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, Alastar platforms and the AudioMate IP gateways discussed below. ReadyOp™ Software ReadyOp is a proprietary, innovative web-based planning and communications 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. - 22 - ReadyOp requires no new or on-site hardware or programming by clients and provides multiple options for communications including radio interoperability using the Company's AudioMate gateways. Plans and operations can be built and stored securely in ReadyOp on a by-location, region and systemwide basis. Assets can be listed along with their location, person to contact and other information that may be needed. Diagrams, charts, maps, pictures, report forms and other documentation can be securely stored yet immediately available securely from any location. ReadyOp also provides efficient planning and response for responding to disasters and for continuity of operations (COOP) and recovery. ReadyOp is the COOP platform for multiple organizations including many federal agencies. ReadyMed™ Software In October 2019, the Company acquired the ReadyMed software platform from Collabria LLC. In exchange for this asset, the Company issued 12,000,000 shares of Common stock of the Company. 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 recordkeeping to track the healing process of patients, record their recovery and monitor their medications. During the COVID-19 pandemic this software proved beneficial to multiple federal and state agencies and clients in 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 products. Alastar Software On August 1, 2024, the Company acquired a group of similar assets from Alastar, Inc. (“Alastar”) for $50,000. This asset group consisted of cash, prepaids and other current assets, as well as intellectual property including trademarks, software platforms, and a client list. The client list was the only asset ascribed value which was deemed to have continuing value to the Company. The Company has classified this client list as an intangible asset, which will be amortized over 5 years. It is planned that all operations and marketing of the Alastar platform will be conducted in the ReadyOp Communications subsidiary in conjunction with the current ReadyOp and ReadyMed activities. The Company continues to support the clients who were using Alastar prior to the acquisition plus add additional new clients. Additionally, the Company has been transitioning much of the Alastar functionality into the ReadyOp platform as well as enhance the capabilities for existing and new clients. The Company plans to continue the transition and enhancement activities for at least the next two years. AudioMate IP Gateways The Company offers a proprietary line of Internet Protocol Gateways branded as AudioMate 360 IP Gateway. The AudioMate 360 IP Gateway was designed to provide an Internet Protocol Gateway to users of unified group communications. The AudioMate units are currently being sold directly to end-users by the Company's sales teams and by Value Added Resellers ("VARs"). More than 1,000 end-users in the United States and 18 foreign countries have purchased the Company's AudioMate gateways. Although other devices are available that perform the same or similar functions, we believe that our price for the AudioMate 360 IP Gateway is competitive with prices other companies are charging for similar devices. 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. - 23 - FOR THE THREE MONTHS ENDED MARCH 31, 2026 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2025 Revenue Revenues increased 18.60% to $1,133,502 for the three months ended March 31, 2026 as compared to $955,703 for the three months ended March 31, 2025. The primary reason for the increase was an increase in revenue from the ReadyOp and Alastar platforms from $880,274 in 2025 to $997,213 in 2026. There was also an increase in sales of ReadyOp hardware products from $11,300 in 2025 to $100,500 in 2026. Consulting fees and related income decreased from $64,129 in 2025 to $35,789 in 2026 due to a decrease in consulting activity. Cost of Revenue Cost of revenues increased 26.13% to $227,861 for the three months ended March 31, 2026 as compared to $180,651 for the three months ended March 31, 2025. The primary reason for the increase was due to an increase in ReadyOp and Alastar platform sales and expenses associated with trade show attendance and other marketing expenses. Gross profits were $905,641 and $775,052 for the three months ended March 31, 2026 and 2025, respectively. Operating Expenses Operating expenses increased 5.29% to $853,407 for the three months ended March 31, 2026 compared to $810,525 for the three months ended March 31, 2025. The increase was primarily due to administrative expenses, with a slight offset in selling and research and development expenses. General and administrative expenses increased by $49,053 or 6.67% as a result of the increase in general business expenses, an increase in headcount and personnel related costs associated with the addition of new employees. There were also charitable contributions paid during the three months. For the three months ended March 31, 2026, selling expenses were $60,782 compared to $64,901 for the three months ended March 31, 2025, a decrease of 6.35%. This decrease was primarily due to a decrease in advertising expense, travel expenses and offset by a recovery of credit losses. Research and development expenses were $2,000 for the three months ended March 31, 2026, as compared to $4,000 for the three months ended March 31, 2025, a decrease of 50%. This decrease was primarily due to timing of research and development expenses. Other Income/(Expenses) The Company's other income increased by $4,156 from other income of $7,381 during the three months ended March 31, 2025 as compared to $11,537 in other income for the three months ended March 31, 2026, an increase of 56.31%. This increase was due to an increase in interest income on treasury bill investments of $4,123 for the three months ended March 31, 2026. Income (Loss) before Income Taxes The Company’s income before income taxes was $63,771, during the three months ended March 31, 2026, as compared to loss of $28,092 income before income taxes for the three months ended March, 2025 due to the increase in revenue that was partially offset by the increase in the Company’s operating expenses. Net Income (Loss) Income Attributable to Common Stockholders Net income attributable to common stockholders was $53,652 for the three months ended March 31, 2026 as compared to a net loss of $38,210 for the three months ended March 31, 2025. The increase was primarily due to an increase in revenue which was partially offset by an increase in operating expenses. The increased costs were partially due to addition of new employees associated with Alastar . The preferred stock dividends remained consistent. - 24 - FOR THE SIX MONTHS ENDED MARCH 31, 2026 COMPARED TO THE SIX MONTHS ENDED MARCH 31, 2025 Revenue Revenues increased 24.08% to $2,386,041 for the six months ended March 31, 2026 as compared to $1,923,027 for the six months ended March 31, 2025. The primary reason for the increase was an increase in revenue from the ReadyOp and Alastar platforms from $1,731,576 in 2025 to $2,001,495 in 2026. There was also an increase in sales of ReadyOp hardware products from $32,695 in 2025 to $130,000 in 2026. Consulting fees and related income increased from $158,581 in 2025 to $254,546 in 2026 due to an increase in consulting activity. Cost of Revenue Cost of revenues increased 1.83% to $402,824 for the six months ended March 31, 2026 as compared to $395,589 for the six months ended March 31, 2025. The primary reason for the increase was due to an increase in ReadyOp and Alastar platform sales and expenses associated with trade show attendance and other marketing expenses. Gross profits were $1,983,217 and $1,527,438 for the six months ended March 31, 2026 and 2025, respectively. Operating Expenses Operating expenses increased 7.99% to $1,748,194 for the six months ended March 31, 2026 compared to $1,618,831 for the six months ended March 31, 2025. The increase was primarily due to administrative expenses, with a slight offset in selling and research and development expenses. General and administrative expenses increased by $162,786 or 10.97% as a result of the increase in general business expenses, an increase in headcount and personnel related costs associated with the addition of new employees. There were also charitable contributions paid during the six months. For the six months ended March 31, 2026, selling expenses were $86,709 compared to $117,990 for the six months ended March 31, 2025, a decrease of 26.51%. This decrease was primarily due to a decrease in advertising expense, travel expenses and offset by a recovery of credit losses. Research and development expenses were $4,000 for the six months ended March 31, 2026, as compared to $6,000 for the six months ended March 31, 2025, a decrease of 33.33%. This increase was primarily due to timing of research and development expenses. Other Income/(Expenses) The Company's other income increased by $9,378 from other income of $14,176 during the six months ended March 31, 2025 as compared to $23,554 in other income for the six months ended March 31, 2026, an increase of 66.15%. This increase was due to an increase in interest income on treasury bill investments of $7,279 for the six months ended March 31, 2026. Income (Loss) before Income Taxes The Company’s income before income taxes was $258,577, during the six months ended March 31, 2026, as compared to loss of $77,217 income before income taxes for the six months ended March, 2025 due to the increase in revenue that was partially offset by the increase in the Company’s operating expenses. Net Income (Loss) Income Attributable to Common Stockholders Net income attributable to common stockholders was $238,115 for the six months ended March 31, 2026 as compared to a net loss of $97,678 for the six months ended March 31, 2025. The increase was primarily due to an increase in revenue which was partially offset by an increase in operating expenses. The increased costs were partially due to addition of new employees associated with Alastar . The preferred stock dividends remained consistent. - 25 - LIQUIDITY AND CAPITAL RESOURCES For the six months ended March 31, 2026, net cash used in operations of $55,927 was the result of a net income of $258,577, depreciation and amortization expense of $11,065, a recovery of credit losses of $20,952, an increase of accounts receivable of $11,602, a decrease in prepaid expenses of $7,059 and an increase in inventory of $26,105. These were offset by an increase in accounts payable of $21,993 and a decrease in deferred revenue of $348,172. For the six months ended March 31, 2025, net cash used in operations of $124,945 was the result of a net loss of $77,217, depreciation and amortization expense of $11,205, amortization of operating lease of $5,983, an increase of accounts receivable of $102,503, and an increase in accounts payable of $68,895. These were offset by a decrease in inventory of $6,611, decrease in deferred revenue of $36,396, a decrease in prepaid expenses of $4,983 and a decrease in operating lease liability of $6,506. Net cash used in investing activities was $8,617 and $0 for the six months ended March 31, 2026 and 2025, 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, 2025 for information regarding our critical accounting estimates. Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not applicable