250,000.





On
      March
      31, 2007, the Company secured the required purchase orders as defined in the
      Credit Agreement and redeemed 25% of the initial Warrants. The aggregate Lender
      Warrants issued to each of Lender and Prospero, after giving effect to the
      25%
      redemption, to purchase 813,407 shares of the Company’s common stock have a five
      (5) year term which were valued at the grant date at approximately $494,000.
      The
      fair value was calculated using the Black-Scholes model with an expected
      volatility of 44% and a risk free interest rate of 4.50%.





The
      debt
      discount will be charged to operations over the life of the underlying debt
      with
      a corresponding increase to the debt. For the nine and three months ended March
      31, 2007, approximately $82,000 was charged to operations as debt discount
      costs
      for these warrants.





Financing
      fees in connection with this debt approximated $135,000, including a $90,000
      fully earned non-refundable commitment fee paid to the Lender which is included
      in operations, and other costs of $45,000 which are being amortized over the
      term of the convertible debt. For the nine and three months ended March 31,
      2007, the expense and amortization of financing costs approximated $98,000
      .





**Derivative
      Financial Instruments**





Pursuant
      to Paragraph 14 of EITF No. 00-19, “Accounting for Derivative Financial
      Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”, the
      Investor Warrants meet the requirements of and are accounted for as a liability
      since the Investor Warrants contain registration rights where Liquidated Damages
      Warrants would be required to be issued to the holder in the event the Company
      failed to receive an effective registration. The initial value of the Investor
      Warrants granted on August 9, 2006 ($635,000) was treated as a discount to
      the
      convertible notes payable (debt discount) and recorded as a liability
      (derivative financial instruments). The value of the additional warrants granted
      on October 17, 2006 and March 31, 2007 ($328,000) were treated as additional
      debt discount expense and recorded as a liability (derivative financial
      instruments). The value of the warrants granted on February 1, 2007 ($494,000)
      to the Lender were treated as a discount to the debt (debt discount) and
      recorded as a liability (derivative financial instruments). Using the
      Black-Scholes option-pricing method, the value of the derivative financial
      instruments are reassessed at each balance sheet date and marked to market
      as a
      derivative gain or loss until exercised or expiration. Upon exercise of the
      derivative financial instruments, the related liability is removed by recording
      an adjustment to additional paid-in-capital. The derivative financial
      instruments had a value of approximately $1,560,000 at March 31, 2007. The
      derivative loss for the nine and three months ended March 31, 2007 approximated
      $102,000 and $58,000 respectively.




**Note
      6. DEBT CONVERSION AND REPAYMENT**





As
      a
      result of the merger with OLDCO, on August 9, 2006, the Company was able to
      obtain approximately $7.5 million in financing as described above. From the
      proceeds of this financing, the Company repaid approximately $4.4 million of
      Innopump’s current notes and interest payable and converted $1.2 million of
      Innopump’s current principal notes into 28,792 shares of Innopump stock which
      were subsequently converted to 1,247,912 shares of the Company’s common stock.





11


The
      debt
      repayment of $4.4 million consisted of principal and interest due to related
      parties of approximately $746,000, principal and interest due to other parties
      of approximately $3,567,000 and interest due to parties converting debt of
      approximately $114,000. Interest expense for the six and three months ended
      December 31, 2006 on these notes approximated $68,000 and -0-,
      respectively.





In
      addition, the Company expensed approximately $18,000 of unamortized financing
      costs associated with prior debt that was repaid at the
      closing.





**Note
      7. CUSTOMER ADVANCE**





On
      September 29, 2006, the Company received $700,000 from a customer in the
      consumer products industry in exchange for the Company’s undertaking to deliver
      pre-production samples of a specially designed dual chamber dispensing pump
      and
      to fund pre-production tooling and mold expenses. The Company had no obligation
      to repay the advance, if the samples did not satisfy the customer’s
      requirements. In May, 2007, the customer approved the pre-production samples
      and
      on May 14, 2007 advanced the Company an additional $1.0 million to fund
      pre-production tooling and mold expenses. The $1.7 million advance will be
      applied against future revenues as a credit against shipments commencing six
      months after the date of the first shipment and based on repayment at a rate
      of
      a certain amount per piece for all products shipped. In the event of a default
      by the Company, the customer may, at its discretion, recover the remaining
      amount of the advance as a credit against other product purchases from the
      Company or will be due from the Company under the terms of a promissory note
      to
      be issued at the time of default (see Note 10). This advance has been classified
      as long-term at March 31, 2007. Management anticipates that the Company will
      enter into an exclusive supply relationship with this customer for a term in
      excess of one year.





**Note
      8. STOCKHOLDERS’ DEFICIT**





**Capitalization**





The
      Company’s initial authorized capitalization consisted of 50 million (50,000,000)
      shares of common stock, par value $.001 and no preferred stock. Prior to the
      merger, the certificate of incorporation was amended to increase the
      capitalization of the Company to 1.3 billion (1,300,000,000) shares of common
      stock, par value $.001 and 100 million (100,000,000) shares of preferred stock,
      par value $.001. In March 2007, the Company’s Articles of Incorporation were
      amended to provide for authority to issue 35,000,000 shares of common stock,
      par
      value $.0001 per share, and 2,000,000 shares of preferred stock, par value
      $.0001 per share. As of March 31, 2007, there were 13,539,470 shares of common
      stock outstanding. No shares of preferred stock were outstanding as of that
      date.





**Issuance
      of Common Stock**





On
      August
      8, 2006, ODC Partners, LLC, a debtholder of OLDCO, agreed to convert its
      outstanding debt of approximately $100,000 and accrued interest into 222,223
      shares of the Company’s common stock. This conversion resulted in an aggregate
      of 914,227 shares (as rounded up for fractional shares) outstanding prior to
      the
      merger of OLDCO.





On
      August
      9, 2006, as a result of the merger, the Company issued an aggregate of
      11,377,331 shares to Innopump shareholders (a conversion of approximately 43.333
      shares of NEWCO stock for each share of Innopump stock, 262,500 shares
      outstanding). In addition the Company issued an aggregate of 1,247,912 shares
      to
      Innopump debtholders who elected to convert their debt to equity prior to the
      merger (a conversion of approximately 43.333 shares of NEWCO stock for each
      share of Innopump stock). These debtholders converted $1.2 million in debt
      to
      28,792 shares of Innopump stock prior to the merger. Subsequent to the merger,
      the Company has 13,539,470 common shares outstanding.





**Reverse
      Stock Split**





On
      March
      2, 2007, the Company completed a one for forty-five reverse stock split . The
      common stock and per share information in the consolidated financial information
      and related notes have been retroactively adjusted to give effect to the stock
      split. Prior to the reverse split the Company had outstanding 609,259,259 common
      shares. Subsequent to the reverse split, the Company had outstanding 13,539,470
      common shares. All fractional shares were rounded up.





12


**Issuance
      of Other Warrants**





In
      addition to the Investor and Lender warrants described in Note 5, on August
      9,
      2006, under the terms of prior agreements with Innopump debtholders and the
      investment banker, the Company issued an aggregate of 57,527 warrants. All
      of
      these warrants are exercisable for a period of five (5) years at exercise prices
      between $.945 and $.99 per share. An aggregate of 40,002 of these warrants
      were
      issued to the Innopump debtholders that converted $1.2 million in debt prior
      to
      the merger, 1,778 warrants were issued to the investment banker, 11,112 warrants
      were issued to a related party Innopump debtholder , and 4,635 warrants were
      issued to a current debtholder of the Company.




**Loss
      Per Share**





Basic
  loss per share excludes dilution and is calculated by dividing the net loss
  attributable to common shareholders by the weighted average number of common
  shares outstanding for the period. Diluted loss per share reflects the potential
  dilution that could occur if securities or other contracts to issue common stock
  were exercised or converted into common stock and resulted in the issuance of
  common stock. At March 31, 2006, basic loss per share does not include approximately
  715,154 shares which were redeemable by the shareholders as described below. At
  March 31, 2007, the basic and diluted loss per common share does not include
  an aggregate of 3,723,838 warrants outstanding and 6,373,415 shares issuable
  under the terms of convertible debt (see Note 5). The effect of these securities
  would be antidilutive. These warrants are currently exercisable at prices that
  range between $.94-$2.475 and expire between August 9, 2011 and February 1,
  2012.





**Common
      Stock Subject to Redemption**





In
      April
      2005, $825,000 of SCG convertible debt was converted into 8.25 membership
      interests at a conversion ratio of 1 interest for each $100,000 of convertible
      debt. The debt holders were also issued an additional 16,500 common shares
      of
      Innopump stock in connection with the convertible notes. On August 9, 2006,
      the
      date of the merger, these shares were exchanged for 715,154 shares of the
      Company’s common stock.





A
      provision in the May 25, 2005 Asset Purchase Agreement between Innopump and
      SCG
      provided the prior debt holders a put option whereby they could sell their
      Innopump shares, which were subsequently exchanged for the Company’s shares,
      back to the Company between September 30, 2006 and October 30, 2006, at an
      amount equal to the principal and interest which would have been due upon
      conversion of the original debt. The aggregate amount of $887,403 (which
      includes $62,403 in accrued interest through the conversion date) was included
      on the balance sheet as a liability at September 30, 2006. The put options
      expired on October 30, 2006 and none of the shares were redeemed. The aggregate
      amount of the put options is included in additional paid-in capital subsequent
      to October 30, 2006.





**Note
      9. COMMITMENTS AND CONTINGENCIES**





**Manufacturing
      Agreement**





On
      September 20, 2006, the Company entered into a 30-month manufacturing agreement
      with an outside contractor located in Germany. The agreement calls for the
      contractor to develop certain production molds for the Company for a new size
      (20 millimeter) dispenser. The Company will place all customer orders relating
      to the product with the contractor until at least eighty percent (80%) of the
      manufacturer’s production capacity is utilized based on five (5) days per week,
      three (3) shifts per day. The agreement calls for the Company to make payments
      in the aggregate of approximately $3 million for the required molds. The
      payments start in October 2006, vary in amount, and will be made over the
      30-month term of the agreement. Title of the molds will transfer to the Company
      upon final payment. As of March 31, 2007, the Company has made payments of
      approximately $1.6 million for the molds which is included in property and
      equipment.





13


**Equipment
      Purchase**





In
      conjunction with the above manufacturing agreement, the Company also ordered
      related assembly equipment from a vendor in the amount of approximately $1.1
      million. The Company has made payments of approximately $360,000 for the
      equipment which is included in property and equipment.




**Note
      10. SUBSEQUENT EVENTS**





**Debt
      Extensions**





SCG
      has
      an outstanding note with a related party in the amount of $1,098,536 which
      bears
      interest at 8% and matures on October 30, 2006. On November 9, 2006, the lender
      agreed to extend the maturity date, under the same terms and conditions as
      the
      original note to November 30, 2006. The note was not paid when due. On January
      26, 2007, the lender agreed to extend the maturity date, under the same terms
      and conditions as the original note, to March 31, 2007. The note was not paid
      when due. On March 31, 2007, the lender agreed to extend the maturity date,
      under the same terms and conditions as the original note, to June 30,
      2007.





SCG
      has
      an outstanding note with a related party in the amount of $100,000 which bears
      interest at 8% and matures on October 30, 2006. On October 16, 2006, SCG repaid
      $30,000 of the note. On November 9, 2006, the lender agreed to extend the
      maturity date on the remaining $70,000 balance and all accrued interest, under
      the same terms and conditions as the original note to November 30, 2006. The
      note was not paid when due. On January 26, 2007, the lender agreed to extend
      the
      maturity date, under the same terms and conditions as the original note, to
      March 31, 2007. The note was not paid when due. On March 31, 2007, the lender
      agreed to extend the maturity date, under the same terms and conditions as
      the
      original note, to June 30, 2007.





The
      Company has an outstanding note in the amount of $104,284 which bears interest
      at 8% and matures on October 31, 2006. On November 9, 2006, the lender agreed
      to
      extend the maturity date, under the same terms and conditions as the original
      note to November 30, 2006. The note was not paid when due. On February 8, 2007,
      the lender agreed to extend the maturity date, under the same terms and
      conditions as the original note, to February 28, 2007. The note was not paid
      when due. On May 4, 2007, the lender agreed to extend the maturity date to
      December 31, 2007. In addition, the lender was granted warrants to purchase
      55,000 shares of the Company’s common stock exercisable for five years from the
      date of issuance at an initial exercise price equal to $2.475 per share.





**Supply
      and Tooling Amortization Agreement**





On
      April
      24, 2007, the Company entered into a Supply Agreement and a related Tooling
      Amortization Agreement with an outside contractor located in the United States
      (the “Supplier”).





These
      two
      agreements became effective on April 30, 2007, when SCG and the licensor to
      the
      Company of the technology covering the patented dual chamber dispensing pump
      produced by the Company, and Gerhard Brugger, the patent owner of the patented
      dual chamber dispensing pump, entered into an Agreement to License with the
      Supplier. This Agreement, a condition precedent to the effectiveness of the
      Supply Agreement and the related Tooling Amortization Agreement, provides
      security to the Supplier if the Company were to default in the performance
      of
      its obligations under the Supply Agreement.





The
      Supply Agreement provides, among other things, that the Company, over the five
      year term of the Agreement, shall purchase from the Supplier no less than
      100,000,000 units of the Company’s 40 millimeter and 49 millimeter dual
      chambered dispensing pumps.





These
      Agreements provide that the Supplier will fund the estimated $4,000,000 cost
      of
      the injection molding, tooling and automatic equipment necessary to produce
      the
      products to be purchased by the Company. Although financed by the Supplier,
      the
      equipment will be owned by the Company.





The
      cost
      of the tooling and automatic equipment, with a three (3%) percent per annum
      interest factor, will be amortized over a period of 18 months against pumps
      purchased and delivered to the Company pursuant to the Supply Agreement, with
      a
      per unit amortization cost included in the cost price for the pumps. The Supply
      Agreement also contains normal commercial terms, including a representation
      by
      the Supplier as to the pumps being produced in accordance with specifications,
      indemnification of the Supplier by the Company against intellectual property
      infringement claims of third parties, insurance, confidentiality and termination
      provisions, including a right of optional termination by Company upon payment
      of
      all unamortized tooling and equipment costs plus a penalty, the amount of which
      varies based on the date of termination.





14


The
      price
      for the pumps is fixed, subject to adjustment at six month intervals to reflect
      changes in the cost of resins and other component parts.




The
      Supply Agreement also grants to the Supplier a right of first refusal to furnish
      additional tooling, if the Company elects to acquire additional tooling, and
      affords the Supplier a right to match the terms of a replacement supply contract
      at the end of the five year term of the Supply Agreement.





The
      related Agreement to License between the Supplier and Sea Change Group, LLC
      and
      Gerhard Brugger permits the Supplier, in the event of a default by the Company
      under the Supply Agreement, to require that SCG and Brugger utilize Supplier
      to
      continue to produce and market the pumps that are the subject of the Supply
      Agreement for the remaining term of the Supply Agreement, if the Supplier is
      not
      then in default of its obligations under the Supply Agreement. In such case,
      the
      right of Supplier to continue to amortize the cost of the tooling and automatic
      equipment would continue.





**Customer
      Advance**





On
      September 29, 2006, the Company received $700,000 from a customer in the
      consumer products industry in exchange for the Company’s undertaking to deliver
      pre-production samples of a specially designed dual chamber dispensing pump
      and
      to fund pre-production tooling and mold expenses. The Company had no obligation
      to repay the advance, if the samples did not satisfy the customer’s
      requirements. In May, 2007, the customer approved the pre-production samples
      and
      on May 14, 2007 advanced the Company an additional $1.0 million to fund
      pre-production tooling and mold expenses. The $1.7 million advance will be
      applied against future revenues as a credit against shipments commencing six
      months after the date of the first shipment and based on repayment at a rate
      of
      a certain amount per piece for all products shipped. In the event of a default
      by the Company, the customer may, at its discretion, recover the remaining
      amount of the advance as a credit against other product purchases from the
      Company or will be due from the Company under the terms of a promissory note
      to
      be issued at the time of default (see Note 7).





**License
      Agreement and Sublicense Agreement, Related Parties**





*License
      Agreement*





On
      June
      16, 2006, under the terms of a License Agreement between the SCG (the”Licensee”)
      and Gerhard Brugger (the “Licensor”), the Licensor signed a waiver of defaults
      whereby payments in arrears due through June 30, 2006 of $525,000 would be
      paid
      as follows: $100,000 no later than September 30, 2006, an aggregate total of
      $250,000 of the unpaid balance no later than the earlier of December 31, 2006
      or
      within ten business days of a merger transaction with CARS, $75,000 on or before
      January 1, 2007, $100,000 on or before April 1, 2007, and $100,000 on or before
      July 1, 2007. In addition, the licensor agreed to accept royalties as calculated
      on actual shipments after June 30, 2006 through June 30, 2007 to be paid monthly
      and the cumulative difference between minimum monthly royalties and actual
      monthly royalties to be paid no later than June 30, 2007 as long as the
      technical consultant payments are made in accordance with the License Agreement.
      All payments were paid when due through March 31, 2007. On April 1, 2007, the
      Company did not make the required payment of $100,000. The licensor agreed
      to
      extend the payment date to June 30, 2007. All other payments for current
      royalties and consulting were paid as per the terms of the
      agreement.





*Sublicense
      Agreement*





On
      May 1,
      2005, SCG (the “Sub-licensor”) entered into a sub-license agreement, as amended,
      with the Company (the “Sub-licensee”) whereby SCG assigned to the Company all
      rights, titles and interests that the Sub-licensor has in the Amended and
      Restated License Agreement dated January 1, 2003 between SCG and Gerhard
      Brugger. In consideration for the assignment and patent rights thereunder,
      the
      Company agreed to pay SCG a sublicense fee of $600,000, $150,000 to be paid
      upon
      the merger of the Company with CARS but in no event later than October 31,
      2006,
      $150,000 on March 31, 2007, $150,000 on May 1, 2007 and $150,000 on May 1,
      2008.
      In addition the Company agreed to pay the royalties due under the original
      Amended and Restated License Agreement either directly to the original licensor
      or to SCG. The Company also agreed to pay SCG a royalty of 3% of the first
      $130
      million of gross revenues.





On
      August
      11, 2006, SCG was paid $150,000 as per the terms of the agreement. The payment
      due on March 31, 2007 was not made when due. On April 1, 2007, the Sub-licensor
      agreed to defer the payment due on March 31, 2007 and May 1, 2007 in the
      aggregate of $300,000 until September 30, 2007.





15




**Item
              2.**
            **Management’s
                Discussion and Analysis of Financial Condition and****Results
                of Operations**





The
      following discussion should be read along with our financial statements, which
      are included in another section of this 10-QSB. This discussion contains
      forward-looking statements about our expectations for our business and financial
      needs. These expectations are subject to a variety of uncertainties and risks
      that may cause actual results to vary significantly from our expectations.
      The
      cautionary statements made in this Report should be read as applying to all
      forward-looking statements in any part of this 10-QSB. The forward-looking
      statements are made as of the date of this Form 10-QSB, and the Company assumes
      no obligation to update the forward-looking statements, or to update the reasons
      actual results could differ from those projected in such forward-looking
      statements.




**Organization**





Versadial,
      Inc. (hereinafter referred to as the “Registrant” or “Versadial” or the
“Company”), was originally incorporated in Nevada under the name
      Carsunlimited.com, Inc. (“CARS”) on March 7, 2000. CARS, a publicly traded
      corporation, prior to August 9, 2006, was a development stage company with
      limited operations and revenues and only nominal assets. Its intended purpose
      was to offer users the ability to search a database that contained products
      and
      information about the Automobile industry, new and used car sales (classified
      ads), as well as automotive products such as extended warranty information
      and
      anti-theft body part marking. On March 2, 2007, CARS changed its name to
      Versadial to capitalize on the awareness of its trademarked name for its
      products in the marketplace as described below.





On
      August
      9, 2006, the Registrant executed an Agreement and Plan of Merger (“Merger
      Agreement”) with Pump Acquisition Corp. (“PAC”), a wholly-owned subsidiary of
      the Registrant , Innopump, Inc. D/B/A Versadial (“Innopump”), a Nevada
      corporation which was formed on April 1, 2005, and certain Innopump
      stockholders. Pursuant to the Merger Agreement, the Registrant issued 12,625,243
      shares of its common stock to shareholders of Innopump in consideration of
      Innopump merging with and into PAC and becoming a wholly-owned subsidiary of
      the
      Registrant (“Merger”). The Registrant, prior to the Merger, is sometimes
      referred to herein as OLDCO .The Merger is more fully described below. As a
      result of the merger, Innopump became a majority-owned subsidiary of OLDCO
      and
      the holders of Innopump common stock and debt acquired a majority interest
      of
      OLDCO. The accounting of this transaction differs from its legal form, as
      Innopump is considered the accounting acquirer and OLDCO the acquired entity.
      The transaction has been accounted for as a reverse acquisition under the
      purchase method of accounting, whereby the assets of OLDCO were revalued and
      the
      purchase price allocated to those assets acquired and liabilities assumed.
      Innopump’s historical financial statements were carried forward subsequent to
      the merger as those of the combined entity (hereinafter referred to as
“NEWCO”).





The
      Company is engaged in the manufacture of a dispenser that enables the user
      to
      blend two liquids in varying proportions. The dispensers are manufactured in
      Germany and are currently being utilized in the food, suncare, skincare, and
      cosmetic industries.





On
      May
      25, 2005, Innopump acquired all of the assets and assumed certain liabilities
      of
      Sea Change Group, LLC (“SCG”), a privately held New York Limited Liability
      Company formed in 1999. This transaction between Innopump and SCG, which were
      entities under common control, was accounted for in a manner similar to a
      pooling of interests whereby the assets and liabilities of SCG were transferred
      to Innopump at historical amounts. Prior to the merger with OLDCO, the financial
      statements of Innopump were prepared as if the transaction had occurred at
      the
      beginning of the period presented, and present the financial data of previously
      separate entities.





NEWCO’s
      fiscal year ends on June 30, and therefore references to fiscal 2006 and 2005
      refer to the fiscal years ended June 30, 2006 and June 30, 2005, respectively.
      OLDCO’s fiscal year end was December 31, which was changed to June 30 to conform
      to the year end of Innopump, the accounting acquirer.





The
      common stock and per share information have been retroactively adjusted to
      give
      effect to the reverse merger on August 9, 2006 and to give effect to the one
      for
      forty-five reverse stock split that became effective on March 2,
      2007.




**Merger
      Agreement**





On
      August
      9, 2006, OLDCO executed an Agreement and Plan of Merger (“Merger Agreement”)
      with Pump Acquisition Corp., a wholly-owned subsidiary of OLDCO (“PAC”),
      Innopump, and certain Innopump stockholders. Pursuant to the Merger Agreement,
      the Company issued 12,625,243 shares of its common stock to shareholders of
      Innopump in consideration of Innopump merging with and into PAC and becoming
      a
      wholly-owned subsidiary of OLDCO (“Merger”). Holders of Innopump convertible
      notes, warrants and options received equivalent amount of notes, warrants and
      options convertible or exercisable into that number of the Registrant common
      stock had they converted or exercised immediately prior to the closing.





16


The
      Merger Agreement required OLDCO to issue to the Innopump stockholders 43.333
      shares of common stock for each share of Innopump common stock outstanding
      at
      the closing date of August 9, 2006. At the closing, there were 262,500
      outstanding shares of Innopump common stock plus 28,792 shares issued on
      conversion of certain debt for a total of 291,292 shares which resulted in
      the
      issuance of 12,625,243 shares (rounded up for fractional shares) of common
      stock
      and resulted in OLDCO stockholders retaining approximately 6.75% (914,227 shares
      rounded up for fractional shares) of the outstanding stock and Innopump
      stockholders receiving approximately 93.25% of the outstanding stock on a
      pre-diluted basis.





The
      parties’ completion of the transactions contemplated under the Merger Agreement
      were subject to the satisfaction of certain contingencies including, without
      limitation, requisite approvals and consents and that OLDCO shall have no less
      than $7,500,000 in cash or cash equivalents and no more than $80,000 in
      liabilities immediately prior to closing. These conditions were deemed satisfied
      at the closing.





NEWCO
      incurred merger costs of approximately $503,000, which were charged to equity,
      consisting of approximately a $350,000 advisory fee payable to the investment
      banker and $153,000 in legal fees. The investment banker agreed to defer payment
      of $175,000 of the advisory fee until February 2007. The deferred portion of
      the
      fee was paid on February 9, 2007 pursuant to the agreement with the investment
      banker. All other fees were paid at or subsequent to the closing.




Innopump,
      Inc, was established to capitalize on the commercial opportunities for
      innovation in packaging and dispensing within the consumer products industries.
      Innopump holds the exclusive worldwide license for a patented multi-chambered
      variable dispensing system for all category uses, marketed under the registered
      trademark “Versadial(R)”. The patented system utilizes multiple volumetric
      pumps, controlled by a rotating head and disc system, providing the dispensing
      of precise fixed or variable ratios of distinct and separate fluids. The
      Versadial(R) custom blending dual dispensing head provides consumer packaged
      goods manufacturers with a new and innovative dispensing technique permitting
      precision measured blending by the consumer of lotions, creams and
      liquids.





See
      the
      Company’s Report on Form 8-K dated August 9, 2006, filed with the SEC on August
      11, 2006, for a more detailed description of the Merger.




**Liquidity
      and Capital Resources**





The
      following table sets forth the working capital deficit of the Company as at
      March 31, 2007:


At
                  March 31,
                2007Current
                  assets
              
              $
              1,315,788Current
                  liabilities
              
              
              5,800,605Working
                  capital deficit
              
              $
              (4,484,817
              )





At
      March
      31, 2007, the Company has incurred cumulative losses of approximately $11.7
      million since inception and $4.9 million for the nine months ended March 31,
      2007. The Company has a working capital deficit of approximately $4.5 million
      and a stockholders’ deficit of approximately $10.3 million as of March 31, 2007.





During
      the nine months ended March 31, 2007, the Company utilized cash of approximately
      $2.6 million for operating activities primarily due to the revenues not yet
      great enough to cover general and administrative expenses. The Company utilized
      cash of approximately $2.7 million from investing activities primarily to
      purchase molds and equipment and for merger costs. The Company received cash
      from financing activities of approximately $4.5 million from the merger, the
      secured credit line and a customer advance. These funds were utilized to
      purchase equipment and cover operating costs.





On
      August
      9, 2006, concurrent with the merger, OLDCO sold 10% senior redeemable
      convertible debt (“Convertible Debt”) in the principal amount of $7.5 million to
      Mellon HBV Master U.S. Event Driven Fund, L.P. and Mellon HBV Master Global
      Event Driven Fund, L.P. (now known as Fursa Master Global Event Driven Fund
      LP,
      collectively, the “Investor”). The note bears interest at 10% per annum and is
      due on February 9, 2009. The proceeds were first used to pay approximately
      $1
      million in financing and legal fees, $4.5 million in current notes payable
      and
      accrued interest and $250,000 in other current obligations which became due
      on
      the date of the merger. The Company received net proceeds of approximately
      $1.7
      million, which management used for working capital needs.





17


At
      June
      30, 2006, the Company had approximately $7.1 million in current notes payable
      and accrued interest. On August 9, 2006, prior to the reverse merger with OLDCO,
      the Company converted $1.2 million of these notes into common stock. As noted
      above, Innopump repaid approximately $4.5 million with the proceeds from the
      $7.5 million financing. At March 31, 2007, current notes payable of
      approximately $1.5 million are primarily due to shareholders which management
      believes will be extended prior to their June 30 maturity. The balance of
      current notes payable of approximately $2.6 million (gross of amortizable debt
      discount) are due on February 1, 2008 as described below under the terms of
      a
      Secured Line of Credit.





On
      February 1, 2007 the Company entered into a Secured Line Of Credit Agreement
      (“Credit Agreement”) with Fursa Alternative Strategies, LLC (referred to herein
      as the “Lender”), which acts as the investment advisor to the Investor, allowing
      the Company to draw upon a $3.0 million line of credit with a Maturity Date
      of 1
      year from the date of the Credit Agreement, which may be extended for an
      additional 3 months. The per annum base Interest Rate applicable in each month
      that advances are drawn down or outstanding pursuant to the Credit Agreement
      is
      equal to the three month LIBOR rate as published on the first date of such
      month
      in the “Money Rates” section of The Wall Street Journal (rounded up or down to
      the nearest one-sixteenth of one percent) plus 700 basis points (7.0%). Upon
      a
      default under the terms of the Note, the Interest Rate would increase by 4%.
      In
      addition, on the maturity date, the Company shall pay the Lender a
      non-refundable fee equal to .75% on the average monthly undrawn portion of
      the
      Maximum Amount of the line of credit ($3.0 million). At March 31, 2007, the
      Company had utilized $2.45 million of the available line of credit.





Management
      recognizes that the Company must generate additional revenue and sufficient
      gross profits to achieve profitable operations. Management’s plans to increase
      revenues include the continued building of the existing customer base
      capitalizing on successful product introductions in 2007 resulting in
      anticipated volume increases of more than 200%, or five (5) million pieces
      per
      annum for 2008 and 2009, from current customers; the addition of firm
      commitments from new customers totaling more than twenty (20) million units
      for
      the combined 2008 and 2009 seasons; the solidification of high potential
      customer interest equivalent to twenty (20) million units for the same period
      deliverable upon demonstration of ability to manufacture; the realization that
      the above production is coming from a limited amount of potential customers
      whose demand is so great it may limit our opportunity to create capacity for
      other interested customers, and the resultant focus by Management to identify
      production partners who will fund manufacturing equipment in consideration
      for
      customer commitment. Initial results of that focus are as follows.





On
      April
      24, 2007, the Company entered into a Supply Agreement and a related Tooling
      Amortization Agreement with an outside contractor located in the United States
      (the “Supplier”). The Supply Agreement provides, among other things, that the
      Company, over the five year term of the Agreement, shall purchase from the
      Supplier no less than 100 million units of the Company’s 40 millimeter and 49
      millimeter dual chambered dispensing pumps and the Supplier will supply no
      less
      than twenty (20) million units annually. The Company has received firm
      commitments from several customers for initial production in excess of 17
      million units at March 31, 2007. These Agreements provide that the Supplier
      will
      fund the estimated $4,000,000 cost of the injection molding, tooling and
      automatic equipment necessary to produce the products to be purchased by the
      Company. Although financed by the Supplier, the equipment will be owned by
      the
      Company. The cost of the tooling and automatic equipment, with a three (3%)
      percent per annum interest factor, will be amortized over a period of 18 months
      against pumps purchased and delivered to the Company pursuant to the Supply
      Agreement, with a per unit amortization cost included in the cost price for
      the
      pumps. The Company anticipates the facility becoming operational in calendar
      third quarter 2007.





On
      September 20, 2006, the Company entered into a 30-month manufacturing agreement
      with an outside contractor located in Germany. The agreement calls for the
      contractor to develop certain production molds for the Company for a new size
      (20 millimeter) dispenser. The Company will place all customer orders relating
      to the product with the contractor until at least eighty percent (80%) of the
      manufacturer’s production capacity is utilized based on five (5) days per week,
      three (3) shifts per day. The agreement calls for the Company to make payments
      in the aggregate of approximately $3 million for the required molds. The
      payments start in October 2006, vary in amount, and will be made over the
      30-month term of the agreement. Title of the molds will transfer to the Company
      upon final payment. As of March 31, 2007, the Company has made payments of
      approximately $1.6 million for the molds which is included in property and
      equipment. In conjunction with the above manufacturing agreement, the Company
      also ordered related assembly equipment from a vendor in the amount of
      approximately $1.1 million. The Company has made payments of approximately
      $360,000 for the equipment which is included in property and equipment. The
      equipment is capable of producing fifteen (15) million units
      annually.





18


On
      September 29, 2006, the Company received $700,000 from a customer in the
      consumer products industry in exchange for the Company’s undertaking to deliver
      pre-production samples of a specially designed dual chamber 20 millimeter
      dispensing pump and to fund pre-production tooling and mold expenses. These
      pumps are being designed in conjunction with the manufacturing agreement
      described above. The Company had no obligation to repay the advance, if the
      samples did not satisfy the customer’s requirements. In May, 2007, the customer
      approved the pre-production samples and on May 14, 2007 advanced the Company
      an
      additional $1.0 million to fund pre-production tooling and mold expenses. The
      $1.7 million advance will be applied against future revenues as a credit against
      shipments commencing six months after the date of the first shipment and based
      on repayment at a rate of a certain amount per piece for all products shipped.
      In the event of a default by the Company, the customer may, at its discretion,
      recover the remaining amount of the advance as a credit against other product
      purchases from the Company or will be due from the Company under the terms
      of a
      promissory note to be issued at the time of default. Management anticipates
      that
      the Company will enter into an exclusive supply relationship with this customer
      which will consume all available manufacturing capacity of the specially
      designed pump through the first year. The Company anticipates production to
      begin in late 2007.





The
      Company is currently in negotiations with several other large consumer products
      companies regarding the introduction of a similar 20mm dual chamber pump. The
      fulfillment of these orders, if obtained, will require a similar capital
      investment as described above, and Management is currently evaluating, in lieu
      of debt or equity financing, several opportunities for capitalization of same
      from existing and new production partners in consideration for a volume and
      amortization commitment. Management believes that in the future the Company
      can
      finance all the capital requirements through such arrangements due to the
      strength of the current customer commitments; the performance of the Company’s
      products currently in the marketplace; the consumer interest demonstrated in
      the
      Company’s products, as revealed by the Company’s customers market research
      investigations and resultant large initial order commitments; and, the multiple
      indicators of support the Company is receiving from potential manufacturing
      partners.




Based
      on
      the current operating plan and available cash and cash equivalents currently
      available, the Company may need to obtain additional financing through the
      sale
      of equity securities, private placements, and/or bridge loans within the next
      12
      months. Additional financing, whether through public or private equity or debt
      financing, arrangements with stockholders or other sources to fund operations,
      may not be available, or if available, may be on terms unacceptable to the
      Company. The ability to maintain sufficient liquidity is dependent on the
      Company’s ability to successfully build its customer base and product line with
      the required capital equipment. If additional equity securities are issued
      to
      raise funds, the ownership percentage of existing stockholders would be reduced.
      New investors may demand rights, preferences or privileges senior to those
      of
      existing holders of common stock. Debt incurred by the Company would be senior
      to equity in the ability of debt holders to make claims on the Company’s assets.
      The terms of any debt issued could impose restrictions on the operations of
      the
      Company.





There
      can
      be no assurance that the Company will be successful in building its customer
      base and product line or that the available capital will be sufficient to fund
      current operations and the necessary capital expenditures until such time that
      the revenues increase. If the Company is unsuccessful in building its customer
      base or is unable to obtain additional financing, if necessary, on terms
      favorable to the Company there could be a material adverse effect on the
      financial position, results of operations and cash flows of the Company. The
      accompanying financial statements do not include any adjustments that might
      be
      necessary if the Company is unable to continue as a going concern.




**Results
      of Operations**




*Nine
      months ended March 31, 2007 and 2006*





REVENUES.
      Revenues during the nine months ended March 31, 2007 were $1,168,356 as compared
      to revenues of $182,115 during the nine months ended March 31, 2006, an increase
      of approximately 542%. In the period ended March 31, 2007, revenues were mainly
      attributable to two new customers in the suncare and skincare industry. In
      the
      period ended March 31, 2006, revenues were attributable to three small
      customers, two in the food industry and one in the cosmetic industry. We believe
      that our sales will continue to grow in the future as we strengthen our sales
      force, increase our production capacity as discussed above, with both new and
      improved equipment, and are able to introduce new products into the market
      which
      will enable us to diversify and increase our customer base.





19


GROSS
      MARGIN. Cost of revenues - direct costs, which consist of direct labor, overhead
      and product costs, were $1,100,748 (94% of revenues) for the nine months ended
      March 31, 2007 as compared to $143,865 (79% of revenues) for the period ended
      March 31, 2006. The increase for 2007 is a result of the increase in revenues.
      The increase as a percent of revenues is related to additional labor costs
      required on one product line which is not yet fully automated and customer
      chargebacks to the Company mainly for shipping costs due to late production.
      Cost of revenues - indirect costs, which consist of indirect labor, quality
      control costs, factory maintenance, product development and depreciation, were
      $516,880 for the nine months ended March 31, 2007 as compared to $330,662 for
      the period ended March 31, 2006. The increase was due primarily to increased
      depreciation of approximately $92,000 due to the purchase of more manufacturing
      equipment, and approximately $64,000 in equipment repair and the purchase of
      small parts as compared to approximately $2,000 in 2006 as the revenues and
      related production increased. Gross margin was a deficit of $(449,272) for
      the
      nine months ended March 31, 2007 as compared to a deficit of $(292,412) for
      the
      period ended March 31, 2006, representing gross margins of approximately (38)%
      and (161)% of revenues, respectively. The negative gross margin percentage
      in
      both periods is attributable to revenues which could not cover indirect costs.
      Management believes that these indirect costs, which are primarily related
      to
      depreciation and the purchase of small parts and supplies as production
      increased, will decrease as products become introduced into the marketplace
      and
      that revenues will increase to cover these costs. Management also believes
      direct costs will decrease on a percentage of revenue basis as labor becomes
      streamlined with the addition of new assembly equipment and that production
      capacity will increase with the purchase of additional molds with higher cavity
      production capabilities. Management anticipates that in calendar third quarter
      2007 the U.S. facility will become operational and that all production will
      be
      fully automated on all product lines with higher production capabilities and
      lower labor costs. Shipping time will also improve due to the current U.S.
      customer base, which in the past had lengthy delays due to the use of ocean
      cargo. In addition, direct material and labor costs will be stabilized as the
      Company was purchasing from foreign suppliers in the past and subject to foreign
      currency fluctuations of the Eurodollar.





OPERATING
      EXPENSES. General and administrative expenses totaled $2,313,071 for the nine
      months ended March 31, 2007, as compared to $1,435,917 for the period ended
      March 31, 2006, an increase of approximately 61%. This increase of approximately
      $877,000 is primarily attributable to an increase in the royalties due the
      licensor and under contract of $75,000, an increase in consulting fees of
      $572,000 as more general consultants were used in 2007 for sales, administrative
      and development functions and an increase in salaries and benefits of
      approximately $230,000 as the Company established a financial and sales staff
      which did not exist during all of 2006.





NET
      LOSS.
      The net loss during the nine months ended March 31, 2007 aggregated $4,854,162
      as compared to $1,987,229, for the nine months ended March 31, 2006, an increase
      of approximately $2,867,000. The increase in net loss is attributable to the
      increases in general and administrative and cost of revenues as described above.
      In addition, interest expense increased by approximately $792,000 in 2007 due
      to
      increased debt obligations. The Company also incurred financing and debt
      discount costs which are being amortized over the life of the related debt
      obligations of approximately $913,000 for the nine months ended March 31, 2007
      as compared to approximately $56,000 for the period ended March 31, 2006 due
      to
      the increased debt in the current period. Management believes that revenues
      will
      continue to increase as new products are introduced and the Company is able
      to
      grow its customer base, and direct costs will decrease as production becomes
      more automated, allowing operating expenses and indirect costs to be covered
      and
      an improvement in the gross margin. Management’s plans in regard to these
      matters are discussed in more detail above.





*Three
      months ended March 31, 2007 and 2006*





REVENUES.
      Revenues during the three months ended March 31, 2007 were $727,386 as compared
      to revenues of $124,695 during the three months ended March 31, 2006, an
      increase of approximately 483%. In the period ended March 31, 2007, revenues
      were mainly attributable to two new customers in the suncare and skincare
      industry. In the period ended March 31, 2006, revenues were attributable to
      two
      customers, one in the food industry and one in the cosmetic industry.. We
      believe that our sales will continue to grow in the future as we strengthen
      our
      sales force, increase our production capacity as discussed above, with both
      new
      and improved equipment, and are able to introduce new products into the market
      which will enable us to diversify and increase our customer base.





GROSS
      MARGIN. Cost of revenues - direct costs, which consist of direct labor, overhead
      and product costs, were $687,057 (94% of revenues) for the three months ended
      March 31, 2007 as compared to $95,366 (76% of revenues) for the period ended
      March 31, 2006. The increase for 2007 is a result of the increase in revenues.
      The increase as a percent of revenues is related to additional labor costs
      required on one product line which is not yet fully automated and customer
      chargebacks to the Company mainly for shipping costs due to late production.
      Cost of revenues - indirect costs, which consist of indirect labor, quality
      control costs, factory maintenance, product development and depreciation, were
      $201,008 for the three months ended March 31, 2007 as compared to $143,781
      for
      the period ended March 31, 2006. The increase was due primarily to increased
      depreciation of approximately $31,000 due to the purchase of more manufacturing
      equipment and approximately $38,000 in equipment repair and the purchase of
      small parts as compared to approximately $4,000 in 2006 as the revenues and
      related production increased. Gross margin was a deficit of $(160,679) for
      the
      three months ended March 31, 2007 as compared to a deficit of $(114,452) for
      the
      period ended March 31, 2006 representing gross margins of approximately (22)%
      and (92)% of revenues, respectively. The negative gross margin percentage in
      both periods is attributable to revenues which could not cover indirect costs.
      Management believes that these indirect costs, which are primarily related
      to
      depreciation and the purchase of small parts and supplies as production
      increased, will decrease as products become introduced into the marketplace
      and
      that revenues will increase to cover these costs. Management also believes
      direct costs will decrease on a percentage of revenue basis as labor becomes
      streamlined with the addition of new assembly equipment and that production
      capacity will increase with the purchase of additional molds with higher cavity
      production capabilities. Management anticipates that in calendar third quarter
      2007 the U.S. facility will become operational and that all production will
      be
      fully automated on all product lines with higher production capabilities and
      lower labor costs. Shipping time will also improve due to the current U.S.
      customer base, which in the past had lengthy delays due to the use of ocean
      cargo. In addition, direct material and labor costs will be stabilized as the
      Company was purchasing from foreign suppliers in the past and subject to foreign
      currency fluctuations of the Eurodollar.





20


OPERATING
      EXPENSES. General and administrative expenses totaled $829,362 for the three
      months ended March 31, 2007, as compared to $592,512 for the period ended March
      31, 2006, an increase of approximately 40%. This increase of approximately
      $236,000 is primarily attributable to an increase in the royalties due the
      licensor under contract of $25,000 and an increase in consulting fees of
      $270,000 as more general consultants were used in 2007 for sales, administrative
      and development functions. These increases were offset by some decreases mainly
      in professional fees as costs were higher in 2006 due to ongoing merger and
      debt
      negotiations and agreements.





NET
      LOSS.
      The net loss during the three months ended March 31, 2007 aggregated $1,972,950
      as compared to $813,862 for the three months ended March 31, 2006, an increase
      of approximately $1,159,000. The increase in net loss is attributable to the
      increases in general and administrative and cost of revenues as described above.
      In addition, interest expense increased by approximately $280,000 in 2007 due
      to
      increased debt obligations. The Company also incurred financing and debt
      discount costs which are being amortized over the life of the related debt
      obligations of approximately $493,000 for the three months ended March 31,
      2007
      as compared to approximately $15,000 for the period ended March 31, 2006 due
      to
      the increased debt in the current period . Management believes that revenues
      will continue to increase as new products are introduced and the Company is
      able
      to grow its customer base, and direct costs will decrease as production becomes
      more automated, allowing operating expenses and indirect costs to be covered
      and
      an improvement in the gross margin. Management’s plans in regard to these
      matters are discussed in more detail above.




21


**ITEM
      3. CONTROLS AND PROCEDURES**




**Evaluation
      of Disclosure Controls and Procedures**




For
      purposes of rule 13a-14 and 15d-14 of the Securities Exchange Act of 1934
      (“Exchange Act”) the term “disclosure controls and procedures” refers to the
      controls and other procedures of a company that are designed to ensure that
      information required to be disclosed by a company in the reports that it files
      under the Exchange Act is recorded, processed, summarized and reported within
      the required time periods. As of the last date of the end of the period covered
      by this report (“Evaluation Date”), the Company carried out an evaluation under
      the supervision and with the participation of its Chief Executive Officer and
      Principal Accounting Officer, who are the same person, of the effectiveness
      of
      the design and operation of its disclosure controls and procedures. Based on
      that evaluation, the Chief Executive Officer has concluded that, as of the
      Evaluation Date, such controls and procedures were effective at ensuring that
      required information will be disclosed on a timely basis in our periodic reports
      filed under and pursuant to the Exchange Act.




**Changes
      in Internal Controls**




The
      Company made no significant changes in its internal controls or in other factors
      that could significantly affect those controls subsequent to the date of the
      evaluation of those controls subsequent to the Evaluation Date.




22




**PART
      II. OTHER INFORMATION**




**ITEM
      1. Legal Proceedings**




None




**ITEM
      2. Unregistered Sales of Equity Securities**




There
      have been no changes in the instruments defining the rights or rights evidenced
      by any class of registered securities.




There
      have been no dividends declared.




**ITEM
      3. Defaults Upon Senior Securities**




None




**ITEM
      4. Submission of Matters to Vote of Security Holders**




None




**ITEM
      5. Other Information**




None




**ITEM
      6. Exhibits and Reports on Form 8-K**




(A)
      Exhibits




2.1
              Agreement
                  and Plan of Merger by and between the Registrant, Innopump, Inc.
                  and
                  certain shareholders of Innopump dated August 9, 2006
                  (3)




3.1
            Certificate
                of Amendment to Articles of Incorporation
                (2)




3.2
            Certificate
                of Amendment to Articles of Incorporation
                (1)




3.3
            Certificate
                of Amendment to Articles of Incorporation
                (8)




3.4
            Certificate
                of Change to Articles of Incorporation
                (8)




4.1
            Registration
                Rights Agreement by and among the Registrant and Mellon HBV Master
                U.S.
                Event Driven Fund, L.P. and Mellon HBV Master Global Event Driven
                Fund,
                L.P. (collectively referred to as the “Investor”) dated as of August 9,
                2006 (3)




4.2
              Form
                  of Convertible Note
                  (3)




4.3
            Form
                of Warrant (3)




4.4
              Secured
                  Line of Credit Agreement dated as of February 1, 2007 between the
                  Registrant and Fursa Alternative Strategies, LLC
                  (6)




10.1
            Note
                Conversion Agreement between the Company and ODC Partners, LLC
                (2)




10.2
            Amendment
                No. 1 to Securities Purchase Agreement between the Company and Mellon
                HBV
                Master U.S. Event Driven Fund LP and Mellon HBV Master Global Event
                Driven
                Fund LP (4)




10.3
            Amendment
                No. 2 to Securities Purchase Agreement between the Company and Mellon
                HBV
                Master U.S. Event Driven Fund LP and Mellon HBV Master Global Event
                Driven
                Fund LP (5)




10.4
            Amendment
                No. 3 to Securities Purchase Agreement between the Company and Fursa
                Master Global Event Driven Fund LP
                (7)




23




10.5
            Supply
                Agreement dated as of April 20, 2007 between the Registrant and Alltrista
                Plastics Corporation d/b/a Jarden Plastic Solutions
                (9)




10.6
            Tooling
                Amortization Agreement dated as of April 20, 2007 between the Registrant
                and Alltrista Plastics Corporation d/b/a Jarden Plastic Solutions
                (9)




10.7
            Agreement
                to License dated as of April 20, 2007 by and between Gerhard Brugger,
                Sea
                Change Group, LLC and Alltrista Plastics Corporation d/b/a Jarden
                Plastic
                Solutions (9)




31
            Certification
                of CEO and CFO pursuant to Securities Exchange Act rules 13a-15 and
                15d-15(c) as adopted pursuant to section 302 of the Sarbanes-Oxley
                Act of
                2002.*




32
            Certification
                of Chief Executive Officer and Chief Financial Officer, pursuant
                to 18
                U.S.C. section 1350, as adopted pursuant to section 906 of the
                Sarbanes-Oxley Act of 2002.*




(1)
            Filed
                with the Company’s Form 8-K on August 2, 2006 and incorporated by
                reference.




(2)
            Filed
                with the Company’s Form 8-K on August 9, 2006 and incorporated by
                reference.




(3)
            Filed
                with the Company’s Form 8-K on August 11, 2006 and incorporated by
                reference.




(4)
            Filed
                with the Company’s Form 8-K on October 23, 2006 and incorporated by
                reference.




(5)
            Filed
                with the Company’s Form 8-K on November 15, 2006 and incorporated by
                reference.




(6)
            Filed
                with the Company’s Form 8-K on February 7, 2007 and incorporated by
                reference.




(7)
            Filed
                with the Company’s Form 8-K on February 22, 2007 and incorporated by
                reference.




(8)
            Filed
                with the Company’s Form 8-K on March 2, 2007 and incorporated by
                reference.




(9)
            Filed
                with the Company’s Form 8-K on May 4, 2007 and incorporated by
                reference.




*
      Filed
      herewith





(B)
      Reports on Form 8-K





Current
      reports on Form 8-K during the quarter ended March 31, 2007 and the subsequent
      interim period ended May 11, 2007 are as follows:




·
            Report
                on Form 8-K filed with the SEC on February 7, 2007, announcing under
                Item
                1.01 the entering into a Secured Line of Credit Agreement between
                the
                Registrant and Fursa Alternative Strategies, LLC and reporting under
                Item
                5.02 the appointment of five (5) Directors.


·
            Report
                on Form 8-K filed with the SEC on February 13, 2007, reporting under
                Item
                5.02 the resignation of a Director.


·
            Report
                on Form 8-K filed with the SEC on February 22, 2007, reporting under
                Item
                1.01 Amendment No. 3 to the Securities Purchase Agreement between
                the
                Registrant and Fursa Master Event Driven
                Fund.


·
            Report
                on Form 8-K filed with the SEC on March 2, 2007, reporting under
                Item 5.03
                amendments to the Articles of Incorporation to change the name of
                the
                Registrant, reduce the number of authorized common and preferred
                shares
                and effect a one for forty five reduction in the number of shares
                outstanding by effect of a reverse stock
                split.


·
            Report
                on Form 8-K filed with the SEC on May 4, 2007, reporting under Item
                1.01
                the entering into a Supply Agreement and related Tooling Amortization
                Agreement between the Registrant and Alltrista Plastics Corporation
                d/b/a
                Jarden Plastic Solutions.





24


**SIGNATURES**




Pursuant
      to the requirements of the Exchange Act, the registrant caused this report
      to be
      signed on its behalf by the undersigned, thereunto duly authorized.




**VERSADIAL,
              INC.**By:
            /s/ Geoffrey
              DonaldsonChief
                Executive Officer,
              Principal
                Accounting Officer and Director
              Dated:
                May 21, 2007




25