| OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE
1 – OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The
Company Veritec,
Inc. (Veritec or the Company) 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 6). 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, 2024. The Company earns a fee of 35% of all revenues
billed up to March 31, 2024, and recognizes management fee revenue as services are performed. Basis
of Presentation The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with United States of America generally accepted accounting principles (“GAAP”)
for interim financial information and with the instructions to Form 10-Q. Accordingly, the condensed consolidated financial statements
do not include all of the information and footnotes required for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating
results for the nine months ended March 31, 2024, are not necessarily indicative of the results that may be expected for the year ending
June 30, 2024. The balances as of June 30, 2023 are derived from the Company’s audited consolidated financial statements as of
and for the year ended June 30, 2023, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange
Commission (the “SEC”) on October 13, 2023. These financial statements should be read in conjunction with that report. The accompanying condensed consolidated financial statements
include the accounts of Veritec and its wholly-owned subsidiaries, Veritec Financial Systems, Inc., Tangible Payment Systems, Inc., and
Public Bell, Inc. Inter-company transactions and balances were eliminated in consolidation. Going
Concern The
accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which
contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the nine months ended
March 31, 2024, the Company incurred a net loss of $ 849,000
and used cash in operating activities of $ 403,000 ,
and on March 31, 2024, the Company had a stockholders’ deficit of $ 9,519,000 .
In addition, as of March 31, 2024, the Company is delinquent in payment of $ 788,000
of its convertible notes and notes payable. These
factors, among others, raise substantial doubt about our ability to continue as a going concern within one year of the date that the
financial statements are issued. In
addition, the Company’s independent registered public accounting firm, in its report on the Company’s June 30, 2023 financial
statements, has raised substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial
statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern. The
Company believes it will require additional funds to continue its operations through fiscal 2024 and to continue to develop its existing
projects and plans to raise such funds by finding additional investors to purchase the Company’s securities, generating sufficient
sales revenue, implementing dramatic cost reductions or any combination thereof. There is no assurance that the Company can be successful
in raising such funds, generating the necessary sales, or reducing major costs. Further, if the Company is successful in raising such
funds from sales of equity securities, the terms of these sales may cause significant dilution to existing holders of common stock. The
condensed consolidated financial statements do not include any adjustments that may result from this uncertainty. Use
of Estimates The preparation of condensed 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, 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. 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 (Topic 606) (“ASC 606"). The underlying principle
of ASC 606 is to recognize revenue to depict the transfer of goods or services to customers at the amount expected to be collected. ASC
606 creates a five-step model that requires entities to exercise judgment when considering the terms of contracts, which includes (1)
identifying the contracts or agreements with a customer, (2) identifying the Company’s performance obligations in the contract
or agreement, (3) determining the transaction price, (4) allocating the transaction price to the separate performance obligations, and
(5) recognizing revenue as each performance obligation is satisfied. The Company only applies the five-step model to contracts when it
is probable that the Company will collect the consideration it is entitled to in exchange for the services it transfers to its clients. 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 6). 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, 2024. The Company earned a fee of 35% of all revenues
billed up to March 31, 2024. 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 customer type for the three and nine months ended March 31, 2024 and 2023:
Disaggregate
Net Sales
Three Months Ended Nine Months Ended
2024 2023 2024 2023
Medical $ 35,000 $ 12,000 $ 89,000 $ 34,000
Banking 3,000 ` 15,000 11,000 71,000
Associations 3,000 3,000 9,000 9,000
Education 3,000 3,000 9,000 9,000
Other revenue, management fee related party 92,000 54,000 183,000 172,000
Total revenue $ 136,000 $ 87,000 $ 301,000 $ 295,000 During the nine months ended March 31, 2024 and 2023, 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 $ 92,000
183,000 54,000
172,000 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 expenses, approximate the
related fair values due to the short-term maturities of these instruments. The carrying values of convertible notes 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. Net
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 shares outstanding plus the number of additional common shares
that would have been outstanding if all dilutive potential common shares had been issued, using the treasury stock method. Potential
common shares are excluded from the computation as their effect is antidilutive. For
the periods ended March 31, 2024 and 2023, the calculations of basic and diluted loss per share are the same because potential dilutive
securities would have an anti-dilutive effect. For the periods ended March 31, 2024, and 2023, the Company
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
As
of March 31,
2024 2023
Series
H Preferred Stock 10,000 10,000
Convertible
Notes Payable 32,061,338 26,827,207
Options 550,000 900,000
Total 32,621,388 27,737,207 Concentrations During the three months ended March 31, 2024, the Company had
one customer that represented 68 26 14 12 62 No other customer represented more than 10% of our revenues. During the nine months ended March 31, 2024, the Company had
one customer that represented 61 30 During the six months ended March 31, 2023, the Company had three major customers,
one that represented 24 %
of our revenue, one that represented 13 %
of our revenue, and one, a related party, that represented 57 %
of our revenues. At March 31, 2024 and June 30, 2023, one customer represented
substantially all of the Company’s accounts receivable balance as of that date. 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 condensed consolidated financial statements. Recently
Issued Accounting Standards In November 2023, the Financial Accounting Standards Board (“FASB”)
issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosure, which is intended to improve reportable
segment disclosure requirements, primarily through enhanced disclosures about significant segment expense categories that are regularly
provided to the chief operating decision maker and included in each reported measure of a segment’s profit or loss. The update
also requires all annual disclosures about a reportable segment’s profit or loss and assets to be provided in interim periods and
for entities with a single reportable segment to provide all the disclosures required by ASC 280, Segment Reporting, including the
significant segment expense disclosures. The Company adopted ASU 2023-07 beginning January 1, 2024. The Company does not
believe the impact of the new guidance and related codification improvements had a material impact to its financial position, results
of operations and cash flows. 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. |
