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CLEARTRONIC, INC. - 10-Q/A - Management's Discussion and Analysis or Plan of Operation.(Edgar Glimpses Via Acquire Media NewsEdge) Overview Cleartronic, Inc. (the "Company," formerly GlobalTel IP, Inc.) was incorporated in Florida on November 15, 1999. The Company, through its wholly owned subsidiary, VoiceInterop, Inc., designs, builds 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, 2013 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 2012 Revenues Revenues decreased to $114,568 for the three months ended March 31, 2013 as compared to $260,845 for the three months ended March 31, 2012. During the three months ended March 31, 2013 there were no installations of interoperable communications systems resulting in the comparative decrease in revenues. For the three months ended March 31, 2012, installation revenue from an airport contract amounted to $150,725 which was approximately 58% of total revenue for the period. Revenues from the sale of proprietary hardware and software increased approximately $23,000 or 31% during the three month period ended March 31, 2013. Cost of Revenues Cost of revenues was $59,731 for the three months ended March 31, 2013 as compared to $205,673 for the three months ended March 31, 2012. The decline was primarily due to no installation costs related to installation revenue during the three months ended March 31, 2013. Costs associated with the sale of proprietary hardware and software increased during the three month period ended March 31, 2103 due to increased sales of these products. Gross profits were $54,837 and $55,172 for the three months ended March 31, 2013 and 2012, respectively. The primary reason for the improvement in gross profit margin is the lower costs associated with the sale of proprietary hardware and software. Operating Expenses Operating expenses for the three months ended March 31, 2013 were $182,132 compared to $241,144 for the three months ended March 31, 2012. For the three months ended March 31, 2013, selling expenses decreased $30,961 or approximately 78% because of a reduction in sales and marketing expenses. General and administrative expenses increased $34,398 or approximately 25% primarily caused by an increase in use of outside consulting services. Research and development expenses were $0 for the three months ended March 31, 2013 as compared to $60,841 for the three months ended March 31, 2012, because of managements decision not to invest in new product development. Loss from Operations The Company's net loss from operations decreased to $127,295 during the three months ended March 31, 2013 as compared to $185,972 for the three months ended March 31, 2012. The primary reason for this decrease was due to a decrease in operating expenses of approximately 25%. Net Loss Net loss per common share was $0.00021 and $4.464 for the three months ended March 31, 2013 and 2012, respectively. The reduction in net loss per common share was due primarily to the recapitalization of the Company through the issuance Preferred shares in exchange for cancellation of common shares, the issuance of Preferred shares in exchange for the cancellation of accounts payable and accrued expenses and the issuance 2,000,000,000 restricted shares of common stock to the Company's CEO. FOR THE SIX MONTHS ENDED MARCH 31, 2013 COMPARED TO THE SIX MONTHS ENDED MARCH 31, 2012 Revenues Revenues from operations were $216,393 for the six months ended March 31, 2013 as compared to $359,974 for the six months ended March 31, 2012. The decrease was primarily due to a lack of installation contracts to furnish materials, equipment and supervision as well as labor and other services for installation of interoperable communication systems for enterprise clients. 13 Cost of Revenues Cost of revenues was $114,512 for the six months ended March 31, 2013, as compared to $269,772 for the six months ended March 31, 2012. This decrease was due primarily to a lack of enterprise communication projects and their associated costs. Gross profits were $101,881 and $90,202 for the six months ended March 31, 2013 and 2012, respectively. The increase in gross profits was primarily due to higher gross margins earned on sales of proprietary hardware and software projects. Operating Expenses Operating expenses for the six months ended March 31, 2013 were $1,471,127 compared to $553,818 for the six months ended March 31, 2012. This increase was primarily due to the recognition of stock compensation issued under a new employment agreement with the Company's CEO. Loss from Operations The Company's net loss increased to $1,369,246 during the six months ended March 31, 2013 as compared to a loss of $463,616 for the six months ended March 31, 2012. The primary reason for this increase was a 310% increase in administrative expenses to $1,452,018 for the six months ended March 31, 2013 compared to $355,406 for the same period in 2012. This increase was primarily due to the recognition of stock compensation issued under a new employment agreement with the Company's CEO and losses incurred from restructuring activities. Net Loss Net loss per common share was $0.003 and $11.237 for the six months ended March 31, 2013 and 2012, respectively. The reduction in net loss per common share was due primarily to the recapitalizationg of the Company through the issuance Preferred shares in exchange for cancellation of common shares, the issuance of Preferred shares in exchange for the cancellation of accounts payable and accrued expenses and the issuance 2,000,000,000 restricted shares of common stock to the Company's CEO which resulted in a larger number of common shares outstanding. LIQUIDITY AND CAPITAL RESOURCES Net cash used in operating activities was $84,736 for the six months ended March 31, 2013 compared to $112,770 for the six months ended March 31, 2012. This decrease was mainly attributable to the recapitalization efforts implemented by the Company using non-cash expenditures. Accounts payable and accrued expenses were reduced through the issuance of Preferred stock in exchange for the cancellation of those liabilities in addition to the issuance of Common and Preferred stock for payment of services. Net cash provided by financing activities was $60,000 for the six months ended March 31, 2013 compared to $137,920 for the six months ended March 31, 2012. The decrease was due to the payment of convertible debt financing during the period. 14 Our obligations are being met on a month-to-month basis as cash becomes available. We have made a concentrated effort to restructure the capital of the Company through the issuance of Preferred stock in exchange for cancellation of debt, issuance of stock in lieu of cash paid for services and exchanging preferred stock for common stock. We believe that this restructure will put the Company in a better position to secure an acquisition or consummate a merger with a private company. There can be no assurance that the Company's efforts in this restructure will be successful or that 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 $75,000 per month. In order for us to cover our monthly operating expenses, we would have to generate revenues of approximately $180,000 per month. Accordingly, in the absence of revenues, we will need to secure $75,000 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 $900,000 in equity or debt capital. If we are unsuccessful in securing sufficient capital or revenues, we would have to cease business in approximately 90 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. 15 |