Cleartronic, Inc. - Quarter Report: 2010 March (Form 10-Q)

CLRI 10Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

_____________

FORM10-Q

(Mark One)


[ X ]	Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the quarterly period ended March 31, 2010

[ ]	Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

	For the transition period from to

Commission File Number: 333-135585

Cleartronic, Inc.

(Exact name of registrant as specified in it’s charter)

Florida 65-0958798
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

8000 North Federal Highway, Boca Raton, Florida 33487
(Address of principal executive offices) (Zip Code)

561-939-3300

(Registrant’s telephone number, including area code)

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

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____ 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 ____

Smaller reporting company _X_

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: 124,796,678 shares as of May 14, 2009

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements


CLEARTRONIC, INC. AND SUBSIDIARIES
(UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEET



ASSETS

	March 31,	September 30,
	2010	2009
Current assets:
Cash	$ 20,547	$ 8,273
Accounts receivable, net	975	1,140
Inventory	63,159	35,820
Prepaid expenses and other current assets	30,062	39,671

Total current assets	114,743	84,904

Property and equipment, net	74,963	89,719

Total assets	$ 189,706	$ 174,623


LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)


Current liabilities:
Accounts payable	221,109	279,405
Accrued expenses	60,781	223,135
Deferred revenue, current portion	16,003	23,503
Notes payable - stockholders	122,359	137,459

Total current liabilities	420,252	663,502

Long Term Liabilities
Notes payable - stockholders	25,000	-
Deferred revenue, net of current portion	3,188	5,314

Total long term liabilities	28,188	5,314

Total liabilities	448,440	668,816

Stockholders' equity (deficit):
Preferred stock - $.001 par value; 200,000,000 shares authorized,
no shares issues and outstanding	-	-
Common stock - $.001 par value; 750,000,000 shares authorized,
113,477,244 and 77,717,454 issued and outstanding, respectively	113,479	71,717
Additional paid-in capital	5,513,131	4,830,648
Accumulated Deficit	(5,885,344)	(5,396,558)


Total stockholders' equity (deficit)	(258,734)	(494,193)

Total liabilities and stockholders' equity (deficit)	$ 189,706	$ 174,623

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


CLEARTRONIC, INC. AND SUBSIDIARIES
(Unaudited)

Condensed Consolidated Statements of Operations


	For the three	For the three	For the six	For the six
	months ended	months ended	months ended	months ended
	March 31, 2010	March 31, 2009	March 31, 2010	March 31, 2009


Revenue	$ 23,127	$ 682,028	$ 90,291	$ 1,061,182

Cost of Revenue	11,040	446,813	43,387	679,673

Gross Profit	12,087	235,215	46,904	381,509

Operating Expenses:
Selling expenses	34,440	28,458	49,677	84,966
Administrative expenses	215,325	205,081	374,284	422,927
Research and development	21,985	38,460	66,861	53,839
Depreciation	6,689	7,602	14,540	15,095

Total Operating Expenses	278,439	279,600	505,362	576,826

Other (Expenses)	(19,167)	(9,432)	(30,327)	(12,290)

Net loss	(285,519)	(53,817)	(488,785)	(207,607)

(Loss) per Common Share	$ (0.003)	$ (0.001)	$ (0.005)	$ (0.004)

(Loss) per Common Share
basic and diluted	$ (0.003)	$ (0.001)	$ (0.005)	$ (0.004)

Weighted Average of
Shares Outstanding -
basic and diluted	101,677,485	53,329,738	89,596,677	51,483,488



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


CLEARTRONIC, INC. AND SUBSIDIARIES
(Unaudited)

Condensed Consolidated Statements of Cash Flows

	For the six	For the six
	months ended	months ended
	March 31, 2010	March 31, 2009

NET LOSS	$ (488,785)	$ (207,607)

Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation	14,540	14,481
Common stock and warrants issued for services	118,750	114,375
Loss on settlement and disposal of assets	4,220
Amortization of notes payable discount	17,942	-
(Increase) decrease in assets:
Accounts receivable	(165)	50,278
Inventory	(27,339)	(20,704)
Prepaid expenses and other current assets	(8,333)	441,367
Increase (decrease) in liabilities:
Accounts payable	(40,095)	164,904
Accrued expenses	95,269	14,889
Deferred revenue	(9,626)	(622,343)

Net Cash Used in Operating Activities	(323,622)	(50,360)

Cash Flows From Investing Activities:
Purchase of property and equipment	(4,004)	-
Proceeds from sale of property and equipment	-	1,845

Net Cash Provided by Investing Activities:	(4,004)	1,845

Cash Flows From Financing Activities
Proceeds from notes payable, net	39,900	30,000
Proceeds from issuance of common stock and warrants	300,000	13,725
Proceeds from stock subscription receivable	-	5,475

Net Cash Provided by Financing Activities	339,900	49,200

Net Increase In Cash	12,274	685

Cash - Beginning of Period	8,273	20,711


Cash - End of Period	$ 20,547	$ 21,396


SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$ 6,313	$ 1,183

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
The Company issued 15,275,076 shares of common stock as consideration for
cancellation of accounts payable of $56,847 and accrued expenses of $211,582
during the six months ended March 31, 2010
The Company issued 1,761,866 shares of common stock as consideration for
cancellation of notes payable of $32,066 during the six months ended March 31, 2010

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

CLEARTRONIC, INC. AND SUBSIDARIES

Notes to Condensed Consolidated Financial Statements

March 31, 2010

NOTE 1 -

ORGANIZATION

Cleartronic, Inc. (the “Company”) was incorporated in Florida on November 15, 1999. The Company was originally formed as a website developer under the name Menu Sites, Inc., which ceased operations in 2002. In 2005, the Company became a provider of Voice Over Internet Protocol (VOIP) services and re-seller of international pre-paid telecommunication services through Interactive Media Technologies, Inc., (“IMT”), a related party, and was renamed GlobalTel IP, Inc. In August 2008, the Company ceased re-selling international pre-paid telecommunication services and sold back to IMT certain VoIP assets and began to transition its remaining VoIP business into managed unified group communication operations and development of VoIP related products and services.

In November 2007, the Company formed, as Florida corporations, two wholly-owned subsidiaries: Gulf Telco, Inc. and VoiceInterop, Inc. VoiceInterop, Inc. is the operating subsidiary of the Company and Gulf Telco, Inc. is currently inactive. In May 2008, the Company changed its name to Cleartronic, Inc. The Company now designs, builds and installs unified group communication solutions, including unique hardware and customized software, for public and private enterprises and markets those services and products under the VoiceInterop brand name. The Company introduced its (patent pending) line of AudioMate360 IP gateway appliances in 2008 and continues to develop an Application Service Provider solution for voice interoperability to be marketed as a hosted interoperability solution for potential customers.

NOTE 2 -

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The accompanying unaudited interim consolidated financial statements contain the consolidated accounts of Cleartronic, Inc., VoiceInterop, Inc. and Gulf Telco, Inc. All material intercompany transactions and balances have been eliminated.

BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements have been prepared in accordance with country-regionplaceUnited 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 country-regionplaceUnited 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, 2009 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 March 31, 2010 are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, 2010.

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.

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 has an Accounts Receivable Purchase and Security Agreement with Bridgeport Capital Resources of Birmingham, AL. Under the terms of the agreement the Company sells certain acceptable accounts receivable to Bridgeport Capital at a discount to the receivable face value. Discounts can range between 2.25 and 6.25 percent depending on the length of time the receivable remains outstanding.

CONCENTRATION OF CREDIT RISK

The Company currently maintains cash balances at one banking institution. FDIC deposit insurance has temporarily increased from $100,000 to $250,000 per depositor through December 31, 2013. The Company did not have cash balances excess the FDIC limits at March 31, 2010 and September 30, 2009.

RESEARCH AND DEVELOPMENT COSTS

The Company expenses research and development costs as incurred. For the three months ending March 31, 2010 and 2009, the Company had $21,985 and $38,460 in research and development costs, respectively. For the six months ending March 31, 2010 and 2009, the Company had $66,861 and $53,839 in research and development costs, respectively.

REVENUE RECOGNITION AND DEFERRED REVENUES

Unified group communication solutions consist of three elements to be provided to customers: software licenses and equipment purchased from third-party vendors, proprietary hardware that is manufactured on contract to required specifications and installation and integration of the hardware and software into the cohesive communication source.

The Company's revenue recognition policies are in accordance with Accounting Standards Codification 605-10 “Revenue Recognition” (ASC 605-10). Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the contract price is fixed or determinable, and collectability is reasonably assured. No right of return privileges are granted to customers after shipment. The Company recognizes revenue for the elements separately as the sales of the equipment and software, installation and integration, and support services represent separate earnings processes that are generally specified under separate agreements.

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, provided (1) there is evidence of an arrangement, (2) collection of the fee is considered probable and (3) the fee is fixed and determinable.

The Company also provides support to customers under separate contracts varying from one to three 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.

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, 2010 and 2009 and there were 16,976,759 and 10,085,000 options and warrants outstanding, respectively.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, accrued expenses and notes payable. The carrying amounts of such financial instruments approximate their respective estimated fair value due to the short-term maturities and approximate market interest rates of these 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 market on a first-in, first-out basis. The Company’s policy is to record a reserve for technological obsolescence or slow-moving inventory items. No reserve was made for inventory balances as of March 31, 2010.

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.

STOCK-BASED COMPENSATION

Effective January 1, 2006, the Company adopted the fair value recognition provisions of Accounting Standards Codification 718-10 “Compensation” (ASC 718-10) using the modified retrospective transition method. SFAS 123R requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as expense ratably over the requisite service periods. The Company has estimated the fair value of each award as of the date of grant or assumption using the Black-Scholes option pricing model, which was developed for use in estimating the value of traded options that have no vesting restrictions and that are freely transferable. The Black-Scholes option pricing model considers, among other factors, the expected life of the award and the expected volatility of the Company's stock price. In March 2005, the SEC issued SAB No. 107, Share-Based Payment ("SAB 107") which provides guidance regarding the interaction of ASC 718-10 and certain SEC rules and regulations. The Company has applied the provisions of SAB 107 in its adoption of ASC 718-10.

ADVERTISING COSTS

Advertising costs are expensed as incurred. The Company had advertising costs of $10,172 during the three months ended March 31, 2010 and $1,776 during the three months ended March 31, 2009. For the six months ending March 31, 2010 and 2009, the Company had $22,435 and $3,893 in advertising costs, respectively.

NOTE 3 -

GOING CONCERN

The Company's financial statements are prepared using accounting principles generally accepted in the placecountry-regionUnited 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 has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management is currently seeking funding from significant shareholders and outside funding sources sufficient to meet its minimal operating expenses. 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. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 4 -

EQUITY TRANSACTIONS

Common Stock

During the quarter ended March 31, 2010, the Company sold 8,241,759 units consisting of two shares of common stock and one warrant for a total of $300,000. The warrants are exercisable for three years at a price $1.00 per share. The value of the warrants was calculated using the Black Scholes model. The following assumptions were used: The stock price at date of issuance was approximately $0.18, the risk-free rate of return was 1.40% based on 3 year treasury notes at time of issuance, volatility was 45% and the expected life of the warrants was 2 years. Based on the valuation model, the value of each warrant issued was calculated to be $.0003. The value assigned to the common stock issued was approximately $.18 per share.

During January 2010, the Company issued 500,000 shares of common stock to a shareholder as an incentive for making a loan to the Company and the Company issued 1,818,832 shares of common stock to a shareholder for converting a note payable to the Company in the amount of approximately $33,100. The Company issued 1,326,328 shares of common stock to two vendors for cancellation of accounts payable of approximately $24,000 and the Company issued 6,270,855 shares of common stock to four consultants for cancellation of accrued expenses of approximately $114,000 and the Company. The Company also issued 206,044 shares of common stock to one consultant for services rendered valued at approximately $3,750.

During February 2010, the Company issued 659,340 shares of common stock to two consultants for services valued at $12,000.

During March 2010, the Company issued 164,835 shares of common stock to one consultant for services valued at $3,000.

NOTE 5 -

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 $26,011 and $25,259 for the three months ended March 31, 2010 and 2009, respectively.

NOTE 6 -

SUBSEQUENT EVENTS

In May 2009, the FASB issued accounting guidance now codified as FASB ASC Topic 855, “Subsequent Events,” which establishes general standards of accounting for, and disclosures of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. FASB ASC Topic 855 is effective for interim or fiscal periods ending after June 15, 2009. Accordingly, we adopted the provisions of FASB ASC Topic 855 on June 30, 2009. The Company has evaluated subsequent events for the period from March 31 2010, the date of these financial statements, through May 14, 2010, the date of issuance of these condensed, consolidated financial statements.

Issuance of common stock and warrants:

In April 2010, the Company issued 10,989,012 shares of common stock and 5,494,506 warrants to purchase common stock at $.10 per share for $200,000 in cash. The warrants expire on February 15, 2013. The Company issued 549,440 shares of common stock to two consultants for services valued at $10,000.

Item 2. Management’s Discussion and Analysis or Plan of Operation.

Overview

Cleartronic, Inc. (the “Company,” formerly GlobalTel IP, Inc.) was incorporated in Florida on November 15, 1999. Originally formed as a website developer, the Company ceased operations in 2002. In 2005, the Company commenced operations as a provider of Voice Over Internet Protocol (VoIP) services. In 2007, the Company elected to exit the international VoIP business and concentrate on providing unified group communication solutions. The Company, through its wholly owned subsidiary, VoiceInterop, Inc., now designs, sells and installs unified group communication solutions for public and private enterprises and is developing an Application Service Provider solution for voice interoperability.

FOR THE THREE MONTHS ENDED MARCH 31, 2010 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2009

Revenues

Revenues decreased to $23,127 for the three months ended March 31, 2010 as compared to $682,028 for the three months ended March 31, 2009. The decrease was due to a decline in sales of equipment and software due to decreased sales of unified communications solutions. Total revenue in the three months ended March 31, 2009 included approximately $486,000 in software sales previously recorded as deferred revenue.

Cost of Revenues

Cost of revenues was $11,040 for the three months ended March 31, 2010 as compared to $446,813 for the three months ended March 31, 2009. The decrease was due to decreased sales of unified communications solutions.

Operating Expenses

Operating expenses for the three months ended March 31, 2010 were $278,439 compared to $279,600 for the three months ended March 31, 2009. The Company expects operating expenses to increase slightly in the future as we will attempt to hire additional salespeople in an effort to grow revenue.

Loss from Operations

The Company’s net loss from operations increased to $285,519 during the three months ended March 31, 2009 as compared to $53,817 for the three months ended March 31, 2009. The reason for this increase was due to a significant decrease in revenue for the period. Net loss per common share was $0.003 and $0.001 for the three months ended March 31, 2010 and 2009, respectively.

FOR THE SIX MONTHS ENDED MARCH 31, 2010 COMPARED TO THE SIX MONTHS ENDED MARCH 31, 2009

Revenues

Revenues from operations were $90,291 for the six months ended March 31, 2010 as compared to $1,061,182 for the six months ended March 31, 2009. The decrease was primarily due to a decline in sales of equipment and software due to decreased sales of unified communications solutions.

Cost of Revenues

Cost of revenues was $43,837 for the six months ended March 31, 2010, as compared to $679,673 for the six months ended March 31, 2009. Due to decreased sales of unified communications software and equipment the Company incurred substantial decreased costs for both software and equipment. Gross profits were $46,904 and $381,509 for the six months ended March 31, 2010 and 2009 respectively.

Operating Expenses

Operating expenses for the six months ended March 31, 2010 were $505,362 compared to $576,826 for the six months ended March 31, 2009. This decrease was due to the continued efforts by management to control operating expenses.

Loss from Operations

The Company’s net loss increased to $488,785 during the six months ended March 31, 2010 as compared to a loss of $207,607 for the six months ended March 31, 2009. The primary reasons for this increase were decreased revenues. Net loss per common share was $0.005 and $0.004 for the six months ended March 31, 2010 and 2009, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $323,622 for the six months ended March 31, 2010 compared to $50,360 for the six months ended March 31, 2009, due to a increase in net loss for the period and recognition of $491,775 in deferred revenue in 2009.

Net cash used in investing activities was $4,004 for the six months ended March 31, 2010 compared to $1,845 provided by investing activities for the six months ended March 31, 2009.

Net cash provided by financing activities was $339,900 for the six months ended March 31, 2010 compared to $49,200 for the six months ended March 31, 2009. The decrease was due to increased debt and equity financing activity.

Our obligations are being met on a month-to-month basis as cash becomes available. There can be no assurance that the Company’s present flow of cash will be sufficient to meet current and future obligations.

We have incurred losses since our inception and continue to require additional capital to fund operations and development. As such, our ability to pay our already incurred obligations is mostly dependent on the Company being able to have substantially increased revenues and raising substantial additional capital through the sale of its equity or debt securities. There can be no assurance that the Company will be successful in accomplishing any of the foregoing.

We believe that in order to fund our business plan, we will need approximately $1 million in new equity or debt capital. In the past, in addition to revenues and deferred revenues, we have obtained funds from the private sale of our debt and equity securities. We intend to continue to seek private financing from existing stockholders and others.

The costs to operate our current business are approximately $90,000 per month. In order for us to cover our monthly operating expenses, we would have to generate revenues of approximately $200,000 per month. Accordingly, in the absence of revenues, we will need to secure $90,000 in equity or debt capital each month to cover our overhead expenses. In order to remain in business for one year without any revenues we would need to secure $1,080,000 in equity or debt capital. If we are unsuccessful in securing sufficient capital or revenues, we would have to cease business in approximately 60 days.

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 the Company’s revenues and profitability, (ii) prospective business opportunities and (iii) its strategy for financing its 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 the Company’s plans, objectives and expectations for future operations. Although the Company believes that its expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of its knowledge of its 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 the Company’s 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. The Company undertakes no obligation to release publicly the results of any future revisions it 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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 4. Controls and Procedures.

An evaluation was conducted by the registrant’s chief executive officer (CEO) and principal financial officer (“PFO”) of the effectiveness of the design and operation of the registrant’s disclosure controls and procedures as of March 31, 2010. Based on that evaluation, the CEO and PFO concluded that the registrant’s controls and procedures were effective as of such date to ensure that information required to be disclosed in the reports that the registrant files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. If the registrant develops new business or engages or hires a chief financial officer or similar financial expert, the registrant intends to review its disclosure controls and procedures.

Management is aware that there is a lack of segregation of duties due to the small number of employees dealing with general administrative and financial matters. However, at this time management has decided that considering the abilities of the employees now involved and the control procedures in place, the risk associated with such lack of segregation is low and the potential benefits of adding employees to clearly segregate duties do not justify the substantial expenses associated with such increases. Management may reevaluate this situation as circumstances dictate.

The 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.

Item 4T. Controls and Procedures.

Reference is made to the response to Item 4 above.

PART II - OTHER INFORMATION

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

In January 2010, we issued 1,326,328 shares of common stock to two vendors for cancellation of accounts payable of approximately $24,000 and we issued one lender 1,818,832 shares of common stock for cancellation of a promissory note in the amount of $33,100. We also issued 6,270,855 shares of common stock to four consultants for cancellation of accrued expenses of approximately $114,000 and we issued 500,000 shares of common stock to a shareholder as an incentive to make a loan to the Company.

In January, February and March of 2010, we entered into subscription agreements with a private investor under which the investor purchased 8,241,759 units, each unit consisting of two shares of our common stock and a warrant for the purchase of one (1) share of our common stock, for a purchase price of $0.0364 per unit and an aggregate purchase price of $300,000. The warrants are exercisable at $0.10 per share of common stock and expire on February 15, 2013.

In January, February and March of 2010, we issued 1,030,219 shares of common stock to two consultants for services rendered valued at approximately $18,750.

There were no principal underwriters.

The registrant claimed exemption from the registration provisions of the Securities Act of 1933 with respect to the securities pursuant to Section 4(2) thereof inasmuch as no public offering was involved. The shares were not offered or sold by means of: (i) any advertisement, article, notice or other communication published in any newspaper, magazine or similar medium, or broadcast over television or radio, (ii) any seminar or meeting whose attendees have been invited by any general solicitation or general advertising, or (iii) any other form of general solicitation or advertising and the purchases were made for investment and not with a view to distribution. Each of the purchasers was, at the time of the purchaser’s respective purchase, an accredited investor, as that term is defined in Regulation D under the Securities Act of 1933, and had access to sufficient information concerning the registrant and the offering.

Item 6. Exhibits.


3.01	Articles of Incorporation.(1)
3.02	Articles of Amendment to Articles of Incorporation filed March 12, 2001. (1)
3.03	Articles of Amendment to Articles of Incorporation filed October 4, 2004. (1)
3.04	Articles of Amendment to Articles of Incorporation filed March 31, 2005. (1)
3.05	Articles of Amendment to Articles of Incorporation filed May 9, 2008. (2)
3.06	Bylaws. (1)
31.1	Rule 13a-14(a)/14d-14(a) Certification of Larry Reid. (3)
32.1	Section 1350 Certification of Larry Reid (3)

__________________________________

(1)

Filed as an exhibit to the registrant’s registration statement on Form SB-2 and hereby incorporated by reference.

(2)

Filed as an exhibit to Amendment No. 6 to the registrant’s registration statement on Form S-1 and hereby incorporated by reference.

(3)

Filed herewith.

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.


	CLEARTRONIC, INC.


Date: May 14, 2010	By:	/s/ Larry Reid
		Larry Reid Principal Executive Officer and Principal Financial Officer and Chief Accounting Officer