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 June 30, 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 August 9, 2001 is 361,617,938 shares, $.0001 par value.
CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Balance Sheet - September 30, 2000 and
June 30, 2001 (unaudited) 2 and 3
Statement of Operations - For the Three
Months Ended June 30, 2000 and 2001 (unaudited) 4
Statement of Operations - For the Nine Months
Ended June 30, 2000 and 2001 (unaudited) 5
Statement of Stockholders' Equity - For the
Nine Months Ended June 30, 2001 (unaudited) 6
Statement of Cash Flows - For the Nine Months
Ended June 30, 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 June 30, 2001
(Unaudited)
ASSETS
September June
--------- ----
Current assets:
Cash and cash equivalents $ 435,238 $ 440,408
Accounts receivable 294,521 329,455
Income taxes receivable - 29,472
Inventories (Note 2) 164,252 155,334
Prepaid expenses 12,100 1,650
---------- ---------
Total current assets 906,111 956,319
Furniture and equipment, at cost:
Office furniture and equipment 154,285 80,055
Equipment under service contracts 1,270,655 1,356,631
---------- ---------
1,424,940 1,436,686
Less accumulated depreciation (1,096,481) (1,136,956)
Net furniture and equipment 328,459 299,730
Other assets:
Investment in partnership 432,801 459,856
Note receivable - employee 10,618 10,310
Deposits and other 3,769 3,337
Software development costs 128,693 147,498
------- -------
Total other assets 575,881 621,001
------- -------
$1,810,451 $1,877,050
========== ==========
See accompanying notes
2
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 2000 and June 30, 2001
(Unaudited)
LIABILITIES AND STOCKHOLDERS EQUITY
September June
--------- ----
Current liabilities:
Notes payable - shareholder (Note 4) $ 45,000 $ -
Accounts payable 9,496 -
Income taxes payable 46,000 -
Deferred revenue 124,170 127,477
--------- --------
Total current liabilities 224,666 127,477
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, 344,128,623 shares
(September) and 361,617,938 shares (June)
issued and outstanding 34,413 36,162
Additional paid-in capital 1,045,175 1,106,799
Retained earnings 405,197 606,612
--------- ---------
Total stockholders' equity 1,484,785 1,749,573
--------- ---------
$1,810,451 $1,877,050
========== ==========
See accompanying notes
3
CLANCY SYSTEMS INTERNATIONAL, INC.
INCOME STATEMENT
For the Three Months Ended June 30, 200 and 2001
(Unaudited)
2000 2001
---- ----
Revenues:
Sales $ 70,291 $ 64,556
Service contract income 312,438 359,557
Parking ticket collections 201,237 27,328
--------- --------
Total revenues 583,966 451,441
Costs and expenses:
Cost of sales 24,178 29,226
Cost of services 137,661 128,651
Cost of parking ticket collections 19,451 27,394
General and administrative 154,934 142,068
Stock compensation 875 -
Research and development (Note 5) 15,558 10,414
-------- --------
Total costs and expenses 352,657 337,753
-------- --------
Income from operations 231,309 113,688
Other income (expense):
Interest income 3,620 2,429
Interest expense (5,241) (916)
-------- -------
Total other income (expense) (1,621) 1,513
-------- -------
Income before provision for income
taxes and gain in equity-basis partnership 229,688 115,201
Provision for income taxes (75,127) (41,386)
Gain in equity basis partnership
(net of tax expense of $12,041 -2000 and
$484 -2001) 21,406 1,843
-------- -------
Net income $ 175,967 $ 75,658
========= =========
Basic net income per common share $ * $ *
========= =========
Weighted average number of shares outstanding 340,200,000 361,600,000
=========== ===========
* Less than $.01 per share
See accompanying notes
4
CLANCY SYSTEMS INTERNATIONAL, INC.
INCOME STATEMENT
For Nine Months Ended June 30, 2000 and 2001
(Unaudited)
2000 2001
---- ----
Revenues:
Sales $ 127,090 $ 125,279
Service contract income 912,917 1,013,991
Parking ticket collections 297,239 97,840
--------- ---------
Total revenues 1,337,246 1,237,110
Costs and expenses:
Cost of sales 66,555 85,341
Cost of services 382,550 359,238
Cost of parking ticket collections 84,424 92,008
General and administrative 439,071 424,965
Stock compensation 15,225 -
Research and development (Note 5) 45,060 25,814
--------- --------
Total costs and expenses 1,032,885 987,366
--------- --------
Income from operations 304,361 249,744
Other income (expense):
Interest income 4,906 9,199
Interest expense (17,921) (5,985)
--------- -------
Total other income (expense) (13,015) 3,214
--------- -------
Income before provision for income taxes
and gain in equity-basis partnership 291,346 252,958
Provision for income taxes (96,352) (72,105)
Gain in equity basis partnership (net of
tax expense of $16,100 -2000 and $6,493 -2001) 28,621 20,562
-------- -------
Net income $ 223,615 $ 201,415
========= =========
Basic net income per common share $ * $ *
========= =========
Weighted average number of shares outstanding 339,100,000 352,300,000
=========== ===========
* Less than $.01 per share
See accompanying notes
5
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended June 30, 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 aquisition of web
sites from and officer of the
Company (Note 4) 17,489,315 1,749 61,624 -
Net income for the nine months
ended June 30, 2001 - - - 201,415
------------ --------- ---------- ---------
361,617,938 $ 36,162 $1,106.799 $ 606,612
============ ========= ========== ==========
See accompanying notes
6
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Nine Months Ended June 30, 2000 and 2001
(Unaudited)
2000 2001
---- ----
Cash flows from operating activities:
Net income $ 223,615 $ 201,415
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 179,188 157,454
Deferred income tax (benefit) expense 4,050 (11,000)
Common stock issued for services and for
acquisition of web sites 15,225 61,624
Changes in assets and liabilities:
Accounts receivable (63,696) (34,934)
Notes receivable (10,638) -
Income taxes receivable - (29,472)
Inventories 2,502 8,918
Prepaid expenses 9,167 10,450
Gain in equity basis partnership (44,721) (27,055)
Accounts payable (11,245) (9,496)
Income taxes payable 78,061 (46,000)
Deferred revenue (6,886) 3,307
-------- --------
Total adjustments 151,007 83,796
-------- --------
Net cash provided by operating activities 374,622 285,211
Cash flows from investing activities:
Acquisition of furniture and equipment - net (81,095) (85,976)
Deposits and other (2,875) 308
Increase in software development costs (37,829) (59,373)
-------- --------
Net cash used in investing activities (121,799) (145,041)
Cash flows from financing activities:
Payments on note payable - bank (100,000) (90,000)
Payments on note payable - shareholder (75,000) (45,000)
-------- --------
Net cash used in financing activities (175,000) (135,000)
-------- --------
Decrease in cash and cash equivalents 77,823 5,170
Cash and cash equivalents at beginning of period 315,579 435,238
-------- --------
Cash and cash equivalents at end of period $393,402 $440,408
======== ========
See accompanying notes
7
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 2001
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 June 30, 2001, and the results of
operations and cash flows for the periods ended June 30, 2000 and 2001.
2. Inventories
Inventories consist of the following at:
September 30, June 30,
2000 2001
---- ----
Finished goods $ 7,800 $ 46,600
Work in process - 23,300
Purchased parts and supplies 156,452 85,434
------------ ----------
$ 164,252 $ 155,334
3. Income taxes
The provision for income taxes for the nine months ended June 30,
2000 and 2001 is based on the expected tax rate for the year.
As of September 30, 2000 and June 30, 2001, total deferred tax
assets and liabilities are as follows:
September 30, June 30,
2000 2001
---- ----
Deferred tax assets $ 74,000 $ 57,000
Deferred tax liabilities (85,000) (57,000)
---------- ----------
$ (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. The
notes were paid in full during the three months ended 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. The note was paid in full during the
three months ended June 30, 2001.
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 development 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 June 30, 2001, the Company had working capital of $828,842 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 June 30, 2001, the Company generated revenues
from contract sales from its professional services contracts, sales,
remit-online payment processing, and privatization contracts. New
contracts signed during the quarter included Children's Hospital of
Denver.
Revenues during the quarter were lower than the prior year's quarter
by $132,525 because during the prior year's quarter the Company had a
one time event of selling the Maywood backlog tickets to the Village
for $150,000. Expenses decreased by 4% over the prior year's quarter.
The Company reported a profit of $75,658 for the 2001 quarter as
compared to a net profit of $175,967 for the prior year's quarter,
which included the $150,000 Maywood buyout.
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.
10
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.
11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
- --------------------------
On September 19, 2000, the Company filed an action in Suffolk
County Superior Court against John Short, Syracuse, New York, who
posted as Darth4, MrDarth4, and other aliases on Raging Bull and other
message boards. Relief sought includes monetary damages for harm done
to the Company and its officers in an amount not yet determined,
retraction of false and damaging statements and for the subject to
cease and desist posting or discussing the Company, its officers,
and any activities related thereto. Subsequent to June 30, 2001, the
Company has filed for a default judgement against Mr. Short.
Item 2. Changes in Securities and Use of Proceeds
None
Item 6. Exhibits and Reports on Form 8-K
None
12
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: August 13, 2001 CLANCY SYSTEMS INTERNATIONAL, INC.
(Registrant)
By: /s/ Stanley J. Wolfson
----------------------------------
Stanley J. Wolfson, President
and Chief Executive Officer
13