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, 2002.
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 Section13 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 8, 2002 is 364,617,938 shares, $.0001 par value.
CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Balance Sheet - September 30, 2001
and June 30, 2002 (unaudited) 2 and 3
Income Statement - For the Three Months
Ended June 30, 2001 and 2002 (unaudited) 4
Income Statement - For the Nine Months Ended
June 30, 2001 and 2002 (unaudited) 5
Statement of Stockholders' Equity - For the Nine
Months Ended June 30, 2002 (unaudited) 6
Statement of Cash Flows - For the Nine Months
Ended June 30, 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
1
CLANCY SYSTEMS INTERNATIONAL INC.
BALANCE SHEET
September 30, 2001 and June 30, 2002
(unaudited)
ASSETS
2001 2002
- - - - - - - -
Current assets:
Cash and cash equivalents $ 385,491 $ 368,610
Accounts receivable 342,323 425,331
Income tax refund receivable 55,346 46,263
Inventories (Note 2) 144,602 157,065
Prepaid expenses 14,645 98,766
------------ ---------
Total current assets 942,407 1,096,035
Furniture and equipment, at cost:
Office furniture and equipment 97,501 83,639
Equipment under service contracts 982,290 1,092,099
------------ -----------
1,079,791 1,175,738
Less accumulated depreciation (811,211) (869,798)
----------- -----------
Net furniture and equipment 268,580 305,940
Other assets:
Investment in partnership 454,159 425,498
Deferred tax asset (Note 3) 46,400 32,900
Note receivable - employee 10,277 10,183
Deposits and other 3,194 12,263
Software development costs, net of
accumulated amortization 146,035 146,930
---------- ----------
Total other assets 660,065 627,774
--------- -----------
$1,871,052 $2,029,749
========= =========
See accompanying notes
2
CLANCY SYSTEMS INTERNATIONAL INC.
BALANCE SHEET
September 30, 2001 and June 30, 2002
(unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
2001 2002
------- -------
Current liabilities:
Accounts payable $ 16,008 $ -
Deferred revenue 114,266 183,900
----------- ------------
Total current liabilities 130,274 183,900
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 (2001) and 364,617,938
(2002) shares issued and outstanding 36,162 36,462
Additional paid-in capital 1,131,397 1,149,097
Retained earnings 573,219 660,290
--------- -------
Total stockholders' equity 1,740,778 1,845,849
---------- ---------
$ 1,871,052 $ 2,029,749
=========== ===========
See accompanying notes
3
CLANCY SYSTEMS INTERNATIONAL INC.
INCOME STATEMENT
For the Three Months Ended June 30, 2001 and 2002
(unaudited)
2001 2002
------ -----
Revenues:
Sales $ 64,556 $ 104,212
Service contract income 359,557 329,852
Parking ticket collections 27,328 30,730
------------ ----------
Total revenues 451,441 464,794
Cost and expenses:
Cost of sales 29,226 38,117
Cost of services 128,651 127,043
Cost of parking ticket collections 27,394 23,999
General and Administrative 142,068 186,668
Research and development 10,414 6,511
---------- ---------
Total costs and expenses 337,753 382,338
----------- ---------
Income from operations 113,688 82,456
Other income (expense):
Interest income 2,429 1,070
Interest expense (916) -
--------- -------
Total other income (expense) 1,513 1,070
---------- ----------
Income before provision for income taxes and
gainin equity-basis partnership 115,201 83,526
Provision for income taxes (Note 3) (41,386) (29,902)
Gain (loss) in equity basis partnership
(net of tax expense of $484 - 2001 and
tax benefit of $7,995 - 2002) 1,843 (13,046)
-------- ----------
Net income $ 75,658 $ 40,578
============ ===========
Basic net income per common share $ * $ *
============ ===========
Weighted average number of shares
outstanding 361,600,00 364,600,000
============ ===========
*Less than $.01 per share
See accompanying notes
4
CLANCY SYSTEMS INTERNATIONAL INC.
INCOME STATEMENT
For the Nine Months Ended June 30, 2001 and 2002
(unaudited)
2001 2002
------- -------
Revenues:
Sales $ 125,279 $ 192,965
Service contract income 1,013,991 1,017,827
Parking ticket collections 97,840 84,553
----------- ----------
Total revenues 1,237,110 1,295,345
Costs and expenses:
Cost of sales 85,341 85,710
Cost of services 359,238 375,254
Cost of parking ticket collections 92,008 75,674
General and administrative 424,965 559,598
Research and development 25,814 32,756
------------ -----------
Total costs and expenses 987,366 1,128,992
------------ -----------
Income from operations 249,744 166,353
Other income (expense):
Interest income 9,199 2,745
Interest expense (5,985) -
---------- ----------
Total other income (expense) 3,214 2,745
----------- -----------
Income before provision for income taxes
and gain in equity-basis partnership 252,958 169,098
Provision for income taxes (Note 3) (72,105) (64,257)
Gain (loss) in equity basis partnership
(net of tax expense f $6,493 -2001 and
tax benefit of $10,891 -2002) 20,562 (17,770)
----------- ---------
Net income $ 201,415 $ 87,071
======== ========
Basic net income per common share $ * $ *
======== ========
Weighted average number of shares outstanding 352,300,000 364,600,000
* Less than $.01 per share ========== =========
See accompanying notes
5
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended June 30, 2002
(unaudited)
Additional
Common stock paid-in Retained
shares amount capital earnings
--------- ---------- ----------- ----------
Balance, September 30, 2001 361,617,938 $ 36,162 $ 1,131,397 $ 573,219
Issuance of common stock
for services (Note 4) 3,000,000 300 17,700 -
Net income for the nine
months ended
June 30, 2002 - - - 87,071
Balance, June 30, 2002 ------------ ---------- ---------- ---------
364,617,938 $ 36,462 $ 1,149,097 $ 660,290
========== ========== ========== ===========
See accompanying notes
6
CLANCY SYSTEMS INTERNATIONAL INC.
STATEMENT OF CASH FLOWS
For the Nine Months Ended June 30, 2001 and 2002
(unaudited)
2001 2002
------ -------
Net income $ 201,415 $ 87,071
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 157,454 108,190
Loss (gain) in equity basis partnership (27,055) 28,661
Deferred income tax expense (benefit) (11,000) 13,500
Common stock issued for services
and for acquisition of web sites 61,624 18,000
Changes in assets and liabilities:
Accounts receivable (34,934) (83,008)
Income taxes receivable (29,472) 9,083
Inventories 8,918 (12,463)
Prepaid expenses 10,450 (84,121)
Accounts payable (9,496) (16,008)
Income taxes payable (46,000) -
Deferred revenue 3,307 69,634
----------- ----------
Total adjustments 83,796 51,468
------------- -----------
Net cash provided by operating
activities 285,211 138,539
Cash flows from investing activities:
Acquisition of furniture and equipment
- net (85,976) (109,810)
Decrease in deposits and other 308 94
Increase in software development costs (59,373) (45,704)
---------- ----------
Net cash used in investing activities (145,041) (155,420)
Cash flows from financing activities:
Payments on note payable - bank (90,000) -
Payments on note payable - shareholder (45,000) -
----------- ---------
Net cash used in financing activities (135,000) -
------------ -----------
Increase (decrease) in cash and cash equivalents 5,170 (16,881)
Cash and cash equivalents at beginning of period 435,238 385,491
---------- -----------
Cash and cash equivalents at end of period $ 440,408 $ 368,610
========= =========
See accompanying notes
7
CLANCY SYSTEMS INTERNATIONAL INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 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 June 30, 2002, and the results of
operations and cash flows for the periods ended June 30, 2001 and 2002.
2. Inventories
Inventories consist of the following at:
September 30, June 30,
2001 2002
---- ----
Finished goods $ 24,233 $ 13,969
Work in process 1,885 82,845
Purchased parts and supplies 118,484 60,251
--------- --------
$ 144,602 $ 157,065
============ ==========
3. Income taxes
The provision for income taxes for the nine months ended June 30,
2001 and 2002 is based on the expected tax rate for the year.
As of September 30, 2001 and June 30, 2002, total deferred tax
assets and liabilities are as follows:
September 30, June 20,
2001 2002
---- ----
Deferred tax assets $ 118,100 $ 133,500
Deferred tax liabilities (71,700) (100,600)
------------ ----------
$ 46,400 $ 32,900
============ ==========
4. Stock issuance
On May 13, 2002, the Board of Directors of the Company consented to
the issuance of shares of common stock valued at $18,000 (3,000,000
shares of common stock at $0.0060 per share) to certain employees
for services.
8
Item 2.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
Material Changes in Financial Condition
At June 30, 2002, the Company had working capital of $912,135 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 June 30, 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
3%. Expenses increased by 17% over the prior year's quarter, primarily
attributed to legal expenses and an $18,000 stock bonus issued to employees.
The Company reported a net profit of $40,578 for the quarter as compared to
a net profit of $75,658 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,
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.
9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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.
On July 10, 2002, the court granted the Company's motion to dismiss.
On July 26, 2002 Salazar filed a motion for reconsideration. The Judge
has not yet ruled on Salazar's motion.
Item 2. Changes in Securities and Use of Proceeds
The Company granted stock in an aggregate amount of 3,000,000
shares to 3 employees. No exemption was necessary because the
bonuses did not involve the sale of securities. None of the
employees were officers or directors.
Item 6. Exhibits and Reports on Form 8-K
Exhibit 99.1 Certification by Chief Executive Officer
Exhibit 99.2 Certification by Chief Financial Officer
Filed herewith.
10
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 14, 2002 CLANCY SYSTEMS INTERNATIONAL, INC.
(Registrant)
By: /s/ Stanley J. Wolfson
Stanley J. Wolfson, President
and Chief Executive Officer
11
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Clancy Systems International,
Inc. (the "Company") on Form 10-Q for the period ended June 30,2002 as
filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Stanley J. Wolfson, Chief Executive Officer of
the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant
to 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of
section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and result of
operations of the Company.
/s/ Stanley J. Wolfson
_______________________
Chief Executive Officer
August 14, 2002
12
Exhibit 99.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Clancy Systems International,
Inc. (the "Company") on Form 10-Q for the period ended June 30, 2002 as
filed with the Securities and Exchange Commission on the date hereof
(the "Report"), I, Lizabeth M. Wolfson, Chief Financial Officer
of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted
pursuant to 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents,
in all material respects, the financial condition and result of operations
of the Company.
/s/ Lizabeth M. Wolfson
_______________________
Chief Financial Officer
August 14, 2002
13