FORM 10-QSB
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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: Act No. 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)
(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:
Indicated the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
336,889,149 common shares were outstanding as of May 6, 1996.
CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Balance Sheet - September 30, 1995 and March 31, 1996 2 and 3
Statement of Operations - For the Three Months Ended
March 31, 1995 and 1996 4
Statement of Operations - For the Six Months Ended
March 31, 1995 and 1996 5
Statement of Stockholders' Equity - For the Six Months
Ended March 31, 1996 6
Statement of Cash Flows - For the Six Months Ended
March 31, 1995 and 1996 7
Notes to Unaudited Financial Statements 8
Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION 10
1
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1995 and March 31, 1996
(Unaudited)
ASSETS
September March
Current assets:
Cash, including interest bearing
accounts of $166,616 (September)
and $100,826 (March) $ 236,404 $ 235,481
Accounts receivable, less allowance
for doubtful accounts of $0 175,281 217,521
Inventories (Note 2) 178,154 190,157
Investment in contract (Note - 575,000
Income taxes refundable 12,000 720
Deferred tax asset (Note 3) 5,000 -
Other current assets - 1,845
---------- ---------
Total current asset 606,839 1,220,724
Furniture and equipment, at cost:
Office furniture and equipment 98,278 124,549
Equipment under service contracts 1,207,529 1,234,537
---------- ----------
1,305,807 1,359,086
Less accumulated depreciation 848,617 886,234
---------- ----------
Net furniture and equipment 457,190 472,852
Other assets:
Deposits and other 19,947 47,950
Software licenses 16,882 16,882
Software development costs 205,692 227,020
---------- ---------
242,521 291,852
Less accumulated amortization 147,237 166,045
---------- ---------
Net other assets 95,284 125,807
---------- ----------
$1,159,313 $1,819,383
========== ===========
See accompanying notes.
2
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1995 and March 31, 1996
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September March
Current liabilities:
Notes payable - bank (Note 5) $ - $ 650,000
Warranty reserve 7,300 6,000
Deferred revenue 62,521 44,568
---------- ----------
Total current liabilities 69,821 700,568
Deferred tax liability (Note 3) 9,000 17,000
Stockholders' equity:
Preferred stock, $.0001 par value;
100,000,000 shares authorized,
none issued - -
Common stock, $.0001 par value;
800,000,000 shares authorized,
336,889,149 shares issued and
outstanding 33,689 33,689
Additional paid-in capital 1,030,674 1,030,674
Retained earnings 16,129 37,452
---------- ----------
Total stockholders' equity 1,080,492 1,101,815
---------- ----------
$1,159,313 $1,819,383
========== ==========
See accompanying notes.
3
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1995 and 1996
(Unaudited)
1995 1996
Revenues $ 298,311 $ 286,520
Costs and expenses:
Cost of sale 20,060 4,797
Contract support costs 64,689 52,560
General and administrative 107,560 109,394
Depreciation and amortization 62,770 62,329
Research and development 11,069 10,648
---------- ----------
Total costs and expenses 266,148 239,728
---------- ----------
Income from operations 32,163 46,792
Other income (expense)
Interest income 842 1,849
Interest expense - -
---------- ----------
Total other income (expense) 842 1,849
---------- ----------
Income before provision for income taxes 33,005 48,641
========== ==========
Current income tax expense
(Note 3) - 13,000
---------- ----------
Net income $ 33,005 $ 35,641
========== ===========
Net income per share $ * $ *
========== ===========
Weighted average number of shares
outstanding 336,900,000 336,900,000
=========== ===========
* less than $.01 per share
See accompanying notes.
4
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1995 and 1996
(Unaudited)
1995 1996
Revenues $ 567,137 $ 543,936
Costs and expenses:
Cost of sales 25,043 25,361
Contract support costs 109,713 102,789
General and administrative 208,632 238,061
Depreciation and amortization 124,215 119,084
Research and development 17,226 27,976
Loss on disposal of fixed assets - 4,552
---------- ----------
Total costs and expenses 484,829 517,823
---------- ----------
Income from operations 82,308 26,113
Other income (expense)
Interest income 1,147 3,210
Interest expense (206) -
---------- ----------
Total other income (expense) 941 3,210
---------- ----------
Income before provision for income taxes 83,249 29,323
Current income tax expense
(Note 3) - 8,000
---------- ----------
Net income $ 83,249 $ 21,323
========== ==========
Net income per share $ * $ *
Weighted average number of shares
outstanding 336,900,000 336,900,000
=========== ===========
* less than $.01 per share
See accompanying notes.
5
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Six Months Ended March 31, 1996
(Unaudited)
Additional
Common Stock paid-in Retained
Shares Amount capital earnings
Balance, September
30, 1995 336,889,149 $33,689 $1,030,674 $ 16,129
Net income for the
six months ended
March 31, 1996 - - - 21,323
------------ --------- ------------ ---------
Balance March
31, 1996 336,889,149 $33,689 $1,030,674 $ 37,452
============ ======= ========== ========
See accompanying notes.
6
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended March 31, 1995 and 1996
(Unaudited)
1995 1996
Cash flows from operating activities:
Net income $ 83,249 $ 21,323
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 124,215 119,084
Decrease in deferred revenue (41,267) (17,953)
Decrease (increase) in accounts receivable 140,827 (42,240)
Increase in inventories (4,956) (12,003)
Decrease in income taxes refundable - 11,280
Decrease in deferred tax asset - 5,000
Increase in deferred tax liability - 8,000
Increase in other current assets - (3,690)
Decrease in accounts payable and
accrued liabilities (12,580) (1,300)
Loss on disposal of fixed assets - 4,552
-------- --------
Total adjustments 206,239 70,730
-------- --------
Net cash provided by operating activities 289,488 92,053
Cash flows from investing activities:
Acquisition of furniture and equipment,
software development costs and
patent costs (46,462) (139,973)
Investment in contract - (575,000)
Increase in deposits and other (8,445) (28,003)
-------- ---------
Net cash used in investing activities (54,907) (742,976)
-------- ----------
Cash flows from financing activities:
Borrowings from bank - 650,000
Repayment of notes payable (59,530) -
-------- --------
Net cash provided by (used in)
financing activities (59,530) 650,000
-------- -------
Increase (decrease) in cash 175,051 (923)
Cash at beginning of period 44,705 236,404
------- --------
Cash at end of period $219,756 $235,481
======== ========
See accompanying notes.
7
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1996
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, 1995 and
March 31, 1996, and the results of operations and cash flows for
the periods ended March 31, 1995 and 1996.
Revenue recognition:
On February 15, 1996, the Company entered into a three year
agreement with the Town of Cicero, Illinois, whereby the Company
will issue all parking tickets and provide collection services for
the parking tickets issued and previously issued (see Note 4).
Revenue from the issuance of parking tickets in Cicero, Illinois
will be recognized on a cash basis when received. Costs consisting
of payments to the Town of Cicero and commissions are recorded as
prepaid and amortized ratably over the twelve month period to which
the payments relate.
2. Inventories
Inventories consist of the following at:
September 30, March 31,
1995 1996
Finished goods $ 8,800 $ 9,508
Work in process 2,587 57,047
Purchased parts and supplies 166,767 123,602
------- --------
$178,154 $190,157
======== ========
3. Income taxes
The provision for income taxes for the three months and six months
ended March 31, 1996 is based on the expected tax rate for the
year.
As of September 30, 1995 and March 31, 1996, total deferred tax
assets and liabilities are as follows:
September 30, March 31,
1995 1996
Deferred tax assets $ 3,000 $ -
Deferred tax assets resulting
from loss carryforward 2,000 -
Deferred tax liabilities (9,000) (17,000)
--------- ---------
$ (4,000) $(17,000)
========= =========
8
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1996
4. Agreement with the Town of Cicero, Illinois
On February 15, 1996, the Company entered into a three year
agreement with the Town of Cicero, Illinois, whereby the Company
will issue all parking tickets and provide collection services for
the parking tickets issued and previously issued. As
consideration, the Company will receive all cash receipts from
tickets issued and previously issued during the term of the
agreement. The Company has paid $575,000 of the $750,000 total due
for commissions and amounts due the Town which represents the
annual contract amount payable by the Company for each year of the
agreement including extensions. Such amount will be amortized
monthly on a straight-line basis over the respective twelve month
period of the agreement commencing April 1, 1996. The agreement
contains an annual renewal option for up to four additional years.
The agreement is cancelable by either party upon 30 days notice
with all fees pro rated. Commencing April 1, 1996, the Company
will maintain a list of receivables of current and prior ticket
issuances totaling approximately $2,500,000. The receivables are
not reflected on the Company's financial statements because only
the amounts collected while the agreement is in effect belong to
the Company.
5. Notes payable
Notes payable - bank consists of a three month unsecured note due
June 25, 1996 including interest at 9.75% per annum.
9
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Material Changes in Financial Condition
At March 31, 1996 the Company had working capital of $520,156 derived
primarily from contract sales, as compared to working capital of
$537,018 at September 30, 1995. 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, 1996 the Company generated revenues
from contract sales to the City of Oklahoma City, the Hertz
Corporation, New Orleans, Berkeley California, Auraria Higher
Education Center, Richmond Virginia and other professional service
contract installations. Hertz Corporation, Oklahoma City, OK and
Berkeley, CA each represented in excess of 5% of total revenues. New
clients added to customer base during this period are Yonkers Parking
Authority, Yonkers, NY; Humboldt State college; and Cicero, Illinois.
Revenue for the 1996 three and six month periods were lower than the
prior year's periods, due to lower sales volume as a result of a
weather-related decline of ticket issuance by several clients. The
Company reported net income of $35,641 for the 1996 quarter as
compared to net income of $33,005 for the prior year's quarter. The
increase in income is a result of a change of the mix of revenues
during the quarter to higher margin sales. The Company reported net
income of $21,323 for the six months ended March 31, 1996 as compared
to net income of $83,249 for the six months ended March 31, 1995. The
decrease in income is a result of increased R & D expenses, increased
travel expenses, and weather related decline of ticket issuance by
several clients in the first quarter.
PART II - OTHER INFORMATION
Item 5. Other Information
See footnote 4 above and Management's Discussion and Analysis for
information with respect to the Company's new parking agreement with
the Town of Cicero, Illinois
Item 6. Exhibits and Reports on Form 8-K
(b) During the quarter ended March 31, 1996 the Registrant has
filed no reports on Form 8-K.
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: May 13, 1996 Clancy Systems International, Inc.
(Registrant)
By: /s/ Stanley J. Wolfson
Stanley J. Wolfson, President
and Chief Executive Officer
By: /s/ Lizabeth M. Wolfson
Lizabeth M. Wolfson, Secretary-
Treasurer and Chief Financial
and Chief Accounting Officer
11