UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

[X]QANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended:September 30, 20122013

or

[  ]¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIESTHE SECURITIES EXCHANGE ACT OF 1934

VERITY CORP.

(Exact name of registrant as specified in its charter)

(605) 543-5985

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:None

Securities registered pursuant to Section 12(g) of the Act:Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 the Securities Act. Yes¨ [  ] Noþ [X]

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes¨ [  ] Noþ [X]

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.

Yesþ [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¨ [  ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes¨ [  ] Noþ [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.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes¨ [  ] Noþ

[X]

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on September 30, 2012, based on a closing price of $0.0013 was approximately $730,726. As of January 11, 2013,10, 2014, the registrant had 774,130,0219,177,201 shares of its common stock par value $0.001 per share, outstanding.

Documents Incorporated By Reference: None.

AQUALIV TECHNOLOGIES, INC.VERITY CORP.

FOR THE FISCAL YEAR ENDED

SEPTEMBER 30, 20122013

TABLE OF CONTENTS

FORWARD LOOKING STATEMENTS

Included in thisThis Annual Report on Form 10-K contains 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 “forward-looking” statements, as well as historical information.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 thesethe forward-looking statements are reasonable, we cannot assure you thatguarantee future results, levels of activity, performance or achievements. Our expectations are as of the expectations reflected in these forward-looking statements will prove to be correct. Our actual results could differ materially from those anticipated in forward-looking statements as a result of certain factors, including matters described in the section titled “Risk Factors.” Forward-looking statements include those that use forward-looking terminology, such as the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “project,” “plan,” “will,” “shall,” “should,” and similar expressions, including when used in the negative. Although we believe that the expectations reflected in these forward-looking statements are reasonable and achievable, these statements involve risks and uncertaintiesdate this Form 10-K is filed, and we cannot assure you that actual results will be consistent with these forward-looking statements. We undertake no obligationdo not intend to update or revise theseany of the forward-looking statements whether to reflect events or circumstances after the date initiallythis Annual Report on Form 10-K is filed or published, to reflect the occurrence of unanticipated events or otherwise.confirm these statements to actual results, unless required by law.

PART I

Item 1. Business.

BACKGROUND

On December 31, 2012, AquaLiv Technologies, Inc (“ALTI”) and Verity Farms II, Inc. (“Verity Farms”), a South Dakota corporation, entered into a Share Exchange Agreement. Pursuant to the Share Exchange Agreement, ALTI acquired 100% of the authorized and issued shares of Verity Farm in exchange (the “Exchange”) for 4,850,000 shares of Series B Convertible Preferred Stock, par value $0.001, of ALTI, representing approximately 86% of the outstanding shares of ALTI, on a fully-diluted basis, assuming conversion into common stock. As a result of the Exchange and the other transactions contemplated thereunder, Verity Farms is now a wholly-owned subsidiary of the ALTI and ALTI acquired Verity Farms’s business operations, including the real estate holdings, and its subsidiaries. As part of the Exchange, a change in control took place and Duane Spader was appointed chief executive officer of ALTI. A name change to Verity Corp. and the administrative closing of FOCUS, an ALTI subsidiary, were part of the Exchange. In addition, Mr. Spader received shares of Series C Preferred stock which entitle him at all times to vote with the common stock holders on all matters and cast 51% of the votes, thereby ensuring his control of matters voted upon.

On April 1, 2013, we changed our name change from AquaLiv Technologies Inc., (“ALTI” to Verity Corp. and our stock symbol changed to VRTY.

AquaLiv Technologies, Inc. (now “Verity”) was formed under the laws of the State of Nevada on April 11, 2006 originally under the name of Infrared Systems International “ISI” as a wholly-owned subsidiary of China Sxan Biotech, Inc. (“CSBI”) (then known as Advance Technologies, Inc.) to pursue a narrowly defined business objective called infrared security systems.

On July 11, 2007, CSBI acquired American SXAN Biotech, Inc., a Delaware Corporation (“American SXAN”) doing business exclusively in the People's Republic of China under a registered capital corporation, Tieli XiaoXingAnling Forest Frog Breeding Co, Ltd. Tieli XiaoXingSnling engaged in the business of manufacturing and marketing wines and tonics derived from domesticated forest frogs.  As a result of the acquisition, the stockholders of American SXAN Biotech, Inc. acquired control of CSBI.Verity Corp.

PursuantVerity Corp. is the parent of Verity Farms II, Inc. (“Verity Farms II”) and Aistiva Corporation (“Aistiva”) (fka AquaLiv, Inc.). Verity Farms II is dedicated to oneproviding consumers with safe, high-quality and nutritious food sources through sustainable crop and livestock production. Aistiva has released products in the industries of water treatment, skincare, and agriculture. Aistiva is primarily known for the termsAquaLiv Water System product which produces the majority of its revenue and also blends well with the acquisition, all of the assets and liabilities of CSBI as of the date of the acquisition were transferred into ISI. From that time and until June 22, 2011, ISI had conducted not only the infrared security systems development for which it was formed but also the other prior activities of CSBI.Verity water systems.

Due to American SXAN’s disinterest in continuing the infrared visions business of CSBI, the parties agreed that the business and assets of CSBI would be transferred to CSBI’s wholly-owned subsidiary, ISI, and that the common stock of CSBI would be distributed to the persons who were shareholders of CSBI prior to the July 2007 merger, and any subsequent purchasers of their shares. The shares of ISI owned by CSBI were subsequently distributed to shareholders upon the effectiveness of Form S-1 registration statement filed with the United States Securities and Exchange Commission. The Notice of Effectiveness was issued on July 11, 2008 and filed on July 14, 2008. Verity Farms II, Inc.

In March 2010, ISI transferred all of the assetsOn December 31, 2012, Verity entered into that certain share exchange agreement (the “Share Exchange Agreement”) by and liabilities of ISI into a newly created wholly-owned subsidiary, Infrared Applications, Inc. (“IAI”).   IAI continuedamong Verity, Verity Farms II, Aistiva, and Focus Systems, pursuant to operate the previous business of ISI under this newly created company until June 22, 2011, when, in accordance with a Management and Distribution Agreement dated March 24, 2010, allwhich Verity acquired 100% of the outstanding stock of IAIVerity Farms II. Verity Farms II is dedicated to providing consumers with safe, high quality and nutritious food sources through sustainable crop and livestock production. Verity Farms II has built the foundation for expansion that is diversified into three distinct, yet interlinked, divisions operating six business units. The three divisions: Soil Preservation, Verity Water Systems and Consumer Products. Soil Preservation consists of Verity Farms and Verity Turf; Verity Water Systems comprises its own division; and, Consumer Products will consist of Verity Meats, Verity Produce and Verity Grains. The common goal within each business unit of Verity Farms II is to decrease chemical dependency, diminish the need for genetic modification, preserve the family farm, and ultimately, provide a nutritious, high-quality food to consumers.

Verity Farms (The VerityCorp. flagship, providing healthful and sustainable food production services and products)

Since the 1970’s, farmers associated with Verity Farms II and its subsidiaries/predecessors have dedicated their farming practices to healthy soil and non-GMO crop production based upon natural practices and limited chemical applications. Since June 2011, substantial personnel and facilities resources have been invested into building an organizational model capable of expanding those early efforts into an effective and efficient platform for growing natural and healthful food products. During the Spring and Summer of 2013,invaluable lessons learned over decades of specialized and practical applications upon thousands of acres by dedicated farmers were finally distilled into Verity Farm’s first fully-integrated set of Soil & Plant Health Programs. The programs remove substantial barriers for the farmer desiring to farm the Verity way by providing a unified methodology to unlock soil potential that was transferredpreviously destroyed by excessive chemical usage.

The programs are V-1 SOIL HEALTH- preparing soil for the next crop, V-2 PLANT IGNITOR- nurturing seed and soil for greater root systems, growth and yield potential, and V-3 PLANT ACCELERATORS- proper plant fueling during key growth stages.

The value of these programs is twofold. With substantial barriers removed in the adoption of Verity methods, increased adoption rates are expected. Further, growth of Verity Farms will no longer be limited by a lack of highly specialized personnel as non-specialized personnel can rely upon the programs to Gary Ball,provide specific recommendations to our farmer/producer customers.

Development of the former CEO. SubsequentSoil & Plant Health Programs has been costly and labor intensive. However, major obstacles both in customer acquisition and organizational growth have now been eliminated, and the efficiencies of our newly developed programs will fuel Verity’s market penetration, scalability and profitability.

Verity Turf

Verity Farms II has developed an environmentally-friendly, Organic Materials Review Institute (“OMRI”) approved fertilizer that produces a natural, weed-free lawn that is safe for both people and pets. The product is a natural offshoot of the farm services business of soil sustainability and healthful food production. It nurtures grass by enhancing the natural biology of the soil.

Verity Water Systems

Verity Water Systems units are maintenance-free products designed to this event, Ball shall be responsibleused directly in water lines to make, if any, a Subsidiary Stock Distributionboth revitalize the water at the molecular level and to increase the water’s energy-carrying capability. Different models are designed according to the Company’s shareholderswater capacity needed. Some potential benefits of recordVerity Water Systems as represented by Verity include: healthier livestock and poultry through improved hydration, oxygenation and vitality; plants require less water; increase in nutrient content of March 23, 2010.seed crops and produce; plants better withstand extremes in hot and freezing temperatures; significantly increased bio-availability of nutrients; longer shelf life of agricultural produce and cut flowers; decreased seed germination time; greatly improved aerobic bacterial activity; reduction in mineral deposits like calcium, iron and aragonite; reduced bio-uptake of pollutants and toxins; and increased life span of water valves, pipes, hot water heaters, swamp-coolers and humidifiers.

On April 12, 2010,The addition of Aistiva’s expertise and technology in water enhancement, including their AquaLiv Water System product, is a major complement and exciting enhancement to Verity Water’s products and capabilities. The increased value and blended usage of both teams’ technologies and products are planned as resources allow. (See AquaLiv Water)

Verity Grains

Verity Grain comes from the Company sold a majority interest in its common stock to Take Flight Equities, Inc. (“TFE”)harvest of Verity Farms Crops. These grains originate from only non-GMO (non-genetically modified organism) seeds which are raised on soil which has tested below detectable limits for 250 known carcinogens and chemicals residues (test performed by independent labs using FDA and EPA test methods/guidelines). As part of the agreement, a change in control took place and William Wright was appointed CEO of the company.  Also included in the agreement were provisionsFollowing harvest, these grains are again tested for the future distribution of the IAI assets250 known carcinogens and chemical residues. Those grains which test free from those carcinogens and chemicals are then Verity Farms II certified to the ISI shareholders of record on March 23, 2010 within 15 months of the agreement (which was completed on June 22, 2011).be fed to livestock and sold for consumption.

On April 19, 2010, the Company purchased 100% of the outstanding common stock of Focus Systems, Inc. (“Focus”) from ProPalms, Inc.  Focus is held and operated as a wholly-owned subsidiary of the company. Focus was formed in August of 2007 as a technology company providing remote desktop - cloud computing - services and Voice over Internet Protocol (“VoIP”) phone services to small and mid-sized businesses.  For the calendar year 2008, Focus operated a regional Internet Service Provider (“ISP”) business under a management agreement with a third party.

On December 16, 2010 the Company purchased a 50% interest in AquaLiv, Inc. We have concluded, pursuant to the guidance in FASB ASC 810-10-25-38 (previously FIN 46R) that AquaLiv, Inc. is a Variable Interest Entity, that we are the primary beneficiary with a controlling financial interest in AquaLiv, Inc. and we are required to consolidate its financials accordingly. The remaining 50% non-controlling interest is owned by Craig Hoffman, AquaLiv, Inc.’s President and CEO. AquaLiv, Inc. is a life sciences research and development company creating novel products for numerous industries. The company's technology alters the behavior of organisms, including plants and humans, without chemical interaction. From increased crop yields to drug-free medicine, AquaLiv, Inc. is providing innovative, ingredient-free solutions to the world's largest problems.

On June 22, 2011, in accordance with Management and Distribution Agreement (“Agreement”) dated March 24, 2010, we completed the distribution of substantially all of the assets of IAI. All of the outstanding stock of IAI has been transferred to Gary Ball (“Ball”) in accordance with the Agreement. Subsequent to this event, Ball shall be responsible to make, if any, a Subsidiary Stock Distribution to the Company’s shareholders of record as of March 23, 2010, upon the earlier of the foregoing occurrence: (i) the net proceeds from the sale of substantially all of the assets of IAI or (ii) Ball elects to make a Subsidiary Stock Distribution. Any cost incurred in connection with a Subsidiary Stock Distribution shall be the responsibility of Ball. There is no certainty as to when or if a Subsidiary Stock Distribution will occur.

On September 6, 2011, the Company filed its Articles of Amendment with the State of Nevada to effect a name change to AquaLiv Technologies, Inc. and to increase its authorized common shares to 1,000,000,000. FINRA declared the corporate action effective on September 19, 2011. The name change was effected to more closely align the name with the future direction of the Company.

CORPORATE STRUCTURE AS OF SEPTEMBER 30, 2012

AQUALIV, INC.Verity Meats

AquaLiv, Inc.’sVerity Meats offers all-natural meat products born and raised with pride by American Family Farmers. Working with only a core group of dedicated livestock producers throughout South Dakota, Minnesota and Iowa, Verity has tailored production protocols to directly achieve end-product needs. By knowing the importance of using quality inputs for quality results, Verity Meats producers follow a program based on many years of practical knowledge and utilizes the best of animal nutrition, health, technology, and economics. Verity Family Farmers follow defined protocols for the production of their grain and livestock. The protocols require that only Verity Grains (chemical free) are to be fed to livestock. The result is the highest quality meats available, in both flavor and nutrition for the consumer. While operations have been limited to date, Verity Meats will expand as resources allow.

Verity Produce

Verity Produce is the newest, and could become one of the most crucial components of Verity. Verity Produce consists of fruits and vegetables which are raised for human consumption. Verity Produce has been patterned after the Verity Farms crop production program, utilizing the same concept of creating a healthy, balanced soil. This creates an optimum environment for plants to grow and flourish. The V 1,2,3 programs are currently being adapted for produce production.

AISTIVA CORPORATION

Aistiva’s scientists discovered that most substances and compounds have a unique information signature that influences biological processes via a magnetic cellular mechanism (non-chemical). The company’sVerity’s technology records this biologically significant magnetic information (bioinformation)(bio-information) from a compound or substance and allows for the manipulation, combining, and subsequent transmittal to an organism. BioinformationBio-information from a variety of sources are combined and/or altered to produce a bioinformationbio-information composite designed to influence specific biological processes. The composite can be transmitted to an organism via a variety of methods, including mineralized water, electromagnetic wave, or magnetic field. This technology has the potential to greatly enhance the Verity chemical free plant and animal productions.

The technology, while still at an early stage of development, already has direct applications in the industries of water purification, environmental science, agriculture, animal husbandry, personal use products, and medicine. Revenues generated from AquaLiv, Inc. products for the fiscal year ended September 30, 2012 were $449,626.husbandry.

AquaLiv Water System

The AquaLiv Water System is a water purification and enhancement apparatus available since 2008 that produces a high-quality drinking water. A variety of technologies are utilized in the system to remove impurities from the water, add minerals to the water, alter the molecule to molecule bonding structure of the water molecules, reduce the surface tension, improve the Oxidation Reduction Potential, and increase the pH, dissolved oxygen, and dissolved hydrogen content in the water. Additionally, the water’s bioinformationbio-information is altered to resemble spring water before processing and treatment. Users of the AquaLiv Water System have reported stabilized blood sugar, improvements in both high and low blood pressure, reduced allergy symptoms, less headaches, better digestion, and healthy glowing skin. Some diabetics have even reported that the AquaLiv Water System helped them decrease their insulin requirements. AquaLiv Water System testimonials are validated by a 3rd party. The AquaLiv Water System has approximately 400530 users and produces approximately 99% of Aistiva’s sales revenues. Verity’s food products are intended to benefit the revenues.health of humans, and the AquaLiv Water System is no different.

Infotone Hydrating Mist

Infotone Hydrating Mist is a skincare product designed to clear blemishes, fade wrinkles, and even skin tone. The product has been available since 2010. Each mister contains a ceramic bead infused with AquaLiv Inc.'s bioinformationAistiva’s bio-information technology. The technology allows simple spring water to activate skin'sskin’s natural healing ability resulting in clear, youthful, and glowing skin. Infotone Hydrating Mist is refillable for a full year making it an economical and sustainable skincare product. The mist is 100% natural and hypoallergenic and contains no parabens, additives, chemicals, GMOs, fragrances or artificial ingredients. The benefits of using the product are primarily derived through the elimination of a common skin parasite responsible for irritation (found on 50% of all adults), decreasing the production of melanin in cells that are overproducing and increasing skin hydration. The InfortoneInfotone Hydrating Mist has approximately 850 users and produces approximately 1% of Aistiva’s sales revenues. At present, the revenuesproduct is being reformulated to be more effective and non-refillable, the latter aspect of great importance to attracting retail distribution.

AgSmart Rice

AgSmart Rice

AgSmart Rice is a combined service and product offering that increases rice yields by 30-60% on average (data from actual commercial usage) while decreasing the duration before harvest by approximately one month. Treated rice crops are more resistant to pests, diseases, and wind/hail damage. AgSmart Rice is 100% natural and organic standards compliant and uses no chemical fertilizers, herbicides, or pesticides. AgSmart Rice benefits rice plants by encouraging greater root growth and photosynthesis ability. AgSMartAgSmart Rice has been available since 2011 and is currently used by 2two farms at no charge for their aid in AgSmart Rice’s development. AgSmart Rice is not marketed due to a lack of financial resources and personnel. As of today, AgSmart Rice does not produce any revenue.

AgSmart Potato

AgSmart Potato is acombined service and product offering that has shown increases in potato yields by over 100% in market value (calculated using recent size/weight values coupled with average test results between treated and untreated test plots) under initial company testing. Treated potato crops have a consistent number of potatoes compared to untreated crops, however,crops. In addition, the average size and weight are significantly increased while the normal counts of waste-sized potatoes are greatly reduced. Treated crops have also shown to be more resistant to pests and diseases caused by bacteria and viruses.diseases. AgSmart Potato is 100% natural and organic standards compliant and uses no chemical fertilizers, herbicides, or pesticides. AgSmart Potato benefits potato plants by encouraging greater root growth and photosynthesis ability while controlling bacterial and fungal activity. The CompanyVerity plans on performing further third party commercial tests of the product prior to commercial distribution.The product is still under development and not yet available to the general public.

NatuRx Medication Alternatives

Based on AquaLiv Inc.'s bioinformationAistiva’s bio-information technology, NatuRx formulations utilize bioinformationbio-information composites in lieu of active-molecules (drugs) for treatment. The formulations are non-toxic and have no contraindications. NatuRx formulations are still underin development waiting the necessary funding to begin clinical trials and not yet available to the general public.

Verity Farms II and Aistiva Resources combined

Verity’s practical and historically proven crop and animal production practices combined with the “scientific potential” of Aistiva’s next-generation technology, will be a synergistic combination that we believe provides Verity with a significant competitive advantage in the healthful food production industry.

COMPETITION

Both Verity Farms II and Aistiva are in environments of heavy competition. However, each has competitive advantages that can propel their growth with proper resources and effective management. For each just a fraction of market share will provide substantial growth opportunities.

The Company competes directlycompetitive advantage of Verity lies in its extensive applied and accrued knowledge of sustainable farming practices. In the 1970’s, the easier and more attractive model of “PLANT – SPRAY – HARVEST” was developed. The 70’s model treated undesirable events with other companies offering similar productschemical-based solutions. Today, there is evidence that increased chemical usage destroys the productivity of soil and services. requires progressively more chemicals to achieve comparable yields with each passing year. These chemicals contaminate the crops and food produced from them, resulting in nutritional deficiencies and increased health risks for consumers. As the chemical-based model became predominant, traditional farming methods that required knowledge to “prevent” undesirable events were lost. Verity’s sustainable farming model is increasingly being recognized as an alternative to conventional chemical based agriculture, particularly as the healthful food sector continues to gain ground.

AquaLiv Water System

The AquaLiv Water System competes with all consumer drinking water purification and enhancement systems priced between $350 and $4,000. Direct competition comes from so-called water ionizing machines. However,With the AquaLiv Water Systemadvancement of the V 1,2,3 programs, Verity Farms II has many advantages over them including the ability to remove sodium fluoride and alkalize water naturally and without electricity. The AquaLiv Water System is further differentiatedmade nature-based food production both adoptable in the marketplace by an industry leading 90-Day Unconditional Money Back Guarantee and a 15-Year warranty against defects.

Infotone Hydrating Mist

Infotone Hydrating Mist competes against all cosmetic water misters often sold by popular bottled water brands. When the water is used up in competingscalable as Verity’s customer base increases. Combined with Aistiva’s products consumers must purchase a new mister. However, integratedand technology, in the Infotone Hydrating Mist apparatus enhances ordinary water with skin enhancing effects while also allowing consumers to refill the mister with ordinary water. While the initial cost of Infotone Hydrating Mist is slightly higher than competing products, the ability to refill it greatly increases its value to consumers, making itwe believe Verity has a unique product and service offering in the marketplace.

AgSmart Rice

Because no other available yield enhancing agriculture product exploits the same natural phenomenon, AgSmart Rice can be used in conjunction with other technologies, e.g. hybridization, agrochemicals, and/or GMOs, while still delivering yield increases and other benefits. For this reason, other technologies currently available in rice agriculture do not compete directly with AgSmart Rice as most customers will combine many available technologies to realize even greater increases yields.

FOCUS SYSTEMS

Remote Desktop and Cloud Computing

Focus System’s Remote Desktop services provide authorized remote users the ability to connect to resources on an external network owned and managed by Focus Systems from any Internet-connected device. The remote user may access their account from their own device or one leased or purchased from Focus Systems. Once connected, the remote user has access to a number of software packages made available through Focus Systems as a Microsoft product reseller for a monthly fee. The remote user may also request that other software packages be installed to the user’s virtual server and maintained by Focus Systems. The Company believes that there are inherent benefits of operating in a completely portable desktop office environment. Access to central data and shared recourses can increase productivity and reduce cost for businesses.  The remote environment is controlled, managed and updated by Focus Systems from a centralized location, further reducing operating costs for its customers. Revenues generated from remote desktop and other services for the fiscal year ending September 30, 2012 were $22,850 and included service to approximately 20 users.

VOIP Phone Service

VoIP phone service is a method for taking analog audio signals (similar to the kind you hear when you talk on the phone) and turning them into digital data that can be transmitted over the Internet. This allows VoIP service to replace traditional landline service for business and residential customers. Since the VoIP phone service is digital, companies are able to run both data and voice over the same network infrastructure thereby greatly reducing costs. This reduction in cost is experienced in both the initial start-up phase, as well as the ongoing maintenance and services fees associated with phone service. Company management believes that the trend away from traditional phone service to digital VoIP services will continue to grow.Revenues generated from VoIP services for the fiscal year ending September 30, 2012 were $7,054.

COMPETITION

The remote desktop and cloud computing environment is still relatively in its infancy.  While the advent of computers saw large uses of thin client applications, the PC age saw companies bringing servers and applications both in-house and distributed to the desktops.  Today, as companies struggle with IT cost and look for ways to reduce overhead and speed up deliver of changing software, they are beginning to look again at outsourcing of their IT and utilize the expanding power of cloud computing.  There are several large service providers servicing the commercial market, such as IBM, Hewlett Packard, VMware, and a number of others. They are betting big on this trend and will capture a large segment of the market related to large business.  However, providers of the service to small business have yet to make a large mark in the market space. Buying decisions with small business remain more local, and with the consolidation of the ISP market over recent years, there are less IT businesses in these communities to roll out and support this type of initiative.

VoIP competition is a bit fiercer when it comes to the residential market. Companies such as Vonage and Magic Jack (heavy marketer in the residential market) have made great inroads into the homes of Americans and those abroad.  However, when it comes to small businesses making decisions, they have been less eager (either due to familiarity or lack of knowledge) to move away from the traditional Telco provider and utilize VoIP.  The trend towards a VoIP solution is inevitable as companies continue to consolidate their IT solutions and take advantage of cost savings initiatives, both for initial capital outlay as well as ongoing monthly cost.  Focus is poised to take advantage of the technology decisions that these small business will make in the coming years, either as a provider of remote desktop solutions, VoIP, or both.

Dependence on One or Few Major Customers

The Company’s accounts receivable total was $1,856, or less than 2% of the Company’s total revenue for the current quarter and less than 1% of the total annual revenue for the fiscal year ended September 30, 2012. Furthermore, no single customer represented more than 1% of the total annual revenue. Therefore, the Company no longer anticipates being dependent on any one or few major customers.

PATENTS, TRADEMARKS, LICENSES, FRANCHISES, CONCESSIONS, ROYALTY AGREEMENTS OR LABOR CONTRACTS

VERITY CORP and its subsidiaries retain:

“VERITY” name trademarks

Patented Aquaknox water system restoration process

A royalty agreement of the Verity Turf product developed with co-producers that vary from 3% to 1% of manufactured costs

AISTIVA CORPORATION

AquaLiv® is a registered trademark belonging to AquaLiv, Inc.Aistiva Corp. The trademark’s duration is perpetual while in use.

The Japanese patent personally owned by Dr. Ichimura, AquaLiv Inc.’sAistiva’s Chief Science Officer, covers some aspects of the AquaLiv, Inc.’sAistiva’s technology and was granted in 2008 for a term of 20 years. Dr. Ichimura, in his discretion, allows AcquaLiv, Inc.Aistiva the exclusive use of suchsaid patent. The CompanyVerity currently has no other patents or patent applications pending relating to AquaLiv, Inc. or Focus Systems, Inc.  Aistiva.

RESEARCH AND DEVELOPMENT ACTIVITIES

For the fiscal years ending September 30, 2013 and 2012, and 2011, the CompanyVerity and its subsidiaries have spent approximately $1,213$36,140 and $9,936$1,213 on research and development costs, respectively.

EMPLOYEES

As of September 30, 2012, the Company had three (3) current employees and one (1) independent contractor between the Company2013 Verity and its subsidiaries with William Wright being the solehad 25 employees and three independent contractor at AquaLiv Technologies, Inc. Additional work is performed by subcontractors.contractors.

EXPENSES

We estimate that we will require approximately $500,000, in addition to our gross revenues, over the next twelve months in order to maintain operations. While our operating expenses for each of our prior fiscal years have exceeded this amount, a portion of those expenses have been non-cash expenses.

Item 1A. Risk Factors.

An investment in our common stock involves significant risks. You should carefully consider the following risks and all other information set forth in this Annual Report before deciding to invest in our common stock. If any of the events or developments described below together withoccurs, our business, financial condition and results of operations may suffer. In that case, the value of our common stock may decline and you could lose all or part of your investment.

You should consider each of the following risk factors and any other information includedset forth in this report,Form 10-K and the other reports filed by the Company with the Securities and Exchange Commission (the “SEC”), including the Company’s financial statements and related notes, in considering ourevaluating the Company’s business and prospects. The risks and uncertainties described below are not the only ones facingthat impact on the Company.Company’s operations and business. Additional risks and uncertainties not presently known to usthe Company, or that wethe Company currently deemconsiders immaterial, may also may impair ourits business or operations. The occurrence ofIf any of the following risks could harm ouractually occurs, the Company’s business and financial condition, results or results of operations.prospects could be harmed.

Risks Related to the Our Business and Industry

IF WE DO NOT GENERATE ADEQUATE REVENUES TO FINANCE OUR OPERATIONS, OUR BUSINESS MAY FAIL.If our efforts to attract and retain customers are not successful, our business will be adversely affected.

Verity is a healthy food integrator and has developed a solution for farmers to enhance soil health and improve sustainable agriculture. The Verity solution is a new program for farmers to convert from current farming practices and farmers do not have the ability to convert an entire farm to a new process. Farmers will dedicate a percentage of growing acreage to test the Verity method before committing additional acreage for the Verity program.

We were incorporated

The risks of maintaining, attracting and retaining customers are as follows; a) Farmers may be slow to adapt to new growing methods or technologies and the long sales cycle could have an adverse effect on April 11, 2006. Asrevenue growth, b) Farmers do not have the ability to quickly change growing methods and, c) the marketplace for sustainable agriculture is very popular; however the conversion from traditional methods to sustainable methods requires an investment of September 30, 2012,time, capital and acreage that can disrupt a farmer’s supply chain deliverables to its customers, d) the marketplace may not require or demand a healthy food integrator.

The farming/agriculture business is our core customer, and the business is dependent on outside factors (i.e., weather that can shorten or destroy growing seasons, customer demand, insect infestation, etc.).Many farmers have often experienced setbacks after making commitments to organizations that asked the farmer to produce more healthful food at their expense, only to have the purchase commitment withdrawn after production was completed. This factor caused many farmers to fail, and they can be hesitant to change methods without testing a small portion of the growing acreage.

If we had ado not generate adequate revenues to finance our operations, our business could fail.

Upon the completion of the Exchange, the combined retained deficit of $3,063,113. During the years endedVerity was $9,253,073. Since that time through September 30, 2012 and 2011, respectively,2013, we had additional net losses of $623,079 and $3,235,468. We expect our revenues during the next twelve months from our existing products and service customers to remain flat depending upon the US economic recovery and our ability to create market awareness with our AquaLiv brand.$1,575,608. Our expected revenue generation and expenses are difficult to predict because of the annual nature of farming, and there can be no assurance that revenues will be sufficient to cover operating costs for the foreseeable future. It mayis expected it will be necessary to raise additional funds.funds for our operations. If we are unable to raise funds to cover any operating deficit andor dramatically reduce our sales decreaseoperational costs in 2013,the next twelve months, our business maycould fail.

BECAUSE WE HAD INCURRED A LOSS AND HAVE NOT FULLY COMMENCED OUR PLANNED PRINCIPAL OPERATIONS, OUR ACCOUNTANTS HAVE EXPRESSED DOUBTS ABOUT OUR ABILITY TO CONTINUE AS A GOING CONCERN.Because we had incurred a loss and have not fully implemented our planned principal operations, our accountants have expressed doubts about our ability to continue as a going concern.

For the fiscal year ended September 30, 2012,2013, our accountants have expressed doubt about our ability to continue as a going concern as a result of operating losses since inception, the failure to yet commence planned principal operations, and current liabilities in excess of current assets. Our ability to achieve and maintain profitability and positive cash flow is dependent on such factors as our ability to sell AquaLiv Water Systems and Infotone Face Mist, generate newdramatically increase sales for AquaLiv’s AgSmart and NatuRx product lines, and to capture and retain new remote desktop and VoIP customers.through our newly established V 1,2,3 programs or a substantial special contract. Based upon current plans,expectations we expectanticipate that our operating costs may continue to range between $200,000 and $250,000 for the fiscal year ending September 30, 2013.exceed our needed revenues. We cannot guarantee that we will be successful in generating sufficient revenues or other funds in the future to cover these operating costs. Failure to generate sufficient revenues will cause us to go outincreases the risk of businessfailure or take draconian actions.

substantially reduces operating and research and development expenses.

ISSUANCES OF OUR STOCK COULD DILUTE CURRENT STOCKHOLDERS AND ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK, IF A PUBLIC TRADING MARKET DEVELOPS.Issuances of our stock could dilute current stockholders and adversely affect the market price of our common stock, if a public trading market develops.

We have the authority to issue up to 1,000,000,000 shares of common stock, 50,000,000 shares of preferred stock, and to issue options and warrants to purchase shares of our common stock without stockholder approval. We are currently working on financing plans for future growth and acquisitions, product development, and service development, and wedevelopment. We may need to raise additional capital to fund operations. If we raise funds by issuing equity securities, our existing stockholders may experience substantial dilution. In addition, we couldVerity has the ability to issue large blocks of our common stock to fend off unwanted tender offers or hostile takeovers without further stockholder approval, or in connection with one or more acquisitions. No such transactions currently are planned.

The issuance of preferred stock by our board of directors could adversely affect the rights of the holders of our common stock. An issuance of preferred stock could result in a class of outstanding securities that would have preferences with respect to voting rights and dividends and in liquidation over the common stock and could, upon conversion or otherwise, have all of the rights of our common stock. Our board of directors'directors’ authority to issue preferred stock could discourage potential takeover attempts or could delay or prevent a change in control through merger, tender offer, or proxy contest or otherwise by making these attempts more difficult or costly to achieve.

OUR ARTICLES OF INCORPORATION PROTECT OUR DIRECTORS FROM CERTAIN TYPES OF LAWSUITS, WHICH COULD MAKE IT DIFFICULT FOR US TO RECOVER DAMAGES FROM THEM IN THE EVENT OF A LAWSUIT.Our articles of incorporation protect our directors from certain types of lawsuits, which could make it difficult for us to recover damages from them in the event of a lawsuit.

Our Articles of Incorporation eliminate the liability of our directors for monetary damages to the fullest extent permissible under Nevada law. Nevada law permits the elimination of the personal liability of a director or officer for damages for breach of fiduciary duty as a director or officer, althoughofficer. Although such a provision must not eliminate the liability of a director or officer for (a) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law, or (b) the payment of distributions in violation of Nevada Revised Statutes Section 78.300. This exculpatory provision may have the effect of preventing stockholders from recovering damages against our directors caused by their negligence, poor judgment or other circumstances. The indemnification provisions may require our company to use our assets to defend our directors and officers against claims, including claims arising out of their negligence, poor judgment, or other circumstances.

INTENSE COMPETITION IN THE LIFE SCIENCES AND INFORMATION TECHNOLOGY COULD AFFECT OUR ABILITY TO SUCCESSFULLY MARKET OUT PRODUCTS.Increased competition in the production of food, crop inputs, turf and water services could affect our ability to successfully market our products.

Our business plan involves deploymentEach of technology services, and developing, deploying, and licensing products. Theseour businesses areoperates in highly competitive.competitive arenas. There are numerous similar companies providing suchsimilar services and products in the United States. OurMany of our competitors willmay have greater financial resources and perhaps more expertise in these businesses.arenas. Our ability to deploy our AgSmart and NatuRx products under AquaLiv, Inc., as well as our remote desktop and VoIP phone services under Focus Systems, Inc.generate revenues will depend on our ability to successfully market our products in this highly competitive environment. We cannot guarantee that we will be able to do so successfully.

FAILURE TO ADEQUATELY PROTECT OUR INTELLECTUAL PROPERTY RIGHTS COULD ADVERSELY AFFECT OUR BUSINESS.

While we have exclusive use of the patent personally owned by AquaLiv, Inc’s Chief Science Officer Dr. Ichimura, we cannot be assured that it will be sufficiently broad enough to protect our technology. In addition, we cannot assure that any patents issued to us in the future will not be challenged, invalidated, or circumvented. In order to safeguard our unpatented proprietary know-how, trade secrets,Enforcing and technology, we rely primarily upon trade secret protection and nondisclosure provisions in agreements with employees and others having access to confidential information. We cannot assure that these measures will adequately protect us from improper disclosure or misappropriation ofprotecting our proprietary information.

ENFORCING AND PROTECTING OUR PROPRIETARY INFORMATION CAN BE COSTLY AND ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS AND FINANCIAL CONDITION.information can be costly and adversely affect our business, results of operations and financial condition

If we are not able to adequately protect or enforce our proprietary information or if we become subject to infringement claims by others, our business, results of operations and financial condition may be materially adversely affected. We may need to engage in future litigation to enforce our intellectual property rights or the rights of our customers, to protect our trade secrets, or to determine the validity and scope of proprietary rights of others, including our customers. We also may need to engage in litigation in the future to enforce any patent rights. In addition, we may receive in the future communications from third parties asserting that our products infringe the proprietary rights of third parties. We cannot assure you that any such claims would not result in protracted and costly litigation. Such litigation could result in substantial costs and diversion of our resources and could materially and adversely affect our business, financial condition and results of operations. Furthermore, we cannot assure you that we will have the financial resources to vigorously defend or enforce our proprietary technology.

THE SHARE CONTROL POSITION OF GARY BALL MAY LIMIT THE ABILITY OF OTHER STOCKHOLDERS TO INFLUENCE CORPORATE ACTIONS.The share voting control position of officers and directors may limit the ability of other stockholders to influence corporate actions.

In April 2010, pursuantOfficers and directors control voting rights equal to the agreement, the Company sold 11,557,217 (pre-split) shares of authorized and previously unissued shares of common stock, representing at that time 89.9%least 51% of the outstanding stock of the Company immediately after the transaction, to Take Flight Equities, Inc. for a purchase price of $200,000, consisting of $30,000 cash and a promissory note for $170,000. Pursuant to the agreement, the shares were placed in escrow at closing.  As payments were made on the note, a portion of the shares were to be released from escrow.  In the event that a promissory note payment was not made when due and not cured within the time provided in the escrow agreement, or if an event default occurs under the note, then the shares held in escrow along with promissory note will be transferred to Gary Ball, and Gary Ball will assume responsibility for the payment of the note. In July 2010, Take Flight Equities defaulted on its note obligations and the responsibility for the note payment along with voting rights to the stock remaining in escrow reverted to Gary Ball. As a result, Gary Ball retains voting control of the 88,572,170 common shares issued and held in escrow, thereby making Gary Ball the largest shareholder with control of approximately 16% of our outstanding shares. Because Gary Ball controls such a significant percentage of the outstanding shares, otherOther stockholders, individually or as a group, will be at a disadvantage in their ability to effectively influence the election or removal of our officers and directors, the supervision and management of the business or a change in control of, or the sale of, our company, even if hestockholder believed such changes were in the best interest of our stockholders generally.stockholders.

OUR FUTURE SUCCESS DEPENDS, IN LARGE PART, ON THE CONTINUED SERVICE OF OUR PRESIDENT.

We depend almost entirely on the efforts and continued employment of Mr. William Wright, our President and Secretary-Treasurer. Mr. Wright currently is our sole independent contractor of the parent company, and we will depend on him for nearly all aspects of our operations. We do not have an employment contract with Mr. Wright, and we do not carry key person insurance on his life. Mr. Wright currently is able to devote a substantial amount of his time on our behalf. The loss of the services of Mr. Wright, through incapacity or otherwise, would have a material adverse effect on our business. It would be very difficult to find and retain qualified personnel such as Mr. Wright.

THE COMPANY’S FAILURE TO COMPLY WITH THE OBLIGATIONS SET FORTH IN THE AGREEMENTS ENTERED INTO WITH TCA GLOBAL CREDIT MASTER FUND, LP MAY RESULT IN THE FORECLOSURE OF THE COMPANY’S OR ITS SUBSIDIARIES’ PLEDGED ASSETS AND OTHER ADVERSE CONSEQUENCES.

On April 27 2012, the Company entered into that certain securities and purchase agreement (“Purchase Agreement”) with TCA Global Credit Master Fund, LP (“TCA”). To secure the performance of the Company’s obligations under the Purchase Agreement, the Company and its subsidiaries were required to enter into security agreements, pledge and escrow agreements and a guaranty agreement. Pursuant to a security agreement, the Company granted a continuing, first priority security interest in all of our assets to TCA (the “First Security Agreement”). In addition, our subsidiary, Focus Systems, Inc. (“Focus”), pursuant to a security agreement, granted a continuing, first priority security interest in all of Focus’s assets to TCA (“Second Security Agreement”). Further, pursuant to a pledge and escrow agreement, the Company pledged 11,516,104 of the Company’s common stock to TCA in escrow (the “First P&E Agreement”). Pursuant to a second pledge and escrow agreement, the Company pledged its entire interest in its subsidiary, AquaLiv, Inc., to TCA in escrow (the “Second P&E Agreement”). Lastly, pursuant to a guaranty agreement, Focus has guaranteed and is to act as surety to TCA for the payment of the Company’s liabilities when they become due (the “Guaranty”, together with the Purchase Agreement, First Security Agreement, Second Security Agreement, First P&E Agreement and Second P&E Agreement, collectively, the “TCA Agreements”). The Company’s failure to comply with the obligations in the TCA Agreements or the occurrence of certain other specified events could result in an event of default that, if not cured or waived, could result in the acceleration of all or a substantial portion of our debt, potential foreclosure on our assets and other adverse consequences.

Risks Related to Our Common Stock

AT THIS TIME, WE ARE NOT LISTED ON THEAt this time we are not listed on the OTCBB, WHICH COULD LIMIT THE ABILITY OF BROKER-DEALERS TO SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR SECURITIES IN THE SECONDARY MARKET.which could limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.

At this time, we are not listed on the OTCBB. We plan to begin the relisting process for the OTCBB in the next fiscal year. Currently, we are solely listed on the OTC Markets OTCQB. As a result, the market liquidity for our securities could be adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. In addition, we may be unable to get re-listed on the OTCBB, which may have an adverse material effect on our company.

BECAUSE THE PUBLIC MARKET FOR SHARES OF OUR COMMON STOCK IS LIMITED, INVESTORS MAY BE UNABLE TO RESELL THEIR SHARES OF COMMON STOCK.Because the public market for shares of our common stock is limited, investors may be unable to resell their shares of common stock.

Currently, there is only a limited public market for our common stock on the OTCQB in the United States. Thus, investors may be unable to resell their shares of our common stock. The development of an active public trading market depends upon the existence of willing buyers and sellers who are able to sell their shares as well as market makers willing to create a market in such shares. Under these circumstances, the market bid and ask prices for the shares may be significantly influenced by the decisions of the market makers to buy or sell the shares for their own account. Such decisions of the market makers may be critical for the establishment and maintenance of a liquid public market in our common stock. Market makers are not required to maintain a continuous two-sided market and are free to withdraw firm quotations at any time. We cannot give you any assurance that an active public trading market for the shares will develop or be sustained.

THE APPLICATION OF THE “PENNY STOCK” RULES COULD ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON SHARES AND INCREASE YOUR TRANSACTION COSTS TO SELL THOSE SHARES.The application of the “penny stock” rules could adversely affect the market price of our common shares and increase your transaction costs to sell those shares.

The U.S. Securities and Exchange Commission (the “SEC”) has adopted rule 3a51-1 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, Rule 15g-9 requires:

• that a broker or dealer approve a person’s account for transactions in penny stocks; and

• the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.

In order to approve a person’s account for transactions in penny stocks, the broker or dealer must:

• obtain financial information and investment experience objectives of the person; and

• make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form:

• sets forth the basis on which the broker or dealer made the suitability determination; and

• that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

AS AN ISSUER OF “PENNY STOCK,As an issuer of “penny stock,” THE PROTECTION PROVIDED BY THE FEDERAL SECURITIES LAWS RELATING TO FORWARD LOOKING STATEMENTS DOES NOT APPLY TO US.the protection provided by the federal securities laws relating to forward looking statements does not apply to us.

Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, the CompanyVerity will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by the CompanyVerity contained a material misstatement of fact or was misleading in any material respect because of the Company’sVerity’s failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.

COMPLIANCE AND CONTINUED MONITORING IN CONNECTION WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE MAY RESULT IN ADDITIONAL EXPENSES.Compliance and continued monitoring in connection with changing regulation of corporate governance and public disclosure may result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure may create uncertainty regarding compliance matters. New or changed laws, regulations and standards are subject to varying interpretations in many cases. As a result, their application in practice may evolve over time. We are committed to maintaining high standards of corporate governance and public disclosure. Complying with evolving interpretations of new or changed legal requirements may cause us to incur higher costs as we revise current practices, policies and procedures, and may divert management time and attention from the achievement of revenue generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to uncertainties related to practice, our reputation might be harmed which would could have a significant impact on our stock price and our business. In addition, the ongoing maintenance of these procedures to be in compliance with these laws, regulations and standards could result in significant increase in costs.

THE MARKET PRICE FOR OUR COMMON SHARES IS PARTICULARLY VOLATILE GIVEN OUR STATUS AS A RELATIVELY UNKNOWN COMPANY WITH A SMALL AND THINLY TRADED PUBLIC FLOAT, LIMITED OPERATING HISTORY AND LACK OF PROFITS WHICH COULD LEAD TO WIDE FLUCTUATIONS IN OUR SHARE PRICE. YOU MAY BE UNABLE TO SELL YOUR COMMON SHARES AT OR ABOVE YOUR PURCHASE PRICE, WHICH MAY RESULT IN SUBSTANTIAL LOSSES TO YOU.The market price for our common shares is particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, limited operating history and lack of profits which could lead to wide fluctuations in our share price. You may be unable to sell your common shares at or above your purchase price, which may result in substantial losses to you.

The market for our common shares is characterized by significant price volatility when compared to the shares of larger, more established companies that trade on a national securities exchange and have large public floats, and we expect that our share price will continue to be more volatile than the shares of such larger, more established companies for the indefinite future. The volatility in our share price is attributable to a number of factors. First, as noted above, our common shares are, compared to the shares of such larger, more established companies, sporadically and thinly traded. As a consequence of this limited liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are sold on the market without commensurate demand. Secondly, we are a speculative or “risky” investment due to our limited operating history and lack of profits to date, and uncertainty of future market acceptance for our potential products. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at greater discounts than would be the case with the stock of a larger, more established company that trades on a national securities exchange and has a large public float. Many of these factors are beyond our control and may decrease the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price.

WE DO NOT INTEND TO PAY DIVIDENDS.We do not intend to pay dividends.

We do not anticipate paying cash dividends on our common stock in the foreseeable future. We may not have sufficient funds to legally pay dividends. Even if funds are legally available to pay dividends, we may nevertheless decide in our sole discretion not to pay dividends. The declaration, payment and amount of any future dividends will be made at the discretion of our board of directors, and will depend upon, among other things, the results of our operations, cash flows and financial condition, operating and capital requirements, and other factors our board of directors may consider relevant. There is no assurance that we will pay any dividends in the future, and, if dividends are paid, there is no assurance with respect to the amount of any such dividend.

AS A PUBLIC COMPANY, WE ARE SUBJECT TO COMPLEX LEGAL AND ACCOUNTING REQUIREMENTS THAT WILL REQUIRE US TO INCUR SIGNIFICANT EXPENSES AND WILL EXPOSE US TO RISK OF NON-COMPLIANCE.As a public company, we are subject to complex legal and accounting requirements that will require us to incur significant expenses and will expose us to risk of non-compliance.

As a public company, we are subject to numerous legal and accounting requirements that do not apply to private companies. The cost of compliance with many of these requirements is material, not only in absolute terms but, more importantly, in relation to the overall scope of the operations of a small company. Our relative inexperience with these requirements may increase the cost of compliance and may also increase the risk that we will fail to comply.

Failure to comply with these requirements can have numerous adverse consequences including, but not limited to, our inability to file required periodic reports on a timely basis, loss of market confidence and/or governmental or private actions against us. We cannot assure you that we will be able to comply with all of these requirements or that the cost of such compliance will not prove to be a substantial competitive disadvantage vis-à-vis our privately held and larger public competitors.

WE MAY BE SUBJECT TO SHAREHOLDER LITIGATION, THEREBY DIVERTING OUR RESOURCES THAT MAY HAVE A MATERIAL EFFECT ON OUR PROFITABILITY AND RESULTS OF OPERATIONS.

As discussed in the preceding risk factors, the market for our common shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future.  In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities.  We may become the target of similar litigation. Securities litigation will result in substantial costs and liabilities and will divert management’s attention and resources.

COMPLIANCE WITH CHANGING REGULATION OF CORPORATE GOVERNANCE AND PUBLIC DISCLOSURE WILL RESULT IN ADDITIONAL EXPENSES AND POSE CHALLENGES FOR OUR MANAGEMENT.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the rules and regulations promulgated thereunder, the Sarbanes-Oxley Act and SEC regulations, have created uncertainty for public companies and significantly increased the costs and risks associated with accessing the U.S. public markets.  Our management team will need to devote significant time and financial resources to comply with both existing and evolving standards for public companies, which will lead to increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Property.Properties

LOCATION		LEASE/OWN		MONTHLY RENT
Corporate Office Sioux Falls, South Dakota		Lease		$	5,000
Warehouse Orange City, Iowa		Own
Warehouse Pelham, Georgia		Own
Land Sioux Falls, South Dakota		Own

Verity owns three real estate properties:

Orange City Warehouse at 3480 440^th St, Orange City, Iowa, 51041, $300,000 purchase price, Mortgage Loan at 4.7% interest, monthly payments are $2000 per month, principal of $256,662.08 due 1/1/2015.

 

Pelham Warehouse at 2159 US Hwy 19^th So. Pelham, Georgia, 31779, $500,000 purchase price, 5 year Mortgage 6.0% interest, annual payment $100,000 due September 20^th each year.

Sioux Falls 240 Acre Land Acquisition at 25910 Slip up Creek, Sioux Falls, SD, purchase price $2,400,000, 6 year mortgage loan at 6%, annual payment $400,000 due September 20^th each year.

The Company’s corporate office is currently located at 4550 NW Newberry Hill Road, Suite 202, Silverdale Washington, 98383. The corporate office is shared by Focus Systems, Inc. We currently rent on a month to month basisPelham Warehouse and pay rent of $1,000 per month. We own no real estate nor have plans to acquire any real estate.Sioux Falls Land are mortgage loans held bya board member and principal stockholder. At September 30^th2013 the annual payment due for the Pelham Warehouse and Sioux Falls Land was deferred until September 2014.

 

Item 3. Legal Proceedings.

 

We are currently not 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 or 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 4. Mine Safety Disclosures.

 

Not applicable.

 

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PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

(a) Market Information

 

Our common stock is currently quoted on the OTCQB under the symbol “AQLV.“VRTY.” There is a limited trading market for our common stock. The following table sets forth the range of high and low bid quotations for each quarter since September 30, 2010. These quotations as reported by the OTCQB reflect inter-dealer prices without retail mark-up, mark-down, or commissions and may not necessarily represent actual transactions.

 

Quarter ended		High				Low				Split Adjusted
September 30, 2010		$	0.0200			$	0.0010
December 31, 2010		$	0.0180			$	0.0022
March 31, 2011		$	0.0128			$	0.0030
June 30, 2011		$	0.0160			$	0.0027
September 30, 2011		$	0.0070			$	0.0028
										High				Low
December 31, 2011		$	0.0055			$	0.0050			$	0.63			$	0.07
March 31, 2012		$	0.0059			$	0.0051			$	1.55			$	0.51
June 30, 2012		$	0.0060			$	0.0019			$	0.60			$	0.19
September 30, 2012		$	0.0045			$	0.0013			$	0.38			$	0.13
December 31,2012										$	0.17			$	0.06
March 31, 2013										$	0.81			$	0.10
June 30, 2013										$	0.74			$	0.30
September 30, 2013										$	0.75			$	0.37

 

(b) Holders

 

As of January 11, 2013,December 302013, there were approximately1,402 1,444 holders of record of our common stock.

 

(c) Dividends

 

We have never paid any cash dividends on our common shares, and we do not anticipate that we will pay any dividends with respect to those securities in the foreseeable future. Our current business plan is to retain any future earnings to finance the expansion development of our business.

 

(d) Securities Authorized for Issuance under Equity Compensation Plan

The following table provides information as of September 30, 2012, with respect to the shares of the Company's common stock that may be issued under the Company's existing equity compensation plan, “2010 Incentive Compensation Plan”. 

Equity Compensation Plan Information
Plan category		Number of securities to be issued upon exercise of outstanding options, warrants and rights (a)				Weighted-average Exercise price of outstanding options, warrants and rights (b)				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders			0				0				0
Equity compensation plans not approved by security holders (1)			0				0				15,000,000
Total			0				0				15,000,000

(1) Consists of the 2010 Incentive Compensation Plan filed on Form S-8, July 9, 2010.

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Unregistered Sales of Equity Securities

 

During the fiscal year ending September 30, 2012, the Company2013, Verity issued the following securities pursuant to exemptions from registration provided by Section 4(2) of the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder.

 

InOn October 2011, the Company9, 2012, Verity issued 14,500,000 shares of common stock to Blulife, Inc. (“Bluelife”) to repay $7,250 in debt acquired from Silverdale Partners, LP (“Silverdale”).

In November, 2011, the Company issued 15,000,000 shares of common stock to Blulife to repay $7,500 in debt acquired from Silverdale.

In December 2011, the Company issued 2,500,000 shares of common stock to MRJ Resources LLC in exchange for $10,000 in cash.

In December 2011, the Company issued 500,000 shares of common stock to Robert Foster in exchange for $2,000 in cash.

In December 2011, the Company issued 1,000,000 shares of common stock to Jim Oakes in exchange for $4,000 in cash.

In December 2011, the Company issued 1,000,000 shares of common stock to Jeff and Cassandra Ruggles in exchange for $4,000 in cash.

In December, 2011, the Company issued 16,000,000 shares of common stock to Blulife to repay $8,000 in debt acquired from Silverdale.

In January, 2012, the Company issued 14,000,000 shares of common stock to Blulife to repay $7,000 in debt acquired from Silverdale.

In January 2012, the Company issued 5,000,000 shares of common stock to D Rick Edwards in exchange for $50,000 in cash.

In January 2012, the Company issued 250,000 shares of common stock to Christopher Bruyer in exchange for $2,500 in cash.

In February 2012, the Company issued 17,000,000 shares of common stock to Blulife to repay $8,500 in debt acquired from Silverdale.

In February 2012, the Company issued 2,727,273, 3,409,091 and 4,687,50021,483,871 shares of common stock to Asher Enterprises, Inc. (“Asher”)Inc to retire $42,000 in debt.

In March 2012, the Company issued 3,333,333 shares of common stock to Asher to repay $10,000$13,320.00 in debt and accrued interest.

 

In MarchOn November 11, 2012, the CompanyVerity issued 1,500,000 shares of common stock to Proactive Capital Resources LLC for consulting services valued at $9,000.

In March 2012, the Company issued 1,000,000 shares of common stock to Spencer Edwards Investments Inc. for consulting services valued at $6,000.

In March 2012, the Company issued 19,000,000 shares of common stock to Blulife to repay $9,500 in debt acquired from Silverdale.

In April 2012, the Company issued 4,615,385, 3,409,091 and 4,687,500 shares of common stock to Asher to repay $39,000 in debt and accrued interest.

In April 2012, the Company issued 480,759 shares of common stock to Terry and Pam Morrow in exchange for 4,000 shares of preferred stock valued at $4,000.

In April 2012, the Company issued 2,403,846 shares of common stock to Greg and Melissa Morrow in exchange for 20,000 shares of preferred stock valued at $20,000.

In April 2012, the Company issued 240,385 shares of common stock to Joyce Morrow in exchange for 2,000 shares of preferred stock valued at $2,000.

In April 2012, the Company issued 961,538 shares of common stock to Rafa Parra in exchange for 8,000 shares of preferred stock valued at $8,000.

In April 2012, the Company issued 675,676 shares of common stock to Andrew Dempsey in exchange for 4,000 shares of preferred stock valued at $4,000.

In April 2012, the Company issued 3,378,378 shares of common stock to Muris Bisic in exchange for 20,000 shares of preferred stock valued at $20,000.

In April 2012, the Company issued 238,095 shares of common stock to John and Vickie Cooper in exchange for 2,000 shares of preferred stock valued at $2,000.

In April 2012, the Company issued 675,676 shares of common stock to Carl Bolstad in exchange for 4,000 shares of preferred stock valued at $4,000.

In April 2012, the Company issued 14,000,000 and 7,000,000 shares of common stock to Blulife to repay $10,500 in debt acquired from Silverdale.

In May 2012, the Company issued 625,000 shares of common stock to Sean Sleight in exchange for 4,000 shares of preferred stock valued at $4,000.

In May 2012, the Company issued 5,555,556 shares of common stock to TCA Global Credit Master Fund, LP (“TCA”) as incentive shares valued at $25,000.

In May 2012, the Company issued 11,516,104 shares of common stock to TCA in escrow as part of our financing agreement with TCA.

In May 2012, the Company issued 3,571,42925,548,889 shares of common stock to Auctus Private Equity Management, Inc. (“Auctus Management”Auctus”) as commitment shares valued at $12,500.$22,994 pursuant to the Equity Agreement.

 

In JuneOn December 10, 2012, the CompanyVerity issued 23,000,000120,000,000 shares of common stock to Blulife, Inc.four shareholders to retire $11,500a total of $95,182.16 in debt acquired from Silverdale.and accrued interest.

 

In JulyOn December 28, 2012, the Company issued 20,000,000Verity returned 5,555,556 shares of common stock to Blulifetreasury from TCA Global Credit Master Fund, LP originally issued as incentive shares valued at $25,000 pursuant to repay $10,000 in debt acquired from Silverdale.a securities purchase agreement.

 

In AugustOn December 31, 2012, the CompanyVerity issued 11,538,46225,000,000 shares of common stock to Asher to retire debt in the amountTrak Management Group, Inc. as compensation for consultation services valued at $25,000.

On December 31, 2012, Verity issued 15,000,000 shares of common stock as compensation for rendered professional services valued at $15,000.

 

In SeptemberOn December 31, 2012, the CompanyVerity issued 39,469,2505,000,000 shares of common stock to AsherAuctus as commitment shares valued at $4,000 pursuant to retire $32,000 in debt.the Equity Agreement.

 

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On December 31, 2012, Verity 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 April 12, 2013, Verity issued 69,672 shares of common stock to Dayspring Capital as compensation for their consulting services valued at $29,958.96.

On April 12, 2013, Verity issued 278,686 shares of common stock to Maxim Partners LLC as compensation for their consulting services valued at $119,834.98.

On July 25, 2013, Verity entered into an agreement with Sawmill Partners, LLC, Amboy Equities, Inc., Fide Management, Inc., and Virtul Consulting Services, Inc. to rescind their prior agreements, to cancel their Shares totaling 900,000 and to have their debt in the aggregate principal amount of $72,000 reinstated and mature on January 15, 2014.

On August 27, 2013, Verity converted 582,000 shares of Series A Preferred Stock held by 8 shareholders into 1,986,340 shares of common stock.

On September 20, 2013, Verity retired the 900,000 shares of common stock as per the July 25, 2013 agreement with Sawmill Partners, LLC, Amboy Equities, Inc., Fide Management, Inc., and Virtul Consulting Services, Inc.

Each of the foregoing transactions involved the private sale of securities and was exempt under Section 4a.(2) under the Securities Act of 1933, as amended, and/or Rule 506 under Regulation D of the Securities Act of 1933, as amended.

Transfer Agent

 

Our transfer agent is Pacific Stock Transfer, located at 4045 South Spencer Street, Suite 403, Las Vegas, NV 89119.

 

Item 6. Selected Financial Data.

 

Not applicable.applicable because our company is a smaller reporting company.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

THE FOLLOWING DISCUSSION OF OUR PLAN OF OPERATION AND RESULTS OF OPERATION SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND RELATED NOTES TO THE FINANCIAL STATEMENTS INCLUDED ELSEWHERE IN THIS REPORT. THIS DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT RELATE TO FUTURE EVENTS OR OUR FUTURE FINANCIAL PERFORMANCE. THESE STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE OUR ACTUAL RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, LEVELS OF ACTIVITY, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THESE FORWARD-LOOKING STATEMENTS. THESE RISKS AND OTHER FACTORS INCLUDE, AMONG OTHERS, THOSE LISTED UNDER “FORWARD-LOOKING STATEMENTS” AND “RISK FACTORS”AND THOSE INCLUDED ELSEWHERE IN THIS REPORT.

Overview

 

The CompanyVerity Corp. (the “Company”) is the parent of Verity Farms II, Inc. (“Verity Farms II”) and Aistiva Corporation (“Aistiva”) (fka AquaLiv, Inc.). Verity Farms II is dedicated to providing consumers with safe, high-quality and Focus Systems, Inc. (“Focus Systems”). AquaLiv, Inc.’s technology alters the behavior of organisms, including plantsnutritious food sources through sustainable crop and humans, without chemical interaction. From increased crop yields to drug-free medicine, AquaLiv, Inc. is providing innovative, ingredient-free solutions to the world's largest problems. The company’s platform technology influences biological processes naturally and without chemical interaction. To date, AquaLiv, Inc.livestock production. Aistiva has released products in the industries of water treatment, skincare, and agriculture. The companyAistiva is primarily known for the AquaLiv Water System product which also produces the majority of its revenue and also blends well with the company’s revenue.Verity water systems.

Verity Farms II, Inc.

On December 31, 2012, Verity entered into that certain share exchange agreement (the “Share Exchange Agreement”) by and among Verity, Verity Farms II, Aistiva, and Focus Systems, pursuant to which Verity acquired 100% of the outstanding stock of Verity Farms II. Verity Farms II is a technology companydedicated to providing customersconsumers with remote desktop servicessafe, high quality and Voice over Internet Protocol (VoIP) phone services. Focusnutritious food sources through sustainable crop and livestock production. Verity Farms II has built the foundation for expansion that is diversified into three distinct, yet interlinked, divisions operating six business units. The three divisions: Soil Preservation, Verity Water Systems maintains servers that house data and applications thatConsumer Products. Soil Preservation consists of Verity Farms and Verity Turf; Verity Water Systems comprises its customers can access remotely withoutown division; and, Consumer Products will consist of Verity Meats, Verity Produce and Verity Grains. The common goal within each business unit of Verity Farms II is to decrease chemical dependency, diminish the need for genetic modification, preserve the customersfamily farm, and ultimately, provide a nutritious, high-quality food to maintain a server. The company’s VoIP service utilizes the internet for phone service rather than through a traditional telecommunications company.consumers.

 

Verity sales are dependent on the commitment level required of the farmers to begin using our products and the complexity of application required in the usage of our products. To handle the complexity of application, Verity developed the V 1, 2, 3 program in 2013 to provide the simplicity of use of our products for farmers. Each of the three V programs in the V 1, 2, 3 program are designed to accomplish a specific objective in the life cycles of soil health and natural nutritious food production. Verity products stand alone in the importance of their particular cycle, and each of the three cycles is a critical component of the Verity soil health and food production. The Company continuesindividual V programs can be utilized separately and have substantial value in any crop production method, including conventional (chemical dependent) and organic.

In Verity Turf, the development of a dry application to struggle with liquiditysupplement the liquid application (spring 2013) was implemented and capital resources sufficientreceived approval from organic approval agency (OMRI). During 2013, Verity sold this combined product to be ablea few core Verity Turf distributors during the market development stage. After the development stage is complete, we will attempt to fully execute on itssell to additional customers and new markets.

In Verity Water, sales of the water units continue to increase. To establish a higher sales growth rate, Verity is identifying areas that have provided quick and recognizable results. Integration of water units in catfish growing ponds has led to great improvements for the customer, and the process is being simplified to allow for cost effective business plan. Previously we have issued press releases regardingdevelopment.

Verity Meats and Grains, both dependent upon the number of farms employing Verity crop production methods, are presently in a neutral mode. We are confident that successful implementation of the newly developed V 1, 2, 3 program will increase revenues in the meats and grains category.

Verity Produce is starting to develop areas of potential for a $50 million capital infusion. Whilesuccess within the Company has continued to worksoutheast with the funding group towards this goal, wePellham, GA warehouse location. As with farmers, produce growers do not change methods quickly due to the investment required and the product life cycle.

Aistiva sales have yet to receive any funds from this effort. Subsequently, our ability to execute on planned initiatives, such asnot grown since the acquisitionDecember 31, 2012 share exchange agreement. However, sales of certain Japanese operations owned by our Chief Science Officer, have been suspended until such time that adequate capital resources are obtained and business initiatives can be reevaluated. Additionally, the lack of funding has hampered our ability to properly market our existing products and services. Our AquaLiv, Inc. retail product lines, AquaLiv Water System have been stable, and Infotone Hydrating Mist, each suffer from our inability to marketVerity Farms is experiencing substantial benefits in the products to greater numbersuse of people, and such the sales of each have remained relatively stagnate over the course of the past year. Our Focus Systems services, Remote Desktop and VoIP phones service, have also been impacted by our inability to hire sales personnel and properly market these service lines, which has resultedAistiva’s water systems in declining numbers of customers for each service line. Without an increase in liquidity and capital resources, these trends may continue, which could greatly impact the ability for these subsidiaries to thrive.

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specific areas.

Plan of Operation

 

We believe Verity Farms LLC, due to the substantial efforts and resources committed since June 2011 to establish both the organizational foundation and product enhancements, is poised to experience growth in the areas of soil health, crop inputs, turf maintenance, and water revitalization. The momentum to be gained will be limited to the natural farm cycles and also the ability to attract capital to timely maximize any potential.

Recent advancements in AquaLiv, Inc.’sAistiva’s technology have created opportunities in the industries of water purification, environmental science, agriculture, animal husbandry, personal use products, and medicine. AquaLiv, Inc.Aistiva is ready to expand its innovative product offering.Additionally, management is investigating possible acquisitions that would be accretive to the core business and enable the growth of its revenues both locally and abroad.offering, based on capital availability.

 

The technology industry, especially as it appliesIn order to succeed in our goals, sales and development have to overcome the small business sector, has slowed drastically duringfarmers/growers resistance to changing methods mainly due to complexity and comprehension needed to sustain healthy soil and produce nutritious food products. Our mission is to produce healthy foods starting with healthy soil. Verity is confident very few companies have the recession. New service orders for both remote desktoppotential to replicate Verity’s methods of maintaining healthy soil. A lack of working capital and VoIP products have been slow since acquisition. Management isrevenues exceeding expenses will be a challenge in the short term. However, we believe the long term opportunities to produce healthy foods with healthy soil will increase working on increasing exposure for its remote desktop product and is working to expand its VoIP phone service from the small business market into the residential market as well. Management is investigating possible acquisitions that would be accretive to the core business and enable the growth of its revenues.capital.

 

Results of Operations

 

For the Year Ended September 30, 20122013 Compared to the Year Ended September 30, 20112012

 

Revenues

 

Revenues were approximately $479,529$2,411,093 for the fiscal year ended September 30, 2012,2013, as compared to approximately $590,138$449,626 for the prior fiscal year. Revenue was comprised of sales revenue, service revenue, and royalty revenue (stopped receiving June 22, 2011).product sales. Sales revenue, the revenue generated by AquaLiv, Inc., for the fiscal year ended September 30, 20122013 and 20112012 amounted to $449,626 and $446,053, respectively. Sales revenue accounted for 93.8% of the revenue for the fiscal year ended September 30, 2012 and 76% of the revenue for the prior fiscal year.  Service revenue is the revenue generated by Focus Systems and includes fees for remote desktop and VoIP services provided by Focus Systems. Service revenue amounted to $29,904 for the fiscal year ended September 30, 2012, compared to $44,085 for the fiscal year ended September 30, 2011. Service revenue accounted for 6.2% of the total revenue, for the fiscal year ended September 30, 2012, and 7% for the fiscal year ended September 30, 2011. Royalty revenue for the fiscal year ended September 30, 2012 and 2011 amounted to $0 and $100,000, respectively. Royalty revenue accounted for 0% of the revenue for the fiscal year ended September 30, 2012 (stopped receiving June 22, 2011) and 17% of the revenue for the fiscal year ended September 30, 2011.  The decrease in total revenue was due to sales and service revenue remaining relatively flat for the current fiscal year compared to the prior fiscal year, and the lack of royalty revenue during the current fiscal year.  The decrease in revenues related to royalty revenue is a reflection of the distribution of the assets of Infrared Applications, Inc. (“Infrared”) on June 22, 2011, as which time the Company ceased recognizing royalty revenue.

 

Cost of Sales

 

Cost of sales for the fiscal year ended September 30, 20122013 was $123,173$1,253,950 as compared to $193,430$113,784 for the prior fiscal year. The decreaseincrease in cost of sales is a resultbased on increased revenues and product mix of cost saving measures instituted anditems sold in the outsourcing of certain services by our subsidiaries.year ending September 30, 2013.

 

General and Administrative Expenses

 

Operating expenseexpenses for the fiscal year ended September 30, 2012 was $783,5372013 were $2,585,594 as compared to $1,020,310$787,807 for the prior fiscal year, a decreasean increase of 22%.$1,797,787. The decreaseincrease in operating expenses was due to the reduction of expenses following the distribution of the Infrared assets on June 22, 2011. Additionally, consulting fees decreased from $60,819 in 2011 to $35,810 in 2012, a decreaseincrease of 41%,$155,346, depreciation of $113,826, $104,585 of marketing and a resultadvertising expenses, increased payroll expense of the Company limiting its use of outside vendors to perform services for us. Research and development decreased from $9,936 in 2011 to $1,213 in 2012, an 88% decrease and a result of reduced research work on AquaLiv, Inc.’s technologies during the fiscal year. Travel, meals, and entertainment decreased from $20,333 in 2011, to $18,769 in 2012, an 8% decrease and a result of management’s need to travel to meetings throughout the fiscal year slightly less than the prior fiscal year. Other general and administrative decreased from $287,412 in 2011 to $254,384 in 2012, a decrease of 10%, and primarily attributed to a decrease in utilities, rent, and other items associated with the disposition of the Infrared assets on June 22, 2011. There was a onetime loss on goodwill impairment associated with the AquaLiv, Inc. acquisition during the 2011 fiscal year in the amount of $315,484, a result of the Company fully impairing the goodwill received in the acquisition. The reductions in operating expenses were offset by increases in other areas, including$810,871, professional fees which increased from $88,683 in 2011 to $178,001 in 2012,increase of $298,699, rent of $116,222, travel expense increase of $163,311, and an increase of 100%, attributed to the increase in legal$34,927 for research and other fees. An increase in management fees from $105,900 in 2011 to $120,000 in 2012, an increase of 13%, and a result of fees paid to our acting President. Payroll expense increased from $127,455 in 2011 to $172,861 in 2012, and increase of 36% and attributed to the employees acquired in with the acquisition of AquaLiv, Inc.

development expenses.

 

Other Income and Expense

 

For the fiscal year ended September 30, 2012, the expense2013, interest was $226,758$231,674 compared to income of $17,352$146,911 for the prior fiscal year, an increase of 1,306%57.7%. The increase in interest expense resulted primarily from a one time gain on distribution of assets of Infrared during the prior fiscal yeardebt used to fund working capital and the authorization of debt expense associated with our derivative liabilities. Normal operations for the Company will result in a net other expense when accounting for interest expense.

research and development.

 

Net (Loss) Before Provision for Income Taxes

 

The net loss for the fiscal year ended September 30, 20122013 was $653,939 versus $606,250 for$7,593,213 that included a loss on goodwill impairment of $5,943,533. Operating loss from operations totaled $1,428,451 as compared to an operating loss of $451,965 in the prior fiscal year. The increase in the loss of $47,689 wasfrom operations is due to a decrease in operating expensesthe implementation of $196,421the V 1, 2, 3 program and a decrease in costthe combining of goods of $70,257. The decreases to expenses were primarily offset by a decrease in revenues of $110,609 and an increase in other expenses of $209,406.

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two companies based on the December 31, 2012 share exchange agreement.

Liquidity and Capital Resources

 

Cash on hand was $94,503 and $7,519 at September 30, 2013 and 2012, respectively. The primary use of cash is to fund the operations of Verity.

Operating expensesCash used by operations was $(997,970) for the fiscalyear ended September 30, 2013 as compared to $(405,712) for the year ended September 30, 2012.

Cash used by investing activities was $(3,246,172) for the year ended September 30, 2013 driven primarily by a $3,200,000 acquisition of land and buildings and $46,172 of fixed asset purchases. During the year ended September 30, 2012, and 2011, were $783,537 and $1,020,310, respectively. The net loss$20,264 in cash was used to purchase fixed assets.

Cash provided by financing activities was $4,331,126 for the fiscal year ended September 30, 20122013 and 2011$429,762 for the year ended September 30, 2012. During the year ended September 30, 2013, $4,060,000 of financing was $653,939provided by a related party for operating capital and $606,250, respectively.to purchase $3,200,000 of land and buildings.

 

As of September 30, 2012,the Company2013, Verity did not have and continues to not have sufficient cash on hand to pay present obligations as they become due. In addition, due to current economic conditions and the Company’s related risks and uncertainties, there is no assurance that we will be able to raise additional capital on acceptable terms, if at all, to meet our current obligation over the next 12 months. Because of the foregoing, the Company’sVerity’s auditors have expressed substantial doubt about our ability to continue as a going concern.

 

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 $500,000, with an estimated burn rate of $35,000 per month.approximately $1,500,000.

 

On April 27, 2012, the Company entered intoVerity has been using a securities purchase agreement (the “Purchase Agreement”) with TCA Global Credit Master Fund, LP,credit line that reached $2,805,000 on September 30, 2013. It is a Cayman Islands limited partnership (“TCA”), pursuant to which TCA purchased from the Company a two hundred thousand dollar ($200,000) senior secured redeemable debenture (the “Debenture”). The maturity dateprivate note held by our principal shareholder and board member. That line is reaching its maximum limit. As of the Debenture is April 24, 2013, subject to adjustment (the “Maturity Date”). The Debenture bearsSeptember 30,2013 that note was unsecured and accruing interest at a rate of twelve percent (12%) per annum.

As further consideration, the Company issued to TCA 5,555,556 shares of the Company’s common stock on May 1, 2012 totaling an aggregate amount of twenty five thousand dollars ($25,000) (the “Incentive Shares”). In the event the value of the Incentive Shares issued to TCA does not equal $25,000 after a nine month evaluation date, the Purchase Agreement provides for an adjustment provision allowing for necessary action (either the issuance of additional shares to TCA or the return of shares previously issued to TCA to the Company’s treasury) to adjust the number of Incentive Shares issued. The Incentive Shares are not being registered for resale in this registration statement.

First Pledge and Escrow Agreement

On April 27, 2012, in connection with the Purchase Agreement, the Company entered into a pledge and escrow agreement (the “First P&E Agreement”), by and among the Company, TCA and David Kahan, P.A., as escrow agent (the “Escrow Agent”). Pursuant to the terms of the First P&E Agreement, the Company agreed to issue and irrevocably pledge to TCA the lesser of (i) 4.99% of the Company’s common stock and (ii) 200% of the outstanding amount under the Debenture, subject to adjustment pursuant to the terms of the Purchase Agreement. On May 1, 2012, the Company issued 11,516,104 shares of common stock to TCA in escrow. Upon timely payment in full of all obligations under the transaction documents, TCA will notify the Escrow Agent in writing and the Escrow Agent shall return the pledged materials to the Company and all of TCA’s rights in and to the pledged materials and other collateral shall be terminated.

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Second Pledge and Escrow Agreement

On April 27, 2012, in connection with the Purchase Agreement, the Company entered into a pledge and escrow agreement (the “Second P&E Agreement”), by and among the Company, TCA and the Escrow Agent. Pursuant to the terms of the Second P&E Agreement, the Company agreed to irrevocably pledge to TCA its entire ownership in Aqualiv, Inc., consisting of 50,000 shares of AquaLiv, Inc.’s common stock.

3%.A First Security Agreement

On April 27, 2012, the Company entered into a security agreement (the “First Security Agreement”) with TCA, related to the issuance of the Debenture, whereby the Company granted to TCA a continuing, granting first priority security interest in all of the Company’sVerity’s assets, wheresoever located and whether now existing or hereafter arising or acquired.acquired, has been granted in favor of the note holder as of January 3, 2014. That filing will replace a similar filing by a previous note holder.

 

Second Security AgreementContractual Obligations

 

On April 27, 2012, Focus Systems, Inc., entered into a security agreement (the “Second Security Agreement”) with TCA,For the purpose of this table, contractual obligations includes accounts payable, related party debt obligations and third party debt obligations.

Contractual Obligations
		TOTAL				LESS THAN 1 YEAR				1-3 YEARS				3-5 YEARS
Customer Deposits		$	10,241			$	10,241
Accounts Payable		$	247,996			$	247,996
Notes Payable		$	372,082			$	112,459			$	259,623
Notes Payable-Related Party		$	6,536,267			$	3,636,267							$	2,900,000
Accrued Interest – Related Party		$	265,045			$	265,045
Accrued Interest		$	18,628			$	18,628
Total		$	7,450,259			$	4,290,636			$	259,623			$	2,900,000

Customer Deposits relate to the issuanceprepayments for seed products

Accounts Payable includes current trade payables for Verity Corp.

Notes payable consists of the Debenture, whereby Focus Systems grantedfollowing:

$100,955 owed to TCAan affiliated company of a continuing, first priority securityformer officer of Verity Corp. which is not secured by collateral of Verity, carries accrued interest in allof 6% and is due on demand by the holder. The interest accrued, but not paid as of September 30, 2013 is $1,305. and a note payable for real estate purchased with a balance of $271,127 at September 30, 2013.

Notes Payable – Related Party consists of the Focus Systems assets, wheresoever locatedfollowing notes:

$2,900,000 for real estate purchases from a board member. $500,000 due September 2017 and whether now existing or hereafter arising or acquired.$2,400,000 due September 2018 with accrued interest of $130,500 for both real estate loans

$2,805,000 due on demand with accrued interest of $84,396

$341,267 due on 12/28/13 with accrued interest of $ 14,760 (payment deferred to December 29, 2014)

$150,000 due on demand with accrued interest of $ 14,404

$340,000 due on demand with accrued interest of $ 20,986

 

Guaranty AgreementRelated Parties

 

On April 27, 2012, Focus Systems entered intoNote payable- related party: At September 30, 2013, Verity had a guaranty agreement (the “Guaranty Agreement”) with TCA,note payable due to our Board Member in connection with the Company’s issuanceamount of the Debenture. Pursuant to the terms$341,267 which is secured by Verity’s ownership in Aistiva Corporation, carries accrued interest of the Guaranty Agreement, Focus Systems has guaranteed6% and is due on December 28, 2013. Payment due has been deferred until December 28, 2014. The interest accrued but not paid as of September 30, 2013 is $14,760. A second note payable to actour Board Member in the amount of $2,805,000 is secured as suretyof January 3, 2014, carries an interest rate of 3% and is due on demand. The interest accrued, but not paid as of September 30, 2013 is $84,396. A third note payable to TCA forour Board Member in the paymentamount of $150,000, is unsecured, carries an interest rate of 5% and is due on demand. The interest accrued but not paid as of September 30, 2013 is $14,404. A fourth note payable to our Board Member in the Liabilities (as defined below) when they become due.amount of $340,000, is unsecured, carries an interest rate of 3% and is due on demand. The “Liabilities” includes, collectively, (i)interest accrued but not paid as of September 30, 2013 is $20,986.

Real estate loan- related party: In December 2012, Verity issued a note payable in the repaymentamount of all sums due$2,400,000 to a company under the Debenturecontrol of our Board Member to acquire land. The loan is secured by real estate, carries an interest rate of 6% and other transaction documentsis due in September 2018. At September 30, 2013, the balance of this loan is $2,400,000 and (ii) the performance and observance of all terms, conditions, covenants, representations and warranties set forthinterest accrued but not paid is $108,000. In December 2012, Verity issued a note payable in the transaction documents.amount of $500,000 to a company under the control of our Board Member to acquire a building. The loan is secured by real estate, carries an interest rate of 6% and is due in September 2017. At September 30, 2013, the balance of this loan is $500,000 and the interest accrued but not paid is $22,500.

 

Further, on April 27, 2012,Going Concern

We have limited working capital and limited revenues from sales of products and services. During the Company entered into an Equity Facility Agreement (the “Equity Agreement”) with Auctus Private Equity Fund, LLC,fiscal year ended September 30, 2013, our operating expenses continued to be greater than our revenues. These factors have caused our accountants to express substantial doubt about our ability to continue as a Massachusetts corporation (“Auctus”). Pursuantgoing concern. The accompanying financial statements do not include any adjustment that might be necessary if we are unable to the terms of the Equity Agreement, forcontinue as a period of twenty-four (24) months commencing on the date of effectiveness of the a registration statement, Auctus has committed to purchase up to $3,500,000 of the Company’s common stock, par value $0.001 per share. Pursuant to the terms of the Debenture issued by the Company in favor of TCA, the Company shall cause Auctus to pay directly to TCA, for each advance taken by the Company under the Equity Agreement, 50% of any net proceeds otherwise payable to the Company, up to $25,000 per month.

going concern.

Management has determined that general expenditures must be reduced and additional capital will be required in the form of equity or debt securities. In addition, if we cannot raise additional short term capital we 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.Verity. If we are 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 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 when needed on satisfactory terms, we may be required to cease operatingreduce operations or otherwise modify our business strategy.

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Going Concern

We have limited working capital and limited revenues from sales of products, services, or licensing. During the fiscal year ended September 30, 2012, our operating expenses continued to be greater than our revenues. These factors have caused our accountants to express substantial doubt about our ability to continue as a going concern. The accompanying financial statements do not include any adjustment that might be necessary if we are unable to continue as a going concern.

 

Our ability to continue as a going concern has caused the Board of Directors to continue to look for sources of investment capital, and investigate merger and acquisition opportunities. We will look to further diversify our holdings and sources of cash flow.

 

Off-Balance Sheet Arrangements

 

As of September 30, 2012, the Company2013, Verity has no off balance sheet arrangements.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

We do not hold any derivative instruments and do not engage in any hedging activities.

 

Item 8. Financial Statements and Supplementary Data.

 

Our financial statements are contained in pages F-1 through F-14 which appear at the end of this Annual Report.

 

Item 9. Changes in and Disagreements Withwith Accountants on Accounting and Financial Disclosure.

 

None.

 

Item 9A. Controls and Procedures ..

 

(a) Evaluation of Disclosure and Control Procedures

 

Pursuant to Rule 13a- 15(b) under the Exchange Act, the CompanyVerity carried out an evaluation, with the participation of the Company’sVerity’s management, including the Company’sVerity’s Principal Executive Officer (“PEO”) and Principal Financial Officer (“PFO”), of the effectiveness of the Company’sVerity’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, the Company’sVerity’s PEO and PFO concluded that the Company’sVerity’s disclosure controls and procedures were not effective to ensure that information required to be disclosed by the CompanyVerity in the reports that the CompanyVerity 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 the Company’sVerity’s management, including the Company’sVerity’s PEO and PFO, as appropriate, to allow timely decisions regarding required disclosure.

 

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(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, the Company’sVerity’s management has evaluated the effectiveness of its internal control over financial reporting as of September 30, 2012,2013, 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, the Company’sVerity’s management has evaluated and concluded that the Company’sVerity’s internal control over financial reporting was ineffective as of September 30, 2012,2013, 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. Until such time as the Company is able to hire a Chief Financial Officer, we do not believe we meet the full requirement for separation; and

• We have not achieved the desired level of documentation of our internal controls and procedures. When the Company 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.

●	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. Until such time as Verity is able to hire a Chief Financial Officer, we do not believe we meet the full requirement for separation; and
●	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 the Company'sVerity’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 the CompanyVerity 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.

 

Item 9B. Other Information.

 

None.

 

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PART III

 

Item 10. Directors, Executive Officers, and Corporate Governance.

 

The following table and biographical summaries set forth information, including principal occupation and business experience, about our directors and executive officers at January 11,September 30, 2013:

  

Name		Age		Position		Officer and/or Director Since
Duane Spader		70		Chairman, Chief Executive Officer		2012
William M. Wright		47		Principal Financial Officer, Secretary		2010

Name		Age		Position		Officer and/or Director Since
Duane Spader¹		71		Chairman, Chief Executive Officer		2012
William M. Wright ²		47		Principal Financial Officer, Secretary		2010 to May 01,2013
Edward J Jakos³		54		CFO, Director		Sept 2013
Verlyn Sneller		67		Director, President of subsidary		May 2013

__________________________

1.	Resigned as an executive officer on November 14, 2013. Mr. Spader remains a member of the Board of Directors.
2.	Mr. Wright resigned as an officer and member of the Board of Directors in May 2013.
3.	Mr. Jakos resigned as an officer and member of the Board of Directors in October 2013.

 

Each director serves until his or her successor is elected. There are no arrangements or understandings between any director and any other person pursuant to which he or she was selected as a director or nominee.

 

Each officer serves until he or she is replaced by the Board of Directors. There are no arrangements or understandings between any officer of the CompanyVerity and any other person pursuant to which he or she was selected as an officer.

 

Duane Spader

 

Duane Spader has been AquaLiv Technologies, Inc.’sChairman of our Board of Directors since December 2012. He served as President and Chief Executive Officer President, and Chairman sincefrom December 2012.2012 until November 2013. Mr. Spader has dedicated his time mentoring and growing Verity Farms as its Managing Member since June 2011. Previously, he had owned and operated Spader RV Centers for 46 years until its sale in 2010. Additionally, Mr. Spader founded The Spader Companies, including Spader Business Management (“SBM”) in 1977 and was its President until 2002. During his 35 years with SBM, Mr. Spader mentored over 4,000 companies and its executive teams on organizational and behavioral excellence in business. In 1983, Mr. Spader led the expansion and development of training software, which was eventually sold in 1997 to Bell and Howell Publications Systems Company. Mr. Spader has sat on numerous Boards of Directors, including local chamber of commerce, St. Joseph Cathedral, National Marine and RV Industry Associations, and others.Heothers. He attended South Dakota State College prior to starting his business career in 1964.

 

William M. Wright

 

Mr. Wright has been AquaLiv Technologies, Inc.’s Secretary and Principal Financial Officer, and a director since April 2010. Mr. Wright was AquaLiv Technologies, Inc.’s CEO and President from April 2010 to December 2012, and is currently the company’swas Verity’s Executive Vice President.President until May 2013. Mr. Wrighthas been the President and CEO of Focus Systems, Inc., a Washington corporation, since its formation in 2008.  Focus Systems, Inc. provides Desktop Virtualization which can perform all of the networking functions that can be utilized on standard in-house networks at a fraction of costs, and also Voice over Internet Protocol phone service to its customer base.  From July 2006 to July 2007, Mr. Wright was the Chief Operating Officer and a Director of Gottaplay Interactive, Inc., a Nevada corporation involved in the internet connectivity business and the video game subscription and rental business. Mr. Wright has over 20 years of experience and knowledge in financial management and business operations. His experience includes the startup of DONOBi, Inc., an internet Service Provider that specialized in the acquisition and rollup of numerous rural service providers, and the eventual taking of the company public in 2004. Mr. Wright served as both Chief Executive Officer and Chairman of the Board during his six year tenure with DONOBi, leading to the merger with Gottaplay in 2006. Prior to his work in the technology field, Mr. Wright was a Real Estate Broker in both California and Washington, and including the position of President and minority owner of a local property management company. Mr. Wright received his Bachelors of Science in Business Administration with an emphasis in Financial Services from San Diego State University.

Edward J. Jakos

 

Mr. Jakos joined Verity Farms, LLC in 2012 as Operations Manager. From 2005 to 2012, Mr. Jakos was a Senior Accountant with CNA Surety. From 2000 to 2005, Mr. Jakos worked as an accountant for Great West Casualty Company. From 1986 through 2005, Mr. Jakos held various positions in financial and accounting matters. Mr. Jakos received a BS in Forestry from North Carolina State University.

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Verlyn Sneller

In 1989, Mr. Sneller started Feed Tech Company to work with farmers on soil and plant nutrition to improve livestock health and production. This resulted in reducing dependency on chemicals and fertilizers in the soils and antibiotics for animals as well. In 2004, and continuing through the present, Mr. Sneller became a plant and animal nutritionist for the Company’s subsidiary, Verity Farms, LLC using cumulative knowledge and experience to assist all Verity family farmers in production of crops and animals. Mr. Sneller uses only non-GMO (Genetically Modified Organisms) seed and methods to nutritionally balance and regenerate the life in the soil to eliminate chemical residues in both the soils and crops and raise the nutritional standards of the crops. Methods of livestock production include a “never-ever” policy for antibiotics, hormones, growth promotants, and GMO feed. Mr. Sneller received a BS in Agricultural Education from South Dakota State University - Brookings.

Subsequent Event – Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers

On October 21, 2013, Richard Kamolvathin was appointed as a member of the Board of Directors of Verity. Effective October 25, 2013, Mr. Kamolvathin was appointed President of Verity. He was appointed Chief Executive Officer on November 14, 2013. Mr. Kamolvathin, age 44, has been President of Verity since October 25, 2013 and Executive Vice President of Verity Farms LLC, a wholly owned subsidiary of Verity, since February 2011. From June 2006 through January 2011, Mr. Kamolvathin was a sustainable agriculture field advisor for the Rice Bank Foundation, United Nations Thailand. Prior to such positions, Mr. Kamolvathin worked in the financial services industry.

On November 13, 2013, Verity appointed James White, age 62, as Chief Operating Officer, effective as of November 15, 2013. In 2004, Mr. Wright founded JLW Communications, a consulting company for sales, marketing and strategic management, including five years of consulting work for the Company. Mr. Wright previously served as president of Triumph Boats, president of McCulloch Corporation and vice president of Deere & Company.

On November 13, 2013, Verity entered into an agreement with LLS Enterprises, Inc. (“LLS”), pursuant to which Ken Wright, age 51, will serve as Chief Financial Officer of Verity on a part time basis. Mr. Wright has been a Certified Public Accountant for more than 15 years. Since January 2009, Mr. Wright has served as Director for Advance Finance, LLC, an accounting service provider. From July 2005 through 2008, Mr. Wright served as director of Growth Finance, LLC, an accounting service provider.

Effective October 21, 2013, Verity appointed Ronald Kaufman to the Board of Directors. Mr. Kaufman, age 57, has been a professional crop and live-stock farmer since 1976. Mr. Kaufman has served on the boards of Farmers Home Association and the Kingsbury County Crop Improvement Board.

The current members of the Board of Directors as of January 10, 2014 are:

Duane Spader

Richard Kamolvathin

Verlyn Sneller

Ronald Kaufmann

 

Committees of the Board of Directors

 

Currently, we do not have any committees of the Board of Directors, and none are planned at this time. Our

Audit Committee Financial Expert

Richard Kamolvathin, our President and Chief Executive Officer is an “audit committee financial expert” within the meaning of Item 407(d)(5) of Regulation S-K. In general, an “audit committee financial expert” is an individual member of the audit committee or, in the absence of an audit committee, of the Board of Directors has determined that none of our directors is an audit committee financial expert.who:

●	understands generally U.S. GAAP and financial statements,
●	is able to assess the general application of such principles in connection with accounting for estimates, accruals and reserves,
●	has experience preparing, auditing, analyzing or evaluating financial statements comparable to the breadth and complexity to our financial statements,
●	understands internal controls over financial reporting, and
●	understands audit committee functions.

 

Indemnification and Limitation on Liability of Directors

 

Our Articles of Incorporation eliminate the liability of our directors for monetary damages to the fullest extent permissible under Nevada law. Under the Nevada Revised Statutes, director immunity from liability to a company or its stockholders for monetary liabilities applies automatically unless it is specifically limited by a company'scompany’s Articles of Incorporation. Excepted from that immunity are: (a) a willful failure to deal fairly with the companyVerity or its stockholders in connection with a matter in which the director has a material conflict of interest; (b) a violation of criminal law, unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful; (c) a transaction from which the director derived an improper personal profit; and (d) willful misconduct.

 

Our bylaws provide that we will indemnify our directors and officers to the fullest extent not prohibited by Nevada law; provided, however, that we may modify the extent of such indemnification by individual contracts with our directors and officers; and, provided, further, that we shall not be required to indemnify any director or officer in connection with any proceeding, or part thereof, initiated by such person unless such indemnification: (a) is expressly required to be made by law, (b) the proceeding was authorized by our board of directors, (c) is provided by us, in our sole discretion, pursuant to the powers vested in us under Nevada law or (d) is required to be made pursuant to the bylaws.

 

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.

 

Family Relationships

 

There are no family relationships between any of our officers, directors or affiliates.affiliates, except that Ronald Kaufmann is the nephew of Duane Spader..

 

Legal Proceedings

 

To the best of our knowledge, during the past ten years, none of the following occurred, except as noted, with respect to a present or former director, executive officer, or employee: (1) any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time, except that Mr. Bushnell was the President of a construction company that filed for Chapter 7 bankruptcy during 2010; (2) any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (3) being subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and (4) being found by a court of competent jurisdiction (in a civil action), the SEC or the Commodities Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

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Compliance with Section 16(A) of the Exchange Act

 

Section 16(a) of the Exchange Act requires the Company’s directors, executive officers and persons who beneficially own 10% or more of a class of securities registered under Section 12 of the Exchange Act16 is not applicable to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Directors, executive officers and greater than 10% stockholders are required by the rules and regulations of the SEC to furnish the Company with copies of all reports filed by them in compliance with Section 16(a).

Based solely on our review of certain reports filed with the Securities and Exchange Commission pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, the reports required to be filed with respect to transactions in our common stock during the fiscal year ended September 30, 2012, were timely.Verity.

 

Code of Ethics

 

The Company does not haveVerity has a written code of ethics applicable to its executive officers. The Board of Directors has not adopted a written code of ethics since the Company has only one officer who is also a director of the Companyofficers, directors and due to the small size and limited funds of the Company.all employees.

 

Item 11. Executive Compensation.

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named executive officers paid by us during the periods ended September 30, 2012, 20112013 and 2010.

2012

 

NAME AND PRINCIPAL POSITION	Fiscal Year	Salary	Bonus	Stock Awards	Option Awards	NONEQUITY INCENTIVE PLAN COMPENSATION	NONQUALIFIED DEFERRED COMPENSATION EARNINGS	ALL OTHER COMPENSATION		TOTAL
William M. Wright, Chief Executive Officer (currently Executive Vice President)	2012	$0	0	0	0	0	0	$ 120,000		$120,000	(1)
	2011	$40,000(2)	0	0	0	0	0	$ 80,000	(1)	$80,000	(1)
	2010	$40,000(2)	0	0	0	0	0	$30,000	(2)	$70,000	(1)	(2)

Executive Compensation
Name And Principal Position		Fiscal Year		Salary				Bonus				Stock Awards				Option Awards				Non-equity Incentive Plan Compensation				Nonqualified Deferred Compensation Earnings				All Other Compensation				TOTAL
Duane Spader, Director		2013		$	0				0				0				0				0				0				0			$	0
		2012		$	0				0				0				0				0				0				0			$	0
Ed Jakos, CFO		2013		$	41,000				0				0				0				0				0				0			$	41,000
		2012		$	41,000				0				0				0				0				0				0			$	41,000
Verlyn Sneller, Executive VP		2013		$	41,000				0				0				0				0				0				0			$	41,000
		2012		$	41,000				0				0				0				0				0				0			$	41,000
William Wright (former Executive Vice President)		2013		$	0				0				0				0				0				0				0			$	0
		2012		$	0				0				0				0				0				0				$ 80,000 (1)				$80,000 (1)

 

 (1) Consists of management fees paid as Chief Executive Officer of the Company. The Company determined to pay Mr. Wright a consistent fixed fee of $5,000 to $10,000 per month for his services as Chief Executive Officer of the Company. Prior to July 2011, Mr. Wright received $5,000 per month and currently receives $10,000 per month for services rendered.

(2) Consists of a salary received as President of Focus Systems, Inc.

(26)(1)

Consists of management fees paid as Chief Executive Officer of Aqualiv in 2012.

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Compensation Discussion and Analysis

As indicated in the Summary Compensation Table, the only compensation paid to an officer is the salary and management fee payable to William M. Wright. The total salary and management fee paid to Mr. Wright was $120,000 in fiscal year 2012.

Employment Agreements

We do not have a written employment agreement with any of the Company’sVerity’s executive officers. Mr. Wright is an independent contractor of the Company.

 

Equity Incentive Plan

 

No stock options or similar instruments have been granted to any of our officers or directors.

 

Lack of Compensation Committee

 

We do not have a separate compensation committee due to the fact that there is currently only one employee of the Company and since no compensation currently is paid to directors of the Company.committee. The entire Board of Directors participates inCEO determined the consideration of executive officer and director compensation.

Compensation Committee Interlocks and Insider Participation

 

As of September 30, 2012, William M. Wright,2013, Duane Spader, the sole paid independent contractor of the Company, also is a director of the Company, and participates in determining the amount ofDirector, determined his compensation.

Compensation Committee Report

The Board of Directors of the Company has reviewed and discussed the Compensation Discussion and Analysis provided above with management and, based on such review and discussions, has recommended that the Compensation Discussion and Analysis be included in this Annual Report on Form 10-K.

 

The current members of the Board of Directors as of October 21, 2013 are:

 

William M. Wright

Duane Spader

Ronald Kaufmann

Richard Kamolvathin

Verlyn Sneller

 

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DIRECTOR COMPENSATION

 

The following summary compensation table sets forth all compensation awarded to, earned by, or paid to the named directors by us during the years ended September 30, 2012, 20112013 and, 2010.2012

 

Name and Principal Position		Year				Salary ($)				Bonus ($)				Stock Awards ($)				Option Awards ($)				Non-Equity Incentive Plan Compensation ($)				All Other Compensation ($)				Total ($)
(a)		(b)				(b)				(b)				(b)				(b)				(b)				(b)				(b)
William M. Wright			2012			$	0			$	0			$	0			$	0			$	0			$	0			$	0
Director			2011			$	0			$	0			$	0			$	0			$	0			$	0			$	0
			2010			$	0			$	0			$	0			$	0			$	0			$	0			$	0
Tracy D. Bushnell			2012			$	0			$	0			$	0			$	0			$	0			$	0			$	0
Director			2011			$	0			$	0			$	0			$	0			$	0			$	0			$	0
			2010			$	0			$	0			$	0			$	0			$	0			$	0			$	0

DIRECTOR COMPENSATION
Name And Principal Position		Fiscal Year		Salary				Bonus				Stock Awards				Option Awards				Non-Equity Incentive Plan Compensation				All Other Compensation				TOTAL
Duane Spader		2013		$	0				0				0				0				0				0			$	0
Director		2012		$	0				0				0				0				0				0			$	0
William Wright		2013		$	0				0				0				0				0				0			$	0
Director		2012		$	0				0				0				0				0			$	80,000	(1)		$	80,000	(1)

 

 (1) Mr. Bushnell resigned as a Director of the Company on December 31, 2012.

(1)

Consists of management fees paid as Chief Executive Officer of Aqualiv in 2012.

 

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

 

The following table sets forth, as of January 11,September 30, 2013, the number of shares of our common stock owned by (i) each person who is known by us to own of record or beneficially five percent (5%) or more of our outstanding shares, (ii) each of our directors, (iii) each of our named executive officers and (iv) all of our directors and executive officers as a group. Unless otherwise indicated, each of the persons listed below has sole voting and investment power with respect to the shares of our common stock beneficially owned.

Name and Address (1)	Beneficial Relationship to Company		Outstanding Common Stock				Percentage of Ownership of Common Stock(4)
William M. Wright(1)	Executive Vice-President, Chief Financial Officer, Director			27,250,000	(2)			3.52	%
Tracy D. Bushnell(1)(5)	Director			25,000,000				3.23	%
Duane Spader (1)(6)	Chief Executive Officer, Chairman			0				0	%
Gary E. Ball				88,572,170	(3)			11.44	%(3)
Officers and Directors (2 persons)	-			52,250,000	(2)			6.78	%

owned and the address for holder is c/o Verity Corp., 47184 258^th Street, Sioux Falls, SD 57107.

 

Name

(1)

The business address for such persons is c/o Aqualiv Technologies, Inc., 4550 NW Newberry Hill Rd, Suite 202, Silverdale, WA 98383.

(2)Outstanding Common Stock

Includes 27,250,000 common shares held by Take Flight Equities, Inc., of which William Wright is President.

(3)

Includes the voting rights to 88,572,170 common shares held in escrow due to a default in a promissory note from Take Flight Equities, Inc.Percentage of Ownership of Common Stock(4)

	(4)	Based on 774,130,021 shares outstanding as of January 11, 2013.
	(5)	Mr. Bushnell resigned as Director of the Company on December 31, 2012 and was issued the common shares subsequent to his resignation.
Duane Spader	(6)		2,575,0001				18.4	%
Spader Verity, LLC1			2,150,0001				15.3	%
Richard Kamolvathin			450,0002				4.7	%
Verlyn Sneller			650,0003				6.6	%
Ronald Kaufmann			650,0003				6.6	%
James White			40,0004				.04	%
Take Flight Equities5			1,094,8405				10.5	%
Takashi Mori			568,182				6.2	%
Craig Hoffman			581,396				6.3	%
Edward J Jakos			0
All Directors and Officers as a Group			4,365,0006				33.3	%

26

 ______________________________

1.	Includes 2,150,000 shares of common stock issuable to Spader Verity LLC upon conversion of 2,150,000 shares of Series B Preferred Stock. Spader Verity LLC is controlled by Mr. Spader was appointed Chief Executive OfficerSpader.
2.	Includes 450,000 shares of common stock issuable upon conversion of 450,000 shares of Series B Preferred Stock.
3.	Includes 650,000 shares of common stock issuable upon conversion of 650,000 shares of Series B Preferred Stock.
4.	Includes 40,000 shares of common stock issuable upon conversion of 40,000 shares of Series B Preferred Stock.
5.	Take Flight Equities is controlled by William Wright. Includes 100,000 shares of common stock issuable upon conversion of 100,000 shares of Series A Preferred Stock and Chairman261,618 shares of the Company on December 31, 2012common stock issuable upon conversion of 261,618 shares of Series B Preferred Stock.
6.	Includes 650,000 shares of common stock issuable upon conversion of 650,000 shares of Series B Preferred Stock.

 

Changes in Control

 

We are not aware of any arrangements that may result in “changes in control” as that term is defined by the provisions of Item 403(c) of Regulation S-K.S-K, other than the Exchange which took place in December 2012 and described at the beginning of the Report on Form 10-K.

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Item 13. Certain Relationships and Related Transactions, and Director Independence.

 

Related Party Transactions

 

During the year endedNote payable- related party: At September 30, 2013, Verity had a note payable due to our Board Member in the amount of $341,267 which is secured by Verity’s ownership in Aistiva Corporation, carries accrued interest of 6% and is due on December 28, 2013, Payment was deferred until December 28, 2014. The interest accrued but not paid as of September 30, 2013 is $14,760. A second note payable to our Board Member in the amount of $2,805,000 is secured as of January 3, 2014, carries an interest rate of 3% and is due on demand. The interest accrued, but not paid as of September 30, 2013 is $84,396. A third note payable to our Board Member in the amount of $150,000, is unsecured, carries an interest rate of 5% and is due on demand. The interest accrued but not paid as of September 30, 2013 is $14,404. A fourth note payable to our Board Member in the amount of $340,000, is unsecured, carries an interest rate of 3% and is due on demand. The interest accrued but not paid as of September 30, 2013 is $20,986.

Real estate loan- related party: In December 2012, there were no related transactions requiredVerity issued a note payable in the amount of $2,400,000 to be reporteda company under Item 404the control of Regulation S-K.our Board Member to acquire land. The loan is secured by real estate, carries an interest rate of 6% and is due in September 2018. At September 30, 2013, the balance of this loan is $2,400,000 and the interest accrued but not paid is $108,000. In December 2012, Verity issued a note payable in the amount of $500,000 to a company under the control of our Board Member to acquire a building. The loan is secured by real estate, carries an interest rate of 6% and is due in September 2017. At September 30, 2013, the balance of this loan is $500,000 and the interest accrued but not paid is $22,500

 

Director Independence

 

The common stock of the CompanyVerity is currently quoted on the OTCQB, an exchange which currently does not have director independence requirements. On an annual basis, each director and executive officer will be obligated to disclose any transactions with the CompanyVerity in which a director or executive officer, or any member of his or her immediate family, have a direct or indirect material interest in accordance with Item 407(a) of Regulation S-K. Following completion of these disclosures, the Board will make an annual determination as to the independence of each director using the current standards for “independence” that satisfy both the criteria for the Nasdaq and the American Stock Exchange.

 

As of September 30, 2012, the Board determined that the following director is independent under these standards:

Tracy D. Bushnell

27

 

Item 14. Principal Accounting Fees and Services.

 

The following table sets forth the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the Company'sVerity’s annual financial statements and review of financial statements included in the Company'sVerity’s Form 10-Q quarterly reports or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years.

 

		2012				2011				2013				2012
Audit Fees		$	19,200			$	19,200			$	37,500			$	19,200
Audit-Related Fees		$	—			$	20,500			$	—				$
Tax Fees		$	—			$	—			$	—			$	—
All Other Fees		$	14,252			$	3,000			$	12,000			$	14,252
TOTAL		$	33,452			$	42,700			$	49,500			$	33,452

 

Audit Committee

 

Our auditor has not provided any non-audit services in the past and does not anticipate providing any non-audit services to the Company.Verity. In the event non-audit services are contemplated in the future, our Board of Directors, which functions in the capacity of an audit committee, will consider whether the non-audit services provided by our auditors to us would be compatible with maintaining the independence of our auditors and whether the independence of our auditors would be compromised by the provision of such services. Our Board of Directors pre-approves all auditing services and would approve any permitted non-audit services contemplated in the future, including the fees and terms of those services, to be performed for us by our independent auditor prior to engagement.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(A) Financial Statements

See index to Financial Statements on Page F-1

(B) Exhibits.

Exhibit No.		Description
2.1		Form of Share Exchange Agreement, dated December 31, 2012, by and among AquaLiv Technologies, Inc., Verity Farms II, Inc., AquaLiv, Inc. and Focus Systems, Inc. (as filed as Exhibit 2.1 to the Company Current Report on Form 8-K, filed with the SEC on January 8, 2013, and incorporated herein by reference)
3.1		Articles of Incorporation (as filed as Exhibit 3.1 to the Company’s Registration Statement on Form SB-2, filed with the SEC on November 13, 2007, and incorporated herein by reference)
3.2		Bylaws (as filed as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on September 2, 2008, and incorporated herein by reference)
3.3		Series B Preferred Stock Certificate of Designation
10.3		Registration Rights Agreement, dated April 27, 2012, by and between AquaLiv Technologies, Inc. and Auctus Private Equity Fund, LLC (as filed as Exhibit 10.3 to the Company’s Registration Statement on Form S-1/A, Amendment No. 1, filed with the SEC on October 10, 2012, and incorporated herein by reference)
10.4		Acquisition Agreement, dated November 30, 2010, by and among Infrared Systems International, AquaLiv, Inc. and Craig Hoffman, individually (as filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on December 20, 2010, and incorporated herein by reference)
10.5		Acquisition Agreement, dated April 19, 2010, by and among Infrared Systems International, Focus Systems, Inc. and Propalms, Inc. (as filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on April 21, 2010, and incorporated herein by reference)
10.6		Share Purchase Agreement, dated March 24, 2010, by and among Infrared Systems International, Take Flight Equities, Inc., Propalms, Inc., William M. Wright III, individually, and Gary E. Ball, individually (as filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on March 30, 2010, and incorporated herein by reference)
31.1		Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))*
31.2		Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))*
32.1		Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2		Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
101.INS		XBRL Instance Document**
101.SCH		XBRL Taxonomy Extension Schema Document**
101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF		XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB		XBRL Taxonomy Extension Label Linkbase Document**
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document**

* Filed herewith

** In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Annual Report on Form 10-K shall be deemed “furnished” and not “filed”.

 

(29)29

Table of Contents

 

PART IV

AQUALIV TECHNOLOGIES, INC.VERITY CORP

 

SEPTEMBER 30, 20122013 FINANCIAL STATEMENTS

 

TABLE OF CONTENTS

 

	Page
Reports of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets, September 30, 2012 and 2011	F-3
Consolidated Statements of Operations, For the Years Ended September 30, 2012 and 2011	F-4
Consolidated Statements of Cash Flows, For the Years Ended September 30, 2012 and 2011	F-5
Consolidated Statements of Changes in Stockholders'Stockholders’ (Deficit), For the Years Ended September 30, 2012 and 2011	F-6
Notes to the Consolidated Financial Statements	F-7

F-1

  

FL Office

7951 SW 6th St., Suite. 216

Plantation, FL 33324

Tel: 954-424-2345

Fax: 954-424-2230

 

NC Office

19720 Jetton Road, 3rd Floor Cornelius,

Cornelius, NC 28031

Tel: 704-892-8733

Fax: 704-892-6487

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors

Verity Corp. and Stockholders ofIts Subsidiaries

AquaLiv Technologies, Inc.

We have audited the accompanying consolidated balance sheets of AquaLiv Technologies, Inc.Verity Corp. and its wholly owned subsidiariesIts Subsidiaries (“Thethe Company”) as of September 30, 2013 and 2012 and 2011, and the related consolidated statements of operations, changes inconsolidated statements of stockholders’ deficit,equity (deficit), and consolidated cash flows for the years then ended.ended September 30, 2013 and 2012. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness forof the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includesstatements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of AquaLiv Technologies, Inc.Verity Corp. and its wholly owned subsidiariesIts Subsidiaries as of September 30, 2013 and 2012, and 2011, and the consolidated results of its operations, changes in stockholders’ equity (deficit) and its consolidated cash flows for the years then ended September 30, 2013 and 2012 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, theThe Company has incurredsuffered recurring losses, from operations, has a liquidity problem,negative working capital, and requires funds for its operational activities. These factors raisehas yet to generate an internal net cash flow that raises substantial doubt that the Company will be ableabout its ability to continue as a going concern. Management’s plans in regard to these matters are described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.uncertainty

/s/Bongiovanni & Associates, C.P.A.’s

/s/ Bongiovanni & Associates, CPA’s

Bongiovanni & Associates, C.P.A.’sCPA’s

Certified Public Accountants

Cornelius, North Carolina

January 13,The United States of America

December 26, 2013

.

  

VERITY CORP.

AND ITS SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

		September 30, 2013				September 30, 2012
		(audited)				(audited)
ASSETS
CURRENT ASSETS:
Cash		$	94,503			$	7,519
Accounts receivable			149,743				1,855
Inventory			576,266				1,156
Prepaid expenses			136,391				-
Other receivables			16,747				-
Total Current Assets			973,650				10,530
FIXED ASSETS
Land			2,400,000				-
Building			800,000				-
Accumulated depreciation - Building			(41,667	)			-
Property, plant, and equipment			607,973				90,754
Accumulated depreciation - PP&E			(312,313	)			(67,767	)
Net Fixed Assets			3,453,993				22,987
OTHER ASSETS
Investment in Crop Resources			19,965				-
Total Other Assets			19,965				-
TOTAL ASSETS		$	4,447,608			$	33,517
LIABILITIES AND STOCKHOLDERS’ (DEFICIT)
CURRENT LIABILITIES:
Accounts payable			209,938				128,145
Credit cards payable			38,058				-
Customer deposits			10,241				-
Notes payable			100,956				-
Notes payable - related party			3,636,267				314,525
Real estate loans, current portion			11,503				-
Real estate loans, current portion- related party			717,670				-
Accrued interest payable			283,674				19,166
Convertible note, net of discount			-				8,556
Derivative liability			-				18,963
Other liabilities			-				6,721
Total Current Liabilities			5,008,306				496,076
LONG TERM LIABILITIES:
Real estate loans, net current portion			259,623				-
Real estate loans, current portion- related party			2,182,330				-
			2,441,953				-
Total Liabilities			7,450,259				496,076
STOCKHOLDERS’ DEFICIT:
Series A Preferred, $0.001 par value, 331,618 and 913,618 shares issued and outstanding, respectively			332				914
Series B Preferred, $0.001 par value, 4,850,000 and -0- shares issued and outstanding, respectively			4,850				-
Series C Preferred, $0.001 par value, 51 and 10,000 shares issued and outstanding, respectively			-				10
Common stock, $0.001 par value, 1,000,000,000 shares authorized 9,177,201 and 5,620,969 shares issued and outstanding, respectively			9,178				5,621
Capital in excess of par value			7,929,001				2,815,540
Retained earnings (Deficit)			(10,828,681	)			(3,235,468	)
Noncontrolling interest			(117,331	)			(49,176	)
Total Stockholders’ (Deficit)			(3,002,651	)			(462,559	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT		$	4,447,608			$	33,517

The Report of Independent Registered Public Accounting Firm and accompanying notes are an integral part of these consolidated financial statements.

VERITY CORP.

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

		For the Years
		Ended September 30,
		2013				2012
REVENUES:
Sales		$	2,411,093			$	449,626
Service			-
Total Revenues			2,411,093				449,626
COST OF GOODS SOLD			1,253,950				113,784
GROSS PROFIT			1,157,143				335,842
OPERATING EXPENSES:
Consulting fees			216,141				35,810
Depreciation			113,826				-
Management fees			41,265				120,000
Marketing and advertising			104,585				-
Payroll expense			983,732				172,861
Professional fees			479,064				180,385
Rent			116,222				-
Repairs and maintenance			34,600				-
Research and development			36,140				1,213
Travel, meals, and entertainment			144,542				18,769
Other general and administrative			315,476				258,769
Total Operating Expenses			2,585,594				787,807
LOSS FROM OPERATIONS			(1,428,451	)			(451,965	)
OTHER INCOME (EXPENSE):
Loss on Derivative liability			-				(68,904	)
Interest expense			(231,674	)			(146,911	)
Misc. Other Income (Expense)			(49,912	)			0
LOSS BEFORE INCOME TAX PROVISION			(1,710,036	)			(667,780	)
PROVISION FOR INCOME TAXES			-				-
CONSOLIDATED NET LOSS			(1,710,036	)			(667,780	)
Loss on goodwill impairment, Verity Farms			(5,943,533	)			-
DISCONTINUED OPERATIONS
Income/(Loss) on operations for Focus			(7,799	)			13,841
Net loss (income) attributable to non-controlling
interest, Aistiva			68,155				30,860
NET LOSS ATTRIBUTABLE TO COMPANY		$	(7,593,213	)		$	(623,079	)
BASIC LOSS PER SHARE		$	(1.06	)		$	(0.15	)
WEIGHTED AVERAGE SHARES OUTSTANDING			7,157,914				4,289,388

The Report of Independent Registered Public Accounting Firm and accompanying notes are an integral part of these consolidated financial statements.

VERITY CORP.

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF

CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)  

		Preferred Series A Stock								Preferred Series B Stock								Preferred Series C Stock								Common Stock								Additional												Total
		Number								Number								Number								Number								Paid in				Retained				Noncontrolling				Stockholders'
		of Shares				Amount				of Shares				Amount				of Shares				Amount				of Shares				Amount				Capital				(Deficit)				Interest				Equity
BALANCE as of September 30, 2011			901,618			$	902												10,000			$	10				2,916,174			$	2,916			$	2,196,066			$	(2,612,390	)		$	(18,315	)		$	(430,811	)
Issuance of Common Stock to repay Debt			-				-																				2,389,232				2,389			$	209,361				-				-			$	211,750
Adjustment to derivative liability for value of conversions			-				-																				-				-				245,441				-				-			$	245,441
Issuance of common stock for cash			-				-																				102,500				103			$	72,398				-				-			$	72,500
Issuance of common stock for professional services			-				-																				116,270				116			$	52,384				-				-			$	52,500
Preferred stock returned for common stock			(68,000	)			(68	)																			96,794				97			$	(29	)			-				-			$	(0	)
Issuance of preferred stock for cash			80,000				80																				-				-				39,920				-				-			$	40,000
Net Loss for the year ended September 30, 2012			-				-																				-				-				-				(623,079	)			(30,861	)		$	(653,940	)
BALANCE as of September 30, 2012			913,618			$	914				0			$	0				10,000			$	10				5,620,969			$	5,621			$	2,815,540			$	(3,235,469	)		$	(49,176	)			(462,560	)
Issuance of common stock to retire debt			-				-																				1,670,331				1,670			$	147,811				-				-			$	149,482
Issuance of common stock for professional services			-				-																				450,000				450			$	43,550				-				-			$	44,000
Purchase of subsidiary & share exchange											4,850,000				4,850												0				-				4,845,150				-				-			$	4,850,000
Preferred Series C stock adjustment																			(9,949	)			(10	)											10											$	0
Adjustments due to 100:1 reverse split																											1,203				2															$	2
Issuance of common stock for professional services			-				-																				348,358				348				149,446				-				-			$	149,794
Preferred stock returned for common stock			(582,000	)			(582	)																			1,986,340				1,986				(1,404	)			-				-			$	0
Common stock returned for reinstatement of debt																											(900,000	)			(900	)			(71,100	)										$	(72,000	)
Net Loss for the year ended September 30, 2013			-				-																				-				-				-			$	(7,593,213	)			(68,155	)			(7,661,368	)
BALANCE as of
September 30, 2013			331,618			$	332				4,850,000				4,850				51				0				9,177,201			$	9,178			$	7,929,001			$	(10,828,681	)		$	(117,331	)		$	(3,002,651	)

 The Report of Independent Registered Public Accounting Firm and accompanying notes are an integral part of these consolidated financial statements.

.VERITY CORP.

AND ITS SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED SEPTEMBER 30, 2013 AND 2012

		For the Years
		Ended September 30,
		2013				2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(7,593,213	)		$	(623,079	)
Adjustments to reconcile net loss to net cash by
operating activities:
Noncontrolling interest in income of consolidated subsidiary			(68,155	)			(30,860	)
Depreciation			113,826				5,704
Bad debt			11,789				0
Issuance of stock for services received			193,794				52,500
Loss on goodwill impairment, Verity Farms			5,943,533				-
Loss on derivative liability, net			-				68,904
Amortization of debt discount			-				131,945
Net (increase) decrease in operating assets:
Accounts receivable			(95,964	)			112
Inventory			(79,786	)			(433	)
Other receivable			82,269				-
Prepaid expense			54,905				-
Other assets			302,606				-
Net increase (decrease) in operating liabilities:
Accounts payable			65,097				20,707
Credit cards payable			38,058				(17,187	)
Customer deposits			(196,997	)			-
Other liabilities			230,268				(14,025	)
Net Cash Provided (Used) by Operating Activities			(997,970	)			(405,712	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property, equipment			(46,172	)			(20,264	)
Payments for land and buildings			(3,200,000	)			-
Payments for Verity acquisition			-				-
Net Cash Provided (Used) by Investing Activities			(3,246,172	)			(20,264	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes			278,500				331,562
Proceeds from notes-related party			4,060,000				0
Payments for notes			(7,374	)			(14,300	)
Proceeds of capital stock issuance			0				112,500
Net Cash Provided by Financing Activities			4,331,126				429,762
NET INCREASE (DECREASE) IN CASH			86,984				3,786
CASH AT BEGINNING OF PERIOD			7,519				3,732
CASH AT END OF PERIOD		$	94,503			$	7,519
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest		$	8,626			$	-
Income taxes		$	-			$	-
NON-CASH INVESTING AND FINANCING ACTIVITIES:
Issuance of stock to retire notes payable, derivative liability, and accrued interest		$	276,282			$	211,750
Issuance of preferred stock for acquisition		$	4,850,000			$	-

The Report of Independent Registered Public Accounting Firm and accompanying notes are an integral part of these consolidated financial statements.

VERITY CORP AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

AS OF SEPTEMBER 30, 2013

 

NOTE- 1 ORGANIZATION AND BUSINESS BACKGROUND

Verity Corp. (the “Company”) is the parent of Verity Farms II, Inc. (“Verity Farms II”) and Aistiva Corporation (“Aistiva”) (fka AquaLiv, Inc.). Verity Farms II is dedicated to providing consumers with safe, high-quality and nutritious food sources through sustainable crop and livestock production. Aistiva has released products in the industries of water treatment, skincare, and agriculture. Aistiva is primarily known for the AquaLiv Water System product which also produces the majority of its revenueand blends well with the Verity Water systems.

Verity Farms II, Inc.

On December 31, 2012, the Company entered into that certain share exchange agreement (the “Share Exchange Agreement”) by and among the Company, Verity Farms II, Aistiva, and Focus Systems, pursuant to which the Company acquired 100% of the outstanding stock of Verity Farms II. Verity Farms II is dedicated to providing consumers with safe, high quality and nutritious food sources through sustainable crop and livestock production. Verity Farms II has built the foundation for expansion that is diversified into three distinct, yet interlinked, divisions operating six business units. The three divisions: Soil Preservation, Verity Water Systems and Consumer Products. Soil Preservation consists of Verity Farms and Verity Turf; Verity Water Systems comprises its own division; and, Consumer Products will consist of Verity Meats, Verity Produce and Verity Grains. The common goal within each business unit of Verity Farms II is to decrease chemical dependency, diminish the need for genetic modification, preserve the family farm, and ultimately, provide a nutritious, high-quality food source to consumers.

Verity Farms

Since the 1970’s, farmers associated with Verity Farms II and its subsidiaries and predecessors have dedicated their farming practices to healthy soil and crop production based upon natural practices and limited chemical usage. Since June 2011, substantial resources of people and facilities have been applied to build the organizational model to expand those efforts into an effective and efficient growth of natural healthy food products.

Verity Turf

Verity Farms II has developed an environmentally friendly Organic Matals Review Institute (“ORMI”) approved fertilizer to provide a natural, weed-free lawn that is safe to use and good for the environment. This product is people and pet friendly. It nurtures your grass by enhancing the natural biology of your soil.

Verity Water Systems

 

AQUALIV TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
		September 30, 2012				September 30, 2011
CURRENT ASSETS:
Cash		$	7,519			$	3,732
Accounts receivable			1,855				1,968
Total Current Assets			9,374				5,700
PROPERTY AND EQUIPMENT, net			22,987				8,427
INVENTORY			1,156				723
TOTAL ASSETS		$	33,517			$	14,850

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable		$	128,145			$	107,438
Credit cards payable			—				17,187
Notes payable			314,525				189,179
Accrued interest payable			19,166				—
Convertible note, net of discount of $2,444			8,556				—
Derivative liability			18,963				111,111
Other liabilities			6,721				20,746
Total Current Liabilities			496,076				445,661
STOCKHOLDERS' DEFICIT:
Preferred stock, $0.001 par value, 50,000,000
shares authorized,
923,618 and 911,618 shares issued and			924				912
outstanding, respectively
Common stock, $0.001 par value, 1,000,000,000
shares authorized,
562,096,927 and 291,617,428 shares issued and			562,096				291,617
outstanding, respectively
Additional paid in capital			2,259,065				1,907,365
Retained (deficit)			(3,235,468	)			(2,612,390	)
Noncontrolling interest			(49,176	)			(18,315	)
Total Stockholders' (Deficit)			(462,559	)			(430,811	)
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT)		$	33,517			$	14,850

AQUALIV TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
		For the Years
		Ended September 30,
		2012				2011
REVENUES:
Sales		$	449,626			$	446,053
Service			29,904				44,085
Royalty			—				100,000
Total Revenues			479,529				590,138
COST OF GOODS SOLD			(123,173)				(193,430)
GROSS PROFIT			356,356				396,708
OPERATING EXPENSES:
Bad Debt			—				4,289
Consulting fees			35,810				60,819
Management fees			120,000				105,900
Payroll expense			172,861				127,455
Professional fees			180,501				88,683
Research and development			1,213				9,936
Travel, meals, and entertainment			18,769				20,333
Loss on goodwill impairment, AquaLiv			—				315,484
Other general and administrative			254,384				287,412
Total Operating Expenses			783,537				1,020,310
LOSS FROM OPERATIONS			(427,181	)			(623,602	)
OTHER INCOME (EXPENSE):
Recapture of loss on impairment of
note receivable			—				19,400
Gain on distribution of IAI, net			—				74,353
Loss on derivative liability			(68,904	)			(61,111	)
Interest expense			(157,854	)			(15,290	)
NET (LOSS) BEFORE INCOME TAX PROVISION			(653,939	)			(606,250	)
PROVISION FOR INCOME TAXES			—				—
CONSOLIDATED NET (LOSS)			(653,939	)			(606,250	)
Add: Net loss attributable to noncontrolling interest, AquaLiv, Inc.			30,860				41,956
NET (LOSS) ATTRIBUTABLE TO COMPANY		$	(623,079	)		$	(564,294	)
BASIC AND DILUTED NET (LOSS) PER SHARE		$	*			$	*
WEIGHTED AVERAGE SHARES
OUTSTANDING			428,938,761				228,052,093

Verity Water Systems units are maintenance-free products designed to be used directly in water lines to both revitalize the water at the molecular level and to increase the water’s energy-carrying capability. Different models are designed according to the water capacity needed either for personal or commercial usage. Some of the potential benefits of Verity Water Systems as represented by the Company include: healthier livestock and poultry through improved hydration, oxygenation and energy; plants require less water; increase in nutrient content of seed crops and produce; plants withstand extremes in hot and freezing temperatures better; significantly increased bio-availability of nutrients; longer shelf life of agricultural produce and cut flowers; decreased seed germination time; greatly improved aerobic bacterial activity; eliminates mineral deposits like calcium, iron & aragonite; reduced bio-availability of pollutants and toxins; and increased life span of water valves, pipes, hot water heaters, swamp-coolers and humidifiers.

 

*= lessVerity Meats

Verity Meats has on a limited basis and intends to expand the offer of all -natural meat products born and raised with pride by American Family Farmers. Working with only a core group of dedicated livestock producers throughout South Dakota, Minnesota and Iowa, The Company was able to tailor production protocols directly to end-product needs. By knowing the importance of using quality inputs for quality results, its producers follow a program that utilizes the best of animal nutrition, health, technology, and economics along with many years of practical knowledge and scientific principles. Verity Family Farmers follow defined protocols for the production of their grain and livestock. The protocols require proper preparation of the ground. Following up to three years of conditioning and cleansing of the soil, the soil is tested and must be free of more than $.01. 250 chemical residues. The grain used to feed the livestock must pass the same test before qualifying as feed for Verity livestock. The result is the highest quality meats available, according to management, – raised for Verity Farms customer’s total eating enjoyment and health.

 

AQUALIV TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
		For the Years
		Ended September 30,
		2012				2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(623,079	)		$	(564,294	)
Adjustments to reconcile net loss to net cash
provided by
(used in)  operating activities:
Noncontrolling interest in income (loss) of consolidated subsidiary			(30,860	)			(41,956	)
Depreciation			5,704				3,446
Amount reserved due to doubtful accounts			—				4,289
Recapture on impairment of note receivable			—				(19,400	)
Issuance of stock for services received			52,500				5,000
Loss on goodwill impairment, Aqualiv			—				315,484
Loss on derivative liability			68,904				61,111
Authorization of debt discount			131,945				—
Gain on distribution of IAI, net of intercompany transfers			—				(18,298	)
Net (increase) decrease in operating assets:
Accounts receivable			112				14,040
Net changes in inventory			(433	)			—
Net increase (decrease) in operating liabilities:
Accounts payable			20,707				6,925
Credit cards payable			(17,187	)			(29,075	)
Other liabilities			(14,025	)			(15,853	)
Net Cash  (Used in) Operating Activities			(405,711	)			(278,581	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments for property and equipment			(20,264	)			(6,873	)
Net Cash (Used in) Investing Activities			(20,264	)			(6,873	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable			331,562				105,988
Payments for notes payable			(14,300	)			(22,250	)
Proceeds of capital stock issuance			112,500				204,414
Net Cash Provided by Financing Activities			429,762				288,152
NET INCREASE IN CASH			3,787				2,698
CASH AT BEGINNING OF PERIOD			3,732				1,034
CASH AT END OF PERIOD		$	7,519			$	3,732
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest		$	—			$	—
Income taxes		$	—			$	—
NON-CASH INVESTING AND FINANCING ACTIVITIES
Issuance of stock to retire notes payable,		$	211,750			$	85,350
accrued interest, and derivative liability
Issuance of preferred stock for acquisition		$	—			$	400,000

F-7

Verity Grains

 

Verity Grain comes from the harvest of Verity Farms Crops. These grains originate from only non-GMO (genetically modified organism) seeds which are raised on soil which has tested below detectable limits for 250 known carcinogens and chemicals residues (test performed by independent labs using FDA and EPA test methods/guidelines). Following harvest, these grains are again tested for the 250 known carcinogens and chemical residues. Those grains which test free from those carcinogens and chemicals are then Verity Farms II certified to be fed to livestock and sold for consumption.

AQUALIV TECHNOLOGIES, INC.
AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CHANGES IN STOCKHOLDERS' (DEFICIT)
			Preferred Stock								Common Stock
																			Additional												Total
																			paid in				Retained				Noncontrolling				Stockholders
			Shares				Amount				Shares				Amount				capital				(Deficit)				interest				(Deficit)
BALANCES,
September 30, 2010				285,618			$	286				187,243,870			$	187,244			$	1,414,898			$	(2,024,455	)		$	—			$	(422,027	)
Issuance of common stock to
repay debt				—				—				100,623,558				100,623				(15,273	)			—				—				85,350
Issuance of preferre stock
for 50% purchase of AquaLiv,
Inc.				400,000				400				—				—				399,600				(23,641	)			23,641				400,000
Issuance of common stock				—				—				3,750,000				3,750				20,250				—								24,000
Preferred stock returned for
common stock				(24,000	)			(24	)			—				—				(23,976	)			—								(24,000	)
Issuance of preferred stock
for cash				240,000				240				—				—				119,760				—								120,000
Issuance of preferred stock
for sevices				10,000				10				—				—				4,990				—								5,000
Distribution of IAI assets,
net				—				—				—				—				(18,298	)			—								(18,298	)
Other capital contribution				—				—				—				—				5,414				—								5,414
Net Loss for
the year ended
September 30, 2011				—				—				—				—				—				(564,294	)			(41,956	)			(606,250	)
BALANCES,
September 30, 2011				911,618			$	912				291,617,428			$	291,617			$	1,907,365			$	(2,612,390	)		$	(18,315	)		$	(430,811	)
Issuance of common stock to
repay debt				—				—				238,923,151				238,923				(27,173)				—				—				211,750
Adjustment to derivative liability for value of conversions				—				—				—				—				245,441				—				—				245,441
Issuance of common stock
for cash				—				—				10,250,000				10,250				62,250				—								72,500
Issuance of common stock
for professional services				—				—				11,626,985				11,627				40,873				—								52,500
Preferred stock returned for
common stock				(68,000	)			(68	)			9,679,363				9,679				(9,611	)			—								—
Issuance of preferred stock
for cash				80,000				80				—				—				39,920				—								40,000
Net Loss for
the year ended
September 30, 2012				—				—				—				—				—				(623,079	)			(30,861	)			(653,939	)
BALANCES,
September 30, 2012				923,618			$	924				562,096,927			$	562,096			$	2,259,065			$	(3,235,468	)		$	(49,176	)		$	(462,559	)

Verity Produce

Verity Produce is the newest, and could become one of the most crucial components of the Company. Verity Produce consists of fruits and vegetables which are raised for human consumption. Verity Produce has been patterned after the Verity Farms crop production program, utilizing the same concept of creating a healthy, balanced soil. This creates an optimum environment for plants to grow and flourish.

 

 

Aistiva Corporation

Aistiva’s scientists discovered that most substances and compounds have a unique information signature that influences biological processes via a magnetic cellular mechanism (non-chemical). The company’s technology records this biologically significant magnetic information (bio-information) from a compound or substance and allows for the manipulation, combining, and subsequent transmittal to an organism. Bio-information from a variety of sources are combined and/or altered to produce a bio-information composite designed to influence specific biological processes. The composite can be transmitted to an organism via a variety of methods, including mineralized water, electromagnetic wave, or magnetic field. This technology has the potential to greatly enhance the Verity chemical free plant and animal productions.

The technology, while still at an early stage of development, already has direct applications in the industries of water purification, environmental science, agriculture, animal husbandry. Revenues generated from Aistiva’s products for the year ended September 30, 2013 were $459,000 and for the year ended September 30, 2012 were $449,626.

AquaLiv Water System

The AquaLiv Water System is a water purification and enhancement apparatus that produces a high-quality drinking water. A variety of technologies are utilized in the system to remove impurities from the water, add minerals to the water, alter the molecule to molecule bonding structure of the water molecules, reduce the surface tension, improve the Oxidation Reduction Potential, and increase the pH, dissolved oxygen, and dissolved hydrogen content in the water. Additionally, the water’s bio-information is altered to resemble spring water before processing and treatment. The AquaLiv Water System has approximately 400 users and produces approximately 99% of Aistiva’s sales revenues. The Aistiva water systems provide a key link to Human water consumption that is missing in the Verity water systems.

Infotone Hydrating Mist

Infotone Hydrating Mist is a skincare product designed to clear blemishes, fade wrinkles, and even skin tone. Each mister contains a ceramic bead infused with Aistiva’s bio-information technology. The technology allows simple spring water to activate skin’s natural healing ability resulting in clear, youthful, and glowing skin. Infotone Hydrating Mist is refillable for a full year making it an economical and sustainable skincare product. The mist is 100% natural and hypoallergenic and contains no parabens, additives, chemicals, GMOs, fragrances or artificial ingredients. The benefits of using the product are primarily derived through the elimination of a common skin parasite responsible for irritation (found on 50% of all adults), decreasing the production of melanin in cells that are overproducing and increasing skin hydration. The Infotone Hydrating Mist has approximately 850 users and produces approximately 1% of Aistiva’s sales revenues.

AgSmart Rice

AgSmart Rice is combined service and product offering that increases rice yields by 30-60% on average (data from actual commercial usage) while decreasing the duration before harvest by approximately one month. Treated rice crops are more resistant to pests, diseases, and wind/hail damage. AgSmart Rice is 100% natural and organic standards compliant and uses no chemical fertilizers, herbicides, or pesticides. AgSmart Rice benefits rice plants by encouraging greater root growth and photosynthesis ability. AgSMart Rice has been available since 2011 and is currently used by 2 farms at no charge for their aid in AgSmart Rice’s development. AgSmart Rice is not marketed due to a lack of financial resources and personnel. As of today, AgSmart Rice does not produce any revenue.

AgSmart Potato

AgSmart Potato is a combined service and product offering that has shown increases in potato yields by over 100% in market value (calculated using recent size/weight values coupled with average test results between treated and untreated test plots) under initial company testing. Treated potato crops have a consistent number of potatoes compared to untreated crops, however, the average size and weight are significantly increased while the normal counts of waste-sized potatoes are greatly reduced. Treated crops have also shown to be more resistant to pests and diseases caused by bacteria and viruses. AgSmart Potato is 100% natural and organic standards compliant and uses no chemical fertilizers, herbicides, or pesticides. AgSmart Potato benefits potato plants by encouraging greater root growth and photosynthesis ability while controlling bacterial and fungal activity. The Company plans on performing further third party commercial tests of the product prior to commercial distribution. The product is still under development and not yet available to the general public.

NatuRx Medication Alternatives

Based on Aistiva’s bio-information technology, NatuRx formulations utilize bio-information composites in lieu of active-molecules (drugs) for treatment. The formulations are non-toxic and have no contraindications. NatuRx formulations are in development and not yet available to the general public.

AQUALIV TECHNOLOGIES, INC.Verity Farms II and Aistiva Resources combined

AND ITS’ SUBSIDIARIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSThe practical and historical proven practices of Verity’s crop and animal production processes, combined with the advanced “scientific potential” of Aistiva’s products will provide Verity Corp the synergy to set the standards in healthy food production.

 

NOTE 1 -2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

AquaLiv Technologies, Inc. (the “Company") is a corporation incorporated under the laws of the State of Nevada on April 11, 2006, originally under the name of Infrared Systems International, as a wholly-owned subsidiary of China SXAN Biotech, Inc. (formerly Advance Technologies, Inc.) ("CSBI"). CSBI was organized under the laws of the State of Delaware on June 16, 1969. In July 2007, CSBI transferred the needs a space before “as” assets, liabilities, and operations of its technology licensing business to the Company. Because CSBI's operations are considered to be the Company's predecessor business, the

The accompanying consolidated financial statements include CSBI's operations from the inception of the business. In December 2008,Company have been prepared in accordance with accounting principles generally accepted in the Company completed its spin-off by dividend to stockholdersUnited States of CSBI.  America (U.S. GAAP) under the accrual basis of accounting.

Use of Estimates

 

In March 2010, the Company transferred the assets, liabilities, and operations of its technology licensing business to a wholly-owned subsidiary, Infrared Applications, Inc (“IAI”).  IAI was incorporated under the laws of the State of Texas on March 26, 2010. On April 14, 2010, the Company sold a majority interest in its common stock to Take Flight Equities, Inc. (“TFE”), a corporation incorporated under the laws of the State of Washington, and control of the Company was transferred to William Wright, its current CEO. Under the terms of the agreement, IAI continued to operate as a wholly-owned subsidiary until June 22, 2011, when IAI was distributed to the Gary Ball, the companies former CEO, under a Management and Distribution Agreement dated March 24, 2010.  

Also in April 2010, the Company acquired 100% of the outstanding common stock of Focus Systems, Inc. (“Focus”), a corporation incorporated under the laws of the State of Washington on August 8, 2007, from ProPalms, Inc. (“ProPalms”), for 3,000,000 shares of common stock, 250,000 shares of preferred stock, and the assumption of $283,639 in liabilities.  Focus is operated as a wholly-owned subsidiary of the Company. In addition to this agreement, the Company agreed to issue ProPalms 500,000 preferred shares for an Investment Receivable of $250,000. Under the terms of the agreement, ProPalms was to make the investment over the course of 4 months or return the unvested stock within 1 year.  Over the course of the 4 months, ProPalms invested $17,809.  ProPalms returned the unvested portion of the stock (amounting to 464,382 preferred shares) and the Company has accounted for it on its Change in Stockholders’ Deficit.  On May 14, 2010, the Company completed a 10:1 forward split of its common stock.

On December 16, 2010, the Company purchased a 50% interest in AquaLiv, Inc. from Craig Hoffman for $400,000 paid in the form of 400,000 shares of preferred stock valued at $1.00 per share. We have concluded, pursuant to the guidance in FASB ASC 810-10-25-38 (previously FIN 46R) that AquaLiv, Inc. is a Variable Interest Entity, that we are the primary beneficiary with a controlling financial interest in AquaLiv, Inc. and we are required to consolidate its financials accordingly. The remaining 50% non-controlling interest is owned by Craig Hoffman, AquaLiv, Inc’s President and CEO. AquaLiv, Inc. is a life sciences research and development company creating novel products for numerous industries. The company's technology alters the behavior of organisms, including plants and humans, without chemical interaction. From increased crop yields to drug-free medicine, AquaLiv, Inc. is providing innovative, ingredient-free solutions to the world's largest problems.

On June 22, 2011, in accordance with Management and Distribution Agreement (“Agreement”), dated March 24, 2010, we completed the distribution of substantially all of the assets of IAI. All of the outstanding stock of IAI has been transferred to Gary Ball (“Ball”) in accordance with the Agreement. Subsequent to this event, Ball shall be responsible to make, if any, a Subsidiary Stock Distribution to the Company’s shareholders of record as of March 23, 2010, upon the earlier of the foregoing occurrence: (i) the net proceeds from the sale of substantially all of the assets of IAI or (ii) Ball elects to make a Subsidiary Stock Distribution. Any cost incurred in connection with a Subsidiary Distribution shall be the responsibility of Ball. There is no certainty as to when or if a Subsidiary Stock Distribution will occur.

On September 6, 2011, the Company filed its Articles of Amendment with the State of Nevada to effect a name change to AquaLiv Technologies, Inc. and to increase its authorized common shares to 1,000,000,000. FINRA declared the corporate action effective on September 19, 2011. The name change was effected to more closely align the name with the future direction of the company.

Nature of Operations - The Company’s subsidiary, AquaLiv, Inc.,is a life sciences research and development company based in Seattle, Washington. The company’s technology taps into a previously undiscovered natural phenomenon that gives us significant competitive advantages in the industries of agriculture and medicine. This technology represents an entirely new way to affect the health and behavior of plants and animals, including human beings.. The Company’s wholly-owned subsidiary, Focus, provides remote desktop and cloud computing solutions to small businesses.  Additionally, Focus provides Voice over Internet Protocol (VoIP) phone solutions to small businesses and can deliver the service to households as well.  The Company has not paid any dividends and any dividends that may be paid in the future will depend upon the financial requirements of the Company and other relevant factors.

Use of Estimates - The preparation ofpreparing consolidated financial statements in conformity with U.S.accounting principles generally accepted accounting principles requiresin the United States of America, management to makemakes estimates and assumptions that affect certainthe reported amounts of assets and disclosures. Accordingly, actualliabilities 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 thosethese 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 - The Company considerscash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly-liquid debthighly liquid investments purchased with aan original maturity of three months or less to be cash equivalents.as of the purchase date of such investments.

Accounts Receivable

 

Accounts Receivable -receivable are recorded at the invoiced amount and do not bear interest. The Company recordsextends 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 receivableis 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.

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 September 30, 2013 and September 30, 2012, the Company recorded an allowance for uncollectible accounts in the amounts of $8,584 and $0, 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 September 30, 2013 and September 30, 2012, the Company recorded an allowance for obsolete inventories in the amounts of $33,630 and $10,403, respectively.

Fixed Assets, Net

Fixed assets are stated at cost less allowance for doubtful accounts. The Company estimates allowances for doubtful accounts basedaccumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the aged receivable balances and historical losses.  Management hasstraight-line basis over the following expected useful lives from the date on which they become fully operational. There are no estimated that $0 is necessary for doubtful accounts after reviewing the accounts receivable at September 30, 2012.residual values taken into account.

 

Property and Equipment - The Company records property and equipment at cost and uses straight-line depreciation methods over three to ten years. Maintenance, repairs, and expenditures for renewals and betterments not determined to extend the useful lives or to materially increase the productivity of the assets are expensed as incurred. Other renewals and betterments are capitalized.   Property and Equipment is that of our subsidiaries, AquaLiv, Inc. and Focus Systems, Inc., which we have been recorded at actual cost and estimated net book value, less depreciation, which was recorded under Other Expenses on our Consolidated Statements of Operations.  

				Residual
		Depreciable life		value
Software and website development		3 years			0	%
Machinery and Equipment		5 years			0	%
Furniture and fixtures		7 years			0	%

 

Revenue Recognition - The Company's revenue is derived throughExpenditures for maintenance and repairs that do not make the fixed asset more useful or prolong its subsidiaries. AquaLiv, Inc.’s revenue comes primarily from the sales of AquaLiv Water Systems and Infotone Hydrafting Mist. The productsuseful life are sold though the subsidiary’s website portal, www.aqualiv.com. Revenue is derived from AquaLiv, Inc. from several smaller purchases ranging from $35 to $1,695. Revenue derived from Focus comes from several smaller accounts and is billed on a monthly basis.  The monthly billing for these accounts range from $72 to $1,087. IAI’s revenue came from royalties derived through licensing its technology to a single customer. The licensing agreement allowed the customer exclusively to use the subsidiary’s technology in aircraft systems manufactured by the customer in exchange for a royalty fee for each system that includes the Company's technology sold by the customer for commercial sales. The royalty fee was payable quarterly and amounts to $800 per aircraft system. As of June 22, 2011, royalty revenue has been discontinued along with the distribution of the IAI assets per the Management and Distribution Agreement.  

Research and Development - The Company expenses research and development costsexpensed as incurred.

 

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 measurementImpairment 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.Long Lived Assets

For the years ended September 30, 2012 and 2011, the Company did not have any interest and penalties associated with tax positions. As of September 30, 2012 and 2011, the Company did not have any significant unrecognized uncertain tax positions.

 

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.

Comprehensive income - The Company adoptedevaluated the recoverability of its property, plant, equipment, and other long-lived assets in accordance with FASB Accounting Standards Codification 220 “Comprehensive Income” (formerly SFAS No. 130, “Reporting Comprehensive income”Topic 360,“Property, Plant and Equipment” (“ASC 360”), which establishes standards for reporting and displayrequires recognition of comprehensive income, and its componentsimpairment of long-lived assets in the consolidated financial statements. Componentsevent the net book value of comprehensive income include net income and foreign currency translation adjustments.such assets exceed the estimated future undiscounted cash flows attributable to such assets or the business to which such intangible assets relate. The Company has presented consolidated statementsevaluated the recoverability of income which includes other comprehensive income or loss.the fixed assets and did not recognize any impairment during the year ended September 30, 2013.

 

Fair value of financial instruments - 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 Accounting Standards CodificationASC (“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 accounting principles generally accepted in the United States of America (U.S. GAAP),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 cash equivalents, trade accounts and other receivables, inventories, prepaid expenses, accounts payable other payables and accrued liabilities, deposits received in advance, taxes payable, deferred tax liabilities, and short term borrowings approximate their fair values because of the short maturity of these instruments. The Company’s short term borrowings approximate the fair value of such instrument based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangement at September 30, 2011 and 2010.

 

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 September 30, 2013 and September 30, 2012 and 2011, 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 year endedSeptember 30, 2012 and 20112013.

.Revenue Recognition

 

CommitmentsThe Company derives revenues from the sale of agricultural products, animal feeds, consulting services, and contingencies - Liabilitiesvarious water units. In accordance with guidance by paragraph 605-10-S99-1 of the FASB ASC for loss contingencies arising from claims, assessments, litigation, finesrevenue 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. For the years ended September 30, 2013 and 2012, the Company did not have any interest and penalties associated with tax positions. As of September 30, 2013 and other sources,2012, the Company did not have any significant unrecognized uncertain tax positions.

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 applicable, are recorded when it is probablemore likely than not these items will either expire before the Company is able to realize their benefits, or that a liability has been incurred and the amount of the assessment can be reasonably estimated.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 twelve months ended September 30, 2013.

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.

 

RecentRelated Parties

The Company follows subtopic 850-10 of the FASB Accounting Pronouncements - 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

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements and does not believe the future adoption of any such pronouncements may be expected to cause a material impact on its consolidated financial condition or the consolidated results of its operations.

In May 2011, FASB issued Accounting Standards Update No. 2011-04, “Fair Value Measurements (ASC 820): Amendments to Achieve Common Fair Value MeasurementsMeasurement and Disclosures

In January 2010,Disclosure Requirements in U.S. GAAP and IFRSs” (“ASU 2011-04”). ASU 2011-04 changes the Financial Accounting Standards Board (“FASB”)  issued authoritative guidance regardingwording used to describe many of the requirements in U.S. GAAP for measuring fair value measures and disclosures. The guidance requires disclosure of significant transfers between level 1 and level 2for disclosing information about fair value measurements along withto ensure consistency between U.S. GAAP and IFRS. ASU 2011-04 also expands the reasondisclosures for the transfer. An entity must also separately report purchases, sales, issuances and settlements within the level 3 fair value roll forward.measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied prospectively. The guidance further provides clarificationCompany anticipates that the adoption of this standard will not materially expand its financial statement note disclosures.

In June 2011, FASB issued ASU No. 2011-05, “Comprehensive Income (ASC 220): Presentation of Comprehensive Income” (“ASU 2011-05”), which amends current comprehensive income guidance. This accounting update eliminates the option to present the components of other comprehensive income as part of the levelstatement of disaggregation toshareholders’ equity. Instead, the Company must report comprehensive income in either a single continuous statement of comprehensive income which contains two sections, net income and other comprehensive income, or in two separate but consecutive statements. ASU 2011-05 will be used within the fair value measurement disclosures for each class of assets and liabilities and clarified the disclosures required for the valuation techniques and inputs used to measure level 2 or level 3 fair value measurements. This new authoritative guidance is effective for public companies during the Company in fiscal yearsinterim and annual periods beginning after December 15, 2010, and for interim periods within those fiscal years.2011, with early adoption permitted. The adoption of this guidance will not impact the Company’s consolidated results of operations or financial position.

Variable Interest Entities (VIEs)

In June 2009, the FASB issued authoritative guidance changing the approachCompany is reviewing ASU 2011-05 to determine a VIE’s primary beneficiary and requiring ongoing assessments of whether an enterprise is the primary beneficiary of a VIE. This guidance also requires additional disclosures about a company’s involvement with VIEs and any significant changes in risk exposure due to that involvement. This guidance was adopted January 1, 2010, and did not have anascertain its impact on the Company’s consolidated financial position, results of operations or cash flows. flows as it only requires a change in the format of the current presentation.

 

BasisIn September 2011, the FASB issued ASU 2011-08, “Testing Goodwill for Impairment”, which allows, but does not require, an entity when performing its annual goodwill impairment test the option to first do an initial assessment of presentationqualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount for purposes of determining whether it is even necessary to perform the first step of the two-step goodwill impairment test. Accordingly, based on the option created in ASU 2011-08, the calculation of a reporting unit’s fair value is not required unless, as a result of the qualitative assessment, it is more likely than not that fair value of the reporting unit is less than its carrying amount. If it is less, the quantitative impairment test is then required. ASU 2011-08 also provides for new qualitative indicators to replace those currently used. Prior to ASU 2011-08, entities were required to test goodwill for impairment on at least an annual basis, by first comparing the fair value of a reporting unit with its carrying amount. If the fair value of a reporting unit is less than its carrying amount, then the second step of the test is performed to measure the amount of impairment loss, if any. ASU 2011-08 is effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011, with early adoption permitted. The Company adopted ASU 2011-08 during the first quarter of fiscal 2013. The adoption of ASU 2011-08 did not impact the Company’s results of operations or financial condition.

In December 2011, FASB issued Accounting Standards Update 2011-11, “Balance Sheet - Disclosures about Offsetting Assets and Liabilities” to enhance disclosure requirements relating to the offsetting of assets and liabilities on an entity’s balance sheet. The update requires enhanced disclosures regarding assets and liabilities that are presented net or gross in the statement of financial position when the right of offset exists, or that are subject to an enforceable master netting arrangement. The new disclosure requirements relating to this update are retrospective and effective for annual and interim periods beginning on or after January 1, 2013. The update only requires additional disclosures, as such, the Company does not expect that the adoption of this standard will have a material impact on its consolidated results of operations, cash flows or financial condition.

In July 2012, the FASB issued ASU No. 2012-02, “Testing Indefinite-Lived Intangible Assets for Impairment”. The guidance allows companies to perform a “qualitative” assessment to determine whether further impairment testing of indefinite-lived intangible assets is necessary, similar in approach to the goodwill impairment test.

ASU 2012-02 allows companies the option to first assess qualitatively whether it is more likely than not that an indefinite-lived intangible asset is impaired, before determining whether it is necessary to perform the quantitative impairment test. An entity is not required to calculate the fair value of an indefinite-lived intangible asset and perform the quantitative impairment test unless the entity determines that it is more likely than not that the asset is impaired. Companies can choose to perform the qualitative assessment on none, some, or all of its indefinite-lived intangible assets or choose to only perform the quantitative impairment test for any indefinite-lived intangible in any period.

ASU 2012-02 is effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012, with early adoption permitted. The Company is in the process of evaluating the guidance and the impact ASU 2012-02 will have on its consolidated financial statements.

The accompanying consolidated financial statements ofhave been prepared by the Company in accordance with Article 8 of U.S. Securities and Exchange Commission’s (the “SEC”) Regulation S-X. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows at September 30, 2013 and 2012 and for the periods then ended have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles generally acceptedhave been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the financial statements and notes thereto included in the United States of America under the accrual basis of accounting. All intercompany accounts and transactions have been eliminated.

Inventories – The Company’s inventories (finished goods, work in process, raw materials and packaging materials) are stated at the lower of cost or market. Cost is determined on a first in first out basis. In addition, the Company estimates net realizable value based on intended use, current market value and contract terms. The Company writes down the inventories for estimated obsolescence, slow moving or unmarketable inventories equal to the difference between the cost of inventories and the estimated market value based upon assumptions about future demand and market conditions.September 30, 2013 audited financial statements.

 

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 360 “Property, Plant and Equipment” (formerly SFAS 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”), 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. Impairments of these types of assets were recognized during the years ended September 30, 2011 and 2010.

Loss per share-The Company reports loss per share in accordance with FASB Accounting Standards Codification 260 “Earnings per Share” (formerly SFAS 128, “Earnings per Share”). This statement requires dual presentation of basic and diluted earnings (loss) with a reconciliation of the numerator and denominator of the loss per share computations. Basic earnings per share amounts are based on the weighted average shares of common outstanding. If applicable, diluted earnings per share assume the conversion, exercise or issuance of all common stock instruments such as options, warrants and convertible securities, unless the effect is to reduce a loss or increase earnings per share. Accordingly, this presentation has been adopted for the periods presented. There were no adjustments required to net income for the period presented in the computation of diluted earnings per share. There were no common stock equivalents (CSE) necessary for the computation of diluted loss per share.

NOTE 2 -3 – GOING CONCERN

 

The Company'sCompany’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 September 30, 2012,2013, the Company had a retained deficit of $3,235,468$10,828,681 and current liabilities in excess of current assets by $462,559.$4,034,656. During the year ended September 30, 2012,2013, the Company incurred a net loss of $623,079$7,593,213 and incurred negative cash flows from operations of $405,711.$997,970. These factors create an uncertainty about the Company'sCompany’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'sCompany’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, our ability to continueCompany’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 a going concern has causedwell as exploring strategic acquisitions in the board of directors (the “Board”) to continue investigating merger and acquisition opportunities.  We will look to further diversify our holdings and sources of cash flow.technology field. Should the Company'sCompany’s financial resources prove inadequate to meet the Company'sCompany’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 3 -4 – RELATED PARTY TRANSACTIONS

 

Revenues - Service – TheNote payable- related party: At September 30, 2013, the Company through its wholly owned subsidiary, Focus, received $1,303 in service revenues from parties relatedhad a note payable due to our CEO duringBoard Member in the fiscal year endedamount 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 September 30, 2011.2013 is $14,760. A second note payable to our Board Member in the amount of $2,805,000 is unsecured, carries an interest rate of 3% and is due on demand. The revenue was booked atinterest accrued, but not paid as of September 30, 2013 is $84,396. A third note payable to our Board Member in the sameamount of $150,000, is unsecured, carries an interest rate of 5% and is due on demand. The interest accrued but not paid as that of non-affiliated customers.September 30, 2013 is $14,404. A fourth note payable to our Board Member in the amount of $340,000, is unsecured, carries an interest rate of 3% and is due on demand. The interest accrued but not paid as of September 30, 2013 is $20,986.

 

Management compensation - During the years ended September 30,Real estate loan- related party: In December 2012, and 2011, respectively, the Company paid management feesissued a note payable in the amount of $120,000 and $105,900$2,400,000 to its officers.

Consulting - During the years ended September 30, 2012 and 2011, respectively, the Company paid $10,462 and $30,000 for consulting services to officers and directors or entities related to ora company under the control of our Board Member to acquire land. The loan is secured by real estate, carries an officer or directorinterest rate of the Company.

Credit cards payable – During the years ended6% and is due in September 2018. At September 30, 20122013, the balance of this loan is $2,400,000 and 2011, the Company’s current and former officers extended credit tointerest accrued but not paid is $108,000. In December 2012, the Company and/or its subsidiaries in the form of personal credit card usageissued a note payable in the amount of $19,367 and $17,187, respectively, of which $17,187 was unpaid at September 30, 2011.

Notes payable – During the fiscal year ended September 30, 2012 and 2011,$500,000 to a company closely held by an officerunder the control of the company, loaned the Company $28,456 and $23,388, respectively.our Board Member to acquire a building. The loan is secured by real estate, carries an interest rate of 6% and is due on demand and carries no interest.  Imputed interest is included in the accompanying Consolidated Statements of Operations.

NOTE 4 - PROPERTY AND EQUIPMENT

		Estimated Useful Lives		September 30, 2012		September 30, 2011
Optical equipment		5 years		$      39,386		$          39,386
Office equipment		3 - 10 years		28,495		8,231
Computers and peripherals		5 years		16,000		16,000
Furniture and fixtures		5 years		6,873		6,873
				90,754		70,490
Less accumulated depreciation				(67,767)		(62,063)
Net property and equipment				$       22,987		$         8,427

Depreciation expense for the years endedSeptember 2017. At September 30, 2012and 2011 was $5,7042013, the balance of this loan is $500,000 and $2,800, respectively.

the interest accrued but not paid is $22,500.

 

NOTE 5 - DEFINITE-LIFE INTANGIBLE ASSETS– VERITY FARMS ACQUISITION

 

AquaLiv, Inc. Acquisition

		September 30, 2011				December 31, 2012
Acquisition value
Preferred shares (per contract)		$	400,000
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		$	400,000			$	10,515,579
Valuation classification
Physical assets		$	5,516
Cash			79,000			$	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			315,484				5,943,533
Impairment of Goodwill			(315,484)				(5,943,533	)
Goodwill, net			—				—
Net value		$	84,516			$	4,572,046

 

We have concluded, pursuant toThe Company recorded the guidance in FASB ASC 810-10-25-38 (previously FIN 4R) that AquaLiv, Inc. is a Variable Interest Entity, that we are the primary beneficiary with a controlling financial interest in AquaLiv, Inc. and we are required to consolidate its financials accordingly. Additionally, the acquisition was recorded at its fair market value in that the cash, computeraccounts receivable, inventory, notes receivable, land, warehouses, equipment and inventoryother 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 – 6ACCOUNTS RECEIVABLE

Accounts receivable was comprised of the following amounts as of September 30, 2013 and 2012:

		9/30/2013				9/30/2012
Gross accounts receivable from customers		$	158,327			$	1,855
Allowance for doubtful customer accounts			(8,584	)			(0	)
Accounts receivable, net		$	149,743			$	1,855

The bad debt expenses of $11,789 and $0 were recognized during the years ended September 30, 2013 and 2012, respectively, in the accompanying consolidated statements of operations.

NOTE – 7 INVENTORIES

Inventories as of September 30, 2013 and 2012 consisted of the following:

		9/30/2013				9/30/2012
Raw materials		$	75,357			$	5,201
Work in Process							1,734
Finished goods			534,539				4,623
			609,896				11,558
Allowance for obsolete inventories			(33,630	)			(10,403	)
Inventories, net		$	576,266			$	1,156

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 $9,077 and $0 during the year ended September 30, 2013 and 2012, respectively.

 

NOTE 6 – INVENTORY

Inventories are comprised of the following amounts at the respective dates:
		September 30, 2012				September 30, 2011
Raw materials		$	5,201			$	4,340
Work in process			1,734				1,447
Finished goods			4,623				3,858
Provision for inventory liquidations			(10,403	)			(8,921	)
Inventory - end of period		$	1,156			$	723

NOTE 7 - NOTES PAYABLE AND DERIVATIVE LIABILITY8 PREPAID EXPENSES

 

As of September 30, 2013 and 2012, the Company had prepaid expenses of $136,391 and $0, respectively, and consisted of the following: 

		9/30/2013				9/30/2012
Prepaid insurance		$	44,017			$	0
Prepaid inventories			92,374				0
Total		$	136,391			$	0

NOTE 9 – FIXED ASSETS

		9/30/2013				9/30/2012
Machinery and equipment		$	513,298			$	83,881
Software and website development			68,184				0
Furniture and fixtures			26,491				6,873
Land			2,400,000				0
Warehouses			800,000				0
Total property and equipment			3,807,973				90,754
Less accumulated depreciation			(353,980	)			(67,767	)
Net property and equipment		$	3,453,993			$	22,987

Depreciation expense for the years ended September 30, 2013 and 2012 was $113,588 and $5,704, respectively.

Land valued at $2,400,000 as of December 31, 2012, includes a 240 acre parcel located in Sioux Falls, South Dakota. The Company acquired the land for the purposes of a future corporate campus and to create buffered test plots for our various farming operations. The property was originally acquired from a board member at an appraised value of $9,963 per acre.

Warehouses include two properties whose total value is $800,000 as of December 31, 2012. The first property is located in Pelham, Georgia, includes 16 acres, a 16,748 square foot building and is being used as a distribution center. The property was acquired from our board member for $500,000. Prior to the acquisition, the property was appraised for $469,000 and received improvements totaling $110,000 since its original purchase. The second 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.

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 September 30, 2013 and 2012, respectively.

Partnership			Crop Resources LLC
Percentage of Ownership			19	%
Book Equity 9/30/2012		$	19,798
Share of Net Income/(Loss)			167
Book Equity 9/30/2013			19,965

NOTE 11 – NOTES PAYABLE

Note payable: At September 30, 2013, the Company had a note payable to an affiliated company of one of our former officers in the amount of $28,955, which is not secured by collateral of the Company, carries accrued interest of 6% and is due on demand by the holder. The interest accrued, but not paid as of September 30, 2013 is $1,305. In July 2013, the Company entered into a Mutual 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. The interest accrued but not paid as of September 30, 2013 is $1,080.

Note payable- related party: At September 30, 2013, 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 September 30, 2013 is $14,760. A second note payable to our Board Member in the amount of $2,805,000 is unsecured, carries an interest rate of 3% and is due on demand. The interest accrued, but not paid as of September 30, 2013 is $84,396. A third note payable to our Board Member in the amount of $150,000, is unsecured, carries an interest rate of 5% and is due on demand. The interest accrued but not paid as of September 30, 2013 is $14,404. A fourth note payable to our Board Member in the amount of $340,000, is unsecured, carries an interest rate of 3% and is due on demand. The interest accrued but not paid as of September 30, 2013 is $20,986.

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 September 30, 2013, the balance of this loan is $271,125 and the Company has paid $8,625 in interest and $7,375 in principal.

Real estate loan- related party: In December 2012, the Company issued a note payable in the amount of $2,400,000 to a company under the control of our Board Member to acquire land. The loan is secured by real estate, carries an interest rate of 6% and is due in September 2018. At September 30, 2013, the balance of this loan is $2,400,000 and the interest accrued but not paid is $108,000. In December 2012, the Company issued a note payable in the amount of $500,000 to a company under the control of our Board Member to acquire a building. The loan is secured by real estate, carries an interest rate of 6% and is due in September 2017. At September 30, 2013, the balance of this loan is $500,000 and the interest accrued but not paid is $22,500.

Comparatively, at fiscal year ended September 30, 2012, the Company had notes payable in the amount of $343,224, compared to $189,179, in the prior fiscal year.$343,224. The notes included a note payable to an unaffiliated party in the amount of $93,769, which is not secured by collateral of the Company, carries accrued interest of 6%and is due on demand by the holder. The second note payable is to an affiliated company of our former President in the amount of $28,456, is not secured by collateral of the company, carries no interest, and is due on demand by the holder.

 

A third note payable was issued to an unaffiliated party on February 27, 2012 in the aggregate amount of $58,000. NOTE – 12 CUSTOMER DEPOSITS

As of September 30, 2012, $11,000 remained outstanding on the principle amount of the note. The note carries an interest rate of 8%, is not secured by collateral of the company,2013 and has a maturity date of November 29, 2012. The note has conversion rights beginning after month six (6). The variable conversion price is 58% of the market price, which is calculated by the average three (3) lowest closing bid prices as quoted on the applicable trading market (the “OTCBB”) during the previous ten (10) trading days. The note holder may not own any more than 4.99% of the company’s outstanding common stock. The Company recognizes the conversion option of the note (an embedded derivative) as a derivative liability.

Derivative Liability

ASC Topic 815 (“ASC 815”) requires that all derivative financial instruments be recorded on the balance sheet at fair value. Fair values for exchange traded securities and derivatives are based on quoted market prices. Where market prices are not readily available, fair values are determined using market based pricing models incorporating readily observable market data and requiring judgment and estimates.

The Company issued convertible notes and has evaluated the terms and conditions of the conversion features contained in the notes to determine whether they represent embedded or freestanding derivative instruments under the provisions of ASC 815. The Company determined that the conversion features contained in the notes represent freestanding derivative instruments that meet the requirements for liability classification under ASC 815. As a result, the fair value of the derivative financial instruments in the notes is reflected in the Company’s balance sheet as a liability. The fair value of the derivative financial instruments of the convertible notes was measured at the inception date of the notes and warrants and each subsequent balance sheet date. Any changes in the fair value of the derivative financial instruments are recorded as non-operating, non-cash income or expense at each balance sheet date.

The Company valued the conversion features in its convertible notes using the Black-Scholes model. The Black-Scholes model values the embedded derivatives based on a risk-free rate of return ranging from 0.29% to 0.30%, grant dates at 8/1/2011, 10/6/2011 and 9/30/2012, the term of convertible note, conversion prices is 55% and 58% of stock bid price at date of note conversion, current stock prices on the measurement date ranging from $0.0013 to $0.0070, and the computed measure of the Company’s stock volatility, ranging from 1,839.96% to 2,342.87%. 

Included in the September 30, 2012 financial statements is a derivative liability in the amount of $18,963to account for this transaction. It is revalued quarterly henceforth and adjusted as a gain or loss to the consolidated statements of operations depending on its value at that time.

Included in our Consolidated Statements of Operations for the years ended September 30, 2012 and 2011 are $68,907 in change of fair value of derivative and $131,945 of debt discount amortization in non-cash charges pertaining to the derivative liability as it pertains to the gain on derivative liability and debt discount, respectively.

Loss on goodwill impairment 

	September 30, 2012	September 30, 2011
Loss on goodwill impairment, AquaLiv	$ --	$ 315,484
	_________
Net loss on impairments	$ --	$ 315,484

NOTE 8 – STOCKHOLDERS’ DEFICIT

In October 2010 the Company issued 9,500,000 shares of Common stock to repay $5,000 in debt.

In December 2010 the Company issued 400,000 shares of Preferred stock for the purchase of 50% interests in AquaLiv, Inc.

In December 2010 the Company issued 3,750,000 shares of Common stock in exchange for 24,000 shares of Preferred stock valued at $24,000.

In January 2011, the Company issued 90,000 shares of Preferred stock for $45,000 in cash.

In January 2011, the Company issued 100,000 shares of Preferred stock for $50,000 in cash.

In April 2011 the Company issued 10,000,000 shares of Common stock to repay $5,000 in debt.

In May 2011 the Company issued 10,000,000 shares of Common stock to repay $5,000 in debt.

In May 2011 the Company issued 10,000,000 shares of Common stock to repay $5,000 in debt.

In June 2011 the Company issued 10,000,000 shares of Common stock to repay $5,000 in debt.

In June 2011 the Company issued 3,947,368 shares of Common stock to repay $15,000 in debt.

In June 2011 the Company issued 2,380,952 shares of Common stock to repay $10,000 in debt.

In July 2011 the Company issued 3,200,000 shares of Common stock to repay $8,000 in debt.

In July 2011 the Company issued 11,500,000 shares of Common stock to repay $5,750 in debt.

In July 2011 the Company issued 4,095,238 shares of Common stock to repay $8,600 in debt.

In August 2011 the Company issued 12,000,000 shares of Common stock to repay $6,000 in debt.

In September 2011 the Company issued 6,500,000 shares of Common stock to repay $3,250 in debt.

In September 2011 the Company issued 7,500,000 shares of Common stock to repay $3,750 in debt.

In September 2011 the Company issued 10,000 shares of Preferred stock for $5,000 in management fees.

In September 2011 the Company issued 50,000 shares of Preferred stock for $25,000 in cash.

In September 2011 the Company’s subsidiary received $5,414 in cash in exchange for previously issued Preferred stock related to the AquaLiv, Inc. acquisition.

In October 2011 the Company issued 14,500,000 shares of Common stock to repay $7,250 in debt.

In November 2011 the Company issued 15,000,000 shares of Common stock to repay $7,500 in debt.

In December 2011 the Company issued 5,000,000 shares of Common stock for $20,000 in cash.

In December 2011 the Company issued 16,000,000 shares of Common stock to repay $8,000 in debt.

In January 2012, the Company issued 14,000,000 shareshad customer deposits of Common stock to repay $7,000 in debt.

In January 2012 the Company issued 5,250,000 shares of Common stock$10,241 and $0, respectively, representing payments received for $52,500 in cash.

In February 2012 the Company issued 27,823,864 shares of Common stock to repay $50,500 in debt.

In March 2012 the Company issued 22,333,333 shares of Common stock to repay $19,500 in debt.

In March 2012 the Company issued 2,500,000 shares of Common stock to pay for $15,000 in consulting services.

In April 2012 the Company issued 33,711,976 shares of Common stock to repay $47,500 in debt.

In April 2012 the Company issued 9,054,353 shares of Common stock in exchange for 64,000 shares of Preferred stock valued at $64,000.

In May 2012 the Company issued 625,000 shares of Common stock in exchange for 4,000 shares of Preferred stock valued at $4,000.

In May 2012 the Company issued 5,555,556 shares of Common stock as incentive shares in exchange for $25,000 in professional fees.

In May 2012 the Company issued 3,571,429 shares of Common stock as commitment shares in exchange for $12,500 in fees.

In May 2012 the Company issued 11,516,104 shares of Common stock into escrow as part of a financing agreement.

In June 2012 the Company issued 23,000,000 shares of Common stock to repay $11,500 in debt.

In July 2012 the Company issued 20,000,000 shares of Common stock to repay $10,000 in debt.

In August 2012 the Company issued 11,538,462 shares of Common stock to repay $15,500 in debt.

In September 2012 the Company issued 39,469,250 shares of Common stock to repay $32,000 in debt.

NOTE 9 - CONCENTRATIONS

At September 30, 2012, the Company’s accounts receivable total was $1,856, or less than 2% of the Company’s total revenue for the current quarter and less than 1% of the total annual revenue for the fiscal year ended September 30, 2012. Furthermore, no single customer represented more than 1% of the total annual revenue. Therefore, the Company no longer anticipates being dependent on any one or few major customers. The Company doesorders not expect a high level of concentration related to our current products and services.

NOTE 10 - CONTINGENCIES

The Company had no contingencies existing as of September 30, 2012 and 2011.

NOTE 11 - LOSS PER SHARE 

The basic loss per share was calculated using the net loss and the weighted average number of shares outstanding during the reporting periods. All share and per share data have been adjusted to reflect the forward stock split. 

NOTE 12 - SEGMENTS

The Company determined that it do not operate in any material, separately reportable operating segments as of September 30, 2012 and 2011. yet shipped.

 

NOTE 13 - INCOME TAXES– SHAREHOLDERS’ EQUITY

 

At September 30,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 has federal net operating loss carryoversissued 214,839 (post-reverse split) shares of approximately $1,795,000 availablecommon stock to offset future taxable incomeAsher Enterprises, Inc to retire $31,306 in debt and expiring as follows:

$2,320 in 2026, $12,616 in 2027, $127,675 in 2028, $37,465 in 2029, and $428,000 in 2030, $564,000 in 2031 and $623,000 in 2032. The Company also has a federal contribution carryover of $150 that expires in 2029. At September 30, 2012, the Company had experienced losses since inception and had not yet generated any taxable income; therefore, the Company established a valuation allowance to offset the net deferred tax assets.

The income tax provision consists of the following components for the years ended September 30, 2012 and 2011:

			2012				2011
Current income tax expense (benefit)		$	—			$	—
Deferred income tax expense (benefit)			—				—
Net income tax expense (benefit) charged to operations		$	—			$	—

The income tax provision differs from the amounts that would be obtained by applying the federal statutory income tax rate to loss before income tax provision as follows for the years ended September 30, 2012 and 2011:

		2012				2011
Loss before income tax provision		$	(623,079	)		$	(564,294	)
Expected federal income tax rate			15.0	%			15.0	%
Expected income tax expense (benefit at statutory rate		$	(934,462	)		$	(84,644	)
Tax effect of			-
Meals and entertainment			1,408				—
Change in valuation allowance			92,054				84,644
Net income tax expense (benefit)		$	—			$	—

The Company's deferred tax assets, deferred tax liabilities, and valuation allowance are as follows:

		September 30, 2012				September 30, 2011
Deferred tax assets:
Organization costs		$	—			$	—
Contribution carryover			—				—
Net operating loss carryovers			269,250				175,800
Total deferred tax assets		$	269,250			$	175,800
Deferred tax liabilities:
Book basis of patent application		$	—			$	—
Tax depreciation in excess of book			—				—
Total deferred tax liabilities		$	—			$	—
Total deferred tax assets		$	269,250			$	175,800
Total deferred tax liabilities			—				—
Valuation allowance			(269,250	)			(175,800	)
Net deferred tax asset (liability)		$	—			$	—

These amounts have been presented in the financial statements as follows: 

			September 30, 2012				September 30, 2011
Current deferred tax asset (liability)		$	—			$	—
Non-current deferred tax asset (liability)			—				—
		$	—			$	—

F-15

NOTE 14 - SUBSEQUENT EVENTSaccrued interest.

 

On November 21,11, 2012, the Company issued 25,548,888225,492 (post-reverse split) shares of common stock to Auctus Private Equity Management, , Inc. (“Auctus Management”Auctus”) foras commitment shares valued at $22,994 in commitment fees.

pursuant to the Equity Agreement.

On December 10, 2012, the Company issued at total of 120,000,0001,200,000 (post-reverse split) shares of common stock to four (4) non-affiliated partiesshareholders to pay off $95,182.16retire a total of $95,182 in debt.

On December 28, 2012, the Company recorded the return of 5,555,556 shares of common stock to the treasury from TCA Global Master Fund, LP (“TCA”) in exchange for $25,000 paid in cash for prior commitment fees.

debt and accrued interest.

 

On December 31, 2012, the Company issued 25,000,000250,000 (post-reverse split) shares of common stock to Trak Management Group, Inc. as compensation for $25,000 in consulting services.

On December 31, 2012, the Company issued 15,000,000 shares of common stock for $15,000 in rendered legal services.

consultation services valued at $25,000.

 

On December 31, 2012, the Company issued 5,000,000150,000 (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 Management foras commitment shares valued at $4,000 in commitment fees.

On January 8, 2013,pursuant to the Company filed a Current Report on Form 8-K with the Securities and Exchange Commission (“SEC”) disclosing that on December 28, 2012, the Company issued a Secured Promissory Note in favor of Mr. Duane Spader in the principal sum of $241,266.67 plus interest at a rate of 6% per annum. The maturity date is December 28, 2013. Proceeds of the note were used to pay off the note held by TCA.Equity Agreement.

 

On January 8, 2013, the Company filed a Current Report on Form 8-K with the SEC disclosing that on December 31, 2012, the Company entered into a Share Exchange Agreement (the “Exchange Agreement”) by and among the Company, Verity Farms II, Inc., a South Dakota corporation and parent company of Verity Farms, LLC (“Verity”), AquaLiv, Inc. and Focus. Pursuant to the Exchange Agreement, the Company acquired 100% of the authorized and issued shares of Verity in exchange (the “Exchange”) for 4,850,000 shares of the Company’s Series B Convertible Preferred Stock par value $0.001 (the “Series B Preferred”)to the shareholders of Verity Farms II, Inc . Asvalued at $4,850,000 pursuant to a resultshare 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 ExchangeCompany 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 the other transactions contemplated thereunder, Verity is now a wholly-owned subsidiaryReinstatement of Debt Agreement, Pursuant to which an aggregate of 900,000 shares of common stock were returned to the Company and the Company has acquired Verity’s current business operations, including the real estate holdings, and its subsidiaries.$72,000 worth of note payable was reinstated.

 

On January 8,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.

NOTE 14 – CONCENTRATIONS

At September 30, 2013, 11.6% of the Company’s accounts receivable was due from a single customer. During the twelve months ended September 30, 2013, 7.5% of the Company’s revenues were generated from a single customer compared to 2% for the twelve months ended September 30, 2013.

NOTE 15 – INCOME TAXES

Due to the operating loss and the inability to recognize an income tax benefit, there is no provision for current or deferred federal or state income taxes for the period from inception through September 30, 2013.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for federal and state income tax purposes.

The Company’s total deferred tax asset, calculated using federal and state effective tax rates, as of September 30, 2013 and 2012, respectively, is as follows:

			2013				2012
Total Deferred Tax Asset		$	(1,114,000	)		$	(269,250	)
Valuation Allowance			1,114,000				269,250
Net Deferred Tax Asset		$	-			$	-

The reconciliation of income taxes computed at the federal statutory income tax rate to total income taxes for the years ended September 30, 2013 and 2012 is as follows:

		2013				2012
Income tax computed at the federal statutory rate			35.0	%			35.0	%
State income tax, net of federal tax benefit			0.0	%			0.0	%
Total			35.0	%			35.0	%
Valuation allowance			-35.0	%			-35.0	%
Total deferred tax asset			0.0	%			0.0	%

Because of the Company’s lack of earnings history, the deferred tax asset has been fully offset by a valuation allowance. The valuation allowance increased (decreased) by approximately $844,750 and $93,450 in the years ended September 30, 2013 and 2012, respectively.

As of September 30, 2013, the Company filedhad a Current Report on Form 8-K withfederal and state net operating loss carry forward in the SEC disclosing that on December 31, 2012, Mr. William M. Wright (“Mr. Wright”) resigned as Chairman and Chief Executive Officeramount of approximately $3,183,000 which expires in the Company. Mr. Wright shall remain as Executive Vice President, Chief Financial Officer and a member of the Board.year 2033.

 

On January 8,NOTE 16 –DISCONTINUED OPERATIONS

In March 2013 the Company filed a Current Report on Form 8-K with the SEC disclosing that on December 31, 2012, Mr. Tracy Bushnell resigned from his position as a member of the Board.

On January 8, 2013, the Company filed a Current Report on Form 8-K with the SEC disclosing that on December 31, 2012, Mr. Duane Spader was appointed as the Company’s Chief Executive Officer, President and Chairman of the Board.

On January 8, 2013, the Company filed a Current Report on Form 8-K with the SEC disclosing that on January 7, 2013, the Company filed a Certificate of Designation with the Nevada Secretary of Stateoperating subsidiary FOCUS ceased operations due to designate the rights and preferences of Series B Preferred.

On January 8, 2013, the Company filed a Current Report on Form 8-K with the SEC disclosing that effective on the closing date, the Company shall issue 4,850,000 shareschange in management. FOCUS represented less than 0.1% of the Company’s Series B Preferred to Verity, which shall carry voting rights equal to approximately 86% ofrevenues in 2013 and 7% in 2012. The discontinued operations are reported in these financial statements as for the outstanding shares of the Company’s common stock.

years ended September 30, 2013 and 2012 as follows:

 

F-16

Exhibit No.		Description
2.1		Form of Share Exchange Agreement, dated December 31, 2012, by and among AquaLiv Technologies, Inc., Verity Farms II, Inc., AquaLiv, Inc. and Focus Systems, Inc. (as filed as Exhibit 2.1 to the Company Current Report on Form 8-K, filed with the SEC on January 8, 2013, and incorporated herein by reference)
3.1		Articles of Incorporation (as filed as Exhibit 3.1 to the Company’s Registration Statement on Form SB-2, filed with the SEC on November 13, 2007, and incorporated herein by reference)
3.2		Bylaws (as filed as Exhibit 3.2 to the Company’s Quarterly Report on Form 10-Q, filed with the SEC on September 2, 2008, and incorporated herein by reference)
3.3		Series B Preferred Stock Certificate of Designation *
10.1		Infrared Systems International 2010 Incentive Compensation Plan (as filed as Exhibit 4.1 to the Company’s Registration Statement on Form S-8 on July 9, 2010, and incorporated herein by reference)
10.2		Drawdown Equity Financing Agreement, dated April 27, 2012, by and between AquaLiv Technologies, Inc. and Auctus Private Equity Fund, LLC (as filed as Exhibit 10.2 to the Company’s Registration Statement on Form S-1/A, Amendment No. 1, filed with the SEC on October 10, 2012, and incorporated herein by reference)
10.3		Registration Rights Agreement, dated April 27, 2012, by and between AquaLiv Technologies, Inc. and Auctus Private Equity Fund, LLC (as filed as Exhibit 10.3 to the Company’s Registration Statement on Form S-1/A, Amendment No. 1, filed with the SEC on October 10, 2012, and incorporated herein by reference)
10.4		Acquisition Agreement, dated November 30, 2010, by and among Infrared Systems International, AquaLiv, Inc. and Craig Hoffman, individually (as filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on December 20, 2010, and incorporated herein by reference)
10.5		Acquisition Agreement, dated April 19, 2010, by and among Infrared Systems International, Focus Systems, Inc. and Propalms, Inc. (as filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on April 21, 2010, and incorporated herein by reference)
10.6		Share Purchase Agreement, dated March 24, 2010, by and among Infrared Systems International, Take Flight Equities, Inc., Propalms, Inc., William M. Wright III, individually, and Gary E. Ball, individually (as filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the SEC on March 30, 2010, and incorporated herein by reference)
10.7		Securities Purchase Agreement, dated April 27, 2012, by and between AquaLiv Technologies, Inc. and TCA Global Credit Master Fund, LP (as filed as Exhibit 10.7 to the Company’s Registration Statement on Form S-1/A, Amendment No. 1, filed with the SEC on October 10, 2012, and incorporated herein by reference)
10.8		Senior Secured, Convertible, Redeemable Debenture, dated as of April 27, 2012, issued by AquaLiv Technologies, Inc. in favor of TCA Global Credit Master Fund, LP (as filed as Exhibit 10.8 to the Company’s Registration Statement on Form S-1/A, Amendment No. 1, filed with the SEC on October 10, 2012, and incorporated herein by reference)
10.9		Security Agreement, dated April 27, 2012, by and between Focus Systems, Inc. and TCA Global Credit Master Fund, LP (as filed as Exhibit 10.9 to the Company’s Registration Statement on Form S-1/A, Amendment No. 1, filed with the SEC on October 10, 2012, and incorporated herein by reference)
10.10		Security Agreement, dated April 27, 2012, by and between AquaLiv Technologies, Inc. and TCA Global Credit Master Fund, LP (as filed as Exhibit 10.10 to the Company’s Registration Statement on Form S-1/A, Amendment No. 1, filed with the SEC on October 10, 2012, and incorporated herein by reference)
10.11		First Pledge and Escrow Agreement, dated April 27, 2012, by and between AquaLiv Technologies, Inc. and TCA Global Credit Master Fund, LP, with the joinder of David Kahan P.A., as escrow agent (as filed as Exhibit 10.11 to the Company’s Registration Statement on Form S-1/A, Amendment No. 1, filed with the SEC on October 10, 2012, and incorporated herein by reference)
10.12		Second Pledge and Escrow Agreement, dated April 27, 2012, by and between AquaLiv Technologies, Inc. and TCA Global Credit Master Fund, LP, with the joinder of David Kahan P.A., as escrow agent (as filed as Exhibit 10.12 to the Company’s Registration Statement on Form S-1/A, Amendment No. 1, filed with the SEC on October 10, 2012, and incorporated herein by reference)
10.13		Guaranty Agreement, dated April 27, 2012, made by Focus Systems, Inc. in favor of TCA Global Credit Master Fund, LP (as filed as Exhibit 10.13 to the Company’s Registration Statement on Form S-1/A, Amendment No. 1, filed with the SEC on October 10, 2012, and incorporated herein by reference)
31.1		Certification by the Principal Executive Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))*
31.2		Certification by the Principal Financial Officer of Registrant pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (Rule 13a-14(a) or Rule 15d-14(a))*
32.1		Certification by the Principal Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*
32.2		Certification by the Principal Financial Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002*

(17)

Table of Contents

REVENUES:
Sales		$	1,922			$	26,555
Cost of sales			-				8,930
Gross profit (loss)			1,922				17,625
EXPENSES:
Selling, general and administrative expenses			-				(5,111	)
Professional Fees			275				116
Interest expense			1,414				8,779
Loss on discontinued operations			8,032				-
Net Income/(Loss)		$	(7,799	)		$	13,841

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

				AQUALIV TECHNOLOGIES, INC.Verity Corp.
Date: January 14, 2013	2014	By:	/s/ Duane Spader	/s/ RICHARD KAMOLVATHIN
	Name:			Name: Duane Spader	Richard Kamolvathin
	Title:			Title: Chief Executive Officer (Principal (Principal Executive Officer)
Date: January 14, 2013	2014	By:	/s/ William M. Wright	/s/ KEN WRIGHT
	Name:			Name: William M.Ken Wright
	Title:			Title: Chief Financial Officer (Principal (Principal Financial Officer) (Principal (Principal Accounting Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name		Position		Date
/s/ Duane SpaderRICHARD KAMOLVATHIN		President and Chief Executive Officer, Chairmanand Director		January 14, 20132014
Duane SpaderRichard Kamolvathin
/s/ William M. WrightDUANE SPADER		Chief Financial Officer, Director		January 14, 20132014
William M. Wright Duane Spader
/s/ VERLYN SNELLER		Director
Verlyn Sneller				January 14, 2014
/s/ RONALD KAUFMANN		Director		January 14, 2014
Ronald Kaufmann