UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 33-4882-D
CLANCY SYSTEMS INTERNATIONAL, INC.
(Exact name of Registrant as specified in its charter)
Colorado 84-1027964
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
2250 S. Oneida #308, Denver, Colorado 80224
(Address of principal executive offices and Zip Code)
(303) 753-0197
(Registrant's telephone number)
N/A
(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 preceding 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
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's classes of common stock,
as of May 14, 2001 is 361,617,938 shares, $.0001 par value.
CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX
Page No.
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PART I. FINANCIAL INFORMATION
Balance Sheet - September 30, 2000 and March 31, 2001
(unaudited) 2 and 3
Statement of Operations - For the Three Months Ended
March 31, 2000 and 2001 (unaudited) 4
Statement of Operations - For the Six Months Ended
March 31, 2000 and 2001 (unaudited) 5
Statement of Stockholders' Equity - For the Six Months
Ended March 31, 2001 (unaudited) 6
Statement of Cash Flows - For the Six Months Ended
March 31, 2000 and 2001 (unaudited) 7
Notes to Unaudited Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION 11
1
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 2000 and March 31, 2001
ASSETS
September March
--------- -----
Current assets:
Cash and cash equivalents $ 435,238 $ 396,111
Accounts receivable 294,521 299,029
Income taxes receivable - 59,472
Inventories (Note 2) 164,252 168,978
Prepaid expenses 12,100 5,133
--------- ---------
Total current assets 906,111 928,723
Furniture and equipment, at cost:
Office furniture and equipment 154,285 80,056
Equipment under service contracts 1,270,655 1,323,863
---------- ---------
1,424,940 1,403,919
Less accumulated depreciation (1,096,481) (1,096,366)
---------- ----------
Net furniture and equipment 328,459 307,553
Other assets:
Investment in partnership 432,801 457,529
Note receivable - employee 10,618 10,555
Deposits and other 3,769 3,481
Deferred tax asset (Note 3) - -
Software development costs 128,693 141,303
---------- ---------
Total other assets 575,881 612,868
---------- ---------
$ 1,810,451 $ 1,849,144
============ ===========
See accompanying footnotes
2
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 2000 and March 31, 2001
LIABILITIES AND STOCKHOLDERS' EQUITY
September March
--------- -----
Current liabilities:
Notes payable - shareholder (Note 4) $ 45,000 $ 45,000
Note payable - bank (Note 4) - 20,000
Accounts payable 9,496 3,775
Income taxes payable 46,000 -
Deferred revenue 124,170 106,454
--------- --------
Total current liabilities 224,666 175,229
Long-term note payable - bank 90,000 -
Deferred tax liability (Note 3) 11,000 -
Stockholders' equity (Note 5):
Preferred stock, $.0001 par value;
100,000,000 shares authorized, none issued - -
Common stock, $.0001 par value; 800,000,000
shares authorized, 334,128,623 shares
(September) and 361,617,938 shares (March)
issued and outstanding 34,413 36,162
Additional paid-in capital 1,045,175 1,106,799
Retained earnings 405,197 530,954
---------- ---------
Total stockholders' equity 1,484,785 1,673,915
---------- ---------
$ 1,810,451 $ 1,849,144
============= ===========
See accompanying footnotes
3
CLANCY SYSTEMS INTERNATIONAL, INC.
INCOME STATEMENT
For the Three Months Ended March 31, 2000 and 2001
(Unaudited)
2000 2001
---- ----
Revenues:
Sales $ 40,993 $ 47,186
Service contract income 280,693 285,312
Parking ticket collections 50,599 46,593
-------- --------
Total revenues 372,285 379,091
Costs and expenses:
Cost of sales 19,422 22,834
Cost of services 112,555 110,741
Cost of parking ticket collections 33,106 35,982
General and administrative 137,736 152,080
Research and development 17,575 4,977
-------- --------
Total costs and expenses 320,394 326,614
-------- --------
Income from operations 51,891 52,477
Other income (expense):
Interest income 878 3,022
Interest expense (5,792) (2,251)
-------- --------
Total other income (expense) (4,914) 771
Income before provision for income taxes and
gain in equity-basis partnership 46,977 53,248
Provision for income taxes (15,825) (7,805)
Gain in equity basis partnership (net of tax
expense of $1,959 -2000 and $4858 -2001) 3,315 16,672
-------- --------
Net income $ 34,467 $ 62,115
======== ========
Basic net income per common share $ * $ *
Weighted average number of shares
outstanding 337,600,000 351,300,000
* Less than $.01 per share
See accompanying footnotes
4
CLANCY SYSTEMS INTERNATIONAL, INC.
INCOME STATEMENT
For Six Months Ended March 31, 2000 and 2001
(Unaudited)
2000 2001
---- ----
Revenues:
Sales $ 56,799 $ 60,723
Service contract income 600,479 654,434
Parking ticket collections 96,002 70,512
-------- ---------
Total revenues 753,280 785,669
Costs and expenses:
Cost of sales 42,377 56,115
Cost of services 244,889 230,587
Cost of parking ticket collections 64,973 64,614
General and administrative 298,487 282,897
Research and development 29,502 15,400
-------- ---------
Total costs and expenses 680,228 649,613
-------- ---------
Income from operations 73,052 136,056
Other income (expense):
Interest income 1,286 6,770
Interest expense (12,680) (5,069)
-------- ---------
Total other income (expense) (11,394) 1,701
-------- ---------
Income before provision for income taxes and
gain in equity-basis partnership 61,658 137,757
Provision for income taxes (21,225) (30,719)
Gain in equity basis partnership (net of
tax expenseof $4,059 -2000 and $6,009 -2001) 7,215 18,719
-------- ---------
Net income $ 47,648 125,757
======== =========
Basic net income per common share $ * $ *
Weighted average number of shares outstanding 337,200,000 347,700,000
* Less than $.01 per share
See Accompanying Footnotes
5
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
For the Six Months Ended March 31, 2001
(Unaudited)
Additional
Common stock paid-in Retained
Shares Amount capital earnings
Balance, September 30, 2000 344,128,623 $ 34,413 $ 1,045,175 $ 405,197
Issuance of common stock in exchange
for acquisition of web sites from
an officer of the Company (Note 4) 17,489,315 1,749 61,624 -
Net loss for the six months ended
March 31, 2001 - - - 125,757
----------- ---------- ----------- ---------
Balance, March 31, 2001 361,617,938 $ 36,162 $ 1,106,799 $ 530,954
=========== ========== ============ =========
See Accompanying Notes
6
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended March 31, 2000 and 2001
2000 2001
---- ----
Cash flows from operating activities:
Net income $ 47,648 $ 125,757
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 133,386 101,981
Deferred income tax (benefit) expense 2,700 (11,000)
Common stock issued for services and for
aquisition of web sites 14,350 61,624
Changes in assets and liabilities:
Accounts receivable (62,570) (4,508)
Income taxes receivable - (59,472)
Inventories (2,846) (4,726)
Prepaid expenses 5,500 6,967
Gain in equity basis partnership (11,274) (24,728)
Accounts payable (7,382) (5,721)
Income taxes payable 7,784 (46,000)
Deferred revenue (9,239) (17,716)
------- -------
Total adjustments 70,409 ( 3,299)
------- -------
Net cash provided by operating
activities 118,057 122,458
Cash flows from investing activities:
Acquisition of furniture and equipment - net (54,635) (53,209)
Increase in deposits and other - -
Increase in deposits and other (14,127) 63
Increase in software development costs (26,261) (38,439)
Investment in partnership - -
------- -------
Net cash used in investing activities (95,023) (91,585)
Cash flows from financing activities:
Payments on note payable - bank (40,000) (70,000)
Proceeds from note payable - related party - -
Payments on note payable - shareholder (65,000) -
------- -------
Net cash used in financing activities (105,000) (70,000)
Decrease in cash and cash equivalents (81,966) (39,127)
Cash and cash equivalents at beginning of period 315,579 435,238
------- -------
Cash and cash equivalents at end of period $233,613 $396,111
======== ========
See Accompanying Footnotes
7
1. Basis of presentation
The accompanying financial statements have been prepared by the Company,
without audit. In the opinion of management, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal
recurring accruals) necessary for a fair presentation of the financial
position as of September 30, 2000 and March 31, 2001, and the results
of operations and cash flows for the periods ended March 31, 2000 and
2001.
2. Inventories
Inventories consist of the following at:
September 30, March 31,
2000 2001
------------ ---------
Finished goods $ 7,800 $ 8,449
Work in process - 25,347
Purchased parts and supplies 156,452 135,182
----------- ----------
$ 164,252 $ 168,978
=========== ===========
3. Income taxes
The provision for income taxes for the six months ended March 31,
2000 and 2001 is based on the expected tax rate for the year.
As of September 30, 2000 and March 31, 2001, total deferred tax
assets and liabilities are as follows:
September 30, March 31,
2000 2001
------------ ---------
Deferred tax assets $ 74,000 $ 58,000
Deferred tax liabilities (85,000) (58,000)
----------- -----------
$ (11,000) $ -
=========== ============
4. Notes payable
Related party:
During the year ended September 30, 1999, the Company executed five
notes payable from a major shareholder of the Company for a total of
$120,000. The notes bear interest at 8 and 9% annually. During the year
ended September 30, 2000, the due dates of two of the remaining notes
for a total of $45,000 were extended to May 1 and June 30, 2001.
8
4. Notes payable (continued)
Bank:
In October 2000, the Company extended the due date of its note payable
- - bank to October 15, 2001. The note bears interest at 9%, with interest
payable monthly and is secured by a certificate of deposit in the name
of two officers of the Company.
5. Stockholders' equity
In November 1999, the Company entered into a letter of intent to acquire
two website related businesses owned and developed by the Company's
president and major shareholder for shares of the Company's common stock
valued at $255,344 (17,489,315 shares of common stock at $.0146 per share).
The businesses were acquired in February 2001 and were recorded by the
Company at the president's historical cost basis in the trademarks and
proprietary technology related to the websites which approximates the
par value of the shares to be issued of $1,749. This has been included
on the balance sheet under software developmehnt costs. The income tax
benefit to be derived from the amortization of the tax basis of the web
sites is recorded as an addition of $61,624 to additional paid-in capital.
9
Item 2.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Material Changes in Financial Condition
At March 31, 2001, the Company had working capital of $753,494 derived
primarily from contract sales, as compared to working capital of $681,445
at September 30, 2000. The Company anticipates that working capital will
be sufficient to meet its working capital requirements for the current
year. Funds will continue to be used for general and administrative
purposes, equipment purchases, equipment manufacturing, travel, marketing
and research and development.
Material Changes in Results of Operations
During the quarter ended March 31, 2001, the Company generated revenues
from contract sales from its professional services contracts, sales, and
privatization contracts. Berkeley, CA and Oklahoma City, OK each generated
revenues in excess of 5% of total revenues.
Revenues during the quarter were higher than the prior year's quarter by
2% which is primarily due to a larger client base. Expenses increased by
2% over the prior year's quarter due to an increase in general and
administrative expenses. The Company reported net income of $62,115 for
the 2001 quarter as compared to a net profit of $34,467 for the prior
year's quarter.
Forward Looking Information
Statements of the Company's or management's intentions, beliefs,
anticipations, expectations and similar expressions concerning future
events contained in this document constitute "forward looking statements"
as defined in the Private Securities Litigation Reform Act of 1995. As with
any future event, there can be no assurance that the events described in
the forward looking statements made in this report will occur or that the
results of future events will not vary materially from those described in
the forward looking statements in this document. Important factors that
could cause the Company's actual performance and operating results to differ
materially from the forward looking statements include, but are not limited
to, (i) the ability of the Company to obtain new customers, (ii) the ability
of the Company to obtain sufficient financing for business opportunities, (iii)
the ability of the Company to reduce costs and thereby maintain adequate profit
margins.
Chat Room Disclaimer
This forum of exposure to publicly traded companies presents a venue for
the public to inquire about companies from other individuals as well as
post opinions.
The Company has no way to regulate postings nor monitor information posed
on these boards. Management can only provide accurate information to
shareholders and potential shareholders when contacted directly and such
information can only be provided when it is based on fact and has been
filed as required by law with the Securities and Exchange Commission and
other regulatory agencies.
10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities and Use of Proceeds
(c) The Company issued 17,489,315 shares of its common stock to Stanley
J. Wolfson, an officer and director, in exchange for 2 web sites
developed by him. The shares were issued pursuant to an exemption
under Section 4(2) of the Securities Act of 1933. No commissions or
finders fees were paid on the transaction.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) During the quarter ended March 31, 2001, the Registrant has filed one
report on Form 8-K dated March 6, 2001, reporting on an Item 2 event.
11
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: May 14, 2001 CLANCY SYSTEMS INTERNATIONAL, INC.
(Registrant)
By: /s/ Stanley J. Wolfson
Stanley J. Wolfson, President
and Chief Executive Officer
12