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, 2002.
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- --- EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number: 33-4882-D
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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
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(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
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APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's classes of common stock, as
of May 13, 2002 is 361,617,938 shares, $.0001 par value.
CLANCY SYSTEMS INTERNATIONAL, INC.
Page No.
PART I. FINANCIAL INFORMATION
Balance Sheet - September 30, 2001 and March 31, 2002 (unaudited) 2 and 3
Statement of Income For the Three Months Ended March 31, 2001
and 2002 (unaudited) 4
Statement of Income - For the Six Months Ended March 31, 2001
and 2002 (unaudited) 5
Statement of Stockholders' Equity - For the Six Months Ended
March 31, 2002 (unaudited) 6
Statement of Cash Flows - For the Six Months Ended
March 31, 2001 and 2002 (unaudited) 7
Notes to Unaudited Financial Statements 8
Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II. OTHER INFORMATION 10
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 2001 and March 31, 2002
(Unaudited)
ASSETS
2001 2002
------------ ------------
Current assets:
Cash and cash equivalents $ 385,491 $ 332,611
Accounts receivable 342,323 308,824
Income tax refund receivable 55,346 43,331
Inventories (Note 2) 144,602 148,427
Prepaid expenses 14,645 108,350
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Total current assets 942,407 941,543
Furniture and equipment, at cost:
Office furniture and equipment 97,501 83,638
Equipment under service contracts 982,290 1,029,218
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1,079,791 1,112,856
Less accumulated depreciation (811,211) (830,279)
------------ ------------
Net furniture and equipment 268,580 282,577
Other assets:
Investment in partnership 454,159 446,539
Deferred tax asset (Note 3) 46,400 37,400
Note receivable - employee 10,277 10,207
Deposits and other 3,194 2,906
Software development costs, net
of accumulated amortization 146,035 144,657
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Total other assets 660,065 641,709
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$ 1,871,052 $ 1,865,829
============ ============
See accompanying notes.
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CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 2001 and March 31, 2002
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
2001 2002
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Current liabilities:
Accounts payable $ 16,008 $ -
Deferred revenue 114,266 78,558
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Total current liabilities 130,274 78,558
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 573,219 619,712
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Total stockholders' equity 1,740,778 1,787,271
------------ ------------
$ 1,871,052 $ 1,865,829
============ ============
See accompanying notes.
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CLANCY SYSTEMS INTERNATIONAL, INC.
INCOME STATEMENT
For the Three Months Ended March 31, 2001 and 2002
(Unaudited)
2001 2002
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Revenues:
Sales $ 47,186 $ 49,358
Service contract income 285,312 345,656
Parking ticket collections 46,593 32,593
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Total revenues 379,091 427,607
Costs and expenses:
Cost of sales 22,834 13,055
Cost of services 110,741 133,973
Cost of parking ticket collections 35,982 25,401
General and administrative 152,080 191,522
Research and development 4,977 12,122
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Total costs and expenses 326,614 376,073
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Income from operations 52,477 51,534
Other income (expense):
Interest income 3,022 724
Interest expense (2,251) -
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Total other income (expense) 771 724
Income before provision for income taxes and gain
in equity-basis partnership 53,248 52,258
Provision for income taxes (Note 3) (7,805) (19,810)
Gain in equity basis partnership
(net of tax expense of
$4,858 -2001 and $40 -2002) 16,672 67
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Net income $ 62,115 $ 32,515
============ ============
Basic net income per common share $ * $ *
============ ============
Weighted average number of shares
outstanding 351,300,000 361,600,000
* Less than $.01 per share
See accompanying notes.
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CLANCY SYSTEMS INTERNATIONAL, INC.
INCOME STATEMENT
For the Six Months Ended March 31, 2001 and 2002
(Unaudited)
2001 2002
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Revenues:
Sales $ 60,723 $ 88,753
Service contract income 654,434 687,975
Parking ticket collections 70,512 53,823
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Total revenues 785,669 830,551
Costs and expenses:
Cost of sales 56,115 47,593
Cost of services 230,587 248,211
Cost of parking ticket collections 64,614 51,675
General and administrative 282,897 372,930
Research and development 15,400 26,245
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Total costs and expenses 649,613 746,654
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Income from operations 136,056 83,897
Other income (expense):
Interest income 6,770 1,675
Interest expense (5,069) -
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Total other income (expense) 1,701 1,675
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Income before provision for income
taxes and gain in equity-basis
partnership 137,757 85,572
Provision for income taxes (Note 3) (30,719) (34,355)
Gain (loss) in equity basis
partnership (net of tax expense
of $6,009 -2001 and tax benefit of
$2,896 -2002) 18,719 (4,724)
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Net income $ 125,757 $ 46,493
============ ============
Basic net income per common share $ * $ *
============ ============
Weighted average number of shares
outstanding 347,700,000 361,600,000
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* Less than $.01 per share
See accompanying notes
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CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended March 31, 2002
(Unaudited)
Additional
Common stock paid-in Retained
Shares Amount capital earnings
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Balance,
September 30, 2001 361,617,938 $ 36,162 $ 1,131,397 $ 573,219
Net income for the six
months ended
March 31, 2002 - - - 46,493
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Balance,
March 31, 2002 361,617,938 $ 36,162 $ 1,131,397 $ 619,712
========== ========= =========== =========
See accompanying notes
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CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended March 31, 2001 and 2002
(Unaudited)
2001 2002
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Cash flows from operating activities:
Net income $ 125,757 $ 46,493
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 101,981 97,458
Loss (gain) in equity basis partnership (24,728) 7,620
Deferred income tax expense (benefit) (11,000) 9,000
Common stock issued for services
and for acquisition of web sites 61,624 -
Changes in assets and liabilities:
Accounts receivable (4,508) 33,499
Income taxes receivable (59,472) 12,015
Inventories (4,726) (3,825)
Prepaid expenses 6,967 (93,705)
Accounts payable (5,721) (16,008)
Income taxes payable (46,000) -
Deferred revenue (17,716) (35,708)
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Total adjustments (3,299) 10,346
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Net cash provided by operating activities 122,458 56,839
Cash flows from investing activities:
Acquisition of furniture and equipment
- net (53,209) (81,028)
Decrease in deposits and other 63 70
Increase in software development costs (38,439) (28,761)
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Net cash used in investing activities (91,585) (109,719)
Cash flows from financing activities:
Payments on note payable - bank (70,000) -
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Net cash used in financing activities (70,000) -
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Decrease in cash and cash equivalents (39,127) (52,880)
Cash and cash equivalents at beginning of
period 435,238 385,491
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Cash and cash equivalents at end of
period $ 396,111 $ 332,611
============ ============
See accompanying notes.
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CLANCY SYSTEMS INTERNATIONAL, INC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2002
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 March 31, 2002, and the results of
operations and cash flows for the periods ended March 31, 2001 and 2002.
2. Inventories
Inventories consist of the following at:
September 30, March 31,
2001 2002
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Finished goods $ 24,233 $ 40,472
Work in process 1,885 13,495
Purchased parts and supplies 118,484 94,460
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$ 144,602 $ 148,427
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3. Income taxes
The provision for income taxes for the six months ended March 31, 2001 and
2002 is based on the expected tax rate for the year.
As of September 30, 2001 and March 31, 2002, total deferred tax assets and
liabilities are as follows:
September 30, March 31,
2001 2002
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Deferred tax assets $ 118,100 $ 133,500
Deferred tax liabilities (71,700) (96,100)
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$ 46,400 $ 37,400
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Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Material Changes in Financial Condition
At March 31, 2002, the Company had working capital of $862,985 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 March 31, 2002, 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; and Carolina Beach,
North Carolina.
Revenues during the quarter were higher than the prior year's quarter by
13%. Expenses increased by 15% over the prior year's quarter, primarily
attributed to legal expenses. The Company reported a profit of $32,515 for
the quarter as compared to a net profit of $62,115 for the prior year's
quarter. The Company also reflected a loss from it's equity based investment
in Urban Transit Solutions.
Forward Looking Information
Statements of the Company's or management's intentions, beliefs, anticipa-
tions, 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.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
In an action filed against the Company by Philip Benjamin Davis in the
Circuit Court for the City of Richmond, Davis seeks Judgment against the
Company for payment of a finder's fee for the opportunity to invest in
Urban Transit Solutions as well as other compensation for contracts in
Richmond, VA, North Carolina State University, and Charleston, SC. The
Company had commission agreements with Davis for Richmond, VA and North
Carolina State University through August 1998. All commissions due Davis
were paid in full. Davis was not the sole procuring agent for the sale
of the system in Charleston, SC and was paid a 10% finder's fee which
he agreed to and knowingly accepted as payment in full. No compensation
agreement was ever reached between Clancy and Mr. Davis in relation to
Urban Transit Solutions. In addition, all the terms presented to Clancy
by Mr. Davis as a reason for investment in UTS have not come to fruition
or been honored. Venue has been changed to the Eastern District of the
Virginia Federal Court. The Company is seeking damages against Mr. Davis.
On March 26, 2002, the case was withdrawn by Mr. Davis per agreement
reached with the Company.
On March 21, 2002, a lawsuit was filed against the Company by Francis
R. Salazar to seek compensation for alleged loss of profit on the sale
of 6,000,000 shares of the Company's stock which carried a restrictive
legend subject to Rule 144 regulations, and that such restriction prevented
him from selling the shares during an uptick in price. The Company views
this as yet another frivolous lawsuit by Mr. Salazar and filed a Motion to
Dismiss on April 29, 2002. The Company is seeking costs and attorneys fees
from Mr. Salazar.
Item 2. Changes in Securities and Use of Proceeds
None
Item 6. Exhibits and Reports on Form 8-K
None
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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 13, 2002 CLANCY SYSTEMS INTERNATIONAL, INC.
(Registrant)
By: /s/ Stanley J. Wolfson
Stanley J. Wolfson, President
and Chief Executive Officer
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