UNITED STATES
SECURITIES AND
EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 10-Q
[X] QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period
Ended: June 30, 2014
or
[ ] TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
VERITY
CORP.
(Exact
name of registrant as specified in its charter)
Nevada |
|
333-147367 |
|
38-3767357 |
(State
or other jurisdiction of
incorporation or organization) |
|
(Commission
File Number) |
|
(I.R.S.
Employer
Identification Number) |
47184 258th
Street
Sioux Falls, SD 57107
(Address
of principal executive offices, including zip code)
(605)
543-5985
(Registrant’s
telephone number, including area code)
Indicate by check mark whether the registrant:
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such
filing requirements for the last 90 days. Yes [X] No [ ]
Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files). Yes [ ] No [X]
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of
“large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act.
Large
Accelerated Filer [ ] |
Accelerated
Filer [ ] |
|
|
Non-Accelerated
Filer [ ] |
Smaller reporting
company [X] |
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]
As of August 20, 2014, the registrant had
10,177,201 shares of its common stock outstanding.
VERITY
CORP.
FOR
THE QUARTER ENDED
JUNE
30, 2014
TABLE
OF CONTENTS
Part
1 - Financial Information
Item
1. Financial Statements
VERITY
CORP.
AND
ITS SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
| |
June 30, 2014 | | |
September 30, 2013 | |
| |
(unaudited) | | |
(audited) | |
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
CURRENT ASSETS: | |
| | | |
| | |
Cash | |
$ | 129,773 | | |
$ | 94,503 | |
Accounts receivable | |
| 699,019 | | |
| 149,743 | |
Inventory | |
| 653,586 | | |
| 576,266 | |
Prepaid expenses | |
| 142,909 | | |
| 136,391 | |
Other receivables | |
| 16,256 | | |
| 16,747 | |
Total Current Assets | |
| 1,641,543 | | |
| 973,650 | |
| |
| | | |
| | |
FIXED ASSETS | |
| | | |
| | |
Land | |
| - | | |
| 2,400,000 | |
Building | |
| 300,000 | | |
| 800,000 | |
Accumulated depreciation - Building | |
| (26,667 | ) | |
| (41,667 | ) |
Property, plant, and equipment | |
| 686,544 | | |
| 607,973 | |
Accumulated depreciation - PP&E | |
| (377,353 | ) | |
| (312,313 | ) |
Net Fixed Assets | |
| 582,525 | | |
| 3,453,993 | |
| |
| | | |
| | |
OTHER ASSETS | |
| | | |
| | |
Investment in Crop Resources | |
| 19,965 | | |
| 19,965 | |
Total Other Assets | |
| 19,965 | | |
| 19,965 | |
| |
| | | |
| | |
TOTAL ASSETS | |
$ | 2,244,032 | | |
$ | 4,447,608 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | |
| | | |
| | |
| |
| | | |
| | |
CURRENT LIABILITIES: | |
| | | |
| | |
Accounts payable | |
| 880,571 | | |
| 209,938 | |
Credit cards payable | |
| 36,501 | | |
| 38,058 | |
Customer deposits | |
| 10,241 | | |
| 10,241 | |
Notes payable | |
| 147,122 | | |
| 100,956 | |
Notes payable - related party | |
| 541,267 | | |
| 3,636,267 | |
Real estate loans, current portion | |
| 11,503 | | |
| 11,503 | |
Real estate loans, current portion- related party | |
| - | | |
| 717,670 | |
Accrued interest payable | |
| 246,802 | | |
| 283,674 | |
| |
| | | |
| | |
Total Current Liabilities | |
| 1,874,007 | | |
| 5,008,306 | |
| |
| | | |
| | |
LONG TERM LIABILITIES: | |
| | | |
| | |
Real estate loans, net current portion | |
| 251,047 | | |
| 259,623 | |
Related Party Note Payable | |
| 3,710,000 | | |
| 2,182,330 | |
| |
| 3,961,047 | | |
| 2,441,953 | |
| |
| | | |
| | |
Total Liabilities | |
| 5,835,054 | | |
| 7,450,259 | |
| |
| | | |
| | |
STOCKHOLDERS’ DEFICIT: | |
| | | |
| | |
Preferred stock, $0.001 par value, 50,000,000 shares authorized | |
| | | |
| | |
Series A Preferred, $0.001 par value, 331,618 and 331,618 shares issued and outstanding, respectively | |
| 332 | | |
| 332 | |
Series B Preferred, $0.001 par value, 4,750,006 and 4,850,000 shares issued and outstanding,
respectively | |
| 4,750 | | |
| 4,850 | |
Series C Preferred, $0.001 par value, 51 and 51 shares issued and outstanding, respectively | |
| 0 | | |
| - | |
Common stock, $0.001 par value, 1,000,000,000 shares authorized 10,177,201 and 9,177,201 shares issued and outstanding,
respectively * | |
| 10,178 | | |
| 9,178 | |
Capital in excess of par value | |
| 7,928,101 | | |
| 7,929,001 | |
Retained earnings (Deficit) | |
| (11,413,821 | ) | |
| (10,828,681 | ) |
Noncontrolling interest | |
| (120,561 | ) | |
| (117,331 | ) |
| |
| | | |
| | |
Total Stockholders’ (Deficit) | |
| (3,591,022 | ) | |
| (3,002,651 | ) |
| |
| | | |
| | |
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | |
$ | 2,244,032 | | |
$ | 4,447,608 | |
*
Reflects a 1:100 reverse stock split on 4/4/2013
The
accompanying notes are an integral part of these consolidated financial statements.
VERITY
CORP.
AND
ITS SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
FOR
THE THREE AND NINE MONTHS ENDED JUNE 30, 2014 AND 2013
| |
For the Three Months | | |
For the Nine Months | |
| |
Ended June 30, | | |
Ended June 30, | |
| |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| |
| | |
| | |
| | |
| |
REVENUES: | |
| | | |
| | | |
| | | |
| | |
Sales | |
$ | 1,749,439 | | |
$ | 1,428,021 | | |
$ | 2,440,336 | | |
$ | 2,108,885 | |
Service | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
Total Revenues | |
| 1,749,439 | | |
| 1,428,021 | | |
| 2,440,336 | | |
| 2,108,885 | |
| |
| | | |
| | | |
| | | |
| | |
COST
OF GOODS SOLD | |
| 1,029,706 | | |
| 742,951 | | |
| 1,347,798 | | |
| 1,151,874 | |
| |
| | | |
| | | |
| | | |
| | |
GROSS PROFIT | |
| 719,733 | | |
| 685,070 | | |
| 1,092,539 | | |
| 957,011 | |
| |
| | | |
| | | |
| | | |
| | |
OPERATING EXPENSES: | |
| | | |
| | | |
| | | |
| | |
Consulting fees | |
| 425 | | |
| 23,500 | | |
| 850 | | |
| 210,500 | |
Depreciation | |
| 14,870 | | |
| 37,917 | | |
| 87,857 | | |
| 77,140 | |
Management fees | |
| - | | |
| - | | |
| - | | |
| 41,265 | |
Marketing and advertising | |
| 30,782 | | |
| 34,815 | | |
| 63,976 | | |
| 82,802 | |
Payroll expense | |
| 502,028 | | |
| 347,878 | | |
| 966,748 | | |
| 684,071 | |
Professional fees | |
| 116,323 | | |
| 242,206 | | |
| 224,833 | | |
| 400,920 | |
Rent | |
| 42,562 | | |
| 32,426 | | |
| 77,311 | | |
| 90,106 | |
Repairs and maintenance | |
| 5,309 | | |
| 11,801 | | |
| 22,088 | | |
| 23,882 | |
Research and development | |
| 5,701 | | |
| 4,265 | | |
| 25,989 | | |
| 13,457 | |
Travel, meals, and entertainment | |
| 92,901 | | |
| 52,030 | | |
| 144,583 | | |
| 105,625 | |
Other general and administrative | |
| 152,545 | | |
| 115,336 | | |
| 255,000 | | |
| 250,676 | |
Total Operating Expenses | |
| 963,466 | | |
| 902,174 | | |
| 1,869,235 | | |
| 1,980,444 | |
| |
| | | |
| | | |
| | | |
| | |
LOSS FROM OPERATIONS | |
| (243,733 | ) | |
| (217,104 | ) | |
| (776,696 | ) | |
| (1,023,433 | ) |
| |
| | | |
| | | |
| | | |
| | |
OTHER INCOME (EXPENSE): | |
| | | |
| | | |
| | | |
| | |
Loss on Derivative liability | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| 116,515 | | |
| (39,370 | ) | |
| (34,886 | ) | |
| (82,141 | ) |
Misc. Other Income (Expense) | |
| - | | |
| (42,094 | ) | |
| 2,027 | | |
| (42,530 | ) |
| |
| | | |
| | | |
| | | |
| | |
LOSS BEFORE INCOME TAX PROVISION | |
| (127,218 | ) | |
| (298,568 | ) | |
| (809,555 | ) | |
| (1,148,104 | ) |
| |
| | | |
| | | |
| | | |
| | |
PROVISION FOR INCOME TAXES | |
| - | | |
| - | | |
| - | | |
| - | |
| |
| | | |
| | | |
| | | |
| | |
CONSOLIDATED NET LOSS | |
| (127,218 | ) | |
| (298,568 | ) | |
| (809,555 | ) | |
| (1,148,104 | ) |
| |
| | | |
| | | |
| | | |
| | |
Loss on goodwill impairment, Verity Farms | |
| - | | |
| 152,611 | | |
| - | | |
| 5,943,533 | |
Loss on discontinued operations | |
| | | |
| 35,053 | | |
| | | |
| 7,799 | |
| |
| | | |
| | | |
| | | |
| | |
Net loss (income) attributable to non-controlling interest, Aistiva | |
| 2,927 | | |
| 8,710 | | |
| 6,156.37 | | |
| 74,686 | |
| |
| | | |
| | | |
| | | |
| | |
NET LOSS ATTRIBUTABLE TO COMPANY | |
$ | (124,291 | ) | |
$ | (477,522 | ) | |
$ | (803,399 | ) | |
$ | (7,024,750 | ) |
| |
| | | |
| | | |
| | | |
| | |
BASIC LOSS PER SHARE | |
$ | (0.01 | ) | |
$ | (0.06 | ) | |
$ | (0.09 | ) | |
$ | (1.01 | ) |
| |
| | | |
| | | |
| | | |
| | |
WEIGHTED AVERAGE SHARES OUTSTANDING | |
| 9,150,534 | | |
| 7,692,867 | | |
| 9,288,312 | | |
| 6,948,239 | |
The
accompanying notes are an integral part of these consolidated financial statements.
VERITY
CORP.
AND
ITS SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
FOR
THE NINE MONTHS ENDED JUNE 30, 2014 AND 2013
| |
For the nine months | |
| |
Ended June 30, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
CASH FLOWS FROM
OPERATING ACTIVITIES: | |
| | | |
| | |
Net loss | |
$ | (803,399 | ) | |
$ | (7,024,750 | ) |
Adjustments to reconcile net loss to net cash by operating activities: | |
| | | |
| | |
Noncontrolling interest in income of consolidated subsidiary | |
| (6,156 | ) | |
| (74,686 | ) |
Depreciation | |
| 87,857 | | |
| 77,140 | |
Issuance of stock for services received | |
| - | | |
| 216,788 | |
Loss on goodwill impairment, Verity Farms | |
| - | | |
| 5,943,533 | |
Net (increase) decrease in operating assets: | |
| | | |
| | |
Accounts receivable | |
| (549,276 | ) | |
| (384,177 | ) |
Inventory | |
| (77,320 | ) | |
| (573,070 | ) |
Other receivable | |
| 492 | | |
| (12,221 | ) |
Prepaid expense | |
| (6,518 | ) | |
| (120,891 | ) |
Net increase (decrease) in operating liabilities: | |
| | | |
| | |
Accounts payable | |
| 670,633 | | |
| 112,164 | |
Credit cards payable | |
| (1,557 | ) | |
| 41,157 | |
Customer deposits | |
| 46,167 | | |
| 43,005 | |
Other liabilities | |
| 146,455 | | |
| 253,290 | |
| |
| | | |
| | |
Net Cash Provided (Used) by Operating Activities | |
| (492,622 | ) | |
| (1,502,718 | ) |
| |
| | | |
| | |
CASH FLOWS FROM
INVESTING ACTIVITIES: | |
| | | |
| | |
Payments for property, equipment | |
| (78,571 | ) | |
| (41,602 | ) |
Payments for Verity acquisition | |
| - | | |
| (4,850,000 | ) |
| |
| | | |
| | |
Net Cash Provided (Used) by Investing Activities | |
| (78,571 | ) | |
| (4,891,602 | ) |
| |
| | | |
| | |
CASH FLOWS FROM
FINANCING ACTIVITIES | |
| | | |
| | |
Proceeds from notes | |
| - | | |
| 6,574,767 | |
Proceeds from notes-related party | |
| 615,000 | | |
| 0 | |
Payments for notes | |
| (8,577 | ) | |
| (320,034 | ) |
Proceeds of capital stock issuance | |
| 0 | | |
| 227,474 | |
| |
| | | |
| | |
Net Cash Provided by Financing Activities | |
| 606,423 | | |
| 6,482,207 | |
| |
| | | |
| | |
NET INCREASE (DECREASE)
IN CASH | |
| 35,270 | | |
| 87,887 | |
| |
| | | |
| | |
CASH AT BEGINNING OF PERIOD | |
| 94,503 | | |
| 7,519 | |
| |
| | | |
| | |
CASH AT END OF PERIOD | |
$ | 129,773 | | |
$ | 95,406 | |
| |
| | | |
| | |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | |
| | | |
| | |
Cash paid during the period for: | |
| | | |
| | |
Interest | |
$ | 9,424 | | |
$ | - | |
Income taxes | |
$ | - | | |
$ | - | |
| |
| | | |
| | |
NON-CASH INVESTING AND FINANCING ACTIVITIES | |
| | | |
| | |
Issuance of stock to retire notes payable, derivative liability, and accrued interest | |
| | | |
$ | 276,282 | |
Issuance of preferred stock for acquisition | |
$ | - | | |
$ | 4,850,000 | |
The
accompanying notes are an integral part of these consolidated financial statements.
VERITY
CORP AND SUBSIDIARIES
NOTES
TO FINANCIAL STATEMENTS (UNAUDITED)
AS
OF JUNE 30, 2014
NOTE
1 – ORGANIZATION AND BUSINESS BACK GROUND
OVERVIEW
Verity
Corp. (the “Company”) is a natural-oriented, technologically sophisticated Agribusiness Services company. The Company’s
Corporate Goal is to provide consumers with safe, high-quality and nutritious food sources and high-quality water for drinking
and for agricultural and livestock production. The Company has a portfolio of proprietary natural (oriented) products and
services focused from Soil to Plate to fulfill its Corporate Goal.
HISTORY
AND PRODUCT OVERVIEW
Verity’s
predecessor company Verity Farms, LLC was incorporated in July 2004. Since then the Company has taken its sustainable crop and
livestock production protocols and developed:
i) |
a
portfolio of (hard) products that can be widely used by either conventional or organic/non-GMO farms to: |
|
a) |
improve
the quality of grain, livestock & aquaculture production; |
|
|
|
|
b) |
reduce
growing costs; while |
|
|
|
|
c) |
maintaining
production yields. |
ii) |
a
fully integrated set of Soil and Plant Health Programs that remove substantial barrier for farmers desiring to convert conventional
farms into farms with healthy soil and sustainable, non-GMO crop and livestock production based upon natural practices and
limited chemical applications. |
These
products and programs position Verity as a leader & one-stop farming & food production resource addressing powerful &
accelerating trends that are altering production methods in the $53 billion Food Market.
ORGANIZATION
& OPERATIONS
The
Company is organized into 3 divisions: Verity Agriculture Productions & Soil Preservation; Verity Water Systems; and Verity
Consumer Products. These distinct divisions are interlinked by one sales team, located in major agricultural production markets,
to provide: farmers, ranchers, food distributors & processors and food manufacturers and grocery retailers a wide spectrum
of product & service solutions to address their issues in production, supply, and market positioning. Verity has integrated
operations at its Corporate Headquarters, in Sioux Falls, South Dakota and in Pelham Georgia, which provides Product Distribution,
Sales, and Crop Advisory Services in Georgia for the Southeast U.S. In order to focus the Company’s limited resources, Verity’s
Consumer products remains in test / pre-production mode. The Company’s Agriculture Production & Soil Preservation Division
and Water Systems Division are moving from a limited “Bottom Up” Sales mode to Mass Commercialization through the
establishment of strategic relationships .
STRATEGY
Verity
changed its top management and corporate organization in Q1 FY2014. This change is accompanied by a change in focus and allocation
of resources that had gained momentum in preceding years. The prior CEO has retired from day-to-day operational responsibilities,
is an advisor and consultant to the Company, and remains a member of Verity’s Board of Directors.
From
FY 2004 through FY 2013, Verity focused on:
|
a) |
Development
of a distinctive portfolio of unique and innovative products and services. |
|
|
|
|
b) |
Development
of a sales & distribution network of Verity representatives that: i) use the Verity Agriculture & Soil Preservation
Products and Services in their family farms; and ii) market and sell Verity Products and Services in the farming communities
in their regions. |
STRATEGY
(Cont.)
In
FY 2014, the Company has: rolled out a distinctive line of Hard Products for use by family farmers that will also appeal
to Agribusinesses that have integrated production and processing operations. The Company has focused management attention and
Company resources to implementing a new “Top Down” strategy that will complement the Company’s continuing “Bottom
Up” strategy. The “Bottom Up” strategy has created a network of family farmers / salesmen that are Verity’s
eyes, ears, voice and hands in their regions. This Sales Force provides Verity with: a) regional farming and agribusiness intelligence
and has identified prospective Strategic Customer & Distribution opportunities in their regions and b) active family farmers
using, selling and distributing Verity Products & Services in their regions.
The
Company’s new “Top Down” strategy is focusing on:
Part
A) |
Identifying
strategic customer & relationship prospects and introducing Verity’s easy-to-understand and purchase line of agriculture
production “Hard Products”. |
|
|
Part B) |
Introducing
Verity Corporation and its diverse portfolio of Products and Services to these strategic customers & relationship prospects.
|
Part
A of the Top Down Strategy is expected to result in meaningful increases in FY2014 revenue. Part B of the Top Down Strategy is
expected to result in customer and business partnership relationships that will strategically expand Verity’s network of
business relationships and sales of the full line of Verity Products and Services. Part B is expected to result in a meaningful
increase in revenue in the intermediate term of FY2014 & FY2015.
COMPETITION
Verity
Corp. operates in environments of heavy competition. However, the Company’s Products & Services have competitive advantages
that can propel their growth with proper resources and effective management. Obtaining a small fraction of market share will provide
Verity with substantial growth opportunities
NOTE
2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis
of Presentation
The
accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles generally
accepted in the United States of America (U.S. GAAP) under the accrual basis of accounting.
Use
of Estimates
In
preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the dates of the consolidated financial statements, as well as the reported amounts of
revenues and expenses during the reporting periods. These accounts and estimates include, but are not limited to, the valuation
of accounts receivables, inventories, prepaid expenses, other receivables, investment in partnership, liabilities and the estimation
on useful lives of property, and plant and equipment. Actual results could differ from these estimates.
Basis
of Consolidation
The
consolidated financial statements include the financial statements of the Company and its subsidiaries.
All
significant inter-company balances and transactions within the Company and subsidiaries have been eliminated upon consolidation.
Cash
and Cash Equivalents
Cash
and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions
and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments.
Accounts
Receivable
Accounts
receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers
in the ordinary course of business but mitigates the associated risks by actively pursuing past due accounts. An allowance for
doubtful accounts is established and determined based on managements’ assessment of the accounts receivables collectibles.
Judgment is required in assessing the amount of the allowance. The Company considers the historical level of credit losses and
applies percentages to different receivables categories. The Company makes judgments about the creditworthiness of each customer
based on ongoing credit evaluations, and monitors current economic trends that might impact the level of credit losses in the
future. If the financial condition of the customers were to deteriorate, resulting in their inability to make payments, a larger
allowance may be required.
Accounts
Receivable (cont.)
Based
on the above assessment, during the reporting periods, management establishes the general provisioning policy to make an allowance
equivalent to approximately 5% of the gross amount of accounts receivables. Additional specific provision is made against accounts
receivables to the extent which they are considered to be doubtful.
Historically,
losses from uncollectible accounts have not significantly deviated from the general allowance estimated by management and no significant
additional bad debts have been written off directly to net income. There were no changes in the general provisioning policy in
the past since establishment and management considers that the aforementioned general provisioning policy is adequate, not excessive
and does not expect to change this established policy in the near future. As of June 30, 2014 and September 30, 2013, the Company
recorded an allowance for uncollectible accounts in the amounts of $8,584 and $8,584, respectively.
Inventories
Inventories
consist of raw materials and finished goods and goods available for resale, which are valued at lower of cost or market value,
cost being determined on the first-in, first-out method. The Company periodically reviews historical sales activity to determine
excess, slow moving items and potentially obsolete items and also evaluates the impact of any anticipated changes in future demand.
The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand,
which was approximately 5% of ending inventories at the reporting periods. The spoilage will be written-off directly to the profit
and loss when it occurs. As of June 30, 2014 and September 30, 2013, the Company recorded an allowance for obsolete inventories
in the amounts of $36,241 and $33,630, respectively.
Fixed
Assets, Net
Fixed
assets are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated
on the straight-line basis over the following expected useful lives from the date on which they become fully operational. There
are no estimated residual values taken into account.
| |
Depreciable life | |
Residual
value | |
Software and website development | |
3 years | |
| 0 | % |
Machinery and Equipment | |
5 years | |
| 0 | % |
Furniture and fixtures | |
7 years | |
| 0 | % |
Expenditures
for maintenance and repairs that do not make the fixed asset more useful or prolong its useful life are expensed as incurred.
Impairment
of Long Lived Assets
The
Company evaluated the recoverability of its property, plant, equipment, and other long-lived assets in accordance with FASB Accounting
Standards Codification Topic 360, “Property, Plant and Equipment” (“ASC 360”), which requires recognition
of impairment of long-lived assets in the event the net book value of such assets exceed the estimated future undiscounted cash
flows attributable to such assets or the business to which such intangible assets relate. The Company evaluated the recoverability
of the fixed assets and did not recognize any impairment during the nine months ended June 30, 2014.
Fair
Value for Financial Assets and Financial Liabilities
The
Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification (“ASC”) for disclosures about
fair value of its financial instruments and paragraph 820-10-35-37 of the FASB ASC (“Paragraph 820-10-35-37”) to measure
the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in U.S. GAAP,
and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and
related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques
used to measure fair value into three broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted)
in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of fair
value hierarchy defined by Paragraph 820-10-35-37 are described below:
Level
1 |
Quoted
market prices available in active markets for identical assets or liabilities as of the reporting date. |
|
|
Level 2 |
Pricing
inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable
as of the reporting date. |
|
|
Level 3 |
Pricing
inputs that are generally observable inputs and not corroborated by market data. |
The
carrying amounts of the Company’s financial assets and liabilities, such as cash and accounts payable approximate their
fair values because of the short maturity of these instruments.
The
Company does not have any assets or liabilities measured at fair value on a recurring or a non-recurring basis, consequently,
the Company did not have any fair value adjustments for assets and liabilities measured at fair value at June 30, 2014 and September
30, 2013 nor gains or losses are reported in the statement of operations that are attributable to the change in unrealized gains
or losses relating to those assets and liabilities still held at the reporting date for the for the nine months ended June 30,
2014.
Revenue
Recognition
The
Company derives revenues from the sale of agricultural products, animal feeds, consulting services, and various water units. In
accordance with guidance by paragraph 605-10-S99-1 of the FASB ASC for revenue recognition, the Company recognizes revenue when
persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price
is fixed or determinable and collectability is reasonably assured. The Company’s sales arrangements are not subject to warranty.
Cost
of Goods Sold
Cost
of goods sold consists primarily of material costs which are directly attributable to the manufacture of products, to the products
held for resale and to the provision of services.
Income
Taxes
The
Company adopts the ASC Topic 740, “Income Taxes ” regarding accounting for uncertainty in income taxes which prescribes
the recognition threshold and measurement attributes for financial statement recognition and measurement of tax positions taken
or expected to be taken on a tax return. In addition, the guidance requires the determination of whether the benefits of tax positions
will be more likely than not sustained upon audit based upon the technical merits of the tax position. For tax positions that
are determined to be more likely than not sustained upon audit, a company recognizes the largest amount of benefit that is greater
than 50% likely of being realized upon ultimate settlement in the financial statements. For tax positions that are not determined
to be more likely than not sustained upon audit, a company does not recognize any portion of the benefit in the financial statements.
The guidance provides for de-recognition, classification, penalties and interest, accounting in interim periods and disclosure.
Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to be applied to taxable income in the years in which those temporary differences are expected
to reverse. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the statement of income
in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely
than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is
uncertain.
Uncertain
Tax Positions
The
Company did not take any uncertain tax positions and had no adjustments to unrecognized income tax liabilities or benefits pursuant
to the provisions of Section 740-10-25 for the nine months ended June 30, 2014.
Comprehensive
income
The
Company adopted FASB Accounting Standards Codification 220 “Comprehensive Income” (ASC “220”) which establishes
standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as
defined includes all changes in equity during the year from non-owner sources. There are no items of comprehensive income (loss)
applicable to the Company during the years covered in the consolidated financial statements.
Off-balance
sheet arrangements
The
Company does not have any off-balance sheet arrangements.
Related
Parties
The
Company follows subtopic 850-10 of the FASB Accounting Standards Codification for the identification of related parties and disclosure
of related party transactions.
Pursuant
to Section 850-10-20 the Related parties include: a). affiliates of the Company; b). entities for which investments in their equity
securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15,
to be accounted for by the equity method by the investing entity; c). trusts for the benefit of employees, such as pension and
profit-sharing trusts that are managed by or under the trusteeship of management; d). principal owners of the Company; e). management
of the Company; f). other parties with which the Company may deal if one party controls or can significantly influence the management
or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its
own separate interests; and g). other parties that can significantly influence the management or operating policies of the transacting
parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent
that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
The
consolidated financial statements shall include disclosures of material related party transactions, other than compensation arrangements,
expense allowances, and other similar items in the ordinary course of business. However, disclosure of transactions that are eliminated
in the preparation of consolidated or combined financial statements is not required in those statements. The disclosures shall
include: a). the nature of the relationship(s) involved; b). a description of the transactions, including transactions to which
no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other
information deemed necessary to an understanding of the effects of the transactions on the financial statements; c). the dollar
amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the
method of establishing the terms from that used in the preceding period; and d). amounts due from or to related parties as of
the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.
Commitments
and Contingencies
The
Company follows subtopic 450-20 of the FASB Accounting Standards Codification to report accounting for contingencies. Certain
conditions may exist as of the date the consolidated financial statements are issued, which may result in a loss to the Company
but which will only be resolved when one or more future events occur or fail to occur. The Company assesses such contingent liabilities,
and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings
that are pending against the Company or unasserted claims that may result in such proceedings, the Company evaluates the perceived
merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected
to be sought therein.
If
the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability
can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment
indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be
estimated, then the nature of the contingent liability, and an estimate of the range of possible losses, if determinable and material,
would be disclosed.
Loss
contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the guarantees would
be disclosed. Management does not believe, based upon information available at this time that these matters will have a material
adverse effect on the Company’s consolidated financial position, consolidated results of operations or consolidated cash
flows. However, there is no assurance that such matters will not materially and adversely affect the Company’s business,
consolidated financial position, and consolidated results of operations or consolidated cash flows.
Subsequent
Events
The
Company adopted FASB Accounting Standards Codification 855 “Subsequent Events” (“ASC 855”) to establish
general standards of accounting for and disclosure of events that occur after the balance sheet date, but before the financial
statements are issued or available to be issued.
Recently
issued accounting standards
In
April 2014, the FASB issued ASU No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment
(Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The amendments in this
Update change the requirements for reporting discontinued operations in Subtopic 205-20.
Under
the new guidance, a discontinued operation is defined as a disposal of a component or group of components that is disposed of
or is classified as held for sale and “represents a strategic shift that has (or will have) a major effect on an entity’s
operations and financial results.” The ASU states that a strategic shift could include a disposal of (i) a major geographical
area of operations, (ii) a major line of business, (iii) a major equity method investment, or (iv) other major parts of an entity.
Although “major” is not defined, the standard provides examples of when a disposal qualifies as a discontinued operation.
The
ASU also requires additional disclosures about discontinued operations that will provide more information about the assets, liabilities,
income and expenses of discontinued operations. In addition, the ASU requires disclosure of the pre-tax profit or loss attributable
to a disposal of an individually significant component of an entity that does not qualify for discontinued operations presentation
in the financial statements.
The
ASU is effective for public business entities for annual periods beginning on or after December 15, 2014, and interim periods
within those years.
In
May 2014, the FASB has issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606)”. The guidance in
this update supersedes the revenue recognition requirements in Topic 605, “Revenue Recognition.” In addition, the
existing requirements for the recognition of a gain or loss on the transfer of nonfinancial assets that are not in a contract
with a customer (for example, assets within the scope of Topic 360, Property, Plant, and Equipment, and intangible assets within
the scope of Topic 350, Intangibles—Goodwill and Other) are amended to be consistent with the guidance on recognition and
measurement (including the constraint on revenue) in this Update. Under the new guidance, an entity should recognize revenue to
depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity
expects to be entitled in exchange for those goods or services. The amendments in ASU No, 2014-09 are effective for annual reporting
periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted.
We do not believe the adoption of this update will have a material impact on our financial statements.
Management
does not believe that any other recently issued, but not yet effective accounting pronouncements, if adopted, would have a material
effect on the accompanying financial statements.
NOTE
3 – GOING CONCERN
The
Company’s financial statements have been presented on the basis that it is a going concern, which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business. At June 30, 2014, the Company had a retained deficit
of $11,413,821 and current liabilities in excess of current assets by $232,464. During the nine months ended June 30, 2014, the
Company incurred a net loss of $803,399 and incurred negative cash flows from operations of $492,622. These factors create an
uncertainty about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments
that might be necessary if the Company is unable to continue as a going concern.
The
Company’s continuation as a going concern is dependent upon its ability to increase revenues, decrease or contain costs
and achieve profitable operations. In this regard, Company’s management is focused on the development and expansion of the
Company’s technology, including water filtration and purification, bio-information and life sciences, the deployment of
its technology platform in the agricultural medical fields, and the licensing of patents, as well as exploring strategic acquisitions
in the technology field. Should the Company’s financial resources prove inadequate to meet the Company’s needs before
additional revenue sources can be realized, the Company may raise additional funds through loans or through sales of common or
preferred stock. There is no assurance that the Company will be successful in achieving profitable operations or in raising any
additional capital.
NOTE
4 – RELATED PARTY TRANSACTIONS
Note
payable- related party: At June 30, 2014, the Company had a note payable due to our Board Member in the amount of $341,267 which
is secured by the Company’s ownership in Aistiva Corporation, carries accrued interest of 6% and is due on December 28,
2013, the interest accrued but not paid as of June 30, 2014 is $19,551. A second note payable to our Board Member in the amount
of $3,220,000, carries an interest rate of 3% and is due in annual payments of $1,073,333 beginning September 30, 2017. The interest
accrued, but not paid as of June 30, 2014 is $175,474. The second note payable was modified on May 16, 2014 to extend the maturity
date of the loan and interest payment due dates. The $3,220,000 note payable due dates have been extended to 3 annual principal
payments of $1,073,333 beginning September 30, 2017. Accrued interest from December 31, 2012 to September 30, 2015 will be due
and payable on or before September 30, 2015. After September 30, 2015, accrued unpaid interest will be due on or before September
30, 2016, 2017, 2018 and 2019. A third note payable to our Board Member in the amount of $150,000, carries an interest rate of
5% and is due in annual principal payments of $50,000 beginning September 30, 2017. The interest accrued but not paid as of June
30, 2014 is $17,779. The third note payable was modified on May 16, 2014 to extend the maturity date of the loan and interest
payment due dates. The $150,000 note payable due dates have been extended to 3 annual principal payments of $50,000 beginning
September 30, 2017. Accrued interest from December 31, 2012 to September 30, 2015 will be due and payable on or before September
30, 2015, accrued unpaid interest will be due annually on September 30, 2016, 2017, 2018 and 2019.A fourth note payable to our
Board Member in the amount of $340,000, carries an interest rate of 3% and is due in annual payments of $113,333 beginning September
30, 2017. The interest accrued but not paid as of June 30, 2014 is $28,575. The fourth note payable was modified on May 16, 2014
to extend the maturity date of the loan and interest payment due dates. The $340,000 note payable due dates have been extended
to 3 annual principal payments of $113,333 beginning September 30, 2017. Accrued interest from December 31, 2012 to September
30, 2015 will be due and payable on or before September 30, 2015, accrued unpaid interest will be due annually on September 30,
2016, 2017, 2018 and 2019.
During
2014, a fifth note payable of $200,000, unsecured, due to our Board Member with an interest rate of 3% and due on demand was entered
into. Interest accrued but not paid as of June 30, 2014 was $5,423.
The
Company and its subsidiaries granted security interests to Mr. Spader in substantially all of the Company’s and subsidiaries
assets on May 16, 2014.
NOTE
5 – VERITY FARMS ACQUISITION
| |
December 31, 2012 | |
| |
| |
Acquisition value | |
| | |
| |
| | |
Capital in excess of par | |
$ | 4,845,150 | |
Preferred shares – 4,850,000 Series B | |
| 4,850 | |
Assumed liabilities | |
| 5,665,579 | |
Total Acquisition value | |
$ | 10,515,579 | |
| |
| | |
Valuation classification | |
| | |
Cash | |
$ | 227,474 | |
Accounts receivable | |
| 62,775 | |
Inventory | |
| 495,323 | |
Notes receivable | |
| 96,756 | |
Land | |
| 2,400,000 | |
Warehouses | |
| 800,000 | |
Equipment | |
| 298,423 | |
Other assets | |
| 191,296 | |
| |
| | |
Goodwill | |
| 5,943,533 | |
Impairment of Goodwill | |
| (5,943,533 | ) |
Goodwill, net | |
| — | |
| |
| | |
Net value | |
$ | 4,572,046 | |
The
Company recorded the acquisition at its fair market value in that the cash, accounts receivable, inventory, notes receivable,
land, warehouses, equipment and other miscellaneous assets were recorded at their fair market value on the date of the acquisition.
Impairment of goodwill from the date of acquisition was written off to its net realizable value in the accompanying statements
of operations.
NOTE
6 – ACCOUNTS RECEIVABLE
Accounts
receivable was comprised of the following amounts as of June 30, 2014 and September 30, 2013:
| |
| 06/30/2014 | | |
| 09/30/2013 | |
| |
| | | |
| | |
Gross accounts receivable from customers | |
$ | 707,603 | | |
$ | 158,327 | |
Allowance for doubtful customer accounts | |
| (8,584 | ) | |
| (8,584 | ) |
Accounts receivable, net | |
$ | 699,019 | | |
$ | 149,743 | |
The
bad debt expenses of $5,057 and $0 were recognized during the nine months ended June 30, 2014 and 2013, respectively, in the accompanying
consolidated statements of operations.
NOTE
7 – INVENTORIES
Inventories
as of June 30, 2014 and September 30, 2013 consisted of the following:
| |
| 06/30/2014 | | |
| 9/30/2013 | |
| |
| | | |
| | |
Raw materials | |
$ | 60,432 | | |
$ | 75,357 | |
Work in Process | |
| 51,892 | | |
| | |
Finished goods | |
| 577,503 | | |
| 534,539 | |
| |
| 689,827 | | |
| 609,896 | |
Allowance for obsolete inventories | |
| (36,241 | ) | |
| (33,630 | ) |
Inventories, net | |
$ | 653,586 | | |
$ | 576,266 | |
The
Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. Accordingly,
the Company recorded cost of goods sold due to inventories obsolescence in amount of $2,611 and $0 during the nine months ended
June 30, 2014 and 2013, respectively.
NOTE
8 – PREPAID EXPENSES
As
of June 30, 2014 and September 30, 2013, the Company had prepaid expenses of $142,909 and $136,391, respectively, and consisted
of the following:
| |
| 06/30/2014 | | |
| 9/30/2013 | |
| |
| | | |
| | |
Prepaid insurance | |
$ | 52,576 | | |
$ | 44,017 | |
Prepaid inventories | |
| 90,333 | | |
| 92,374 | |
Total | |
$ | 142,909 | | |
$ | 136,391 | |
NOTE
9 – FIXED ASSETS
| |
| 06/30/2014 | | |
| 9/30/2013 | |
Machinery and equipment | |
$ | 591,869 | | |
| 513,298 | |
Software and website development | |
| 68,184 | | |
| 68,184 | |
Furniture and fixtures | |
| 26,491 | | |
| 26,491 | |
| |
| | | |
| 2,400,000 | |
Warehouse | |
| 300,000 | | |
| 800,000 | |
| |
| | | |
| | |
Total property and equipment | |
| 986,544 | | |
| 3,807,973 | |
Less accumulated depreciation | |
| (404,020 | ) | |
| (353,980 | ) |
| |
| | | |
| | |
Net property and equipment | |
$ | 582,525 | | |
| 3,453,993 | |
Depreciation
expense for the nine months ended June 30, 2014 and 2013 was $87,857 and $77,140, respectively.
Warehouse
includes a property whose total value is $300,000 as of June 30, 2014. The warehouse, also being used as a distribution center,
is located in Orange City, Iowa. The property was acquired from a third party for $300,000 and has a 6,600 square foot building
on 20 acres of land.
In
December 2012, our wholly owned subsidiary Verity Farms LLC (“Verity Farms”), entered into a Contract for Deed, as
amended, with Spader, Inc. (“Spader”, a company controlled by Duane Spader, then an officer, Director and principal
stockholder of the Verity Corp. (the “Company”). Pursuant to the Agreement, Verity Farms purchased certain real estate
interests in South Dakota from Spader, in exchange for $2,400,000 to be paid over time. The Company has not made any payment to
Spader under the agreement. On May 16, 2014, Verity Farms and Spader entered into a Termination Agreement, pursuant to which the
property rights were returned to Spader and the financial obligations were terminated, resulting in the elimination of $2,400,000
owed to Spader, together with accrued interest of $192,000 as of April 30, 2014.
In
December 2012, Verity Farms entered into a Contract for Deed, as amended, with Spader pursuant to which Verity Farms purchased
certain real estate interests in Georgia from Spader, in exchange for $500,000 to be paid over time. The Company has not made
any payment to Spader under the agreement. On May 16, 2014, Verity Farms and Spader entered into a Termination Agreement, pursuant
to which the property rights were returned to Spader and the financial obligations were terminated, resulting in the elimination
of $500,000 owed to Spader, together with accrued interest of $40,000 as of April 30, 2014.
NOTE
10 – INVESTMENT IN PARTNERSHIP
In
2006, Verity Farms II acquired a 19% interest in Crop Resources LLC by contributing $25,000 cash to the partnership. Investment
in partnership was comprised of the following amounts as of March 31, 2014..
| |
| Crop Resources LLC | |
Partnership | |
| | |
Percentage of Ownership | |
| 19 | % |
Book Equity 03/31/2014 | |
$ | 19,798 | |
Share of Net Income/(Loss) | |
| 167 | |
| |
| | |
Book Equity 06/30/2014 | |
| 19,965 | |
NOTE
11 – NOTES PAYABLE
Note
payable- related party: At June 30, 2014, the Company had a note payable due to our Board Member in the amount of $341,267 which
is secured by the Company’s ownership in Aistiva Corporation, carries accrued interest of 6% and is due on December 28,
2013, the interest accrued but not paid as of June 30, 2014 is $19,551. A second note payable to our Board Member in the amount
of $3,220,000, carries an interest rate of 3% and is due in annual payments of $1,073,333 beginning September 30, 2017. The interest
accrued, but not paid as of June 30, 2014 is $175,474. The second note payable was modified on May 16, 2014 to extend the maturity
date of the loan and interest payment due dates. The $3,220,000 note payable due dates have been extended to 3 annual principal
payments of $1,073,333 beginning September 30, 2017. Accrued interest from December 31, 2012 to September 30, 2015 will be due
and payable on or before September 30, 2015. After September 30, 2015, accrued unpaid interest will be due on or before September
30, 2016, 2017, 2018 and 2019. A third note payable to our Board Member in the amount of $150,000, carries an interest rate of
5% and is due in annual principal payments of $50,000 beginning September 30, 2017. The interest accrued but not paid as of June
30, 2014 is $17,779. The third note payable was modified on May 16, 2014 to extend the maturity date of the loan and interest
payment due dates. The $150,000 note payable due dates have been extended to 3 annual principal payments of $50,000 beginning
September 30, 2017. Accrued interest from December 31, 2012 to September 30, 2015 will be due and payable on or before September
30, 2015, accrued unpaid interest will be due annually on September 30, 2016, 2017, 2018 and 2019.A fourth note payable to our
Board Member in the amount of $340,000, carries an interest rate of 3% and is due in annual payments of $113,333 beginning September
30, 2017. The interest accrued but not paid as of June 30, 2014 is $28,575. The fourth note payable was modified on May 16, 2014
to extend the maturity date of the loan and interest payment due dates. The $340,000 note payable due dates have been extended
to 3 annual principal payments of $113,333 beginning September 30, 2017. Accrued interest from December 31, 2012 to September
30, 2015 will be due and payable on or before September 30, 2015, accrued unpaid interest will be due annually on September 30,
2016, 2017, 2018 and 2019.
During
2014, a fifth note payable of $200,000, unsecured, due to our Board Member with an interest rate of 3% and due on demand was entered
into. Interest accrued but not paid as of June 30, 2014 was $5,423.
The
Company and its subsidiaries granted security interests to Mr. Spader in substantially all of the Company’s and subsidiaries
assets on May 16, 2014.
In
December 2012, our wholly owned subsidiary Verity Farms LLC (“Verity Farms”), entered into a Contract for Deed, as
amended, with Spader, Inc. (“Spader”, a company controlled by Duane Spader, then an officer, Director and principal
stockholder of the Verity Corp. (the “Company”). Pursuant to the Agreement, Verity Farms purchased certain real estate
interests in South Dakota from Spader, in exchange for $2,400,000 to be paid over time. The Company has not made any payment to
Spader under the agreement. On May 16, 2014, Verity Farms and Spader entered into a Termination Agreement, pursuant to which the
property rights were returned to Spader and the financial obligations were terminated, resulting in the elimination of $2,400,000
owed to Spader, together with accrued interest of $192,000 as of April 30, 2014.
In
December 2012, Verity Farms entered into a Contract for Deed, as amended, with Spader pursuant to which Verity Farms purchased
certain real estate interests in Georgia from Spader, in exchange for $500,000 to be paid over time. The Company has not made
any payment to Spader under the agreement. On May 16, 2014, Verity Farms and Spader entered into a Termination Agreement, pursuant
to which the property rights were returned to Spader and the financial obligations were terminated, resulting in the elimination
of $500,000 owed to Spader, together with accrued interest of $40,000 as of April 30, 2014.
Real
estate loan: In December 2012, the Company issued a note payable in the amount of $278,500 to acquire a building from an unrelated
party. The loan is secured by real estate, carries an interest rate of 4.7% and is due in January 2015. At June 30, 2014, the
balance of this loan is $262,550 and the Company has paid $9,424 in interest during the nine months ended June 30, 2014.
Principal
maturities of these loans payable for the next five years and thereafter are as follows:
Years ended September 30, | | |
Principal | |
2014 | | |
| 541,267 | |
2015 | | |
| 262,550 | |
2016 | | |
| 0 | |
2017 | | |
| 1,236,666 | |
2018 | | |
| 1,236,666 | |
Thereafter | | |
| 1,236,667 | |
| | |
| 4,513,815 | |
NOTE
12 – CUSTOMER DEPOSITS
As
of June 30, 2014 and September 30, 2013, the Company had customer deposits of $10,241 and $10,241, respectively, representing
payments received for orders not yet shipped.
NOTE
13 – SHAREHOLDERS’ EQUITY
On
April 4, 2013, the Company effectuated a 1 for 100 reverse split of its common stock. All common stock and per share data for
all periods presented in these financial statements have been restated to give effect to the reverse split.
On
October 9, 2012, the Company issued 214,839 (post-reverse split) shares of common stock to Asher Enterprises, Inc to retire $31,306
in debt and accrued interest.
On
November 11, 2012, the Company issued 225,492 (post-reverse split) shares of common stock to Auctus Private Equity Management,
Inc. (“Auctus”) as commitment shares valued at $22,994 pursuant to the Equity Agreement.
On
December 10, 2012, the Company issued 1,200,000 (post-reverse split) shares of common stock to four shareholders to retire a total
of $95,182 in debt and accrued interest.
On
December 31, 2012, the Company issued 250,000 (post-reverse split) shares of common stock to Trak Management Group, Inc. as compensation
for consultation services valued at $25,000.
On
December 31, 2012, the Company issued 150,000 (post-reverse split) shares of common stock as compensation for rendered professional
services valued at $15,000.
On
December 31, 2012, the Company issued 50,000 (post-reverse split) shares of common stock to Auctus as commitment shares valued
at $4,000 pursuant to the Equity Agreement.
On
December 31, 2012, the Company issued 4,850,000 shares of Series B Convertible Preferred Stock to the shareholders of Verity Farms
II, Inc . valued at $4,850,000 pursuant to a share exchange agreement.
On
February 26, 2013, the Company reduced the number of Series C preferred Stock from 10,000 shares to 51 shares.
On
April 12, 2013, the Company issued 69,672 shares of common stock to Dayspring Capital as compensation for their consulting services
valued at $29,958.
On
April 12, 2013, the Company issued 278,686 shares of common stock to Maxim Partners LLC as compensation for their consulting services
valued at $119,834.98.
On
July 23, 2013, the Company entered into a Mututal Rescission of Note Conversion and Reinstatement of Debt Agreement, Pursuant
to which an aggregate of 900,000 shares of common stock were returned to the Company and $72,000 worth of note payable was reinstated.
On
August 22, 2013, 9 shareholders converted an aggregate of 582,000 shares of Series A preferred stock to 1,986,340 shares of common
stock.
On
June 13, 2014, 1 preferrd shareholder converted 100,000 Series B Convertible shares to 1,000,000 common shares.
The
company didn’t issue any stock for the nine months ended June 30, 2014.
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This
quarterly report on Form 10-Q and other reports filed by Verity Corp. (the “Company”) from time to time with the SEC
(collectively, the “Filings”) contain or may contain forward-looking statements and information that are based upon
beliefs of, and information currently available to, the Company’s management. Readers are cautioned not to place undue reliance
on these forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities
Exchange Act of 1934. These statements relate to future events or our future financial performance. We have attempted to identify
forward-looking statements by terminology including “anticipates,” “believes,” “expects,”
“can,” “continue,” “could,” “estimates,” “intends,” “may,”
“plans,” “potential,” “predict,” “should” or “will” or the negative
of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause
our actual results, levels of activity, performance or achievements to be materially different from any future results, levels
or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the
expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity,
performance or achievements. Our expectations are as of the date this Form 10-Q is filed, and we do not intend to update any of
the forward-looking statements after the date this Quarterly Report on Form 10-Q is filed to confirm these statements to actual
results, unless required by law.
Although
the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee
future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities
laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements
to actual results.
Our
financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).
These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments
and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments
and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities
as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented.
Our financial statements would be affected to the extent there are material differences between these estimates and actual results.
In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s
judgment in its application. There are also areas in which management’s judgment in selecting any available alternative
would produce a materially different result. The following discussion should be read in conjunction with our financial statements
and notes thereto appearing elsewhere in this report.
Overview
Business
Our
Company
OVERVIEW
Verity
Corp. (the “Company”) is a natural-oriented, technologically sophisticated Agribusiness Services company. The Company’s
products and services support Crop Production and Animal Production. The Company’s Corporate Goal is to provide consumers
with safe, high-quality and nutritious food sources and high-quality water for drinking and for agricultural and livestock production.
The Company has a portfolio of proprietary natural products and services focused from Soil to Plate Food Production to fulfill
its Corporate Goal.
HISTORY
AND PRODUCT OVERVIEW
Verity’s
predecessor company Verity Farms, LLC was incorporated in July 2004. Since then the Company has taken its sustainable crop and
livestock production protocols and developed:
a. |
a
portfolio of best-in-market hard products that can be widely used by either conventional or organic/non-GMO farms to: |
|
d) |
improve
the quality of grain, livestock & aquaculture production; |
|
|
|
|
e) |
reduce
growing costs; while |
|
|
|
|
f) |
maintaining
production yields. |
b. |
a
fully integrated set of Soil and Plant Health Programs that remove substantial barrier for farmers desiring to convert conventional
farms into farms with healthy soil and sustainable, non-GMO crop and livestock production based upon natural practices and
limited chemical applications. |
These
products and programs position Verity as a leader & one-stop farming & food production resource addressing powerful &
accelerating trends that are altering production methods in the Agriculture and Food Market.
ORGANIZATION
& OPERATIONS
The
Company is organized into 3 divisions: Verity Agriculture Products & Soil Preservation; Verity Water Systems; and Verity Consumer
Products. These distinct divisions work are interlinked by one sales team, located, across the US, in major agricultural production
markets, to provide: farmers, ranchers, food distributors & processors and food manufacturers and grocery retailers a wide
spectrum of product & service solutions to address their production and supply issues, and market positioning. Verity has
integrated operations at its Corporate Headquarters, in Sioux Falls, South Dakota and in Pelham Georgia, which provides Product
Distribution, Sales, and Crop Advisory Services in Georgia for the Southeast U.S. In order to focus the Company’s limited
resources, Verity’s Consumer Products Division remains in test / pre-production mode. The Company’s Agriculture Products
& Soil Preservation Division and Water Systems Division are moving from a limited “Bottom Up” Sales mode to mass
commercialization through the establishment of strategic relationships.
STRATEGY
Verity
changed its top management and corporate organization in Q1 FY2014. This change is accompanied by a change in focus and allocation
of resources that have gained momentum in preceding years.
From
FY 2004 through FY 2013, Verity focused on:
|
a) |
Development
of a distinctive portfolio of unique and innovative products and services. |
|
|
|
|
b) |
Development
of a sales & distribution network of Verity representatives that: i) use the Verity Agriculture & Soil Preservation
Products and Services in their family farms; and ii) market and sell Verity Products and Services in the farming communities
in their regions. |
In
FY 2014, the Company has: rolled out a distinctive “best-in-market” line of Hard Products for use by farmers of any
size, from family farms to large integrated agribusiness companies. The Company has focused management attention & Company
resources to implementing a new “Top Down” strategy that will compliment the Company’s continuing “Bottom
Up” strategy. The “Bottom Up” strategy has created a network of family farmers / salesmen that are Verity’s
eyes, ears, voice and hands in their regions. This Sales Force provides Verity with: a) regional farming and agribusiness intelligence
and has identified prospective Strategic Customer & Distribution opportunities in their regions; and b) active family farmers
using, selling and distributing Verity Products & Services to the farmers in their regions.
The
Company’s new “Top Down” strategy is focusing on:
Part
A) |
Identifying
strategic customer & relationship prospects and introducing Verity’s easy-to-understand and purchase line of agriculture
production “Hard Products” to them; and |
|
|
Part B) |
Introducing
Verity Corporation and its diverse portfolio of Products and Services to these strategic customers & relationship prospects.
|
Part
A of the Top Down Strategy is expected to result in meaningful increases in near-term sales in FY2014. Part B of the Top Down
Strategy is expected to result in customer and business partnership relationships that will strategically expand Verity’s
network of business relationships and sales of the full line of Verity Products and Services. Part B is expected to result in
a meaningful increase in sales in the intermediate term of FY2014 & FY2015.
COMPETITION
Verity
Corporation operates in environments of heavy competition. However, the Company’s Products & Services have competitive
advantages that can propel their growth with proper resources and effective management. Obtaining a small fraction of market share
will provide Verity with substantial growth opportunities.
Results
of Operations
For
the Nine Months Ended June 30, 2014 compared with the Nine Months Ended June 30, 2014.
Revenues
Revenues
for the nine months ended June 30, 2014 totaled $2,440,336 as compared to $2,108,885 for the nine months ended June 30, 2014.
Revenues increased 15.72% as compared to the nine months ended June 30, 2013.
Revenue
Recognition is accounted for as follows: Sales revenue is billed and shipped in the same period each month and service revenue
is billed in advance on the first day of the month that service is rendered.
Cost
of Goods Sold
Cost
of goods sold for the nine months ended June 30, 2014 was $1,347,798 as compared to $1,151,874 for the nine months ended June
30, 2013. The increase in cost of goods sold is due to increased sales. Gross Margin for the nine months ended June 30, 2014 was
45%. And Gross Margin for the nine months ended June 30, 2013 was 45%. Gross Margin percentages have maintained at 45% for the
nine months ended June 30.
Operating
Expenses
Operating
expenses for the nine months ended June 30, 2014 totaled $1,869,235 as compared to $1,980,444 for the nine months ended June 30,
2013. The decrease in operating expenses is directly related to a reduction in consulting and professional fees of $385,737. The
reduction in consulting and professional fees is offset by an increase in payroll expenses of $282,677 and in increase in travel
of $38,958. Research and Development expenses increased $12,532 during the nine months ended June 30, 2014. Marketing and advertising
expenses decreased $18,826, rent decreased $12,795, management fees decreased $41,265 and all other expenses increased $13,247.
Interest
Expense
Interest
Expense for the nine months ended June 30, 2014 was $34,886 as compared to $82,141 for the nine months ended June 30, 2014. The
decrease in interest expense is directly related to the return of land and building to a board member that resulted in a reduction
of accrued interest due of $232,000..
Net
Loss Before Provision for Income Taxes
The
net loss for the nine months ended June 30, 2014 was $803,399 as compared to a net loss of $1,081,217 before loss on goodwill
impairment of $5,943,533 for the nine months ended June 30, 2013. The decrease in operating net loss is based on increased revenues
at consistent gross margins for product sales and a decrease in operating expenses as mentioned above.
Liquidity
and Capital Resources
Cash
flows used by operating activities were $492,622 for the nine months ended June 30, 2014 as compared to $1,502,718 for the nine
months ended June 30, 2014. Negative cash flow is a direct result of operating expenses exceeding revenues generated during the
nine months ended June 30, 2014 and 2013.
Cash
Flows used by Investing Activities was $78,571 for purchases of equipment during the nine months ended June 30, 2014. For the
nine months ended June 30, 2014, cash flows from investing activities was $4,891,602 for the purchase of land, building and equipment.
Cash
Flows provided by financing activities were $606,423 for the nine months ended June 30, 2014 and $6,482,207 for the nine months
ended June 30, 2014. The cash provided by financing activities was related to proceeds received from notes payable.
As
of June 30, 2014, Verity did not have and continues to not have sufficient cash on hand to pay present obligations as they become
due. In addition, there is no assurance that we will be able to raise additional capital on acceptable terms, if at all, to meet
our current obligations over the next 12 months. Because of the foregoing, Verity’s auditors expressed substantial doubt
about our ability to continue as a going concern in the September 30, 2013 Audit report.
If
we obtain additional funds by selling any of our equity securities or by issuing common stock to pay current or future obligations,
the percentage ownership of our stockholders will be reduced, stockholders may experience additional dilution, or the equity securities
may have rights preferences or privileges senior to the common stock. If adequate funds are not available to us on satisfactory
terms, we may be required to cease operating or otherwise modify our business strategy. Our estimated working capital requirement
for the next 12 months, based on current assumptions and conditions, is approximately $1,500,000.
Management
has determined that general expenditures must be reduced unless revenue growth is obtained. Additional capital will be required
in the form of equity or debt securities to maintain operations. In addition, if the Company cannot raise additional short term
capital, the Company will be forced to continue to further accrue liabilities due to our limited cash reserves. There are no assurances
that management will be able to raise capital on terms acceptable to the Company. If the Company is unable to obtain sufficient
amounts of additional capital, we may be required to reduce the scope of our planned development, which could harm our business,
financial condition and operating results. If the Company obtains additional funds by selling any of our equity securities of
by issuing common stock to pay current or future obligations, the percentage ownership of our shareholders will be reduced, shareholders
may experience additional dilution, or the equity securities may have rights preferences or privileges senior to the common stock.
If adequate funds are not available to us when needed on satisfactory term, the Company may be required to cease operating or
otherwise drastically modify the business strategy.
Off-Balance
Sheet Arrangements
There
are no off-balance sheet arrangements
Item
3. Quantitative and Qualitative Disclosures About Market Risk
Verity
Corp. does not hold any derivative instruments and do not engage in any hedging activities.
Item
4. Controls and Procedures
(a)
Evaluation of Disclosure and Control Procedures
Pursuant
to Rule 13a- 15(b) under the Exchange Act, Verity carried out an evaluation, with the participation of Verity’s management,
including Verity’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”),
of the effectiveness of Verity’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange
Act) as of the end of the period covered by this report. Based upon that evaluation, Verity’s PEO and PFO concluded that
Verity’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by Verity
in the reports that Verity files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the
time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to Verity’s
management, including Verity’s PEO and PFO, as appropriate, to allow timely decisions regarding required disclosure.
(b)
Management’s Assessment of Internal Control over Financial Reporting
Management
is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in
the Exchange Act Rules 13a-15(f). A system of internal control over financial reporting is a process designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles.
Under
the supervision and with the participation of management, including the principal executive officer and the principal financial
officer, Verity’s management has evaluated the effectiveness of its internal control over financial reporting as of September
30, 2013, based on the criteria established in a report entitled “Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission” and the interpretive guidance issued by the Commission
in Release No. 34-55929. Based on this evaluation, Verity’s management has evaluated and concluded that Verity’s internal
control over financial reporting was ineffective as of September 30, 2013, and identified the following material weaknesses:
|
● |
The
small size of our Company limits our ability to achieve the desired level of separation of internal controls and financial
reporting. We do not have a separate PEO and PFO. |
|
|
|
|
● |
We
have not achieved the desired level of documentation of our internal controls and procedures. When Verity obtains sufficient
funding, this documentation will be strengthened through utilizing a third party consulting firm to assist management with
its internal control documentation and further help to limit the possibility of any lapse in controls occurring. |
A
material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there
is a reasonable possibility that a material misstatement of Verity’s annual or interim financial statements will not be
prevented or detected on a timely basis.
Management
intends to mitigate the risk of the material weaknesses going forward provided Verity has sufficient funding by utilizing external
financial consulting services, in a more effective manner, prior to the review by our principal independent accounting firm to
ensure that all information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported accurately and within the time periods specified in the Commission’s rule and forms.
(c)
Changes in Internal Control over Financial Reporting
There
were no changes in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange
Act, during our most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting.
PART
II – OTHER INFORMATION
Item
1. Legal Proceedings
Verity
Corp. is not currently involved in any litigation that we believe could have a material adverse effect on our financial condition
or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization of body pending or, to the knowledge of the executive officers of our company
or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies
or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material
adverse effect.
Item
1A. Risk Factors.
Verity
Corp takes the position that there are no changes that constitute material changes from the risk factors previously disclosed
in our Annual Report on Form 10-K for the year ended September 30, 2013., filed with the SEC on January 14, 2014.
Item
2. Unregistered Sales of Equity Securities
During
the nine months ended June 30, 2014, the Company did not have any unregistered sales of equity securities.
Item
3. Defaults Upon Senior Securities
There
have been no default in the payment of principal, interest, sinking or purchase fund installment, or any other material default,
with respect to any indebtedness of the Company.
Item
4. Mine Safety Disclosures.
Not
applicable.
Item
5. Other Information
There
is no other information required to be disclosed which was not previously disclosed.
ITEM
6. Exhibits
Exhibit
No. |
|
Description |
|
|
|
31.1* |
|
Certification
of the Chief Executive Officer and Chief Financial Officer of Verity Corp, pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934 as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
|
|
32.1* |
|
Certification
of the Chief Executive Officer and Chief Financial Officer of Verity Corp., furnished pursuant to Section 1350 of Chapter
63 of 18 U.S.C. as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
|
|
EX-101.INS* |
|
XBRL
Instance Document |
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|
|
EX-101.SCH* |
|
XBRL
Taxonomy Extension Schema Document |
|
|
|
EX-101.CAL* |
|
XBRL
Taxonomy Extension Calculation Linkbase |
|
|
|
EX-101.DEF* |
|
XBRL
Taxonomy Extension Definition Linkbase |
|
|
|
EX-101.LAB* |
|
XBRL
Taxonomy Extension Labels Linkbase |
|
|
|
EX-101.PRE* |
|
XBRL
Taxonomy Extension Presentation Linkbase |
*
Filed herewith
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
|
Verity
Corp. |
|
|
|
Date:
August 20, 2014 |
By: |
/s/
JIM WHITE |
|
Name: |
Jim White |
|
Title: |
Chief Executive
Officer (Principal Executive Officer) |
|
|
|
Date:
August 20, 2014 |
By: |
/s/
KEN WRIGHT |
|
Name: |
Ken Wright |
|
Title: |
Chief Financial
Officer (Principal Financial Officer) (Principal Accounting Officer) |
Exhibit
31.1
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I,
Jim White, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of verity Corp.;
2. |
Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report; |
|
|
3. |
Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
|
|
4. |
The
registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
b) |
Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
c) |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and |
|
|
|
|
d) |
Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and |
5. |
The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors
(or persons performing the equivalent function): |
|
a) |
All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
|
|
|
|
b) |
Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
Date:
August 20, 2014
By: |
/s/
Jim White |
|
|
Jim White |
|
|
Chief Executive
Officer |
|
|
(Principal Executive
Officer) |
|
Exhibit
31.2
Certification
Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I,
Ken Wright, certify that:
1.
I have reviewed this quarterly report on Form 10-Q of verity Corp.;
2. |
Based
on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect
to the period covered by this report; |
|
|
3. |
Based
on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
presented in this report; |
|
|
4. |
The
registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
|
a) |
Designed
such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision,
to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during the period in which this report is being prepared; |
|
|
|
|
b) |
Designed
such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles; |
|
|
|
|
c) |
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and |
|
|
|
|
d) |
Disclosed
in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
and |
5. |
The
registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors
(or persons performing the equivalent function): |
|
a) |
All
significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which
are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and |
|
|
|
|
b) |
Any
fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s
internal control over financial reporting. |
Date:
August 20, 2014
By: |
/s/
Ken Wright |
|
|
Ken
Wright |
|
|
Chief
Financial Officer |
|
|
(Principal
Financial and Accounting Officer) |
|
Exhibit
32.1
Certification
Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In
connection with the Quarterly Report of Verity Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2014,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jim White, Chief Executive
Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act
of 2002, that to the best of my knowledge:
|
(1) |
The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
|
|
(2) |
The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company. |
Date:
August 20, 2014
By: |
/s/
Jim White |
|
|
Chief Executive
Officer |
|
|
(Principal Executive
Officer) |
|
Exhibit
32.2
Certification
Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
In
connection with the Quarterly Report of Verity Corp. (the “Company”) on Form 10-Q for the period ended June 30, 2014,
as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ken Wright, Chief Financial
Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act
of 2002, that to the best of my knowledge:
|
(1) |
The
Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
|
|
|
|
(2) |
The
information contained in the Report fairly presents, in all material respects, the financial condition and results of operations
of the Company. |
Date:
August 20, 2014
By: |
/s/
Ken Wright |
|
|
Ken
Wright |
|
|
Chief
Financial Officer |
|
|
(Principal
Financial and Accounting Officer) |
|