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Item 2. Management’s Discussion and Analysis

2023-02-13 compared with 2022-08-10 · 30 added, 57 removed, 38 unchanged (70% of the section changed)

26 unchanged sentences

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 products.

FOR THE THREE MONTHS ENDED JUNE 30, 2022 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2021

Revenues increased 30.02% to $538,102 for the three months ended June 30, 2022 as compared to $413,868 for the three months ended June 30, 2021.

The primary reason for the increase in revenue was due to an increase subscriptions to the ReadyOp platform increased from $405,318 in 2021 to $459,983 in 2022, or approximately 13.49% and an increase in sales of ReadyOp hardware products from $8,550 in 2021 to $16,350 in 2022.

FOR THE THREE MONTHS ENDED DECEMBER 31, 2022 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2021

Revenues decreased 2.41% to $506,650 for the three months ended December 31, 2022 as compared to $519,185 for the three months ended December 31, 2021.

The primary reason for the decrease was due to a decrease in sales of ReadyOp hardware products from $32,000 in 2021 to $6,125 in 2022.

Revenue from the ReadyOp platform increased from $449,500 in 2021 to $460,244 in 2022.

Consulting fees and related income increased from $37,685 in 2021 to $40,281 in 2022 due to more training activity and conference income.

Cost of Revenue

Cost of revenues was $89,938 for the three months ended June 30, 2022 as compared to $64,777 for the three months ended June 30, 2021.

Gross profits were $448,164 and $349,091 for the three months ended June 30, 2022 and June 30, 2021, respectively.

Gross profit margins decreased from 84% for the three months ended June 30, 2021 to 83% for the three months ended June 30, 2022.

The decrease in gross profit was primarily due to higher costs associated with sales of subscriptions to the ReadyOp platform.

Cost of revenues decreased to $77,491 for the three months ended December 31, 2022 as compared to $92,236 for the three months ended December 31, 2021.

Gross profits were $429,159 and $426,949 for the three months ended December 31, 2022 and December 31, 2021, respectively.

Gross profit margins increased from 82% for the three months ended December 31, 2021 to 85% for the three months ended December 31, 2022.

The increase in gross profit and gross profit margin was primarily due to the increase in sales of subscriptions to the ReadyOp platform and the decrease in sales of hardware products.

Operating Expenses

Operating expenses increased 8.75% to $329,003 for the three months ended June 30, 2022 compared to $302,542 for the three months ended June 30, 2021.

The increase was primarily due increases in selling and depreciation expense and administrative expense slightly offset by decrease in research and development.

For the three months ended June 30, 2022, selling expenses were $173,822 compared to $147,483 for the three months ended June 30, 2021.

This increase was primarily due to an increase in advertising, travel and commissions expense plus the cost of a security review required for selling to government agencies.

General and administrative expenses increased by $1,046 or 0.98% as a result of increase in general business expenses.

Depreciation expense increased by 84.07% from $521 for the three months ended June 30, 2021 to $959 for the three months ended June 30, 2022 due to the additional computer equipment purchases.

Research and development expenses were $48,285 for the three months ended June 30, 2021 as compared to $46,923 for the three months ended June 30, 2022.

The decrease was primarily due to decrease in expenses associated with the development of a new technology associated with a patent owned by the University of South Florida Research Foundation slightly offset by an increase in salary.

Operating expenses increased 12.57% to $412,624 for the three months ended December 31, 2022 compared to $366,534 for the three months ended December 31, 2021.

The increase was primarily due increases in administrative expense and slightly offset by decrease in selling expenses.

General and administrative expenses increased by $193,983 or 151.65% as a result of the increase in general business expenses.

This increase was primarily due to salary expenses included as part of general business expenses, charitable contributions, and employee holiday bonuses.

For the three months ended December 31, 2022, selling expenses were $67,831 compared to $188,545 for the three months ended December 31, 2021.

This decrease was primarily due to a decrease in commissions expense with an offset by an increase in advertising and travel expenses.

Research and development expenses were $49,260 for the three months ended December 31, 2021, as compared to $21,815 for the three months ended December 31, 2022.

The increase was primarily due to a decrease in expenses associated with the development of a new technology associated with a patent owned by the University of South Florida Research Foundation.

The Company has obtained the exclusive license to develop and market the technology associated with the patent.

Other Income/(Expenses)

The Company's other income increased by $28,965 from other income of $47,659 during the three months ended June 30, 2022 as compared to $18,694 for the three months ended June 30, 2021.

The primary reason for this increase was an increase in interest expense as the notes payable were fully repaid in the prior year and the settlement of certain accounts payable.

Income before Income Taxes

The Company's income before income taxes was $166,820, during the three months ended June 30, 2022 as compared to $65,243 for the three months ended June 30, 2021.

The 155.69% increase was primarily due to an increase in subscription of ReadyOp software in 2022, an increase in consulting fees and conference income, a gain on settlement of certain accounts payable offset by an increase in operating and marketing expenses.

Net Income Attributable to Common Stockholders

Net income attributable to common stockholders was $156,588 for the three months ended June 30, 2022 as compared to a net income of $55,124 for the three months ended June 30, 2021.

The 184.07% increase was primarily due to primarily due to an increase in subscription of ReadyOp software in 2022, increase in consulting fees and conference income, a gain on settlement of certain accounts payable offset by an increase in operating and marketing expenses while preferred stock dividend remained consistent.

FOR THE NINE MONTHS ENDED JUNE 30, 2022 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 2021

Revenues increased 25.45% to $1,527,910 for the nine months ended June 30, 2022 as compared to $1,217,928 for the nine months ended June 30, 2021.

The primary reason for the increase in revenue was due to an increase subscriptions to the ReadyOp platform increased from $1,162,584 in 2021 to $1,370,606 in 2022, or approximately 17.89%.

There was a slight offset by a decrease in sales of ReadyOp hardware products from $28,950 in 2021 to $27,850 in 2022.

Consulting fees and related income increased from $26,394 in 2021 to $129,454 in 2022 due to more training activity, conference income, and sale of thermal scanners in the nine months ended June 30, 2022.

Cost of Revenue

Cost of revenues was $248,074 for the nine months ended June 30, 2022 as compared to $198,580 for the nine months ended June 30, 2021.

Gross profits were $1,279,836 and $1,019,348 for the nine months ended June 30, 2022 and June 30, 2021, respectively, an increase of 25.55%.

Gross profit margins remained the same at 84% for the nine months ended June 30, 2021 and for the nine months ended June 30, 2022.

The increase in gross profit was primarily due to an increase in the sales of subscriptions to the ReadyOp platform and to lower costs associated with sales of the subscriptions.

Operating Expenses

Operating expenses increased 14.97% to $994,503 for the nine months ended June 30, 2022 compared to $864,985 for the nine months ended June 30, 2021.

The increase was primarily due increases in selling, administrative expense, research and development and depreciation expense.

For the nine months ended June 30, 2022, selling expenses were $498,232 compared to $417,614 for the nine months ended June 30, 2021.

This increase was primarily due to an increase in advertising, travel and commissions expense.

General and administrative expenses increased by $23,003 or 7.03% as a result of increase in general business expenses.

Depreciation expense increased by 92.06% from $1,423 for the nine months ended June 30, 2021 to $2,733 for the nine months ended June 30, 2022 due to the additional computer equipment purchased during the period.

Research and development expenses were $118,612 for the nine months ended June 30, 2021 as compared to $143,199 for the nine months ended June 30, 2022.

The increase was primarily due to decrease in expenses associated with the development of a new technology associated with a patent owned by the University of South Florida Research Foundation offset by an increase in salary.

The Company has obtained the exclusive license to develop and market the technology associated with the patent.

Other Income/(Expense)

The Company's other income increased by $29,964 from other income of $47,390 during the nine months ended June 30, 2022 as compared to $17,426 for the nine months ended June 30, 2021.

The primary reason for this increase was a decrease in interest expense as the notes payable were fully repaid in the prior year and the settlement of certain accounts payable.

The Company's other income increased by $717 from other income of $542 during the three months ended December 31, 2022 as compared to $168 in other expenses, for the three months ended December 31, 2021.

The primary reason for this increase was an increase in interest income on note receivable due from a related party.

Income before Income Taxes

The Company's income before income taxes was $332,723 during the nine months ended June 30, 2022 as compared to $171,789 for the nine months ended June 30, 2021, an increase of 93.68%.

The increase was primarily due to an increase in subscription of ReadyOp software in 2022, increase in consulting fees and conference income, a gain on settlement of certain accounts payable offset by increase in operating expenses.

The Company's income before income taxes was $17,084, during the three months ended December 31, 2022, as compared to $60,247 for the three months ended December 31, 2021.

The decrease was primarily due to an increase in administrative and research and development expenses and a decrease in sales of ReadyOp hardware products.

The increased costs were partially increase in subscription of ReadyOp software and consulting income in 2022.

Net Income Attributable to Common Stockholders

Net income attributable to common stockholders was $302,028 for the nine months ended June 30, 2022 as compared to a net income of $141,205 for the nine months ended June 30, 2021.

Net income attributable to common stockholders was $6,740 for the three months ended December 31, 2022 as compared to a net income of $49,903 for the three months ended December 31, 2021.

The decrease was primarily due to an increase in administrative and research and development expenses and a decrease in sales of ReadyOp hardware products.

The increased costs were partially due to an in increase in subscriptions of ReadyOp software and consulting income in 2022 while preferred stock dividends remained consistent.

LIQUIDITY AND CAPITAL RESOURCES

For the nine months ended June 30, 2022, net cash used in operations of $168,898 was the result of a net income of $332,723, depreciation expense of $2,733, provision of bad debt of $8,000, gain on settlement and reversal of accounts payable of $47,792, an increase in accounts receivable of $148,650, and an increase of accounts payable of $3,687.

These were offset by an decrease in inventory of $1,564, a decrease in prepaid expenses of $20,658, and a decrease in deferred revenue of $333,320.

For the nine months ended June 30, 2021, net cash provided by operations of $276,634 was the result of a net income of $171,789, depreciation expense of $1,423, provision of bad debt of $6,000, a decrease in accounts receivable of $9,470 and a slight decrease in inventory of $1,309.

These were offset by an increase in prepaid expenses of $49,152, a decrease of accounts payable of $36,729, a decrease in accrued expenses of $43,457 and an increase in deferred revenue of $241,959.

Net cash used in investing activities was $5,058 and $2,068 for the nine months ended June 30, 2022 and 2021, respectively, which was for the purchase of fixed assets.

Net cash used in financing activities was $48,447 for the nine months ended June 30, 2021, which was a repayment of a stockholder note payable of $48,447.

For the three months ended December 31, 2022, net cash used in operations of $188,014 was the result of a net income of $17,084, depreciation expense of $1,080, an increase in accounts payable of $32,933, and a decrease in prepaid expenses of $9,280.

These were offset by an increase in accounts receivable of $24,752 and a decrease in deferred revenue of $223,639.

For the three months ended December 31, 2021, net cash used in operations of $17,849 was the result of a net income of $60,247, depreciation expense of $814, an increase in accounts payable of $26,406, a decrease in accounts receivable of $46,867, a decrease in prepaid expenses of $33,364.

These were offset by an increase in inventory of $6,588, an increase in due from related party of $6,386, and a decrease in deferred revenue of $172,573.

Net cash used in investing activities was $0 and $5,058 for the three months ended December 31, 2022 and 2021, respectively, which was for the purchase of fixed assets.

Critical Accounting Estimates

See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended September 30, 2021 for information regarding our critical accounting estimates.

See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates" in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022 for information regarding our critical accounting estimates.

Quantitative and Qualitative Disclosures About Market Risk.

1 unchanged sentence

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis