Cleartronic, Inc. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. FORWARD-LOOKING STATEMENTS The information set forth in this Management's Discussion and Analysis contains certain "forward-looking statements," including, among others (i) expected changes in our revenues and profitability, (ii) prospective business opportunities, and (iii) our strategy for financing our business. Forward-looking statements are statements other than historical information or statements of current condition. Some forward-looking statements may be identified by use of terms such as "believes," "anticipates," "intends," or "expects." These forward-looking statements relate to our plans, objectives, and expectations for future operations. Although we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and operations, in light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements in this prospectus should not be regarded as a representation that our objectives or plans will be achieved. In light of the risks and uncertainties, there can be no assurance that actual results, performance, or achievements will not differ materially from any future results, performance, or achievements expressed or implied by such forward-looking statements. The foregoing review of important factors should not be construed as exhaustive. We undertake no obligation to release publicly the results of any future revisions we may make to forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events. Overview 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. ReadyOp is a proprietary, innovative web-based planning, communications and operations platform for efficiently and effectively planning, managing, communicating, and directing operations and emergency response. ReadyOp is used by local, state and federal government agencies, corporations, school districts, utilities, hospitals and others to manage and report daily operations as well as the ability to handle incidents and emergency situations. ReadyOp is offered as a software as a service (SAAS) program on an annual contract basis although an increasing number of clients have requested multi-year agreements. In March 2018, the Company approved the spin-off of VoiceInterop, Inc. ("Voiceinterop"), one of the Company's wholly-owned subsidiaries, into a separate company under a Form S-1 registration filed with the United States Securities and Exchange Commission. 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 platform provides caregivers with patient tracking capability and allows physicians and other healthcare entities to track patient progress after medical treatment and/or release from hospital care. The software also enables monitoring and reporting of patients in medium and long-term care. Additionally, the platform provides secure communications capabilities and record keeping to track the healing process of patients, record their recovery and monitor their medications. ReadyMed proved beneficial for multiple clients in the healthcare industry due to the impact of the COVID-19 pandemic. 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 MARCH 31, 2023 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2022 Revenue Revenues increased 8.51% to $510,668 for the three months ended March 31, 2023 as compared to $470,623 for the three months ended March 31, 2022. The primary reason for the increase was due to an increase in revenue from the ReadyOp platform from $461,123 in 2022 to $492,969 in 2023. Sales of ReadyOp hardware products increased from $9,500 in 2022 to $17,698 in 2023. Consulting fees and related income increased from $0 in 2022 to $350 in 2023 due to more training activity. Cost of Revenue Cost of revenues increased to $71,546 for the three months ended March 31, 2023 as compared to $65,900 for the three months ended March 31, 2022. Gross profits were $439,122 and $404,723 for the three months ended March 31, 2023 and March 31, 2022, respectively. Gross profit margins remained at 86% for the three months ended March 31, 2023 and March 31, 2022.. Operating Expenses Operating expenses increased 22.08% to $364,971 for the three months ended March 31, 2023 compared to $298,966 for the three months ended March 31, 2022. The increase was primarily due increases in administrative expense and slightly offset by decrease in selling expenses. General and Administrative expenses increased by $34,948 or 13.45% as a result of shifting the salary expenses formerly included in Selling and in Research and Development costs to General and Administrative costs. 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 March 31, 2023, selling expenses were $66,831 compared to $35,003 for the three months ended March 31, 2022, mainly reflecting the shift in salaries to General and Administrative costs. There was also a decrease in commissions expense and an increase in advertising and travel expenses. Research and development expenses were $2,000 for the three months ended March 31, 2023, as compared to $3,093 for the three months ended March 31, 2022. This decrease was primarily due to salary expenses now included as part of General and Administrative expenses and not direct research and development costs. Other Income/(Expenses) The Company's other income increased by $779 from other income of $678 during the three months ended March 31, 2023 as compared to $101 in other expenses, for the three months ended March 31, 2022. 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 $74,829, during the three months ended March 31, 2023, as compared to $105,656 for the three months ended March 31, 2022. The decrease was primarily due to an increase in administrative expenses and offset by an increase in sales of ReadyOp licenses and hardware. The increased costs were partially an increase in costs of the hardware sold. Net Income Attributable to Common Stockholders Net income attributable to common stockholders was $64,710 for the three months ended March 31, 2023 as compared to a net income of $95,537 for the three months ended March 31, 2022. The decrease was primarily due to an increase in administrative and research and development expenses and offset by an increase in sales of ReadyOp hardware products. The increased costs were primarily due to an increase in subscriptions of ReadyOp software. -13- FOR THE SIX MONTHS ENDED MARCH 31, 2023 COMPARED TO THE SIX MONTHS ENDED MARCH 31, 2022 Revenue Revenues increased 2.78% to $1,017,318 for the six months ended March 31, 2023 as compared to $989,808 for the six months ended March 31, 2022. The primary reason for the increase was an increase in revenue from the ReadyOp platform from $910,623 in 2022 to $953,214 in 2023. There was also an increase in sales of ReadyOp hardware products from $11,500 in 2022 to $22,125 in 2023. Consulting fees and related income decreased from $67,685 in 2022 to $40,631 in 2023 in the six months ended March 31, 2022 due primarily to a decrease in sales of thermal scanners as these were primarily purchased by clients for operations during the COVID 19 pandemic. Cost of Revenue Cost of revenues decreased to $149,037 for the six months ended March 31, 2023 as compared to $158,136 for the six months ended March 31, 2022. Gross profits were $868,281 and $831,672 for the six months ended March 31, 2023 and March 31, 2022, respectively. Gross profit margins increased from 84% for the six months ended March 31, 2022 to 85% for the six months ended March 31, 2023. The increase in gross profit and gross profit margin was primarily due to the increase in sales of subscriptions to the ReadyOp platform and a slight decrease in cost of revenue. Operating Expenses Operating expenses increased 16.84% to $777,595 for the six months ended March 31, 2023 compared to $665,500 for the six months ended March 31, 2022. The increase was primarily due to administrative expenses and slightly offset by decreases in selling expenses. General and administrative expenses increased by $81,338 or 15.19% as a result of the increase in general business expenses. This increase was primarily due to salary expenses formerly included in Selling and in Research and Development costs now included as part of General business expenses. There were also charitable contributions and employee holiday bonuses paid during the six month period. For the six months ended March 31, 2023, selling expenses were $134,662 compared to $120,532 for the six months ended March 31, 2022. This decrease was primarily due to salary expenses now included as part of General business expenses and not selling expenses. There was also an increase in advertising and travel expenses as the Company increased its sales and marketing efforts following the COVID 19 pandemic. Research and development expenses were $23,815 for the six months ended March 31, 2023, as compared to $7,776 for the six months ended March 31, 2022. This decrease was primarily due to salary expenses now included as part of general business expenses and not research and development expenses. Other Income/(Expenses) The Company's other income increased by $1,496 from other income of $1,227 during the six months ended March 31, 2023 as compared to $269 in other expenses for the six months ended March 31, 2022. 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 $91,913, during the six months ended March 31, 2023, as compared to $165,903 for the six months ended March 31, 2022. The decrease was primarily due to expensing audit expenses, a move of the corporate headquarters and the addition of new employees. The increased costs were partially offset by an increase in subscriptions of ReadyOp licenses. Net Income Attributable to Common Stockholders Net income attributable to common stockholders was $71,450 for the six months ended March 31, 2023 as compared to a net income of $145,440 for the six months ended March 31, 2022. The decrease was primarily due to an increase in administrative and offset by an increase in sales of ReadyOp licenses. The increased costs were partially due expenses related to a move of the corporate headquareters and the addition of new employees. The preferred stock dividends remained consistent. LIQUIDITY AND CAPITAL RESOURCES For the six months ended March 31, 2023, net cash used in operations of $78,100 was the result of a net income of $91,913, depreciation expense of $2,362, amortization of operating lease of $5,983, an increase in accounts payable of $4,585, and a decrease in prepaid expenses of $18,652. These were offset by an increase in accounts receivable of $7,006, an increase in inventory of $973 and a decrease in deferred revenue of $202,147. For the six months ended March 31, 2022, net cash used in operations of $12,165 was the result of a net income of $165,903, a decrease in accounts receivable of $29,434, and a decrease of accounts payable of $6,922. These were offset by an increase in inventory of $4,595, a decrease in prepaid expenses of $11,343, and a decrease in deferred revenue of $200,601. Net cash used in investing activities was $4,320 and $5,058 for the six months ended March 31, 2023 and 2022, 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, 2022 for information regarding our critical accounting estimates. -14- Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable.