UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________

FORM10-Q

 

Commission File Number: 333-231420

 

 

(Former name, former address and former fiscal year, if changed since last report)

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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    X      No     

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes X  No __

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

Large accelerated filer ____

Accelerated filer ____

Non-accelerated filer _X___

 Smaller repotting company X

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 12(a) of the Exchange Act [  ]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___   No X

 

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes __ No __

 

APPLICABLE ONLY TO CORPORATE ISSUERS:

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 18,469,827 shares as of June 10, 2020.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

The accompanying notes are an integral part of these unaudited condensed financial statements

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The accompanying notes are an integral part of these unaudited condensed financial statements

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The accompanying notes are an integral part of these unaudited condensed financial statements

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The accompanying notes are an integral part of these unaudited condensed financial statements

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VOICEINTEROP, INC.

Notes to Condensed Financial Statements

March 31, 2020

(Unaudited)

NOTE 1 - ORGANIZATION, AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION

VoiceInterop, Inc. (the “Company”) was incorporated in the state of Florida on November 15, 2007.

The accompanying financial statements include the historical accounts of VoiceInterop, Inc. (“VoiceInterop”), a wholly-owned subsidiary of Cleartronic, Inc. (“Cleartronic” or “Parent”) from inception to February 14, 2020.

On March 21, 2018, the Board of Directors approved plans for the complete legal and structural separation of VoiceInterop from Cleartronic (the “Spin-Off”). The Spin-Off is expected to be executed by a special dividend distribution to holders of Cleartronic’s common stock and holders of Cleartronic’s Series C and D Convertible Preferred stock. Cleartronic common stock shareholders will receive .075 shares of VoiceInterop common stock for each one (1) share of Cleartronic common stock held. Cleartronic Series C and D Preferred shareholders will receive .375 shares of VoiceInterop common stock for each one (1) share of Series C or D Preferred share held. Any fractional shares will be rounded up. Following the Spin-Off, Cleartronic will not own any equity interest in us, and we will operate independently from Cleartronic.

On November 14, 2019, the S-1 registration statement for Voiceinterop, Inc. was declared effective by the United States Securities and Exchange Commission.

In connection with the Spin-off, effective as of November 7, 2019, the Company declared a 1,000 for 17,819,827 forward stock split. As of November 7, 2019, Cleartronic owns 17,819,827 shares of our common stock, which it will distribute to its shareholders in the Spin-Off Transaction. Per share and weighted average amounts have been retroactively restated in the accompanying financial statements and related notes to reflect this stock split.

On February 14, 2020, the distribution of shares was approved by FINRA and completed. The Company was deconsolidated from Cleartronic, Inc.  

The Company, designs, builds and installs unified group communication solutions, including unique hardware and customized software under the tradename “CommandPhone”, for public and private enterprises and markets those services and products under the VoiceInterop brand name. The Company also provides support for these communication installations under a Support Agreement with the customer. These agreements range from one to five years. The Company also sells IP Gateways for Land Mobile Radio installations under the tradename VoiceInterop. The gateway is manufactured by Cleartronic, Inc.

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BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared on a stand-alone basis and are derived from the condensed consolidated financial statements and accounting records of Cleartronic, Inc.through February 14, 2020. Our condensed financial statements reflect our financial position, results of operations and cash flows as we were historically managed, in conformity with accounting principles generally accepted in the United States (U.S. GAAP).

VoiceInterop has historically operated as a part of Cleartronic and not as a stand-alone company.  The financial statements have been derived from Cleartronic’s historical accounting records and are presented on a stand-alone basis from inception to February 14, 2020.  The accompanying financial statements include the assets, liabilities, revenue, and expenses that are directly attributable to VoiceInterop.  In addition, certain costs related to VoiceInterop as well as allocations deemed reasonable by management have been included to present the financial position, results of operations, changes in equity and cash flows of VoiceInterop on a stand-alone basis.  The allocation methodologies have been described within the notes to the financial statements where appropriate. These allocated costs are primarily related to corporate administrative expenses, including administrative and technical employee related costs including benefits for corporate and shared employees, and fees for other corporate and support services.  Income taxes have been accounted for in these financial statements as described in “Income Taxes” section.

The financial statements included herein may not necessarily reflect the financial position, results of operations, changes in equity and cash flows of VoiceInterop in the future or what they have been had VoiceInterop been a separate, stand-alone entity during the periods presented and through February 14, 2020.

The accompanying unaudited interim 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 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, 2020 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 assumption used in valuation of allowance for doubtful accounts and deferred tax assets.

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 March 31, 2020 and September 30, 2019.  

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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.

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. At March 31, 2020 and September 30, 2019, the Company had no cash balances above the FDIC-insured limit, respectively.

REVENUE RECOGNITION AND DEFERRED REVENUES

The Company’s 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 performant 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.

Unified group communication solutions consist of three elements to be provided to customers: software licenses developed by the Company, equipment purchased from third-party vendors, and proprietary hardware that is manufactured on contract to required specifications and installation and integration of the hardware and software into the cohesive communication source. Revenue from the resale of equipment utilized in unified group communication solutions is recognized when shipped. For software licenses, the Company does not provide any services that are considered essential to the functionality of the software, and therefore revenue is recognized upon delivery of the software. The Company also provides support to customers under separate contracts varying from one to five years. The Company’s obligations under its service contracts vary by the length of the contract. In all cases the Company is the primary obligor to provide first level support to the client. If the contract has less than one year of service and support remaining on the contract, it is classified as a current liability; if longer, it is classified as a non-current liability. Installation and integration services are recognized upon completion.

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EARNINGS (LOSS) PER SHARE

In accordance with accounting guidance now codified as FASB ASC 260 “Earning per Share”, basic (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 operations.   The Company has no common stock equivalents and potentially dilutive securities outstanding for the three and six months ended March 31, 2020 and 2019, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company adopted ASC topic 820, “Fair Value Measurements and Disclosures” (ASC 820), “Fair Value Measurements,” effective January 1, 2009. 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.

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 unobservable. 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 payable, accrued expenses and deferred revenue. The carrying amounts of such financial instruments in the accompanying 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.

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INVENTORY

The Company maintains no inventory. All hardware items are purchased on an as needed basis from third party vendors.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. For financial statement purposes depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the asset.

Expenditures for replacements, maintenance and repairs that do not extend the lives of the respective assets are charged to expense as incurred. When assets are retired, sold or otherwise disposed of, their costs and related accumulated depreciation are removed from the accounts and resulting gains or losses are recognized.

As of March 31, 2020, and September 30, 2019, all property and equipment had been fully depreciated.

INCOME TAXES

The Company accounts for income taxes in accordance with accounting guidance now codified as FASB ASC Topic 740, “Income Taxes,” which requires that the Company recognizes income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recorded for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a tax rate change on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Company records valuation allowance to reduce net deferred tax assets to the amount considered more likely than not to be realized. Changes in estimates of future taxable income can materially change the amount of such valuation allowances.

The Company is required to recognize measure, classify, and disclose in the financial statements uncertain tax positions taken or expected to be taken in the Company’s tax returns. Management has determined that the Company does not have any uncertain tax positions and associated unrecognized benefits that materially impact the financial statements or related disclosures. Since tax matters are subject to some degree of uncertainty, there can be no assurance that the Company’s tax returns will not be challenged by the taxing authorities and that the Company will not be subject to additional tax penalties, and interest because of such challenge. The federal and state income tax returns of the Company for the years ended September 30, 2019, 2018 and 2017 are subject to examination by the IRS and state taxing authorities generally for three years after they were filed. There are no tax examinations currently in process. The Company’s tax returns were filed as consolidated returns were filed as consolidated returns with Cleartronic for the years ended September 30, 2019, 2018 and 2017.

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ADVERTISING COSTS

Advertising costs are expensed as incurred. The Company had advertising costs of $131 and $300 during the three months ended March 31, 2020 and 2019, respectively, and $506 and $600 during the six months ended March 31, 2020 and 2019, respectively.

RECLASSIFACATION

Certain amounts from prior periods have been reclassified to conform to the current period presentation. These reclassifications had no impact on the Company's net loss or cash flows.

NOTE 2 - 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 6.

NOTE 3 - GOING CONCERN

During the six months ended March 31, 2020 and 2019, and since inception, the Company has experienced cash flow problems. From time-to-time, the Company has experienced difficulties meeting its obligations as they became due. As reflected in the accompanying financial statements, the Company has an accumulated deficit as of March 31, 2020 and September 30, 2019.

The Company believes that becoming a separate corporate entity with a simple capital structure it will be able to raise additional capital and complete strategic acquisitions. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its 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. There is substantial doubt about the Company’s ability to continue as a going concern without raising additional debt or equity capital. The COVID-19 pandemic may have an adverse impact on the Company's ability to raise capital or to continue as a going concern. As a result of the above, there is substantial doubt about the ability of the Company to continue as a going concern and the accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying condensed financial statements do not include any adjustments that may result from the outcome of this uncertainty.

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NOTE 4 – RELATED PARTY TRANSACTIONS

VoiceInterop has been allocated expenses from Cleartronic for the period from October 1, 2019 to February 14, 2020 and six months ended March 31, 2019, respectively. These allocated costs, which are included in selling and administrative expenses and are primarily related to corporate administrative expenses, including administrative and technical employee related costs including benefits for corporate and shared employees, and fees for other corporate and support services.  The costs for these services and support functions have been allocated to VoiceInterop using the most meaningful allocation methodology which was based on proportionate direct costs.

All of VoiceInterop’s transactions with Cleartronic are considered to be financing transactions, which are presented as net contributions from Parent in the accompanying statements of cash flows.

During the six months ended March 31, 2020, the Company’s Chief Executive Office loaned the Company $16,512, to pay for operating expense.   The loan is non-interest bearing and payable on demand.   

NOTE 5 – 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 debt issuance cost is amortized over the life of the loan. The agreement calls for 308 installments of $194 paid over 432 days. As of September 30, 2019, the loan balance is $14,587, net of debt issuance cost of $5,200.  The loan balance was repaid on October 8, 2019(See below).  

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.  The remaining outstanding loan balance as of February 26, 2020 is $29,880, net of debt issuance cost of $10,789.  On February 26, 2020, the Company entered into a settlement agreement with United Settlement to settle the outstanding loan balance of $40,669 with WebBank for $32,236. The Company recorded $2,256 as a loss on debt extinguishment and amortized the remaining debt discount.  The agreement calls for 36 installments of $895 paid over 18 months.  The Company repaid $1,790 during the six months ended March 31, 2020.  The remaining outstanding loan balance as of March 31, 2020 is $30,446.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

OBLIGATIONS UNDER SUB-LEASE AGREEMENT

The Company leases approximately 1,700 square feet for its principal offices in Boca Raton, Florida. 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 with annual increases of base rent of 4% until the expiration date. The lease expires on November 30, 2021. VoiceInterop sub-leases approximately 900 square feet to three separate entities bringing its net rent expense to approximately $2,900 per month.

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Rent expense incurred during the six months ended March 31, 2020 and 2019 was $17,566 and $8,400 in each respective years.  Sublease rental income during the six months ended March 31, 2020 and 2019 was $5,552 and $0, respectively.   Rent expense incurred during the three months ended March 31, 2020 and 2019 was $7,406 and $3,900 in each respective years.  Sublease rental income during the three months ended March 31, 2020 and 2019 was $2,102 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 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 asset of $75,078, which was adjusted for deferred rent on the adoption date 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 October1, 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.

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.

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MAJOR CUSTOMERS

For the six months ended March 31, 2020 four customers accounted for approximately 20%, 14%, 11% and 11% of the Company’s total revenue.  For the six months ended March 31, 2019, one customer accounted for approximately 31% of the Company’s total revenue.

As of March 31, 2020 and September 30, 2019, the Company had no accounts receivable, respectively.

MAJOR SUPPLIER AND SOLE MANUFACTURING SOURCE

During 2014, the Company developed a proprietary interoperable communications software solution for its Command-Phone installations. The Company relies on no one major supplier for its third-party hardware needs. The Company obtains the AudioMate IP gateway from one supplier.

COMMITMENT TO SELL SHARES OF COMMON STOCK AND ISSUE COMMN STOCK FOR SERVICES

In 2018, the Company committed to sell 600,000 shares of common stock to five unrelated parties for $68,000 to provide working capital to the Company upon the completion of the spin off. On February 14, 2020, the spin-off has been completed and the shares were issued to the unrelated parties.    

In May 2019, the Company agreed to issue an aggregate of 50,000 shares of our common stock to Thomas Mahoney for service rendered to the Company, subject to the effectiveness of the registration statement. On February 14, 2020, the shares were issued with a fair value of $5,500 based on the most recent cash offering.

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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

 

We were initially incorporated as VoiceInterop, Inc. (“the Company” or “VoiceInterop”) on November 15, 2007 as a Florida corporation by our parent, Cleartronic, Inc (“Cleartronic” or “parent company”)

In March 2018, Cleartronic, Inc. approved the spin-off of 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. On February 11, 2020 the process of spinning-off VoiceInterop was completed and the distribution of shares was completed on February 14, 2020.

Business Overview

VoiceInterop sells hardware and software solutions for unified group communications, which are deployed by commercial enterprises, as well as government emergency responders, airports and educational institutions.  VoiceInterop will continue to focus on our leading product, the airport crash phone system, named Command Phone.  While not limited to airports, its primary function is group calling to a fixed set of endpoints (phones, speakers, etc.) so that everybody in the relevant community receives the same message simultaneously.

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FOR THE THREE MONTHS ENDED MARCH  31, 2020 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2019

 

Revenue

 

Revenues increased approximately 66% to $19,156 for the three months ended March 31, 2020 as compared to $11,159 for the three months ended March 31, 2019.   The primary reason for the increase in revenue was due to increased sales of IP gateways and related equipment.

 

Cost of Revenue

 

Cost of revenues was $9,338 for the three months ended March 31, 2020 as compared to $14,107 for the three months ended March 31, 2019.   Gross profits (loss) were $9,818 and $(2,598) for the three months ended March 31, 2020 and 2019, respectively.  The increase was primarily attributable to higher cost of goods sold in the three months ended March 31, 2019.

 

Operating Expenses

 

 Operating expenses increased approximately 59% for the three months ended March 31, 2020, to $75,399 compared to $47,415 in the three months ended March 31, 2019.  Operating expenses include selling expenses, administrative expenses, research and development costs and amortization expense.  

Selling Expenses.  Selling expenses increased approximately 30% from $2,364 in the three months ended March 31, 2019, to $3,079 in three months ended March 31, 2020, primarily due to more commissions paid because of increase in sales.

Administrative Expenses.  Administrative expenses decreased approximately 75% from $32,046 in the three months ended March 31, 2019, to $7,825 in 2020 attributable to decrease in total costs and expenses of the normal business operations.  

Professional Fees.  Professional fees increased approximately 394% from $13,005 for the three months ended March 31, 2019 to $64,495 in 2020, primarily due to the increase in legal expenses associated with the spin-off from the parent company.

Other Income and Other Expense.   Interest and other expense decreased from $7,022 in the three months ended March 31, 2019 to $2,023 in 2020. The decrease was primarily due to interest expense associated with an installment loan agreement entered into in October 2019. On February 26, 2020, the Company entered into a settlement agreement with United Settlement to settle the outstanding loan balance.  The Company recorded $2,256 as a loss on debt extinguishment and amortized the remaining debt discount.   Other income decreased from $13,500 in the three months ended March 31, 2019 compared with $2,102 for the three months ended March 31, 2020 which is due to a decrease in interest income received from the issuance of note receivable and credit card processing income.  

 

Net (Loss) Income.  Net loss was $(67,758) for the three months ended March 31, 2020 as compared to a net loss of $(43,535) for the three months ended March 31, 2020. This increase in net loss was due to increase in expenses associated with the spin-off from Cleartontic which was slightly offset by increase in gross profit.  

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FOR THE SIX MONTHS ENDED MARCH 31, 2020 COMPARED TO THE SIX MONTHS ENDED MARCH 31, 2019

 

Revenue

 

Revenues decreased approximately 44% to $32,299 for the six months ended March 31, 2020 as compared to $57,060 for the six months ended March 31, 2019.   The reason for the decrease in revenue was due to increase in sales of IP gateways, related equipment and crash phone systems offset by the decreases in maintenance agreement and software revenues.

 

Cost of Revenue

 

Cost of revenues was $11,088 for the six months ended March 31, 2020 as compared to $23,101 for the six months ended March 31, 2019.   Gross profits were $21,211 and $33,959 for the six months ended March 31, 2020 and 2019, respectively.  The decrease was primarily attributable to lower cost of goods sold and overall decrease in revenues in the six months ended March 31, 2020.

 

Operating Expenses

 

 Operating expenses increased approximately 34% for the six months ended March 31, 2020, to $105,687 compared to $78,717 in the six months ended March 31, 2019.  Operating expenses include selling expenses, administrative expenses, and professional fees.  

Selling Expenses.  Selling expenses decreased approximately 45% from $7,070 in the six months ended March 31, 2019, to $3,862 in six months ended March 31, 2020, primarily due to less commissions paid because of the decrease in sales revenue.

Administrative Expenses.  Administrative expenses decreased approximately 34% from $43,642 in the six months ended March 31, 2019, to $28,772 in 2020, primarily attributable to decrease in total costs and expenses of the normal business operations.  

Professional Fees.  Professional fees increased approximately 160% from $28,005 for the six months ended March 31, 2019 to $73,053 in 2020, primarily due to the increased legal expenses associated with the spin-off from the parent company.

Other Income and Other Expense.   Interest and other expense increased from $8,427 in the six months ended March 31, 2019 to $10,004 in 2020. The increase was primarily due to interest expense associated with an installment loan agreement entered into in October 2019.  On February 26, 2020, the Company entered into a settlement agreement with United Settlement to settle the outstanding loan balance.  The Company recorded $2,256 a as a loss on debt extinguishment and amortized the remaining debt discount.  Other income of approximately $15,096 in the six months ended March 31, 2019 compared with $5,552 for the six months ended March 31, 2020, the decrease in other income was attributable primarily due to decreases in interest income received from the issuance of note receivable and credit card processing income.  

 

Net (Loss) Income.  Net loss was $(91,184) for the six months ended March 31, 2020 as compared to a net loss of ($38,089) for the six months ended March 31, 2019. This increase was due to increase in expenses associated with the spin-off from Cleartronic and decrease in gross profit resulting from decreased revenues.

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Going Concern

While we are attempting to generate revenues, our cash position may not be significant enough to support our daily operations.  Management intends to raise additional funds by way of an offering of our debt or equity securities.  Management believes that the actions presently being taken to further implement our business plan and generate revenues provide the opportunity for VoiceInterop to continue as a going concern.  While we believe in the viability of our strategy to generate revenues and in our ability to raise additional funds, we may not be successful.  Our ability to continue as a going concern is dependent upon our capability to further implement our business plan and generate revenues.

Our financial statements have been prepared on the basis that we will continue as a going concern. The accompanying financial statements do not include any adjustments that may result from the outcome of this uncertainty.

 

LIQUIDITY AND CAPITAL RESOURCES

 

Net cash used in operating activities was $(45,489) for the six months ended March 31, 2020 compared to cash provided by operating activities of $26,383 for the six months ended March 31, 2019. The primary reason for the increase was an increase in net loss from $(38,089) in the six months ended March 31, 2019 compared with net loss of $(91,184) in the six months ended March 31, 2020 and decrease in deferred revenue offset by the increases in accounts payable and accrued expenses.

 

Net cash used in investing activities was $0.00 for the six months ended March 31, 2020 compared to $0.00 for the six months ended March 31, 2019.   In December 2018 the Company loaned $25,000 to a shareholder. On March 6, 2019 the loan was repaid along with $1,770 in interest.   

 

Net cash used in financing activities was $(14,253) for the six months ended March 31, 2019 as compared to cash provided by $41,419 for the six months ended March 31, 2020. For the six months ended March 31, 2020, the cash provided by financing activities was from a new installment loan partially offset by repayment of an installment loan, proceeds from loan payable related party and contributions from parent company. For the six months ended March 31, 2019 used in financing activities was proceeds from an installment loan offset by repayments of loan and contributions from parent.

 

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 COVID-19 pandemic may have an adverse impact on the Company’s ability to raise capital or to continue as a going concern. As a result of the above, there is substantial doubt about the ability of the Company to continue as a going concern and the accompanying condensed financial statements have been prepared assuming that the Company will continue as a going concern. The accompanying condensed financial statements do not include any adjustments that may result from the outcome of this uncertainty.

18

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, 2019 for information regarding our critical accounting estimates.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

 

Not applicable.

 

Item 4. Controls and Procedures.

 

Evaluation of Disclosure and Controls and Procedures.  We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined) in Exchange Act Rules 13a – 15(c) and 15d – 15(e)).  Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were not effective as of March 31, 2020 due to the Company’s limited internal resources and lack of ability to have segregation of duties and multiple levels of transaction review.

The term disclosure controls and procedures means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act (15 U.S.C. 78a, et seq.) is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our Chief Executive Officer, does not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all error and all fraud.  A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.  Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.  Because of inherent limitations in all control systems, internal control over financial reporting may not prevent or detect misstatements, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the registrant have been detected.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Change in Internal Controls over Financial Reporting

 

There was no change in the registrant's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a–15 or Rule 15d–15 under the Securities Exchange Act of 1934 that occurred during the registrant's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

 

There have been no material developments during the quarter ended March 31, 2020 in any material legal proceedings to which we are a party or of which any of our property is subject.

 

Item 3. Defaults upon Senior Securities

 

None

 

Item 5. Other Information

 

None

 

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Item 6. Exhibits required by Item 601 of Regulation S-K

Exhibit No.		Description
2.1		Form of Separation Agreement between VoiceInterop, Inc. and Cleartronic(1)
3.1		Amended and Restated Articles of Incorporation of VoiceInterop, Inc.(1)
3.2		Amended and Restated By-laws(1)
10.1		Employment Agreement between Cleartronic, Inc. and Larry Reid (1)
10.2		Waiver Agreement dated September 18, 2018 between the Company and Richard Martin(1)
10.3		Waiver Agreement dated September 18, 2018 between the Company and Mark Moore(1)
10.4		Waiver Agreement dated September 18, 2018 between the Company and Larry Reid(1)
10.5		Investor Relations Agreement dated May 30, 2019 between the Company and Thomas Mahoney(2)
10.6		Subscription Agreement dated March 7, 2018 between the Company and Carl Feuerstein (3)
10.7		Subscription Agreement dated March 7, 2018 between the Company and Janet Mortensen (3)
10.8		Subscription Agreement dated March 7, 2018 between the Company and Harry Schloss(3)
10.9		Subscription Agreement dated April 24, 2018 between the Company and Frank Vicino, Jr.(3)
10.10		Subscription Agreement dated April 24, 2018 between the Company and Frank Vicino, Sr.(3)
10.11		Notice of Conversion dated September 20, 2018- Richard J. Martin(4)
10.12		Asset Purchase Agreement dated October 22, 2019 between Cleartronic, Inc and Collabri, LLC. (4)
14.1		Code of Ethics(1)
31.1		Certification of Larry M. Reid Chief Executive Officer of Cleartronic, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.+
31.2		Certification of Larry M. Reid, Chief Financial Officer and Principal Accounting Officer of Cleartronic, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §302 of the Sarbanes-Oxley Act of 2002.+
32.1		Certification of Larry M. Reid, Chief Executive Officer and Chief Financial Office of Cleartronic, Inc., pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002.+
101		XBRL Interactive Data Tables+

(1) Previously Filed on FORM S-1 on May 13, 2019

(2) Previously Filed on FORM S-1/A (Amendment No.1) on July 15, 2019

(3) Previously Filed on FORM S-1/A (Amendment No.2) on August 08, 2019

(4) Previously Filed on FORM S-1/A (Amendment No.3) on November 08, 2019

+ Filed hereby with this Registration Statement

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

Date: June 11, 2020                               VOICEINTEROP, INC.

By:/s/ Larry Reid

Larry M. Reid, President, Chief Executive Officer, Principal Financial Officer and Chief Accounting Officer

 

 

 

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Exhibit 31.1

CERTIFICATION

 

I, Larry M. Reid, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of VoiceInterop, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. I am the only certifying officer responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Board of Directors:

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: June 11, 2020

 

/s/ Larry M. Reid

Larry M. Reid, Principal Executive Officer

23

Exhibit 31.2

CERTIFICATION

I, Larry Reid, certify that:

 

1. I have reviewed this Quarterly Report on Form 10-Q of Cleartronic, Inc.;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

 

4. I am the only certifying officer responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

 

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the Board of Directors:

 

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

 

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: June 11, 2020

 

/s/ Larry M. Reid

Larry Reid, Principal Financial Officer

24

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of Section 1350, Chapter 63 of Title 18, United States Code), the undersigned officer of Cleartronic, Inc. (the “Company”), does hereby certify, to such officer’s knowledge, that the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 of the Company fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

June 11 , 2020

 

By:  /s/ Larry M. Reid

Larry M. Reid

Principal Executive Officer and

Principal Financial Officer 

 

25