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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 March 31, 2008
 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.
  
 
 
 
 þ o
 o þ
 
 þ o
   Number of Shares of Common Stock15,113,088
 Transition Small Business Disclosure Format (check one): o þ




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##### 



FORM 10-QSB
VERITEC, INC.
 INDEX
 Page(s)PART I. FINANCIAL INFORMATION
    
    
    1Item 1. Financial Statements
    
    
    1Item 2. Managements Discussion and Analysis or Plan of Operations
    
    
    10Item 3. Controls and Procedures
    
    
    14PART II. OTHER INFORMATION
    
    
    14Item 1. Legal Proceedings
    
    
    14Item 1A. Risk Factors
    
    
    15Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    17Item 3. Defaults Upon Senior Securities
    
    
    17Item 4. Submission of Matters to a Vote of Security Holders
    
    
    17Item 5. Other Information
    
    
    17Item 6. Exhibits
    
    
    17Signatures
    
    
    17Exhibits Index
    
    
    18Exhibit 31Exhibit 32




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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 VERITEC, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    June 30,2008
    
    
    2007(Unaudited)ASSETSCurrent Assets:Cash
    
    $
    402,630
    
    
    $
    790,089Accounts receivable, net
    
    
    28,681
    
    
    
    11,927Note receivable from RBA, net
    
    
    
    
    
    
    78,516Inventories
    
    
    19,853
    
    
    
    26,213Prepaid expenses
    
    
    12,650
    
    
    
    27,325Total Current Assets
    
    
    463,814
    
    
    
    934,070Property and Equipment, net
    
    
    89,770
    
    
    
    88,005Software License, net
    
    
    58,333
    
    
    
    83,333Patent Costs
    
    
    43,756
    
    
    
    18,756Total Assets
    
    $
    655,673
    
    
    $
    1,124,164LIABILITIES AND STOCKHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    28,624
    
    
    $
    56,072Accrued expenses
    
    
    239,385
    
    
    
    405,074Total Current Liabilities
    
    
    268,009
    
    
    
    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
    
    
    (36,579
    )
    
    
    (193,876
    )Additional paid-in capital
    
    
    13,668,636
    
    
    
    13,575,926Accumulated deficit
    
    
    (13,396,524
    )
    
    
    (12,870,993
    )Total Stockholders Equity
    
    
    387,664
    
    
    
    663,018Total Liabilities and Stockholders Equity
    
    $
    655,673
    
    
    $
    1,124,164
   1




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VERITEC, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended March 31,2008
    
    
    2007Revenues:Other
    
    $
    317,244
    
    
    $
    171,015Infringement
    
    
    
    
    
    
    1,105,966Total Revenues
    
    
    317,244
    
    
    
    1,276,981Cost of Sales
    
    
    38,635
    
    
    
    24,191Gross Profit
    
    
    278,609
    
    
    
    1,252,790Operating Expenses:Selling, general and administrative
    
    
    300,443
    
    
    
    709,070Research and development
    
    
    127,062
    
    
    
    95,716Total Operating Expenses
    
    
    427,505
    
    
    
    804,786Income (Loss) from Operations
    
    
    (148,896
    )
    
    
    448,004Interest income
    
    
    2,615
    
    
    
    15,193Net Income (Loss)
    
    $
    (146,281
    )
    
    $
    463,197Income (Loss) Per Common ShareBasic and Diluted
    
    $
    (0.01
    )
    
    $
    0.03
   2




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VERITEC, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Nine months ended March 31,2008
    
    
    2007Revenues:Other
    
    $
    525,537
    
    
    $
    362,913Infringement
    
    
    445,349
    
    
    
    1,767,894Total Revenues
    
    
    970,886
    
    
    
    2,130,807Cost of Sales
    
    
    124,327
    
    
    
    39,729Gross Profit
    
    
    846,559
    
    
    
    2,091,078Operating Expenses:Selling, general and administrative
    
    
    972,408
    
    
    
    1,433,128Research and development
    
    
    417,338
    
    
    
    290,611Total Operating Expenses
    
    
    1,389,746
    
    
    
    1,723,739Income (Loss) from Operations
    
    
    (543,187
    )
    
    
    367,339Other Income:Interest income
    
    
    16,671
    
    
    
    31,701Gain on sale of property and equipment
    
    
    985
    
    
    
    Total Other Income
    
    
    17,656
    
    
    
    31,701Net Income (Loss)
    
    $
    (525,531
    )
    
    $
    399,040Income (Loss) Per Common ShareBasic and Diluted
    
    $
    (0.03
    )
    
    $
    0.03
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VERITEC, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Nine months ended March 31,2008
    
    
    2007CASH FLOWS FROM OPERATING ACTIVITIESNet income (loss)
    
    $
    (525,531
    )
    
    $
    399,040Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities:Depreciation
    
    
    24,152
    
    
    
    7,728Amortization of software license
    
    
    25,000
    
    
    
    5,000Stock based compensation
    
    
    56,060
    
    
    
    123,539Interest income added to note receivable from RBA
    
    
    (5,284
    )
    
    
    (6,794
    )Services applied to reduce note receivable from RBA
    
    
    57,750
    
    
    
    26,488Gain on sale of property and equipment
    
    
    (985
    )
    
    
    Reverse allowance for note receivable from RBA
    
    
    (48,000
    )
    
    
    Changes in operating assets and liabilities:Accounts receivable
    
    
    (16,754
    )
    
    
    (1,898
    )Inventories
    
    
    6,360
    
    
    
    (7,661
    )Prepaid expenses
    
    
    14,675
    
    
    
    (46,000
    )Accounts payables and accrued expenses
    
    
    (165,687
    )
    
    
    119,698Net cash provided (used) by operating activities
    
    
    (578,244
    )
    
    
    619,140CASH FLOWS FROM INVESTING ACTIVITIESAdvances on note receivable
    
    
    (50,950
    )
    
    
    (400,000
    )Proceeds from sale of property and equipment
    
    
    985
    
    
    
    Collection on note receivable from RBA
    
    
    125,000
    
    
    
    304,083Purchases of equipment
    
    
    (25,917
    )
    
    
    (23,882
    )Purchase of patent
    
    
    (25,000
    )
    
    
    Purchases of software license
    
    
    
    
    
    
    (100,000
    )Net cash provided (used) by investing activities
    
    
    24,118
    
    
    
    (219,799
    )CASH FLOWS FROM FINANCING ACTIVITIESProceeds on subscription receivable (including $9,370 interest
credited to additional paid-in capital)
    
    
    166,667
    
    
    
    55,556NET INCREASE (DECREASE) IN CASH
    
    
    (387,459
    )
    
    
    454,897CASH AT BEGINNING OF PERIOD
    
    
    790,089
    
    
    
    898,424CASH AT END OF PERIOD
    
    $
    402,630
    
    
    $
    1,353,321NONCASH 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
    
    
    
    
    
    
    6,296Purchase of property and equipment included in accounts payable
    
    
    
    
    
    
    48,000
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VERITEC, INC. AND SUBSIDIARY
          ®
   5




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6




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Three 
Months
    
    
    Nine 
MonthsNet income
    
    $
    463,197
    
    
    $
    399,040Weighted average shares outstanding
    
    
    15,078,598
    
    
    
    15,078,598Incremental shares from assumed exercise or conversion of dilutive instruments:Options
    
    
    32,130
    
    
    
    35,084Preferred Stock
    
    
    10,000
    
    
    
    10,000Shares outstanding  diluted
    
    
    15,120,728
    
    
    
    15,123,682Income per common share  diluted
    
    $
    0.03
    
    
    $
    0.03
    7




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Number of
    
    
    Weighted  AverageShares
    
    
    Exercise PriceOutstanding at June 30, 2007
    
    
    156,666
    
    
    $
    1.03Granted
    
    
    129,000
    
    
    $
    0.49Forfeited
    
    
    (2,917
    )
    
    $
    0.51Outstanding at March 31, 2008
    
    
    282,749
    
    
    $
    0.79
        8




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© ©
     9




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Item 2. Managements Discussion and Analysis or Plan of Operation
 Business Overview
  Principal products
 © ©
 Product Identification ®
 Secure Bio-ID Cards and Stored-Value Cards   
  ®   
 Time and Attendance Systems
  10




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PhoneCodes© Products © ® © © ©
 Patent Infringement Lawsuits and License Fees
   Results of Operations  March 31, 2008 compared to March 31, 2007
 Revenues
    11




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
  Cost of Sales
   Selling General and Administrative
   Research and Development
 ©
  12




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©
 Liquidity and Capital Resources
    Critical Accounting Policies
      13




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Quantitative and Qualitative Disclosures About Market Risk
  
 Item 3. Controls and Procedures
 Disclosure Controls and Procedures
  Internal Control over Financial Reporting
  
 PART II OTHER INFORMATION
 
 Item 1. Legal Proceedings
    14




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Item 1A. Risk Factors
   Cash Shortfall; Going Concern
  We Have a History of Operating Losses
   15




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Loss of the Services of Key Employees Could Harm Our Operations
  Continuing Licensing Revenues from VData and Intellectual Property
  Competition in the Asian Market
 ®
 Ability to Obtain Access to Capital
  Effect of the Bankruptcy
  Competition
 ® 
  16




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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  17




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EXHIBIT INDEX
 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).
  18