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

Cleartronic, Inc. (the "Company") was incorporated in Florida on November 15, 1999. All current operations are conducted through the Company's wholly owned subsidiary, ReadyOp Communications, Inc. ("ReadyOp"), a Florida corporation incorporated on September 15, 2014.ReadyOp facilitates the marketing and sales of subscriptions to the ReadyOp™ and ReadyMed™ platform and the AudioMate IP gateways discussed below.

ReadyOp is a proprietary, innovative web-based planning, communications and operations platform for efficiently and effectively planning, managing, communicating, and directing operations and emergency response. ReadyOp is used by local, state and federal government agencies, corporations, school districts, utilities, hospitals and others to manage and report daily operations as well as the ability to handle incidents and emergency situations. ReadyOp is offered as a software as a service (SAAS) program on an annual contract basis although an increasing number of clients have requested multi-year agreements.

In March 2018, the Company approved the spin-off of VoiceInterop, Inc. ("Voiceinterop"), one of the Company's wholly-owned subsidiaries, into a separate company under a Form S-1 registration filed with the United States Securities and Exchange Commission. Therefore, the Company has presented the operations of this subsidiary as discontinued operations.

In October 2019, the Company acquired the ReadyMed software platform from Collabria LLC. ReadyMed is a web-based secure communications platform initially designed for the healthcare industry. This includes hospitals, clinics, doctor's offices, health insurance companies, workers compensation insurance companies and many other segments of the healthcare industry. The platform provides caregivers with patient tracking capability and allows physicians and other healthcare entities to track patient progress after medical treatment and/or release from hospital care. The software also enables monitoring and reporting of patients in medium and long-term care. Additionally, the platform provides secure communications capabilities and record keeping to track the healing process of patients,record their recovery and monitor their medications. ReadyMed has proved beneficial for multiple clients in the healthcare industry due to the impact of the COVID-19 pandemic. The Company offers both the ReadyOp and ReadyMed capabilities to clients and usually refers to the platform as ReadyOp to avoid confusion in the marketplace of two products.

FOR THE THREE MONTHS ENDED DECEMBER 31, 2020 COMPARED TO THE THREE MONTHS ENDED DECEMBER 31, 2019.





Revenue

Revenues decreased 11% to $381,338 for the three months ended December 31, 2020 as compared to $427,795 for the three months ended December 31, 2019. The primary reason for the decrease in revenue was a decline in sales of ReadyOp hardware products from $56,080 in 2019 to $11,598 in 2020. Subscriptions to the ReadyOp platform increased from $329,684 in 2019 to $367,340 in 2020, or approximately 11%. Consulting fees and related income decreased from $42,031 in 2019 to $2,400 in 2020 due to less training activity in the three months ended December 31, 2020.





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Cost of Revenue

Cost of revenues was $60,334 for the three months ended December 31, 2020 as compared to $117,304 for the three months ended December 31, 2019. Gross profits were $321,004 and $310,491 for the three months ended December 31, 2020 and December 31, 2019, respectively. Gross margins increased from73% for the three months ended December 31, 2019 to 84% for the three months ended December 31, 2020. The increase in gross profit margins was primarily due to higher margins associated with sales of subscriptions to the ReadyOp platform.





Operating Expenses

Operating expenses increased 1% to approximately $284,465 for the three months ended December 31, 2020 compared to $282,002 for the three months ended December 31, 2019.The increase was primarily due to an increase in selling and administrative expense offset by a decrease in research and development expense and amortization expense. For the three months ended December 31, 2020, selling expenses were $160,859 compared to $130,340 for the three months ended December 31, 2019. This increase was primarily due to increased bad debt and commission expenses offset by a decrease in travel expense. General and administrative expenses increased by $7,311 or approximately 9% as a result of increase in insurance expense and SEC filings related fees and slightly offset by a decrease in legal fees and other general business expenses. Amortization and depreciation expense decreased by 95% from $10,878 for the three months ended December 31, 2019 to $451 for the three months ended December 31, 2020 due to the ReadyOp software platform that was fully amortized in the prior year. Research and development expenses were $55,729 for the three months ended December 31, 2019 as compared to $30,789 for the three months ended December 31, 2020. The decrease was primarily due to lower expenses associated with the development of a new technology associated with a patent owned by the University of South Florida Research Foundation. The Company has obtained the exclusive license to develop and market the technology associated with the patent.

Income from Continuing Operations

The Company's income from operations was $35,424 during the three months ended December 31, 2020 as compared to $24,598 for the three months ended December 31, 2019. The increase was due to the increase in gross profit from $310,491 to $321,004 in the three months ended December 31, 2019 and 2020, respectively and a decrease in amortization and depreciation expense from $10,878 to $451 in the three months ended December 31, 2019 and 2020, respectively.

Income (Loss) from Discontinued Operations

There was no income from discontinued operations during the three months ended December 31, 2020 compared to a loss of $23,426 for the three months ended December 31, 2019. The primary reason for the decrease was the deconsolidation of VoiceInterop from the Company in February 2020.

Net Income (Loss) Attributable to Common Stockholders

Net income attributable to common stockholders was $25,078 for the three months ended December 31, 2020 as compared to a net loss of $ 9,172 for the three months ended December 31, 2019.

LIQUIDITY AND CAPITAL RESOURCES

For the three months ended December 31, 2020, net cash used in operations of $1,927 was the result of a net income of $35,424, provision of bad debt of $16,500, a decrease in accounts receivable of $40,900, and a decrease in inventory of $594. These were offset by an increase in prepaid expenses of $14,404, a decrease of accounts payable of $14,870, and a decrease in deferred revenue of $70,540.

For the three months ended December 31, 2019, net cash used in operations of $102,713 was the result of a net income of $1,172, amortization expense of $10,878, decrease in accounts receivable of $56,391 offset by a recovery of bad debt of $13,335, a decrease in prepaid expenses of $23,656, an increase of accounts payable of $35,946, an increase in accrued expenses of $15,317. These were offset by an increase in inventory by $69,213 and a decrease in deferred revenue of $161,184.

Net cash used in financing activities was $15,615 for the three months ended December 31, 2020 which was a repayment of a stockholder note payable of $15,615. Net cash provided by financing activities was $75,339 for the three months December 31, 2019, which was attributable to proceeds from notes payable stockholders and repayment of notes payable to stockholders.


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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, 2020 for information regarding our critical accounting estimates.

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