THE FOLLOWING DISCUSSION SHOULD BE READ TOGETHER WITH THE INFORMATION CONTAINED IN THE CONSOLIDATED FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS ANNUAL REPORT ON FORM 10-K.





Impact of COVID-19 Outbreak

The COVID-19 global and national health emergency caused significant disruption in United States economy and financial markets. The spread of COVID-19 caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, supply chain interruptions and overall economic and financial market instability. The COVID-19 pandemic impacted the Company's sales efforts and supply chain, but the Company was able to continue growing its client base, revenue and profitability during the pandemic period. While travel and other restrictions have been imposed, the Company has mitigated the situation by teleconferencing and web demos.

A severe, prolonged economic downturn could result in a variety of risks including weakened demand for products and services and a decreased ability to raise additional capital when needed on acceptable terms, if at all. The Company will continue to closely monitor market conditions and respond accordingly. However, there is no assurance that we will not have adverse impacts in the future.





                                      -6-

                             MANAGEMENT DISCUSSION

The following discussion reflects the Company's plan of operation. This discussion should be read in conjunction with the financial statements which are attached to this report. This discussion contains forward-looking statements, including statements regarding our expected financial position, business and financing plans. These statements involve risks and uncertainties. The actual results could differ materially from the results described in or implied by these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this report, particularly under the headings "Special Note Regarding Forward-Looking Statements."

Unless the context otherwise suggests, "we," "our," "us," and similar terms, as well as references to "Cleartronic," all refer to Cleartronic, Inc. and our subsidiaries as of the date of this report.





Results of Operations

Year Ended September 30, 2022 Compared to Year Ended September 30, 2021.





Revenue

Revenues from operations were $2,017,563 for the year ended September 30, 2022 as compared to $1,651,297 for the year ended September 30, 2021. Subscriptions of ReadyOp software increased 14.99% from $1,581,413 to $1,818,035 in the year ended September 30, 2021 and 2022, respectively. Sales of ReadyOp ACE IP gateways increased 8.33% from $31,200 to $33,800 in the year ended September 30, 2021 and 2022, respectively. Consulting fees and related income increased from $18,815 in 2021 to $86,000 in 2022 due to more training activity.





Cost of Revenue

Cost of revenues was $334,138 for the year ended September 30, 2022, as compared to $267,298 for the year ended September 30, 2021. This increase was primarily due to higher costs associated with the products. Gross profits were $1,683,425 and $1,383,999 for the years ended September 30, 2022 and 2021, respectively, an increase of 21.63% . Gross profit margin decreased slightly to 83.44% from 83.81% for the years ended September 30, 2022 and 2021, respectively.





Operating Expenses

Operating expenses increased 14.80% to approximately $1,329,791 for the year ended September 30, 2022 compared to $1,158,318 for the year ended September 30, 2021. For the year ended September 30, 2022, selling expenses were $659,796 compared to $571,242 for the year ended September 30, 2021. This increase is primarily due to an increase in travel expenses as sales efforts began increasing due to the decreased impact of the COVID-19 pandemic and hiring additional sales staff due an increase in revenues and slightly offset by the decrease in advertising expenses. General and administrative expenses increased by $44,059 or 10.56%. Amortization and depreciation expense increased from $2,129 for the year ended September 30, 2021 to $3,732 for the year ended September 30, 2022. Research and development expenses were $167,661 for the year ended September 30, 2021 as compared to $204,918 for the year ended September 30, 2022. The increase was primarily due to increase in consulting expense and 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 decreased to $47,261 from $135,417 during the year ended September 30, 2021, as compared to the year ended September 30, 2022. The primary reason for this decrease was gain on forgiveness of PPP loan, the settlement of certain accounts payable and offset slightly by decreased interest expense.

Income from Continuing Operations

The Company's income from continuing operations increased to $400,895 from $361,098 during the year ended September 30, 2022 as compared to the year ended September 30, 2021. The increase was primarily due to higher margins generated from subscriptions of ReadyOp software. Factoring out the $106,727 gain for the forgiveness of the PPP loan in the year ending September 30, 2021, the Company's income from continuing operations would have been $254,371. The Company's increase in income from continuing operations would then have been $409,562 for the current year versus the $254,371, an annual increase of 57.60%


                                      -7-

Net Income Attributable to Common Stockholders

Net income attributable to common stockholders was $359,858 and $320,171 for the years ended September 30, 2022 and 2021, respectively. The increase was primarily due to higher profit generated from subscription of ReadyOp software in 2022.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended September 30, 2022, net cash used in operations of $74,649 was the result of a net income of $400,895, depreciation expense of $3,732, provision of bad debt of $14,000, gain on settlement and reversal of accounts payable of $47,792, an increase in accounts receivable of $231,785, and a decrease of accounts payable of $36,943. These were offset by an increase in inventory of $6,444, an increase in prepaid expenses of $6,228, and an increase in deferred revenue of $6,285.

For the year ended September 30, 2021, net cash provided by operations of $378,558 was the result of a net income of $361,098, depreciation expense of $2,129, provision of bad debt of $10,000, gain on forgiveness on PPP loan of $106,727, gain on settlement and reversal of accounts payable of $29,965, an increase in accounts receivable of $111,630, an increase in prepaid expenses of $9,541, an increase in due from related parties of $31,381 and a slight increase in inventory of $2,182. These were offset by a decrease of accounts payable of $63,458, a decrease in accrued expenses of $43,457 and an increase in deferred revenue of $403,671.

Net cash used in investing activities was $7,483 and $5,093 for the years ended September 30, 2022 and 2021, respectively, which was for the purchase of fixed assets.

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





Critical Accounting Estimates

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and make estimates and assumptions that affect our reported amounts of assets, liabilities, revenue and expenses, and the related disclosures of contingent liabilities. We base our estimates on historical experience and other assumptions that we believe are reasonable in the circumstances. Actual results may differ from these estimates.

The following critical accounting policies affect our more significant estimates and assumptions used in preparing our consolidated financial statements.





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.





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.

Recent Accounting Pronouncements

The recent accounting standards that have been issued or proposed by Financial Accounting Standard Board (FASB) or other standard setting bodies that do not require adoption until a future date are not expected to have a material impact on the financial statement upon adoption.


                                      -8-

The recent accounting pronouncements are described in Note 2 to the consolidated financial statement appearing elsewhere in this report.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

© Edgar Online, source Glimpses