CONVERTIBLE NOTES AND NOTES PAYABLE

3 Months Ended

Sep. 30, 2024

NOTE 3 – CONVERTIBLE NOTES AND NOTES PAYABLE

Convertible notes and notes payable

Convertible notes and notes payable include principal and accrued interest and consist of the following at September 30, 2024 and June 30, 2024:


	September 30, 2024		June 30, 2024
(a) Unsecured convertible notes ($22,000 and $21,000 in default)	$	69,000	$	69,000
(b) Notes payable (in default)		497,000		492,000
(c) Notes payable (in default)		30,000		30,000
Total notes payable - third parties	$	596,000	$	591,000

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

At June 30, 2024, convertible notes totaled $69,000. During the three months ended September 30, 2024, interest of less than $1,000 was added to the principal resulting in a balance owed of $69,000 at September 30, 2024. On September 30, 2024, $22,000 of the convertible notes were in default and convertible at a conversion price of $0.30 per share into 71,872 shares of the Company’s common stock. The balance of $47,000 is due on demand and convertible at a conversion price of $0.08 per share into 590,005 shares of the Company’s common stock.

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

At June 30, 2024, the notes totaled $492,000. During the three months ended September 30, 2024, interest of $5,000 was added to principal resulting in a balance owed of $497,000 at September 30, 2024. At September 30, 2024, $447,000 of notes are secured by the Company’s intellectual property and $50,000 of notes are unsecured.

At June 30, 2024 the notes totaled $30,000. During the three months ended September 30, 2024, interest of less than $1,000 was added to the principal resulting in a balance owed of $30,000 at September 30, 2024.

Convertible notes and notes payable-related parties

Convertible and notes payable-related parties include principal and accrued interest and consist of the following at September 30, 2024 and June 30, 2024:


	September 30, 2024		June 30, 2024
(a) Convertible notes-The Matthews Group	$	2,113,000	$	2,084,000
(b) Notes payable-The Matthews Group		5,963,000		5,821,000
(c) Convertible notes-other related parties ($253,000 and $251,000 in default)		569,000		500,000
Total notes-related parties	$	8,645,000	$	8,405,000

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

The Matthews Group is a related party (see Note 6) and is owned 50% by Ms. Van Tran, the Company’s CEO, and 50% by Larry Johanns, a significant shareholder of the Company. At June 30, 2024, convertible notes due to The Matthews Group totaled $2,084,000. During the three months ended September 30, 2024, $29,000 of interest was added to principal, resulting in a balance payable at September 30, 2024 of $2,113,000. At September 30, 2024, the notes are convertible at a conversion price of $0.08 per share into 26,411,730 shares of the Company’s common stock.

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

At June 30, 2024, notes due to The Matthews Group totaled $5,821,000. During the three months ended September 30, 2024, $38,000 of notes payable were issued and interest of $104,000 was added to principal, resulting in a balance owed of $5,963,000 at September 30, 2024.

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

At June 30, 2024, convertible notes due to other related parties totaled $500,000. During the three months ended September 30, 2024, $60,000 of notes payable were issued and interest of $9,000 was added to principal, resulting in a balance owed of $569,000 at September 30, 2024. At September 30, 2024, $253,000 of the notes were due in 2010 and are in default, and $316,000 is due on demand. At September 30, 2024, the total principal and accrued interest balance due to other related parties of $569,000 are convertible into approximately 7,476,000 shares of the company's common stock based on conversion prices ranging from $0.04 to $0.30 per share.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

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+ Details

VERITEC INC 10-Q