CLRI Cleartronics Inc (PK)

Notes to Condensed Consolidated Financial Statements

March 31, 2021

(Unaudited)

NOTE 1   - ORGANIZATION

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.

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 May 13, 2019, VoiceInterop filed an S-1 registration with the United States Securities and Exchange Commission. All VoiceInterop transactions have been recorded as discontinued operations. On February 14, 2020, the distribution of shares was approved by FINRA and VoiceInterop was deconsolidated from Cleartronic, Inc. (See Note 9).

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 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.

NOTE 2   - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements contain the consolidated accounts of Cleartronic, Inc. and its subsidiary, ReadyOp Communications, Inc. All material intercompany transactions and balances have been eliminated. On February 14, 2020, the deconsolidation of VoiceInterop was completed and transactions through that date are recorded as discontinued operations (See Note 9).

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, 2020 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 and six months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ended September 30, 2021.

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 and property and equipment, valuation of inventory and allowance for doubtful accounts.

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 on March 31, 2021 and September 30, 2020.

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.

The Company provided $11,000 and $6,000 allowances for doubtful accounts as of March 31, 2021 and September 30, 2020, respectively.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost and depreciated or amortized using the straight-line method over the estimated useful life of the asset or the underlying lease term for leasehold improvements, whichever is shorter onset the property and equipment is put into service.

-6-

ASSET ACQUISITION

In October 2019, the Company acquired a software platform from Collabria LLC. In exchange for this asset, the Company issued 12,000,000 shares of Common stock valued at historical costs of $600,000.  ReadyMed is a web based secure communication platform designed for the health care industry. This includes hospitals, clinics, doctor's offices and health insurance companies and many other segments of the health care industry.  It provides hospitals with patient tracking capability within the hospital. It allows physicians to track patient progress after release from the hospital and allows for secure communication with the patient to track the healing process, record their recovery and monitor their medications. As of the acquisition date, the Company has recorded an estimated historical cost of the ReadyMed software platform based on a preliminary purchase price allocation prepared by management.  As a result, during the preliminary purchase price allocation period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired. After the preliminary purchase price allocation period, the Company recorded adjustments to assets acquired subsequent to the purchase price allocation period in the period in which the adjustments were determined. Accordingly, the ReadyMed software platform purchased price was adjusted. As of March 31, 2021 and September 30, 2020, the ReadyMed software platform is valued at historical costs of $0 (See Notes 6 and 7).

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.  The amortization expense for the six months ended March 31, 2021 and 2020 was $0 and $10,878, respectively. As of March 31, 2021 and September 30, 2020, ReadyOp software platform has been fully amortized.

CONCENTRATION OF CREDIT RISK

The Company currently maintains cash balances at one FDIC-insured banking institution. Deposits held in non interest-bearing transaction accounts are insured up to a maximum of $250,000 at all FDIC-insured institutions. As of March 31, 2021 and September 30, 2020, the Company had no cash balances in excess of FDIC insurance limits.

RESEARCH AND DEVELOPMENT COSTS

The Company expenses research and development costs as incurred.  For the six months ended March 31, 2021 and 2020, the Company had $70,327 and $86,801, respectively, in research and development costs from continuing operations. For the three months ended March 31, 2021 and 2020, the Company had $39,538 and $31,072, 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.  As of March 31, 2021 and September 30, 2020, respectively, the Company recorded $9,100 and $20,900, respectively, in deferred subscriber costs, which is included as a component of prepaid expense.

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.

From time to time clients request special training meetings. We send employees to these meeting and charge our clients on a per diem basis. These charges are recorded as consulting fees on our income statement.

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.

-7-

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 March 31, 2021 and 2020, we had no options and warrants outstanding.  

As of March 31, 2021 and 2020, we had 512,996 shares of Series A Convertible Preferred stock outstanding, which are convertible into 51,299,600 shares of common stock.

As of March 31, 2021 and 2020, we had 3,911,715 and 4,433,375 shares of Series C Convertible Preferred stock outstanding, respectively, which are convertible into 19,558,575 and 22,166,875 shares of common stock, respectively.

As of March 31, 2021 and 2020, we had 670,904 shares of Series D Preferred stock outstanding which are convertible into 3,354,520 shares of common stock.

As of March 31, 2021 and 2020, we had 3,000,000 shares of Series E Convertible Preferred stock outstanding which are convertible into 300,000,000 shares of common stock.

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 March 31, 2021 and September 30, 2020, respectively.

EQUITY INSTRUMENTS ISSUED TO PARTIES OTHER THAN EMPLOYEES FOR 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 $8,706 and $14,816 during the six months ended March 31, 2021 and 2020, respectively, and $5,174 and $20,194 during the three months ended March 31, 2021 and 2020, respectively.

RECENT ACCOUNTING PRONOUNCEMENTS

All newly issued accounting pronouncements but not yet effective have been deemed either immaterial or not applicable

-8-

Depreciation expense for the three months ended March 31, 2021 and 2020, was $451 and $0, respectively.

Depreciation expense for the six months ended March 31, 2021 and 2020, was $902 and $0, respectively

NOTE 4 - NOTES RECEVABLE

On June 18, 2020, the Company entered into an unsecured note receivable in the amount of $10,000 with a shareholder which bears interest at 6% and matures on August 31, 2020. The maturity of the note receivable in the amount of $10,000 was extended to March 31, 2021 (See Note 7). As of March 31, 2021, interest receivable was $480.   The note is currently in default.

On June 25, 2020, the Company entered into an unsecured note receivable in the amount of $15,000 with a shareholder which bears interest at 6% and matures on August 31, 2020. The maturity of the note receivable in the amount of $15,000 was extended to March 31, 2021 (See Note 7). As of March 31, 2021, interest receivable was $702.  The note is currently in default.

NOTE 5 - NOTES PAYABLE

Notes payable to Stockholders

As of March 31, 2021 and September 30, 2020, the Company had unsecured notes payable to stockholders totaling $0 and $48,447, respectively. One note with a principal balance of $17,588 was due on December 31, 2019. The maturity of the note payable in the amount of $17,588 was extended to August 31, 2020 and was paid in full including $8,002 in accrued interest.

On September 30, 2019, the note holder, who is a shareholder and director, converted $65,000 of a 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 March 31, 2021 and September 30, 2020 the balance due was $0 and $48,447, respectively.  As of March 31, 2021, the note balance was paid in full.

Interest expense on the notes payable to stockholders was $542 and $2,936 for the three months ended March 31, 2021 and 2020, respectively.

Interest expense on the notes payable to stockholders was $2,040 and $5,085 for the six months ended March 31, 2021 and 2020, respectively.

During the year ended September 30, 2020, 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. As of September 30, 2020, the loan balance of $9,000 was paid in full and $7,262 included in liabilities from discontinued operations was deconsolidated as of February 14, 2020 (See Notes 7 and 9).  

Note Payable – PPP Loan

On June 10, 2020, the Company, was granted a loan (the "Loan") from Bank of America, N.A., in the aggregate amount of $106,727, pursuant to the Paycheck Protection Program (the "PPP") under Division A, Title I of the CARES Act, which was enacted March 27, 2020.

The Loan, which was in the form of a Note dated on or about June 10, 2020 issued by the Borrower, matures on or about June 10, 2025 and bears interest at an approximate rate of 1% per annum. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Funds from the Loan may only be used for payroll costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations incurred before February 15, 2020. The Company intends to use the entire Loan amount for qualifying expenses. Under the terms of the PPP, certain amounts of the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act.

-9-

Note Payable

On December 2, 2019, the Company issued a promissory note in the amount of $50,000.  The loan balance of $50,000 and interest of $732 was paid in full at maturity on February 29, 2020.

NOTE 6 - EQUITY TRANSACTIONS

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 $0 (See Notes 2 and 7).  

Preferred Stock Dividends

As of March 31, 2021 and September 30, 2020, the cumulative arrearage of undeclared dividends for Series A Preferred stock totaled $103,532 and $83,071, respectively.

Common stock issued for  Conversion of C Preferred

On March 17, 2021, the  holders of Series C preferred stock,  converted 521,660 shares of Series C Preferred Stock into 2,608,300 shares of Common Stock.

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. On February 14, 2020, the Company distributed 17,819,827 shares of VoiceInterop common stock to its shareholders (See Note 9).  The Company recorded $225,316 to additional paid in capital for deconsolidation of VoiceInterop, Inc.

NOTE 7 - RELATED PARTY TRANSACTIONS

The Company leases its office space from VoiceInterop the Company's former wholly owned subsidiary and now 96% owned by our shareholders for approximately $1,400 per month.  On February 14, 2020, VoiceInterop was deconsolidated and is no longer our subsidiary.  Rent expense during the three months ended March 31, 2021 and March 31, 2020 was $4,482, and $4,291, respectively.  Rent expense incurred during the six months ended March 31, 2021 and 2020 was $8,955 and $8,491, respectively (See Note 8).

In October 2019, the Company acquired a software platform from Collabria LLC. In exchange for this asset, the Company issued 12,000,000 shares of Common stock valued at $0 (See Notes 2 and 6).

During the year ended September30, 2020, 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. As of September 30, 2020, the loan balance of $9,000 was paid in full and $7,262 included in liabilities from discontinued operations was deconsolidated as of February 14, 2020 (See Notes 5 and 9).  

On September 30, 2019, the note holder, who is a shareholder and director, 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 March 31, 2021 and September 30, 2020, the balance due was $0 and $48,447, respectively.  As of March 31, 2021, the note balance was paid in full (See Note 5).  

On June 18, 2020, the Company entered into an unsecured note receivable in the amount of $10,000 with a shareholder which bears interest at 6% and matures on August 31, 2020. The maturity of the note receivable in the amount of $10,000 was extended to March 31, 2021 (See Note 4).  The note is currently in default.

On June 25, 2020, the Company entered into an unsecured note receivable in the amount of $15,000 with a shareholder which bears interest at 6% and matures on August 31, 2020. The maturity of the note receivable in the amount of $15,000 was extended to March 31, 2021 (See Note 4).  The note is currently in default.

As of March 31, 2021, the Company advanced $16,495 to VoiceInterop, the Company's former wholly owned subsidiary and now 96% owned by our shareholders. The amount is included in due from related party on the consolidated balance sheet.   The amount is due on demand and is non-interest bearing.  

-10-

NOTE 8 - 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. Upon the deconsolidation, the Company subleases the office space from VoiceInterop at approximately $1,400 per month.

Rent expense incurred during the three months ended March 31, 2021 and 2020 was $4,482 and $4,291, respectively.

Rent expense incurred during the six months ended March 31, 2021 and 2020 was $8,955 and $8,491, respectively.

Revenue and Accounts Receivable Concentration

One customer accounted for more than 10% of the Company’s revenue for the six months ended March 31, 2021. No customer accounted for more than 10% of the Company's revenue for the six months ended March 31, 2020. As of March 31, 2021, one customer accounted for approximately 20% of the Company's total outstanding accounts receivable.  As of September 30, 2020, two customers accounted for approximately 29% of the Company's total outstanding accounts receivable with each customer representing 18% and 11%, respectively. 

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.  For the year ended September 30, 2020, the CFO received a onetime bonus of $15,356 as an additional compensation for services performed.

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 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:

  -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, 2020, the Company has recorded $2,000 for the minimum royalty for the fiscal year ended 2020.

-11-

NOTE 9 – 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 distributed to its shareholders owning Common Stock and Series C and D Preferred stock an aggregate of

17,819,827 shares of shares of Common Stock of VoiceInterop. Each common shareholder received .075 shares of VoiceInterop common stock for each one (1) share of Cleartronic stock held by the shareholder, and each shareholder of Series C and D Preferred stock received 0.375 shares of VoiceInterop common stock for each one (1) share of Series C or Series D Preferred stock held by the shareholder.

On November 14, 2019, VoiceInterop, Inc.'s, S-1 Registration Statement was declared effective by Securities and Exchange Commission. On February 14, 2020, the distribution of shares was approved by FINRA and completed and deconsolidation was completed. The Company recorded $225,316 to additional paid in capital for deconsolidation of VoiceInterop, Inc. and discontinued operations are not presented.  

The following table illustrates the reporting of the discontinued operations included in the Statements of Operations for the period from January 1, 2020 to February 14, 2020.

-12-

The following table illustrates the reporting of the discontinued operations included in the Statements of Operations for the period from October 1, 2019 to February 14, 2020.

-13-

On February 14, 2020, the Company recorded $225,316 to additional paid in capital for deconsolidation of VoiceInterop, Inc. and discontinued operations are not presented.  

-14-

Loan Payable - related party

During the year ended September 30, 2020, 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.  As of September 30, 2020, the loan balance of $9,000 was paid in full and $7,626 included in liabilities from discontinued operations was deconsolidated as of February 14, 2020.    

Operating lease asset and liability

The Company leases its office space from VoiceInterop the Company's former wholly owned subsidiary and now 96% owned by our shareholders.  On February 14, 2020, VoiceInterop was deconsolidated and is no longer our subsidiary. Rent expense paid to the related party was $8,955 and $22,154 for the six months ended March 31, 2021 and 2020, respectively.

As of February 14, 2020, the operating lease liabilities of $66,114 and lease assets of $62,226 were included in liabilities from discontinued operations and were deconsolidated.  

NOTE 10 - RESTATEMENT 

The Company is restating its Condensed Consolidated Unaudited Statement of Operations, Condensed Consolidated Unaudited Statement of Cash Flow, and Condensed Consolidated Unaudited Statement of Changes in Stockholders' Deficit for the three  and six months ended  March 31, 2020. The restatement shows the previously filed financial statements, the restatement adjustments and as restated columns for the Condensed Consolidated Unaudited Statement of Operations, Condensed Consolidated Unaudited Statement of Cash Flow, and Condensed Consolidated Unaudited Statement of Changes in Stockholders' Deficit for the three and six months ended March 31, 2020. The restatement of our financial statements in this Form 10-Q reflects the correction of certain identified errors related to the valuation of ReadyMed software platform acquired in October 2019.

The table below present the impact of the restatement in the Company's condensed consolidated unaudited financial statements:

-15-