Cleartronic, Inc. 10-Q

Item 1. Financial Statements CLEARTRONIC, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS June 30, 2021 September (Unaudited) 30, 2020 Current assets: Cash $ 302,102 $ 75,983 Accounts receivable, net 203,145 218,615 Inventory 11,162 12,471 Prepaid expenses and other current assets 88,568 39,416 Note receivable 25,000 25,000 Total current assets 629,977 371,485   Property and Equipment, net 9,072 8,427   Other assets: Due from related party 20,968 13,420 Total other assets 20,968 13,420 Total assets $ 660,017 $ 393,332   LIABILITIES AND STOCKHOLDERS' DEFICIT Current liabilities: Accounts payable $ 198,213 $ 253,372 Accrued expenses - 43,457 Deferred revenue, current portion 962,921 693,886 Notes payable stockholders - 48,447 Note payable, current portion - 18,944 Total current liabilities 1,161,134 1,058,106   Long Term Liabilities Note payable, net of current portion 106,727 87,783 Deferred revenue, net of current portion 7,163 34,239 Total long term liabilities 113,890 122,022 Total liabilities 1,275,024 1,180,128   Commitments and Contingencies (See Note 8) - -   Stockholders' deficit: Series A preferred stock - $. 00001 par value; 1,250,000 shares authorized, 512,996 issued and outstanding, respectively. 5 5 Series B preferred stock - $. 00001 par value; 10 shares authorized, 0 shares issued and outstanding, respectively. - - Series C preferred stock - $. 00001 par value; 50,000,000 shares authorized, 3,911,715 and 4,433,375 shares issued and outstanding, respectively 40 45 Series D preferred stock - $. 00001 par value; 10,000,000 shares authorized, 670,904 shares issued and outstanding, respectively. 7 7 Series E preferred stock - $. 00001 par value, 10,000,000 shares authorized, 3,000,000 shares issued and outstanding, respectively. 30 30 Common stock - $. 00001 par value; 5,000,000,000 shares authorized, 226,602,935 and 223,994,635 shares issued and outstanding, respectively 2,266 2,240 Additional paid-in capital 15,266,697 15,266,718 Accumulated Deficit ( 15,884,052 ) ( 16,055,841 ) Total stockholders' deficit ( 615,007 ) ( 786,796 ) Total liabilities and stockholders' deficit $ 660,017 $ 393,332 The accompanying notes are an integral part of these condensed consolidated unaudited financial statements -1- CLEARTRONIC, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) For the Three Months ended June 30, 2021 For the Three Months ended June 30, 2020 For the Nine Months ended June 30, 2021 For the Nine Months ended June 30, 2020 (Restated) (Restated) Revenue $ 413,868 $ 375,250 $ 1,217,928 $ 1,319,152 Cost of Revenue 64,777 73,142 198,580 322,564 Gross Profit 349,091 302,108 1,019,348 996,588   Operating Expenses: Selling expenses 147,483 116,624 417,614 388,895 Administrative expenses 106,253 91,010 327,336 291,858 Amortization and depreciation 521 150 1,423 11,028 Research and development 48,285 28,192 118,612 114,993 Total Operating Expenses 302,542 235,976 864,985 806,774   Gain on the settlement and reversal of accounts payable 18,430 - 18,430 - Interest expense, net 264 ( 2,116 ) ( 1,004 ) ( 7,201 ) Total Other Income(Expense) 18,694 ( 2,116 ) 17,426 ( 7,201 )   Income from continuing operations before income taxes 65,243 64,016 171,789 182,613   Provision for income taxes from continuing operations - - - -   Income from continuing operations 65,243 64,016 171,789 182,613   Discontinued operations Loss from discontinued operations before income taxes - - - ( 64,936 )   Provision for Income taxes from discontinued operations - - - - Loss from discontinued operations - - - ( 64,936 )   Net Income 65,243 64,016 171,789 ( 117,677 )   Preferred stock dividends Series A Preferred ( 10,119 ) ( 10,231 ) ( 30,584 ) ( 30,806 )   Net income attributable to common stockholders $ 55,124 $ 53,785 $ 141,205 $ ( 86,871 )   Net income per share - basic and diluted Income from Continuing Operations 0.00 0.00 0.00 0.00 Loss from discontinued operations - - - ( 0.00 ) Net income per common share - basic $ 0.00 $ 0.00 $ 0.00 $ 0.00   Net income per common share - diluted $ 0.00 $ 0.00 $ 0.00 $ 0.00   Weighted Average of number of shares outstanding - basic 226,602,935 223,994,635 224,997,827 222,355,291   Weighted Average of number of shares outstanding - diluted 600,815,630 600,815,630 599,210,522 599,176,286 The accompanying notes are an integral part of these condensed consolidated unaudited financial statements -2- CLEARTRONIC, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW (Unaudited) For nine months For nine months ended ended June 30, 2021 June 30, 2020 (Restated) NET INCOME $ 171,789 $ 117,677 Cash Flows From Operating Activities Adjustments to reconcile net income to net cash provided by (used in) operating activities: Amortization of ReadyOp software platform - 10,878 Depreciation expense 1,423 150 Gain on the settlement and reversal of accounts payable ( 18,430 ) - Provision (Recovery) for bad debt 6,000 ( 13,335 ) (Increase) decrease in assets: Accounts receivable 9,470 49,176 Inventory 1,309 13,042 Prepaid expenses and other current assets ( 49,152 ) 15,000 Due from related party ( 7,548 ) ( 13,420 ) Other assets - 8,656 Assets from discontinued operations - 9,929 Increase (decrease) in liabilities: Accounts payable ( 36,729 ) ( 28,019 ) Accrued expenses ( 43,457 ) ( 68,756 ) Deferred revenue 241,959 ( 142,091 ) Liabilities from discontinued operations - 2,486 Net Cash Provided By (Used In) Operating Activities 276,634 ( 38,627 )   Cash Flows From Investing Activities Purchase of fixed assets ( 2,068 ) ( 9,029 ) Issuance of note receivable - ( 25,000 ) Net Cash Used in Investing Activities ( 2,068 ) ( 34,029 )   Cash Flows From Financing Activities Proceeds from issuance of installment loan-discontinued operations - 43,600 Repayment of installment loan - discontinued operations - ( 33,151 ) Proceeds from notes payable - 156,727 Repayment of notes payable - ( 50,000 ) Repayment of notes payable stockholders ( 48,447 ) ( 20,732 ) Proceeds from loan payable - related party - discontinued operations - 11,362 Net Cash (Used in) Provided by Financing Activities ( 48,447 ) 107,806   Net increase in cash 226,119 35,150   Cash at beginning of period 75,983 27,698   Cash at end of period $ 302,102 $ 62,848   SUPPLEMENTAL CASH FLOW INFORMATION: Cash paid for interest $ 2,754 $ 4,433 Cash paid for taxes $ - $ -   Supplemental disclosure of non-cash investing and financing activities: Operating lease asset obtained for operating lease liability from discontinued operations $ - $ 75,078 Deconsolidation of Voiceinterop, Inc. $ - $ 225,316 The accompanying notes are an integral part of these condensed consolidated unaudited financial statements -3- CLEARTRONIC, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2021 (Unaudited) Series A Series B Series C Series D Series E Additional Total Preferred Stock Preferred Stock Preferred Stock Preferred Stock Preferred Stock Common Stock paid-in Accumulated Stockholders' Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount capital deficit Deficit Balance at March 31, 2021 (Unaudited) ​ ​ 512,996 $ 5 - $ - 3,911,715 $ 40 670,904 $ 7 3,000,000 $ 30 226,602,935 $ 2,266 $ 15,266,697 $ ( 15,949,295 ) $ ( 680,250 )   Net income for the three months ended June 30, 2021 - - - - - - - - - - - - - 65,243 65,243 Balance at June 30, 2021   (Unaudited) 512,996 $ 5 - $ - 3,911,715 $ 40 670,904 $ 7 3,000,000 $ 30 226,602,935 $ 2,266 $ 15,266,697 $ ( 15,884,052 ) $ ( 615,007 )   Series A Series B Series C Series D Series E Additional Total Preferred Stock Preferred Stock Preferred Stock Preferred Stock Preferred Stock Common Stock paid-in Accumulated Stockholders' Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount capital deficit Deficit   Balance at September 30, 2020 ​ ​ 512,996 $ 5 - $ - 4,433,375 $ 45 670,904 $ 7 3,000,000 $ 30 223,994,635 $ 2,240 $ 15,266,718 $ ( 16,055,841 ) $ ( 786,796 )   Series C Convertible Preferred shares exchanged for common shares - - - - ( 521,660 ) ( 5 ) - - - - 2,608,300 26 ( 21 ) - -   Net income for the nine months ended June 30, 2021 - - - - - - - - - - - - - 171,789 171,789 Balance at June 30, 2021   (Unaudited) 512,996 $ 5 - $ - 3,911,715 $ 40 670,904 $ 7 3,000,000 $ 30 226,602,935 $ 2,266 $ 15,266,697 $ ( 15,884,052 ) $ ( 615,007 ) The accompanying notes are an integral part of these condensed consolidated unaudited financial statements -4- CLEARTRONIC, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2020 (Restated and Unaudited) Series A Series B Series C Series D Series E Additional Total Preferred Stock Preferred Stock Preferred Stock Preferred Stock Preferred Stock Common Stock paid-in Accumulated Stockholders' Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount capital deficit Deficit   Balance at March 31, 2020 (Restated and Unaudited) 512,996 $ 5 - $ - 4,433,375 $ 45 670,904 $ 7 3,000,000 $ 30 223,994,635 $ 2,240 $ 15,266,718 $ ( 16,167,449 ) $ ( 898,404 )   Net income for three months ended June 30, 2020 - - - - - - - - - - - - - 64,016 64,016   Balance at June 30, 2020 (Restated and Unaudited) 512,996 $ 5 - $ - 4,433,375 $ 45 670,904 $ 7 3,000,000 $ 30 223,994,635 $ 2,240 $ 15,266,718 $ ( 16,103,433 ) $ ( 834,388 )   Series A Series B Series C Series D Series E Additional Total Preferred Stock Preferred Stock Preferred Stock Preferred Stock Preferred Stock Common Stock paid-in Accumulated Stockholders' Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount capital deficit Deficit Balance at September 30, 2019 ​ ​ 512,996 $ 5 - $ - 4,433,375 $ 45 670,904 $ 7 3,000,000 $ 30 211,994,635 $ 2,120 $ 15,041,522 $ ( 16,221,110 ) $ ( 1,177,381 )   Deconsolidation of Voiceintrop, Inc.​​ - - - - - - - - - - - - 225,316 - 225,316   Acquisition of ReadyMed platform in exchange for common shares - - - - - - - - - - 12,000,000 120 ( 120 ) - -   Net income for nine months ended June 30, 2020 - - - - - - - - - - - - - 117,677 117,677   Balance at June 30, 2020 (Restated and Unaudited) 512,996 $ 5 - $ - 4,433,375 $ 45 670,904 $ 7 3,000,000 $ 30 223,994,635 $ 2,240 $ 15,266,718 $ ( 16,103,433 ) $ ( 834,388 ) The accompanying notes are an integral part of these condensed consolidated unaudited financial statements -5- CLEARTRONIC, INC. AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements June 30, 2021 (Unaudited) NOTE 1 - ORGANIZATION Cleartronic, Inc. (the "Company") was incorporated in Florida on November 15, 1999. All current operations are conducted through the Company's wholly owned subsidiary, ReadyOp Communications, Inc. ("ReadyOp"), a Florida corporation incorporated on September 15, 2014. ReadyOp facilitates the marketing and sales of subscriptions to the ReadyOp ™ and ReadyMed ™ platform and the AudioMate IP gateways discussed below. In March 2018, the Company approved the spin-off VoiceInterop into a separate company under a Form S-1 registration to be filed with the United States Securities and Exchange Commission. On May 13, 2019, VoiceInterop filed an S-1 registration with the United States Securities and Exchange Commission. All VoiceInterop transactions have been recorded as discontinued operations. On February 14, 2020, the distribution of shares was approved by FINRA and VoiceInterop was deconsolidated from Cleartronic, Inc. (See Note 9). In October 2019, the Company acquired the ReadyMed software platform from Collabria LLC. ReadyMed is a web-based secure communications platform initially designed for the healthcare industry. This includes hospitals, clinics, doctor's offices, health insurance companies, workers compensation insurance companies and many other segments of the healthcare industry. The Company offers both the ReadyOp and ReadyMed capabilities to clients and usually refers to the platform as ReadyOp to avoid confusion in the marketplace of two platforms. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The accompanying consolidated financial statements contain the consolidated accounts of Cleartronic, Inc. and its subsidiary, ReadyOp Communications, Inc. All material intercompany transactions and balances have been eliminated. On February 14, 2020, the deconsolidation of VoiceInterop was completed and transactions through that date are recorded as discontinued operations (See Note 9). BASIS OF PRESENTATION The accompanying unaudited interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q of Regulation S-K. They may not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended September 30, 2020 included in the Company's Annual Report on Form 10-K filed with the United States Securities and Exchange Commission. The unaudited interim consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal and recurring adjustments have been made. Operating results for the three and nine months ended June 30, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ended September 30, 2021. USE OF ESTIMATES In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and operations for the reporting period. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results. Significant estimates include the assumptions used in valuation of deferred tax assets, estimated useful life of intangible assets and property and equipment, valuation of inventory and allowance for doubtful accounts. CASH AND CASH EQUIVALENTS For financial statement purposes, the Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company did not own any cash equivalents on June 30, 2021 and September 30, 2020. ACCOUNTS RECEIVABLE The Company provides an allowance for uncollectible accounts based upon a periodic review and analysis of outstanding accounts receivable balances. Uncollectible receivables are charged to the allowance when deemed uncollectible. Recoveries of accounts previously written off are used to credit the allowance account in the periods in which the recoveries are made. When a client is invoiced, the amount is recorded as an asset in Accounts Receivable and as Deferred Revenue in Current Liabilities. When payment is received the amount is moved to Cash on the balance sheet. The amount listed as Deferred Revenue is amortized monthly over the license period. The Company provided $ 6,000 and $ 6,000 allowances for doubtful accounts as of June 30, 2021 and September 30, 2020, respectively. -6- PROPERTY AND EQUIPMENT Property and equipment are recorded at cost and depreciated or amortized using the straight-line method over the estimated useful life of the asset or the underlying lease term for leasehold improvements, whichever is shorter onset the property and equipment is put into service. ASSET ACQUISITION In October 2019, the Company acquired a software platform from Collabria LLC. In exchange for this asset, the Company issued 12,000,000 shares of Common stock valued at historical costs of $ 600,000 . ReadyMed is a web based secure communication platform designed for the health care industry. This includes hospitals, clinics, doctor's offices and health insurance companies and many other segments of the health care industry. It provides hospitals with patient tracking capability within the hospital. It allows physicians to track patient progress after release from the hospital and allows for secure communication with the patient to track the healing process, record their recovery and monitor their medications. As of the acquisition date, the Company has recorded an estimated historical cost of the ReadyMed software platform based on a preliminary purchase price allocation prepared by management. As a result, during the preliminary purchase price allocation period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired. After the preliminary purchase price allocation period, the Company recorded adjustments to assets acquired subsequent to the purchase price allocation period in the period in which the adjustments were determined. Accordingly, the ReadyMed software platform purchased price was adjusted. As of June 30, 2021 and September 30, 2020, the ReadyMed software platform is valued at historical costs of $ 0 (See Notes 6 and 7). In November 2016, the Company acquired the ReadyOp software platform and the Collabria customer base from Collabria LLC. In exchange for these assets the Company issued 3,000,000 shares of restricted Series E Convertible Preferred stock valued at $ 292,240 . This valuation was based on internal calculations and validated by a third party valuation expert. The ReadyOp software platform was valued at $ 195,600 to be amortized over three years . The amortization expense for the nine months ended June 30, 2021 and 2020 was $ 0 and $ 10,878 , respectively. The amortization expense for the three months ended June 30, 2021 and 2020 was $ 0 and $ 0 , respectively. As of June 30, 2021 and September 30, 2020, ReadyOp software platform has been fully amortized. CONCENTRATION OF CREDIT RISK The Company currently maintains cash balances at one FDIC-insured banking institution. Deposits held in non interest-bearing transaction accounts are insured up to a maximum of $ 250,000 at all FDIC-insured institutions. As of June 30, 2021 and September 30, 2020, the Company had $ 51,690 and $ 0 , respectively, in excess of FDIC insurance limits. RESEARCH AND DEVELOPMENT COSTS The Company expenses research and development costs as incurred. For the nine months ended June 30, 2021 and 2020, the Company had $ 118,612 and $ 114,993 , respectively, in research and development costs . For the three months ended June 30, 2021 and 2020, the Company had $ 48,285 and $ 28,192 , respectively, in research and development costs. REVENUE RECOGNITION AND DEFERRED REVENUES The Company revenue recognition policy follows guidance from Accounting Standards Codification (ASC) 606, Revenue from contract with customers. Revenue is recognized when the Company transferred promised goods and services to the customer and in the amount that reflect the consideration to which the company expected to be entitled in exchange for those goods and services. The Company applies the following five-step model in order to determine this amount: i. Identification of Contact with a customer; ii. Identify the performance obligation of the contract iii. Determine transaction price; iv. Allocation of the transaction price to the performance obligations; and v. Recognition of revenue when (or as) the Company satisfies each performance obligation. The Company generates revenue primarily through the sale of integrated hardware and software licenses. The portion of the contract that is associated with ongoing hosting and related customer service is amortized monthly over the license period. The Company incurs certain incremental contract costs (referred to as deferred subscriber acquisition costs, net) including selling expenses (primarily commissions) related to acquiring customers. Deferred subscriber acquisition costs, net are included in prepaid and expenses and other current assets on the consolidated balance sheet. Commissions paid in connection with acquiring new customers are determined based on the value of the contractual fees. Deferred subscriber acquisition costs will be amortized over the license period. As of June 30, 2021 and September 30, 2020, respectively, the Company recorded $ 56,866 and $ 20,900 , respectively, in deferred subscriber costs, which is included as a component of prepaid expense. In transactions in which hardware is sold to a customer, the Company recognizes the revenue when the hardware has been shipped to the customer. The hardware supplied by the Company does not require a related software license and can be operated and fully functional without the Company's software. From time to time clients request special training meetings. We send employees to these meeting and charge our clients on a per diem basis. These charges are recorded as consulting fees on our income statement. The Company allocates the transaction price to each performance obligation based on a relative standalone selling price. Revenue associated with the sale and installation of system licenses is recognized once installation is complete. Customer billings for services not yet rendered are deferred and recognized as revenue as services are provided. These fees are recorded as current deferred revenue on the consolidated balance sheet as the Company expects to satisfy any remaining performance obligations as well as recognize the related revenue within the next twelve months. Accordingly, the Company has applied the practical expedient regarding deferred revenue to exclude the value of remaining performance obligations if (i) the contract has an original expected term of one year or less or (ii) the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed. -7- EARNINGS PER SHARE Basic income (loss) per common share is calculated using the weighted average number of shares outstanding during the periods reported. Diluted earnings per share include the weighted average effect of all dilutive securities outstanding during the periods presented. Diluted per share loss is the same as basic per share loss when there is a loss from continuing operations. Accordingly, for purposes of dilutive earnings per share, the Company excluded the effect of warrants and options. As of June 30, 2021 and 2020, we had no options and warrants outstanding. As of June 30, 2021 and 2020, we had 512,996 shares of Series A Convertible Preferred stock outstanding, which are convertible into 51,299,600 shares of common stock. As of June 30, 2021 and 2020, we had 3,911,715 and 4,433,375 shares of Series C Convertible Preferred stock outstanding, respectively, which are convertible into 19,558,575 and 22,166,875 shares of common stock, respectively. As of June 30, 2021 and 2020, we had 670,904 shares of Series D Preferred stock outstanding which are convertible into 3,354,520 shares of common stock. As of June 30, 2021 and 2020, we had 3,000,000 shares of Series E Convertible Preferred stock outstanding which are convertible into 300,000,000 shares of common stock. The table below details the computation of basic and diluted earnings per share ("EPS") for the three months ended June 30, 2021 and 2020: For the three months ended June 30, 2021 For the three months ended June 30, 2020 Net income attributable to common stockholders for the period $ 55,124 $ 53,785   Weighted average number of shares outstanding 226,902,935 223,994,635   Basic earnings per share $ 0.00 $ 0.00 The following table sets for the computation of diluted earnings per share: For the three months ended June 30, 2021 For the three months ended June 30, 2020 Net income attributable to common stockholders for the period $ 55,124 $ 53,785 Add: Preferred stock dividends 10,119 10,231   Adjusted net income $ 65,243 $ 64,016   Weighted average number of shares outstanding 226,602,935 223,994,635 Add: Shares issued upon conversion of preferred stock 374,212,695 376,820,995 Weighted average number of common and common equivalent shares 600,815,630 600,815,630   Diluted earnings per share $ 0.00 $ 0.00 -8- The table below details the computation of basic and diluted earnings per share ("EPS") for the nine months ended June 30, 2021 and 2020: For the nine months ended June 30, 2021 For the nine months ended June 30, 2020 Net income attributable to common stockholders for the period $ 141,205 $ 86,871   Weighted average number of shares outstanding 224,997,827 222,355,291   Basic earnings per share $ 0.00 $ 0.00 The following table sets for the computation of diluted earnings per share: For the nine months ended June 30, 2021 For the nine months ended June 30, 2020 Net income attributable to common stockholders for the period $ 141,205 $ 86,871 Add: Preferred stock dividends 30,584 30,806   Adjusted net income $ 171,789 $ 117,677   Weighted average number of shares outstanding 224,997,827 222,355,291 Add: Shares issued upon conversion of preferred stock 374,212,695 376,820,995 Weighted average number of common and common equivalent shares 599,210,522 599,176,286   Diluted earnings per share $ 0.00 $ 0.00 FAIR VALUE OF FINANCIAL INSTRUMENTS The Company measures the fair value of its assets and liabilities under ASC topic 820, "Fair Value Measurements and Disclosures". ASC 820 defines "fair value" as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There was no impact relating to the adoption of ASC 820 to the Company's consolidated financial statements. ASC 820 also describes three levels of inputs that may be used to measure fair value: - Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets. - Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. - Level 3: Inputs that are generally observable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value. Financial instruments consist principally of cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and deferred revenue. The carrying amounts of such financial instruments in the accompanying consolidated balance sheet approximate their fair values due to their relatively short-term nature. The fair value of long-term debt is based on current rates at which the Company could borrow funds with similar remaining maturities. The carrying amounts approximate fair value. It is management's opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments. -9- INVENTORY Inventory consists of components held for assembly and finished goods held for resale or to be utilized for installation in projects. Inventory is valued at lower of cost or net realizable value on a first-in, first-out basis. The Company's policy is to record a reserve for technological obsolescence or slow-moving inventory items. The Company only carries finished goods to be shipped along with completed circuit boards and parts necessary for final assembly of finished product. All existing inventory is considered current and usable. The Company recorded no reserve for obsolete inventory as of June 30, 2021 and September 30, 2020, respectively. EQUITY INSTRUMENTS ISSUED TO PARTIES OTHER THAN EMPLOYEES FOR ACQUIRING GOODS OR SERVICES The Company accounts for stock-based instruments issued for services in accordance with ASC 718 "Compensation – Stock Compensation." ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity-based compensation issued. The value of the portion of a stock award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method. ADVERTISING COSTS Advertising costs are expensed as incurred. The Company had advertising costs of $ 12,583 and $ 25,691 during the nine months ended June 30, 2021 and 2020, respectively, and $ 3,877 and $ 5,497 during the three months ended June 30, 2021 and 2020, respectively. RECENT ACCOUNTING PRONOUNCEMENTS In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) : Simplifying the Accounting for Income Taxes, as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. The FASB's amendments primarily impact ASC 740, Income Taxes , and may impact both interim and annual reporting periods. ASU 2019-12 will be effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years and early adoption is permitted. The Company is currently evaluating the impact of adopting ASU 2019-12. All other newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable. NOTE 3 - PROPERTY AND EQUIPMENT At June 30, 2021 and September 30, 2020, property and equipment, net, is as follows: June 30, 2021 (Unaudited) September 30, 2020 Office Equipment $ 11,097 $ 9,029 Less: Accumulated Depreciation ( 2,025 ) ( 602 ) Total Property and Equipment, net $ 9,072 $ 8,427 Depreciation expense for the three months ended June 30, 2021 and 2020, was $ 521 and $ 150 , respectively. Depreciation expense for the nine months ended June 30, 2021 and 2020, was $ 1,423 and $ 150 , respectively NOTE 4 - NOTES RECEVABLE On June 18, 2020, the Company entered into an unsecured note receivable in the amount of $ 10,000 with a shareholder which bears interest at 6 % and matures on August 31, 2020 . The maturity of the note receivable in the amount of $10,000 was extended to August 31, 2021 (See Note 7). As of June 30, 2021, interest receivable was $ 638 . On June 25, 2020, the Company entered into an unsecured note receivable in the amount of $ 15,000 with a shareholder which bears interest at 6 % and matures on August 31, 2020 . The maturity of the note receivable in the amount of $15,000 was extended to August 31, 2021 (See Note 7). As of June 30, 2021, interest receivable was $ 938 . Interest income for the three months ended June 30, 2021 and 2020 was $ 395 and $ 0 , respectively. Interest income for the nine months ended June 30, 2021 and 2020 was $ 1,167 and $ 0 , respectively. On July 15, 2021, a shareholder returned 875,000 shares of Company's common stock to the Company in exchange for the two notes receivable in the total sum of $ 25,000 and $ 1,576 in interest receivable (See Notes 7 and 11). -10- NOTE 5 - NOTES PAYABLE Notes payable to Stockholders As of June 30, 2021 and September 30, 2020, the Company had unsecured notes payable to stockholders totaling $ 0 and $ 48,447 , respectively. One note with a principal balance of $ 17,588 was due on December 31, 2019. The maturity of the note payable in the amount of $17,588 was extended to August 31, 2020 and was paid in full including $ 8,002 in accrued interest. On September 30, 2019, the note holder, who is a shareholder and director, converted $ 65,000 of a note payable and $ 10,279 of accrued interest into an installment promissory note with a principal balance of $ 75,279 . The note is due on September 30, 2021 and bears an interest rate of 8 %. This note requires a monthly payment of $ 3,405 for the next 24 months. As of September 30, 2020 the balance due was $ 48,447 . As of June 30, 2021, the note balance was paid in full. Interest expense on the notes payable to stockholders was $ 0 and $ 2,116 for the three months ended June 30, 2021 and 2020, respectively. Interest expense on the notes payable to stockholders was $ 2,040 and $ 7,201 for the nine months ended June 30, 2021 and 2020, respectively. June 30, 2021 September 30, (Unaudited) 2020 Note payable stockholder $ - $ 48,447 Less: current portion - ( 48,447 ) Long-term note payable $ - $ - During the year ended September 30, 2020, the Company owed $ 16,262 to two officers, of which $ 7,262 is included in liabilities from discontinued operations. The loan is non-interest bearing and payable on demand. As of September 30, 2020, the loan balance of $ 9,000 was paid in full and $7,262 included in liabilities from discontinued operations was deconsolidated as of February 14, 2020 (See Notes 7 and 9). Note Payable – PPP Loan On June 10, 2020, the Company, was granted a loan (the "Loan") from Bank of America, N.A., in the aggregate amount of $ 106,727 , pursuant to the Paycheck Protection Program (the "PPP") under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The Loan, which was in the form of a Note dated on or about June 10, 2020 issued by the Borrower, matures on or about June 10, 2025 and bears interest at an approximate rate of 1 % per annum. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. On July 20, 2021, the loan was 100 % forgiven by the SBA. As a result, the Company will record a gain on debt forgiveness t of PPP loan in the amount of $ 106,727 in the fourth quarter of 2021. (See Note 11). June 30, 2021 September 30, (Unaudited) 2020 Note payable (PPP Loan) $ 106,727 $ 106,727 Less: current portion - ( 18,944 ) Long-term note payable $ 106,727 $ 87,783 Note Payable On December 2, 2019, the Company issued a promissory note in the amount of $ 50,000 . The loan balance of $ 50,000 and interest of $ 732 was paid in full at maturity on February 29, 2020 . -11- NOTE 6 - EQUITY TRANSACTIONS Common stock issued for Ready Med Platform In October 2019, the Company acquired the software platform from Collabria LLC, a related party. In exchange for these assets the Company issued 12,000,000 shares of Common stock valued at the historical cost of the asset of $ 0 (See Notes 2 and 7). Preferred Stock Dividends As of June 30, 2021 and September 30, 2020, the cumulative arrearage of undeclared dividends for Series A Preferred stock totaled $ 113,655 and $ 83,071 , respectively. Common stock issued for Conversion of C Preferred On March 17, 2021, the holders of Series C preferred stock, converted 521,660 shares of Series C Preferred Stock into 2,608,300 shares of Common Stock. Declaration of Stock Dividend On April 23, 2018, the board of Directors declared a stock dividend for common stock shareholders and for certain classes of preferred stock shareholder of the Company. That each common shareholder would receive . 075 shares of VoiceInterop common stock for each one (1) share of Cleartronic stock held by the shareholder, and that each shareholder of Series C and D Preferred stock shall receive . 375 shares of VoiceInterop common stock for each one (1) share of Series C or Series D Preferred stock held by the shareholder. The record date of the dividend distribution shall be defined as the first business day following an effective statement from the United States Securities and Exchange Commission ("SEC") regarding a pending S-1 filing. On May 13, 2019 VoiceInterop filed an S-1 registration statement with the SEC which was approved on November 14, 2019. On February 14, 2020, the Company distributed 17,819,827 shares of VoiceInterop common stock to its shareholders (See Note 9). The Company recorded $ 225,316 to additional paid in capital for deconsolidation of VoiceInterop, Inc. NOTE 7 - RELATED PARTY TRANSACTIONS The Company leases its office space from VoiceInterop the Company's former wholly owned subsidiary and now 96 % owned by our shareholders for approximately $ 1,400 per month. On February 14, 2020, VoiceInterop was deconsolidated and is no longer our subsidiary. Rent expense during the three months ended June 30, 2021 and June 30, 2020 was $ 4,473 , and $ 4,905 , respectively. Rent expense incurred during the nine months ended June 30, 2021 and 2020 was $ 13,428 and $ 27,059 , respectively (See Note 8). In October 2019, the Company acquired a software platform from Collabria LLC. In exchange for this asset, the Company issued 12,000,000 shares of Common stock valued at $ 0 (See Notes 2 and 6). During the year ended September 30, 2020, the Company owed $ 16,262 to two officers, of which $ 7,262 is included in liabilities from discontinued operations. The loan is non-interest bearing and payable on demand. As of September 30, 2020, the loan balance of $ 9,000 was paid in full and $7,262 included in liabilities from discontinued operations was deconsolidated as of February 14, 2020 (See Notes 5 and 9). On September 30, 2019, the note holder, who is a shareholder and director, converted $ 65,000 of note payable and $ 10,279 of accrued interest into an installment promissory note. The note is due on September 30, 2021 and bears an interest rate of 8 %. The note requires a monthly payment of $ 3,405 for the next 24 months. As September 30, 2020, the balance due was $ 48,447 . As of June 30, 2021, the note balance was paid in full (See Note 5). On June 18, 2020, the Company entered into an unsecured note receivable in the amount of $ 10,000 with a shareholder which bears interest at 6 % and matures on August 31, 2020 . The maturity of the note receivable in the amount of $10,000 was extended to August 31, 2021 (See Note 4). On June 25, 2020, the Company entered into an unsecured note receivable in the amount of $ 15,000 with a shareholder which bears interest at 6 % and matures on August 31, 2020 . The maturity of the note receivable in the amount of $15,000 was extended to August 31, 2021 (See Note 4). On July 15, 2021, a shareholder returned 875,000 shares of Company's common stock to the Company in exchange for the two notes receivable in the total sum of $ 25,000 and $ 1,576 in interest receivable (See Notes 4 and 11). As of June 30, 2021, the Company advanced $ 20,968 to VoiceInterop, the Company's former wholly owned subsidiary and now 96 % owned by our shareholders. The amount is included in due from related party on the consolidated balance sheet. The amount is due on demand and bears interest at 5 % effective June 30, 2021. -12- NOTE 8 - COMMITMENTS AND CONTINGENCIES Obligation Under Operating Lease The Company leases approximately 1,700 square feet for its principal offices in Boca Raton, Florida at a monthly rental of approximately $ 3,500 , which expired in November 2018. VoiceInterop executed a new 3-year lease with its current landlord on December 1, 2018 for the same office space. The lease provided one month free as a concession. The monthly rent is $ 3,630 and provides for annual increases of base rent of 4 % until the expiration date. The lease expires on November 30, 2021 . Upon the deconsolidation, the Company subleases the office space from VoiceInterop at approximately $ 1,400 per month. Rent expense incurred during the three months ended June 30, 2021 and 2020 was $ 4,473 and $ 4,905 , respectively. Rent expense incurred during the nine months ended June 30, 2021 and 2020 was $ 13,428 and $ 27,059 , respectively. Revenue and Accounts Receivable Concentration No customer accounted for more than 10 % of the Company's revenue for the nine months ended June 30, 2021. No customer accounted for more than 10 % of the Company's revenue for the nine months ended June 30, 2020. As of June 30, 2021, one customer accounted for approximately 17 % of the Company's total outstanding accounts receivable. As of September 30, 2020, two customers accounted for approximately 29 % of the Company's total outstanding accounts receivable with each customer representing 18 % and 11 %, respectively. Major Supplier and Sole Manufacturing Source During 2014, the Company developed a proprietary interoperable communications solution. The Company relies on no major supplier for its products and services. The Company has contracted with a single local manufacturing facility to provide completed circuit boards used in the assembly of its IP gateway devices. Interruption to the manufacturing source presents additional risk to the Company. The Company believes that other commercial facilities exist at competitive rates to match the resources and capabilities of its existing manufacturing source. Employment Agreements In December 2016, the Board of Directors accepted the resignation of Larry M. Reid as Chief Executive Officer of the corporation and appointed Mr. Reid as Chief Financial Officer. The Board also appointed Michael M. Moore as Chief Executive Officer. Under the terms of an employment agreement effective on November 28, 2016, Mr. Moore as CEO receives an annual salary of $ 200,000 . The term of agreement is for a one-year period beginning on the effective date and shall automatically renew and continue in effect for additional one-year periods. Under the terms of an employment agreement effective on March 13, 2015, Mr. Reid as CFO receives an annual salary of $ 96,000 . The term of agreement is for a one-year period beginning on the effective date and shall automatically renew and continue in effect for additional one-year periods. Exclusive Licensing Agreement On May 5, 2017, the Company entered into an Exclusive Licensing Agreement with Sublicensing Terms (the "Agreement") with the University of Southern Florida Research Foundation, Inc. ("USFRF") relating to an exclusive license of certain patent rights in connection with one of USFRF's U.S. Patent Applications. Both parties recognize that the research and development work provided by the Company was sufficient for USFRF to enter into the Agreement with the Company. The Agreement is effective April 25, 2017 and continues until the later of the date that no Licensed Patent remains a pending application or an enforceable patent or the date on which the Licensee's obligation to pay royalties expires. The Company paid USFRF a License Issue Fee of $ 3,000 and $ 7,253 as reimbursement of expenses associated with the filing of the Licensed Patent. The company agreed to pay USFRF a royalty of 3 % for sales of all Licensed Products and Licensed Processes and agreed to pay USFRF minimum royalty payments as follows: Payment Year $ 1,000 2019 $ 4,000 2020 $ 8,000 2021 -and every year thereafter on the same date, for the life of the agreement. In the event the Company proposes to sell any Equity Securities, then USFRF will have the right to purchase 5 % of the securities issued in such offering on the same terms and conditions are offered to other purchasers in such financing. As of September 30, 2020, the Company has recorded $ 2,000 for the minimum royalty for the fiscal year ended 2020. -13- NOTE 9 – DISCONTINUED OPERATIONS In March 2018, the Company approved the spin-off VoiceInterop into a separate company under a Form S-1 registration to be filed with the United States Securities and Exchange Commission. On April 23, 2018, the board of Directors declared a stock dividend for certain shareholders of the Company. The Company distributed to its shareholders owning Common Stock and Series C and D Preferred stock an aggregate of 17,819,827 shares of shares of Common Stock of VoiceInterop. Each common shareholder received . 075 shares of VoiceInterop common stock for each one (1) share of Cleartronic stock held by the shareholder, and each shareholder of Series C and D Preferred stock received 0.375 shares of VoiceInterop common stock for each one (1) share of Series C or Series D Preferred stock held by the shareholder. On November 14, 2019, VoiceInterop, Inc.'s, S-1 Registration Statement was declared effective by Securities and Exchange Commission. On February 14, 2020, the distribution of shares was approved by FINRA and completed and deconsolidation was completed. The Company recorded $ 225,316 to additional paid in capital for deconsolidation of VoiceInterop, Inc. and discontinued operations are not presented. The following table illustrates the reporting of the discontinued operations included in the Statements of Operations for the period from October 1, 2019 to February 14, 2020. For the period From October 1, 2019 to February 14, 2020 (Unaudited)   Revenue $ 27,698 Cost of Revenue 12,383 Gross Profit 15,315   Operating Expenses: Selling expenses 3,862 Administrative expenses 24,151 Professional Fees 50,007 Total Operating Expenses 78,020   Loss from operations ( 62,705 )   Other Income (Expense) Other Income 5,750 Interest and other expense ( 7,981 ) Total Other Income (Expense) ( 2,231 )   Loss Before Income Taxes ( 64,936 ) Provision for Income Taxes - Loss from discontinued operations $ ( 64,936 ) -14- On February 14, 2020, the Company recorded $ 225,316 to additional paid in capital for deconsolidation of VoiceInterop, Inc. and discontinued operations are not presented. February 14, 2020 (Unaudited) Current assets: Cash $ 2,279 Accounts Receivable 4,780 Operating lease asset, net 62,226   Total Assets from discontinued operations $ 69,285   Current liabilities: Accounts payable and accrued expenses $ 92,236 Operating lease liability, current 33,941 Deferred revenue, current portion 17,357 Deferred rent, current portion - Installment loan, net, current portion 31,269 Due to related parties 11,362 Due to unrelated parties 68,000 Total Current liabilities from discontinued operations 254,165   Long Term Liabilities Deferred revenue, net of current 8,263 Operating lease liability, net of current 32,173 Total Long term liabilities from discontinued operations 40,436   Total Liabilities from discontinued operations $ 294,601 Loan Payable - related party During the year ended September 30, 2020, the Company owed $ 16,262 to two officers, of which $ 7,262 is included in liabilities from discontinued operations. The loan is non-interest bearing and payable on demand. As of September 30, 2020, the loan balance of $ 9,000 was paid in full and $ 7,626 included in liabilities from discontinued operations was deconsolidated as of February 14, 2020. Operating lease asset and liability The Company leases its office space from VoiceInterop the Company's former wholly owned subsidiary and now 96 % owned by our shareholders. On February 14, 2020, VoiceInterop was deconsolidated and is no longer our subsidiary. Rent expense paid to the related party was $ 13,428 and $ 27,059 for the nine months ended June 30, 2021 and 2020, respectively. As of February 14, 2020, the operating lease liabilities of $ 66,114 and lease assets of $ 62,226 were included in liabilities from discontinued operations and were deconsolidated. -15- NOTE 10 - RESTATEMENT The Company is restating its Condensed Consolidated Unaudited Statement of Operations, Condensed Consolidated Unaudited Statement of Cash Flow, and Condensed Consolidated Unaudited Statement of Changes in Stockholders' Deficit for the three and nine months ended June 30, 2020. The restatement shows the previously filed financial statements, the restatement adjustments and as restated columns for the Condensed Consolidated Unaudited Statement of Operations, Condensed Consolidated Unaudited Statement of Cash Flow, and Condensed Consolidated Unaudited Statement of Changes in Stockholders' Deficit for the three and nine months ended June 30, 2020. The restatement of our financial statements in this Form 10-Q reflects the correction of certain identified miscalculations related to the valuation of the ReadyMed software platform acquired in October 2019. The table below present the impact of the restatement in the Company's condensed consolidated unaudited financial statements: For the Three Months ended June 30, 2020 (Unaudited) As previously reported Adjustment As Restated Statement of Operations Administrative expense $ 91,160 $ ( 150 ) * $ 91,010 Amortization and depreciation $ 53,050 $ ( 52,900 ) * $ 150 Total Operating Expense $ 289,026 $ ( 53,050 ) $ 235,976 Income from continuing operations before income taxes $ 10,966 $ 53,050 $ 64,016 Net Income $ 10,966 $ 53,050 $ 64,016 Net Income attributable to common stockholders $ 735 $ 53,050 $ 53,785   Income from continuing operations $ 0.00 $ 0.00 $ 0.00 Net Income per common share - basic and diluted $ 0.00 $ 0.00 $ 0.00   For the Nine Months ended June 30, 2020 (Unaudited) As previously reported Adjustment As Restated Statement of Operations Administrative expense $ 292,008 $ ( 150 ) * $ 291,858 Amortization and depreciation $ 148,960 $ ( 137,932 ) * $ 11,028 Total Operating Expense $ 944,856 $ ( 138,082 ) $ 806,774 Income from continuing operations before income taxes $ 44,531 $ 138,082 $ 182,613 Net Income/(Loss) $ ( 20,405 ) $ 138,082 $ 117,677 Net Income/(Loss) attributable to common stockholders $ ( 51,211 ) $ 138,082 $ 86,871   Income from continuing operations $ 0.00 $ 0.00 $ 0.00 Net Income/(Loss) per common share - basic and diluted $ ( 0.00 ) $ 0.00 $ 0.00   June 30, 2020 (Unaudited) As previously reported Adjustment As Restated Statement of Changes in Stockholders’ Deficit Additional Paid in Capital $ 15,866,718 $ ( 600,000 ) $ 15,266,718 Accumulated Deficit $ ( 16,241,515 ) $ 138,082 $ ( 16,103,433 ) Total Stockholders’ Deficit $ ( 372,470 ) $ ( 461,918 ) $ ( 834,388 ) Total Liabilities and Stockholders’ Deficit $ 758,976 $ ( 461,918 ) $ 297,058   June 30, 2020 (Unaudited) As previously reported Adjustment As Restated Statement of Cash Flow Net Income/(Loss) $ ( 20,405 ) $ 138,082 $ 117,677 Amortization of ReadyMed software platform $ 138,082 $ ( 138,082 ) $ -   Supplemental disclosures of non-cash investing and financing activities: Common stock issued for ReadyMed platform $ 600,000 $ ( 600,000 ) $ -   * Reclassification Certain reclassifications have been made to the 2020 financial statement amounts and disclosures to conform to the 2021 presentation. -16- NOTE 11 - SUBSEQUENT EVENTS On July 20, 2021, the loan was 100 % forgiven by the SBA. As a result, the Company will record a gain on debt forgiveness of the PPP loan in the amount of $ 106,727 in the fourth quarter of 2021 (See Note 5). On July 8, 2021, a holder of Series C preferred stock, converted 275,000 shares of Series C Convertible Preferred Stock into 1,375,000 shares of Common Stock. On July 15, 2021, a shareholder returned 875,000 shares of Company's common stock to the Company in exchange for the two notes receivable in the total sum of $ 25,000 and $ 1,576 in interest receivable (See Notes 4 and 7). -17-