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, 1999
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 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:
The number of shares outstanding of the issuer's classes of common stock,
as of May 15, 1999 is 336,889,149 shares, $.0001 par value.
CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX
Page No.
--------
PART I. FINANCIAL INFORMATION
Balance Sheet - September 30, 1998 and March 31, 1999
(unaudited) 2 and 3
Statement of Operations - For the Three Months Ended March
31, 1998 and 1999 (unaudited) 4
Statement of Operations - For the Six Months Ended March
31, 1998 and 1999 (unaudited) 5
Statement of Stockholders' Equity - For the Six Months
Ended March 31, 1999 (unaudited) 6
Statement of Cash Flows - For the Six Months Ended
March 31, 1998 and 1999 (unaudited) 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, 1998 and March 31, 1999
(Unaudited)
ASSETS
September March
--------- --------
Current assets:
Cash and cash equivalents $ 91,432 $ 85,301
Accounts receivable 244,448 349,702
Inventories (Note 2) 190,960 188,346
Investment in contract, n 23,334 5,834
Income taxes refundable 16,000 -
---------- ----------
Total current assets 566,174 629,183
Furniture and equipment, at cost:
Office furniture and equipment 235,180 235,180
Equipment under service contracts 1,442,295 1,520,324
---------- ---------
1,677,475 1,755,504
Less accumulated depreciation 1,204,775 1,298,126
---------- ---------
Net furniture and equipment 472,700 457,378
Other assets:
Investment in partnership 329,915 409,235
Deposits and other 28,310 28,310
Deferred tax asset (Note 3) 5,000 -
Software licenses 16,882 -
Software development costs 356,353 381,684
---------- ----------
736,460 819,229
Less accumulated amortization 225,040 236,838
---------- ----------
Net other assets 511,420 582,391
---------- ----------
$1,550,294 $1,668,952
========== ==========
2
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1998 and March 31, 1999
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September March
--------- --------
Current liabilities:
Accounts payable $ 37,999 $ -
Note payable - bank - 295,000
Notes payable - related party (Note 4) - 120,000
Income taxes payable - 8,000
Deferred revenue 87,971 90,406
---------- ---------
Total current liabilities 125,970 513,406
Long-term note payable - bank 320,000 -
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 out-
standing 33,689 33,689
Additional paid-in capital 1,030,674 1,030,674
Retained earnings 39,961 91,183
Total stockholders' equity 1,104,324 1,155,546
---------- ----------
$1,550,294 $1,668,952
========== ==========
3
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1998 and 1999
(Unaudited)
1998 1999
-------- --------
Revenues:
Sales $ 59,468 $ 44,428
Service contract income 278,598 293,231
Parking ticket collections 59,035 79,088
-------- --------
Total revenues 397,101 416,747
Costs and expenses:
Cost of sales 53,020 22,099
Cost of services 158,556 129,952
Cost of parking ticket collections 28,830 73,331
General and administrative 140,208 114,220
Research and development 11,190 11,327
-------- --------
Total costs and expenses 391,804 350,929
-------- --------
Income from operations 5,297 65,818
Other income (expense):
Interest income 3,197 367
Interest expense (8,507) (8,180)
--------- --------
Total other income (expense) (5,310) (7,813)
--------- --------
Income (loss) before provision for income taxes (13) 58,005
Provision for income taxes 831 21,500
Loss in equity basis partnership (net of tax benefit
of $11,000) - 18,800
--------- --------
Net income (loss) $ (844) $ 17,705
========== ========
Basic net income (loss) per common share $ (*) $ *
========= ========
Weighted average number of shares outstanding 336,900,000 336,900,000
=========== ===========
* Less than $.01 per share
4
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
For the Six Months Ended March 31, 1998 and 1999
(Unaudited)
1998 1999
-------- ---------
Revenues:
Sales $ 142,471 $ 146,992
Service contract income 508,826 574,641
Parking ticket collections 64,450 163,330
--------- ---------
Total revenues 715,747 884,963
Costs and expenses:
Cost of sales 89,397 38,574
Cost of services 284,782 272,759
Cost of parking ticket collections 49,549 161,269
General and administrative 241,667 251,538
Research and development 25,515 23,373
--------- ---------
Total costs and expenses 690,910 747,513
--------- ---------
Income from operations 24,837 137,450
Other income (expense):
Interest income 5,272 960
Interest expense (8,507) (15,008)
--------- ---------
Total other income (expense) (3,235) (14,048)
--------- ---------
Income before provision for income taxes 21,602 123,402
Provision for income taxes 7,831 44,500
Loss in equity basis partnership (net of tax benefit of
$15,500) - 27,680
--------- ---------
Net income $ 13,771 $ 51,222
========= =========
Basic net income per common share $ * $ *
=========== ==========
Weighted average number of shares outstanding 336,900,000 336,900,000
=========== ===========
* Less than $.01 per share
5
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Months Ended March 31, 1998 and 1999
(Unaudited)
Additional
Common stock paid-in Retained
Shares Amount capital earnings
------ ------ ---------- --------
Balance, September 30, 1998 336,889,149 $ 33,689 $1,030,674 $ 39,961
Net income for the six months ended
March 31, 1999 - - - 51,222
----------- -------- ---------- ---------
Balance, March 31, 1999 336,889,149 $ 33,689 $1,030,674 $ 91,183
=========== ======== ========== ========
6
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended March 31, 1998 and 1999
(Unaudited)
1998 1999
-------- --------
Cash flows from operating activities:
Net income $ 13,771 $ 51,222
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 121,340 139,531
Decrease in deferred tax asse 1,000 5,000
Increase in accounts receivable (52,573) (105,254)
Decrease in inventories 1,155 2,614
Loss in equity basis partnershi - 43,180
Decrease in accounts payable - (37,999)
Decrease in accrued expenses (2,286) -
Decrease in income taxes refundable - 16,000
Increase in income taxes payable 6,000 8,000
Increase in deferred revenue 28,739 2,435
Decrease in warranty reserve (400) -
-------- --------
Total adjustments 102,975 73,507
-------- --------
Net cash provided by operating activities 116,746 124,729
Cash flows from investing activities:
Acquisition of furniture and equipment - net (136,169) (78,029)
Increase in software development costs (36,236) (25,331)
Investment in partnership - (122,500)
Increase in deposits and other assets (10,000) -
-------- --------
Net cash used in investing activities (182,405) (225,860)
Cash flows from financing activities:
Proceeds from note payable - bank 190,000 -
Proceeds from note payable - related party - 120,000
Payments on note payable - bank (190,000) (25,000)
-------- --------
Net cash provided by financing activities - 95,000
-------- --------
Decrease in cash and cash equivalents (65,659) (6,131)
Cash and cash equivalents at beginning of year 199,195 91,432
-------- --------
Cash and cash equivalents at end of year $133,536 $ 85,301
======== ========
7
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1999
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, 1998
and March 31, 1999, and the results of operations and cash flows for
the periods ended March 31, 1998 and 1999.
2. Inventories
Inventories consist of the following at:
September 30, March 31,
1998 1999
-------- --------
Finished goods $ 19,690 $ 9,417
Work in process - 18,835
Purchased parts and supplies 171,270 160,094
-------- --------
$190,960 $188,346
======== ========
3. Income taxes
The provision for income taxes for the three months and six months
ended March 31, 1998 and 1999 is based on the expected tax rate for the
year.
As of September 30, 1998 and March 31, 1999, total deferred tax
assets and liabilities are as follows:
September 30, March 31,
1998 1999
-------- --------
Deferred tax assets $ 10,000 $ -
Deferred tax liabilities (5,000) -
-------- ---
$ 5,000 $ -
======= ===
4. Notes payable - related party
On October 1, 1998, the Company executed a one-year note payable for
$25,000 with an officer of the Company. The note is unsecured, bears
interest at 8%, and is due on October 1, 1999.
On December 1, 1998, the Company executed a one-year note payable for
$30,000 with an officer of the Company. The note is unsecured, bears
interest at 8%, and is due on December 1, 1999.
8
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 1999
4. Notes payable - related party (continued)
On January 1, 1999, the Company executed a one-year note payable for
$20,000 with an officer of the Company. The note is unsecured, bears
interest at 9%, and is due on January 1, 2000.
On February 1, 1999, the Company executed a one-year note payable for
$20,000 with an officer of the Company. The note is unsecured, bears
interest at 9%, and is due on February 1, 2000.
On March 1, 1999, the Company executed a one-year note payable for
$25,000 with an officer of the Company. The note is unsecured, bears
interest at 9%, and is due on March 1, 2000.
9
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Material Changes in Financial Condition
At March 31, 1999 the Company had working capital of $115,777
derived primarily from contract sales, as compared to working capital
of $440,204 at September 30, 1998. The Company received additional
loans in the amount of $65,000 from a Company Officer for investment
in the Urban Transit Solutions partnership.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, 1999 the Company generated revenues
from contract sales from its professional services contracts,
sales, and privatization contracts. Berkeley, CA and Oklahoma City,
OK each generated revenues in excess of 5% of total revenues. New
clients added during the quarter include Preferred Parking,
Charlotte, NC; Frederick Ross Company, Denver, CO; Winchester, VA;
and San Marcos, TX.
Revenues for the six-month period ended March 31, 1999 were 24% higher
than the same period in the prior year. Expenses for the six-month
period ended March 31, 1999 were 8% higher than the same period in
the prior year. The increases in both revenue and expenses were
mainly attributable to the addition of new service contracts during
the period. The Company reported a net profit of $17,705 for the 1999
quarter as compared to a loss of $844 for the prior year's quarter.
During the fiscal year ended September 30, 1998, the Company upgraded
70% of its clients to its new year 2000 compliant software and hardware.
The Company anticipates that by June 30, 1999, all client upgrades
will have been completed. Costs associated with the software
portion of the year 2000 upgrade have been insignificant because the
Company is continually upgrading and improving its software for its
clients as a normal course of business. Management estimates costs
associated with completing replacement of hardware to approximate $65,000
during fiscal year 1999.
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K
Exhibits
27.1 Financial Data Schedule (1)
During the quarter ended March 31, 1999, the Registrant has
filed no reports on Form 8-K
(1) 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: May 15, 1999 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