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 June 30, 1997 	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) ----------------------------------------------------	 	(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: Indicate 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 August 13, 1997. 	CLANCY SYSTEMS INTERNATIONAL, INC. 	INDEX ----- Page No. ------- PART I.	FINANCIAL INFORMATION Balance Sheet - September 30, 1996 and June 30, 1997 2 and 3 Statement of Operations - For the Three Months Ended June 30, 1996 and 1997 4 Statement of Operations - For the Nine Months Ended 	June 30, 1996 and 1997 5 Statement of Stockholders' Equity - For the Nine Months 	Ended June 30, 1997 6 Statement of Cash Flows - For the Nine Months Ended 	June 30, 1996 and 1997 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, 1996 and June 30, 1997 	(Unaudited) 	ASSETS ------ 						 September	 June -------- ---- Current assets: 	Cash and cash equivalents 	$ 90,510	 $ 171,541 	Accounts receivable	 286,931 	307,042 	Inventories (Note 2)	 190,255 	204,074 	Investment in contract, net 		(Note 4)	 376,028 	-				 	 Income taxes refundable	 720 	- 	Deferred tax asset (Note 3)	 12,000	 7,000 --------- --------- 		Total current assets	 956,444 	689,657 Furniture and equipment, at cost: 	Office furniture and equipment 	185,245 	228,680 	Equipment under service contracts	 1,276,677 	 1,298,071 --------- --------- 						1,461,922 	1,526,751 	Less accumulated depreciation	 955,371	 1,075,289 --------- --------- 		Net furniture and equipment 	506,551 	451,462 Other assets: 	Deposits and other 	44,810 	20,835 	Software licenses 	16,882 16,882 	Software development costs	 201,919	 271,628 -------- --------- 					 	263,611 	309,345 	Less accumulated amortization	 114,869 	 153,880 -------- -------- 		Net other assets	 148,742	 155,465 -------- -------- 						 $1,611,737 	$1,296,584 ========== ========== 	 See accompanying notes. 	 2 	CLANCY SYSTEMS INTERNATIONAL, INC. 	BALANCE SHEET 	September 30, 1996 and June 30, 1997 	(Unaudited) 	LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ 						 September 	 June Current liabilities: 	Note payable - bank 	$ 393,000 	$ - 	Accounts payable	 15,046 	- 	Other accrued expenses 	2,286 	10,558 	Warranty reserve	 4,000	 1,300 	Income taxes payable 	-	 9,280 	Deferred revenue	 76,121	 90,219 ---------- --------- 		Total current liabilities	 490,453 	111,357 Deferred tax liability (Note 3) 	24,000 	24,000 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	 32,921 96,864 --------- --------- 		Total stockholders' equity	 1,097,284 1,161,227 --------- --------- 						 $1,611,737	$1,296,584 ========== ========== 	See accompanying notes. 	 3 	CLANCY SYSTEMS INTERNATIONAL, INC. 	STATEMENT OF OPERATIONS 	For the Three Months Ended June 30, 1996 and 1997 	(Unaudited) 						 1996 	 1997 ---- ---- Revenues: 	Sales		 	$ 41,625 	$ 28,036 	Service contract income	 283,363 	337,882 	Parking ticket collections	 229,965 20,994 --------- --------- 		Total revenues	 554,953 	386,912 Costs and expenses: 	Cost of sales 	20,615	 20,096 	Cost of services 	172,013 	154,327 	Cost of parking ticket collections 		(Note 4)	 235,212 	18,849 	General and administrative 	98,397	 141,863 	Research and development	 8,136 	5,019 	Loss on disposal of fixed assets	 168	 - -------- ------- 		Total costs and expenses	 534,541	 340,154 -------- ------- Income from operations 	20,412 	46,758 Other income (expense): 	Interest income 	983 	985 	Interest expense	 (16,327)	 (1,631) 	 -------- -------- 		Total other expenses	 (15,344)	 (646) --------- -------- Income before provision for income taxes 	5,068 	46,112 Provision for income taxes (Note 3)	 341	 10,000 -------- ------- Net income	 $ 4,727	 $ 36,112 ========= ========= Net income per common 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 Nine Months Ended June 30, 1996 and 1997 	 (Unaudited) 						 1996 	 1997 ---- ---- Revenues: 	Sales			 $ 135,011 	$ 98,054 	Service contract income 	733,913 	872,760 	Parking ticket collections	 229,965	 286,289 --------- --------- 		Total revenues	 1,098,889 	1,257,103 Costs and expenses: 	Cost of sales 	45,976 	65,662 	Cost of services	 393,886 	419,782 	Cost of parking ticket collections 		(Note 4)	 235,212	 301,234 	General and administrative	 336,458 	349,904 	Research and development	 36,112 	24,310 	Loss on disposal of fixed assets	 4,720 - --------- --------- 		Total costs and expenses	 1,052,364	 1,160,892 --------- --------- Income from operations 	46,525	 96,211 Other income (expense): 	Interest income 	4,193 	1,795 	Interest expense	 (16,327)	 (14,063) 	 --------- ------ 		Total other expenses	 (12,134)	 (12,268) ---------- -------- Income before provision for income taxes	 34,391 	83,943 Provision for income taxes (Note 3)	 8,341	 20,000 --------- ------- Net income	 $ 26,050 	$ 63,943 ========== ========== Net income per common 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 Nine Months Ended June 30, 1997 	(Unaudited) 								Additional 						 	Common Stock 	paid-in 	Retained 						 Shares 	 Amount 	 capital 	 earnings ----------------- ---------- -------- Balance, September 	30, 1996 	336,889,149	$33,689 	$1,030,674 	$ 32,921 Net income for the 	nine months ended 	June 30, 1997	 -	 -	 -	 63,943 ------------ ------- ---------- -------- Balance June 30, 	1997		 	336,889,149	$33,689 	$1,030,674 	$ 96,864 ============ ======= ========== ======== 	See accompanying notes. 	 6 		CLANCY SYSTEMS INTERNATIONAL, INC. 	STATEMENT OF CASH FLOWS 	For the Nine Months Ended June 30, 1996 and 1997 	(Unaudited) 			 1996 	 1997 Cash flows from operating activities: 	Net income 	$ 26,050	 $ 63,943 	Adjustments to reconcile net income to 		net cash provided by operating activities: 			Depreciation and amortization	 313,852 	591,549 			Increase in deferred revenue	 3,614 	14,098 			Decrease (increase) in accounts receivable 	15,159 	(20,111) 			Decrease (increase) in inventories 	394 	(13,819) 			Decrease in income taxes refundable	 11,280 - 			Decrease in deferred tax asset	 5,000	 5,000 			Increase in income taxes payable 	- 	10,000 			Increase in deferred tax liability	 8,000 	- 			Increase in other current assets	 (3,690)	 - 			Decrease in warranty reserve	 (2,200) 	(2,700) 			Decrease in accounts payable and 				accrued liabilities	 -	 (6,774) 			Loss on disposal of fixed assets	 4,720	 - ------ ------- 				Total adjustments	 356,129	 577,243 ------- ------- 				Net cash provided by operating activities	382,179	 641,186 Cash flows from investing activities: 	Acquisition of furniture and equipment, 		software development costs and 		patent costs 	(293,993) 	(191,130) 	Investment in contract	 (750,000) 	- 	Decrease (increase) in deposits and other	 (30,083) 23,975 -------- ------- 		Net cash used in investing activities 	(1,074,076) (167,155) Cash flows from financing activities: 	Borrowings from bank 	650,000 	- 	Repayment of notes payable - bank	 (50,000)	(393,000) --------- -------- 		Net cash provided by (used in) 			financing activities	 600,000 	(393,000) ------- ------- Increase (decrease) in cash	 (91,897)	 81,031 Cash at beginning of period	 236,404 	 90,510 ------- ------ Cash at end of period	 $ 144,507 	$171,541 ========== ======== 	 See accompanying notes. 	 7 	CLANCY SYSTEMS INTERNATIONAL, INC. 	NOTES TO UNAUDITED FINANCIAL STATEMENTS 	June 30, 1997 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, 1996 and June 30, 1997, and the results of operations and cash flows for the periods ended June 30, 1996 and 1997. Financial statement reclassifications: Certain reclassifications have been made to the prior years' financial statements to conform to the 1997 presentation. 2.	Inventories Inventories consist of the following at: 		September 30,	 June 30, 		 1996 	 1997 ------------ -------	 Finished goods	 $ - 	$ 6,122 	Work in process	 9,380 	51,019 	Purchased parts and supplies	 180,875	 146,933 -------- -------- 		 $190,255 	$204,074 ======== ======== 3.	Income taxes The provision for income taxes for the three months and nine months ended June 30, 1996 and 1997 is based on the expected tax rate for the year. As of September 30, 1996 and June 30, 1997, total deferred tax assets and liabilities are as follows: 		September 30, 	June 30, 		 1996 	 1997 ------------ ------- 	Deferred tax assets	 $ 31,000 	$ 31,000 	Deferred tax assets resulting 	 from loss carryforward 	10,000 	-0 	Deferred tax liabilities	 (53,000)	 (48,000) -------- -------- 		 $(12,000)	 $(17,000) ========= ========= 	 8 	CLANCY SYSTEMS INTERNATIONAL, INC. 	NOTES TO UNAUDITED FINANCIAL STATEMENTS 	June 30, 1997 4. 	Investment in contract ---------------------- On February 15, 1996, the Company entered into a three year agreement with the Town of Cicero, Illinois, whereby the Company issued all parking tickets for the City and provided collection services for those parking tickets issued and all outstanding parking tickets previously issued by the City. As consideration, the Company received all cash receipts from tickets issued and previously issued. The Company has paid a total of $750,000 for commissions and amounts due to the Town. Amounts paid pursuant to the contract were being amortized monthly on a straight-lin basis over the period of the agreement commencing April 1, 1996. Commencing April 1, 1996, the Company has maintained 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 until the amounts are collected. Effective December 5, 1996, the contract with the Town of Cicero was terminated. In January of 1997, the Company received $185,484 from the Town of Cicero representing a prorated refund of the initial contract costs paid to the Town of Cicero. 	9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of - ------------------------------------------------------------------------- Operations - ---------- Material Changes in Financial Condition - --------------------------------------- At June 30, 1997 the Company had working capital of $578,300 derived primarily from contract sales, as compared to working capital of $465,991 at September 30, 1996. 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, 1997 the Company generated revenues from contract sales to the City of Oklahoma City, the Hertz Corporation, Berkeley California, Yonkers NY, Clancy UK, Richmond Virginia and other professional service contract installations. Oklahoma City, OK and Berkeley, CA each represented in excess of 5% of total revenues. New clients added to customer base during this period include Reading, Pennsylvania. Revenues for the 1997 quarter were higher than the prior year's quarter. The Company reported a net profit of $36,112 for the 1997 quarter as compared to net profit of $4,727 for the prior year's quarter. PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 	(b)	During the quarter ended June 30, 1997 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: August 13, 1997 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