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 December 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.
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(Exact name of Registrant as specified in its charter)
Colorado 84-1027964
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(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
2250 S. Oneida #308, Denver, Colorado 80224
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(Address of principal executive offices and Zip Code)
(303) 753-0197
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(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 Mr. 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 February 14, 2002 is 361,617,938 shares, $.0001 par value.
CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
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Balance Sheet - September 30, 2001 and December 31, 2001 (unaudited) 2 and 3
Statement of Income - For the Three Months Ended December 31, 2000
and 2001 (unaudited) 4
Statement of Stockholders' Equity - For the Three Months Ended
December 31, 2001 (unaudited) 5
Statement of Cash Flows - For the Three Months Ended
December 31, 2000 and 2001 (unaudited) 6
Notes to Unaudited Financial Statements 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations 8
PART II. OTHER INFORMATION 9
1
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 2001 and December 31,2001
(Unaudited)
ASSETS
------
September December
---------- ---------
Current assets:
Cash and cash equivalents $ 385,491 $ 456,992
Accounts receivable 342,323 287,143
Income tax refund receivable 55,346 48,316
Inventories (Note 2) 144,602 147,494
Prepaid expenses 14,645 10,436
---------- ---------
Total current assets 942,407 950,381
Furniture and equipment, at cost:
Office furniture and equipment 97,501 114,501
Equipment under service contracts 982,290 995,323
---------- ---------
1,079,791 1,109,824
Less accumulated depreciation (811,211) (843,478)
---------- ---------
Net furniture and equipment 268,580 266,346
Other assets:
Investment in partnership 454,159 446,431
Deferred tax asset (Note 3) 46,400 41,900
Note receivable - employee 10,277 10,242
Deposits and other 3,194 3,050
Software development costs, net of
accumulated amortization 146,035 138,690
--------- ---------
Total other assets 660,065 640,313
--------- ---------
$ 1,871,052 $ 1,857,040
========= =========
See accompanying notes.
2
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 2001 and December 31,2001
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
September December
--------- ---------
Current liabilities:
Accounts payable $ 16,008 $ -
Deferred revenue 114,266 102,284
--------- ---------
Total current liabilities 130,274 102,284
Stockholders' equity:
Preferred stock, $.0001 par value;
100,000,000 shares
authorized, none issued - -
Common stock, $.0001 par value;
800,000,000 shares
authorized, 361,617,938 shares
issued and outstanding
36,162 36,162
Additional paid-in capital 1,131,397 1,131,397
Retained earnings 573,219 587,197
--------- ---------
Total stockholders' equity 1,740,778 1,754,756
--------- ---------
$ 1,871,052 $ 1,857,040
========= =========
See accompanying notes.
3
CLANCY SYSTEMS INTERNATIONAL, INC.
INCOME STATEMENTS
For the Three Months Ended December 31, 2000 and 2001
(Unaudited)
2000 2001
-------- -------
Revenues:
Sales $ 13,537 $ 39,395
Service contract income 369,122 342,319
Parking ticket collections 23,919 21,230
--------- ---------
Total revenues 406,578 402,944
Costs and expenses:
Cost of sales 33,281 34,538
Cost of services 119,846 114,238
Cost of parking ticket collections 28,632 26,274
General and administrative 130,817 181,408
Research and development 10,423 14,123
--------- ---------
Total costs and expenses 322,999 370,581
--------- ---------
Income from operations 83,579 32,363
Other income (expense):
Interest income 3,748 951
Interest expense (2,818) -
--------- ---------
Total other income (expense) 930 951
--------- ---------
Income before provision for income taxes
and gain in equity-basis partnership 84,509 33,314
Provision for income taxes (22,914) (14,545)
Gain (loss) in equity basis partnership
(net of tax expense of $1,151 -2000
and tax benefit of $2,936 -2001) 2,047 (4,791)
--------- ---------
Net income $ 63,642 $ 13,978
========= =========
Basic net income per common share $ * $ *
========= =========
Weighted average number of
shares outstanding 337,600,000 361,600,000
=========== ===========
* Less than $.01 per share
See accompanying notes.
4
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Months Ended December 31, 2001
(Unaudited)
Common stock Additional
paid-in Retained
Shares Amount capital earnings
------ ------ ---------- --------
Balance, September 30, 2001 361,617,938 $ 36,162 $ 1,131,397 $ 573,219
Net income for the three
months ended
December 31, 2001 - - - 13,978
------------ ----------- --------------- -----------
Balance, December 31, 2001 361,617,938 $ 36,162 $ 1,131,397 $ 587,197
============ =========== =============== =============
See accompanying notes.
5
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Three Months Ended December 31, 2000 and 2001
(Unaudited)
2000 2001
------- --------
Cash flows from operating activities:
Net income $ 63,642 $ 13,978
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 49,527 47,431
Loss (gain) in equity basis partnership (3,198) 7,728
Deferred income tax expense 3,000 4,500
Changes in assets and liabilities:
Accounts receivable (51,477) 55,180
Inventories (11,108) (2,892)
Prepaid expenses 3,484 4,209
Accounts payable (9,496) (16,008)
Income taxes payable (45,795) 7,030
Deferred revenue 8,403 (11,982)
_________ _________
Total adjustments (56,660) 95,196
--------- ---------
Net cash provided by operating activities 6,982 109,174
Cash flows from investing activities:
Acquisition of furniture and equipment - net (40,288) (30,033)
Receipts from note receivable 31 35
Increase in software development costs (18,181) (7,675)
Net cash used in investing activities (58,438) (37,673)
-------- -------
Cash flows from financing activities:
Payments on note payable - bank (20,000) -
---------- ---------
Net cash used in financing activities (20,000) -
---------- ---------
Increase (decrease) in cash and cash equivalents (71,456) 71,501
Cash and cash equivalents at beginning of period 435,238 385,491
---------- ---------
Cash and cash equivalents at end of period $ 363,782 $ 456,992
========== =========
See accompanying notes.
6
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 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, 2001 and December 31, 2001, and the results of
operations and cash flows for the periods ended December 31, 2000 and 2001.
2. Inventories
Inventories consist of the following at:
September 30, December 31,
2001 2001
--------- ---------
Finished goods $ 24,233 $ 46,986
Work in process 1,885 20,102
Purchased parts and supplies 118,484 80,406
--------- ---------
$ 144,602 $ 147,494
========= =========
3. Income taxes
The provision for income taxes for the three months ended December 31, 2000
and 2001 is based on the expected tax rate for the year.
As of September 30, 2001 and December 31, 2001, total deferred tax assets
and liabilities are as follows:
September 30, December 31,
2001 2001
------------ -------------
Deferred tax assets $ 118,100 $ 125,800
Deferred tax liabilities (71,700) (83,900)
------------ -------------
$ 46,400 $ 41,900
============ =============
7
Item 2.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Material Changes in Financial Condition
At December 31, 2001, the Company had working capital of $848,097 derived
primarily from contract sales, as compared to working capital of $812,133
at September 30, 2001. 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 December 31, 2001, the Company generated revenues
from contract sales from its professional services contracts, sales,
remit-online payment processing, and privatization contract. New contracts
signed during the quarter included Fairfax County, Virginia; Middlesex
Sheriff's Department; and River Falls, Wisconsin.
Revenues during the quarter were lower than the prior year's quarter by 1%.
Expenses increased by 15% over the prior year's quarter, primarily attributed
to legal expenses and capturing an operating loss from the Company's equity
based investment in Urban Transit Solutions. The Company reported a profit
of $13,978 for the quarter as compared to a net profit of $63,642 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 posted
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.
8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On September 19, 2000, the Company filed an action in Suffolk County
Superior Court against Mr. John Mr. 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.
In a judgment rendered by the Superior Court Department of the Trial Court
of Suffolk County, a default judgment against Mr. Short was entered on
October 31, 2001. The Judgment orders Mr. Short to pay the Company
attorney's fees and costs of $16,699.61 and an additional fine of $50,000
for his willful failure to comply with a Court order of June 28, 2001.
Mr. Short filed an appeal on December 2, 2001, 3 days late of the 30 day
appeal period. The appeal was not allowed and the Court judgment of October
31, 2001 stands as issued.
Item 2. Changes in Securities and Use of Proceeds
None
Item 6. Exhibits and Reports on Form 8-K
None
9
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: February 14, 2002 CLANCY SYSTEMS INTERNATIONAL, INC.
(Registrant)
By: /s/ Stanley J. Wolfson
----------------------------------
Stanley J. Wolfson, President
and Chief Executive Officer
10