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, 2003
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)
Transitional Small Business Disclosure format (check one):
yes x no
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the issuer's classes of common
stock, as of February 20,2004 is 365,117,938 shares, $.0001 par
value.
CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 2003
and December 31, 2003 (unaudited) 2 and 3
Consolidated Statements of Income - For the
Three Months Ended December 31, 2002 and 2003
(unaudited) 4
Consolidated Statement of Stockholders' Equity -
For the Three Months Ended December 31, 2003
(unaudited) 5
Consolidated Statements of Cash Flows - For the
Three Months Ended December 31, 2002 and 2003
(unaudited) 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of 9
Financial Condition and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 3. Controls and Procedures 16
Item 6. Exhibits and Reports on Form 8-K 16
-1-
CLANCY SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2003 AND DECEMBER 31, 2003
(unaudited)
ASSETS
September December
--------- --------
Current assets:
Cash, including interest bearing accounts $ 669,292 $ 598,015
Accounts receivable, net of allowance for
doubtful accounts 488,361 511,868
Accounts receivable, related party (note 3) 30,019 30,019
Income tax refund receivable 9,450 9,450
Inventories (Note 2) 135,437 158,498
Prepaid expenses 77,389 58,363
--------- --------
Total current assets 1,409,948 1,366,213
Furniture and equipment, at cost:
Office furniture and equipment 269,523 269,523
Equipment under service contracts 2,109,045 2,161,893
Leasehold improvements 96,604 96,604
Equipment and vehicles under capital leases 439,286 439,286
--------- ---------
2,914,458 2,967,306
Less accumulated depreciation (1,328,226) (1,447,089)
--------- ---------
Net furniture and equipment 1,586,232 1,520,217
Other assets:
Deposits and other 76,028 72,797
Goodwill 225,214 225,214
Software development costs, net of
accumulated amortization 180,163 190,086
-------- --------
Total other assets 481,405 488,097
--------- ---------
$ 3,477,585 $ 3,374,527
============ ============
See accompanying notes.
-2-
CLANCY SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2003 AND DECEMBER 31, 2003
(unaudited)
LIABILITIES AND STOCKHOLDER'S EQUITY
September December
Current liabilities: --------- --------
Accounts payable $ 229,229 $ 191,025
Accrued expenses 276,176 286,063
Accounts payable, related party (note 3) 11,000 11,000
Income taxes payable 21,852 ---
Current portion of long term debt 250,197 253,946
Current portion of obligations under
capital leases 125,102 118,754
Deferred revenue 134,401 125,199
---------- ----------
Total current liabilities 1,047,957 985,987
Long-term debt, net of current portions 124,866 69,438
Obligations under capital leases, net of
current portion 75,948 73,887
Minority interest in subsidiary 123,084 107,519
Deferred tax liability (note 4) 4,600 5,965
Commitments
Stockholders' equity:
Preferred stock, $.0001 par value;
100,000,000 shares authorized, none
issued --- ---
Common stock, $.0001 par value;
800,000,000 shares authorized,
365,117,938 shares issued and
outstanding 36,512 36,512
Additional paid-in capital 1,151,547 1,151,547
Retained earnings 913,071 943,672
---------- -----------
Total stockholder's equity 2,101,130 2,131,731
---------- -----------
$ 3,477,585 $ 3,374,527
=========== ===========
See accompanying notes.
-3-
CLANCY SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended December 31, 2002 and 2003
(unaudited)
December December
2002 2003
Revenues: -------- --------
Sales $ 40,775 $ 41,929
Service contract income 621,451 659,735
Parking ticket collections and
other 38,286 64,319
--------- ---------
Total revenues 700,512 765,983
Costs and expenses:
Cost of sales 20,443 3,727
Cost of services 122,096 231,632
Cost of parking ticket collections 35,688 31,919
General and administrative 338,928 445,440
Research and development 8,925 14,022
--------- ---------
Total costs and expenses 526,080 726,740
--------- ---------
Income from operations 174,432 39,243
Other income (expense):
Gain (loss) on disposal of assets (17,762) ---
Interest income 548 194
Interest expense (11,507) (8,410)
Minority interest in loss of
subsidiary (3,849) 15,565
Other income --- 1,872
--------- ---------
Total other income (expense) (32,570) 9,221
--------- ---------
Income before provision for income
taxes 141,862 48,464
Provision for income taxes:
Current expense 41,013 16,498
Deferred expense 13,050 1,365
---------- ---------
Total income tax expense 54,063 17,863
--------- ---------
Net income $ 87,799 $ 30,601
========== ==========
Basic net income per common share $ * $ *
========== ==========
Weighted average number of shares
outstanding 365,118,000 365,118,000
=========== ===========
*Less than $.01 per share
See accompanying notes.
-4-
CLANCY SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the three months ended December 31, 2003
(Unaudited)
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings
------ ------ ------- -------
Balance, September
30, 2003 365,117,938 $36,512 $ 1,151,547 $ 913,071
Net income for the
three months
ended December 31,
2003 --- --- --- 30,601
------------- -------- ---------- ----------
Balance, December
31, 2003 365,117,938 $36,512 $ 1,151,547 $ 943,672
=========== ======= =========== ===========
See accompanying notes.
-5-
CLANCY SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended December 31, 2002 and 2003
(unaudited)
December 31, December 31,
2002 2003
------------ ------------
Cash flows from operating activities:
Net income $ 87,799 $ 30,601
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 69,616 135,992
Deferred income tax expense 13,050 1,365
Minority interest 3,849 (15,565)
Changes in assets and liabilities:
Accounts receivable (108,256) (23,507)
Inventories (305) (23,061)
Income taxes refundable 26,653 ---
Prepaid expenses 36,783 19,026
Accounts payable 93,022 (38,204)
Accrued expenses 16,870 9,887
Income taxes payable --- (21,852)
Deferred revenue (7,500) ( 9,202)
---------- -------
Total adjustments 143,782 34,879
--------- --------
Net cash provided by operating activities 231,581 65,480
--------- --------
Cash flows from investing activities:
Acquisition of furniture and equipment (250,099) (52,849)
Increase in software licenses and
software development costs (21,826) (26,407)
Change in deposits and other assets (2,000) 2,587
--------- --------
Net cash used in investing activities (273,925) (76,669)
--------- --------
Cash flows from financing activities:
Borrowings on notes payable and capital leases 160,000 ---
Payments on notes payable and capital leases (60,835) (60,088)
---------- --------
Net cash provided (used in) by financing
activities 99,165 (60,088)
---------- -------
Increase (decrease) in cash and cash
equivalents 56,821 (71,277)
Cash and cash equivalents at beginning of
period 357,315 669,292
---------- --------
Cash and cash equivalents at end of period $ 414,136 $ 598,015
=========== ===========
See accompanying notes.
-6-
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2003
1. Basis of presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principals generally accepted
in the United States of America for interim financial information and
with the instructions to Form 10-QSB and Item 310 of Regulation S-B.
Accordingly, they do not include all of the information and footnotes
required by accounting principals generally accepted in the United States
of America for complete financial statements. The accompanying unaudited
consolidated financial statements reflect all adjustments that, in the
opinion of management, are considered necessary for a fair presentation
of the financial position, results of operations, and cash flows for the
periods presented. The results of operations for such periods are not
necessarily indicative of the results expected for the full fiscal year or
for any future period. The accompanying unaudited consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements of Clancy Systems International, Inc. and Subsidiary
included in the Form 10-KSB for the fiscal year ended September 30, 2003.
The Company's subsidiary, Urban Transit Solutions, Inc. ("UTS") was
incorporated under the Laws of the Commonwealth of Puerto Rico. The
financial statements of UTS have been prepared on the basis of
accounting principles generally accepted in the United States of America
and denominated in U.S dollars. Therefore, there are no amounts recorded
for foreign currency translation or for transactions denominated in a
foreign currency. The Company has consolidated the financial results of
UTS with those of the Company for the three months ended December 31, 2002
and 2003. All significant intercompany transactions and balances have
been eliminated in consolidation.
2. Inventories
Inventories consist of the following at:
September 30, December 31,
2003 2003
------------ -----------
Finished goods $ 21,521 $ 47,490
Work in process 4,563 55,504
Purchased parts and supplies 109,353 55,504
---------- ----------
$ 135,437 $ 158,498
========= =========
-7-
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
DECEMBER 31, 2003
3. Related party transactions
Related party account balances consist of the following at:
September 30, December 31,
2003 2003
----------- ---------
Accounts receivable, related party $ 30,019 $ 30,019
========= =========
Accounts payable, related party $ 11,000 $ 11,000
========= =========
Accounts receivable, related party is due from Pan American
Parking Solutions, Inc. which is a company owned by the former
president of UTS.
Accounts payable, related party is due to Pan American Products,
a company owned by the current president of UTS.
4. Income taxes
The provision for income taxes for the three months ended December
31, 2002 and 2003 is based on the expected tax rate for the year.
Total deferred tax assets and liabilities are as follows:
September 30, December 31,
2003 2003
--------- ----------
Non current deferred tax assets $ 68,400 $ 68,400
Non current deferred tax liabilities (73,000) (74,365)
--------- ---------
Net non-current deferred taxes $ (4,600) $ (5,965)
=========== ===========
-8-
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's Statement Regarding 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 with any future event, there
can be no assurance that the events described in 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 made 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.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
At December 31, 2003, the Company had consolidated working capital
of $380,226 derived primarily from contract sales and contract service,
as compared to $361,991 at September 30, 2003. At December 31, 2003,
the components of working capital were $1,079,912 for Clancy and working
capital deficit of $ (699,686) for UTS compared to $1,007,082 for Clancy
and $(645,091) for UTS at September 30, 2003.
The Company anticipates using its working capital to fund ongoing
operations, including general and administrative expenses, equipment
purchases, equipment manufacturing, travel, marketing and research
and development. The Company anticipates having sufficient working
capital to fund operations for the fiscal year ending September 30,
2004.
REVENUES. From the quarter ended December 31, 2002 to the quarter ended
December 31, 2003 revenues increased by $65,471 or 9.3% from $700,512 to
$765,983. For Clancy only, revenues increased $26,937 or 5.9%, from
$456,352 to $483,289. For UTS, revenues increased $38,534 or 15.8% from
$244,160 to $282,694 for UTS. The increase in revenues is due to the
addition of new customers and products during the quarter ended December
31, 2003.
COST OF SERVICES. From the quarter ended December 31, 2002 to the quarter
ended December 31, 2003, cost of services increased by $109,536 or 89.7%
from $122,096 to $231,632 for the Company. Cost of services as a
percentage of service contract income was 19.6% for the 2002 quarter and
35.1% for the 2003 quarter.
-9-
For Clancy only, the cost of services was $179,900 for the quarter ended
December 31, 2003 compared to $115,329 for the comparable period of 2002.
The increase is of $64,571 or 56.0% is primarily due to an increase in
depreciation expense and increases in cost of tickets/envelopes. The Company
has gone from a 5 year straight line depreciation schedule to a 3 year
straight line depreciation schedule. Paper costs have escalated and been
reflected in billings from the Company's ticket and envelope suppliers.
Cost of services as a percentage of service contract income was 30.57%
for the 2002 quarter and 47.7% for the 2003 quarter.
For UTS, cost of services increased by $44,965 or 664.5% from $6,767
in the quarter ended December 31, 2002 to $51,732 for the quarter ended
December 31, 2003. The increase is due to moving expenses, service and
ticket fees and increased depreciation. UTS has also gone from a 5 year
straight line depreciation schedule to a 3 year straight line depreciation
schedule. Cost of services as a percentage of service contract income was
2.77% for the 2002 quarter and 18.3 for the 2003 quarter. The company
is now issuing tickets at two of its cities. While this will increase
revenues, this has also increased basic cost of services.
RESEARCH AND DEVELOPMENT. The Company's parking enforcement systems
research and development costs increased from $8,925 to $14,022, or
57.1%, from the quarter ended December 31, 2002 to 2003. Product
development and improvement is still paramount to the Company, and
costs have been incurred for development of several new items during
the quarter ended December 31, 2003.
GENERAL AND ADMINISTRATIVE. General and administrative expenses
increased by $106,512 or 31.4% from $338,928 to $445,440 for the quarter
ended December 31, 2003 and 2002. For Clancy, general and administrative
expenses increased $41,682 or 29.7% from $140,422 to $182,104 and UTS
increased $64,830 or 32.7% from $198,506 to $263,336. The increase in
general and administrative costs for the Company is primarily due to the
increase in directors and officers insurance, accounting and other
professional services, increased salaries and related expenses of
expanding operations and increases due more stringent and comprehensive
securities laws and corporate governance requirements under Sarbanes-Oxley
Act of 2002.
NET INCOME. For the quarter ended December 31, 2003, the Company
reported net income of $30,601 ($69,513 for Clancy directly and a
loss of $38,912 for UTS) compared to $87,799 ($82,028 for Clancy
directly and $5,771 for UTS) for the quarter ended December 31, 2002.
The primary reason for the decrease in net income of $57,198 is the
increase in cost of services and general and administrative expense
which are discussed above.
During the next twelve months, the Company will continue to expand
its Internet parking services and operations. A concentrated effort
will be put on "Park-by-phone" which will include an aggressive
advertising campaign. The Company will also be manufacturing its
printer in a new and smaller case.
In order to keep its products and systems from becoming obsolete,
the Company regularly modifies and updates its hardware and software.
In order to streamline its ticket writing and car rental equipment,
the Company redesigned the printer so that it weighs less than two
pounds. New battery technology has also allowed the Company to reduce
the size and weight of the printers.
-10-
During 2001/2002, the Company began manufacturing a new printer
board to interface to Palm handheld devices. It incorporates a
state of the art print mechanism, light weight battery technology,
and flat forms. The company has also developed a keyboard cradle
for the Palm devices. The Palm type has a 45 key full alpha/numeric
keypad with function keys and assignable function keys.
Management keeps informed of new developments in components so that
the printer and keypads are up-to-date, fast and suit user requirements.
The Company communicates with vendors on a regular and ongoing basis so
that management is aware of upgraded components, new technologies and
processes that can be used to upgrade its hardware. The Company has a
relationship with an engineer, who, although he works as an independent
contractor,he dedicates as much time as the company requires to develop
and enhance its products. The engineer also does R&D for the company
and makes prototype boards for testing and evaluation.
The Company's software is developed in-house by five full- time
programmers and by the Company's President, Stanley Wolfson, and
is maintained and updated on a regular basis.
Clancy has qualified to be a Microsoft Certified Partner. This
relationship allows the Company to receive pre-releases of software
products which gives us the leading edge on upgrading programs and
embedding new services into our systems.
The office computer software allows daily ticket, rental and inventory
information to be transferred from the portable data entry units to a
central computer database. The information is compiled and then processed
further according to user requirements.
Through sophisticated communications software developed internally,
the Company is able to update, modify, repair, enhance and change
programs at the client's location via modem and the Internet.
The Company has developed numerous Internet based parking programs
which include payment processing, permit registrations, and pre-paid
parking and parking reservations, special event parking and permitting,
and its Expo1000 Parking Industry Guide.
URBAN TRANSIT SOLUTIONS
The Company provided a total financial investment of $500,000 to Urban
Transit Solutions between March 1998 and April 1999. UTS has been
generating revenue since August 1998. Collections from parking lot
fees from Cauguas commenced in January of 1999. The Company's loan
to its primary bank and private lender have been paid back by the
Company's cash flows. The settlement of ownership between the Company
and UTS set forth the opportunity for Clancy management to take a more
significant role in the operations of UTS. In June, 2003, a new management
team was installed at UTS. Kenneth Stewart is the President of UTS.
Damaris Carasquillo is the operations manager. The UTS Board of Directors
includes Kenneth Stewart, Stanley Wolfson, and Lizabeth Wolfson. The new
management team has taken an aggressive approach to bringing the accounts
-11-
payable current, reducing unnecessary expenses and reducing debt
obligations. The Company expects to see an improvement to UTS
profitability during the 2003-2004 fiscal year. UTS has funded its
operations primarily by loans and cash flows. It has notes payable and
capital lease obligations arising from borrowings for working capital and
purchases of equipment.
TRENDS AND CONDITIONS
The Company anticipates no major impact as a result of trends of the past
few years. A further discussion appears below. If current trends continue,
the Company's liquidity will continue to improve on a short-term and a long-
term basis.
The Company anticipates that its expenses shall increase as a direct result
of the Sarbanes-Oxley Act of 2002 as it pertains to: (i) additional accounting
and auditing procedures; (ii) additional legal costs due to compliance with new
corporate governance mandates. The Company now utilizes five different
accounting firms for preparation of financial statements and reviews and
auditing functions. Director and Officer insurance premiums have tripled for
the Company (this is consistent with the industry as a result of the public
company irregularities of several years ago). The Company is able to qualify
for Directors and Officers insurance when many companies are not longer able to
qualify. The Company's newest equipment has proven to be a capital intense
program.The Company has designed its printer board to work and fit in both its
current model case as well as its new case, which will prove to be a cost
savings. While the Company has adequate cash flow to accomplish the upgrades
without incurring debt, it is anticipated that the ongoing upgrades and
tooling for newer product shall continue to require a large capital commitment.
With the weakened economy as of recent years, municipalities are in search
of additional revenues and the installation and implementation of means to
efficiently and effectively collect parking ticket revenues as a viable
source of such additional revenues for many locales. As on street parking
spaces are finite, and populations increase, a structured management system
of turnover, enforcement and accountability of parking revenues will be
imperative for all cities.
In addition, the Company supplies all hardware, software, training,
supplies and maintenance for the system, thus eliminating all significant
capital expenditures by the user.
The Company has experienced a large number of inquiries about its system
related to the total program and special features and anticipates growth
in this area in the next fiscal year.
Uncertainties that can impact revenues from the Company's service contract
agreements would be related to dramatic weather changes and municipal
disaster occurrences (i.e. September 11, 2001). As parking ticket
issuance operations are primarily "out-of-doors" tasks, severe weather
such as a major blizzard, hurricane, or rains could impact ticket production
for a limited period in certain locales. While such reductions are
temporary, they can impact revenues as the Company bills most clients on
a fee-per-ticket basis. The meter collections for UTS could be temporarily
reduced during a hurricane or tropical storm. Further, as the Company is
-12-
contracting primarily with City government agencies, a deployment
of personnel to other duties during a disaster could temporarily
reduce ticket issuance activities.
Internal and external sources of liquidity
The Company anticipates using its working capital to fund ongoing
operations, including general and administrative expenses, equipment
manufacturing, travel, marketing and research and development. The
Company anticipates having sufficient working capital to fund
operations for the fiscal year ending September 30, 2004.
UTS has funded its operations primarily by cash flows and bank debt.
It has notes payable and capital lease obligations arising from
borrowings for working capital and purchases and installation of meter
equipment. With UTS under new management, the Company anticipates that
UTS will be profitable for the year ending September 30, 2004.
The Company has experienced significant interest in the Denver Boot for
vehicles as well as for security on other mobile devices including
construction trailers and communications generators. There has also
been a demand for the Denver Boot for enforcement on private property.
Exposure on the Internet has been favorable for sales of this product.
The Company has experienced an interest in its IDBadgemaker software.
The program is utilized by news services, janitorial companies, social
service agencies, private clubs and others for security and
identification purposes. The program receives "excellent" ratings
at download.com.
Remit-on-line.com has grown as a ticket payment site. It is offered
to Clancy ticket system clients and other companies in parking industry
businesses. Remit processes and average of $200,000 per month in
transactions. The Company has observed a continuing increase in activity
monthly.
In addition, for Clancy,current outstanding ticket fines of approximately
$200,000 and for UTS, outstanding ticket fines of approximately $195,000,
have not been recognized as revenue at December 31, 2003.
-13-
CONTRACTUAL OBLIGATIONS
The following obligations are the debt of UTS. Clancy does not have
any debt obligations other than operating leases for its office space.
Payment Due by Period
Contractual Less than
Obligations Total 1 year 1-3 years 4-5 years Over
Long Term
Debt $ 323,384 $ 253,946 $ 69,438 $ - $ -
Capital
Lease
Obligations 192,641 118,754 63,440 10,447 -
Operating
Expenses
UTS 9,600 3,600 6,000 - -
Clancy 21,798 21,798
Purchase
Obligations - - - - -
Other Long-
term
obligations - - - - -
--------- --------- ---------- ---------- ---------
Total
Contractual
Cash
Obligations $ 547,423 $ 398,098 $ 138,878 $ 10,447 $ -
========= ========== ========= ========== ==========
CRITICAL ACCOUNTING POLICIES
The Company has identified the accounting policies described below as
critical to its business operations and the understanding of the Company's
results of operations. The impact and any associated risks related to
these policies on the Company's business operations is discussed throughout
this section where such policies affect the Company's reported and expected
financial results. The preparation of financial statements requires the
Company to make estimates and assumptions that affect the reported amount
of assets and liabilities of the Company, revenues and expenses of the
Company during the reporting period and contingent assets and liabilities
as of the date of the Company's financial statements. There can be no
assurance that the actual results will not differ from those estimates.
REVENUE RECOGNITION: Revenue derived from professional service contracts
on equipment and support services is included in income ratably over the
contract term; related costs consist mainly of depreciation, supplies and
sales commissions.
-14-
The Company defers revenue for equipment and services under service
contracts that are billed to customers on a quarterly, semi-annual,
annual, or other basis and are included in income ratably over the
expected term of the contract.
Revenue from the issuance of parking citations for the Company's
privatization projects is recognized on a cash basis when received
as collectibility is not reasonably assured. .
Revenue derived from professional service contracts on parking meter
and lots fees collections is recognized net of municipalities' fees as
services are provided. Related costs consist mainly of depreciation
and lot rents.
Revenue derived from professional service contracts for permit
fulfillment and remit-online services is recognized based on add-on
fees earned for each transaction.
COMPUTER SOFTWARE. Costs incurred prior to establishment of the
technological feasibility of computer software are research and
development costs, which are charged to expense as incurred. Software
development costs incurred subsequent to establishment of technological
feasibility are capitalized and subsequently amortized based on the
greater of the straight line method over the remaining estimated economic
life of the product (generally 5 years) or the estimate of current
and future revenues for the related product.
GOODWILL. On January 1, 2002, the Company adopted Statement of
Financial Accounting Standards No. 142(SFAS 142, Goodwill and Intangible
Assets, which clarifies the accounting for goodwill and intangible assets.
Under SFAS 142, goodwill and intangible assets with indefinite lives will
no longer be amortized, but will be tested for impairment annually and
also in the event of an impairment indicator.
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.
-15-
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See status of Legal Proceedings disclosed in form 10-KSB
for period ended September 30, 2003.
Item 3. Controls and Procedures
An evaluation was performed under the supervision and with the
participation of the Company's management, including the
Chief Executive Officer and Chief Financial Officer of the
effectiveness of the design and operation of the Company's
disclosure controls and procedures within 180 days before the
filing date of this quarterly report.
Based on that evaluation, the Company's management, including the
CEO and CFO, concluded that the Company's disclosure controls and
procedures were effective. There have been no significant changes
in the Company's internal controls or in other factors that could
significantly affect internal controls subject to their evaluation.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 31.1 Section 302 Certification by Chief Executive Officer
Exhibit 31.2 Section 302 Certification by Chief Financial Officer
Exhibit 32.1 Section 906 Certification by Chief Executive Officer
Exhibit 32.2 Section 906 Certification by Chief Financial Officer
Filed herewith.
(b) Reports on form 8-K
None
16
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 20, 2004 CLANCY SYSTEMS INTERNATIONAL, INC.
(Registrant)
By: /s/ Stanley J. Wolfson
Stanley J. Wolfson, President
and Chief Executive Officer
-17-