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 provided an allowance for doubtful accounts of $1,000 at June 30, 2009 and September 30, 2008.

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.

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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, 2009. The Company did not have cash balances excess the FDIC limits at June 30, 2009 and September 30, 2008.

RESEARCH AND DEVELOPMENT COSTS

The Company expenses research and development costs as incurred.  For the three months ending June 30, 2009 and 2008, the Company had $32,447 and $60,363 in research and development costs from continuing operations, respectively. For the nine months ending June 30, 2009 and 2008, the Company had $86,286 and $200,134 in research and development costs from continuing operations, respectively.

REVENUE RECOGNITION AND DEFERRED REVENUES

Unified group communication solutions consist of three elements to be provided to customer: 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 compliance with Staff accounting bulletin (SAB) 104. in order to encompass EITF No. 00-21 , Revenue Arrangements with Multiple Deliverables ( EITF No. 00-21 ). 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. Revenues derived from software license sales are recognized in accordance with Statement of Position (SOP) No. 97-2 , “Software Revenue Recognition,” and SOP No. 98-9 , “Modifications of SOP No. 97-2 , Software Revenue Recognition with Respect to Certain Transactions." 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 June 30, 2009 and 2008. There were 8,585,000 and 8,952,500 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.

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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 June 30, 2009.

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 SFAS No. 123R "Share Based Payments" 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 SFAS 123R and certain SEC rules and regulations. The Company has applied the provisions of SAB 107 in its adoption of SFAS 123R.

ADVERTISING COSTS

Advertising costs are expensed as incurred. The Company had advertising costs of $3,469 during the three months ended June 30, 2009 and $6,003 during the three months ended June 30, 2008.  For the nine months ending June 30, 2009 and 2008, the Company had $7,362 and $36,170 in advertising costs, respectively.

NEW ACCOUNTING PRONOUNCEMENT

In June 2009, the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162. SFAS No. 168 establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. This SFAS is effective for our year-end ending on September 30, 2009. This SFAS is not expected to have a material impact on our consolidated financial position, results of operations and cash flows.

NOTE 3   -

GOING CONCERN

The Company's financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company 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.

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NOTE 4   -

EQUITY TRANSACTIONS

Common Stock

In May 2009 the Company sold 1,259,605 shares of common stock for proceeds of $16,375 and a note-holder and officer of the Company converted promissory notes in the amount of $2,925 for 225,000 shares of common stock.

In June 2009 two officers and directors of the Company converted accrued salaries and consulting fees in the amount of $31,429 for 2,417,608 shares of common stock.

In June 2009 the Company issued 2,000,000 shares of common stock to a consultant for services rendered valued at approximately $30,000.  

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 $24,901 and $25,069 for the three months ended June 30, 2009 and 2008, respectively.

NOTE 7 -     DISCONTINUED OPERATIONS

In August 2007, the Company sold certain hardware and software to Interactive Media Technologies, Inc. (“IMT”), a related party. The hardware and software was integral to the Company’s ability to provide pre-paid VOIP telecommunication services. As a result of the sale, the Company effectively exited that specific line of business and reported results no longer include any revenues or expenses from VoIP operations.

The Company recognized sales from telecommunications services as services were provided. Services consisted primarily of VoIP telecommunication measured in units of time and therefore the primary criterion for the recognition of revenues was the usage of time by customers.  Cost of revenue included the cost of capacity associated with the revenue recognized within the corresponding time period.

The components of the loss from discontinued operations, net of income taxes, are presented below for the three months ended June 30, 2009 and 2008 respectively.

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The components of the loss from discontinued operations, net of income taxes are presented below for nine months ended June 30, 2009 and 2008 respectively.

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 JUNE 30, 2009 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2008

The Company’s net loss from continuing operations decreased approximately 98% to $9,170 during the three months ended June 30, 2009 as compared to $485,266 for the three months ended June 30, 2008. The primary reasons for this decrease were higher revenues and aggressive reduction of selling and administrative expenses.

Revenues

Revenues increased to $532,213 for the three months ended June 30, 2009 as compared to $11,966 for the three months ended June 30, 2008. Approximately 71% of the increase was attributable to the recognition of approximately $376,000 in software sales previously recorded as deferred revenue. The remainder of the increase was  primarily due to increased sales of equipment and software. During the fiscal year ended September 30, 2008, the Company entered into a unified communications contract with a customer for which delivery of equipment associated with that contract is now complete. As a result, the Company has  recognized all of the revenue relating to the contract.

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Cost of Revenues

Cost of revenues was $347,581 for the three months ended June 30, 2009 as compared to $13,178 for the three months ended June 30, 2008. Due to increased sales of unified communications software and equipment the Company incurred substantial increased costs for both software and equipment. The Company recorded approximately $255,000 in prepaid costs related to recognized deferred revenues during the period.

Operating Expenses

Operating expenses for the three months ended June 30, 2009 were $182,254 compared to $485,266 for the three months ended June 30, 2008, a decrease of approximately 62%. This decrease resulted from less spending on sales and marketing efforts and aggressive cost cutting of salaries, consulting fees and other miscellaneous operating expenses by management. The Company intends to continue to try and reduce operating expenses.

Loss from Continuing Operations

Loss from continuing operations for the three months ended June 30, 2009 was $9,170 compared to a loss of $485,266 for the three months ended June 30, 2008. The decrease in loss from operations in 2009 versus 2008 was due to the Company’s increased sales of its products and services and an improvement in gross profit margins from approximately nil in the three months ended June 30, 2008 to approximately 34% for the three months ended June 30, 2009.

Loss from Discontinued Operations

Losses from discontinued operations were nil for the three months ended June 30, 2009 and 2008 respectively.  

Net Loss Applicable to Common Stock

Net loss applicable to common stock was $9,170 for the three months ended June 30, 2009 compared to a net loss of $485,266 for the three months ended June 30, 2008. Net loss per common share was $0.0002 and $0.013 for the three months ended June 30, 2009 and 2008, respectively.

FOR THE NINE MONTHS ENDED JUNE 30, 2009 COMPARED TO THE NINE MONTHS ENDED JUNE 30, 2008

The Company’s net loss decreased to $216,777 during the nine months ended June 30, 2009 when compared to a loss of $1,463,454 for the nine months ended June 30, 2008. The primary reasons for this decrease were increased revenues, larger gross margins and aggressive cutting of administrative expenses.

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Revenues

Revenues from current operations were $1,593,395 for the nine months ended June 30, 2009 as compared to $254,555 for the nine months ended June 30, 2008. Approximately 63% of the increase was attributable to the recognition of approximately $1,007,126 in software sales previously recorded as deferred revenue. The remainder of the increase was  primarily due to increased sales of equipment and software. During the fiscal year ended September 30, 2008, the Company entered into a unified communications contract with a customer for which delivery of equipment associated with that contract is now complete. As a result, the Company has recognized all of the revenue relating to the contract. Revenues from discontinued operations was nil for the nine months ended June 30, 2009 and $22,867 for the nine months ended June 30, 2008..

Cost of Revenues

Cost of revenues was $1,027,254 for the nine months ended June 30, 2009, as compared to $194,950 for the nine months ended June 30, 2008. Due to increased sales of unified communications software and equipment the Company incurred substantial increased costs for both software and equipment. Gross profits were $478,614 and $59,605 for the nine months ended June 30, 2009 and 2008 respectively.

Operating Expenses

Operating expenses for the nine months ended June 30, 2009 were $759,081 compared to $1,484,420 for the nine months ended June 30, 2008. This decrease was primarily a result of aggressive cutting of administrative expenses.

Loss from Operations

Loss from operations for the nine months ended June 30, 2009 was $216,777 compared to a loss of $1,463,454 for the nine months ended June 30, 2008. This decrease in loss from operations in 2009 versus 2008 was due primarily to the Company’s ability to increase revenue, improve gross margins and cut administrative expenses.

Loss from Discontinued Operations

Loss from discontinued operations was nil or the nine months ended June 30, 2009 and $25,153 for the six months ended June 30, 2008, due to the Company’s complete exit from providing VoIP services.

Net Loss Applicable to Common Stock

Net loss applicable to common stock was $216,777 for the nine months ended June 30, 2009 compared to a net loss of $1,463,454 for the nine months ended June 30, 2008.  Net loss per common share was $0.004 and $0.042 for the nine months ended June 30, 2009 and 2008, respectively.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $67,322 for the three months ended June 30, 2009 compared to $125,526 for the three months ended June 30, 2008, due to a decrease in net loss for the period and recognition of $381,102 in deferred revenue.

The Company’s net cash from investing activities was $0 for the three months ended June 30, 2009 compared to $6,780 for the three months ended June 30, 2008.

The Company’s net cash provided by financing activities was $47,803 for the three months ended June 30, 2009 compared to $117,270 for the three months ended June 30, 2008. The decrease was due to decreased debt and equity financing activity.

The Company’s 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.

The Company has incurred losses since its inception, and continues to require additional capital to fund operations and development. As such, the Company’s ability to pay its 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.

The Company believes that in order to fund its business plan, it will need approximately $500 thousand in new equity or debt capital. In the past, in addition to revenues and deferred revenues, the Company has obtained funds from the private sale of its debt and equity securities. The Company intends to continue to seek private financing from its existing stockholders and others.

The costs to operate the Company’s current business are approximately $75,000 per month. In order for the Company to cover its monthly operating expenses, we would have to generate revenues of approximately $225,000 per month. Accordingly, in the absence of revenues, the Company will need to secure $75,000 in equity or debt capital each month to cover its overhead expenses. In order to remain in business for one year without any revenues the Company would need to secure $900,000 in equity or debt capital. If the Company is unsuccessful in securing sufficient capital or revenues, the Company would have to cease business in approximately 60 days.

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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.

Evaluation of Disclosure Controls and Procedures. As required Rules 13a-15(e) and 15d-15(e) under the Exchange Act, 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 June 30, 2009, 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.

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.

Changes in Internal Control Over Financial Reporting. During the quarter ended June 30, 2009, there have been no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Act) that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

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

In May 2009 the Company sold 1,259,605 shares of common stock for proceeds of $16,375 and a note-holder and officer of the Company converted promissory notes in the amount of $2,925 for 225,000 shares of common stock.

In June 2009 two officers and directors of the Company converted accrued salaries and consulting fees in the amount of $31,429 for 2,417,608 shares of common stock.

In June 2009 the Company issued 2,000,000 shares of common stock to a consultant for services rendered valued at approximately $30,000.  

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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.

__________________________________

(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.

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