| OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
1 - OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The
Company Veritec,
Inc. (Veritec) was formed in the State of Nevada on September 8, 1982. Veritec
is primarily engaged in the development, sales, and licensing of products and providing services related to its mobile banking solutions. As
a Cardholder Independent Sales Organization, Veritec is able to promote and sell Visa-branded card programs. As a Third-Party Servicer,
Veritec provides back-end cardholder transaction processing services for Visa-branded card programs on behalf of its sponsoring bank.
Veritec has a portfolio of five United States and eight foreign patents. In addition, we have seven U.S. and twenty-eight foreign
pending patent applications. Veritec has had agreements with various banks in the past and is currently seeking a bank to sponsor its
Prepaid Card programs. On
December 31, 2015, the Company sold all of its assets of its barcode technology, which was comprised solely of its intellectual property,
to The Matthews Group, a related party (see Note 9). The Company subsequently entered into a management services agreement with The Matthews
Group to manage all facets of the barcode technology operations through June 30, 2022. The Company earns a fee of 35% of all revenues
billed up to June 30, 2022, and recognizes management fee revenue as services are performed. COVID-19
Considerations The
Company is subject to risks and uncertainties as a result of the COVID-19 pandemic. The extent of the impact of the COVID-19 pandemic
on the Company’s business is highly uncertain and difficult to predict, as the responses that the Company, other businesses and
governments are taking continue to evolve. Furthermore, capital markets and economies worldwide have also been negatively impacted by
the COVID-19 pandemic, and it is possible that the COVID-19 pandemic could cause a local, national and/or global economic recession.
Policymakers around the globe have responded with fiscal policy actions to support the economy as a whole, but it is presently unknown
whether and to what extent further fiscal actions will continue. The magnitude and overall effectiveness of these actions remain uncertain. The
Company believes that its Mobile Banking revenues have been negatively affected due to the reduction in customer spending, which negatively
impacts the amount of fees earned by the Company from its customers. The Company is also currently experiencing a decline in revenues
earned under the management services agreement with The Matthews Group, as The Matthews Group’s customer orders have been negatively
impacted by the effects of COVID-19. The severity of the impact of the COVID-19 pandemic on the Company’s business will continue
to depend on a number of factors, including, but not limited to, the duration and severity of the pandemic and the extent and severity
of the impact on the Company’s customers, service providers and suppliers, all of which are uncertain and cannot be predicted.
As of the date of issuance of the Company’s financial statements, the extent to which the COVID-19 pandemic may in the future materially
impact the Company’s financial condition, liquidity or results of operations is uncertain. Principles
of Consolidation The
accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries Veritec Financial
Systems, Inc., Tangible Payment Systems, Inc., and Public Bell, Inc. (collectively the “Company”). Intercompany transactions
and balances were eliminated in consolidation. Use
of Estimates The
preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses
during the reporting period. Those estimates and assumptions include estimates for reserves of uncollectible accounts, analysis of impairments
of long-lived assets, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and valuation
of deferred tax assets. Actual results could differ from those estimates. Cash
and cash equivalents Investments
with original maturities of three months or less are considered to be cash equivalents. The Company held no cash equivalents as of June
30, 2021 and 2020. Accounts
Receivable The
Company grants uncollateralized credit to customers but requires deposits on unique orders. Management periodically reviews its accounts
receivable and provides an allowance for doubtful accounts after analyzing the age of the receivable, payment history and prior experience
with the customer. The estimated loss that management believes is probable is included in the allowance for doubtful accounts. While
the ultimate loss may differ, management believes that any additional loss will not have a material impact on the Company's financial
position. Due to uncertainties in the settlement process, however, it is at least reasonably possible that management's estimate will
change during the near term. Based on management’s assessment, no allowance for doubtful accounts was considered necessary at June
30, 2021, or 2020. Revenue
Recognition Revenues
for the Company are classified into management fee revenue and mobile banking technology. The
Company recognizes revenue in accordance with the Financial Accounting Standards Board’s (“FASB”) Accounting Standards
Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers Mobile
Banking Technology Revenue The
Company, as a merchant payment processor and a distributor, recognizes revenue from transaction fees charged to cardholders for the use
of its issued mobile debit cards. The fees are recognized on a monthly basis after all cardholder transactions have been summarized and
reconciled with third party processors. Other
Revenue, Management Fee - Related Party On
September 30, 2015, the Company sold all of its assets of its Barcode Technology, which was comprised solely of its intellectual property,
to The Matthews Group (a related party, see Note 9). The Company subsequently entered into a management services agreement with The Matthews
Group to manage all facets of the barcode technology operations through June 30, 2022. The Company earned a fee of 35% of all revenues
billed up to June 30, 2022. The Company recognizes management fee revenue as services are performed. Disaggregation
of Net Sales The
following table shows the Company’s disaggregated net sales by product type:
Disaggregated revenue
Fiscal
years ended June 30,
2021 2020
Mobile banking
technology revenue $ 93,000 $ 100,000
Other
revenue, management fee - related party 296,000 338,000
Total
revenue $ 389,000 $ 438,000 The
following table shows the Company’s disaggregated net sales by customer type for our Mobile banking technology:
Fiscal
years ended June 30,
2021 2020
Medical $ 60,000 $ 63,000
Associations 12,000 11,000
Education 12,000 12,000
Other 9,000 14,000
Total
revenue $ 93,000 $ 100,000 During
the years ended June 30, 2021 and 2020, all of the Company’s Mobile banking technology revenues were earned in the United States
of America. Other
revenue, management fee - related party revenue was $ 296,000 338,000 Income
Taxes The
Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary
differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences
between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Loss
per Common Share Basic
earnings (loss) per share are computed by dividing the net income (loss) applicable to Common Stockholders by the weighted average number
of shares of Common Stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss)
applicable to Common Stockholders by the weighted average number of common stock outstanding plus the number of additional common stock
that would have been outstanding if all dilutive potential common stock had been issued, using the treasury stock method. For
the years ended June 30, 2021 and 2020, the calculations of basic and diluted loss per share are the same because potential dilutive
securities would have an anti-dilutive effect. As
of June 30, 2021 and 2020, we excluded the outstanding securities summarized below, which entitle the holders thereof to acquire shares
of common stock, from our calculation of earnings per share, as their effect would have been anti-dilutive.
Summary of securities excluded from EPS calculation
June
30,
2021 2020
Series H Preferred
Stock 10,000 10,000
Convertible Notes Payable 24,144,716 21,779,065
Options 3,400,000 3,650,000
Total 27,554,716 25,439,065 Stock-Based
Compensation The
Company periodically issues stock-based compensation to officers, directors, contractors and consultants for services rendered. Such
issuances vest and expire according to terms established at the issuance date. Stock-based
payments to officers, directors, employees, and for acquiring goods and services from nonemployees, which include grants of employee
stock options, are recognized in the financial statements based on their fair values in accordance with ASC 718, Compensation-Stock
Compensation Fair
Value of Financial Instruments The
Company determines the fair value of its assets and liabilities based on the exchange price in U.S. dollars that would be received for
an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the
use of observable inputs and minimize the use of unobservable inputs. The Company uses a fair value hierarchy with three levels of inputs,
of which the first two are considered observable and the last unobservable, to measure fair value:
• Level 1 — Quoted
prices in active markets for identical assets or liabilities.
• Level 2 — Inputs,
other than Level 1, that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities;
quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data
for substantially the full term of the assets or liabilities.
• Level 3 — Unobservable
inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. The
carrying amounts of financial instruments such as cash, accounts receivable, and accounts payable and accrued liabilities, approximate
the related fair values due to the short-term maturities of these instruments. The carrying values of loans and notes payable approximate
their fair values due to the fact that the interest rates on these obligations are based on prevailing market interest rates. Concentrations During
the years ended June 30, 2021 and 2020, the Company had one customer, a related party, that represented 76 77 Segments The
Company operates in one segment, the mobile financial banking industry. In accordance with the “Segment Reporting” Topic
of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who
reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance,
which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly
and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds
material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to
their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing
and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting”
can be found in the accompanying consolidated financial statements Recently
Issued Accounting Standards In
June 2016, the FASB issued ASU No. 2016-13, Credit Losses - Measurement of Credit Losses on Financial Instruments (“ASC 326”).
The standard significantly changes how entities will measure credit losses for most financial assets, including accounts and notes receivables.
The standard will replace today’s “incurred loss” approach with an “expected loss” model, under which companies
will recognize allowances based on expected rather than incurred losses. Entities will apply the standard’s provisions as a cumulative-effect
adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. As small business
filer, the standard will be effective for us for interim and annual reporting periods beginning after December 15, 2022. The Company
is currently assessing the impact of adopting this standard on the Company’s financial statements and related disclosures. In
August 2020, the FASB issued ASU No. 2020-06 (“ASU 2020-06”) “Debt—Debt with Conversion and Other Options (Subtopic
470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40).” ASU 2020-06 reduces the number
of accounting models for convertible debt instruments by eliminating the cash conversion and beneficial conversion models. The diluted
net income per share calculation for convertible instruments will require the Company to use the if-converted method. For contracts in
an entity’s own equity, the type of contracts primarily affected by this update are freestanding and embedded features that are
accounted for as derivatives under the current guidance due to a failure to meet the settlement conditions of the derivative scope exception.
This update simplifies the related settlement assessment by removing the requirements to (i) consider whether the contract would be settled
in registered shares, (ii) consider whether collateral is required to be posted, and (iii) assess shareholder rights. ASU 2020-06 is
effective January 1, 2024, for the Company and the provisions of this update can be adopted using either the modified retrospective method
or a fully retrospective method. Early adoption is permitted, but no earlier than January 1, 2021, including interim periods within that
year. The Company is currently assessing the impact of adopting this standard on the Company’s financial statements and related
disclosures. In
May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50),
Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options Other
recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public
Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's
present or future financial statements. |
