Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Sep. 28, 2018 | Dec. 31, 2017 | |
Document And Entity Information | |||
Entity Registrant Name | VERITEC INC | ||
Entity Central Index Key | 773,318 | ||
Current Fiscal Year End Date | --06-30 | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Shell Company | false | ||
Entity Emerging Growth Company | false | ||
Trading Symbol | VRTC | ||
Document Type | 10-K | ||
Amendment Flag | false | ||
Document Period End Date | Jun. 30, 2018 | ||
Document Fiscal Period Focus | FY | ||
Document Fiscal Year Focus | 2,018 | ||
Entity Well-Known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Common Stock, Shares Outstanding | 39,538,007 | ||
Entity Public Float | $ 238,831 |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Current Assets: | ||
Cash | $ 139,086 | $ 46,693 |
Accounts receivable | 7,071 | 8,139 |
Prepaid expenses | 5,328 | 1,985 |
Total Current Assets | 151,485 | 56,817 |
Intangibles, net | 16,042 | |
Total Assets | 151,485 | 72,859 |
Current Liabilities: | ||
Accounts payable | 671,197 | 647,946 |
Accounts payable, related party | 96,110 | 96,110 |
Accrued expenses | 63,507 | 72,101 |
Convertible notes and notes payable – in default | 602,261 | 575,323 |
Convertible notes and notes payable, related party | 2,994,599 | 2,293,866 |
Deferred revenues | 30,000 | 72,492 |
Derivative liabilities | 728,000 | |
Total Current Liabilities | 4,457,674 | 4,485,838 |
Contingent earnout liability | 155,000 | 155,000 |
Total Liabilities | 4,612,674 | 4,640,838 |
Stockholders' Deficiency: | ||
Convertible preferred stock, par value $1.00; authorized 10,000,000 shares, 276,000 shares of Series H authorized, 1,000 shares issued and outstanding | 1,000 | 1,000 |
Common stock, par value $.01; authorized 150,000,000 shares and 50,000,000 shares, respectively; 39,538,007 shares issued and outstanding | 395,380 | 395,380 |
Common stock to be issued, 145,000 shares to be issued | 12,500 | 12,500 |
Additional paid-in capital | 18,099,576 | 17,974,576 |
Accumulated deficit | (22,969,645) | (22,951,435) |
Total Stockholders' Deficiency | (4,461,189) | (4,567,979) |
Total Liabilities and Stockholders' Deficiency | $ 151,485 | $ 72,859 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parenthetical) - $ / shares | Jun. 30, 2018 | Jun. 30, 2017 |
Convertible preferred stock, par value | $ 1 | $ 1 |
Convertible preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Common stock, par value | $ .01 | $ 0.01 |
Common stock, shares authorized | 150,000,000 | 50,000,000 |
Common stock, shares issued | 39,538,007 | 39,538,007 |
Common stock, shares outstanding | 39,538,007 | 39,538,007 |
Common stock, shares to be issued | 145,000 | 145,000 |
Series H Convertible | ||
Convertible preferred stock, shares issued | 1,000 | 1,000 |
Convertible preferred stock, shares outstanding | 1,000 | 1,000 |
Consolidated Statements of Oper
Consolidated Statements of Operations - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Revenue: | ||
Mobile banking technology revenue | $ 121,901 | $ 152,606 |
Other revenue, management fee related party | 376,580 | 172,930 |
Total revenue | 498,481 | 325,536 |
Cost of Sales | 247,408 | 260,614 |
Gross Profit | 251,073 | 64,922 |
Operating Expenses: | ||
General and administrative (including $51,000 and $46,750, respectively, to related party) | 587,166 | 688,351 |
Sales and marketing | 1,762 | 67,612 |
Research and development | 29,997 | 92,992 |
Total Operating Expenses | 618,925 | 848,955 |
Loss from Operations | (367,852) | (784,033) |
Other Expense: | ||
Interest expense, including $226,420 and $377,522, respectively, to realted parties | (253,358) | (404,460) |
Change in fair value of derivative liabilities | 603,000 | (546,000) |
Gain on settlement of note payable to former officer | 364,690 | |
Total other income (expense) | 349,642 | (585,774) |
Net Loss | $ (18,210) | $ (1,369,807) |
Net Loss Per Common Share - Basic and Diluted | $ 0 | $ (0.03) |
Weighted Average Number of Shares Outstanding - Basic and Diluted | 39,538,007 | 39,538,007 |
Consolidated Statements of Op_2
Consolidated Statements of Operations (Parenthetical) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Statement [Abstract] | ||
Interest expense, related parties | $ 226,420 | $ 377,522 |
General and administrative to related party | $ 51,000 | $ 46,750 |
Consolidated Statements of Stoc
Consolidated Statements of Stockholders' Equity (Deficiency) - USD ($) | Preferred Stock | Common Stock | Common Stock to be Issued | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning balance, Shares at Jun. 30, 2016 | 1,000 | 39,538,007 | ||||
Beginning balance, Amount at Jun. 30, 2016 | $ 1,000 | $ 395,380 | $ 12,500 | $ 17,939,576 | $ (21,581,628) | $ (3,233,172) |
Beneficial conversion feature on issuance of convertible notes payable | 35,000 | 35,000 | ||||
Net Loss | (1,369,807) | (1,369,807) | ||||
Ending balance, Shares at Jun. 30, 2017 | 1,000 | 39,538,007 | ||||
Ending balance, Amount at Jun. 30, 2017 | $ 1,000 | $ 395,380 | 12,500 | 17,974,576 | (22,951,435) | (4,567,979) |
Reclassification of embedded conversion option | 125,000 | 125,000 | ||||
Net Loss | (18,210) | (18,210) | ||||
Ending balance, Shares at Jun. 30, 2018 | 1,000 | 39,538,007 | ||||
Ending balance, Amount at Jun. 30, 2018 | $ 1,000 | $ 395,380 | $ 12,500 | $ 18,099,576 | $ (22,969,645) | $ (4,461,189) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net Income (Loss) | $ (18,210) | $ (1,369,807) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities | ||
Depreciation | 171 | |
Amortization | 16,042 | 64,166 |
Gain on settlement of note payable to former officer | (364,686) | |
Expense related to the fair value of derivative liabilities | 182,000 | |
Change in fair value of derivative liabilities | (603,000) | 546,000 |
Beneficial conversion feature on issuance of convertible notes payable-related party | 35,000 | |
Interest accrued on notes payable | 128,359 | 184,960 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 1,068 | 1,170 |
Prepaid expenses | (3,343) | (88) |
Payroll tax liabilities | (238,718) | |
Deferred revenues | (42,492) | (66,268) |
Accounts payable | 23,251 | (1,207) |
Accrued expenses | (8,594) | (3,273) |
Net cash used in operating activities | (506,919) | (1,030,580) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from convertible notes payable-related party | 477,500 | |
Proceeds from notes payable, related party | 599,312 | 538,820 |
Net cash provided by financing activities | 599,312 | 1,016,320 |
NET INCREASE (DECREASE) IN CASH | 92,393 | (14,260) |
CASH AT BEGINNING OF PERIOD | 46,693 | 60,953 |
CASH AT END OF PERIOD | 139,086 | 46,693 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
Cash paid for interest | 125,000 | |
NON CASH INVESTING AND FINANCING ACTIVITIES | ||
Reclassification of customer deposit to accounts payable | 25,000 | |
Reclassification of embedded conversion option derivative liability to additional paid-in capital | $ 125,000 |
Operations and Summary of Signi
Operations and Summary of Significant Accounting Policies | 12 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | NOTE 1 - OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company Veritec, Inc. (Veritec) was formed in the State of Nevada on September 8, 1982. Veritec is primarily engaged in the development, sales, and licensing of products and providing services related to its mobile banking solutions. As a Cardholder Independent Sales Organization, Veritec is able to promote and sell Visa branded card programs. As a Third-Party Servicer, the Company 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, including Security First Bank (terminated in 2010), Palm Desert National Bank (which was later assigned to First California Bank and subsequently Pacific Western Bank that terminated in 2013), and Central Bank of Kansas City (terminated in 2016). Veritec is currently seeking a bank to sponsor its Prepaid Card programs. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances were eliminated in consolidation. Veritec’s wholly owned subsidiaries include Veritec Financial Systems, Inc., Tangible Payment Systems, Inc., and Public Bell, Inc. (collectively the “Company”). Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Those estimates and assumptions include estimates for reserves of uncollectible accounts, analysis of impairments of long lived assets, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and valuation of deferred tax assets. Actual results could differ from those estimates. Cash and cash equivalents Investments with original maturities of three months or less are considered to be cash equivalents. Accounts Receivable The Company sells to domestic and foreign companies and grants uncollateralized credit to customers, but requires deposits on unique orders. Management periodically reviews its accounts receivable and provides an allowance for doubtful accounts after analyzing the age of the receivable, payment history and prior experience with the customer. The estimated loss that management believes is probable is included in the allowance for doubtful accounts. While the ultimate loss may differ, management believes that any additional loss will not have a material impact on the Company's financial position. Due to uncertainties in the settlement process, however, it is at least reasonably possible that management's estimate will change during the near term. Based on management’s assessment, no allowance for doubtful accounts was considered necessary at June 30, 2018 or 2017. Revenue Recognition Revenues for the Company are classified into mobile banking technology and management fee revenue. a. Mobile Banking 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. The Company has entered into certain long term agreements to provide application development and support. Some customers paid the agreement in full at signing and the Company recorded the receipt of payment as deferred revenue. The Company records revenue relating to these agreements on a pro-rata basis over the term of the agreement and reduces its deferred revenue balance accordingly. b. Management Fee Revenue On September 30, 2015, the Company sold all of its assets of its Barcode Technology, which was comprised solely of its intellectual property, to The Matthews Group (a related party, see Note 9). The Company subsequently entered into a management services agreement with The Matthews Group to manage all facets of the barcode technology operations through June 30, 2019. The Company earned a fee of 20% of all revenues billed from the barcode technology operations up to May 31, 2017, and now earns a fee of 35% of all revenues billed up to June 30, 2019. Derivative Financial Instruments The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve (12) months of the balance sheet date. Income Taxes The Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. Research and Development Research and development costs are expensed as incurred. Loss per Common Share Basic earnings (loss) per share are computed by dividing the net income (loss) applicable to Common Stockholders by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to Common Stockholders by the weighted average number of common stock outstanding plus the number of additional common stock that would have been outstanding if all dilutive potential common stock had been issued, using the treasury stock method. Potential common stock are excluded from the computation as their effect is antidilutive. For the years ended June 30, 2018 and 2017, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect. As of June 30, 2018 and 2017, 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. June 30, 2018 2017 Series H Preferred Stock 10,000 10,000 Convertible Notes Payable 19,337,127 17,833,166 Options 2,500,000 2,500,000 Total 21,847,127 20,343,166 Stock-Based Compensation The Company periodically issues stock options and warrants to employees and non-employees in capital raising transactions, for services and for financing costs. The Company accounts for stock option and stock warrant grants to employees based on the authoritative guidance provided by the Financial Accounting Standards Board (FASB) where the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and stock warrant grants to non-employees in accordance with the authoritative guidance of the FASB where the value of the stock compensation is determined based upon the measurement date at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option or warrant grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date. The fair value of the Company’s common stock option and warrant grants are estimated using a Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods. 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, inventories, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments. The fair value of the derivative liabilities of $728,000 at June 30, 2017, was valued using Level 2 inputs. Concentrations During the year ended June 30, 2018, the Company had one customer, a related party that represented 76% of our revenues. No other customer represented more than 10% of our revenues. During the year ended June 30, 2017, the Company had one customer, a related party, that represented 53% of our revenues and one customer that represented 14% of our revenues. No other customer represented more than 10% of our revenues. During the years ended June 30, 2018 and 2017, the Company had no foreign revenues. Segments The Company operates in one segment, the mobile financial banking industry. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance creating Accounting Standards Codification (“ASC”) Section 606, “ Revenue from Contracts with Customers. In February 2016, the FASB issued ASU No. 2016-02, Leases 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 consolidated financial statements. |
Going Concern
Going Concern | 12 Months Ended |
Jun. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | NOTE 2 - GOING CONCERN The accompanying 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 year ended June 30, 2018, the Company recorded a loss of $18,210, used cash in operating activities of $506,919, and at June 30, 2018, the Company had a stockholders’ deficiency of $4,461,189. In addition, as of June 30, 2018, the Company is delinquent in payment of $761,315 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 our June 30, 2018 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 result from the outcome of this uncertainty be necessary should we be unable to continue as a going concern. The Company believes it will require additional funds to continue its operations through fiscal 2019 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 consolidated financial statements do not include any adjustments that may result from this uncertainty. |
Intangible Assets and Contingen
Intangible Assets and Contingent Earnout Liability | 12 Months Ended |
Jun. 30, 2018 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Contingent Earnout Liability | NOTE 3 – INTANGIBLE ASSETS AND CONTINGENT EARNOUT LIABILITY On September 30, 2014, the Company and Tangible Payments LLC, a Maryland Limited Liability Company, entered into an Asset Purchase Agreement pursuant to which the Company acquired certain assets and liabilities of the Tangible Payments LLC. Tangible Payments LLC developed online payment technology that encrypts sensitive information securely between customers and merchants during online transactions. The purchase price for the acquisition was comprised of 250,000 shares of restricted common stock of Veritec valued at $37,500, issued on closing, and an earnout payment of $155,000 for an aggregate purchase price of $192,500. 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. For the years ended June 30, 2018 and 2017, there was no net profit derived from the acquired assets and accordingly, no payments were made on the earnout. The Company assigned $192,500 of the purchase price to contract commitments which were amortized over a three year period. For the years ended June 30, 2018 and 2017, the Company recorded $16,042 and $64,166 of amortization expense related to this intangible which is included in general and administrative expense in the Consolidated Statements of Operations. As of June 30, 2018, there was no remaining unrecognized amortization expense related to intangible assets. |
Convertible Notes and Notes Pay
Convertible Notes and Notes Payable | 12 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Notes Payable | NOTE 4 – CONVERTIBLE NOTES AND NOTES PAYABLE Convertible notes and notes payable-in default Notes payable includes principal and accrued interest and consists of the following at June 30, 2018 and June 30, 2017: June 30, 2018 June 30, 2017 (a) Convertible notes-in default $ 214,576 $ 205,116 (b) Notes payable-in default 387,684 370,207 Total notes-third parties $ 602,260 $ 575,323 (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. (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, 2016, the notes totaled $352,729 and during the year ended June 30, 2017, interest of $17,478 was added to principal, leaving a balance owed of $370,207 at June 30, 2017. During the year ended June 30, 2018, interest of $17,477 was added to principal leaving a balance owed of $387,684 at June 30, 2018. At June 30, 2018, $351,901 of notes are secured by the Company’s intellectual property and $35,783 of notes are unsecured. Convertible notes and notes payable-related party Notes payable-related party includes principal and accrued interest and consists of the following at June 30, 2018 and June 30, 2017: June 30, 2018 June 30, 2017 (a) Convertible notes-The Matthews Group $ 1,344,782 $ 1,236,943 (b) Notes payable-The Matthews Group 1,384,088 805,195 (c) Convertible notes-other related-in default 265,729 251,728 Total notes-related party $ 2,994,599 $ 2,293,866 (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 9) 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, 2016, convertible notes due to The Matthews Group totaled $669,648. During the year ended June 30, 2017, $477,500 of convertible notes were issued and interest of $89,795 was added to principal leaving a balance payable of $1,236,943 at June 30, 2017. The Company determined that upon issuance of certain convertible notes issued in the second quarter of fiscal 2017, there become insufficient authorized shares of common stock available for conversion. Accordingly, the fair value of the conversion features for these convertible notes were recorded as derivative liabilities with a corresponding discount to the related notes. The Company determined the fair value of the conversion features were $182,000 (see Note 5). As the convertible notes are due on demand, the $182,000 discount was expensed upon issuance. During the year ended June 30, 2018, interest of $107,839 was added to principal leaving a balance payable of $1,344,782 at June 30, 2018. At June 30, 2018, the notes are convertible at a conversion price of $0.08 per share into 16,809,779 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 9) dated September 30, 2015. At June 30, 2016, notes due to The Matthews Group totaled $216,648. During the year ended June 30, 2017, $538,820 of notes payable were issued and interest of $49,727 was added to principal leaving a balance owed of $805,195. During the year ended June 30, 2018, $599,312 of notes payable were issued, interest of $104,581was added to principal, and an interest payment of $125,000 was made, leaving a balance owed of $1,384,088 at June 30, 2018. (c) The notes are due to a current and a former director, are unsecured, convertible into common stock at per share amounts ranging from $0.10 to $0.30, and bear interest at rates ranging from 8% to 10% per annum. At June 30, 2016, convertible notes due other related parties totaled $237,725. During the year ended June 30, 2017, interest of $14,003 was added to principal leaving a balance owed of $251,728 at June 30, 2017. During the year ended June 30, 2018, interest of $14,001 was added to principal leaving a balance owed of $265,729 at June 30, 2018. At June 30, 2018, $197,124 of the notes were due in 2010 and are in default, and the balance of $68,605 is due on demand. At June 30, 2018, $197,124 of the notes are convertible at a conversion price of $0.30 per share into 657,080 shares of the Company’s common stock, $20,581 of the notes are convertible at a conversion price of $0.10 per share into 205,810 shares of the Company’s common stock, and $48,024 of the notes are convertible at a conversion price of $0.08 per share into 600,289 shares of the Company’s common stock. |
Derivative Liabilities
Derivative Liabilities | 12 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Liabilities | NOTE 5 - DERIVATIVE LIABILITIES During fiscal 2017, the Company determined there were insufficient authorized shares of common stock available for conversion of certain of its convertible notes issued in the second quarter of fiscal 2017 (See Note 4) and therefore the conversion feature of the notes did not meet equity classification. Based on this, the Company recorded derivative liabilities of $182,000 upon the issuance of these convertible notes. Subsequent to this recording and through June 30, 2017, the Company recorded a change in the fair value of the derivative liabilities of $546,000. At June 30, 2017, total derivative liabilities were $728,000. On April 18, 2018, the Company increased its authorized shares from 50,000,000 to 150,000,000 shares and therefore, the Company determined it had sufficient authorized shares available to meet equity classification for the conversion features of its convertible notes. Accordingly, on April 14, 2018, the Company remeasured the derivative liabilities to their fair value of $125,000, and recorded a gain in fair value of the derivative of $603,000. The balance of the derivative of $125,000 was then reclassified to equity and recorded as a credit to additional paid-in capital in accordance with ASC 815-15-35-4. The derivative liability was valued at the following dates using a Black-Scholes-Merton model with the following assumptions: April 18, 2018 June 30, 2017 July 11, 2016 to December 31, 2016 Conversion feature: Risk-free interest rate 1.24 % 1.50 % 0.07 % Expected volatility 130 % 179 % 99% to 124% Expected life (in years) 1 year 1-2.5 years 1-1.5 years Expected dividend yield — — Fair Value: Conversion feature $ 125,000 $ 728,000 $ 182,000 The risk-free interest rate was based on rates established by the Federal Reserve Bank. The Company used its own historical stock’s volatility as the estimated volatility. The expected life of the conversion feature of the notes or options was based on the estimated remaining terms of the notes or options, or expected settlement date for notes due on demand or that have matured. The expected dividend yield was based on the fact that the Company has not customarily paid dividends to its holders of common stock in the past and does not expect to pay dividends to holders of its common stock in the future. |
Stockholders' Deficiency
Stockholders' Deficiency | 12 Months Ended |
Jun. 30, 2018 | |
Equity [Abstract] | |
Stockholders' Deficiency | NOTE 6 - STOCKHOLDERS’ DEFICIENCY Preferred Stock The articles of incorporation of Veritec authorize 10,000,000 shares of preferred stock with a par value of $1.00 per share. The Board of Directors is authorized to determine any number of series into which shares of preferred stock may be divided and to determine the rights, preferences, privileges and restrictions granted to any series of the preferred stock. In 1999, a new Series H convertible preferred stock was authorized. Each share of Series H convertible preferred stock is convertible into 10 shares of the Veritec’s common stock at the option of the holder. As of June 30, 2018 and 2017, there were 1,000 shares of Series H convertible preferred stock issued and outstanding. Common Stock On February 2, 2018, the Company’s Board of Directors voted to increase the Company’s authorized common shares to 150,000,000 common shares. The Company filed the requisite documentation with the State of Nevada in April 2018, with an effective date of April 18, 2018. Common Stock to be Issued At June 30, 2018 and 2017, 145,000 shares of common stock to be issued with an aggregate value of $12,500 have not been issued and are reflected as common stock to be issued in the accompanying consolidated financial statements. |
Stock Options
Stock Options | 12 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options | NOTE 7 – STOCK OPTIONS A summary of stock options as of June 30, 2018 and for the two years then ended is as follows: Number of Shares Weighted - Average Exercise Price Outstanding at June 30, 2016 2,500,000 $ 0.08 Granted — — Forfeited — $ 0.08 Outstanding at June 30, 2017 2,500,000 $ 0.08 Granted — — Forfeited — $ 0.08 Outstanding at June 30, 2018 2,500,000 $ 0.08 Exercisable at June 30, 2018 2,500,000 $ 0.08 The Company has agreements with certain employees that provide for five years of annual grants of options, on each employment anniversary date, to purchase shares of the Company’s common stock. The option price is determined based on the market price on the date of grant, the options vest one year from the date of grant, and the options expire five years after vesting. The Company granted 2,500,000 options under this arrangement. There were no options granted in 2018 and 2017 under this agreement. Both the outstanding and exercisable stock options had no intrinsic value at June 30, 2018. Additional information regarding options outstanding as of June 30, 2018 is as follows: Options Outstanding at June 30, 2018 Options Exercisable at June 30, 2018 Range of Exercise Number of Shares Outstanding Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number of Shares Exercisable Weighted Average Exercise Price $ 0.08 2,500,000 1.64 $ 0.08 2,500,000 $ 0.08 2,500,000 2,500,000 |
Income Taxes
Income Taxes | 12 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | NOTE 8 - INCOME TAXES For the years ended June 30, 2018, net income was $106,790, as compared to net loss of $1,369,907 for the year ended June 30, 2017. For the years ended June 30, 2018 and 2017, no provision for income taxes was recorded. We made no provision for income taxes due to our utilization of federal net operating loss carry forwards to offset both regular taxable income and alternative minimum taxable income. Reconciliation between the expected federal income tax rate and the actual tax rate is as follows: Year Ended June 30, 2018 2017 Federal statutory tax rate 28 % 35 % State tax, net of federal benefit 6 % 6 % Total tax rate 34 % 40 % Allowance (34 )% (40 )% Effective tax rate — % — % The following is a summary of the deferred tax assets: Year Ended June 30, 2018 2017 Net operating loss carryforwards $ 2,580,000 $ 4,665,000 Derivative liabilities — 290,000 Intangibles, net — 70,000 Deferred tax assets before valuation allowance 2,580,000 5,025,000 Valuation allowance (2,580,000 ) (5,025,000 ) Net deferred tax asset $ — $ — The Company has provided a valuation allowance on the deferred tax assets at June 30, 2018 and 2017 to reduce such asset to zero, since there is no assurance that the Company will generate future taxable income to utilize such asset. Management will review this valuation allowance requirement periodically and make adjustments as warranted. The net change in the valuation allowance for the year ended June 30, 2018 was a decrease of $111,000. Veritec has net operating loss carryforwards of approximately $12,284,000 million for federal purposes available to offset future taxable income that expire in varying amounts through 2035. The ability to utilize the net operating loss carry forwards could be limited by Section 382 of the Internal Revenue Code which limits their use if there is a change in control (generally a greater than 50% change in ownership). The Company is subject to examination by tax authorities for all years for which a loss carry forward is utilized in subsequent periods. The Company follows FASB guidelines that address the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this guidance, we may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. This guidance also provides guidance on derecognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of June 30, 2018 and 2017, the Company did not have a liability for unrecognized tax benefits, and no adjustment was required at adoption. The Company’s policy is to record interest and penalties on uncertain tax provisions as income tax expense. As of June 30, 2018 and 2017, the Company has no accrued interest or penalties related to uncertain tax positions. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Jun. 30, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | NOTE 9 – RELATED PARTY TRANSACTIONS The Matthews Group is owned 50% by Ms. Van 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 4). Management Services Agreement and Related Notes Payable with Related Party On September 30, 2015, the Company sold all of its assets of its Barcode Technology comprised solely of its intellectual property to The Matthews Group. The Company’s Barcode Technology was originally 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. The Company has a management services agreement with The Matthews Group to manage all facets of the barcode technology operations, on behalf of The Matthews Group, through July 31, 2018. The Matthews Group bears the risk of loss from the barcode operations and has the right to the residual benefits of the barcode operations. In consideration of the services provided by the Company to The Matthews Group, the Company earns a fee of 20% of all revenues up to May 31, 2017 and 35% of all revenues up to July 31, 2018 from the barcode technology operations. During the year ended June 30, 2018 and 2017, the Company recorded management fee revenue related to this agreement of $376,580 and $172,930, 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 as proceeds from unsecured notes payable due The Matthews Group. During the year ended June 30, 2018 and 2017, cash flow loans of $599,312 and $538,820, respectively, were made to the Company at 10% interest per annum and due on demand. At June 30, 2018, cash flow loans of $1,384,088 are due to The Matthews Group (see Note 4). Convertible Notes Activity with Related Parties (see Note 4) During the year ended June 30, 2017, the Company issued $477,500 of convertible notes payable to The Matthews Group. The convertible notes payable-related party can be converted at a price of $0.08 per share. The market price on the date some of the convertible notes payable-related party were issued was in excess of the conversion price, and as a result the Company recognized an expense of $35,000 which is included in interest expense. During the year ended June 30, 2018, no convertible notes were issued to The Matthews Group. Advances from Related Parties From time to time, Ms. Van Tran provides advances to finance the Company’s working capital requirements. As of June 30, 2018 and 2017, total advances to Ms. Van Tran amounted to $96,110, 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. For both the years ended June 30, 2018 and 2017, rental payments to Ms. Van Tran totaled $51,000. On March 1, 2017, the Company’s wholly owned subsidiary, Public Bell, Inc., entered into an Exclusive Product Provider Agreement (“Agreement”) with an affiliate of American Heritage College (AHC). Ms. Van Tran, the Company’s CEO/Executive Chair, is a part owner of the affiliate of AHC. Public Bell paid AHC $50,000 in exchange for AHC agreeing to purchase Wi-Fi/WiMax broadband equipment exclusively from Public Bell and for the exclusive right to provide future products and services to AHC. During the year ended June 30, 2017, the $50,000 paid to AHC was recorded to sales and marketing expense in the accompanying Consolidated Statements of Operations. |
Legal Proceedings
Legal Proceedings | 12 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies | |
Legal Proceedings | NOTE 10 – LEGAL PROCEEDINGS On or about November 13, 2017, David A. Badhwa and Denise a Badhwa (collectively “Plaintiffs”) filed a lawsuit in district court in Hennepin County, Minnesota asserting that the Company breached the terms of a promissory note. Plaintiffs seek repayment on the principal of the promissory note, in the amount of $100,000, $10,000 of which Plaintiffs contend Veritec previously paid, plus interest, collection costs and attorney’s fees. As of May 15, 2018, the date of the last communication on the amount of recovery that Plaintiffs seek, Plaintiffs sought an award or settlement in the amount of $162,990. If Plaintiff’s prevail on their claims, the Court could award Plaintiffs the unpaid principal in the amount of $90,000, plus interest at the rate of eight percent (8%) per annum on the unpaid balance, as well as attorney’s fees incurred by Plaintiffs in seeking payment on the promissory note in an amount determined by the Court. An award of attorney’s fees could be significant. Veritec has vigorously defended Plaintiffs claims and has asserted a variety of counterclaims against Plaintiffs. Veritec has also attempted to engage Plaintiffs in settlement discussions, but Plaintiffs have not engaged in meaningful negotiations to resolve the claims in dispute. 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 $364,686, 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. The Company recorded a gain on the settlement of $364,686 in the accompanying Consolidated Statements of Operations for the year ended June 30, 2017. As of June 30, 2018, the 500,000 shares have not been relinquished. When the Company receives the shares, it will record a cancellation of shares. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Jun. 30, 2018 | |
Commitments and Contingencies | |
Commitments and Contingencies | NOTE 11 – COMMITMENTS AND CONTINGENCIES 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 June 30, 2018, the Company had not achieved an 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. |
Subsequent Event
Subsequent Event | 12 Months Ended |
Jun. 30, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Event | NOTE 9 – SUBSEQUENT EVENT On February 2, 2018, the Company’s Board of Directors voted to increase the Company’s authorized common shares to 150,000,000 common shares. The Company filed the requisite documentation with the State of Nevada in April 2018, with an effective date of April 18, 2018. The Company is currently waiting for approval from the State of Nevada. |
Operations and Summary of Sig_2
Operations and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
The Company | The Company Veritec, Inc. (Veritec) was formed in the State of Nevada on September 8, 1982. Veritec is primarily engaged in the development, sales, and licensing of products and providing services related to its mobile banking solutions. As a Cardholder Independent Sales Organization, Veritec is able to promote and sell Visa branded card programs. As a Third-Party Servicer, the Company 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, including Security First Bank (terminated in 2010), Palm Desert National Bank (which was later assigned to First California Bank and subsequently Pacific Western Bank that terminated in 2013), and Central Bank of Kansas City (terminated in 2016). Veritec is currently seeking a bank to sponsor its Prepaid Card programs. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Intercompany transactions and balances were eliminated in consolidation. Veritec’s wholly owned subsidiaries include Veritec Financial Systems, Inc., Tangible Payment Systems, Inc., and Public Bell, Inc. (collectively the “Company”). |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Those estimates and assumptions include estimates for reserves of uncollectible accounts, analysis of impairments of long lived assets, accruals for potential liabilities, assumptions made in valuing stock instruments issued for services, and valuation of deferred tax assets. Actual results could differ from those estimates. |
Cash and cash equivalents | Cash and cash equivalents Investments with original maturities of three months or less are considered to be cash equivalents. |
Accounts Receivable | Accounts Receivable The Company sells to domestic and foreign companies and grants uncollateralized credit to customers, but requires deposits on unique orders. Management periodically reviews its accounts receivable and provides an allowance for doubtful accounts after analyzing the age of the receivable, payment history and prior experience with the customer. The estimated loss that management believes is probable is included in the allowance for doubtful accounts. While the ultimate loss may differ, management believes that any additional loss will not have a material impact on the Company's financial position. Due to uncertainties in the settlement process, however, it is at least reasonably possible that management's estimate will change during the near term. Based on management’s assessment, no allowance for doubtful accounts was considered necessary at June 30, 2018 or 2017. |
Revenue Recognition | Revenue Recognition Revenues for the Company are classified into mobile banking technology and management fee revenue. a. Mobile Banking 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. The Company has entered into certain long term agreements to provide application development and support. Some customers paid the agreement in full at signing and the Company recorded the receipt of payment as deferred revenue. The Company records revenue relating to these agreements on a pro-rata basis over the term of the agreement and reduces its deferred revenue balance accordingly. b. Management Fee Revenue On September 30, 2015, the Company sold all of its assets of its Barcode Technology, which was comprised solely of its intellectual property, to The Matthews Group (a related party, see Note 9). The Company subsequently entered into a management services agreement with The Matthews Group to manage all facets of the barcode technology operations through June 30, 2019. The Company earned a fee of 20% of all revenues billed from the barcode technology operations up to May 31, 2017, and now earns a fee of 35% of all revenues billed up to June 30, 2019. |
Derivative Financial Instruments | <b><i>Derivative Financial Instruments</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve (12) months of the balance sheet date.</p>" id="sjs-B10"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"><b><i>Derivative Financial Instruments</i></b></p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify"> </p> <p style="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: justify">The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative instrument liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument could be required within twelve (12) months of the balance sheet date.</p> |
Income Taxes | Income Taxes The Company accounts for income taxes using the asset and liability method whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. |
Research and Development | Research and Development Research and development costs are expensed as incurred. |
Loss per Common Share | Loss per Common Share Basic earnings (loss) per share are computed by dividing the net income (loss) applicable to Common Stockholders by the weighted average number of shares of Common Stock outstanding during the year. Diluted earnings (loss) per share is computed by dividing the net income (loss) applicable to Common Stockholders by the weighted average number of common stock outstanding plus the number of additional common stock that would have been outstanding if all dilutive potential common stock had been issued, using the treasury stock method. Potential common stock are excluded from the computation as their effect is anti-dilutive. For the years ended June 30, 2018 and 2017, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect. As of June 30, 2018 and 2017, 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. June 30, 2018 2017 Series H Preferred Stock 10,000 10,000 Convertible Notes Payable 19,337,127 17,833,166 Options 2,500,000 2,500,000 Total 21,847,127 20,343,166 |
Stock-Based Compensation | Stock-Based Compensation The Company periodically issues stock options and warrants to employees and non-employees in capital raising transactions, for services and for financing costs. The Company accounts for stock option and stock warrant grants to employees based on the authoritative guidance provided by the Financial Accounting Standards Board (FASB) where the value of the award is measured on the date of grant and recognized over the vesting period. The Company accounts for stock option and stock warrant grants to non-employees in accordance with the authoritative guidance of the FASB where the value of the stock compensation is determined based upon the measurement date at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete. Non-employee stock-based compensation charges generally are amortized over the vesting period on a straight-line basis. In certain circumstances where there are no future performance requirements by the non-employee, option or warrant grants are immediately vested and the total stock-based compensation charge is recorded in the period of the measurement date. The fair value of the Company’s common stock option and warrant grants are estimated using a Black-Scholes option pricing model, which uses certain assumptions related to risk-free interest rates, expected volatility, expected life of the common stock options, and future dividends. Compensation expense is recorded based upon the value derived from the Black-Scholes option pricing model, and based on actual experience. The assumptions used in the Black-Scholes option pricing model could materially affect compensation expense recorded in future periods. |
Fair Value of Financial Instruments | 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, inventories, and accounts payable and accrued liabilities, approximate the related fair values due to the short-term maturities of these instruments. The fair value of the derivative liabilities of $728,000 at June 30, 2017, was valued using Level 2 inputs. |
Concentrations | Concentrations During the year ended June 30, 2018, the Company had one customer, a related party that represented 76% of our revenues. No other customer represented more than 10% of our revenues. During the year ended June 30, 2017, the Company had one customer, a related party, that represented 53% of our revenues and one customer that represented 14% of our revenues. No other customer represented more than 10% of our revenues. During the years ended June 30, 2018 and 2017, the Company had no foreign revenues. |
Segment Reporting | Segments The Company operates in one segment, the mobile financial banking industry. In accordance with the “Segment Reporting” Topic of the ASC, the Company’s chief operating decision maker has been identified as the Chief Executive Officer and President, who reviews operating results to make decisions about allocating resources and assessing performance for the entire Company. Existing guidance, which is based on a management approach to segment reporting, establishes requirements to report selected segment information quarterly and to report annually entity-wide disclosures about products and services, major customers, and the countries in which the entity holds material assets and reports revenue. All material operating units qualify for aggregation under “Segment Reporting” due to their similar customer base and similarities in: economic characteristics; nature of products and services; and procurement, manufacturing and distribution processes. Since the Company operates in one segment, all financial information required by “Segment Reporting” can be found in the accompanying consolidated financial statements |
Recent Accounting Pronouncements | Recently Issued Accounting Standards In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance creating Accounting Standards Codification (“ASC”) Section 606, “ Revenue from Contracts with Customers. In February 2016, the FASB issued ASU No. 2016-02, Leases 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 consolidated financial statements. |
Operations and Summary of Sig_3
Operations and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Accounting Policies [Abstract] | |
Summary of securities excluded from EPS calculation | June 30, 2018 2017 Series H Preferred Stock 10,000 10,000 Convertible Notes Payable 19,337,127 17,833,166 Options 2,500,000 2,500,000 Total 21,847,127 20,343,166 |
Convertible Notes and Notes P_2
Convertible Notes and Notes Payable (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Debt Disclosure [Abstract] | |
Convertible notes and notes payable - in default | June 30, 2018 June 30, 2017 (a) Convertible notes-in default $ 214,576 $ 205,116 (b) Notes payable-in default 387,684 370,207 Total notes-third parties $ 602,260 $ 575,323 |
Convertible notes and notes payable- related party | June 30, 2018 June 30, 2017 (a) Convertible notes-The Matthews Group $ 1,344,782 $ 1,236,943 (b) Notes payable-The Matthews Group 1,384,088 805,195 (c) Convertible notes-other related-in default 265,729 251,728 Total notes-related party $ 2,994,599 $ 2,293,866 |
Derivative Liabilities (Tables)
Derivative Liabilities (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule Of Derivative Liabilities | April 18, 2018 June 30, 2017 July 11, 2016 to December 31, 2016 Conversion feature: Risk-free interest rate 1.60 % 1.50 % 0.07 % Expected volatility 155 % 179 % 99% to 124% Expected life (in years) 1 year 1-2.5 years 1-1.5 years Expected dividend yield — — Fair Value: Conversion feature $ 125,000 $ 728,000 $ 182,000 |
Stock Options (Tables)
Stock Options (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Stock Options | Number of Shares Weighted - Average Exercise Price Outstanding at June 30, 2016 2,500,000 $ 0.08 Granted — — Forfeited — $ 0.08 Outstanding at June 30, 2017 2,500,000 $ 0.08 Granted — — Forfeited — $ 0.08 Outstanding at June 30, 2018 2,500,000 $ 0.08 Exercisable at June 30, 2018 2,500,000 $ 0.08 |
Additional information regarding outstanding options | Options Outstanding at June 30, 2018 Options Exercisable at June 30, 2018 Range of Exercise Number of Shares Outstanding Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Number of Shares Exercisable Weighted Average Exercise Price $ 0.08 2,500,000 1.64 $ 0.08 2,500,000 $ 0.08 2,500,000 2,500,000 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Jun. 30, 2018 | |
Income Tax Disclosure [Abstract] | |
Reconciliation between the federal and actual tax rate | Year Ended June 30, 2018 2017 Federal statutory tax rate 28 % 35 % State tax, net of federal benefit 6 % 6 % Total tax rate 34 % 40 % Allowance (34 )% (40 )% Effective tax rate — % — % |
Deferred tax assets | Year Ended June 30, 2018 2017 Net operating loss carryforwards $ 2,580,000 $ 4,665,000 Derivative liabilities — 290,000 Intangibles, net — 70,000 Deferred tax assets before valuation allowance 2,580,000 5,025,000 Valuation allowance (2,580,000 ) (5,025,000 ) Net deferred tax asset $ — $ — |
Summary of securities excluded
Summary of securities excluded from EPS calculation (Details) - shares | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Accounting Policies [Abstract] | ||
Series H Preferred Stock | 10,000 | 10,000 |
Convertible Notes Payable | 19,337,127 | 17,833,166 |
Options | 2,500,000 | 2,500,000 |
Total | 21,847,127 | 20,343,166 |
Operations and Summary of Sig_4
Operations and Summary of Significant Accounting Policies (Details Narrative) - USD ($) | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Apr. 18, 2018 | Dec. 31, 2016 | |
Derivative liabilities | $ 728,000 | $ 125,000 | $ 182,000 | |
Customer 1 | ||||
Sales percentage from major customers | 76.00% | 53.00% | ||
Customer 2 | ||||
Sales percentage from major customers | 14.00% |
Going Concern (Details Narrativ
Going Concern (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Net Loss | $ (18,210) | $ (1,369,807) | |
Cash used in operating activities | (506,919) | (1,030,580) | |
Stockholders' deficiency | (4,461,189) | $ (4,567,979) | $ (3,233,172) |
Notes payable in default | $ 761,315 |
Intangible Assets and Conting_2
Intangible Assets and Contingent Earnout Liability (Details Narrative) - USD ($) | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2015 | Sep. 30, 2014 | |
Amortization expense | $ 16,042 | $ 64,166 | ||
Tangible Payments LLC | ||||
Shares issued | 250,000 | |||
Shares issued, value | $ 37,500 | |||
Aggregate purchase price | $ 192,500 | |||
Earnout Payment | $ 155,000 |
Convertible Notes and Notes P_3
Convertible Notes and Notes Payable - Convertible notes and notes payable in default (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |||
Convertible notes payable - in default | [1] | $ 214,576 | $ 205,116 |
Notes payable - in default | [2] | 387,684 | 370,207 |
Total notes - third parties | $ 602,260 | $ 575,323 | |
[1] | The notes are unsecured, convertible into common stock at amounts ranging from $0.08 to $0.30 per share, bear interest at rates ranging from 5% to 8% per annum, were due through 2011 and are in default or due on demand. | ||
[2] | The notes are either secured by the Companys intellectual property or unsecured and bear interest ranging from 6.5% to 10% per annum, were due in 2012, and are in default. |
Convertible Notes and Notes P_4
Convertible Notes and Notes Payable - Convertible notes and notes payable related party (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | ||
Notes Payable Related Party | $ 2,994,599 | $ 2,293,866 | |||
The Matthews Group | |||||
Convertible Notes, Related Party | 1,344,782 | [1] | 1,236,943 | [1] | $ 669,648 |
Notes Payable Related Party | 1,384,088 | [2] | 805,195 | [2] | 216,648 |
Other | |||||
Convertible Notes, Related Party | $ 265,729 | [3] | $ 251,728 | [3] | $ 237,725 |
[1] | 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. | ||||
[2] | 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 9) dated September 30, 2015. During the year ended June 30, 2017, $538,820 of notes payable were issued and interest of $49,727 was added to principal leaving a balance owed of $805,195. During the year ended June 30, 2018, $599,312 of notes payable were issued, interest of $104,581was added to principal, and an interest payment of $125,000 was made, leaving a balance owed of $1,384,088 at June 30, 2018. | ||||
[3] | The notes are due to a current and a former director, are unsecured, convertible into common stock at per share amounts ranging from $0.10 to $0.30, and bear interest at rates ranging from 8% to 10% per annum. |
Convertible Notes and Notes P_5
Convertible Notes and Notes Payable (Details Narrative) - USD ($) | 12 Months Ended | ||||
Jun. 30, 2018 | Jun. 30, 2017 | Jun. 30, 2016 | |||
Notes Payable Related Party | $ 2,994,599 | $ 2,293,866 | |||
Expense related to the fair value of derivative liabilities | 182,000 | ||||
Cash paid for interest | $ 125,000 | ||||
The Matthews Group | |||||
Conversion price | $ 0.08 | ||||
Accrued interest | $ 107,839 | 89,795 | |||
Shares issued upon conversion | 16,809,779 | ||||
Notes payable issued | 477,500 | ||||
Expense related to the fair value of derivative liabilities | 182,000 | ||||
Matthews Group #2 | |||||
Notes payable | $ 1,384,088 | 805,195 | |||
Accrued interest | 104,581 | 49,727 | |||
Notes payable issued | 599,312 | 538,820 | |||
Cash paid for interest | $ 125,000 | ||||
Convertible Notes Payable (In Default) | |||||
Conversion price | $ .30 | ||||
Notes payable | $ 214,576 | 205,116 | $ 195,655 | ||
Accrued interest | 9,461 | 9,460 | |||
Notes in Default | 176,506 | ||||
Balance due on demand | $ 38,070 | ||||
Shares issued upon conversion | 588,354 | ||||
Convertible Notes Payable (In Default) | Minimum | |||||
Conversion price | $ 0.08 | ||||
Shares issued upon conversion | 475,875 | ||||
Interest rate | 5.00% | ||||
Convertible Notes Payable (In Default) | Maximum | |||||
Conversion price | $ 0.30 | ||||
Shares issued upon conversion | 588,354 | ||||
Interest rate | 8.00% | ||||
Notes Payable (In Default) | |||||
Notes payable | 352,729 | ||||
Accrued interest | $ 17,477 | 17,478 | |||
Notes in Default | $ 387,684 | 370,207 | |||
Notes Payable (In Default) | Minimum | |||||
Interest rate | 6.50% | ||||
Notes Payable (In Default) | Maximum | |||||
Interest rate | 10.00% | ||||
Secured Interest Bearing Notes | |||||
Notes in Default | $ 351,901 | ||||
Unsecured Interest Bearing Notes | |||||
Notes in Default | 35,783 | ||||
The Matthews Group | |||||
Convertible Notes, Related Party | 1,344,782 | [1] | 1,236,943 | [1] | 669,648 |
Notes Payable Related Party | $ 1,384,088 | [2] | 805,195 | [2] | 216,648 |
Other | |||||
Conversion price | $ 0.08 | ||||
Accrued interest | $ 14,001 | 14,003 | |||
Convertible Notes, Related Party | $ 265,729 | [3] | $ 251,728 | [3] | $ 237,725 |
$0.30 per share | |||||
Conversion price | $ 0.30 | ||||
Shares issued upon conversion | 657,080 | ||||
Convertible Notes, Related Party | $ 197,124 | ||||
$0.10 per share | |||||
Conversion price | $ 0.10 | ||||
Shares issued upon conversion | 205,810 | ||||
Convertible Notes, Related Party | $ 20,581 | ||||
$0.08 per share | |||||
Conversion price | $ 0.08 | ||||
Shares issued upon conversion | 600,289 | ||||
Convertible Notes, Related Party | $ 48,024 | ||||
[1] | 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. | ||||
[2] | 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 9) dated September 30, 2015. During the year ended June 30, 2017, $538,820 of notes payable were issued and interest of $49,727 was added to principal leaving a balance owed of $805,195. During the year ended June 30, 2018, $599,312 of notes payable were issued, interest of $104,581was added to principal, and an interest payment of $125,000 was made, leaving a balance owed of $1,384,088 at June 30, 2018. | ||||
[3] | The notes are due to a current and a former director, are unsecured, convertible into common stock at per share amounts ranging from $0.10 to $0.30, and bear interest at rates ranging from 8% to 10% per annum. |
Derivative Liabilities - Schedu
Derivative Liabilities - Schedule Of Derivative Liabilities (Details) - USD ($) | 6 Months Ended | 10 Months Ended | 12 Months Ended | |
Dec. 31, 2016 | Apr. 18, 2018 | Jun. 30, 2017 | Jun. 30, 2018 | |
Conversion feature: | ||||
Risk-free interest rate | 2.09% | 1.24% | 1.50% | |
Expected volatility | 132.00% | 130.00% | 179.00% | |
Expected life (in years) | 1 year | 1 year | 1 year | |
Expected dividend yield | ||||
Fair Value: | ||||
Conversion feature | $ 182,000 | $ 125,000 | $ 728,000 |
Derivative Liabilities (Details
Derivative Liabilities (Details Narrative) - USD ($) | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Apr. 18, 2018 | Dec. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||
Derivative liabilities | $ 728,000 | $ 125,000 | $ 182,000 | |
Expense related to the fair value of derivative liabilities | 182,000 | |||
Change in fair value of derivative liabilities | 603,000 | (546,000) | ||
Reclassification of derivative to additional paid-in capital | $ 125,000 |
Stockholders Deficiency (Detail
Stockholders Deficiency (Details Narrative) - USD ($) | Jun. 30, 2018 | Feb. 02, 2018 | Jun. 30, 2017 |
Common stock to be issued | 145,000 | ||
Common stock to be issued, value | $ 12,500 | $ 12,500 | |
Convertible preferred stock, par value | $ 1 | $ 1 | |
Convertible preferred stock, shares authorized | 10,000,000 | 10,000,000 | |
Common stock, shares authorized | 150,000,000 | 150,000,000 | 50,000,000 |
Series H Convertible | |||
Convertible preferred stock, shares issued | 1,000 | 1,000 | |
Convertible preferred stock, shares outstanding | 1,000 | 1,000 |
Stock Options - Summary of Stoc
Stock Options - Summary of Stock Options (Details) - $ / shares | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | ||
Beginning number of shares; outstanding | 2,500,000 | 2,500,000 |
Beginning weighted-average exercise price; outstanding | $ 0.08 | $ .08 |
Options Granted | ||
Options granted, weighted average exercise price | ||
Options Forfeited | ||
Options Forfeited, weighted average exercise price | ||
Ending number of shares; outstanding | 2,500,000 | |
Ending weighted-average exercise price; outstanding | $ .08 | |
Number of Shares; exercisable | 2,500,000 | 2,500,000 |
Weighted-average exercise price; exercisable | $ 0.08 | $ .08 |
Stock Options - Additional info
Stock Options - Additional information regarding outstanding options (Details) | 12 Months Ended |
Jun. 30, 2018$ / sharesshares | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Options outstanding, shares | shares | 2,500,000 |
Weighted average remaining contractual life | 1 year 7 months |
Weighted average exercise price | $ / shares | $ 0.08 |
Options excercisable | shares | 2,500,000 |
Options exercisable, weighted average exercise price | $ / shares | $ 0.08 |
Stock Options (Details Narrativ
Stock Options (Details Narrative) | Jun. 30, 2018USD ($)shares |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Options outstanding | shares | 2,500,000 |
Intrinsic value of options | $ |
Income Taxes - Reconciliation b
Income Taxes - Reconciliation between the federal and actual tax rate (Details) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||
Federal Statutory tax rate | 28.00% | 35.00% |
State tax, net of federal benefit | 6.00% | 6.00% |
Change in valuation | 34.00% | 40.00% |
Allowance | (34.00%) | (40.00%) |
Effective tax rate |
Income Taxes - Deferred tax ass
Income Taxes - Deferred tax assets (Details) - USD ($) | Jun. 30, 2018 | Jun. 30, 2017 |
Income Tax Disclosure [Abstract] | ||
Net operating loss carryforwards | $ 2,580,000 | $ 4,665,000 |
Derivative liabilities | 290,000 | |
Intangibles, net | 70,000 | |
Deferred tax assets before valuation allowance | 2,580,000 | 5,025,000 |
Valuation allowance | (2,580,000) | (5,025,000) |
Net deferred tax asset |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 12 Months Ended | |
Jun. 30, 2018 | Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | ||
Net Loss | $ (18,210) | $ (1,369,807) |
Net change in the valuation allowance | (111,000) | |
Net operating loss carryforwards | $ 12,284,000 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) | 12 Months Ended | 14 Months Ended | 20 Months Ended | |
Jun. 30, 2018USD ($) | Jun. 30, 2017USD ($) | Jul. 31, 2018 | May 31, 2017 | |
Accounts payable, related party | $ 96,110 | $ 96,110 | ||
Managament fee, percent of revenue | 0.35 | 0.20 | ||
Management fee revenue | 376,580 | 172,930 | ||
Cash flow loans | 1,384,088 | |||
Proceeds from convertible notes payable-related party | 477,500 | |||
Proceeds from notes payable, related party | 599,312 | 538,820 | ||
Notes Payable Related Party | 2,994,599 | 2,293,866 | ||
Sales and marketing expense | 50,000 | |||
Matthews Group #2 | ||||
Proceeds from convertible notes payable-related party | 477,500 | |||
Van Tran | ||||
Rental Payments | $ 51,000 | $ 51,000 | ||
Larry Johanns | ||||
Ownership of TMG | 50.00% | |||
Van Tran | ||||
Ownership of TMG | 50.00% |
Legal Proceedings (Details Narr
Legal Proceedings (Details Narrative) - USD ($) | 12 Months Ended | |||
Jun. 30, 2018 | Jun. 30, 2017 | Nov. 13, 2017 | Sep. 21, 2016 | |
Commitments and Contingencies | ||||
Promissory Note | $ 100,000 | |||
Settlement amount | $ 162,990 | |||
Interest | 8.00% | |||
Convertible note payable relinquished | $ 364,686 | |||
Shares to be returned | 500,000 | |||
Gain on settlement of note payable to former officer | $ 364,690 |
Commitments and Contingencies (
Commitments and Contingencies (Details Narrative) - USD ($) | 12 Months Ended | ||
Jun. 30, 2018 | Jan. 17, 2016 | Dec. 05, 2008 | |
Incentive compensation plan percentage | 10.00% | ||
Incentive Compensation Bonus, Minimum Threshold | $ 3,000,000 | ||
Van Tran | |||
Annual base salary | $ 150,000 | ||
Veritec Inc | |||
Member in joint venture | 30.00% | ||
Vietnam Alliance Capital | |||
Member in joint venture | 70.00% |
Subsequent Event (Details Narra
Subsequent Event (Details Narrative) - shares | Jun. 30, 2018 | Feb. 02, 2018 | Jun. 30, 2017 |
Subsequent Events [Abstract] | |||
Common shares, authorized | 150,000,000 | 150,000,000 | 50,000,000 |