Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2023

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 000-15113

VERITEC, INC.

(Exact name of registrant as specified in its charter)

Nevada		95-3954373
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

2445 Winnetka Avenue N.

Golden Valley, MN 55427

(Address of principal executive offices) (zip code)

(763) 253-2670

(Registrant’s telephone number, including area code)

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock, par value $0.01 per share	VRTC	OTC Pink

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 past 90 days.

Yes ☒ 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 whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐

Accelerated filer ☐

Non-accelerated filer ☐

Smaller reporting company ☒

(Do not check if a smaller reporting company)

Emerging growth company ☐

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

Yes ☐ No ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) 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 ☐ No ☒

The number of shares of registrant’s common stock outstanding as of February 14, 2024, was 39,988,007.

VERITEC, INC. AND SUBSIDIARIES

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	F-1
Item 1. Condensed Financial Statements	F-1
Condensed Consolidated Balance Sheets – December 31, 2023 (Unaudited) and June 30, 2023	F-1
Condensed Consolidated Statements of Operations for the three and six months ended December 31, 2023 and 2022 (Unaudited)	F-2
Condensed Consolidated Statements of Changes in Stockholders’ Deficit for the three and six months ended December 31, 2023 and 2022 (Unaudited)	F-3
Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2023 and 2022 (Unaudited)	F-4
Notes to Condensed Consolidated Financial Statements three and six months ended December 31, 2023 and 2022 (Unaudited)	F-5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	1
Item 3. Quantitative and Qualitative Disclosures About Market Risk	7
Item 4. Controls and Procedures	7
PART II – OTHER INFORMATION	8
Item 1. Legal Proceedings	8
Item 1A. Risk Factors	8
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	8
Item 3. Defaults Upon Senior Securities	8
Item 4. Mine Safety Disclosures	8
Item 5. Other Information	8
Item 6. Exhibits	8

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report include forward-looking statements. 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 forward-looking statements.

In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “proposed,” “intended,” or “continue” or the negative of these terms or other comparable terminology. You should read statements that contain these words carefully because they discuss our expectations about our future operating results or our future financial condition or state other “forward-looking” information. There may be events in the future that we are not able to accurately predict or control. Before you invest in our securities, you should be aware that the occurrence of any of the events described in this Quarterly Report could substantially harm our business, results of operations and financial condition, and that upon the occurrence of any of these events, the trading price of our securities could decline, and you could lose all or part of your investment. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, growth rates, and levels of activity, performance, or achievements. We are under no duty to update any of the forward-looking statements after the date of this Quarterly Report to conform these statements to actual results.

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

VERITEC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS


	December 31, 2023			June 30, 2023
		(Unaudited)
Assets
Current Assets:
Cash	$	59,000		$	61,000
Accounts receivable		46,000			7,000
Prepaid expenses and other current assets		6,000			6,000
Total Assets	$	111,000		$	74,000

Liabilities and Stockholders' Deficit
Current Liabilities:
Accounts payable		300,000			289,000
Accounts payable, related party		119,000			119,000
Accrued expenses		60,000			60,000
Customer deposits		29,000			29,000
Convertible notes and notes payable ($555,000 and $525,000 in default)		581,000			570,000
Convertible notes and notes payable, related parties ($247,000 and $242,000 in default)		7,878,000			7,322,000
Total Current Liabilities		8,967,000			8,389,000
Deferred revenues		200,000			200,000
Contingent earnout liability		155,000			155,000
Total Liabilities		9,322,000			8,744,000

Commitments and contingencies

Stockholders' Deficit:
Convertible Preferred stock, par value $1.00; 10,000,000 shares authorized; 276,000 shares of Series H authorized; 1,000 shares issued and outstanding		1,000			1,000
Common Stock, par value $.01; 150,000,000 shares authorized; 39,988,007 and 39,988,007 shares issued and outstanding, respectively		400,000			400,000
Common stock to be issued, 145,000 shares to be issued		12,000			12,000
Additional paid in capital		18,143,000			18,143,000
Accumulated deficit		(27,767,000	)		(27,226,000	)
Total Stockholders' Deficit		(9,211,000	)		(8,670,000	)
Total Liabilities and Stockholders' Deficit	$	111,000		$	74,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-1

VERITEC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three and Six Months Ended December 31, 2023 and 2022

(Unaudited)


	Three Months Ended						Six Months Ended
	December 31,						December 31,
	2023			2022			2023			2022
Revenue:
Mobile banking technology revenue	$	53,000		$	70,000		$	74,000		$	90,000
Other revenue, management fee - related party		54,000			37,000			91,000			118,000
Total revenue		107,000			107,000			165,000			208,000

Costs and operating expenses:
Cost of revenue		31,000			48,000			73,000			98,000
Selling, general and administrative expenses (1)		174,000			209,000			365,000			451,000
Total costs and operating expenses		205,000			257,000			438,000			549,000

Loss from operations		(98,000	)		(150,000	)		(273,000	)		(341,000	)

Other expenses:
Interest expense (2)		(137,000	)		(122,000	)		(268,000	)		(242,000	)
Total other expenses		(137,000	)		(122,000	)		(268,000	)		(242,000	)

Net loss	$	(235,000	)	$	(272,000	)	$	(541,000	)	$	(583,000	)

Net loss per common share - basic and diluted		(0.01	)		(0.01	)		(0.01	)		(0.01	)

Weighted average number of common shares outstanding - basic and diluted		39,988,007			39,988,007			39,988,007			39,988,007

(1) Includes expenses to related party	$	13,000		$	14,000		$	26,000		$	26,000
(2) Includes interest expense to related parties	$	130,000		$	117,000		$	256,000		$	232,000

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-2

VERITEC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY


	Preferred Stock			Common Stock
	Shares		Amount	Shares		Amount		Common Stock to Be Issued		Additional Paid-In Capital		Accumulated Deficit			Stockholders’ Deficit
Balance, September 30, 2023(unaudited)	1,000	$	1,000	39,988,007	$	400,000	$	12,000	$	18,143,000	$	(27,532,000	)	$	(8,976,000	)
Net loss for the period	—		—	—		—		—		—		(235,000	)		(235,000	)
Balance, December 31, 2023 (unaudited)	1,000	$	1,000	39,988,007	$	400,000	$	12,000	$	18,143,000	$	(27,767,000	)	$	(9,211,000	)
Balance, June 30, 2023	1,000	$	1,000	39,988,007	$	400,000	$	12,000	$	18,143,000	$	(27,226,000	)	$	(8,670,000	)
Net loss for the period	—		—	—		—		—		—		(541,000	)		(541,000	)
Balance, December 31, 2023 (unaudited)	1,000	$	1,000	39,988,007	$	400,000	$	12,000	$	18,143,000	$	(27,767,000	)	$	(9,211,000	)
Balance, September 30, 2022 (unaudited)	1,000	$	1,000	39,988,007	$	400,000	$	12,000	$	18,143,000	$	(26,303,000	)	$	(7,747,000	)
Net loss for the period	—		—	—		—		—		—		(272,000	)		(272,000	)
Balance, December 31, 2022 (unaudited)	1,000	$	1,000	39,988,007	$	400,000	$	12,000	$	18,143,000	$	(26,575,000	)	$	(8,019,000	)
Balance, June 30, 2022	1,000	$	1,000	39,988,007	$	400,000	$	12,000	$	18,143,000	$	(25,992,000	)	$	(7,436,000	)
Net loss for the period	—		—	—		—		—		—		(583,000	)		(583,000	)
Balance, December 31, 2022 (unaudited)	1,000	$	1,000	39,988,007	$	400,000	$	12,000	$	18,143,000	$	(26,575,000	)	$	(8,019,000	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-3

VERITEC, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)


	Six Months Ended
	December 31,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(541,000	)	$	(583,000	)
Adjustments to reconcile net loss to cash used in operating activities:
Interest accrued on notes payable		268,000			242,000
Changes in operating assets and liabilities:
Accounts receivable		(39,000	)		—
Customer deposits		—			1,000
Deferred revenue		—			200,000
Accounts payable		11,000			17,000
Accounts payable - related party		—			7,000
Accrued expenses		—			(1,000	)
Net cash used in operating activities		(301,000	)		(117,000	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - related party		299,000			234,000
Net cash provided by financing activities		299,000			234,000

NET INCREASE (DECREASE) IN CASH		(2,000	)		117,000
CASH AT BEGINNING OF PERIOD		61,000			66,000
CASH AT END OF PERIOD	$	59,000		$	183,000

Supplemental disclosures of cash flow information:
Cash paid for income taxes	$	—		$	—
Cash paid for interest	$	—		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

F-4

VERITEC, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Three and Six Months Ended December 31, 2023 and 2022
(Unaudited)

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 December 31, 2023, 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 period ended December 31, 2023, 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 period ended December 31, 2023, the Company incurred a net loss of $541,000 and used cash in operating activities of $301,000, and on December 31, 2023, the Company had a stockholders’ deficit of $9,211,000. In addition, as of December 31, 2023, the Company is delinquent in payment of $802,000 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 Compant’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.

F-5

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.

F-6

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 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 earned a fee of 35% of all revenues billed up to December 31, 2023. 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:

Disaggregate Net Sales
	Three Months Ended				Six Months Ended
	2023		2022		2023		2022
Medical	$	38,000	$	14,000	$	54,000	$	28,000
Banking		8,000	`	50,000		8,000		50,000
Associations		3,000		3,000		6,000		6,000
Education		4,000		3,000		6,000		6,000
Other revenue, management fee related party		54,000		37,000		91,000		118,000
Total revenue	$	107,000	$	107,000	$	165,000	$	208,000

During the six months ended December 31, 2023 and 2022, 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 $54,000 and $91,000 and $37,000 and $118,000, for the three and six months ended December 31, 2023 and 2022, respectively, and realized from our management services agreement with The Matthews Group, a related party, which requires us to manage The Matthews Group’s barcode technology operations. The Matthews Group’s barcode technology customers are primarily manufacturing companies located in China.

F-7

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 period ended December 31, 2023 and 2022, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect.

F-8

As of December 31, 2023, and 2022, 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.


	As of December 31,
	2023		2022
Series H Preferred Stock		10,000		10,000
Convertible Notes Payable		29,832,306		26,443,994
Options		550,000		900,000
Total		30,392,306		27,353,994

Concentrations

During the three months ended December 31, 2023, the Company had one customer that represented 50% (related party) of our revenues, and one customer that represented 33% of our revenues. During the three months ended December 31, 2022, the Company had three major customers, one that represented 47% of our revenue, one that represented 13% of our revenue, and one, a related party, that represented 35% of our revenues.

No other customer represented more than 10% of our revenues.

During the six months ended December 31, 2023, the Company had one customer that represented 55% (related party) of our revenues, and one customer that represented 33% of our revenues. During the six months ended December 31, 2022, 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. No other customer represented more than 10% of our revenues.

At December 31, 2023, one customer represented 92.8% of the Company’s accounts receivable balance as of that date. No other customer represented more than 10% of our accounts receivable at December 31, 2023 and June 30, 2023.

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 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.

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.

F-9

NOTE 2 – CONTINGENT EARNOUT LIABILITY

On December 31, 2014, the Company acquired certain assets and liabilities of the Tangible Payments LLC. A portion of the purchase price for Tangible Payments LLC was an earnout payment of $155,000. The earnout payment is payable on a monthly basis from the net profits derived from the acquired assets commencing three months after the closing. The earnout payment is accelerated and the balance of the earnout payment shall be due in full at such time as Veritec receives equity investments aggregating $1,300,000. As of December 31, 2023, there was no net profit derived from the acquired assets, and the Company had not yet received the required equity investments. Accordingly, no payments were made on the earnout.

NOTE 3 – CONVERTIBLE NOTES AND NOTES PAYABLE

Convertible notes and notes payable

Convertible notes and notes payable includes principal and accrued interest and consist of the following at December 31, 2023 and June 30, 2023:


	December 31, 2023		June 30, 2023
(a) Unsecured convertible notes ($21,000 and $21,000 in default)	$	67,000	$	66,000
(b) Notes payable (in default)		484,000		475,000
(c) Notes payable (in default)		30,000		29,000
Total notes-third parties	$	581,000	$	570,000

F-10

(a) The notes are unsecured, convertible into common stock at amounts ranging from $0.08 to $0.30 per share, bear interest at rates ranging from 5% to 8% per annum, were due through 2011 and are in default or due on demand.

At June 30, 2023, convertible notes totaled $66,000. During the six months ended December 31, 2023, interest of $1,000 was added to the principal resulting in a balance owed of $67,000 at December 31, 2023. On December 31, 2023, $21,000 of the convertible notes were in default and convertible at a conversion price of $0.30 per share into 70,619 shares of the Company’s common stock. The balance of $46,000 is due on demand and convertible at a conversion price of $0.08 per share into 576,310 shares of the Company’s common stock.

(b) The notes are either secured by the Company’s intellectual property or unsecured and bear interest ranging from 6.5% to 10% per annum, were due in 2012, and are in default.

At June 30, 2023, the notes totaled $475,000. During the six months ended December 31, 2023, interest of $9,000 was added to principal resulting in a balance owed of $484,000 at December 31, 2023. At December 31, 2023, $435,000 of notes are secured by the Company’s intellectual property and $49,000 of notes are unsecured.

At June 30, 2023, the notes totaled $29,000. During the six months ended December 31, 2023, interest of $1,000 was added to the principal resulting in a balance owed of $30,000 at December 31, 2023.

Convertible notes and notes payable-related parties

Convertible and notes payable-related parties include principal and accrued interest and consist of the following at December 31, 2023 and June 30, 2023:


	December 31, 2023		June 30, 2023
(a) Convertible notes - The Matthews Group	$	2,027,000	$	1,970,000
(b) Notes payable - The Matthews Group		5,331,000		4,988,000
(c) Convertible notes-other related parties ($244,000 and $242,000 in default)		520,000		364,000
Total notes-related parties	$	7,878,000	$	7,322,000

(a) The notes are unsecured, convertible into common stock at $0.08 per share, bear interest at rates ranging from 8% to 10% per annum and are due on demand.

The Matthews Group is a related party (see Note 6) and is owned 50% by Ms. Van Tran, the Company’s CEO, and 50% by Larry Johanns, a significant shareholder of the Company. At June 30, 2023, convertible notes due to The Matthews Group totaled $1,970,000. During the six months ended December 31, 2023, $57,000 of interest was added to principal, resulting in a balance payable at December 31, 2023 of $2,027,000. At December 31, 2023, the notes are convertible at a conversion price of $0.08 per share into 25,337,787 shares of the Company’s common stock.

(b) The notes are unsecured, accrue interest at 10% per annum, and are due on demand. The notes were issued relating to a management services agreement with The Matthews Group (see Note 6) dated September 30, 2015.

At June 30, 2023, notes due to The Matthews Group totaled $4,988,000. During the six months ended December 31, 2023, $154,000 of notes payable were issued and interest of $189,000 was added to principal, resulting in a balance owed of $5,331,000 at December 31, 2023.

(c) The notes are due to a current and a former director, are unsecured, convertible into common stock at per share amounts ranging from $0.04 to $0.30, and bear interest at rates ranging from 8% to 10% per annum.

At June 30, 2023, convertible notes due to other related parties totaled $364,000. During the six months ended December 31, 2023, $145,000 of notes payable were issued and interest of $11,000 was added to principal, resulting in a balance owed of $520,000 at December 31, 2023. At December 31, 2023, $247,000 of the notes were due in 2010 and are in default, and $273,000 is due on demand. At December 31, 2023, $247,000 of the notes are convertible at a conversion price of $0.30 per share into 814,581 shares of the Company’s common stock, $93,000 of the notes are convertible at a conversion price of $0.09 per share into 1,099,847 shares of the Company’s common stock, and $180,000 of the notes are convertible at a conversion price of $0.04 per share into 4,507,292 shares of the Company’s common stock.

F-11

NOTE 4 - STOCKHOLDERS’ DEFICIT

Common Stock to be Issued

At December 31, 2023 and June 30, 2023, 145,000 shares of common stock with an aggregate value of $12,000 have not been issued and are reflected as common stock to be issued in the accompanying condensed consolidated financial statements.

NOTE 5 – STOCK OPTIONS

A summary of stock options as of December 31, 2023 is as follows:

Summary of Stock Options
	Number of Shares			Weighted Average Exercise Price
Outstanding at June 30, 2023		900,000		$	0.03
Granted		—			—
Forfeited		(350,000	)	$	(0.03	)
Outstanding at December 31, 2023		550,000		$	0.03
Exercisable at December 31, 2023		550,000		$	0.03

As of December 31, 2023, the Company had no outstanding unvested options with future compensation costs. The outstanding and exercisable stock options had intrinsic value on December 31, 2023 of approximately $16,000.

Additional information regarding options outstanding as of December 31, 2023, is as follows:


Options Outstanding and Exercisable at December 31, 2023
Exercise Price		Number of Shares Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
$	0.03		550,000		0.98	$	0.03

NOTE 6 – RELATED PARTY TRANSACTIONS

The Matthews Group is owned 50% by Ms. Tran, the Company’s CEO/Executive Chair and a director, and 50% by Larry Johanns, a significant stockholder of the Company. The Company has relied on The Matthews Group for funding (see Note 3).

Management Services Agreement and Related Notes Payable with Related Party

The Company’s Barcode Technology was invented by the founders of Veritec as a product identification system for identification and tracking of parts, components and products mostly in the liquid crystal display (LCD) markets and for secure identification documents, financial cards, medical records, and other high-security applications. On December 31, 2015, the Company sold all of its assets of its Barcode Technology comprised solely of its intellectual property to The Matthews Group. The Company then entered into a management services agreement with The Matthews Group to manage all facets of the barcode technology operations, on behalf of The Matthews Group, through June 30, 2024. The Matthews Group bears the risk of loss from the barcode operations and has the right to the residual benefits of the barcode operations.

F-12

In consideration of the services provided by the Company to The Matthews Group, the Company earns a fee of 35% of all revenues up to June 30, 2024, from the barcode technology operations. During the three and six months ended December 31, 2023 and 2022, the Company recorded management fee revenue related to this agreement of $54,000 and $91,000 and $37,000 and $81,000, respectively.

Additionally, pursuant to the management services agreement, all cash flow (all revenues collected less direct costs paid) of the barcode technology operations is retained by the Company and reflected as proceeds from unsecured notes payable due The Matthews Group. During the six months ended December 31, 2023 and 2022, cash flow loans of $154,000 and $234,000, respectively, were made to the Company at 10% interest per annum and due on demand. At December 31, 2023, cash flow loans of $5,331,000 are due to The Matthews Group (see Note 3).

Advances from Related Parties

From time to time, Ms. Tran, the Company’s CEO/Executive Chair, provides advances to finance the Company’s working capital requirements. As of December 31, 2023 and June 30, 2023, total advances from Ms. Tran amounted to $119,000 and $119,000, respectively, and have been presented as accounts payable, related party on the accompanying Consolidated Balance Sheets. The advances are unsecured, non-interest bearing, and due on demand.

Other Transactions with Related Parties

The Company leases its office facilities from Ms. Tran, the Company’s CEO/Executive Chair. For the three and six months ended December 31, 2023, lease payments to Ms. Tran totaled $13,000 and $26,000, respectively.

NOTE 7 – AGREEMENTS WITH NUGEN

On July 4, 2022, the Company entered a Memorandum of Understanding (the “MOU”) for the purpose of forming a strategic partnership between the Company and Nugen Universe, LLC (“Nugen”), a corporation located in Wrightsville Beach, North Carolina. Nugen seeks the Company to modify, create, or build a “private label” system for Nugen, with an initial interest in the Company’s blinxPay technology and Bio-ID verification system. Nugen paid the Company $50,000 at the date of the MOU signing and during the period ended December 31, 2022, the Company completed its performance obligations, and recorded the $50,000 payment as Mobile banking technology revenue during the period then ended. Nugen further agreed to pay the Company a 5% ongoing royalty for licensing the Company’s blinxPay technology and Bio-ID verification system. As of December 31, 2023, no royalties have been realized under the MOU.

On October 10, 2022, the Company entered into a License and Distributor Agreement (“License Agreement”) with Nugen. The License Agreement became effective on receipt of $200,000 in December 2022 and extends through August 31, 2027. The License Agreement grants Nugen a Worldwide license and distribution for the Company’s blinxPay Close-Loop Virtual Wallet and blinxPay Open-Loop Visa Debit and all hardware products of the Company. Per the terms of the License Agreement, Nugen agrees to pay the Company a one-time license payment of $1,000,000 for the right to market the Company’s products noted above, of which $200,000 was received by the Company in December 2022. The initial $200,000 has been recorded as deferred revenue in the Consolidated Balance Sheet. The deferred revenue balance of $200,000 at December 31, 2023, will begin being amortized to Mobile banking technology revenue starting once the Company has met its performance obligations under the License Agreement through the remaining term of the License Agreement, which expires on August 31, 2027. The remaining balance of $800,000 is scheduled to be paid as follows: $100,000 when the Company’s identifies a domestic sponsor bank, $350,000 to integrate the Company’s blinxPay software platform, and interface blinxPay with a sponsor foreign bank, and $350,000 on the completion of the final stage of testing, installation, and launch. In addition to the one-time license payment, Nugen agrees to pay a minimum monthly support fee plus 5% royalty from all sales of products noted above. As of December 31, 2023, no royalty related revenues have been realized under the License Agreement.

NOTE 8 – LEGAL PROCEEDINGS

On September 21, 2016, the Company entered into a settlement agreement with an individual who was a former officer of the Company. The individual in prior years was also issued 500,000 shares of common stock for services. The Company alleged that the individual used the Company’s intellectual property without approval. Under the terms of the settlement agreement, the individual agreed to relinquish a convertible note payable and unpaid interest aggregating $365,000 and return 500,000 shares of common stock previously issued to him. In turn, the Company agreed to release and discharge the individual against all claims arising on or prior to the date of the settlement agreement. As of December 31, 2023, the 500,000 shares have not been relinquished. When the Company receives the shares, it will record a cancellation of shares.

NOTE 9 – COMMITMENTS AND CONTINGENCIES

On March 26, 2022, as amended on May 10, 2022, the Company and Es Solo Holdings Ltd (“Es Solo”), an England & Wales limited liability company, entered into a Prepaid Card Client Program Management Agreement (“Management Agreement”). Es Solo develops, markets, and operates prepaid card programs through its affiliations with issuing banks, and the Company desires to have Es Solo develop a prepaid card program to be marketed by the Company for card issuing purposes, pursuant to the terms of the Management Agreement. Es Solo agreed to pay the Company $10,000 as a program setup fee. The Company and Es Solo agreed to a 50%/50% revenue share arrangement based on fees collected from customers using the Company’s prepaid, Bio-ID, and debit card products. As of December 31, 2023, no revenues have been realized under the Management Agreement.

On November 1, 2021, the Company and Elite Web Technology Inc. (“Marketer”) entered into a Sales and Marketing Agreement (“Agreement”). The Company agreed that Marketer can market and sale certain Company products as defined in the Agreement. The Company agreed to pay Marketer a sales commission of 15% of gross revenues, and to set aside 500,000 shares of Company common stock, as a bonus, once Marketer achieves $2 million in gross revenues within the first year of the Agreement. In addition, the Company will issue 25,000 stock options for each additional $1.0 million of gross revenues. As of December 31, 2023, the Marketer had not met any of its revenue targets and no commissions or equity compensation was due.

F-13

On December 5, 2008, the Company adopted an incentive compensation bonus plan to provide payments to key employees in the aggregated amount of 10% of pre-tax earnings in excess of $3,000,000 after the end of each fiscal year to be distributed annually to employees. As of December 31, 2023, the Company had not achieved annual pre-tax earnings in excess of $3,000,000.

On December 5, 2008, the Company entered into an employment agreement with Van Thuy Tran, its Chief Executive Officer, providing for an annual base salary of $150,000 and customary medical and other benefits. The agreement may be terminated by either party upon 30 days’ notice. In the event the Company terminates the agreement without cause, Ms. Tran will be entitled to $1,000,000 payable upon termination, and she will be entitled to severance equal to 12 months compensation and benefits. The Company has also agreed to indemnify Ms. Tran against any liability or damages incurred within the scope of her employment. During the six months ended December 31, 2023 and 2022, salaries paid to Van Thuy Tran under this agreement totaled $75,000 and $75,000.

F-14

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks, uncertainties, and assumptions. See “Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors discussed elsewhere in this report.

The following discussion and analysis of the Company’s financial condition and results of operations is based on the preparation of our financial statements in accordance with U.S. generally accepted accounting principles. You should read this discussion and analysis together with such financial statements and the related notes thereto.

Inflation

Global inflation increased during 2021 and in 2022. The Russia Ukraine conflict and other geopolitical conflicts, as well as related international response, have exacerbated inflationary pressures, including causing increases in the price for goods and services and global supply chain disruptions, which have resulted and may continue to result in shortages in food products, materials and services. Such shortages have resulted and may continue to result in inflationary cost increases for labor, fuel, food products, materials and services, and could continue to cause costs to increase as well as result in the scarcity of certain materials. We cannot predict any future trends in the rate of inflation or other negative economic factors or associated increases in our operating costs and how that may impact our business. To the extent we are unable to recover higher operating costs resulting from inflation or otherwise mitigate the impact of such costs on our and their business, our revenues and operating results could decrease, and our financial condition and results of operations could be adversely affected.

Recent Events

On July 4, 2022, we entered a Memorandum of Understanding (the “MOU”) for the purpose of forming a strategic partnership between the Company and Nugen Universe, LLC (“Nugen”), a corporation located in Wrightsville Beach, North Carolina. Nugen seeks us to modify, create, or build a “private label” system for Nugen, with an initial interest in our blinxPay technology and Bio-ID verification system. Nugen paid us $50,000 at the date of the MOU signing and during the period ended December 31, 2022, we completed our performance obligations, and recorded the $50,000 payment as Mobile banking technology revenue during the period then ended. Nugen further agreed to pay the us a 5% ongoing royalty for licensing the Company’s blinxPay technology and Bio-ID verification system. As of December 31, 2023, no royalties have been realized under the MOU.

On October 10, 2022, the Company entered into a License and Distributor Agreement (“License Agreement”) with Nugen. The License Agreement became effective on receipt of $200,000 in December 31, 2022 and extends through August 31, 2027. The License Agreement grants Nugen a Worldwide license and distribution for the Company’s blinxPay Close-Loop Virtual Wallet and blinxPay Open-Loop Visa Debit and all hardware products of the Company. Per the terms of the License Agreement, Nugen agrees to pay the Company a one-time license payment of $1,000,000 for the right to market the Company’s products noted above, of which $200,000 was received by the Company in December 2022. The initial $200,000 has been recorded as deferred revenue in the Consolidated Balance Sheet. The deferred revenue balance of $200,000 at June 30, 2023, will begin being amortized to Mobile banking technology revenue starting once the Company has met its performance obligations under the License Agreement through the remaining term of the License Agreement, which expires on August 31, 2027. The remaining balance of $800,000 is scheduled to be paid as follows: $100,000 when the Company’s identifies a domestic sponsor bank, $350,000 to integrate the Company’s blinxPay software platform, and interface blinxPay with a sponsor foreign bank, and $350,000 on the completion of the final stage of testing, installation, and launch. In addition to the one-time license payment, Nugen agrees to pay a minimum monthly support fee plus 5% royalty from all sales of products noted above. As of December 31, 2023, no royalty related revenues have been realized under the License Agreement.

Results of Operations - Three months ended December 31, 2023, compared to three months ended December 31, 2022

Revenues

Details of revenues are as follows:

	Three Months Ended December 31,				Increase (Decrease)
	2023		2022		$			%
Mobile banking technology	$	53,000	$	70,000	$	(17,000	)		(24.3	)
Other revenue, management fee - related party		54,000		37,000		17,000			45.9
Total Revenues	$	107,000	$	107,000	$	—			—

• Mobile banking technology

Mobile Banking Technology revenues include products such as the Company’s Blinx On-Off™ prepaid toggle Card and its Open Loop/Close Loop System and Bio ID Card Platform. Mobile Banking Technology uses web-based mobile technology to offer financial cardholders the very best technology in conducting secure financial transactions in real time, protecting personal identity, and financial account security. Mobile Banking Technology revenues for the three months ended December 31, 2023 and 2022 were $53,000 and $70,000, respectively.

• Other revenue, management fee - related party

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. 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 June 30, 2024, and recognizes management fee revenue as services are performed. For the three months ended December 31, 2023 and 2022, revenue earned from the management services agreement was $54,000 and $37,000, respectively.

Cost of Revenue

Cost of revenue for the three months ended December 31, 2023 and 2022 totaled $31,000 and $48,000, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the three months ended December 31, 2023 and 2022 totaled $174,000 and $209,000, respectively. The decrease in selling, general and administrative expenses was primarily due to decreased legal and professional fees as compared to the same period of the prior year.

Other Expense

Interest expense for the three months ended December 31, 2023 and 2022, was $137,000 and $122,000, respectively. The increase was due to the increase in our notes payable balance.

Net Loss

We had a net loss of $235,000 for the three months ended December 31, 2023, compared to a net loss of $272,000 for the three months ended December 31, 2022.

Results of Operations - Six months ended December 31, 2023, compared to six months ended December 31, 2022

Revenues

Details of revenues are as follows:

	Six Months Ended December 31,				Increase (Decrease)
	2023		2022		$			%
Mobile banking technology	$	74,000	$	90,000	$	(16,000	)		(17.8	)
Other revenue, management fee - related party		91,000		118,000		(27,000	)		(22.9	)
Total Revenues	$	165,000	$	208,000	$	(43,000	)		(20.7	)

• Mobile banking technology

Mobile Banking Technology revenues include products such as the Company’s Blinx On-Off™ prepaid toggle Card and its Open Loop/Close Loop System and Bio ID Card Platform. Mobile Banking Technology uses web-based mobile technology to offer financial cardholders the very best technology in conducting secure financial transactions in real time, protecting personal identity, and financial account security. Mobile Banking Technology revenues for the six months ended December 31, 2023 and 2022 were $74,000 and $90,000, respectively.

• Other revenue, management fee - related party

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. 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 June 30, 2024, and recognizes management fee revenue as services are performed. For the six months ended December 31, 2023 and 2022, revenue earned from the management services agreement was $91,000 and $118,000, respectively.

Cost of Revenue

Cost of revenue for the six months ended December 31, 2023 and 2022 totaled $73,000 and $98,000, respectively.

Selling, General and Administrative Expenses

Selling, general and administrative expenses for the six months ended December 31, 2023 and 2022 totaled $365,000 and $451,000, respectively. The decrease in selling, general and administrative expenses was primarily due to decreased legal and professional fees as compared to the same period of the prior year.

Other Expense

Interest expense for the six months ended December 31, 2023 and 2022, was $268,000 and $242,000, respectively. The increase was due to the increase in our notes payable balance.

Net Loss

We had a net loss of $541,000 for the six months ended December 31, 2023, compared to a net loss of $583,000 for the six months ended December 31, 2022.

Liquidity and Capital Resources

Our cash balance on December 31, 2023 decreased to $59,000 as compared to $61,000 on June 30, 2023. The decrease was the result of the $299,000 cash provided by financing activities, offset by $301,000 cash used in operating activities. Net cash used in operations during the six months ended December 31, 2023, was $301,000, compared with $117,000 of net cash used in operations during the same period of the prior year. Cash used in operations during the period ended December 31, 2023, was primarily from our net loss of $541,000, offset by increased interest accrued on convertible notes and notes payable of $268,000. Net cash provided by financing activities of $299,000 was from proceeds received from notes payable - related party during the period ended December 31, 2023. During the same period of the prior year, net cash provided by financing activities of $234,000 was from proceeds received from notes payable – related party.

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 period ended December 31, 2023, the Company incurred a net loss of $541,000 and used cash in operating activities of $301,000, and on December 31, 2023, the Company had a stockholders’ deficit of $9,211,000. In addition, as of December 31, 2023, the Company is delinquent in payment of $802,000 of its 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 its cash and forecasted cash flow from operations will not be sufficient to continue operations through fiscal 2024 without continued external investment. 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 Company has traditionally been dependent on The Matthews Group, LLC, a related party, for its financial support. The Matthews Group is owned 50% by Ms Tran, and 50% by Lawrence J. Johanns, a significant Company stockholder.

Convertible notes and notes payable

Convertible notes and notes payable includes principal and accrued interest and consist of the following at December 31, 2023 and June 30, 2023:

	December 31, 2023		June 30, 2023
(a) Unsecured convertible notes ($21,000 and $21,000 in default)	$	67,000	$	66,000
(b) Notes payable (in default)		484,000		475,000
(c) Notes payable (in default)		30,000		29,000
Total notes-third parties	$	581,000	$	570,000

(b) The notes are either secured by the Company’s intellectual property or unsecured and bear interest ranging from 6.5% to 10% per annum, were due in 2012, and are in default.

At June 30, 2023 the notes totaled $29,000. During the six months ended December 31, 2023, interest of $1,000 was added to the principal resulting in a balance owed of $30,000 at December 31, 2023.

Convertible notes and notes payable-related parties

Convertible and notes payable-related parties include principal and accrued interest and consist of the following at December 31, 2023 and June 30, 2023:

	December 31, 2023		June 30, 2023
(a) Convertible notes-The Matthews Group	$	2,027,000	$	1,970,000
(b) Notes payable-The Matthews Group		5,331,000		4,988,000
(c) Convertible notes-other related parties ($247,000 and $242,000 in default)		520,000		364,000
Total notes-related parties	$	7,878,000	$	7,322,000

(a) The notes are unsecured, convertible into common stock at $0.08 per share, bear interest at rates ranging from 8% to 10% per annum and are due on demand.

The Matthews Group is a related party and is owned 50% by Ms. Van Tran, the Company’s CEO, and 50% by Larry Johanns, a significant shareholder of the Company. At June 30, 2023, convertible notes due to The Matthews Group totaled $1,970,000. During the six months ended December 31, 2023, $57,000 of interest was added to principal, resulting in a balance payable at December 31, 2023 of $2,027,000. At December 31, 2023, the notes are convertible at a conversion price of $0.08 per share into 25,337,787 shares of the Company’s common stock.

(b) The notes are unsecured, accrue interest at 10% per annum, and are due on demand. The notes were issued relating to a management services agreement with The Matthews Group dated September 30, 2015.

At June 30, 2023, convertible notes due to other related parties totaled $364,000. During the six months ended December 31, 2023, $145,000 of notes payable were issued and interest of $11,000 was added to principal, resulting in a balance owed of $520,000 at December 31, 2023. At December 31, 2023, $247,000 of the notes were due in 2010 and are in default, and $273,000 is due on demand. At December 31, 2023, $247,000 of the notes are convertible at a conversion price of $0.30 per share into 822,081 shares of the Company’s common stock, $93,000 of the notes are convertible at a conversion price of $0.09 per share into 1,099,847 shares of the Company’s common stock, and $180,000 of the notes are convertible at a conversion price of $0.04 per share into 4,507,292 shares of the Company’s common stock.

Commitments and Contractual Obligations

The Company leases its corporate office building from Ms. Tran, our chief executive officer, on a month-to-month basis, for $4,000 per month. The corporate office is located at 2445 Winnetka Avenue North, Golden Valley, Minnesota.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, management evaluates its estimates, including those related to impairment of long-lived assets, including finite lived intangible assets, accrued liabilities, fair value of warrant derivatives and certain expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ materially from these estimates under different assumptions or conditions.

Our significant accounting policies are more fully described in Note 1 to our financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses, and the related disclosures of contingent assets and liabilities. Actual results could differ from those estimates under different assumptions or conditions.

Revenue Recognition

Revenues for the Company are classified into mobile banking technology and management fee revenue.

a. Mobile Banking Revenue

b. Other revenue, management fee - related party

On December 31, 2015, the Company sold all of its assets of its Barcode Technology comprised solely of its intellectual property to The Matthews Group and entered into a management services agreement with The Matthews Group to manage all facets of the barcode technology operations, on behalf of The Matthews Group, through June 30, 2024. The Company earned a fee of 35% of all revenues billed up to December 31, 2023.

Recently Issued Accounting Standards

See Footnote 1 of consolidated financial statements for a discussion of recently issued accounting standards.

ITEM 3 -- QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A smaller reporting company is not required to provide the information required by this Item 3.

ITEM 4 -- CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Our management, with the participation of our chief executive officer and our chief financial officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, our chief executive officer and our chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure. As of December 31, 2023, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses in our internal control over financial reporting described in our Form 10-K on June 30, 2023.

Changes in Internal Control over Financial Reporting.

In our Form 10-K on June 30, 2023, we identified certain matters that constitute material weaknesses (as defined under the Public Company Accounting Oversight Board Auditing Standard No. 2) in our internal control over financial reporting as discussed on Management’s Report on Internal Control Over Financial Reporting. We are undergoing ongoing evaluation and improvements in our internal control over financial reporting. Regarding our identified weaknesses, we have performed the following remediation efforts:

•

We have assigned our audit committee with oversight responsibilities.

•

Our financial statements, periodic reports filed pursuant to the Securities Exchange Act of 1934, as amended, our monthly bank statements and imaged checks are now continuously reviewed by our chief financial officer and chief executive officer.

•

All significant contracts are now being reviewed and approved by our board of directors in conjunction with the chief executive officer.

There was no other change in our internal control over financial reporting that occurred during the period covered by this report that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.

PART II

ITEM 1 – LEGAL PROCEEDINGS

On September 21, 2016, the Company entered into a settlement agreement with an individual who was a former officer of the Company. The individual in prior years was also issued 500,000 shares of common stock for services. The Company alleged that the individual used the Company's intellectual property without approval. Under the terms of the settlement agreement, the individual agreed to relinquish a convertible note payable and unpaid interest aggregating $365,000 and return 500,000 shares of common stock previously issued to him. In turn, the Company agreed to release and discharge the individual against all claims arising on or prior to the date of the settlement agreement. As of December 31, 2023, the 500,000 shares have not been relinquished. When the Company receives the shares, it will record a cancellation of shares.

ITEM 1A - RISK FACTORS

A smaller reporting company is not required to provide the information required by this Item.

ITEM 2 - UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES

The Company is in default on its various notes payable totaling $802,000 representing principal and accrued interest as of December 31, 2023.

ITEM 4 - MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5 - OTHER INFORMATION

Not applicable.

ITEM 6 - EXHIBITS

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1	The following financial information from Veritec, Inc.’s Quarterly Report on Form 10-Q for the period ended December 31, 2023, formatted in XBRL: (i) Condensed Consolidated Balance Sheets at December 31, 2023 and June 30, 2023; (ii) Condensed Consolidated Statements of Operations for the three months ended December 31, 2023 and 2022; (iii) Condensed Consolidated Statement of Stockholders’ Deficit as at December 31, 2023 and 2022; (iv) Condensed Consolidated Statements of Cash Flows for the three months ended December 31, 2023 and 2022; (v) Notes to the Condensed Consolidated Financial Statements.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		VERITEC, INC.

February 20, 2024	By:	/s/ Van Tran
		Van Tran
		Chief Executive Officer
		(Principal Executive Officer)

EXHIBIT 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302

OF THE SARBANES-OXLEY ACT OF 2002

I, Van Tran, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Veritec, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

	a.	All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 20, 2024	/s/ Van Tran.
	Van Tran
	Chief Executive Officer
	(Principal Financial Officer)

EXHIBIT 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Veritec Inc., a Nevada corporation (the “Company”) for the period ending December 31, 2023 as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), Van Tran, Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge and belief:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

	VERITEC, INC.

Date: February 20, 2024	By:	/s/ Van Tran
		Van Tran
		Chief Executive Officer
		(Principal Financial Officer)

Cover - shares	6 Months Ended
Cover - shares	Dec. 31, 2023	Feb. 14, 2024
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Dec. 31, 2023
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2024
Current Fiscal Year End Date	--06-30
Entity File Number	000-15113
Entity Registrant Name	VERITEC, INC.
Entity Central Index Key	0000773318
Entity Tax Identification Number	95-3954373
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	2445 Winnetka Avenue N.
Entity Address, City or Town	Golden Valley
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	55427
City Area Code	(763)
Local Phone Number	253-2670
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	VRTC
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		39,988,007

Condensed Consolidated Balance Sheets - USD ($)	Dec. 31, 2023	Jun. 30, 2023
Current Assets:
Cash	$ 59,000	$ 61,000
Accounts receivable	46,000	7,000
Prepaid expenses and other current assets	6,000	6,000
Total Assets	111,000	74,000
Current Liabilities:
Accounts payable	300,000	289,000
Accounts payable, related party	119,000	119,000
Accrued expenses	60,000	60,000
Customer deposits	29,000	29,000
Convertible notes and notes payable ($555,000 and $525,000 in default)	581,000	570,000
Convertible notes and notes payable, related parties ($247,000 and $242,000 in default)	7,878,000	7,322,000
Total Current Liabilities	8,967,000	8,389,000
Deferred revenues	200,000	200,000
Contingent earnout liability	155,000	155,000
Total Liabilities	9,322,000	8,744,000
Stockholders' Deficit:
Convertible Preferred stock, par value $1.00; 10,000,000 shares authorized; 276,000 shares of Series H authorized; 1,000 shares issued and outstanding	1,000	1,000
Common Stock, par value $.01; 150,000,000 shares authorized; 39,988,007 and 39,988,007 shares issued and outstanding, respectively	400,000	400,000
Common stock to be issued, 145,000 shares to be issued	12,000	12,000
Additional paid in capital	18,143,000	18,143,000
Accumulated deficit	(27,767,000)	(27,226,000)
Total Stockholders' Deficit	(9,211,000)	(8,670,000)
Total Liabilities and Stockholders' Deficit	$ 111,000	$ 74,000

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Dec. 31, 2023	Jun. 30, 2023
Convertible notes and notes payable, in default	$ 555,000	$ 525,000
Convertible notes and notes payable, related party, in default	$ 247,000	$ 242,000
Preferred Stock, Par or Stated Value Per Share	$ 1.00	$ 1.00
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Common Stock, Par or Stated Value Per Share	$ 0.01	$ 0.01
Common Stock, Shares Authorized	150,000,000	150,000,000
Common Stock, Shares, Outstanding	39,988,007	39,988,007
Convertible Preferred Stock [Member]
Preferred Stock, Shares Authorized	276,000	276,000
Preferred Stock, Shares Outstanding	1,000	1,000

Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2023	Dec. 31, 2022
Revenue:
Mobile banking technology revenue	$ 53,000	$ 70,000	$ 74,000	$ 90,000
Other revenue, management fee - related party	54,000	37,000	91,000	118,000
Total revenue	107,000	107,000	165,000	208,000
Costs and operating expenses:
Cost of revenue	31,000	48,000	73,000	98,000
Selling, general and administrative expenses (1)	174,000	209,000	365,000	451,000
Total costs and operating expenses	205,000	257,000	438,000	549,000
Loss from operations	(98,000)	(150,000)	(273,000)	(341,000)
Other expenses:
Interest expense (2)	(137,000)	(122,000)	(268,000)	(242,000)
Total other expenses	(137,000)	(122,000)	(268,000)	(242,000)
Net loss	$ (235,000)	$ (272,000)	$ (541,000)	$ (583,000)
Net loss per common share - basic and diluted	$ (0.01)	$ (0.01)	$ (0.01)	$ (0.01)
Weighted average number of common shares outstanding - basic and diluted	39,988,007	39,988,007	39,988,007	39,988,007
(1) Includes expenses to related party	$ 13,000	$ 14,000	$ 26,000	$ 26,000
(2) Includes interest expense to related parties	$ 130,000	$ 117,000	$ 256,000	$ 232,000

Condensed Consolidated Statements of Stockholders' Deficiency - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2023	Dec. 31, 2022
Balance, June 30, 2022	$ (8,976,000)	$ (7,747,000)	$ (8,670,000)	$ (7,436,000)
Net loss for the period	(235,000)	(272,000)	(541,000)	(583,000)
Balance, December 31, 2022 (unaudited)	(9,211,000)	(8,019,000)	(9,211,000)	(8,019,000)
Preferred Stock [Member]
Balance, June 30, 2022	$ 1,000	$ 1,000	$ 1,000	$ 1,000
Shares, Outstanding, Beginning Balance	1,000	1,000	1,000	1,000
Net loss for the period
Balance, December 31, 2022 (unaudited)	$ 1,000	$ 1,000	$ 1,000	$ 1,000
Shares, Outstanding, Ending Balance	1,000	1,000	1,000	1,000
Common Stock [Member]
Balance, June 30, 2022	$ 400,000	$ 400,000	$ 400,000	$ 400,000
Shares, Outstanding, Beginning Balance	39,988,007		39,988,007	39,988,007
Net loss for the period
Balance, December 31, 2022 (unaudited)	$ 400,000	$ 400,000	$ 400,000	$ 400,000
Shares, Outstanding, Ending Balance	39,988,007	39,988,007	39,988,007	39,988,007
Common Stock To Be Issued [Member]
Balance, June 30, 2022	$ 12,000	$ 12,000	$ 12,000	$ 12,000
Net loss for the period
Balance, December 31, 2022 (unaudited)	12,000	12,000	12,000	12,000
Additional Paid-in Capital [Member]
Balance, June 30, 2022	18,143,000	18,143,000	18,143,000	18,143,000
Net loss for the period
Balance, December 31, 2022 (unaudited)	18,143,000	18,143,000	18,143,000	18,143,000
Retained Earnings [Member]
Balance, June 30, 2022	(27,532,000)	(26,303,000)	(27,226,000)	(25,992,000)
Net loss for the period	(235,000)	(272,000)	(541,000)	(583,000)
Balance, December 31, 2022 (unaudited)	$ (27,767,000)	$ (26,575,000)	$ (27,767,000)	$ (26,575,000)

Condensed Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$ (541,000)	$ (583,000)
Adjustments to reconcile net loss to cash used in operating activities:
Interest accrued on notes payable	268,000	242,000
Changes in operating assets and liabilities:
Accounts receivable	(39,000)
Customer deposits		1,000
Deferred revenue	0	200,000
Accounts payable	11,000	17,000
Accounts payable - related party		7,000
Accrued expenses		(1,000)
Net cash used in operating activities	(301,000)	(117,000)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable - related party	299,000	234,000
Net cash provided by financing activities	299,000	234,000
NET INCREASE (DECREASE) IN CASH	(2,000)	117,000
CASH AT BEGINNING OF PERIOD	61,000	66,000
CASH AT END OF PERIOD	59,000	183,000
Supplemental disclosures of cash flow information:
Cash paid for income taxes
Cash paid for interest	$ 0	$ 0

OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Dec. 31, 2023

Accounting Policies [Abstract]

OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 1 – OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Basis of Presentation

Going Concern

Use of Estimates

Revenue Recognition

Revenues for the Company are classified into management fee revenue and mobile banking technology.

Mobile Banking Technology Revenue

Other Revenue, Management Fee – Related Party

Disaggregation of Net Sales

The following table shows the Company’s disaggregated net sales by customer type:

Disaggregate Net Sales
	Three Months Ended				Six Months Ended
	2023		2022		2023		2022
Medical	$	38,000	$	14,000	$	54,000	$	28,000
Banking		8,000	`	50,000		8,000		50,000
Associations		3,000		3,000		6,000		6,000
Education		4,000		3,000		6,000		6,000
Other revenue, management fee related party		54,000		37,000		91,000		118,000
Total revenue	$	107,000	$	107,000	$	165,000	$	208,000

During the six months ended December 31, 2023 and 2022, all of the Company’s Mobile banking technology revenues were earned in the United States of America.

Fair Value of Financial Instruments

•

Level 1 — Quoted prices in active markets for identical 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.

Net Loss per Common Share

For the period ended December 31, 2023 and 2022, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect.


	As of December 31,
	2023		2022
Series H Preferred Stock		10,000		10,000
Convertible Notes Payable		29,832,306		26,443,994
Options		550,000		900,000
Total		30,392,306		27,353,994

Concentrations

No other customer represented more than 10% of our revenues.

Segments

Recently Issued Accounting Standards

CONTINGENT EARNOUT LIABILITY

6 Months Ended

Dec. 31, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

CONTINGENT EARNOUT LIABILITY

NOTE 2 – CONTINGENT EARNOUT LIABILITY

CONVERTIBLE NOTES AND NOTES PAYABLE

6 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

CONVERTIBLE NOTES AND NOTES PAYABLE

NOTE 3 – CONVERTIBLE NOTES AND NOTES PAYABLE

Convertible notes and notes payable

Convertible notes and notes payable includes principal and accrued interest and consist of the following at December 31, 2023 and June 30, 2023:


	December 31, 2023		June 30, 2023
(a) Unsecured convertible notes ($21,000 and $21,000 in default)	$	67,000	$	66,000
(b) Notes payable (in default)		484,000		475,000
(c) Notes payable (in default)		30,000		29,000
Total notes-third parties	$	581,000	$	570,000

(b) The notes are either secured by the Company’s intellectual property or unsecured and bear interest ranging from 6.5% to 10% per annum, were due in 2012, and are in default.

At June 30, 2023, the notes totaled $29,000. During the six months ended December 31, 2023, interest of $1,000 was added to the principal resulting in a balance owed of $30,000 at December 31, 2023.

Convertible notes and notes payable-related parties

Convertible and notes payable-related parties include principal and accrued interest and consist of the following at December 31, 2023 and June 30, 2023:


	December 31, 2023		June 30, 2023
(a) Convertible notes - The Matthews Group	$	2,027,000	$	1,970,000
(b) Notes payable - The Matthews Group		5,331,000		4,988,000
(c) Convertible notes-other related parties ($244,000 and $242,000 in default)		520,000		364,000
Total notes-related parties	$	7,878,000	$	7,322,000

(a) The notes are unsecured, convertible into common stock at $0.08 per share, bear interest at rates ranging from 8% to 10% per annum and are due on demand.

STOCKHOLDERS’ DEFICIT

6 Months Ended

Dec. 31, 2023

Equity [Abstract]

STOCKHOLDERS’ DEFICIT

NOTE 4 - STOCKHOLDERS’ DEFICIT

Common Stock to be Issued

STOCK OPTIONS

6 Months Ended

Dec. 31, 2023

Stock Options

STOCK OPTIONS

NOTE 5 – STOCK OPTIONS

A summary of stock options as of December 31, 2023 is as follows:

Summary of Stock Options
	Number of Shares			Weighted Average Exercise Price
Outstanding at June 30, 2023		900,000		$	0.03
Granted		—			—
Forfeited		(350,000	)	$	(0.03	)
Outstanding at December 31, 2023		550,000		$	0.03
Exercisable at December 31, 2023		550,000		$	0.03

Additional information regarding options outstanding as of December 31, 2023, is as follows:


Options Outstanding and Exercisable at December 31, 2023
Exercise Price		Number of Shares Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
$	0.03		550,000		0.98	$	0.03

RELATED PARTY TRANSACTIONS

6 Months Ended

Dec. 31, 2023

RELATED PARTY TRANSACTIONS

NOTE 6 – RELATED PARTY TRANSACTIONS

Management Services Agreement and Related Notes Payable with Related Party

Advances from Related Parties

Other Transactions with Related Parties

AGREEMENTS WITH NUGEN

6 Months Ended

Dec. 31, 2023

Agreements With Nugen

AGREEMENTS WITH NUGEN

NOTE 7 – AGREEMENTS WITH NUGEN

LEGAL PROCEEDINGS

6 Months Ended

Dec. 31, 2023

Commitments and contingencies

LEGAL PROCEEDINGS

NOTE 8 – LEGAL PROCEEDINGS

COMMITMENTS AND CONTINGENCIES

6 Months Ended

Dec. 31, 2023

Commitments and contingencies

COMMITMENTS AND CONTINGENCIES

NOTE 9 – COMMITMENTS AND CONTINGENCIES

OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Dec. 31, 2023

Accounting Policies [Abstract]

The Company

The Company

Basis of Presentation

Basis of Presentation

Going Concern

Going Concern

Use of Estimates

Use of Estimates

Revenue Recognition

Revenue Recognition

Revenues for the Company are classified into management fee revenue and mobile banking technology.

Mobile Banking Technology Revenue

Other Revenue, Management Fee – Related Party

Disaggregation of Net Sales

The following table shows the Company’s disaggregated net sales by customer type:

Disaggregate Net Sales
	Three Months Ended				Six Months Ended
	2023		2022		2023		2022
Medical	$	38,000	$	14,000	$	54,000	$	28,000
Banking		8,000	`	50,000		8,000		50,000
Associations		3,000		3,000		6,000		6,000
Education		4,000		3,000		6,000		6,000
Other revenue, management fee related party		54,000		37,000		91,000		118,000
Total revenue	$	107,000	$	107,000	$	165,000	$	208,000

During the six months ended December 31, 2023 and 2022, all of the Company’s Mobile banking technology revenues were earned in the United States of America.

Fair Value of Financial Instruments

Fair Value of Financial Instruments

•

Level 1 — Quoted prices in active markets for identical 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.

Net Loss per Common Share

Net Loss per Common Share

For the period ended December 31, 2023 and 2022, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect.


	As of December 31,
	2023		2022
Series H Preferred Stock		10,000		10,000
Convertible Notes Payable		29,832,306		26,443,994
Options		550,000		900,000
Total		30,392,306		27,353,994

Concentrations

Concentrations

No other customer represented more than 10% of our revenues.

Segments

Segments

Recently Issued Accounting Standards

Recently Issued Accounting Standards

OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Dec. 31, 2023

Accounting Policies [Abstract]

Disaggregate Net Sales

Disaggregate Net Sales
	Three Months Ended				Six Months Ended
	2023		2022		2023		2022
Medical	$	38,000	$	14,000	$	54,000	$	28,000
Banking		8,000	`	50,000		8,000		50,000
Associations		3,000		3,000		6,000		6,000
Education		4,000		3,000		6,000		6,000
Other revenue, management fee related party		54,000		37,000		91,000		118,000
Total revenue	$	107,000	$	107,000	$	165,000	$	208,000

Summary of securities excluded from EPS calculation


	As of December 31,
	2023		2022
Series H Preferred Stock		10,000		10,000
Convertible Notes Payable		29,832,306		26,443,994
Options		550,000		900,000
Total		30,392,306		27,353,994

CONVERTIBLE NOTES AND NOTES PAYABLE (Tables)

6 Months Ended

Dec. 31, 2023

Debt Disclosure [Abstract]

Convertible notes and notes payable - in default


	December 31, 2023		June 30, 2023
(a) Unsecured convertible notes ($21,000 and $21,000 in default)	$	67,000	$	66,000
(b) Notes payable (in default)		484,000		475,000
(c) Notes payable (in default)		30,000		29,000
Total notes-third parties	$	581,000	$	570,000

Convertible notes and notes payable- related party


	December 31, 2023		June 30, 2023
(a) Convertible notes - The Matthews Group	$	2,027,000	$	1,970,000
(b) Notes payable - The Matthews Group		5,331,000		4,988,000
(c) Convertible notes-other related parties ($244,000 and $242,000 in default)		520,000		364,000
Total notes-related parties	$	7,878,000	$	7,322,000

STOCK OPTIONS (Tables)

6 Months Ended

Dec. 31, 2023

Stock Options

Summary of Stock Options

Summary of Stock Options
	Number of Shares			Weighted Average Exercise Price
Outstanding at June 30, 2023		900,000		$	0.03
Granted		—			—
Forfeited		(350,000	)	$	(0.03	)
Outstanding at December 31, 2023		550,000		$	0.03
Exercisable at December 31, 2023		550,000		$	0.03

Additional information regarding outstanding options


Options Outstanding and Exercisable at December 31, 2023
Exercise Price		Number of Shares Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
$	0.03		550,000		0.98	$	0.03

OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summary of Disaggregated Net Sales (Details) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2023	Dec. 31, 2022
Product Information [Line Items]
Total revenue	$ 107,000	$ 107,000	$ 165,000	$ 208,000
Medical [Member]
Product Information [Line Items]
Total revenue	38,000	14,000	54,000	28,000
Banking [Member]
Product Information [Line Items]
Total revenue	8,000	50,000	8,000	50,000
Associations [Member]
Product Information [Line Items]
Total revenue	3,000	3,000	6,000	6,000
Education [Member]
Product Information [Line Items]
Total revenue	4,000	3,000	6,000	6,000
Other [Member]
Product Information [Line Items]
Total revenue	$ 54,000	$ 37,000	$ 91,000	$ 118,000

OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Summarized outstanding securities (Details) - shares	6 Months Ended
	Dec. 31, 2023	Dec. 31, 2022
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	30,392,306	27,353,994
Series H Preferred Stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	10,000	10,000
Convertible Notes Payable [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	29,832,306	26,443,994
Options Held [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Total	550,000	900,000

OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2023	Dec. 31, 2022	Sep. 30, 2023	Jun. 30, 2023	Sep. 30, 2022	Jun. 30, 2022
Product Information [Line Items]
Net loss	$ 235,000	$ 272,000	$ 541,000	$ 583,000
Cash used in operating activities			301,000	117,000
Stockholders' deficit	9,211,000	8,019,000	9,211,000	8,019,000	$ 8,976,000	$ 8,670,000	$ 7,747,000	$ 7,436,000
Notes payable in default	802,000		802,000
[custom:RevenueRelatedParties]	$ 54,000	$ 37,000	$ 91,000	$ 118,000
Revenue, Segment Benchmark [Member] \| Customer One [Member]
Product Information [Line Items]
Concentration Risk, Percentage	50.00%	47.00%	55.00%	24.00%
Revenue, Segment Benchmark [Member] \| Customer Two [Member]
Product Information [Line Items]
Concentration Risk, Percentage	33.00%	35.00%	33.00%	13.00%
Revenue, Segment Benchmark [Member] \| Customer Three [Member]
Product Information [Line Items]
Concentration Risk, Percentage				57.00%
Accounts Receivable [Member] \| Customer One [Member]
Product Information [Line Items]
Concentration Risk, Percentage				92.80%

CONTINGENT EARNOUT LIABILITY (Details Narrative) - Acquisition Assets Liabilities [Member] - USD ($)	Oct. 02, 2014	Oct. 01, 2014
Finite-Lived Intangible Assets [Line Items]
Earnout Payment	$ 155,000
Equity investments		$ 1,300,000

CONVERTIBLE NOTES AND NOTES PAYABLE - Convertible notes and notes payable in default (Details) - USD ($)	Dec. 31, 2023	Jun. 30, 2023
Debt Disclosure [Abstract]
(a) Unsecured convertible notes ($21,000 and $21,000 in default)	$ 67,000	$ 66,000
(b) Notes payable (in default)	484,000	475,000
(c) Notes payable (in default)	30,000	29,000
Total notes-third parties	$ 581,000	$ 570,000

CONVERTIBLE NOTES AND NOTES PAYABLE - Convertible notes and notes payable related party (Details) - USD ($)	Dec. 31, 2023	Jun. 30, 2023
Defined Benefit Plan Disclosure [Line Items]
Convertible Notes, Related Party	$ 520,000
Notes Payable Related Party	7,878,000	$ 7,322,000
Matthews Group [Member]
Defined Benefit Plan Disclosure [Line Items]
Convertible Notes, Related Party	2,027,000	1,970,000
Notes Payable Related Party	5,331,000	4,988,000
Other [Member]
Defined Benefit Plan Disclosure [Line Items]
Convertible Notes, Related Party	$ 520,000	$ 364,000

CONVERTIBLE NOTES AND NOTES PAYABLE (Details Narrative) - USD ($)	6 Months Ended
	Dec. 31, 2023	Jun. 30, 2023	Mar. 17, 2020
Debt Instrument [Line Items]
Conversion price	$ 0.08
Notes Payable	$ 30,000	$ 29,000
Convertible Notes Payable, Current	520,000
Increase (Decrease) in Notes Payable, Current	145,000
Convertible notes and notes payable, related party, in default	247,000	242,000
[custom:NotesPayableDueOnDemand-0]	273,000
Other [Member]
Debt Instrument [Line Items]
Convertible Notes Payable, Current	$ 520,000	364,000
Matthews Group [Member]
Debt Instrument [Line Items]
Interest rate	10.00%
Convertible Notes Payable, Current	$ 2,027,000	1,970,000
Unsecured Convertible Notes [Member]
Debt Instrument [Line Items]
Convertible debts	67,000	66,000
Accrued interest	1,000
Notes in Default	21,000
Balance due on demand	$ 46,000
Unsecured Convertible Notes [Member] \| Common Stock [Member]
Debt Instrument [Line Items]
Conversion price	$ 0.30
Unsecured Convertible Note [Member]
Debt Instrument [Line Items]
Shares issued upon conversion	576,310
Unsecured Convertible Note [Member] \| Common Stock [Member]
Debt Instrument [Line Items]
Shares issued upon conversion	70,619
Notes Payable Default [Member]
Debt Instrument [Line Items]
Notes payable		475,000
Notes Payables Default [Member]
Debt Instrument [Line Items]
Interest rate			4.00%
Accrued interest	$ 9,000
Notes payable	484,000
Secured Notes [Member]
Debt Instrument [Line Items]
Notes payable	435,000
Unsecured Notes [Member]
Debt Instrument [Line Items]
Notes payable	$ 49,000
Convertible Notes [Member]
Debt Instrument [Line Items]
Conversion price	$ 0.08
Accrued interest	$ 1,000
Convertible Notes [Member] \| Other [Member]
Debt Instrument [Line Items]
Conversion price	$ 0.30
Convertible debts		364,000
Accrued interest	$ 11,000
Shares issued upon conversion	814,581
Increase (Decrease) in Notes Payable, Current	$ 247,000
Convertible Notes [Member] \| Matthews Group [Member]
Debt Instrument [Line Items]
Convertible debts		1,970,000
Accrued interest	$ 57,000
Shares issued upon conversion	25,337,787
Convertible Notes [Member] \| Other 2 [Member]
Debt Instrument [Line Items]
Balance due on demand	$ 93,000
Convertible Notes [Member] \| Other 3 [Member]
Debt Instrument [Line Items]
Balance due on demand	$ 180,000
Convertible Note [Member] \| Other [Member]
Debt Instrument [Line Items]
Conversion price	$ 0.08
Convertible Note [Member] \| Other 2 [Member]
Debt Instrument [Line Items]
Conversion price	$ 0.09
Shares issued upon conversion	1,099,847
Convertible Note [Member] \| Other 3 [Member]
Debt Instrument [Line Items]
Conversion price	$ 0.04
Shares issued upon conversion	4,507,292
Notes Payable [Member] \| Matthews Group [Member]
Debt Instrument [Line Items]
Interest rate	10.00%
Accrued interest	$ 189,000
Notes payable	5,331,000	$ 4,988,000
Increase (Decrease) in Notes Payable, Current	$ 154,000
Minimum [Member] \| Matthews Group [Member]
Debt Instrument [Line Items]
Interest rate	8.00%
Minimum [Member] \| Unsecured Convertible Notes [Member]
Debt Instrument [Line Items]
Conversion price	$ 0.08
Interest rate	5.00%
Minimum [Member] \| Notes Payable Default [Member]
Debt Instrument [Line Items]
Interest rate	6.50%
Minimum [Member] \| Convertible Notes [Member] \| Other [Member]
Debt Instrument [Line Items]
Conversion price	$ 0.04
Interest rate	8.00%
Maximum [Member] \| Matthews Group [Member]
Debt Instrument [Line Items]
Interest rate	1000.00%
Maximum [Member] \| Unsecured Convertible Notes [Member]
Debt Instrument [Line Items]
Conversion price	$ 0.30
Interest rate	8.00%
Maximum [Member] \| Notes Payable Default [Member]
Debt Instrument [Line Items]
Interest rate	10.00%
Maximum [Member] \| Convertible Notes [Member] \| Other [Member]
Debt Instrument [Line Items]
Conversion price	$ 0.30
Interest rate	10.00%

STOCKHOLDERS’ DEFICIT (Details Narrative) - USD ($)	Dec. 31, 2023	Jun. 30, 2023
Equity [Abstract]
Common stock to be issued	145,000	145,000
Common stock to be issued, value	$ 12,000	$ 12,000

STOCK OPTIONS - Summary of Stock Options (Details)	6 Months Ended
STOCK OPTIONS - Summary of Stock Options (Details)	Dec. 31, 2023 $ / shares shares
Stock Options
Number of Shares outstanding at beginning \| shares	900,000
Beginning weighted average exercise price, outstanding \| $ / shares	$ 0.03
Options Granted \| shares	0
Options granted, weighted average exercise price \| $ / shares	$ 0
Options Expired \| shares	(350,000)
Options Expired, weighted average exercise price \| $ / shares	$ (0.03)
Number of Shares outstanding at end \| shares	550,000
Ending weighted average exercise price, outstanding \| $ / shares	$ 0.03
Options, Exercisable \| shares	550,000
Weighted average exercise price, exercisable \| $ / shares	$ 0.03

STOCK OPTIONS - Additional information regarding outstanding options (Details) - $ / shares	6 Months Ended
	Dec. 31, 2023	Jun. 30, 2023
Debt Conversion [Line Items]
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercisable, Weighted Average Exercise Price	$ 0.03
Options outstanding, shares	550,000	900,000
Weighted average exercise price	$ 0.03	$ 0.03
Conversion Price 03 [Member]
Debt Conversion [Line Items]
Options outstanding, shares	550,000
Weighted average remaining contractual life (years)	11 months 23 days
Weighted average exercise price	$ 0.03

STOCK OPTIONS (Details Narrative)	Dec. 31, 2023 USD ($)
Stock Options
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Vested and Expected to Vest, Outstanding, Aggregate Intrinsic Value	$ 0
Share-Based Compensation Arrangement by Share-Based Payment Award, Options, Exercisable, Intrinsic Value	$ 16,000

RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2023	Dec. 31, 2022	Jun. 30, 2023
Related Party Transaction [Line Items]
Managament fee, percent of revenue			35.00%
[custom:FeeRevenue]	$ 54,000	$ 91,000	$ 37,000	$ 81,000
Proceeds from notes payable - related party			299,000	234,000
Notes Payable Related Party	7,878,000		7,878,000		$ 7,322,000
Chief Executive Officer [Member]
Related Party Transaction [Line Items]
Advances due to related party	119,000		119,000		119,000
Payments for Rent	$ 13,000		26,000
Matthews Group [Member]
Related Party Transaction [Line Items]
Proceeds from notes payable - related party			$ 154,000	$ 234,000
Unsecured related party note, interest	10.00%		10.00%
Notes Payable Related Party	$ 5,331,000		$ 5,331,000		$ 4,988,000
Tran [Member]
Related Party Transaction [Line Items]
Ownership of TMG	50.00%		50.00%
Stockholder [Member]
Related Party Transaction [Line Items]
Ownership of TMG	50.00%		50.00%

AGREEMENTS WITH NUGEN (Details Narrative) - USD ($)	3 Months Ended		6 Months Ended
AGREEMENTS WITH NUGEN (Details Narrative) - USD ($)	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2023	Dec. 31, 2022	Jun. 30, 2023
Revenues, Net of Interest Expense	$ 107,000	$ 107,000	$ 165,000	$ 208,000
Deferred Revenue, Noncurrent	200,000		200,000		$ 200,000
Banking [Member]
Revenues, Net of Interest Expense	$ 8,000	$ 50,000	$ 8,000	$ 50,000

LEGAL PROCEEDINGS (Details Narrative)	Sep. 21, 2016 USD ($) shares
Commitments and contingencies
Convertible note payable relinquished \| $	$ 365,000
Shares to be returned \| shares	500,000

COMMITMENTS AND CONTINGENCIES (Details Narrative) - USD ($)				3 Months Ended		6 Months Ended		18 Months Ended
	May 10, 2022	Nov. 02, 2021	Dec. 05, 2008	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2023	Dec. 31, 2022	Dec. 31, 2023
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Program setup fee	$ 10,000
Revenues				$ 107,000	$ 107,000	$ 165,000	$ 208,000
Sales commissions		15.00%
Number of shares issued		500,000
Stock recevied on transaction		$ 2,000,000
Incentive compensation plan percentage			10.00%
Incentive Compensation Bonus, Minimum Threshold			$ 3,000,000
Termination Loans			1,000,000
Payments to Employees						75,000		$ 75,000
Chief Executive Officer [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Annual base salary			$ 150,000
Equity Option [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Number of shares issued		25,000
Stock recevied on transaction		$ 1,000,000.0
Management Agreement [Member]
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Revenues						$ 0

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