##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-QSB
  þ
    
    QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 (No fee required)
 For the quarterly period ended December 31, 2007
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission file number 0-15113
 VERITEC, INC.
 (Exact name of registrant as specified in its charter)
  (State or other jurisdiction of incorporation or organization)
  (IRS Employer Identification Number)
 2445 Winnetka Avenue North, Golden Valley, MN 55427
   (Registrants telephone number, including area code)
 þ o
 o þ
 
 þ o
   Number of Shares of Common Stock15,113,088
 Transition Small Business Disclosure Format (check one): o þ




---



##### 



Page(s)PART I.
    
    FINANCIAL INFORMATION
    
    
    1Item 1.
    
    Financial Statements
    
    
    1Item 2.
    
    Managements Discussion and Analysis or Plan of Operations
    
    
    9Item 3.
    
    Controls and Procedures
    
    
    15PART II.
    
    OTHER INFORMATION
    
    
    15Item 1.
    
    Legal Proceedings
    
    
    15Item 1A.
    
    Risk Factors
    
    
    16Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    18Item 3.
    
    Defaults Upon Senior Securities
    
    
    18Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    18Item 5.
    
    Other Information
    
    
    18Item 6.
    
    Exhibits
    
    
    18Signatures
    
    
    18Exhibits Index
    
    
    19Exhibit 31Exhibit 32




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 VERITEC, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    June 30,2007
    
    
    2007(Unaudited)ASSETSCurrent Assets:Cash
    
    $
    330,444
    
    
    $
    790,089Accounts receivable, net
    
    
    41,856
    
    
    
    11,927Note receivable from RBA, net
    
    
    125,000
    
    
    
    78,516Inventories
    
    
    20,015
    
    
    
    26,213Prepaid expenses
    
    
    12,650
    
    
    
    27,325Total Current Assets
    
    
    529,965
    
    
    
    934,070Property and Equipment, net
    
    
    95,661
    
    
    
    88,005Software License, net
    
    
    66,981
    
    
    
    83,333Patent Costs
    
    
    18,756
    
    
    
    18,756Total Assets
    
    $
    711,363
    
    
    $
    1,124,164LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    47,148
    
    
    $
    56,072Accrued expenses
    
    
    202,033
    
    
    
    405,074Total Current Liabilities
    
    
    249,181
    
    
    
    461,146Commitments and ContingenciesStockholders Equity:Convertible preferred stock, par value $1.00;
authorized 10,000,000 shares, 276,000 shares of
Series H authorized, 1,000 shares issued
    
    
    1,000
    
    
    
    1,000Common stock, par value $.01; authorized
20,000,000 shares, 15,113,088 and 15,096,088
shares issued
    
    
    151,131
    
    
    
    150,961Subscription receivable
    
    
    (90,322
    )
    
    
    (193,876
    )Additional paid-in capital
    
    
    13,650,616
    
    
    
    13,575,926Accumulated deficit
    
    
    (13,250,243
    )
    
    
    (12,870,993
    )Total Stockholders Equity
    
    
    462,182
    
    
    
    663,018Total Liabilities and Stockholders Equity
    
    $
    711,363
    
    
    $
    1,124,164
  1




---



##### Table of Contents



VERITEC, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended December 31,2007
    
    
    2006Revenues:Infringement
    
    $
    445,349
    
    
    $
    402,264Other
    
    
    138,078
    
    
    
    92,569Total Revenues
    
    
    583,427
    
    
    
    494,833Cost of Sales
    
    
    54,805
    
    
    
    10,428Gross Profit
    
    
    528,622
    
    
    
    484,405Operating Expenses:Selling, general and administrative
    
    
    317,027
    
    
    
    392,577Research and development
    
    
    150,313
    
    
    
    107,491Total Operating Expenses
    
    
    467,340
    
    
    
    500,068Income (Loss) from Operations
    
    
    61,282
    
    
    
    (15,663
    )Interest income
    
    
    5,498
    
    
    
    7,770Net Income (Loss)
    
    $
    66,780
    
    
    $
    (7,893
    )Income (Loss) Per Common ShareBasic and Diluted
    
    $
    0.00
    
    
    $
    (0.00
    )
  2




---



##### Table of Contents



VERITEC, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Six months ended December 31,2007
    
    
    2006Revenues:Infringement
    
    $
    445,349
    
    
    $
    661,928Other
    
    
    208,292
    
    
    
    191,897Total Revenues
    
    
    653,641
    
    
    
    853,825Cost of Sales
    
    
    85,692
    
    
    
    15,538Gross Profit
    
    
    567,949
    
    
    
    838,287Operating Expenses:Selling, general and administrative
    
    
    671,963
    
    
    
    724,057Research and development
    
    
    290,276
    
    
    
    194,895Total Operating Expenses
    
    
    962,239
    
    
    
    918,952Loss from Operations
    
    
    (394,290
    )
    
    
    (80,665
    )Other Income:Interest income
    
    
    14,055
    
    
    
    16,507Gain on sale of property and equipment
    
    
    985
    
    
    
    Total Other Income
    
    
    15,040
    
    
    
    16,507Net Loss
    
    $
    (379,250
    )
    
    $
    (64,158
    )Loss Per Common ShareBasic and Diluted
    
    $
    (0.03
    )
    
    $
    (0.00
    )
  3




---



##### Table of Contents



VERITEC, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six months ended December 31,2007
    
    
    2006CASH FLOWS FROM OPERATING ACTIVITIESNet loss
    
    $
    (379,250
    )
    
    $
    (64,158
    )Adjustments to reconcile net loss to net cash used by operating activities:Depreciation
    
    
    15,094
    
    
    
    4,195Amortization of software license
    
    
    16,352
    
    
    
    Stock based compensation
    
    
    39,853
    
    
    
    83,382Interest income added to note receivable from RBA
    
    
    (5,284
    )
    
    
    Services applied to reduce note receivable from RBA
    
    
    57,750
    
    
    
    Gain on sale of property and equipment
    
    
    (985
    )
    
    
    Reverse allowance for note receivable from RBA
    
    
    (48,000
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (29,929
    )
    
    
    40,062Inventories
    
    
    6,198
    
    
    
    (4,116
    )Prepaid expenses
    
    
    14,675
    
    
    
    (1,000
    )Accounts payables and accrued expenses
    
    
    (184,515
    )
    
    
    (97,401
    )Net cash used by operating activities
    
    
    (498,041
    )
    
    
    (39,036
    )CASH FLOWS FROM INVESTING ACTIVITIESAdvances on note receivable
    
    
    (50,950
    )
    
    
    (100,000
    )Proceeds from sale of property and equipment
    
    
    985
    
    
    
    Purchases of equipment
    
    
    (22,750
    )
    
    
    (23,833
    )Purchases of software license
    
    
    
    
    
    
    (100,000
    )Net cash used by investing activities
    
    
    (72,715
    )
    
    
    (223,883
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds on subscription receivable (including $7,557 interest credited
to additional paid-in capital)
    
    
    111,111
    
    
    
    NET DECREASE IN CASH
    
    
    (459,645
    )
    
    
    (262,919
    )CASH AT BEGINNING OF PERIOD
    
    
    790,089
    
    
    
    898,424CASH AT END OF PERIOD
    
    $
    330,444
    
    
    $
    635,505NONCASH ACTIVITIESIssuance of common stock for accrued expenses
    
    $
    27,450
    
    
    $
    Applied accrued expenses and prepayment on subscription receivable to
subscription receivable
    
    $
    
    
    
    $
    111,111Purchase of assets of Secure Environments, Inc. included in year end
accrued expenses
    
    $
    
    
    
    $
    6,296
  4




---



##### Table of Contents



VERITEC, INC. AND SUBSIDIARY
          ®
  5




---



##### Table of Contents



6




---



##### Table of Contents



Net income
    
    $
    66,780Weighted average shares outstanding
    
    
    15,113,088Incremental shares from assumed exercise or conversion of
dilutive instruments:Options
    
    
    18,007Preferred Stock
    
    
    10,000Shares
outstanding  diluted
    
    
    15,141,095Income per common share  diluted
    
    $
    0.00
     7




---



##### Table of Contents



Number of
    
    
    Weighted  AverageShares
    
    
    Exercise PriceOutstanding at June 30, 2007
    
    
    156,666
    
    
    $
    1.03Granted
    
    
    99,000
    
    
    $
    0.56Forfeited
    
    
    (2,917
    )
    
    $
    0.51Outstanding at December 31, 2007
    
    
    252,749
    
    
    $
    0.85
         8




---



##### Table of Contents



Item 2. Managements Discussion and Analysis or Plan of Operation
  9




---



##### Table of Contents



Critical Accounting Policies
     General
  ®
 10




---



##### Table of Contents



Nature of Business
  ®
   Business Strategy
 ©
 ® © © ©
 11




---



##### Table of Contents




   ®
   Results
of Operations  December 31, 2007 compared to December 31, 2006
 Revenues
    ©
 12




---



##### Table of Contents



Cost of Sales
   Selling General and Administrative
  13




---



##### Table of Contents



Research and Development
   Liquidity and Capital Resources
    Quantitative and Qualitative Disclosures About Market Risk
  14




---



##### Table of Contents



Item 3. Controls and Procedures
 Disclosure Controls and Procedures
  Internal Control over Financial Reporting
  
 PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings
     15




---



##### Table of Contents



Item 1A. Risk Factors
   Cash Shortfall; Going Concern
  We Have a History of Operating Losses
  Loss of the Services of Key Employees Could Harm Our Operations
  16




---



##### Table of Contents



Continuing Licensing Revenues from VData and Intellectual Property
  Competition in the Asian Market
 ®
 Dependence on The Matthews Group
  Ability to Obtain Access to Capital
  Effect of the Bankruptcy
  Competition
 ® 
 17




---



##### Table of Contents



General Conditions Beyond the Companies Control
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
  
 Signatures
  Veritec, Inc./s/ Van Thuy TranVan Thuy Tran, Chief Executive Officer/s/ Gerald ForsGerald Fors, Chief Financial Officer
 18




---



##### Table of Contents



*3(i)
    
    Restated Articles of Incorporation of Veritec, Inc. (filed as exhibit 3(i) to Veritecs
Quarterly Report on Form 10QSB for the quarter ended March 31, 2007, and incorporated herein
by reference).*3(ii)
    
    Bylaws of Veritec, Inc. (filed as exhibit 3(ii) to Veritecs Quarterly Report on Form 10QSB
for the quarter ended December 31, 2006, and incorporated herein by reference).*13(a)
    
    Form 10-KSB for the period ended June 30, 1999, filed on October
13, 1999, and is incorporated herein by this reference.*14.
    
    Code of Ethics of Veritec, Inc. (filed as exhibit 14 to Veritecs
Annual Report on Form 10KSB for the year ended June 30, 2007, and
incorporated herein by reference).31.
    
    CEO/CFO Certification required by Rule 13a14(a)/15d14(a) under the Securities Exchange Act
of 1934.32.
    
    Veritec, Inc. Certification of CEO/CFO pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (18 U.S.C. §1350).
  *
    
    As Previously Filed
 19