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 ongoing COVID-19 global and national health emergency has caused significant
disruption in the international and United States economies and financial
markets. In March 2020, the World Health Organization declared the COVID-19
outbreak a pandemic. The spread of COVID-19 has 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 has the potential to significantly impact the Company's supply
chain and other service providers.
In addition, a severe prolonged economic downturn could result in a variety of
risks to the business, including weakened demand for products and services and a
decreased ability to raise additional capital when needed on acceptable terms,
if at all. As the situation continues to evolve, the Company will continue to
closely monitor market conditions and respond accordingly. To date, the Company
has not experienced a significant adverse economic impact due to COVID-19. While
travel and other restrictions have been imposed the company has mitigated the
situation by teleconferencing, web demos, etc. However, there is no assurance
that we will not have any adverse impact in the future.
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.
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Results of Operations
Year Ended September 30, 2020 Compared to Year Ended September 30, 2019.
Revenues. Revenues increased 50% to $1,752,024 in 2020, from $1,164,191 during
2019. This increase of $587,833 was primarily due to increase in the number of
customers of the ReadyOp/ReadyMed software platform. Revenue from our other
subsidiary, VoiceInterop, Inc., decreased approximately 68% to $27,698 from
$87,254. VoiceInterop was deconsolidated on February 14, 2020.
Cost of Revenues and Gross Margins. Cost of revenues increased from $246,117 in
2019, to $407,136 in 2020. Gross margins increased from $918,074 in 2019 to
$1,344,888 in 2020. Gross Profit as a percentage of Revenue decreased from 79%
in 2019 to 77% in 2020. The decrease was primarily due to the lower profit
margins from sales of ReadyOp ACE (AudioMate) IP gateways as compared to higher
margins generated from licensing of ReadyOp software.
Operating Expenses. Operating expenses decreased approximately 10% in 2020 to
$1,105,956 compared to $1,225,734 during 2019. Operating expenses include
selling expenses, administrative expenses, research and development costs and
amortization expense. Selling expenses decreased approximately 11% from $595,825
in 2019 to $530,853 in 2020, primarily due to decreased travel expenses during
to the Covid-19 pandemic. Amortization expense decreased by $61,762 or 84%,
primarily due to amortization expenses associated with the ReadyOp software
platform which has been fully amortized. The $55,105 decrease in research and
development expense was associated with the Company's development of the
"Rectenna" project. The decrease was primarily due to research of the Rectenna
technology being substantially completed during the year. The Company intends to
devote future development funds to commercialize the Rectenna-related
technology.
Other Income and Other Expense. Interest and other expense decreased from
$17,871 in 2019 to $8,727 in 2020. The decrease was primarily due to payment of
outstanding liabilities. Other income in 2019 of $253,480 was attributable to
the settlement of old accounts payable.
Loss from Discontinued Operations. Losses from discontinued operations were
$64,936 and $104,547 for 2020 and 2019, respectively.
Net Income / Loss. Net income was $165,269 for 2020 and net loss of $176,598 for
2019. On a basis of EBITDA, the Company had EBITDA from continuing operations of
$250,412 in 2020 and $19,062 in 2019, a 1,214% increase.
Liquidity and Capital Resources
Cash and cash equivalents increased by $48,285 during the fiscal year ended
September 30, 2020, to $75,983. Net cash used in operating activities for the
fiscal year ended September 30, 2020, was $1,802 as compared to $69,357 for the
fiscal year ended September 30, 2019. Adjusted earnings before Interest, Taxes,
Depreciation and Amortization ("EBITDA") from continuing operations increased
from earnings of $19,062 to earnings of $250,412 in 2020.
At September 30, 2020, our total liabilities were $1,180,128, which included
$253,372 in accounts payable, $43,457 in accrued expenses, $48,447 in notes
payable stockholders, $106,727 in Paycheck Protection note payable and $728,125
in deferred revenue. Deferred revenues are comprised of revenues from our annual
ReadyOp subscriptions which are recognized over the period of the contract that
is typically twelve months.
Investing Activities
Net cash used in investing activities was $34,029 for fiscal year ended
September 30, 2020, and $0 in 2019. Net cash used in 2020 included the issuance
of a Note Receivable for $25,000 and fixed asset purchases of $9,029.
Financing Activities
Net cash provided by financing activities was $84,116 during fiscal 2020. The
increase was primarily due to proceeds received from note payable part of Cares
Act Paycheck Protection Program of $106,727, proceeds from issuance net of
repayment of installment note of $10,449 and proceeds from loan payable -
related party of $11,362 included discontinued operations. Net cash also
included repayment of a stockholder note payable of $94,422 and proceeds from a
stockholder note payable of $50,000.
Net cash provided by financing activities was $96,642 during fiscal 2019. This
included $43,810 from installment loan-discontinued operations less repayment of
installment loan of $39,964, proceeds from the issuance of common stock of
$100,000 less dividends paid of $7,204.
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Critical Accounting Policies
Our consolidated financial statements and accompanying notes are prepared in
accordance with generally accepted accounting principles in the United States.
Preparing financial statements requires management to make estimates and
assumptions that impact the reported amounts of assets, liabilities, revenue,
and expenses. These estimates and assumptions are affected by management's
application of accounting policies. Critical accounting policies are described
in Note 2 to the consolidated financial statement appearing elsewhere in this
report.
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.
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.
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CLEARTRONIC, INC. 
