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, 2016

 

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 ☒

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, 2016, there were 39,538,007 shares of the issuer’s common stock outstanding.

 

 

VERITEC, INC.

FORM 10-Q

FOR THE THREE AND NINE MONTHS ENDED MARCH 31, 2016

 

TABLE OF CONTENTS

 

	Page No.
PART I	1
ITEM 1  FINANCIAL STATEMENTS	1
ITEM 2  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL AND RESULTS OF OPERATIONS	14
ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	18
ITEM 4  CONTROLS AND PROCEDURES	18
PART II	19
ITEM 1  LEGAL PROCEEDINGS	19
ITEM 1A  RISK FACTORS	19
ITEM 2  UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS	19
ITEM 3  DEFAULTS UPON SENIOR SECURITIES	19
ITEM 4  MINE SAFETY DISCLOSURES	19
ITEM 5  OTHER INFORMATION	19
ITEM 6  EXHIBITS	19
SIGNATURES	20

 

 

 

 

 

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
CONDENSED CONSOLIDATED BALANCE SHEETS

 

		March 31,				June 30,
		2016				2015
ASSETS		(Unaudited)
Current Assets:
Cash		$	30,378			$	52,762
Accounts receivable			15,386				38,749
Inventories			—				14,461
Prepaid expenses			758				18,234
Total Current Assets			46,522				124,206
Restricted cash			36,398				63,029
Property and equipment, net			274				583
Intangibles, net			96,250				144,375
Total Assets		$	179,444			$	332,193
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current Liabilities:
Notes payable		$	542,214			$	521,610
Notes payable, related party			1,243,107				3,041,097
Accounts payable			618,941				630,490
Accounts payable, related party			96,110				96,110
Customer deposits			25,482				25,482
Deferred revenues			396,150				492,603
Payroll tax liabilities			322,477				453,277
Accrued expenses			66,841				22,957
Total Current Liabilities			3,311,322				5,283,626
Contingent earnout liability			155,000				155,000
Total Liabilities			3,466,322				5,438,626
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, 2016 and June 30, 2015, respectively			1,000				1,000
Common stock, par value $.01; authorized 50,000,000 shares, 39,538,007 and 16,530,088 shares issued and outstanding as of March 31, 2016 and June 30, 2015, respectively			395,380				165,301
Common stock to be issued, 155,000 shares and 940,000 shares, respectively			12,500				51,800
Additional paid-in capital			17,881,719				14,959,006
Accumulated deficit			(21,577,477	)			(20,283,540	)
Total Stockholders' Deficiency			(3,286,878	)			(5,106,433	)
Total Liabilities and Stockholders’ Deficiency		$	179,444			$	332,193

 

See accompanying notes 

 

 

VERITEC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2016 AND 2015
(UNAUDITED)

 

		Three Months Ended March 31,
		2016				2015
		(Unaudited)				(Unaudited)
Revenue:
Mobile banking technology revenue		$	59,803			$	62,521
Barcode technology revenue			—				109,664
Other revenue, related party			16,098				—
Total revenue			75,901				172,185
Cost of Sales			52,722				85,079
Gross Profit			23,179				87,106
Operating Expenses:
General and administrative			170,451				201,175
Sales and marketing			—				16,660
Research and development			17,248				25,007
Total operating expenses			187,699				242,842
Loss from Operations			(164,520	)			(155,736	)
Other Expense:
Interest expense and finance costs, including $45,581 and $114,229, respectively, to related parties			(51,658	)			(122,339	)
Total other expense			(51,658	)			(122,339	)
Net Loss		$	(216,178	)		$	(278,075	)
Net Loss Per Common Share, Basic and diluted		$	(0.01	)		$	(0.02	)
Weighted Average Number of Shares Outstanding, Basic and diluted			39,538,007				16,523,784

 

See accompanying notes 

 

VERITEC, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 2016 AND 2015
(UNAUDITED)

 

		Nine Months Ended March 31,
		2016				2015
		(Unaudited)				(Unaudited)
Revenue:
Mobile banking  technology revenue		$	198,524			$	351,868
Barcode technology revenue			133,714				373,071
Other revenue, related party			38,066				—
Total revenue			370,304				724,939
Cost of Sales			250,310				253,739
Gross Profit			119,994				471,200
Operating Expenses:
General and administrative			567,468				571,135
Sales and marketing			16,641				61,856
Research and development			59,064				82,365
Total operating expenses			643,173				715,356
Loss from Operations			(523,179	)			(244,156	)
Other Expense:
Interest expense and finance costs, including $750,699 and $290,112, respectively, to related parties			(770,758	)			(312,746	)
Total other expense			(770,758	)			(312,746	)
Net Loss		$	(1,293,937	)		$	(556,902	)
Net Loss Per Common Share, Basic and diluted		$	(0.04	)		$	(0.03	)
Weighted Average Number of Shares Outstanding, Basic and diluted			31,757,147				16,472,751

 

See accompanying notes 

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

FOR THE NINE MONTHS ENDED MARCH 31, 2016
(UNAUDITED)

 

			Preferred Stock								Common Stock
			Shares				Amount				Shares				Amount				Common Stock to be Issued				Additional Paid-in Capital				Accumulated Deficit				Stockholders’ Deficiency
BALANCE, July 1, 2015			1,000			$	1,000				16,530,088			$	165,301			$	51,800			$	14,959,006			$	(20,283,540	)		$	(5,106,433	)
Shares issued on conversion of notes payable			—				—				22,192,919				221,929				—				1,553,505				—				1,775,434
Shares issued for common stock to be issued			—				—				815,000				8,150				(41,400	)			33,250				—				—
Shares to be issued for services			—				—				—				—				2,100				—				—				2,100
Beneficial conversion feature on issuance of  convertible notes payable			—				—				—				—				—				77,188				—				77,188
Fair value of shares issued as inducement for conversion of notes payable			—				—				—				—				—				452,770				—				452,770
Modification cost of conversion feature of note payable			—				—				—				—				—				136,000				—				136,000
Gain on sale of assets to related party treated as a capital contribution			—				—				—				—				—				670,000				—				670,000
Net Loss			—				—				—				—				—				—				(1,293,937	)			(1,293,937	)
BALANCE, March 31, 2016 (Unaudited)			1,000			$	1,000				39,538,007			$	395,380			$	12,500			$	17,881,719			$	(21,577,477	)		$	(3,286,878	)

 

 See accompanying notes 

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

 

		Nine Months Ended March 31,
		2016				2015
		(Unaudited)				(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Loss		$	(1,293,937	)		$	(556,902	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation			309				309
Amortization			48,125				32,083
Allowance for inventory obsolescence			14,461				—
Shares to be issued for services			2,100				17,350
Beneficial conversion feature on convertible notes payable			77,188				175,375
Fair value of shares issued as inducement for conversion of notes payable			452,770				—
Modification cost of conversion feature of note payable			136,000				—
Interest accrued on notes payable			104,532				136,129
Changes in operating assets and liabilities:
Accounts receivable			23,363				(89,173	)
Restricted cash			26,631				(6,008	)
Inventories			—				(4,847	)
Prepaid expenses			17,746				9,772
Deferred revenues			(96,453	)			242,386
Payroll tax liabilities			(130,800	)			(57,041	)
Customer deposit			—				(5,517	)
Accounts payables and accrued expenses			32,335				54,422
Net cash used in operating activities			(585,630	)			(51,662	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable, related party			565,746				224,500
Payment on notes payable, related party			(2,500	)			(143,500	)
Net cash provided by financing activities			563,246				81,000
NET DECREASE IN CASH			(22,384	)			29,338
CASH AT BEGINNING OF YEAR			52,762				24,665
CASH AT END OF YEAR		$	30,378			$	54,003

 

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest		$	—			$	—
NON CASH INVESTING AND FINANCING ACTIVITIES
Related party capital contribution on sale of assets offset to related party notes payable balance		$	670,000			$	—
Conversion of notes payable into common stock		$	1,775,434			$	—
Common stock issued for acquisition		$	—			$	37,500
Contingent earnout liability from acquisition		$	—			$	155,000

 

See accompanying notes

 

VERITEC, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND NINE MONTHS ENDED MARCH 31, 2016 AND 2015
(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 to the mobile banking technology. On September 30, 2015, the Company sold its barcode technology assets to a related party (See Note 7). Subsequent to September 30, 2015, the Company is currently focusing exclusively on its mobile banking technology business.

 

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. Starting in May 2009, Veritec has been registered by various banking institutions to market and processes the Company’s Visa branded card programs. In February, 2014 the Company began its current relationship with Woodland National Bank.

 

On December 31, 2014, Veritec acquired certain assets and liabilities of the Tangible Payments LLC related to the Company’s mobile banking technology solutions (See Note 6).

 

Barcode Technology (Sold September 30, 2015)

 

The Company’s Barcode Technology was originally invented by the founders of Veritec and included products that contained our VeriCode ® Barcode Technology for identification and tracking of manufactured parts, components and products mostly in the liquid crystal display markets. On September 30, 2015, the Company sold all of its assets of its Barcode Technology, which was comprised solely of its intellectual property, to The Matthews Group, a related party (see Note 7). The sale allows the Company to focus its efforts solely on its Mobile Banking Solutions.

 

Effective October 1, 2015, the Company entered into a management services agreement with The Matthews Group for which the Company will manage all facets of its previous barcode technology operations, on behalf of the Matthews Group, from October 1, 2015 to May 30, 2016 (see Note 10). The Matthews Group bears the risk of loss from the barcode operations and has the right to the residual benefits of the barcode operations.

 

Joint Venture Agreement

 

On January 17, 2016, Veritec Inc. (the “Company”) entered into an agreement with Vietnam Alliance Capital (“VAC”), which is domiciled in Vietnam, to form a joint venture (“JV’) to operate a debit card business in Vietnam. The JV will be named Veritec Asia. The Company will be a 30% member in the JV and VAC will be a 70% member in the JV. Pursuant to the agreement, the Company will grant a license of certain products to the JV, and provide certain technologies and technological support to the JV. VAC will manage, control, and conduct its day-to-day business and development activities. In addition VAC has agreed to raise all funds to capitalize the JV. As of March 31, 2016, the JV has not received funding from VAC and no operating activity has occurred.

 

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, 2016 are not necessarily indicative of the results that may be expected for the year ending June 30, 2016. The Condensed Consolidated Balance Sheet as of March 31, 2016 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, 2015.

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. 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, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the nine months ended March 31, 2016, the Company incurred a net loss of $1,293,937 and used cash to fund operating activities of $585,630, and at March 31, 2016, the Company had a stockholders’ deficiency of $3,286,878. In addition, as of March 31, 2016, the Company is delinquent in payment of $1,785,321 of its notes payable and is also delinquent in payment of $322,477 in payroll taxes and accrued interest and penalties.

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 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, 2015, 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 2016 without continued external investment. The Company will require additional funds to continue its operations through fiscal 2016 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

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that may affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and reported amounts of revenues and expenses during the reporting period. 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-based compensation.

 

Revenue Recognition

 

The Company’s revenue is classified into barcode technology revenue, mobile banking technology revenue, and other revenue-related party.

 

Barcode technology revenues from licenses and identification cards are recognized when the product is shipped, the Company no longer has any service or other continuing obligations, and collection is reasonably assured. 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.

 

For mobile banking technology revenue, 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.

 

The Company has a management services agreement with a related party to manage its previous barcode technology assets and recognizes revenue when the management fee is collected.

 

Fair Value Measurements

 

Fair value measurements are determined using authoritative guidance issued by the FASB, with the exception of the application of the guidance to non-recurring, non-financial assets and liabilities as permitted. Fair value is defined in the authoritative guidance as the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. A fair value hierarchy was established, which prioritizes the inputs used in measuring fair value into three broad levels as follows:

 

Level 1—Quoted prices in active markets for identical assets or liabilities.

Level 2—Inputs, other than the quoted prices in active markets, are observable either directly or indirectly.

Level 3—Unobservable inputs based on the Company's assumptions.

 

The Company is required to use observable market data if available without undue cost and effort.

 

The Company’s financial instruments include cash, accounts receivable, and accounts payable. Management has estimated that the carrying amounts approximate their fair value due to their short-term nature.

 

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 if their effect is antidilutive.

 

For the three months and nine months ended March 31, 2016 and 2015, the calculations of basic and diluted loss per share are the same because potential dilutive securities would have an anti-dilutive effect.

 

As of March 31, 2016 and 2015, 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,
		2016				2015
Series H preferred stock			10,000				10,000
Convertible notes payable			9,884,519				16,077,124
Options			2,510,000				2,530,500
Total			12,404,519				18,617,624

 

Concentrations

 

Revenues

 

During the three months ended March 31, 2016 and 2015, the Company had three customers that accounted for approximately 24%, 19%, and 16% of sales in 2016 and two customers that accounted for approximately 24% and 11% of sales in 2015, respectively. No other customers accounted for more than 10% of sales in either period.

 

During the nine months ended March 31, 2016 and 2015, the Company had no customers that accounted for more than 10% of sales in 2016 and two customers that accounted for approximately 16% and 13% of sales in 2015, respectively. No other customers accounted for more than 10% of sales in either period.

 

Foreign Revenues

 

For the three months ended March 31, 2016 and 2015, foreign revenues accounted for 0% and 49% (27% Taiwan, 12% Korea, 7% China and 3% other) of the Company’s total revenues, respectively.

 

For the nine months ended March 31, 2016 and 2015, foreign revenues accounted for 36% (11% Taiwan, 10% China, and 15% other) and 42% (19% Taiwan, 10% Korea, 8% China, and 5% other) of the Company’s total revenues, respectively.

 

Accounts Receivable

 

As of March 31, 2016, the Company had approximately $5,700 (37%), $3,000 (19%), $2,000 (13%) and $2,000 (13%) respectively, of accounts receivable due from its major customers. As of June 30, 2015, the Company had approximately $6,025 (16%), $5,650 (15%), and $4,575 (12%) of accounts receivable due from its major customers.

 

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 February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The new standard requires a lessee to record a right of use asset and a corresponding lease liability on the balance sheet for all leases with terms longer than 12 months, including leases currently accounted for as operating leases. ASU 2016-02 is effective for all interim and annual reporting periods beginning after December 15, 2018. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. We are currently evaluating the impact that the adoption of ASU 2016-02 will have on our financial statements and related disclosures.

 

Other recent accounting pronouncements issued by the FASB, including its Emerging Issues Task Force, the American Institute of Certified Public Accountants, and the Securities and Exchange Commission did not or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

 

NOTE 5. RESTRICTED CASH

 

The Company entered into Store Value Prepaid Card Sponsorship Agreements (the “Agreements”) 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, 2016 and June 30, 2015, the restricted cash totaled $36,398 and $63,029, 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 December 31, 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 provides a software package that provides integrated services for mobile banking applications.

 

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 is being amortized over a three year period. During the three and nine months ended March 31, 2016 and 2015, the Company recorded $16,042, $48,125, $16,042, and $32,083 of amortization expense, respectively.

 

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

 

		Three months ended March 31, 2015				Nine months ended March 31, 2015
		(Unaudited)				(Unaudited)
Revenues			172,185				787,064
Net loss			(231,841	)			(596,285	)

 NOTE 7. NOTES PAYABLE

 

Notes payable includes accrued interest and consists of the following as of March 31, 2016 and June 30, 2015:

 

			March 31, 2016				June 30, 2015
Convertible notes payable, including $1,113,226 and $2,326,609 due to related parties at March 31, 2016 and June 30, 2015, respectively.  At March 31, 2016, $694,268 of the convertible notes, including $467,695 due to related parties, are in default. The notes are unsecured, interest at 5% to 10%, and due on various dates through March 2016 or on demand.  The principal and accrued interest are convertible at a conversion prices ranging from $0.08 per share to $0.40 per share.  On September 30, 2015, a portion of the outstanding balances were converted into shares of common stock (see (1) below), settled from sale of assets (see (2) below), or replaced (see (3) below).		$	1,339,778			$	2,512,267
Notes payable, including $129,881 and $714,488 due to related parties at March 31, 2016 and June 30, 2015, respectively. At March 31, 2016, $318,077 of the notes payable, including $3,000 due to related parties, are in default. The notes are both secured by the Company’s intellectual property, and unsecured, interest at 0% to 10%. On September 30, 2015, a portion of the outstanding balance were converted into shares of common stock (see (1) below).			445,543				1,049,740
Total		$	1,785,321			$	3,562,707

 

During the three and nine months ended March 31, 2016 and 2015, the Company recorded interest expense on its convertible notes payable and notes payable of $29,663, $104,802, $44,816 and $136,129, respectively.

 

(1) On September 30, 2015, the Company agreed to convert $1,775,433 of various convertible notes payable to The Matthews Group into 22,122,919 shares of common stock, or $0.08 per share. The Matthews Group is owned 50% by Ms. Van Tran, the Company’s CEO/Executive Chair and a director, and 50% by Larry Johanns, a significant stockholder of the Company (see Note 10). The transaction included $670,038 of notes that were converted at less than their stated conversion prices which ranged from $0.10 per share to $0.33 per share. The Company determined this was an induced conversion and calculated an inducement expense of $452,770, which represents the fair value of the additional number of common shares issued as a result of the lower conversion price. The Company recorded the $452,770 in interest expense and additional paid in capital. No similar expense occurred during the same period of the prior year.

 

(2) On September 30 2015, the Company sold its Barcode Technology assets to The Matthews Group for $670,000 in settlement of various convertible notes payables due to The Matthews Group. The cost basis of the Barcode Technology assets were zero, resulting in a gain of $670,000. As the transaction was between the Company and The Matthews Group, a related party, the Company accounted for the gain as a capital contribution.

 

(3) On September 28, 2015, the Company agreed to replace a convertible note payable for $200,000 due to The Matthews Group that was in default (the original note) with another convertible note payable for $200,000 due to the Matthews Group (the replacement note). The original note was for $200,000, secured, 8% interest rate, and convertible into common stock at a rate of $0.25 per share. The replacement note is for $200,000, unsecured, 10% interest rate, and convertible into common stock at a rate of $0.08 per share. The Company determined that the change in the fair value of the conversion option was more than 10% of the carrying value of the original note and recorded a loss on extinguishment of $136,000. The $136,000 is included in interest expense and finance costs and additional paid in capital. No similar expense occurred during the same period of the prior year.

 

During the nine months ended March 31, 2016, the Company issued $441,389 of convertible notes payable-related party. In addition, the Company received loans of $124,357 from The Matthews Group related to the sale of the Company’s Barcode Technology to The Matthews Group (see Note 1). The convertible notes payable-related party can be converted at a price of $0.08 per share. The market price on the date some of the convertible notes payable-related party were issued was in excess of the conversion price, and as a result the Company recognized an expense of $77,188 which is included in interest expense.

 

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

			March 31, 2016				June 30, 2015
Notes payable		$	542,214			$	521,610
Notes payable, related party			1,243,107				3,041,097
Total		$	1,785,321			$	3,562,707

 

NOTE 8 - STOCKHOLDERS’ DEFICIENCY

Common Stock to be issued

 

On July 15, 2014, the Company entered into a consulting agreement with a consultant, which included, among other things, monthly compensation of 5,000 shares of common stock. The consulting agreement was terminated on October 31, 2015. As of June 30, 2015, 50,000 shares of common stock with a value of $7,400 have not been issued and are included in common shares to be issued in the accompanying consolidated balance sheet. During the nine months ended March 31, 2016, the Company recorded an obligation to issue an additional 20,000 shares of common stock with an aggregate fair value of $2,100. As of March 31, 2016, the 70,000 shares of common stock with a value of $9,500 have not been issued and are included in common shares to be issued in the accompanying consolidated balance sheet.

 

NOTE 9 – STOCK OPTIONS

 

Stock Options

 

A summary of stock options for the three months ended March 31, 2016 is as follows:

 

				Number of Shares				Weighted - Average Exercise Price
	Outstanding at June 30, 2015				2,520,000			$	0.42
	Granted				—			$	0.00
	Forfeited				(10,000)			$	0.42
	Outstanding at March 31, 2016				2,510,000			$	0.42
	Exercisable at March 31, 2016				2,510,000			$	0.42

 

At March 31, 2016, the Company had 2,510,000 of options outstanding and exercisable. There were no options granted during the nine months ended March 31, 2016 and the Company recognized no stock-based compensation expense related to stock options during the three and nine months ended March 31, 2016 and 2015, respectively. As of March 31, 2016, there was no remaining unrecognized compensation costs related to stock options, and there was no intrinsic value of these options.

 

Additional information regarding options outstanding as of March 31, 2016 is as follows:

 

Options Outstanding at March 31, 2016																Options Exercisable at March 31, 2016
	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				2,510,000				4.00			$	0.42				2,510,000			$	0.42
					2,510,000												2,510,000

 

The weighted-average remaining contractual life of stock options outstanding and exercisable at March 31, 2016 is 4.00 years.

 

NOTE 10. RELATED PARTY TRANSACTIONS

 

The Company has relied on The Matthews Group, LLC, 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).

 

During the year ended June 30, 2015, the Company received various unsecured, non-interest bearing, due on demand advances from its CEO Ms. Van Tran, a related party. During the nine months March 31, 2016, the Company received no additional advances from Ms. Tran. The balances due Ms. Tran as of March 31, 2016 and June 30, 2015 were $96,110 and $96,110, respectively. These advances have been classified as accounts payable, related party on the accompanying consolidated balance sheets.

 

Effective October 1, 2015, the Company entered into a management services agreement with the Matthews Group for which the Company will manage all facets of its previous barcode technology operations, on behalf of the Matthews Group, from October 1, 2015 to May 30, 2016. Per the terms of the management services agreement, the Company earns a fee of 20% of all revenues, or $16,098 and $38,066, from the barcode technology operations during the three months and nine months ended March 31, 2016, respectively. Additionally all cash flow (all revenues collected less direct costs paid) will be retained by the Company and classified as a unsecured note payable-related party, due on demand, bearing interest at 10% per annum. At March 31, 2016, the total of note payable-related party related to this agreement was $124,357 (see Note 7). The Matthews Group bears the risk of loss from the barcode operations and has the right to the residual benefits of the barcode operations.

 

The Company also leases its office facilities from Ms. Tran. For the three and nine months ended March 31, 2016 and 2015, rental payments to Ms. Van Tran totaled $12,750, $38,250, $12,750 and $38,250, respectively.

 

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

 

Results of Operations – Three Months Ended March 31, 2016 compared to March 31, 2015

 

We had a net loss of $216,178 and $278,075 for the three months ended March 31, 2016 and 2015, respectively.

 

Revenues

 

Details of revenues are as follows:

 

		Three Months Ended March 31,								Increase (Decrease)
		2016				2015				$				%
Mobile Banking Technology		$	59,803			$	62,521			$	(2,718	)			(4.3	)
Barcode Technology			—				109,664				(109,664	)			(100.0	)
Other Revenue, related party			16,098				—				16,098				100.00
Total Revenues		$	75,901			$	172,185			$	(96,284	)			(55.9	)

 

 

Mobile Banking Technology

 

Mobile Banking Technology revenues include products such as the Company’s Blinx On-Off™ prepaid toggle Card and its Open Loop/Close Loop System and Bio ID Card Platform. Mobile Banking Technology uses web-based mobile technology to offer financial cardholders the very best technology in conducting secure financial transactions in real time, protecting personal identity, and financial account security. Mobile Banking Technology revenues for the three months ended March 31, 2016 and 2015 were $59,803 and $62,521, respectively.

 

Barcode Technology

 

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.

 

Other Revenue, related party

 

Effective October 1, 2015, the Company entered into a management services agreement with the Matthews Group for which the Company will manage its previous barcode technology business, on behalf of the Matthews Group, from October 1, 2015 to May 30, 2016. Per the terms of the management services agreement, the Company earned 20% of all revenues, or $16,098, from the barcode technology business during the three months ended March 31, 2016.

 

Cost of Sales

 

Cost of sales for the three months ended March 31, 2016 and 2015, totaled $52,722 and $85,079, respectively. The decrease in expense of $32,357 was the result of decreased labor costs associated with projects being implemented during the period as compared to the same period of the prior year. For the three months ended March 31, 2016 and 2015, cost of sales as a percentage of revenue were 69.5% and 49.4%, respectively.

 

Operating Expenses

 

General and administrative expense for the three months ended March 31, 2016 and 2015 was $170,451 and $201,175, respectively. The decrease of $30,724 in expenses was realized from expense reductions relating to the sale of its barcode technology business and reduced outside contractors and professional fees.

 

Sales and marketing expense for the three months ended March 31, 2016 and 2015 was $0 and $16,660, respectively. The decrease of $16,660 was the result of changes in the timing of expenses associated with sales and marketing efforts as compared to the same period of the prior year.

 

Research and development expense for the three months ended March 31, 2016 and 2015 was $17,248 and $25,007, respectively. The decrease of $7,759 in expense was realized from expense reductions relating to the sale of its barcode technology business and 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, 2016 and 2015, which includes primarily interest expense and financing costs, was $51,658 and $122,339, respectively. The decrease of $70,681 was primarily a result of the reduction in debt balances and $21,000 of non-cash financing costs (see Note 7 to Condensed Consolidated Financial Statements) during the three months ended March 31, 2016 as compared to $76,500 of financing costs during the same period of the prior year.

 

Results of Operations – Nine Months Ended March 31, 2016 compared to March 31, 2015

 

We had a net loss of $1,293,937 and $556,902 for the nine months ended March 31, 2016 and 2015, respectively.

 

Revenues

 

Details of revenues are as follows:

 

		Nine Months Ended March 31,								Increase (Decrease)
		2016				2015				$				%
Mobile Banking Technology		$	198,524			$	351,868			$	(153,344	)			(43.6	)
Barcode Technology			133,714				373,071				(239,357	)			(64.2	)
Other Revenue, related party			38,066				—				38,066				100.00
Total Revenues		$	370,304			$	724,939			$	(354,635	)			(48.9	)

 

Mobile Banking Technology

Mobile Banking Technology revenues include products such as the Company’s Blinx On-Off™ prepaid toggle Card and its Open Loop/Close Loop System and Bio ID Card Platform. Mobile Banking Technology uses web-based mobile technology to offer financial cardholders the very best technology in conducting secure financial transactions in real time, protecting personal identity, and financial account security. Mobile Banking Technology revenues for the nine months ended March 31, 2016 and 2015 were $198,524 and $351,868, respectively. The decrease in Mobile Banking Technology revenues of $153,344 was due to a decrease in the number of projects delivered during the period as compared to the same period of the prior year.

 

Barcode Technology

 

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 Barcode Technology revenue before the sale to The Matthews Group increased approximately $48,000 to $133,714 during the three-months ended September 30, 2015 compared to the three-months ended September 30, 2014 mainly attributable to the increase demand for LCD screens.

 

Other Revenue, related party

 

Effective October 1, 2015, the Company entered into a management services agreement with the Matthews Group for which the Company will manage all facets of its previous barcode technology business, on behalf of the Matthews Group, from October 1, 2015 to May 30, 2016. Per the terms of the management services agreement, the Company earned 20% of all revenues, or $38,066, from the barcode technology business during the nine months ended March 31, 2016.

 

Cost of Sales

 

Cost of sales for the nine months ended March 31, 2016 and 2015, totaled $250,310 and $253,739, respectively. The small decrease in expense was the result of decreased labor costs associated with projects being implemented during the period as compared to the same period of the prior year. For the nine months ended March 31, 2016 and 2015, cost of sales as a percentage of revenue were 67.6% and 35.0%, respectively.

 

Operating Expenses

 

General and administrative expense for the nine months ended March 31, 2016 and 2015 was $567,468 and $571,135, respectively.

 

Sales and marketing expense for the nine months ended March 31, 2016 and 2015 was $16,641 and $61,856, respectively. The decrease of $45,215 was the result of changes in the timing of expenses associated with sales and marketing efforts as compared to the same period of the prior year.

 

Research and development expense for the nine months ended March 31, 2016 and 2015 was $59,064 and $82,365, respectively. The decrease of $23,301 in expense was realized from expense reductions relating to the sale of its barcode technology business and 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, 2016 and 2015, which includes primarily interest expense and financing costs, was $770,758 and $312,746, respectively. The increase of $458,012 was primarily a result of $665,958 of non-cash financing costs (see Note 7 to Condensed Consolidated Financial Statements) during the nine months ended March 31, 2016 as compared to $175,375 of financing costs during the same period of the prior year.

 

Liquidity

 

Our cash balance at March 31, 2016 decreased to $30,378 as compared to $52,762 at June 30, 2015. The decrease was the result of $585,630 in cash used in operating activities offset by $563,246 in cash provided by financing activities. Net cash used in operations during the nine months ended March 31, 2016 was $585,630 compared with $51,662 of cash used in operations during the same period of the prior year. Cash used in operations during the nine months ended March 31, 2016 was primarily due to our net loss in the period of $1,293,937 offset by non-cash expenses of $835,754. Net cash provided by financing activities of $563,246 during the nine months ended March 31, 2016 was primarily due to proceeds received from notes payable of $565,746 offset by payments of $2,500 on notes payable. During the same period of the prior year, net cash used in financing activities of $81,000 was from proceeds received from notes payable of $224,500 offset by payments of $143,500 on notes payable.

 

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. During the nine months ended March 31, 2016, the Company incurred a net loss of $1,293,937 and used cash to fund operating activities of $585,630, and at March 31, 2016, the Company had a stockholders’ deficiency of $3,286,878. In addition, as of March 31, 2016, the Company is delinquent in payment of $1,785,321 of its notes payable and is also delinquent in payment of $322,477 in payroll taxes and accrued interest and penalties.

 

These factors, among others, raise substantial doubt about our ability to continue as a going concern. The Company’s independent registered public accounting firm, in its report on our June 30, 2015 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern. The Company’s financial statements do not include any adjustments that might result from the outcome of this uncertainty be necessary should we be unable to continue as a going concern.

 

The Company believes its cash and forecasted cash flow from operations will not be sufficient to continue operations through fiscal 2016 without continued external investment. The Company believes it will require additional funds to continue its operations through fiscal 2016 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.

 

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.

 

Recent Accounting Pronouncements

 

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

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

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

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures.

 

Our management, with the participation of our chief executive officer and our chief financial officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 (the “Exchange Act”) Rules 13a-15(e) and 15-d-15(e)) as of the end of the period covered by this report (the “Evaluation Date”).  Based upon that evaluation, our chief executive officer and our chief financial officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate to allow timely decisions regarding required disclosure.  As of December 31, 2015, 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, 2015.

 

Changes in Internal Control over Financial Reporting.

 

In our Form 10-K at June 30, 2015, 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 $1,785,321 representing principal and accrued interest as of March 31, 2016.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

 

ITEM 5. OTHER INFORMATION

 

The Company is delinquent in payment of $322,477 for payroll taxes and accrued interest and penalties as of March 31, 2016.

 

On January 20, 2016, Joseph Valandra resigned as a member of the Company’s Board of Directors.

 

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 quarter ended March 31, 2016 formatted in XBRL: (i) Consolidated Balance Sheets at March 31, 2016 and June 30, 2015; (ii) Consolidated Statement of Operations for the three and nine months ended March 31, 2016 and 2015; (iii) Consolidated Statement of Stockholders’ Deficit as at March 31, 2016; (iv) Consolidated Statements of Cash Flows for the nine months ended March 31, 2016 and 2015; (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.

 

By:	/s/ Van Tran		May 16, 2016
	Van Tran
	Chief Executive Officer
	(Principal Executive Officer)