VRTC Veritec Inc (PK)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM l0-Q

 

(Mark One)

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934

 

for the quarterly period ended March 31, 2015

 

OR

 

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

 

for the transition period from ________________ to ___________________.

 

Commission File Number. 0-15113

 

VERITEC, INC.

(Exact name of Registrant as Specified in its Charter)

 

Nevada	95-3954373
(State or Other Jurisdiction of Incorporation or Organization)	(IRS Employer Identification No.)
2445 Winnetka Avenue N. Golden Valley, MN	55427
(Address of principal executive offices)	(Zip Code)

 

Registrant's telephone number, including area code: (763) 253-2670

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the 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 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, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule l2b-2 of the Exchange Act. (Check one):

 

Large accelerated filer ☐	Accelerated filer ☐	Non-accelerated filer ☐	Smaller Reporting Company ☒
		(Do not check if a smaller reporting company)

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☒

 

As of March 31, 2015, there were 16,530,088 shares of the issuer’s common stock outstanding.

 

 

 

VERITEC, INC.

FORM 10-Q

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2015

 

TABLE OF CONTENTS		Page No.
PART I
ITEM 1	FINANCIAL STATEMENTS	4
ITEM 2	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	18
ITEM 3	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	22
ITEM 4	CONTROLS AND PROCEDURES	22
PART II
ITEM 1	LEGAL PROCEEDINGS	23
ITEM 1A	RISK FACTORS	23
ITEM 2	UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS	23
ITEM 3	DEFAULTS UPON SENIOR SECURITIES	23
ITEM 4	MINE SAFETY DISCLOSURES	23
ITEM 5	OTHER INFORMATION	23
ITEM 6	EXHIBITS	24
SIGNATURES		25

 

 

 

 

Special Note Regarding 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, 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

ITEM 1 FINANCIAL STATEMENTS

 

VERITEC, INC. AND SUBSIDIARIES
CONSENSED CONSOLIDATED BALANCE SHEETS

 

		March 31,				June 30,
		2015				2014
		(Unaudited)
ASSETS
Current Assets:
Cash		$	54,003			$	24,665
Accounts receivables, net of allowance of $0 and $13,395, respectively			159,673				70,500
Inventories			12,676				7,829
Prepaid expenses			7,371				17,143
Total Current Assets			233,723				120,137
Restricted cash			57,965				51,957
Property and Equipment, net			685				994
Intangibles, net			160,417				—
Total Assets		$	452,790			$	173,088
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current Liabilities:
Notes payable – in default		$	514,388			$	493,017
Notes payable, related party – in default			2,844,961				2,649,202
Accounts payable			670,163				540,794
Accounts payable, related party			91,860				78,753
Customer deposits			85,743				91,260
Deferred revenues			501,150				258,764
Payroll tax liabilities			482,177				539,218
Accrued expenses			16,114				104,168
Total Current Liabilities			5,206,555				4,755,176
Contingent earnout liability			155,000				—
Total Liabilities			5,361,555				4,755,176
Commitments and Contingencies:			—				—
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 as of March 31, 2015 and June 30, 2014, respectively.			1,000				1,000
Common stock, par value $.01; authorized 50,000,000 shares, 16,530,088 and 15,920,088 shares issued and outstanding as of March 31, 2015 and June 30, 2014, respectively			165,301				159,201
Common stock to be issued, 225,000 shares and 400,000 shares, respectively			21,396				39,596
Additional paid-in capital			14,836,506				14,594,181
Accumulated deficit			(19,932,968	)			(19,376,066	)
Total Stockholders' Deficiency			(4,908,765	)			(4,582,088	)
Total Liabilities and Stockholders’ Deficiency		$	452,790			$	173,088
The accompanying notes are an integral part of these consolidated financial statements

 

 

 

VERITEC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2015 AND 2014
(UNAUDITED)

 

		Three Months Ended March 31,
		2015				2014
		(Unaudited)				(Unaudited)
Revenue:
Barcode technology revenue		$	109,664			$	209,832
Mobile banking technology revenue			62,521				2,034
Total revenue			172,185				21,886
Cost of Sales			85,079				79,799
Gross Profit			87,106				132,067
Operating Expenses:
General and administrative			201,175				125,970
Sales and marketing			16,660				19,357
Research and development			25,007				33,453
Total operating expenses			242,842				178,780
Loss from Operations			(155,736	)			(46,713	)
Other Expense:
Interest income			—				29
Interest expense and finance costs, including $114,229 and $38,575, respectively, to related parties			(122,339	)			(49,141	)
Total other expense			(122,339	)			(49,141	)
Net Loss		$	(278,075	)		$	(95,825	)
Net Loss Per Common Share -
Basic		$	(0.02	)		$	(0.01	)
Diluted		$	(0.02	)		$	(0.01	)
Weighted Average Number of Shares Outstanding -
Basic			16,523,784				15,920,088
Diluted			16,523,784				15,920,088
The accompanying notes are an integral part of these consolidated financial statements

 

 

VERITEC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2015 AND 2014
(UNAUDITED)

 

		Nine Months Ended March 31,
		2015				2014
		(Unaudited)				(Unaudited)
Revenue:
Barcode technology revenue		$	373,071			$	1,291,814
Mobile banking technology revenue			351,868				4,065
Total revenue			724,939				1,295,879
Cost of Sales			253,739				267,487
Gross Profit			471,200				1,028,392
Operating Expenses:
General and administrative			571,135				406,064
Sales and marketing			61,856				66,157
Research and development			82,365				125,374
Total operating expenses			715,356				597,595
Income (Loss) from Operations			(244,156	)			430,797
Other Expense:
Interest income			—				58
Interest expense and finance costs, including $290,112 and $117,853, respectively, to related parties			(312,746	)			(145,000	)
Total other expense			(312,746	)			(144,942	)
Net Income (Loss)		$	(556,902	)		$	285,855
Net Income (Loss) Per Common Share -
Basic		$	(0.03	)		$	0.02
Diluted		$	(0.03	)		$	0.02
Weighted Average Number of Shares Outstanding -
Basic			16,472,751				15,920,088
Diluted			16,472,751				15,920,088
The accompanying notes are an integral part of these consolidated financial statements

 

 

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

FOR THE NINE MONTHS ENDED MARCH 31, 2015

 

			Preferred Stock								Common Stock
			Shares				Amount				Shares				Amount				Common Stock to be Issued				Additional Paid-in Capital				Accumulated Deficit				Stockholders’ Deficiency
BALANCE, July 1, 2014			1,000			$	1,000				15,920,088			$	159,201			$	39,596			$	14,594,181			$	(19,376,066	)		$	(4,582,088	)
Shares issued for acquisition			—				—				250,000				2,500				—				35,000				—				37,500
Shares issued for services			—				—				135,000				1,350				7,050				8,950				—				17,350
Shares issued for common stock issuable			—				—				225,000				2,250				(25,250	)			23,000				—				—
Beneficial conversion feature on issuance of convertible notes payable			—				—				—				—				—				175,375				—				175,375
Net loss			—				—				—				—												(556,902	)			(556,902	)
BALANCE, March 31, 2015 (Unaudited)			1,000			$	1,000				16,530,088			$	165,301			$	21,396			$	14,836,506			$	(19,932,968	)		$	(4,908,765	)
The accompanying notes are and integral part of these condensed consolidated financial statements

 

 

 

VERITEC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

		Nine Months Ended March 31,
		2015				2014
		(Unaudited)				(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income (Loss)		$	(556,902	)		$	285,855
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation			309				136
Amortization			32,083				—
Shares issued for services			17,350				25,068
Beneficial conversion feature on issuance of convertible notes payable			175,375				—
Interest accrued on notes payable			136,129				130,741
Changes in operating assets and liabilities:
Accounts receivable			(89,173	)			241,319
Restricted cash			(6,008	)			351,717
Inventories			(4,847	)			(3,549	)
Prepaid expenses			9,772				15,743
Deferred revenues			242,386				(649,703	)
Payroll tax liabilities			(57,041	)			(73,297	)
Customer deposit			(5,517	)			62,255
Accounts payables and accrued expenses			54,422				2,087
Net cash provided by (used in) operating activities			(51,662	)			388,372
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment			—				(1,232	)
Net cash used in investing activities			—				(1,232	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of notes payable			—				(364,036	)
Proceeds from notes payable, related party			224,500				—
Payment on notes payable, related party			(143,500	)			—
Net cash provided by (used in) financing activities			81,000				(364,036	)
NET INCREASE IN CASH			29,338				23,104
CASH AT BEGINNING OF YEAR			24,665				75,918
CASH AT END OF YEAR		$	54,003			$	99,022
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest		$	—			$	13,421
NON CASH INVESTING AND FINANCING ACTIVITIES
Common stock issued for acquisition		$	37,500			$	—
Contingent earnout liability from acquisition		$	155,000			$	—
The accompanying notes are an integral part of these condensed consolidated financial statements

 

 

 

VERITEC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED MARCH 31, 2015 AND 2014
(UNAUDITED)

 

NOTE 1. NATURE OF BUSINESS

 

References to the “Company” in this Form 10-Q refer to Veritec, Inc. (“Veritec”) and its wholly owned subsidiaries Vcode Holdings, Inc. (Vcode®), and Veritec Financial Systems, Inc. (VTFS).

 

The Company as primarily engaged in the development, marketing, sales and licensing of products and rendering of professional services related thereto in the following two fields of technology: (1) proprietary two-dimensional matrix symbology (also commonly referred to as “two-dimensional barcodes” or “2D barcodes”), and (2) mobile banking solutions. Subsequent to June 30, 2015, the Company began to focus exclusively on mobile banking technology, and sold its barcode technology.

 

Barcode Technology

 

The Company’s Barcode Technology was originally invented by the founders of Veritec under United States patents 4,924,078, 5,331,176, 5,612,524 and 7,159,780. Our principal licensed product to date that contains our VeriCode ® Barcode Technology has been a product identification system for identification and tracking of manufactured parts, components and products mostly in the liquid crystal display (LCD) markets. The VeriCode® symbol is a two-dimensional high data density machine-readable symbol that can contain up to approximately 500 bytes of data. The Company’s VSCode® Barcode Technology is a derivative of the VeriCode® symbol with the ability to encrypt a greater amount of data by increasing data density. The VSCode ® is a data storage “container” that offers a high degree of security and which can also be tailored to the application requirements of the user. The VSCode ® symbol can hold any form of binary information that can be digitized, including numbers, letters, images, photos, graphics, and the minutia for biometric information, including fingerprints and facial image data, to the extent of its data storage capacity, that are likewise limited by the resolution of the marking and reading devices employed by the user. VSCode ® is ideal for secure identification documents (such as national identification cards, driver’s licenses, and voter registration cards), financial cards, medical records and other high security applications. In its PhoneCodes™ product platform, Veritec developed software to send, store, display, and read a VeriCode® Barcode Technology symbol on the LCD screen of a mobile phone. With the electronic media that provide the ease of transferring information over the web, Veritec’s PhoneCodes™ technology enables individuals and companies to receive or distribute gift certificates, tickets, coupons, receipts, or engage in banking transactions using the VeriCode ® technology via wireless phone or PDA.

 

On September 30, 2015, the Company sold all of its assets of its Barcode Technology, which was comprised solely of its intellectual property. The sale allows the Company to focus its efforts solely on its growing Mobile Banking Technology (See Note 11).

 

Mobile Banking Solutions

 

In January 12, 2009, Veritec formed VTFS, a Delaware corporation, to bring its Mobile Banking Technology, products and related professional services to market. In May 2009 Veritec was registered by Security First Bank in Visa’s Third Party Registration Program as a Cardholder Independent Sales Organization and Third-Party Servicer. As a Cardholder Independent Sales Organization, Veritec was able to promote and sell Visa branded card programs. As a Third-Party Servicer, Veritec provided back-end cardholder transaction processing services for Visa branded card programs on behalf of Security First Bank. As of October 2010 the Company’s registration with Security First Bank terminated. As of April 2011 the Company signed an ISO and processor agreement with Palm Desert National Bank (which was later assigned to First California Bank) to market and processes the Company’s Visa branded card program on behalf of the bank. First California Bank was sold to Pacific Western Bank and June 2013 Pacific Western Bank closed its entire debit card division and transferred its contract with VTFS to Central Bank of Kansas City Bank. On February 5th, 2014 the entire relationship between Veritec and Pacific Western Bank ended and the new relationship with Central Bank of Kansas City began.

 

On September 30, 2014, Veritec and Tangible Payments LLC, a Maryland Limited Liability Company, entered into an Asset Purchase Agreement pursuant to which Veritec acquired certain assets and liabilities of the Tangible Payments LLC (See Note 6).

 

The Company 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.

 

NOTE 2. 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 three and nine month periods ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending June 30, 2015. The Condensed Consolidated Balance Sheet as of March 31, 2015 was derived from the unaudited consolidated financial statements as of such date, but does not include all of the information and footnotes required by GAAP. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in our Form 10-K as of and for the year ended June 30, 2014.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts, analysis of impairments of long lived assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services.

 

The accompanying condensed consolidated financial statements include the accounts of Veritec, VCode, and VTFS. All inter-company transactions and balances were eliminated in consolidation.

NOTE 3. GOING CONCERN

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the nine months ended March 31, 2015, the Company incurred a net loss of $556,902. At March 31, 2015, the Company had a working capital deficit of $4,972,832 and a stockholders’ deficiency of $4,908,765. In addition, at March 31, 2015, the Company is delinquent in payment of $3,359,349 of its note payable obligations and is also delinquent in payment of $482,177 for payroll taxes and accrued interest.

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and to ultimately achieve profitable operations. The Company’s independent registered public accounting firm, in their report on the Company’s financial statements for the year ending June 30, 2014, expressed 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 these uncertainties.

The Company believes its cash and forecasted cash flow from operations will not be sufficient to continue operations through fiscal 2015 without continued external investment. The Company will require additional funds to continue its operations through fiscal 2015 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.

 

NOTE 4. SIGNIFICANT ACCOUNTING POLICIES

 

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 three and nine months ended March 31, 2015 and the three and nine months ended March 31, 2014, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect. For the nine months ended March 31, 2014 the calculation of diluted earnings per share included stock options and warrants, calculated under the treasury stock method, and excluded preferred stock, certain stock options, warrants and convertible notes payable since the effect was antidilutive.

 

The following table sets forth the computation of basic and diluted income per common share for the nine months period ended March 31, 2015 and 2014.

		Nine Months Ended March 31,
		2015				2014
Net Income (Loss)		$	(551,902	)		$	285,855
Weighted average common shares – basic			16,177,425				15,920,088
Dilutive effect of outstanding stock options			—				—
Dilutive effect of convertible notes payable			—				—
Weighted average shares outstanding – diluted			16,177,425				19,920,088

As of March 31, 2015 and 2014, 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.

 

		March 31,
		2015				2014
Series H preferred stock		$	10,000			$	10,000
Warrants			—				50,000
Convertible notes payable			16,077,124				8,480,973
Options			2,530,500				3,056,500
Total			18,617,624				11,597,473

 

Concentrations

 

During the three months ended March 31, 2015 and 2014, the Company had two customers that accounted for approximately 24% and 11% of sales in 2015 and three customers that accounted for approximately 39%, 20% and 19% of sales in 2014, respectively. No other customers accounted for more than 10% of sales in either period.

 

 

During the nine months ended March 31, 2015 and 2014, the Company had two customers that accounted for approximately 16% and 13% of sales in 2015 and two customers that accounted for approximately 48% and 11% of sales in 2014, respectively. No other customers accounted for more than 10% of sales in either period.

 

As of March 31, 2015, the Company had accounts receivable due from one customer who comprised approximately $106,465 (67%) of its total accounts receivable. As of June 30, 2014, the Company had approximately $86,361 (69%) and $23,250 (19%), respectively, of accounts receivable due from its major customers.

 

For the three months ended March 31, 2015 and 2014, foreign revenues accounted for 49% (27% Taiwan, 12% Korea, 7% China and 3% other) and 53% (30% Korea, 20% Taiwan, and 3% others) of the Company’s total revenues, respectively.

 

For the nine months ended March 31, 2015 and 2014, foreign revenues accounted for 42% (19% Taiwan, 10% Korea, 8% China 5% other) and 68% (47% Korea and 21% Taiwan) of the Company’s total revenues, respectively.

 

Recent Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements and disclosures.

 

In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation – Stock Compensation (Topic 718). The pronouncement was issued to clarify the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The pronouncement is effective for reporting periods beginning after December 15, 2015. The adoption of ASU 2014-12 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.

 

In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of the adoption of ASU 2014-15 on the Company’s financial statements and disclosures.

 

In November 2014, the FASB issued Accounting Standards Update No. 2014-16 (ASU 2014-16), Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The amendments in this ASU do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. The ASU applies to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share and is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is in the process of evaluating the impact of 2014-16 on the Company’s financial statements and disclosures.

 

 

In July 2015, the FASB issued Accounting Standards Update 2015-11, Simplifying the Measurement of Inventory, which requires that inventory within the scope of ASU 2015-11 be measured at the lower of cost and net realizable value. Inventory measured using last-in, first-out (LIFO) and the retail inventory method are not impacted by the new guidance. ASU 2015-11 applies to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of ASU 2015-11 at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for public business entities in fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2015-11 on the Company’s financial statements and 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 consolidated financial statements. 

 

NOTE 5. RESTRICTED CASH

 

The Company entered into Store Value Prepaid Card Sponsorship Agreements (the “Agreement”) with certain banks whereas the Company markets and sells store value prepaid card programs (the “Programs”). The Programs are marketed and managed daily at the direction of the Bank, for which the Company receives a transaction fee. In connection with the agreements the Company is required to establish a Reserve Account controlled by the Bank. At March 31, 2015 and June 30, 2014, the restricted cash totaled $57,965 and $51,957, respectively. Since this amount is restricted for the purposes related to the Programs, it is classified as restricted cash on the consolidated balance sheets.

 

NOTE 6. ACQUISITION

 

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 Tangible Payments LLC. Tangible Payments LLC is a combined-solution software package that incorporates features the market is currently purchasing as an individual-solutions product that requires integrated services at an additional cost. With a one-stop package, Tangible’s Payments LLC solution eliminates costs and reduces deployment time.

 

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 $1.3 million.

 

The Company assigned $192,500 of the purchase price to contract commitments which will be amortized over a three year period.

 

The following table presents our unaudited pro forma combined historical results of operations for the nine months March 31, 2015 and 2014, respectively, as if we had consummated the acquisition as of July 1, 2013.

		March 31,
		2015				2014
		(Unaudited)				(Unaudited)
Revenues		$	787,064			$	1,506,432
Net income (loss)		$	(596,285	)		$	211,095

 

 

NOTE 7. RELATED PARTY TRANSACTIONS

 

During the nine months March 31, 2015 the Company received various unsecured, non-interest bearing, due on demand advances from its CEO Ms. Van Tran, a related party. The balances due Ms. Tran as of March 31, 2015 and June 30, 2014 were $91,860 and $78,753, respectively. These advances have been classified as accounts payable, related party on the accompanying consolidated balance sheets.

 

The Company has relied on The Matthews Group, LLC (TMG), 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, for funding (see Note 8). The Company also leases its office facilities from Ms. Van Tran.

 

NOTE 8. NOTES PAYABLE

 

Notes payable includes accrued interest and consists of the following as of March 31, 2015 and June 30, 2014:

		March 31, 2015				June 30, 2014
Convertible Notes Payable
Convertible notes payable (includes $138,120 and $130,898, respectively, to non-related parties), unsecured, interest at 8%, due September 2010 through November 2010. The principal and accrued interest is convertible at a conversion price of $0.30. The principal and interest is due immediately on the event of default or change of control. The notes are currently in default.		$	747,452			$	720,302
Convertible notes payable to related parties, unsecured, principal and interest are convertible into common stock at $0.30 to $0.33 per share, interest at 8% to 10%, due on demand to November 2010. The notes are currently in default.			1,245,257				1,107,435
Convertible note payable to related party, secured by the Company’s intellectual property, principal and interest are convertible into common stock at $0.25 per share subject to board of directors’ approval, interest at 8%. The note was due November 2010 and is now in default.			286,871				274,871
Notes payable, secured by the Company's certificate of deposit with a financial institution and classified on the balance sheet as restricted cash, interest at 5%, convertible into common stock at $0.08 per share, due on demand.			33,310				32,215
Convertible note payable, unsecured, principal and interest are convertible into common stock at $0.30 to $0.40 per share subject to board of directors’ approval, interest at 5% to 8%, due January 2011 to March 2013.  The note is now in default.			14,186				13,586
Convertible note payable, unsecured, principal and interest are convertible into common stock at $1.00 per share subject to board of directors’ approval, interest at 8%. The note was due November 2009.			—				1,766
Subtotal convertible notes			2,327,076				2,150,175
Promissory Notes
Note payable to related party, secured by the Company’s intellectual property, interest at 8% due August 2010 and is now in default.			556,373				533,318
Notes payable to related parties, unsecured, interest at 0% to 8%, due on demand.			148,430				142,430
Note payable, unsecured, interest at 10%. The note was due in January 2010 and is now in default.			30,667				29,167
Note payable, secured by the Company's intellectual property, interest at variable rates starting September 1, 2012, due December 2012 and is now in default.			296,803				287,129
Subtotal notes payable			1,032,273				992,044
Total		$	3,359,349			$	3,142,219

 

 

During the nine months ended March 31, 2015, the Company issued $126,500 of convertible notes payable that could be converted at a price of $0.08 per share. The market price on the date the convertible notes payable were issued was in excess of the conversion price. The difference between the conversion price of $0.08 per share and the market price was recognized as an expense of $175,375 and was included in interest expense in the Condensed Consolidated Statements of Operations for the nine months ended March 31, 2015. No similar activity occurred during the same period of the prior year.

 

For the purposes of Balance Sheet presentation notes payable have been presented as follows:

		March 31, 2015				June 30, 2014
Notes payable		$	514,388			$	493,017
Notes payable, related party			2,844,961				2,649,202
Total		$	3,359,349			$	3,142,219

 

NOTE 9 - 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 March 31, 2015 and June 30, 2014, there were 1,000 shares of Series H convertible preferred stock issued and outstanding.

 

Common Stock Issued

 

Shares issued for acquisition

 

On September 30, 2014, the Company issued 250,000 shares of common stock as partial consideration for an acquisition (See Note 6).

 

Shares issued to consultants for services

 

During the nine months ended March 31, 2015, the Company granted and issued 135,000 shares of common stock for services received. The common shares, based on the fair value on the dates granted, were valued at $0.05 to $0.51 per share, for an aggregate of $17,350.

 

Shares issued to directors for services

 

During the nine months ended March 31, 2015, the Company issued an aggregate of 225,000 shares of common stock to four of the Company’s directors. These shares were for services rendered during the fiscal year ended June 30, 2014 valued at $25,250 which had been included in the Company’s common shares to be issued balance as of June 30, 2014.

 

Shares to be issued to consultants for services rendered

 

On July 15, 2014, the Company entered into a "Consulting Agreement" with a consultant to be a general advisor on technical issues to both the Company’s President and its subsidiary, Veritec Financial Systems, Inc. Per the payment terms of the Consulting Agreement, the consultant is to receive both monthly cash compensation and 5,000 shares of common stock. During the nine months ended March 31, 2015, the Company recorded an obligation to issue 40,000 shares of common stock with an aggregate fair value of $5,900 of which 5,000 shares of common stock were issued in December 2014. As of March 31, 2015, the remaining 35,000 shares of common stock with a value of $5,150 have not been issued and have been reflected in common stock to be issued in the accompanying consolidated balance sheet.

 

 

On June 23, 2014, the Company entered into an "Advisory Agreement" with a consultant to be an executive advisor to the Company’s President. Per the payment terms of the Advisory Agreement, the consultant is to receive both monthly cash compensation and 5,000 shares of common stock. The Advisory Agreement was terminated in January 2015. During the nine months ended March 31, 2015, the Company recorded an obligation to issue 35,000 shares of common stock with an aggregate fair value of $4,050 of which 20,000 shares of common stock were issued in December 2014. As of March 15, 2015, the remaining 15,000 shares of common stock with a value of $1,900 have not been issued and have been reflected in common stock to be issued in the accompanying consolidated balance sheet.

 

NOTE 10 – STOCK OPTIONS

 

Stock Options

 

A summary of stock options for the nine months ended March 31, 2015 is as follows:

 

				Number of			Weighted - Average
				Shares			Exercise Price
Outstanding at June 30, 2014				3,056,500		$	0.42
Granted				—		$	0.00
Forfeited				(526,000	)	$	0.42
Outstanding at March 31, 2015				2,530,500		$	0.42
Exercisable at March 31, 2015				2,530,500		$	0.42

 

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 during fiscal year 2013. There were no options granted in fiscal year 2014 or during the nine months ended March 31, 2015 under this agreement. The Company recognized no stock-based compensation expense related to stock options during the three and nine months ended March 31, 2015 and 2014, respectively. As of March 31, 2015, there was no remaining unrecognized compensation costs related to stock options. Based upon the trading value of the common shares, there was no intrinsic value of these options as of March 31, 2015.

 

The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the weighted-average assumptions noted in the following table. The risk-free rate for periods within the contractual life of the options is based on the U. S. Treasury yield in effect at the time of the grant. Volatility was based on the historical volatility of the Company’s common stock. The Company estimated the expected life of options based on historical experience and other averaging methods.

Additional information regarding options outstanding as of March 31, 2015 is as follows:

 

Options Outstanding at March 31, 2015																Options Exercisable at March 31, 2015
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
$0.13 - $1.45				2,530,500			3.98			$	0.42				2,530,500			$	0.42
				2,530,500											2,530,500

 

The weighted-average remaining contractual life of stock options outstanding and exercisable at March 31, 2015 is 3.98 years.

 

 

NOTE 11. SUBSEQUENT EVENTS

 

These unaudited condensed consolidated financial statements should be read in conjunctions with the financial statements and notes thereto included in the Company’s Form 10-K for the year ended June 30, 2015 filed on January 20, 2016 with the Security and Exchange Commission, which contains additional information of events subsequent to December 31, 2014.

 

 

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

 

Results of Operations – Three Months Ended March 31, 2015 compared to March 31, 2014

 

We had a net loss of $278,075 for the three months ended March 31, 2015 compared to a net loss of $95,825 for the three months ended March 31, 2014.

 

License and other revenue

 

Details of revenues are as follows:

 

		Three Months Ended March 31,								Increase (Decrease)
		2015				2014				$				%
Barcode Technology		$	109,664			$	209,832			$	(100,168	)			(47.7	)
Mobile Banking Technology			62,521				2,034				60,487				2,973.7
Total Revenues		$	172,185			$	211,866			$	(39,681	)			(18.7	)

 

Barcode Technology revenues are derived from our Product Identification systems sold principally to customers in the LCD manufacturing industry. Identification Card revenues in these periods were a result of sales of identification card and mobile banking systems.

 

The decrease in Barcode Technology revenues was mainly attributable to the decreased demand for LCD screens. Revenues from the LCD market remain unpredictable as they are generated when customers open new production facilities or update production equipment; however, for now the Company continues to experience relatively low demand for product identification product licenses in the LCD industry. A large portion of our license sales are concentrated in the Asia-Pacific market, which decreased in Taiwan, Japan, Germany, and increased in Korea and China.

Mobile Banking Technology revenues includes 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. The increase in Mobile Banking Technology revenues is due to our efforts to grow this business line which has led to several recent multiyear agreements to provide services and support.

 

On September 30, 2015, the Company and The Matthews Group, a related party, entered into an Asset Purchase Agreement pursuant to which the Company sold the intellectual property assets relating to its Barcode Technology. The sale allows the Company to focus its efforts solely on growing its Mobile Banking Technology business.

 

Cost of Sales

 

Cost of sales for the three months ended March 31, 2015 and 2014, totaled $85,079 and $79,799, respectively. The increase in expense was the result of increased labor costs associated with projects implemented during the period as compared to the same period of the prior year. For the three months ended March 31, 2015 and 2014, cost of sales as a percentage of revenue were 49.4% and 37.7%, respectively.

 

 

Operating Expenses

 

General and administrative expense for the three months ended March 31, 2015 and 2014 was $196,175 and $125,970, respectively. The increase was the result of $34,480 in operating expenses incurred after acquiring Tangible Payments, LLC (see Note 5 of the attached Consolidated Financial Statements). The remaining increase in expenses of $35,675 was primarily from increased salaries, benefits and professional fees.

 

Sales and marketing expense for the three months ended March 31, 2015 and 2014 were comparable at $16,660 and $19,357, respectively.

 

Research and development expense for the three months ended March 31, 2015 and 2014 was $25,007 and $33,453, respectively. The decrease of $8,446 in expense was the result of the Company’s completion of certain research and development projects as compared to the same period of the prior year.

 

Other Expenses, net

 

Other expense for the three months ended March 31, 2015 and 2014, which includes primarily interest expense, was $122,339 and $49,141, respectively. The increase was primarily a result of $76,500 of non-cash expense relating to the beneficial conversion feature of convertible notes payables issued during the three months ended March 31, 2015. A beneficial conversion feature is realized when the conversion price of a convertible notes payable is below the closing market price on the date of issuance.

 

Results of Operations – Nine Months Ended March 31, 2015 compared to March 31, 2014

 

We had a net loss of $556,902 for the nine months ended March 31, 2015 compared to net income of $285,855 for the nine months ended March 31, 2014.

 

License and other revenue

 

Details of revenues are as follows:

 

		Nine Months Ended March 31,								Increase (Decrease)
		2015				2014				$				%
Barcode Technology		$	373,071			$	1,291,814			$	(918,847	)			(71.1	)
Mobile Banking Technology			351,868				4,065				347,803				8,856.0
Total Revenues		$	724,939			$	1,295,879			$	(570,940	)			(44.1	)

 

Barcode Technology revenues are derived from our Product Identification systems sold principally to customers in the LCD manufacturing industry. Identification Card revenues in these periods were a result of sales of identification card and mobile banking systems.

 

The decrease in Barcode Technology revenues was mainly attributable to the decreased demand for LCD screens. Revenues from the LCD market remain unpredictable as they are generated when customers open new production facilities or update production equipment; however, for now the Company continues to experience relatively low demand for product identification product licenses in the LCD industry. A large portion of our license sales are concentrated in the Asia-Pacific market, which decreased in Taiwan, Japan, Germany, and increased in Korea and China.

 

Mobile Banking Technology revenues includes 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. The increase in Mobile Banking Technology revenues is due to our efforts to grow this business line which has led to several recent multiyear agreements to provide services and support.

 

 

On September 30, 2015, the Company and The Matthews Group, a related party, entered into an Asset Purchase Agreement pursuant to which the Company sold the intellectual property assets relating to its Barcode Technology. The sale allows the Company to focus its efforts solely on growing its Mobile Banking Technology business.

 

Cost of Sales

 

Cost of sales for the nine months ended March 31, 2015 and 2014, totaled $253,739 and $267,487, respectively. The decrease in expense was the result of decreased labor costs associated with projects implemented during the period as compared to the same period of the prior year. For the nine months ended March 31, 2015 and 2014, cost of sales as a percentage of revenue were 35.0% and 20.7%, respectively.

 

Operating Expenses

 

General and administrative expense for the nine months ended March 31, 2015 and 2014 was $571,135 and $406,064, respectively. The increase was the result of $79,025 in operating expenses incurred after acquiring Tangible Payments, LLC (see Note 5 of the attached Consolidated Financial Statements). The remaining increase in expenses of $86,046 was primarily from increased salaries, benefits and professional fees.

 

Sales and marketing expense for the nine months ended March 31, 2015 and 2014 were comparable at $61,856 and $66,157, respectively.

 

Research and development expense for the nine months ended March 31, 2015 and 2014 was $82,365 and $125,374, respectively. The decrease of $43,009 in expense was the result of the Company’s completion of certain research and development projects as compared to the same period of the prior year.

 

Other Expenses, net

 

Other expense for the nine months ended March 31, 2015 and 2014, which includes primarily interest expense, was $312,746 and $144,942, respectively. The increase was primarily a result of $175,375 of non-cash expense relating to the beneficial conversion feature of convertible notes payables issued during the nine months ended March 31, 2015. A beneficial conversion feature is realized when the conversion price of a convertible notes payable is below the closing market price on the date of issuance.

 

Liquidity

 

Our cash and cash equivalents balance at March 31, 2015 increased to $54,003 as compared to $24,665 at June 30, 2014. The increase was the result of $51,662 in cash used in operating activities offset by $81,000 in cash provided by financing activities. Net cash used in operations during the nine months ended March 31, 2015 was $51,662 compared with $388,372 of cash provided by operations during the same period of the prior year. Cash used in operations during the nine months ended March 31, 2015 was primarily due to our net loss in the period offset by non-cash charges and an increase in deferred revenues. Net cash provided by financing activities of $81,000 during the nine months ended March 31, 2015 was primarily due to proceeds received from notes payable of $224,500 offset by payments on notes payable of $143,500. During the same period of the prior year, net cash used in financing activities of $364,036 was from payments on notes payable of $364,036.

 

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. During the nine months ended March 31, 2015, the Company had a net loss of $556,902. At March 31, 2015, the Company had a working capital deficit of $4,972,832 and a stockholders’ deficiency of $4,908,765. The Company is delinquent or in default on $3,359,349 of its notes payable and is delinquent in payment of certain amounts due of $482,177 for payroll taxes and accrued interest and penalties as of March 31, 2015.

 

These factors, among others, raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm, in its report on our June 30, 2014 financial statements, has raised substantial doubt about our ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might be necessary should we be 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 2015 without continued external investment. The Company believes it will require additional funds to continue its operations through fiscal 2015 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 Van Tran, the Company’s CEO/Executive Chair and a director, and 50% by Lawrence J. Johanns, a significant Company stockholder.

 

In September 2015, The Matthews Group, a related party and the Company’s largest debt holder, elected to convert $1.8 million of its convertible notes payable balance, at a conversion price of $0.08 per share of common stock, into 22.2 million shares of the Company’s common stock.

 

In September 2015, the Company sold its Barcode Technology assets to The Matthews Group, a related party, for $670,000. The proceeds from the sale were used to reduce the Company’s notes payable balance to The Matthews Group.

 

Recent Accounting Pronouncements

 

See Footnote 4 of our condensed consolidated financial statements for a discussion of recently issued accounting standards.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Critical Accounting Policies

 

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.  Stock-based compensation for employees is measured at the grant date, based on the fair value of the award, and is recognized as expense over the requisite service period.  Options vest and expire according to terms established at the grant date. The value of the stock compensation to non-employees is based upon the measurement date as determined 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.

 

We estimate volatility and forfeitures based upon historical data. As permitted by the authoritative guidance issued by the FASB, we use the “simplified” method to determine the expected life of an option due to the Company’s lack of sufficient historical exercise data to provide a reasonable basis, which is a result of the relative high turnover rates experienced in the past for positions granted options. All of these variables have an effect on the estimated fair value of our share-based awards.

 

 

Revenue Recognition:

 

The Company accounts for revenue recognition in accordance with SEC Staff Accounting Bulletin (SAB) No. 101 "Revenue Recognition in Financial Statements" and related amendments. Revenues for the Company are classified into four separate products; license revenue (Veritec’s Multi-Dimensional matrix symbology), hardware revenue, identification card revenue, and debit card revenue.  Revenues from licenses, hardware, and identification cards are recognized when the product is shipped and collection is reasonably assured. The process typically begins for license and hardware revenue with a customer purchase order detailing its hardware specifications so the Company can import its software into the customer's hardware. Once importation is completed, if the customer only wishes to purchase a license, the Company typically transmits the software to the customer via the Internet.  Revenue is recognized at that point. If the customer requests both license and hardware products, once the software is imported into the hardware and the process is complete, the product is shipped and revenue is recognized at time of shipment.  Once the software and/or hardware are either shipped or transmitted, the customers do not have a right of refusal or return.  Under some conditions, the customers remit payment prior to the Company having completed importation of the software.  In these instances, the Company delays revenue recognition and reflects the prepayments as customer deposits.

 

The process for identification cards begins when a customer requests, via the Internet, an identification card.  The card is reviewed for design and placement of the data, printed and packaged for shipment.  At the time the identification cards are shipped and collection is reasonably assured, revenue is recognized.

 

The Company, as a processor and a distributor, recognizes revenue from transaction fees charged 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.

 

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, 2014, 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 at June 30, 2014.

 

Changes in Internal Control over Financial Reporting.

 

In our Form 10-K at June 30, 2014, 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

 

The Company is subject to various legal proceedings from time to time in the ordinary course of business, none of which is required to be disclosed under this Item 1.

 

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 $3,359,349 representing principal and accrued interest as of March 31, 2015.

 

TEM 4 MINE SAFETY DISCLOSURES

 

Not applicable.

 

 

ITEM 5 OTHER INFORMATION

 

The Company is delinquent in payment of $482,177 for payroll taxes and accrued interest and penalties as of March 31, 2015.

 

 

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 March 31, 2015 formatted in XBRL: (i) Consolidated Balance Sheets at March 31, 2015 and June 30, 2014; (ii) Consolidated Statement of Operations for the three and nine months ended March 31, 2015 and 2014; (iii) Consolidated Statement of Stockholders’ Deficit as at March 31, 2015; (iv) Consolidated Statements of Cash Flows for the nine months ended March 31, 2015 and 2014; (v) Notes to the Consolidated Financial Statements.
**		The certifications attached as Exhibits 32.1 and 32.2 accompany the Quarterly on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by Veritec, Inc. for purposes of Section 18 of the Securities Exchange Act.

 

 

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., a Nevada corporation
March 21, 2016
	By:	/s/ Van Thuy Tran
		Van Thuy Tran
		Chief Executive Officer
		(Principal Executive Officer)

 

  

Exhibit 31.1

 

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

As certifying officer, I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d015f)) for the registrant and have:

 

(a)

designed such disclosure controls and procedures, or caused such internal control over financial reporting 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 our 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.

As certifying officer, 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.

 

 

		VERITEC, INC., a Nevada corporation
March 21, 2016
	By:	/s/ Van Thuy Tran
		Van Thuy Tran
		Chief Executive Officer
		(Principal Executive Officer)

 

Exhibit 32.1

 

CERTIFICATION 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 of Veritec, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2015, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Van Tran, Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

•

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

•

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

 

		VERITEC, INC., a Nevada corporation
March 21, 2016
	By:	/s/ Van Thuy Tran
		Van Thuy Tran
		Chief Executive Officer
		(Principal Executive Officer)

 

v3.3.1.900

Document and Entity Information	9 Months Ended
	Mar. 31, 2015 shares
Document And Entity Information
Entity Registrant Name	VERITEC INC
Entity Central Index Key	0000773318
Document Type	10-Q
Document Period End Date	Mar. 31, 2015
Amendment Flag	false
Current Fiscal Year End Date	--06-30
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	No
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding	16,530,088
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2015

v3.3.1.900

Condensed Consolidated Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2015	Jun. 30, 2014
Current Assets:
Cash	$ 54,003	$ 24,665
Accounts receivables, net of allowance of $0 and $13,395 respectively	159,673	70,500
Inventories	12,676	7,829
Prepaid expenses	7,371	17,143
Total Current Assets	233,723	120,137
Restricted cash	57,965	51,957
Property and Equipment, net	685	$ 994
Intangibles, net	160,417
Total Assets	452,790	$ 173,088
Current Liabilities:
Notes payable - in default	514,388	493,017
Notes payable, related party - in default	2,844,961	2,649,202
Accounts payable	670,163	540,794
Accounts payable, related party	91,860	78,753
Customer deposits	85,743	91,260
Deferred revenues	501,150	258,764
Payroll tax liabilities	482,177	539,218
Accrued expenses	16,114	104,168
Total Current Liabilities	5,206,555	$ 4,755,176
Contingent earnout liability	155,000
Total Liabilities	5,361,555	$ 4,755,176
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 as of March 31, 2015 and June 30, 2014, respectively.	1,000	1,000
Common stock, par value $.01; authorized 50,000,000 shares, 16,530,088 and 15,920,088 shares issued and outstanding as of March 31, 2015 and June 30, 2014, respectively	165,301	159,201
Common stock to be issued, 225,000 shares and 400,000 shares, respectively	21,396	39,596
Additional paid-in capital	14,836,506	14,594,181
Accumulated deficit	(19,932,968)	(19,376,066)
Total Stockholders' Deficiency	(4,908,765)	(4,582,088)
Total Liabilities and Stockholders' Deficiency	$ 452,790	$ 173,088

v3.3.1.900

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Mar. 31, 2015	Jun. 30, 2014
Allowance for Doubtful Accounts	$ 0	$ 13,395
Convertible preferred stock, par value	$ 1.00
Convertible preferred stock, shares authorized	10,000,000
Convertible preferred stock, shares issued	1,000
Convertible preferred stock, shares outstanding	1,000
Common stock, par value	$ .01	$ .01
Common stock, shares authorized	50,000,000	50,000,000
Common stock, shares issued	16,530,088	15,920,088
Common stock, shares outstanding	16,530,088	15,920,088
Common stock, shares to be issued	225,000	400,000
Series H Convertible
Convertible preferred stock, shares authorized	276,000	276,000
Convertible preferred stock, shares issued	1,000	1,000
Convertible preferred stock, shares outstanding	1,000	1,000

v3.3.1.900

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Revenue:
Barcode technology revenue	$ 109,664	$ 209,832	$ 373,071	$ 1,291,814
Mobile banking technology revenue	62,521	2,034	351,868	4,065
Total revenue	172,185	21,886	724,939	1,295,879
Cost of Sales	85,079	79,799	253,739	267,487
Gross Profit	87,106	132,067	471,200	1,028,392
Operating Expenses:
General and administrative	201,175	125,970	571,135	406,064
Sales and marketing	16,660	19,357	61,856	66,157
Research and development	25,007	33,453	82,365	125,374
Total Operating Expenses	242,842	178,780	715,356	597,595
Income (Loss) from Operations	$ (155,736)	(46,713)	$ (244,156)	430,797
Other Expense:
Interest income		29		58
Interest expense and finance costs, including $114,229, $38,575, $290,112 and $117,853, respectively, to related parties	$ (122,339)	(49,141)	$ (312,746)	(145,000)
Total Other Expense	(122,339)	(49,141)	(312,746)	(144,942)
Net Income (Loss)	$ (278,075)	$ (95,825)	$ (556,902)	$ 285,855
Net Income (Loss) Per Common Share
Basic	$ (0.02)	$ (0.01)	$ (0.03)	$ 0.02
Diluted	$ (0.02)	$ (0.01)	$ (0.03)	$ 0.02
Weighted Average Number of Shares Outstanding
Basic	16,523,784	15,920,088	16,177,425	15,920,088
Diluted	16,523,784	15,920,088	16,177,425	19,920,088

v3.3.1.900

Condensed Consolidated Statements of Operations (Parenthetical) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Income Statement [Abstract]
Interest expense, related parties	$ 114,229	$ 38,575	$ 290,112	$ 117,853

v3.3.1.900

Condensed Consolidated Statements of Stockholders' Deficiency - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2014	Mar. 31, 2015
Preferred Stock
Beginning balance, Shares	1,000	1,000
Beginning balance, Amount	$ 1,000	$ 1,000
Shares issued for acquisitions, shares
Shares issued for acquisitions, amount
Shares issued for services, shares
Shares issued for services, amount
Shares issued for common stock issuable, shares
Shares issued for common stock issuable, amount
Beneficial conversion feature on issuance of convertible notes payable
Net loss
Ending balance, Shares		1,000
Ending balance, Amount		$ 1,000
Common Stock
Beginning balance, Shares	15,920,088	15,920,088
Beginning balance, Amount	$ 159,201	$ 159,201
Shares issued for acquisitions, shares		250,000
Shares issued for acquisitions, amount		$ 2,500
Shares issued for services, shares		135,000
Shares issued for services, amount		$ 1,350
Shares issued for common stock issuable, shares		225,000
Shares issued for common stock issuable, amount		$ 2,250
Beneficial conversion feature on issuance of convertible notes payable
Net loss
Ending balance, Shares		16,530,088
Ending balance, Amount		$ 165,301
Common Stock to be Issued
Beginning balance, Amount	39,596	$ 39,596
Shares issued for acquisitions, amount
Shares issued for services, amount		$ 7,050
Shares issued for common stock issuable, amount		$ (25,250)
Beneficial conversion feature on issuance of convertible notes payable
Net loss
Ending balance, Amount		$ 21,396
Additional Paid-In Capital
Beginning balance, Amount	14,594,181	14,594,181
Shares issued for acquisitions, amount		35,000
Shares issued for services, amount		8,950
Shares issued for common stock issuable, amount		23,000
Beneficial conversion feature on issuance of convertible notes payable		$ 175,375
Net loss
Ending balance, Amount		$ 14,836,506
Accumulated Deficit
Beginning balance, Amount	(19,376,066)	$ (19,376,066)
Shares issued for acquisitions, amount
Shares issued for services, amount
Shares issued for common stock issuable, amount
Beneficial conversion feature on issuance of convertible notes payable
Net loss		$ (556,902)
Ending balance, Amount		(19,932,968)
Beginning balance, Amount	$ (4,582,088)	(4,582,088)
Shares issued for acquisitions, shares	250,000
Shares issued for acquisitions, amount		$ 37,500
Shares issued for services, shares		135,000
Shares issued for services, amount		$ 17,350
Shares issued for common stock issuable, amount
Beneficial conversion feature on issuance of convertible notes payable		$ 175,375
Net loss		(556,902)
Ending balance, Amount		$ (4,908,765)

v3.3.1.900

Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$ (556,902)	$ 285,855
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities
Depreciation	309	$ 136
Amortization	32,083
Shares issued for services	17,350	$ 25,068
Beneficial conversion feature on convertible notes payable	175,375
Interest accrued on notes payable	136,129	$ 130,741
Changes in operating assets and liabilities:
Accounts receivable	(89,173)	241,319
Restricted cash	(6,008)	351,717
Inventories	(4,847)	(3,549)
Prepaid expenses	9,772	15,743
Deferred revenues	242,386	(649,703)
Payroll tax liabilities	(57,041)	(73,297)
Customer deposits	(5,517)	62,255
Accounts payables and accrued expenses	54,422	2,087
Net cash provided by operating activities	$ (51,662)	388,372
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment		(1,232)
Net cash used in investing activities		(1,232)
Payment of notes payable		$ (364,036)
Proceeds from notes payable, related party	$ 224,500
Payments on notes payable, related party	(143,500)
Net cash provided by (used in) financing activities	81,000	$ (364,036)
NET INCREASE IN CASH	29,338	23,104
CASH AT BEGINNING OF PERIOD	24,665	75,918
CASH AT END OF PERIOD	$ 54,003	99,022
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest		$ 13,421
NON CASH INVESTING AND FINANCING ACTIVITIES
Common stock issued for acquisition	$ 37,500
Contingent earnout liability from acquisitions	$ 155,000

v3.3.1.900

Nature of Business	9 Months Ended
	Mar. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Nature of Business	NOTE 1. NATURE OF BUSINESS   References to the “Company” in this Form 10-Q refer to Veritec, Inc. (“Veritec”) and its wholly owned subsidiaries Vcode Holdings, Inc. (Vcode®), and Veritec Financial Systems, Inc. (VTFS).   The Company as primarily engaged in the development, marketing, sales and licensing of products and rendering of professional services related thereto in the following two fields of technology: (1) proprietary two-dimensional matrix symbology (also commonly referred to as “two-dimensional barcodes” or “2D barcodes”), and (2) mobile banking solutions. Subsequent to June 30, 2015, the Company began to focus exclusively on mobile banking technology, and sold its barcode technology.   Barcode Technology   The Company’s Barcode Technology was originally invented by the founders of Veritec under United States patents 4,924,078, 5,331,176, 5,612,524 and 7,159,780. Our principal licensed product to date that contains our VeriCode ® Barcode Technology has been a product identification system for identification and tracking of manufactured parts, components and products mostly in the liquid crystal display (LCD) markets. The VeriCode® symbol is a two-dimensional high data density machine-readable symbol that can contain up to approximately 500 bytes of data. The Company’s VSCode® Barcode Technology is a derivative of the VeriCode® symbol with the ability to encrypt a greater amount of data by increasing data density. The VSCode ® is a data storage “container” that offers a high degree of security and which can also be tailored to the application requirements of the user. The VSCode ® symbol can hold any form of binary information that can be digitized, including numbers, letters, images, photos, graphics, and the minutia for biometric information, including fingerprints and facial image data, to the extent of its data storage capacity, that are likewise limited by the resolution of the marking and reading devices employed by the user. VSCode ® is ideal for secure identification documents (such as national identification cards, driver’s licenses, and voter registration cards), financial cards, medical records and other high security applications. In its PhoneCodes™ product platform, Veritec developed software to send, store, display, and read a VeriCode® Barcode Technology symbol on the LCD screen of a mobile phone. With the electronic media that provide the ease of transferring information over the web, Veritec’s PhoneCodes™ technology enables individuals and companies to receive or distribute gift certificates, tickets, coupons, receipts, or engage in banking transactions using the VeriCode ® technology via wireless phone or PDA.   On September 30, 2015, the Company sold all of its assets of its Barcode Technology, which was comprised solely of its intellectual property. The sale allows the Company to focus its efforts solely on its growing Mobile Banking Technology (See Note 11).   Mobile Banking Solutions   In January 12, 2009, Veritec formed VTFS, a Delaware corporation, to bring its Mobile Banking Technology, products and related professional services to market. In May 2009 Veritec was registered by Security First Bank in Visa’s Third Party Registration Program as a Cardholder Independent Sales Organization and Third-Party Servicer. As a Cardholder Independent Sales Organization, Veritec was able to promote and sell Visa branded card programs. As a Third-Party Servicer, Veritec provided back-end cardholder transaction processing services for Visa branded card programs on behalf of Security First Bank. As of October 2010 the Company’s registration with Security First Bank terminated. As of April 2011 the Company signed an ISO and processor agreement with Palm Desert National Bank (which was later assigned to First California Bank) to market and processes the Company’s Visa branded card program on behalf of the bank. First California Bank was sold to Pacific Western Bank and June 2013 Pacific Western Bank closed its entire debit card division and transferred its contract with VTFS to Central Bank of Kansas City Bank. On February 5th, 2014 the entire relationship between Veritec and Pacific Western Bank ended and the new relationship with Central Bank of Kansas City began.   On September 30, 2014, Veritec and Tangible Payments LLC, a Maryland Limited Liability Company, entered into an Asset Purchase Agreement pursuant to which Veritec acquired certain assets and liabilities of the Tangible Payments LLC (See Note 6).   The Company 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.

v3.3.1.900

Basis of Presentation	9 Months Ended
	Mar. 31, 2015
Accounting Policies [Abstract]
Basis of Presentation	NOTE 2. 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 three and nine month periods ended March 31, 2015 are not necessarily indicative of the results that may be expected for the year ending June 30, 2015. The Condensed Consolidated Balance Sheet as of March 31, 2015 was derived from the unaudited consolidated financial statements as of such date, but does not include all of the information and footnotes required by GAAP. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in our Form 10-K as of and for the year ended June 30, 2014. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Those estimates and assumptions include estimates for reserves of uncollectible accounts, analysis of impairments of long lived assets, accruals for potential liabilities and assumptions made in valuing stock instruments issued for services.   The accompanying condensed consolidated financial statements include the accounts of Veritec, VCode, and VTFS. All inter-company transactions and balances were eliminated in consolidation.

v3.3.1.900

Going Concern	9 Months Ended
	Mar. 31, 2015
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Going Concern	NOTE 3. GOING CONCERN The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. Such assumption contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the nine months ended March 31, 2015, the Company incurred a net loss of $556,902. At March 31, 2015, the Company had a working capital deficit of $4,972,832 and a stockholders’ deficiency of $4,908,765. In addition, at March 31, 2015, the Company is delinquent in payment of $3,359,349 of its note payable obligations and is also delinquent in payment of $482,177 for payroll taxes and accrued interest. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to develop additional sources of capital and to ultimately achieve profitable operations. The Company’s independent registered public accounting firm, in their report on the Company’s financial statements for the year ending June 30, 2014, expressed 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 these uncertainties. The Company believes its cash and forecasted cash flow from operations will not be sufficient to continue operations through fiscal 2015 without continued external investment. The Company will require additional funds to continue its operations through fiscal 2015 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.

v3.3.1.900

Significant Accounting Policies	9 Months Ended
	Mar. 31, 2015
Accounting Policies [Abstract]
Significant Accounting Policies	NOTE 4. SIGNIFICANT ACCOUNTING POLICIES   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 three and nine months ended March 31, 2015 and the three and nine months ended March 31, 2014, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect. For the nine months ended March 31, 2014 the calculation of diluted earnings per share included stock options and warrants, calculated under the treasury stock method, and excluded preferred stock, certain stock options, warrants and convertible notes payable since the effect was antidilutive.   The following table sets forth the computation of basic and diluted income per common share for the nine months period ended March 31, 2015 and 2014.     Nine Months Ended March 31,     2015   2014           Net Income (Loss)   $ (551,902 )   $ 285,855                     Weighted average common shares – basic     16,177,425       15,920,088   Dilutive effect of outstanding stock options     —         —     Dilutive effect of convertible notes payable     —         —     Weighted average shares outstanding – diluted     16,177,425       19,920,088                     As of March 31, 2015 and 2014, 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.       March 31,     2015   2014           Series H preferred stock   $ 10,000     $ 10,000   Warrants     —         50,000   Convertible notes payable     16,077,124       8,480,973   Options     2,530,500       3,056,500   Total     18,617,624       11,597,473     Concentrations   During the three months ended March 31, 2015 and 2014, the Company had two customers that accounted for approximately 24% and 11% of sales in 2015 and three customers that accounted for approximately 39%, 20% and 19% of sales in 2014, respectively. No other customers accounted for more than 10% of sales in either period.   During the nine months ended March 31, 2015 and 2014, the Company had two customers that accounted for approximately 16% and 13% of sales in 2015 and two customers that accounted for approximately 48% and 11% of sales in 2014, respectively. No other customers accounted for more than 10% of sales in either period.   As of March 31, 2015, the Company had accounts receivable due from one customer who comprised approximately $106,465 (67%) of its total accounts receivable. As of June 30, 2014, the Company had approximately $86,361 (69%) and $23,250 (19%), respectively, of accounts receivable due from its major customers.   For the three months ended March 31, 2015 and 2014, foreign revenues accounted for 49% (27% Taiwan, 12% Korea, 7% China and 3% other) and 53% (30% Korea, 20% Taiwan, and 3% others) of the Company’s total revenues, respectively.   For the nine months ended March 31, 2015 and 2014, foreign revenues accounted for 42% (19% Taiwan, 10% Korea, 8% China 5% other) and 68% (47% Korea and 21% Taiwan) of the Company’s total revenues, respectively.   Recent Accounting Pronouncements   In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements and disclosures.   In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation – Stock Compensation (Topic 718). The pronouncement was issued to clarify the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The pronouncement is effective for reporting periods beginning after December 15, 2015. The adoption of ASU 2014-12 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.   In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of the adoption of ASU 2014-15 on the Company’s financial statements and disclosures.   In November 2014, the FASB issued Accounting Standards Update No. 2014-16 (ASU 2014-16), Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The amendments in this ASU do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. The ASU applies to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share and is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is in the process of evaluating the impact of 2014-16 on the Company’s financial statements and disclosures.   In July 2015, the FASB issued Accounting Standards Update 2015-11, Simplifying the Measurement of Inventory, which requires that inventory within the scope of ASU 2015-11 be measured at the lower of cost and net realizable value. Inventory measured using last-in, first-out (LIFO) and the retail inventory method are not impacted by the new guidance. ASU 2015-11 applies to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of ASU 2015-11 at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for public business entities in fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2015-11 on the Company’s financial statements and 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 consolidated financial statements.

v3.3.1.900

Restricted Cash	9 Months Ended
	Mar. 31, 2015
Accounting Policies [Abstract]
Restricted Cash	NOTE 5. RESTRICTED CASH   The Company entered into Store Value Prepaid Card Sponsorship Agreements (the “Agreement”) with certain banks whereas the Company markets and sells store value prepaid card programs (the “Programs”). The Programs are marketed and managed daily at the direction of the Bank, for which the Company receives a transaction fee. In connection with the agreements the Company is required to establish a Reserve Account controlled by the Bank. At March 31, 2015 and June 30, 2014, the restricted cash totaled $57,965 and $51,957, respectively. Since this amount is restricted for the purposes related to the Programs, it is classified as restricted cash on the consolidated balance sheets.

v3.3.1.900

Acquisition	9 Months Ended
	Mar. 31, 2015
Business Combinations [Abstract]
Acquisition	NOTE 6. ACQUISITION   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 Tangible Payments LLC. Tangible Payments LLC is a combined-solution software package that incorporates features the market is currently purchasing as an individual-solutions product that requires integrated services at an additional cost. With a one-stop package, Tangible’s Payments LLC solution eliminates costs and reduces deployment time.   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 $1.3 million.   The Company assigned $192,500 of the purchase price to contract commitments which will be amortized over a three year period.   The following table presents our unaudited pro forma combined historical results of operations for the nine months March 31, 2015 and 2014, respectively, as if we had consummated the acquisition as of July 1, 2013.     March 31,     2015   2014     (Unaudited)   (Unaudited) Revenues   $ 787,064     $ 1,506,432   Net income (loss)   $ (596,285 )   $ 211,095

v3.3.1.900

Related Party Transactions	9 Months Ended
	Mar. 31, 2015
Related Party Transactions [Abstract]
Related Party Transactions	NOTE 7. RELATED PARTY TRANSACTIONS   During the nine months March 31, 2015 the Company received various unsecured, non-interest bearing, due on demand advances from its CEO Ms. Van Tran, a related party. The balances due Ms. Tran as of March 31, 2015 and June 30, 2014 were $91,860 and $78,753, respectively. These advances have been classified as accounts payable, related party on the accompanying consolidated balance sheets.   The Company has relied on The Matthews Group, LLC (TMG), 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, for funding (see Note 8). The Company also leases its office facilities from Ms. Van Tran.

v3.3.1.900

Notes Payable	9 Months Ended
	Mar. 31, 2015
Debt Disclosure [Abstract]
Notes Payable	NOTE 8. NOTES PAYABLE   Notes payable includes accrued interest and consists of the following as of March 31, 2015 and June 30, 2014:               March 31, 2015   June 30, 2014                   Convertible Notes Payable                                   Convertible notes payable (includes $138,120 and $130,898, respectively, to non-related parties), unsecured, interest at 8%, due September 2010 through November 2010. The principal and accrued interest is convertible at a conversion price of $0.30. The principal and interest is due immediately on the event of default or change of control. The notes are currently in default.   $ 747,452     $ 720,302                     Convertible notes payable to related parties, unsecured, principal and interest are convertible into common stock at $0.30 to $0.33 per share, interest at 8% to 10%, due on demand to November 2010. The notes are currently in default.     1,245,257       1,107,435                     Convertible note payable to related party, secured by the Company’s intellectual property, principal and interest are convertible into common stock at $0.25 per share subject to board of directors’ approval, interest at 8%. The note was due November 2010 and is now in default.     286,871       274,871                     Notes payable, secured by the Company's certificate of deposit with a financial institution and classified on the balance sheet as restricted cash, interest at 5%, convertible into common stock at $0.08 per share, due on demand.     33,310       32,215                     Convertible note payable, unsecured, principal and interest are convertible into common stock at $0.30 to $0.40 per share subject to board of directors’ approval, interest at 5% to 8%, due January 2011 to March 2013.  The note is now in default.     14,186       13,586                     Convertible note payable, unsecured, principal and interest are convertible into common stock at $1.00 per share subject to board of directors’ approval, interest at 8%. The note was due November 2009.     —         1,766   Subtotal convertible notes     2,327,076       2,150,175                     Promissory Notes                 Note payable to related party, secured by the Company’s intellectual property, interest at 8% due August 2010 and is now in default.     556,373       533,318                     Notes payable to related parties, unsecured, interest at 0% to 8%, due on demand.     148,430       142,430                     Note payable, unsecured, interest at 10%. The note was due in January 2010 and is now in default.     30,667       29,167                     Note payable, secured by the Company's intellectual property, interest at variable rates starting September 1, 2012, due December 2012 and is now in default.     296,803       287,129   Subtotal notes payable     1,032,273       992,044                     Total   $ 3,359,349     $ 3,142,219                       During the nine months ended March 31, 2015, the Company issued $126,500 of convertible notes payable that could be converted at a price of $0.08 per share. The market price on the date the convertible notes payable were issued was in excess of the conversion price. The difference between the conversion price of $0.08 per share and the market price was recognized as an expense of $175,375 and was included in interest expense in the Condensed Consolidated Statements of Operations for the nine months ended March 31, 2015. No similar activity occurred during the same period of the prior year.   For the purposes of Balance Sheet presentation notes payable have been presented as follows:     March 31, 2015   June 30, 2014                   Notes payable   $ 514,388     $ 493,017   Notes payable, related party     2,844,961       2,649,202   Total   $ 3,359,349     $ 3,142,219

v3.3.1.900

Stockholders' Deficiency	9 Months Ended
	Mar. 31, 2015
Equity [Abstract]
Stockholders' Equity (Deficit)	NOTE 9 - 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 March 31, 2015 and June 30, 2014, there were 1,000 shares of Series H convertible preferred stock issued and outstanding.   Common Stock Issued   Shares issued for acquisition   On September 30, 2014, the Company issued 250,000 shares of common stock as partial consideration for an acquisition (See Note 6).   Shares issued to consultants for services   During the nine months ended March 31, 2015, the Company granted and issued 135,000 shares of common stock for services received. The common shares, based on the fair value on the dates granted, were valued at $0.05 to $0.51 per share, for an aggregate of $17,350.   Shares issued to directors for services   During the nine months ended March 31, 2015, the Company issued an aggregate of 225,000 shares of common stock to four of the Company’s directors. These shares were for services rendered during the fiscal year ended June 30, 2014 valued at $25,250 which had been included in the Company’s common shares to be issued balance as of June 30, 2014.   Shares to be issued to consultants for services rendered   On July 15, 2014, the Company entered into a "Consulting Agreement" with a consultant to be a general advisor on technical issues to both the Company’s President and its subsidiary, Veritec Financial Systems, Inc. Per the payment terms of the Consulting Agreement, the consultant is to receive both monthly cash compensation and 5,000 shares of common stock. During the nine months ended March 31, 2015, the Company recorded an obligation to issue 40,000 shares of common stock with an aggregate fair value of $5,900 of which 5,000 shares of common stock were issued in December 2014. As of March 31, 2015, the remaining 35,000 shares of common stock with a value of $5,150 have not been issued and have been reflected in common stock to be issued in the accompanying consolidated balance sheet.   On June 23, 2014, the Company entered into an "Advisory Agreement" with a consultant to be an executive advisor to the Company’s President. Per the payment terms of the Advisory Agreement, the consultant is to receive both monthly cash compensation and 5,000 shares of common stock. The Advisory Agreement was terminated in January 2015. During the nine months ended March 31, 2015, the Company recorded an obligation to issue 35,000 shares of common stock with an aggregate fair value of $4,050 of which 20,000 shares of common stock were issued in December 2014. As of March 15, 2015, the remaining 15,000 shares of common stock with a value of $1,900 have not been issued and have been reflected in common stock to be issued in the accompanying consolidated balance sheet.

v3.3.1.900

Stock Options	9 Months Ended
	Mar. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-Based Compensation	NOTE 10 – STOCK OPTIONS   Stock Options   A summary of stock options for the nine months ended March 31, 2015 is as follows:       Number of     Weighted - Average     Shares     Exercise Price Outstanding at June 30, 2014       3,056,500   $ 0.42     Granted       —     $ 0.00     Forfeited       (526,000 ) $ 0.42     Outstanding at March 31, 2015       2,530,500   $ 0.42     Exercisable at March 31, 2015       2,530,500   $ 0.42       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 during fiscal year 2013. There were no options granted in fiscal year 2014 or during the nine months ended March 31, 2015 under this agreement. The Company recognized no stock-based compensation expense related to stock options during the three and nine months ended March 31, 2015 and 2014, respectively. As of March 31, 2015, there was no remaining unrecognized compensation costs related to stock options. Based upon the trading value of the common shares, there was no intrinsic value of these options as of March 31, 2015.   The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the weighted-average assumptions noted in the following table. The risk-free rate for periods within the contractual life of the options is based on the U. S. Treasury yield in effect at the time of the grant. Volatility was based on the historical volatility of the Company’s common stock. The Company estimated the expected life of options based on historical experience and other averaging methods.   Additional information regarding options outstanding as of March 31, 2015 is as follows:   Options Outstanding at March 31, 2015   Options Exercisable at March 31, 2015                       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                                                        $0.13 - $1.45       2,530,500     3.98     $ 0.42       2,530,500     $ 0.42               2,530,500                     2,530,500                 The weighted-average remaining contractual life of stock options outstanding and exercisable at March 31, 2015 is 3.98 years.

v3.3.1.900

Subsequent Events	9 Months Ended
	Mar. 31, 2015
Subsequent Events [Abstract]
Subsequent Events	NOTE 11. SUBSEQUENT EVENTS   These unaudited condensed consolidated financial statements should be read in conjunctions with the financial statements and notes thereto included in the Company’s Form 10-K for the year ended June 30, 2015 filed on January 20, 2016 with the Security and Exchange Commission, which contains additional information of events subsequent to December 31, 2014.

v3.3.1.900

Significant Accounting Policies (Policies)	9 Months Ended
	Mar. 31, 2015
Accounting Policies [Abstract]
Net Loss per Common Share	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 three and nine months ended March 31, 2015 and the three and nine months ended March 31, 2014, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect. For the nine months ended March 31, 2014 the calculation of diluted earnings per share included stock options and warrants, calculated under the treasury stock method, and excluded preferred stock, certain stock options, warrants and convertible notes payable since the effect was antidilutive.   The following table sets forth the computation of basic and diluted income per common share for the nine months period ended March 31, 2015 and 2014.     Nine Months Ended March 31,     2015   2014           Net Income (Loss)   $ (551,902 )   $ 285,855                     Weighted average common shares – basic     16,177,425       15,920,088   Dilutive effect of outstanding stock options     —         —     Dilutive effect of convertible notes payable     —         —     Weighted average shares outstanding – diluted     16,177,425       19,920,088                     As of March 31, 2015 and 2014, 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.       March 31,     2015   2014           Series H preferred stock   $ 10,000     $ 10,000   Warrants     —         50,000   Convertible notes payable     16,077,124       8,480,973   Options     2,530,500       3,056,500   Total     18,617,624       11,597,473
Concentrations	Concentrations   During the three months ended March 31, 2015 and 2014, the Company had two customers that accounted for approximately 24% and 11% of sales in 2015 and three customers that accounted for approximately 39%, 20% and 19% of sales in 2014, respectively. No other customers accounted for more than 10% of sales in either period.   During the nine months ended March 31, 2015 and 2014, the Company had two customers that accounted for approximately 16% and 13% of sales in 2015 and two customers that accounted for approximately 48% and 11% of sales in 2014, respectively. No other customers accounted for more than 10% of sales in either period.   As of March 31, 2015, the Company had accounts receivable due from one customer who comprised approximately $106,465 (67%) of its total accounts receivable. As of June 30, 2014, the Company had approximately $86,361 (69%) and $23,250 (19%), respectively, of accounts receivable due from its major customers.   For the three months ended March 31, 2015 and 2014, foreign revenues accounted for 49% (27% Taiwan, 12% Korea, 7% China and 3% other) and 53% (30% Korea, 20% Taiwan, and 3% others) of the Company’s total revenues, respectively.   For the nine months ended March 31, 2015 and 2014, foreign revenues accounted for 42% (19% Taiwan, 10% Korea, 8% China 5% other) and 68% (47% Korea and 21% Taiwan) of the Company’s total revenues, respectively.
Recent Accounting Pronouncements	Recent Accounting Pronouncements   In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing revenue recognition guidance under current U.S. GAAP and replace it with a principle based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 is effective for interim and annual periods beginning after December 15, 2017. Early adoption is permitted only in annual reporting periods beginning after December 15, 2016, including interim periods therein. Entities will be able to transition to the standard either retrospectively or as a cumulative-effect adjustment as of the date of adoption. The Company is in the process of evaluating the impact of ASU 2014-09 on the Company’s financial statements and disclosures.   In June 2014, the FASB issued Accounting Standards Update No. 2014-12, Compensation – Stock Compensation (Topic 718). The pronouncement was issued to clarify the accounting for share-based payments when the terms of an award provide that a performance target could be achieved after the requisite service period. The pronouncement is effective for reporting periods beginning after December 15, 2015. The adoption of ASU 2014-12 is not expected to have a significant impact on the Company’s consolidated financial position or results of operations.   In August 2014, the FASB issued Accounting Standards Update No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the financial statements. ASU 2014-15 requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the financial statements are issued. An entity must provide certain disclosures if conditions or events raise substantial doubt about the entity’s ability to continue as a going concern. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and interim periods thereafter, with early adoption permitted. The Company is currently evaluating the impact of the adoption of ASU 2014-15 on the Company’s financial statements and disclosures.   In November 2014, the FASB issued Accounting Standards Update No. 2014-16 (ASU 2014-16), Determining Whether the Host Contract in a Hybrid Financial Instrument Issued in the Form of a Share Is More Akin to Debt or to Equity. The amendments in this ASU do not change the current criteria in U.S. GAAP for determining when separation of certain embedded derivative features in a hybrid financial instrument is required. The amendments clarify that an entity should consider all relevant terms and features, including the embedded derivative feature being evaluated for bifurcation, in evaluating the nature of the host contract. The ASU applies to all entities that are issuers of, or investors in, hybrid financial instruments that are issued in the form of a share and is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted. The Company is in the process of evaluating the impact of 2014-16 on the Company’s financial statements and disclosures.   In July 2015, the FASB issued Accounting Standards Update 2015-11, Simplifying the Measurement of Inventory, which requires that inventory within the scope of ASU 2015-11 be measured at the lower of cost and net realizable value. Inventory measured using last-in, first-out (LIFO) and the retail inventory method are not impacted by the new guidance. ASU 2015-11 applies to all other inventory, which includes inventory that is measured using first-in, first-out (FIFO) or average cost. An entity should measure inventory within the scope of ASU 2015-11 at the lower of cost and net realizable value. Net realizable value is the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. ASU 2015-11 is effective for public business entities in fiscal years, and interim periods within those years, beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact the adoption of ASU 2015-11 on the Company’s financial statements and 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 consolidated financial statements.

v3.3.1.900

Significant Accounting Policies (Tables)	9 Months Ended
	Mar. 31, 2015
Accounting Policies [Abstract]
Basic and diltued income per share	Nine Months Ended March 31,     2015   2014           Net Income (Loss)   $ (551,902 )   $ 285,855                     Weighted average common shares – basic     16,177,425       15,920,088   Dilutive effect of outstanding stock options     —         —     Dilutive effect of convertible notes payable     —         —     Weighted average shares outstanding – diluted     16,177,425       19,920,088
Summary of securities excluded from EPS calculation	March 31,     2015   2014           Series H preferred stock   $ 10,000     $ 10,000   Warrants     —         50,000   Convertible notes payable     16,077,124       8,480,973   Options     2,530,500       3,056,500   Total     18,617,624       11,597,473

v3.3.1.900

Acquisition (Tables)	9 Months Ended
	Mar. 31, 2015
Business Combinations [Abstract]
Unaudited results of operations	March 31,     2015   2014     (Unaudited)   (Unaudited) Revenues   $ 787,064     $ 1,506,432   Net income (loss)   $ (596,285 )   $ 211,095

v3.3.1.900

Notes Payable (Tables)	9 Months Ended
	Mar. 31, 2015
Debt Disclosure [Abstract]
Notes Payable	March 31, 2015   June 30, 2014                   Convertible Notes Payable                                   Convertible notes payable (includes $138,120 and $130,898, respectively, to non-related parties), unsecured, interest at 8%, due September 2010 through November 2010. The principal and accrued interest is convertible at a conversion price of $0.30. The principal and interest is due immediately on the event of default or change of control. The notes are currently in default.   $ 747,452     $ 720,302                     Convertible notes payable to related parties, unsecured, principal and interest are convertible into common stock at $0.30 to $0.33 per share, interest at 8% to 10%, due on demand to November 2010. The notes are currently in default.     1,245,257       1,107,435                     Convertible note payable to related party, secured by the Company’s intellectual property, principal and interest are convertible into common stock at $0.25 per share subject to board of directors’ approval, interest at 8%. The note was due November 2010 and is now in default.     286,871       274,871                     Notes payable, secured by the Company's certificate of deposit with a financial institution and classified on the balance sheet as restricted cash, interest at 5%, convertible into common stock at $0.08 per share, due on demand.     33,310       32,215                     Convertible note payable, unsecured, principal and interest are convertible into common stock at $0.30 to $0.40 per share subject to board of directors’ approval, interest at 5% to 8%, due January 2011 to March 2013.  The note is now in default.     14,186       13,586                     Convertible note payable, unsecured, principal and interest are convertible into common stock at $1.00 per share subject to board of directors’ approval, interest at 8%. The note was due November 2009.     —         1,766   Subtotal convertible notes     2,327,076       2,150,175                     Promissory Notes                 Note payable to related party, secured by the Company’s intellectual property, interest at 8% due August 2010 and is now in default.     556,373       533,318                     Notes payable to related parties, unsecured, interest at 0% to 8%, due on demand.     148,430       142,430                     Note payable, unsecured, interest at 10%. The note was due in January 2010 and is now in default.     30,667       29,167                     Note payable, secured by the Company's intellectual property, interest at variable rates starting September 1, 2012, due December 2012 and is now in default.     296,803       287,129   Subtotal notes payable     1,032,273       992,044                     Total   $ 3,359,349     $ 3,142,219
Notes payable- Balance Sheet presentation	March 31, 2015   June 30, 2014                   Notes payable   $ 514,388     $ 493,017   Notes payable, related party     2,844,961       2,649,202   Total   $ 3,359,349     $ 3,142,219

v3.3.1.900

Stock Options (Tables)	9 Months Ended
	Mar. 31, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Summary of Stock Options	Number of     Weighted - Average     Shares     Exercise Price Outstanding at June 30, 2014       3,056,500   $ 0.42   Granted       —     $ 0.00   Forfeited       (526,000 ) $ 0.42   Outstanding at March 31, 2015       2,530,500   $ 0.42   Exercisable at March 31, 2015       2,530,500   $ 0.42
Additional information regarding outstanding options	Options Outstanding at March 31, 2015   Options Exercisable at March 31, 2015                     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                                                $0.13 - $1.45       2,530,500     3.98     $ 0.42       2,530,500     $ 0.42           2,530,500                     2,530,500

v3.3.1.900

Going Concern (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Jun. 30, 2014
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Net income (loss)	$ (278,075)	$ (95,825)	$ (556,902)	$ 285,855
Working capital deficit	4,972,832		4,972,832
Stockholders' deficiency	(4,908,765)		(4,908,765)		$ (4,582,088)
Note payable obligations - in default	3,359,349		3,359,349
Payroll taxes and accrued interest and penalties	$ 482,177		$ 482,177		$ 539,218

v3.3.1.900

Significant Accounting Policies - Basic and diluted income per share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014
Accounting Policies [Abstract]
Net income (loss)	$ (278,075)	$ (95,825)	$ (556,902)	$ 285,855
Weighted average common shares - basic	16,523,784	15,920,088	16,177,425	15,920,088
Dilutive effect of outstanding stock options
Dilutive effect of convertible notes payable
Weighted average shares outstanding - diluted	16,523,784	15,920,088	16,177,425	19,920,088

v3.3.1.900

Significant Accounting Policies - Summary of securities excluded from EPS calculation (Details) - shares	Mar. 31, 2015	Mar. 31, 2014
Accounting Policies [Abstract]
Series H Preferred Stock	10,000	10,000
Warrants		50,000
Convertible Notes Payable	16,077,124	8,480,973
Options	2,530,500	3,056,500
Total	18,617,624	11,597,473

v3.3.1.900

Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended		9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014	Mar. 31, 2015	Mar. 31, 2014	Jun. 30, 2014
Foreign revenues	49.00%	53.00%	42.00%	68.00%
Taiwan
Foreign revenues	27.00%	20.00%	19.00%	21.00%
Korea
Foreign revenues	12.00%	30.00%	10.00%	47.00%
China
Foreign revenues	7.00%		8.00%
Other
Foreign revenues	3.00%	3.00%	5.00%
Customer 1
Sales percentage from major customers	24.00%	39.00%	16.00%	48.00%
Customer 2
Sales percentage from major customers	11.00%	20.00%	13.00%	11.00%
Customer 3
Sales percentage from major customers		19.00%
67%
Accounts receivable	$ 106,465		$ 106,465
69%
Accounts receivable					$ 86,361
19%
Accounts receivable					$ 23,250

v3.3.1.900

Restricted Cash (Details Narrative) - USD ($)	Mar. 31, 2015	Jun. 30, 2014
Accounting Policies [Abstract]
Restricted Cash	$ 57,965	$ 51,957

v3.3.1.900

Acquisition - Unaudited results of operations (Details) - USD ($)	9 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Business Combinations [Abstract]
Revenues	$ 787,064	$ 1,506,432
Net income (loss)	$ (596,285)	$ 211,095

v3.3.1.900

Acquisition (Details Narrative)	9 Months Ended
	Mar. 31, 2015 USD ($) shares
Business Combinations [Abstract]
Shares issued | shares	250,000
Value of shares issued	$ 37,500
Earnout Payment	155,000
Aggregate purchase price	192,500
Equity investments received	1,300,000
Contract commitments	$ 192,500

v3.3.1.900

Related Party Transactions (Details Narrative) - USD ($)	Jun. 30, 2015	Mar. 31, 2015	Jun. 30, 2014	Mar. 31, 2014
Accounts payable, related party		$ 91,860	$ 78,753	$ 78,753
Larry Johanns
Ownership of TMG	50.00%
Van Tran
Ownership of TMG	50.00%

v3.3.1.900

Notes Payable - Notes Payable (Details) - USD ($)	Mar. 31, 2015	Jun. 30, 2014
Convertible notes payable, non-related paries	$ 2,327,076	$ 2,150,175
Promissory Notes Payable	1,032,273	992,044
Notes payable	3,359,349	3,142,219
Unsecured, due Sept 2010 to Nov 2010
Convertible notes payable	747,452	720,302
Convertible notes payable, non-related paries	$ 138,120	$ 130,898
Interest rate	8.00%	8.00%
Conversion price	$ .30	$ .30
Unsecured, due Nov 2010
Convertible notes payable	$ 1,245,257	$ 1,107,435
Interest rate	8.00%	8.00%
Interest rate, maximum	10.00%	10.00%
Conversion price	$ 0.30	$ 0.30
Conversion price, maximum	$ 0.33	$ 0.33
Secured, due Nov 2010
Convertible notes payable	$ 286,871	$ 274,871
Interest rate	8.00%	8.00%
Conversion price	$ .25	$ .25
Secured, due on demand
Convertible notes payable	$ 33,310	$ 32,215
Interest rate	5.00%	5.00%
Conversion price	$ .08	$ .08
Unsecured, due Jan 2011 to March 2013
Convertible notes payable	$ 14,186	$ 13,586
Interest rate	5.00%	5.00%
Interest rate, maximum	8.00%	8.00%
Conversion price	$ .30	$ .30
Conversion price, maximum	$ .40	$ .40
Unsecured, due Nov 2009
Convertible notes payable		$ 1,766
Interest rate	8.00%	8.00%
Conversion price	$ 1.00	$ 1.00
Secured, due Aug 2010
Interest rate	8.00%	8.00%
Promissory Notes Payable	$ 556,373	$ 533,318
Unsecured, due on demand
Interest rate	0.00%	0.00%
Interest rate, maximum	8.00%	8.00%
Promissory Notes Payable	$ 148,430	$ 142,430
Unsecured, due Jan 2010
Interest rate	10.00%	10.00%
Promissory Notes Payable	$ 30,667	$ 29,167
Secured, due Dec 2012
Promissory Notes Payable	$ 296,803	$ 287,129

v3.3.1.900

Notes Payable - Notes payable- Balance Sheet presentation (Details) - USD ($)	Mar. 31, 2015	Jun. 30, 2014
Debt Disclosure [Abstract]
Notes payable	$ 514,388	$ 493,017
Notes payable, related party	2,844,961	2,649,202
Total	$ 3,359,349	$ 3,142,219

v3.3.1.900

Stockholders' Deficiency (Details Narrative) - USD ($)	1 Months Ended	3 Months Ended	9 Months Ended		12 Months Ended
	Dec. 31, 2014	Sep. 30, 2014	Mar. 31, 2015	Mar. 31, 2014	Jun. 23, 2014	Jun. 15, 2014	Jun. 30, 2014
Convertible preferred stock, par value			$ 1.00
Convertible preferred stock, shares authorized			10,000,000
Convertible preferred stock, shares issued			1,000
Convertible preferred stock, shares outstanding			1,000
Shares issued for acquisitions, shares		250,000
Shares issued for services, shares			135,000
Shares issued for services, fair value			$ 17,350	$ 25,068
Shares issued to directors, shares			225,000
Shares issued to directors, value			$ 25,250
Consulting Agreement
Stock issued	5,000					5,000
Obligation to issue stock, Shares			40,000
Stock issued, aggregate fair value			$ 5,900
Shares authorized but unissued			35,000
Share authorized but unissued, value			$ 5,150
Advisory Agreement
Stock issued	20,000				5,000
Obligation to issue stock, Shares			35,000
Stock issued, aggregate fair value			$ 4,050
Shares authorized but unissued			15,000
Share authorized but unissued, value			$ 19,000
Series H Convertible
Convertible preferred stock, shares authorized			276,000				276,000
Convertible preferred stock, shares issued			1,000				1,000
Convertible preferred stock, shares outstanding			1,000				1,000
Series H convertible preferred stock to common stock			10				10

v3.3.1.900

Stock Options - Summary of Stock Options (Details) - $ / shares	9 Months Ended	12 Months Ended
	Mar. 31, 2015	Mar. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Beginning number of shares; outstanding	3,056,500
Beginning weighted-average exercise price; outstanding	$ 0.42
Options Granted		2,500,000
Options granted, weighted average exercise price	$ 0.00
Options Forfeited	(526,000)
Options Forfeited, weighted average exercise price	$ .42
Ending number of shares; outstanding	2,530,500
Ending weighted-average exercise price; outstanding	$ 0.42
Number of Shares; exercisable	2,530,500
Weighted-average exercise price; exercisable	$ 0.42

v3.3.1.900

Stock Options - Additional information regarding outstanding options (Details) - $ / shares	9 Months Ended	12 Months Ended
	Mar. 31, 2015	Jun. 30, 2015
Options outstanding, shares		2,530,500
Weighted average remaining contractual life	3 years 11 months	3 years 11 months
Options excercisable		2,530,500
Options exercisable, weighted average exercise price		$ 0.42
Min
Weighted average exercise price	$ 0.13
Max
Weighted average exercise price	$ 1.45

v3.3.1.900

Stock Options (Details Narrative) - shares	9 Months Ended	12 Months Ended
	Mar. 31, 2015	Jun. 30, 2015	Mar. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Options granted			2,500,000
2013 Agreement terms	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.
Weighted average remaining contractual life	3 years 11 months	3 years 11 months