The accompanying notes are an integral part of these condensed consolidated financial statements
The accompanying notes are an integral part of these condensed consolidated financial statements
The accompanying notes are an integral part of these condensed consolidated financial statements
The accompanying notes are an integral part of these condensed consolidated financial statements
The accompanying notes are an integral part of these condensed consolidated financial statements
Notes to Condensed Consolidated Financial Statements
December 31, 2019
(Unaudited)
NOTE 1 -ORGANIZATION
Cleartronic, Inc. (the "Company") was incorporated in the state of Florida on November 15, 1999. The Company’s subsidiaries are VoiceInterop ("VoiceInterop") and ReadyOp Communications, Inc. ("ReadyOp").
In September 2014, the Company formed ReadyOp Communications, Inc. (a Florida corporation), as a wholly owned subsidiary to facilitate the marketing of ReadyOp software. The Company's only operating subsidiary is ReadyOp Communications, Inc.
In November 2016, the Company cancelled its Licensing Agreement with Collabria LLC of Tampa, Florida ("Collabria") and acquired all of the intellectual property related to Collabria’s command and control software, trade-named ReadyOp. In addition the Company acquired Collabria’s client list. In exchange for these assets the Company issued Collabria 3,000,000 restricted shares of the Company’s Series E Convertible Preferred stock. The Company assumed none of Collabria’s liabilities.
In April 2018, the Company approved a stock dividend for certain shareholders. Cleartronic is distributing all shares of VoiceInterop's common stock held by it to its shareholders owning common stock, Class C preferred stock and Class D preferred stock. Each shareholder of Cleartronic common stock on November 20, 2019 (the "Record Date") will receive .075 shares of VoiceInterop's common stock for each one share of Cleartronic common stock (1,000 shares of Cleartronic common stock will receive 75 shares of VoiceInterop common stock). Shareholders owning Series C preferred stock and Series D preferred stock on the Record Date will receive .375 shares of VoiceInterop's common stock for one share of Series C preferred stock or Series D preferred stock (1,000 shares of Cleartronic Series C or Series D preferred stock will receive 375 shares of VoiceInterop common stock). In the event that anyone is entitled to receive a fractional share, the number of shares will be rounded up. The Distribution will be made in book-entry form by the distribution agent.)
In March 2018, the Company approved the spin-off VoiceInterop, Inc.("Voiceinterop") into a separate company under a Form S-1 registration to be filed with the United States Securities and Exchange Commission. On May 13, 2019, VoiceInterop filed an S-1 registration with the United States Securities and Exchange Commission. On November 14, 2019, the S-1 registration statement was declared effective by the Securities and Exchange Commission. Therefore, the Company has presented the operations of this subsidiary as discontinued operations. The Company has requested and received approval by the Financial Industry Regulatory Authority ("FINRA") for the distribution of VoiceInterop's shares of common stock totaling 17,819,642 shares as a dividend to the Company's shareholders. Shareholders of record as of November 20, 2019 of the Company's common stock and Series C and Series D Preferred stock will receive shares of VoiceInterop's common stock. The distribution date is February 14, 2020.
-6-
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements contain the consolidated accounts of Cleartronic, Inc. and its subsidiaries, ReadyOp Communications, Inc. and VoiceInterop, Inc. All material intercompany transactions and balances have been eliminated. All VoiceInterop transactions have been recorded as discontinued operations. (See Note 8)
BASIS OF PRESENTATION
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q of Regulation S-K. They may not include all information and footnotes required by United States generally accepted accounting principles for complete financial statements. However, except as disclosed herein, there have been no material changes in the information disclosed in the notes to the financial statements for the year ended September 30, 2019 included in the Company’s Annual Report on Form 10-K filed with the United States Securities and Exchange Commission. The unaudited interim consolidated financial statements should be read in conjunction with those financial statements included in the Form 10-K. In the opinion of management, all adjustments considered necessary for a fair presentation, consisting solely of normal and recurring adjustments have been made. Operating results for the three months ended December 31, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2020.
USE OF ESTIMATES
In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and operations for the reporting period. Although these estimates are based on management’s knowledge of current events and actions it may undertake in the future, they may ultimately differ from actual results.
Significant estimates include the assumptions used in valuation of deferred tax assets, estimated useful life of intangible assets, valuation of inventory and allowance for doubtful accounts.
-7-
CASH AND CASH EQUIVALENTS
For financial statement purposes, the Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company did not own any cash equivalents at December 31, 2019 and September 30, 2019.
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.
The Company provided $38,665 and $52,000 allowances for doubtful accounts as of December 31, 2019 and September 30, 2019, respectively.
ASSET ACQUISITION
In October 2019, the Company acquired a software platform from Collabria LLC., a related party. In exchange for this software asset, the Company issued 12,000,000 shares of Common stock valued at $600,000. This valuation was based on the historical cost of the software. The ReadyMed software platform of $600,000 to be amortized over three years, amortization expense recognized for the three months ended December 31, 2019 and 2018 was $38,356 and $0, respectively.
In November 2016, the Company acquired the ReadyOp software platform and the Collabria customer base from Collabria LLC. In exchange for these assets the Company issued 3,000,000 shares of restricted Series E Convertible Preferred stock valued at $292,240. This valuation was based on internal calculations and validated by a third party valuation expert. The ReadyOp software platform was valued at $195,600 to be amortized over three years, amortization expense recognized for the three months ended December 31, 2019 and 2018 was $10,878 and $16,299 , respectively.
The Collabria customer base was valued at $96,640 to be amortized over two years, amortization expense recognized for the three months ended December 31, 2019 and December 31, 2018 was $0 and $8,046, respectively. As of September 30, 2019, the Collabria customer base has been fully amortized.
-8-
CONCENTRATION OF CREDIT RISK
The Company currently maintains cash balances at one FDIC-insured banking institution. Deposits held in noninterest-bearing transaction accounts are insured up to a maximum of $250,000 at all FDIC-insured institutions.
RESEARCH AND DEVELOPMENT COSTS
The Company expenses research and development costs as incurred. For the three months ended December 31, 2019 and 2018, the Company had $55,729 and $52,448, respectively, in research and development costs from continuing operations.
REVENUE RECOGNITION AND DEFERRED REVENUES
The Company revenue recognition policy follows guidance from Accounting Standards Codification (ASC) 606, Revenue from contract with customers. Revenue is recognized when the Company transferred promised goods and services to the customer and in the amount that reflect the consideration to which the company expected to be entitled in exchange for those goods and services.
The Company applies the following five-step model in order to determine this amount:
i. Identification of Contact with a customer;
ii. Identify the performance obligation of the contract
iii. Determine transaction price;
iv. Allocation of the transaction price to the performance obligations; and
v. Recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company generates revenue primarily through the sale of integrated hardware and software licenses. The portion of the contract that is associated with ongoing hosting and related customer service is amortized monthly over the license period. The Company incurs certain incremental contract costs (referred to as deferred subscriber acquisition costs, net) including selling expenses (primarily commissions) related to acquiring customers. Deferred subscriber acquisition costs, net are included in prepaid and expenses and other current assets on the consolidated balance sheet. Commissions paid in connection with acquiring new customers are determined based on the value of the contractual fees. Deferred subscriber acquisition costs will be amortized over the license period.
-9-
In transactions in which hardware is sold to a customer, the Company recognizes the revenue when the hardware has been shipped to the customer. The hardware supplied by the Company does not require a related software license and can be operated and fully functional without the Company’s software.
The Company allocates the transaction price to each performance obligation based on a relative standalone selling price. Revenue associated with the sale and installation of system licenses is recognized once installation is complete.
Customer billings for services not yet rendered are deferred and recognized as revenue as services are provided. These fees are recorded as current deferred revenue on the consolidated balance sheet as the Company expects to satisfy any remaining performance obligations as well as recognize the related revenue within the next twelve months. Accordingly, the Company has applied the practical expedient regarding deferred revenue to exclude the value of remaining performance obligations if (i) the contract has an original expected term of one year or less or (ii) the Company recognizes revenue in proportion to the amount it has the right to invoice for services performed.
EARNINGS PER SHARE
Basic income (loss) per common share is calculated using the weighted average number of shares outstanding during the periods reported. Diluted earnings per share include the weighted average effect of all dilutive securities outstanding during the periods presented. Diluted per share loss is the same as basic per share loss when there is a loss from continuing operations. Accordingly, for purposes of dilutive earnings per share, the Company excluded the effect of warrants and options.
As of December 31, 2019 and 2018, we had no options and warrants outstanding.
As of December 31, 2019 and 2018, the Company had 512,996 shares of Series A Convertible Preferred stock outstanding, which are convertible into 51,299,600 shares of common stock.
As of December 31, 2019 and 2018, we had 4,433,375 shares of Series C Convertible Preferred stock outstanding, which are convertible into 22,166,875 shares of common stock.
As of December 31, 2019 and 2018, we had 670,904 shares of Series D Preferred stock outstanding which are convertible into 3,354,520 shares of common stock.
As of December 31, 2019 and 2018, we had 3,000,000 shares of Series E Convertible Preferred stock outstanding which are convertible into 300,000,000 shares of common stock.
-10-
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company measures the fair value of its assets and liabilities under ASC topic 820, “Fair Value Measurements and Disclosures”. ASC 820 defines “fair value” as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There was no impact relating to the adoption of ASC 820 to the Company’s consolidated financial statements.
ASC 820 also describes three levels of inputs that may be used to measure fair value:
§ Level 1: Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities traded in active markets.
§ Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.
§ Level 3: Inputs that are generally observable. These inputs may be used with internally developed methodologies that result in management’s best estimate of fair value.
Financial instruments consist principally of cash, accounts receivable, prepaid expenses and other current assets, accounts payable, accrued expenses and deferred revenue. The carrying amounts of such financial instruments in the accompanying consolidated balance sheet approximate their fair values due to their relatively short-term nature. The fair value of long-term debt is based on current rates at which the Company could borrow funds with similar remaining maturities. The carrying amounts approximate fair value. It is management’s opinion that the Company is not exposed to any significant currency or credit risks arising from these financial instruments.
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. The Company recorded no reserve for obsolete inventory as of December 31, 2019 and September 30, 2019, respectively.
EQUITY INSTRUMENTS ISSUED TO PARTIES OTHER THAN EMPLOYEESFOR ACQUIRING GOODS OR SERVICES
The Company accounts for stock-based instruments issued for services in accordance with ASC 718 “Compensation – Stock Compensation.” ASC 718 requires companies to recognize in the statement of operations the grant-date fair value of stock options and other equity based compensation issued. The value of the portion of a stock award that is ultimately expected to vest is recognized as an expense over the requisite service periods using the straight-line attribution method.
ADVERTISING COSTS
Advertising costs are expensed as incurred. The Company had advertising costs of $5,378 and $2,297 during the three months ended December 31, 2019 and 2018, respectively.
-11-
RECENT ACCOUNTING PRONOUNCEMENTS
In February 2016, the FASB issued ASU 2016-02, Leases, which will amend current lease accounting to require lessees to recognize (i) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis, and (ii) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. ASU 2016-02 does not significantly change lease accounting requirements applicable to lessors; however, certain changes were made to align, where necessary, lessor accounting with the lessee accounting model. This standard will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company adopted this standard effective October 1, 2019 which are fully discussed in Note 7.
NOTE 3 - GOING CONCERN
The Company's unaudited condensed consolidated financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company believes the acquisition of the ReadyOp software platform was a prudent purchase by the Company. Additional revenue has been generated for the Company and management believes revenue will continue to increase each quarter. In order to continue as a going concern, the Company will need, among other things, additional capital resources. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its capital funding plans.
The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
-12-
NOTE 4 - NOTES PAYABLE
Notes payable to Stockholders
As of December 31, 2019 and September 30, 2019, the Company had unsecured notes payable to stockholders totaling $87,043 and $92,869, respectively. These notes range in interest from 8% to 15% which are payable quarterly. One note with a principal balances of $17,588 is due on June 30, 2020.
On September 30, 2019, the note holder converted $65,000 of note payable and $10,279 of accrued interest into an installment promissory note with a principal balance of $75,279. The note is due on September 30, 2021 and bears an interest rate of 8%. This note requires a monthly payment of $3,405 for the next 24 months. As of December 31, 2019 and September 30, 2019 the balance due was $69,455 and $75,279, respectively.
Interest expense on the notes payable to stockholders was $2,149 and $3,243 for the three months ended December 31, 2019 and 2018, respectively.
Installment Loan Payable
On December 14, 2018, VoiceInterop entered into a Business Loan Agreement with WebBank whereby VoiceInterop borrowed $59,751, of this amount $15,491 was recorded as debt issuance cost. The agreement calls for 308 installments of $194 paid over 432 days. The debt issuance cost is amortized over the life of the loan. As of December 31, 2019 the remaining loan balance of $18,429 was paid in full from the note payable dated October 8, 2019.
On October 8, 2019, VoiceInterop entered into a Business Loan Agreement with WebBank whereby VoiceInterop borrowed $56,680, of this amount $13,080 was recorded as debt issuance cost. The debt issuance cost is amortized over the life of the loan. The agreement calls for 308 installments of $184 paid over 432 days. The Company used $18,429 of loan proceeds to pay off the remaining loan balance of WebBank loan dated December 14, 2018. As of December 31, 2019, the loan balance is $35,502, net of debt issuance cost of $10,688. The amount is included in liabilities from discontinued operations (see Note 8).
-13-
Note Payable
On December 2, 2019, the Company issued a promissory note in the amount of $50,000. The note bear 6% interest and mature on February 29, 2020.
Loan Payable – related party
During the three months ended December 31, 2019, the Company owed $16,262 to two officers, of which $7,262 is included in liabilities from discontinued operations. The loan is non-interest bearing and payable on demand. (See Note 6 and 8).
NOTE 5 - EQUITY TRANSACTIONS
Common stock issued for cash
In December 2018, the Company sold 3,333,334 shares of common stock to unrelated parties for $75,000 in cash of which $25,000 was received by the Company on January 15, 2019.
Common stock issued for Ready Med Platform
In October 2019, the Company acquired the software platform from Collabria LLC, a related party. In exchange for these assets the Company issued 12,000,000 shares of Common stock valued at the historical cost of the asset of $600,000 (See Note 2).
Preferred Stock Dividends
As of December 31, 2019 and September 30, 2019, the cumulative arrearage of undeclared dividends for Series A Preferred stock totaled $52,151 and $41,920, respectively.
Subscription Agreements between VoiceInterop, Inc., our wholly-owned subsidiary and private investors
During the year ended September 30, 2018, Voiceinterop committed to sell 600,000 shares of its common stock to private investors for $68,000. The shares issuance is contingent upon a spin-off of the Company from Cleartronic, Inc. into a separate company. As of December 31, 2019, $68,000 is recorded as due to unrelated parties as the spin-off has not been completed and the shares have not been issued. This amount is included in liabilities from discontinued operations (See Note 8).
-14-
Declaration of Stock Dividend
On April 23, 2018, the board of Directors declared a stock dividend for common stock shareholders and for certain classes of preferred stock shareholder of the Company. That each common shareholder would receive .075 shares of VoiceInterop common stock for each one (1) share of Cleartronic stock held by the shareholder, and that each shareholder of Series C and D Preferred stock shall receive .375 shares of VoiceInterop common stock for each one (1) share of Series C or Series D Preferred stock held by the shareholder.
The record date of the dividend distribution shall be defined as the first business day following an effective statement from the United States Securities and Exchange Commission (“SEC”) regarding a pending S-1 filing. On May 13, 2019 Voiceinterop filed an S-1 registration statement with the SEC which was approved on November 14, 2019. The Company will distribute 17,819,642 shares of VoiceInterop common stock to it’s shareholders upon approval of FINRA (See Note 8).
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company leases its office space from another entity that is also a stockholder. Rent expense paid to the related party was $14,360 and $11,671 for the three months ended December 31, 2019 and 2018, respectively.
In October 2017, the Company issued two promissory notes to a shareholder and director in the amounts of $15,000 each. The notes bear interest at 8% per annum and mature June 30, 2019. The note was converted to an installment promissory note on September 30, 2019 (See below and Note 4).
During the three months ended December 31, 2019, the Company owed $16,262 to two officers, of which $7,262 is included in liabilities from discontinued operations. The loan is non-interest bearing and payable on demand. (See Note 4 and 8).
On September 30, 2019, the note holder converted $65,000 of note payable and $10,279 of accrued interest into an installment promissory note. The note is due on September 30, 2021 and bears an interest rate of 8%. The note requires a monthly payment of $3,405 for the next 24 months. As of December 31, 2019 and September 30, 2019 the balance due was $69,455 and $75,279, respectively (See Note 4).
-15-
NOTE 7 - COMMITMENTS AND CONTINGENCIES
Obligation Under Operating Lease
The Company leases approximately 1,700 square feet for its principal offices in Boca Raton, Florida at a monthly rental of approximately $3,500, which expired in November 2018. VoiceInterop executed a new 3-year lease with its current landlord on December 1, 2018 for the same office space. The lease provided one month free as a concession. The monthly rent is $3,630 and provides for annual increases of base rent of 4% until the expiration date. The lease expires on November 30, 2021.
Rent expense incurred during the three months ended December 31, 2019 and 2018 was $14,360 and $11,671, respectively.
VoiceInterop subleases part of its office space to two entities for approximately $1, 150 per month. Sublease rental income received during three months ended December 31, 2019 was $3,450 and $0, respectively.
The Company adopted the new lease guidance effective October 1, 2019 using the modified retrospective transition approach, applying the new standard to all of its leases existing at the date of initial application which is the effective date of adoption. Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before October 1. 2019. We elected the package of practical expedients which permits us to not reassess (1) whether any expired or existing contracts are or contain leases, (2) the lease classification for any expired or existing leases, and (3) any initial direct costs for any existing leases as of the effective date. We did not elect the hindsight practical expedient which permits entities to use hindsight in determining the lease term and assessing impairment. The adoption of the lease standard did not change our previously reported consolidated statements of operations and did not result in a cumulative catch-up adjustment to opening equity. The adoption of the new guidance resulted in the recognition of operating lease assets of $75,078 and lease liability of $79,171.
The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes its incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment. In calculating the present value of the lease payments, the Company elected to utilize its incremental borrowing rate based on the remaining lease terms as of the October 1, 2019 adoption date. This rate was determined to be 23% and the Company determined the initial present value, at inception, of $79,171.
Operating lease asset and operating lease liability are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. The operating lease asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred, if any.
-16-
The Company has elected the practical expedient to combine lease and non-lease components as a single component. The lease expense is recognized over the expected term on a straight-line basis. Operating leases are recognized on the balance sheet as operating lease asset, current operating lease liability and non-current operating lease liability.
The new standard also provides practical expedients and certain exemptions for an entity’s ongoing accounting. We have elected the short-term lease recognition exemption for all leases that qualify. This means, for those leases where the initial lease term is one year or less or for which the operating lease asset at inception is deemed immaterial, we will not recognize operating lease asset or lease liability. Those leases are expensed on a straight line basis over the term of the lease.
|
|
|
|
|
Operating Leases - Balance Sheet Classification
|
|
|
December 31,
|
|
|
2019
|
|
Operating lease assets, net
|
$
|
66,903
|
|
|
|
|
|
Current lease liability
|
|
|
|
Operating lease laibility
|
|
32,382
|
|
Non- current lease liability
|
|
|
|
Long term operating lease liability
|
|
38,608
|
|
Total lease liability
|
$
|
70,990
|
|
|
|
|
|
Maturities of lease liability at December 31, 2019 are as follows:
|
|
Payments:
|
|
|
|
2019
|
$
|
11,035
|
|
2020
|
|
45,451
|
|
2021
|
|
43,188
|
|
Total
|
|
99,674
|
|
Less: present value discount
|
|
(28,684)
|
|
Total lease liability
|
$
|
70,990
|
-17-
Revenue and Accounts Receivable Concentration
No customer accounted for more than 10% of the Company’s revenue for the three months ended December 31, 2019 and 2018. As of December 31, 2019 two customer accounted for approximately 38% of the Company’s total outstanding accounts receivable. As of December 31, 2018, four customers accounted for approximately 56% of the Company’s total outstanding accounts receivable.
Major Supplier and Sole Manufacturing Source
During 2014, the Company developed a proprietary interoperable communications solution. The Company relies on no major supplier for its products and services. The Company has contracted with a single local manufacturing facility to provide completed circuit boards used in the assembly of its IP gateway devices. Interruption to the manufacturing source presents additional risk to the Company. The Company believes that other commercial facilities exist at competitive rates to match the resources and capabilities of its existing manufacturing source.
Employment Agreements
In December 2016, the Board of Directors accepted the resignation of Larry M. Reid as Chief Executive Officer of the corporation and appointed Mr. Reid as Chief Financial Officer. The Board also appointed Michael M. Moore as Chief Executive Officer.
Under the terms of an employment agreement effective on November 28, 2016, Mr. Moore as CEO receives an annual salary of $200,000. The term of agreement is for a one-year period beginning on the effective date and shall automatically renew and continue in effect for additional one-year periods.
Under the terms of an employment agreement effective on March 13, 2015, Mr. Reid as CFO receives an annual salary of $96,000. The term of agreement is for a one-year period beginning on the effective date and shall automatically renew and continue in effect for additional one-year periods.
-18-
Exclusive Licensing Agreement
On May 5, 2017, the Company entered into an Exclusive Licensing Agreement with Sublicensing Terms (the “Agreement”) with the University of Southern Florida Research Foundation, Inc. (“USFRF”) relating to an exclusive license of certain patent rights in connection with one of USFRF’s U.S. Patent Applications. Both parties recognize that the research and development work provided by the Company was sufficient for USFRF to enter into the Agreement with the Company.
The Agreement is effective April 25, 2017 and continues until the later of the date that no Licensed Patent remains a pending application or an enforceable patent or the date on which the Licensee’s obligation to pay royalties expires.
The Company paid USFRF a License Issue Fee of $3,000 and $7,253 as reimbursement of expenses associated with the filing of the Licensed Patent. The Company agreed to complete the first commercial sale of products to the retail customer on or before January 31, 2019 or USFRF has the right to terminate the agreement. In addition, the Company agreed that it will have made and tested a prototype by August 31, 2018 or USFRF has the right to terminate the agreement. The company agreed to pay USFRF a royalty of 3% for sales of all Licensed Products and Licensed Processes and agreed to pay USFRF minimum royalty payments as follows:
|
|
|
|
Payment
|
Year
|
|
$1,000
|
2019
|
|
$4,000
|
2020
|
|
$8,000
|
2021
|
-and every year thereafter on the same date, for the life of the agreement.
In the event the Company proposes to sell any Equity Securities, then USFRF will have the right to purchase 5% of the securities issued in such offering on the same terms and conditions are offered to other purchasers in such financing.
As of September 30, 2019, the Company has recorded $1,000 for the minimum royalty for the fiscal year ended 2019.
-19-
NOTE 8 – DISCONTINUED OPERATIONS
In March 2018, the Company approved the spin-off Voiceinterop into a separate company under a Form S-1 registration to be filed with the United States Securities and Exchange Commission.
On April 23, 2018, the board of Directors declared a stock dividend for certain shareholders of the Company. The Company will distribute to its shareholders owning Common Stock and Series C and D Preferred stock an aggregate of 17,819,642 shares of shares of Common Stock of Voiceinterop. That each common shareholder would receive .075 shares of Voiceinterop common stock for each one (1) share of Cleartronic stock held by the shareholder, and that each shareholder of Series C and D Preferred stock shall receive .375 shares of Voiceinterop common stock for each one (1) share of Series C or Series D Preferred stock held by the shareholder.
The record date of the dividend distribution shall be defined as the first business day following an effective statement from the United States Securities and Exchange Commission (“SEC”) regarding a pending S-1 filing. On May 13, 2019 Voiceinterop filed an S-1 registration statement with the SEC. On November 14, 2019, Voiceinterop, Inc’s., S-1 Registration Statement was declared effective by Securities and Exchange Commission.
The Company has requested and received approval by the Financial Industry Regulatory Authority (“FINRA”) to distribute the shares of common stock to the shareholders of common stock and Series C and Series D Preferred stock.
-20-
As of December 31, 2019 and September 30, 2019, assets and liabilities from discontinued operations are listed below:
|
|
|
|
|
|
|
December 31, 2019
|
|
September 30, 2019
|
|
|
(unaudited)
|
|
|
|
Current assets:
|
|
|
|
|
Cash
|
$ 3,077
|
|
$ 4,136
|
|
Total current assets
|
3,077
|
|
4,136
|
|
|
|
|
|
|
Operating lease asset, net
|
66,903
|
|
-
|
|
|
|
|
|
|
Total assets from discontinued operations
|
$ 69,980
|
|
$ 4,136
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
Accounts payable and accrued expenses
|
$ 72,374
|
|
$ 77,584
|
|
Operating lease liability, current
|
32,382
|
|
-
|
|
Deferred revenue, current portion
|
16,923
|
|
23,492
|
|
Deferred rent, current portion
|
-
|
|
896
|
|
Installment loan, net, current portion
|
35,502
|
|
14,587
|
|
Due to unrelated parties
|
68,000
|
|
68,000
|
|
Loan payable - related party
|
7,262
|
|
-
|
|
Total current liabilities from discontinued operations
|
232,443
|
|
184,559
|
|
|
|
|
|
|
Long Term Liabilities
|
|
|
|
|
Deferred revenue, net of current
|
8,263
|
|
9,987
|
|
Deferred rent, long term portion
|
-
|
|
680
|
|
Operating lease liability, net of current
|
38,608
|
|
-
|
|
Total long term liabilities from discontinued operations
|
46,871
|
|
10,667
|
|
|
|
|
|
|
Total liabilities from discontinued operations
|
279,314
|
|
195,226
|
-21-
The following table illustrates the reporting of the discontinued operations included in the Statements of Operations for the three months ended December 31, 2019 and 2018.
|
|
|
|
|
|
For the Three
|
For the Three
|
|
|
Months Ended
|
Months Ended
|
|
|
December 31, 2019
|
December 31, 2018
|
|
|
(Unaudited)
|
(Unaudited)
|
|
Revenue
|
$ 13,143
|
$ 45,551
|
|
Cost of Revenue
|
1,750
|
8,994
|
|
Gross Profit
|
11,393
|
36,557
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
Selling expenses
|
783
|
4,706
|
|
Administrative expenses
|
20,947
|
26,596
|
|
Professional Fees
|
8,558
|
-
|
|
Total Operating Expenses
|
30,288
|
31,302
|
|
|
|
|
|
Loss from operations
|
(18,895)
|
5,255
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
Other Income
|
3,450
|
1,596
|
|
Interest and other expense
|
(7,981)
|
(1,405)
|
|
Total Other Income (Expense)
|
(4,531)
|
191
|
|
|
|
|
|
(Loss) Income Before Income Taxes
|
(23,426)
|
5,446
|
|
Provision for Income Taxes
|
-
|
-
|
|
(Loss) Income from discontinued operations
|
$ (23,426)
|
$ 5,446
|
-22-
