10QSB 1 clancy10q.txt 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, 2001 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 14, 2001 is 361,617,938 shares, $.0001 par value. CLANCY SYSTEMS INTERNATIONAL, INC. INDEX Page No. ------- PART I. FINANCIAL INFORMATION Balance Sheet - September 30, 2000 and March 31, 2001 (unaudited) 2 and 3 Statement of Operations - For the Three Months Ended March 31, 2000 and 2001 (unaudited) 4 Statement of Operations - For the Six Months Ended March 31, 2000 and 2001 (unaudited) 5 Statement of Stockholders' Equity - For the Six Months Ended March 31, 2001 (unaudited) 6 Statement of Cash Flows - For the Six Months Ended March 31, 2000 and 2001 (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 11 1 CLANCY SYSTEMS INTERNATIONAL, INC. BALANCE SHEET September 30, 2000 and March 31, 2001 ASSETS September March --------- ----- Current assets: Cash and cash equivalents $ 435,238 $ 396,111 Accounts receivable 294,521 299,029 Income taxes receivable - 59,472 Inventories (Note 2) 164,252 168,978 Prepaid expenses 12,100 5,133 --------- --------- Total current assets 906,111 928,723 Furniture and equipment, at cost: Office furniture and equipment 154,285 80,056 Equipment under service contracts 1,270,655 1,323,863 ---------- --------- 1,424,940 1,403,919 Less accumulated depreciation (1,096,481) (1,096,366) ---------- ---------- Net furniture and equipment 328,459 307,553 Other assets: Investment in partnership 432,801 457,529 Note receivable - employee 10,618 10,555 Deposits and other 3,769 3,481 Deferred tax asset (Note 3) - - Software development costs 128,693 141,303 ---------- --------- Total other assets 575,881 612,868 ---------- --------- $ 1,810,451 $ 1,849,144 ============ =========== See accompanying footnotes 2 CLANCY SYSTEMS INTERNATIONAL, INC. BALANCE SHEET September 30, 2000 and March 31, 2001 LIABILITIES AND STOCKHOLDERS' EQUITY September March --------- ----- Current liabilities: Notes payable - shareholder (Note 4) $ 45,000 $ 45,000 Note payable - bank (Note 4) - 20,000 Accounts payable 9,496 3,775 Income taxes payable 46,000 - Deferred revenue 124,170 106,454 --------- -------- Total current liabilities 224,666 175,229 Long-term note payable - bank 90,000 - Deferred tax liability (Note 3) 11,000 - Stockholders' equity (Note 5): Preferred stock, $.0001 par value; 100,000,000 shares authorized, none issued - - Common stock, $.0001 par value; 800,000,000 shares authorized, 334,128,623 shares (September) and 361,617,938 shares (March) issued and outstanding 34,413 36,162 Additional paid-in capital 1,045,175 1,106,799 Retained earnings 405,197 530,954 ---------- --------- Total stockholders' equity 1,484,785 1,673,915 ---------- --------- $ 1,810,451 $ 1,849,144 ============= =========== See accompanying footnotes 3 CLANCY SYSTEMS INTERNATIONAL, INC. INCOME STATEMENT For the Three Months Ended March 31, 2000 and 2001 (Unaudited) 2000 2001 ---- ---- Revenues: Sales $ 40,993 $ 47,186 Service contract income 280,693 285,312 Parking ticket collections 50,599 46,593 -------- -------- Total revenues 372,285 379,091 Costs and expenses: Cost of sales 19,422 22,834 Cost of services 112,555 110,741 Cost of parking ticket collections 33,106 35,982 General and administrative 137,736 152,080 Research and development 17,575 4,977 -------- -------- Total costs and expenses 320,394 326,614 -------- -------- Income from operations 51,891 52,477 Other income (expense): Interest income 878 3,022 Interest expense (5,792) (2,251) -------- -------- Total other income (expense) (4,914) 771 Income before provision for income taxes and gain in equity-basis partnership 46,977 53,248 Provision for income taxes (15,825) (7,805) Gain in equity basis partnership (net of tax expense of $1,959 -2000 and $4858 -2001) 3,315 16,672 -------- -------- Net income $ 34,467 $ 62,115 ======== ======== Basic net income per common share $ * $ * Weighted average number of shares outstanding 337,600,000 351,300,000 * Less than $.01 per share See accompanying footnotes 4 CLANCY SYSTEMS INTERNATIONAL, INC. INCOME STATEMENT For Six Months Ended March 31, 2000 and 2001 (Unaudited) 2000 2001 ---- ---- Revenues: Sales $ 56,799 $ 60,723 Service contract income 600,479 654,434 Parking ticket collections 96,002 70,512 -------- --------- Total revenues 753,280 785,669 Costs and expenses: Cost of sales 42,377 56,115 Cost of services 244,889 230,587 Cost of parking ticket collections 64,973 64,614 General and administrative 298,487 282,897 Research and development 29,502 15,400 -------- --------- Total costs and expenses 680,228 649,613 -------- --------- Income from operations 73,052 136,056 Other income (expense): Interest income 1,286 6,770 Interest expense (12,680) (5,069) -------- --------- Total other income (expense) (11,394) 1,701 -------- --------- Income before provision for income taxes and gain in equity-basis partnership 61,658 137,757 Provision for income taxes (21,225) (30,719) Gain in equity basis partnership (net of tax expenseof $4,059 -2000 and $6,009 -2001) 7,215 18,719 -------- --------- Net income $ 47,648 125,757 ======== ========= Basic net income per common share $ * $ * Weighted average number of shares outstanding 337,200,000 347,700,000 * Less than $.01 per share See Accompanying Footnotes 5 CLANCY SYSTEMS INTERNATIONAL, INC. STATEMENTS OF STOCKHOLDER'S EQUITY For the Six Months Ended March 31, 2001 (Unaudited)
Additional Common stock paid-in Retained Shares Amount capital earnings Balance, September 30, 2000 344,128,623 $ 34,413 $ 1,045,175 $ 405,197 Issuance of common stock in exchange for acquisition of web sites from an officer of the Company (Note 4) 17,489,315 1,749 61,624 - Net loss for the six months ended March 31, 2001 - - - 125,757 ----------- ---------- ----------- --------- Balance, March 31, 2001 361,617,938 $ 36,162 $ 1,106,799 $ 530,954 =========== ========== ============ =========
See Accompanying Notes 6 CLANCY SYSTEMS INTERNATIONAL, INC. STATEMENT OF CASH FLOWS For the Six Months Ended March 31, 2000 and 2001 2000 2001 ---- ---- Cash flows from operating activities: Net income $ 47,648 $ 125,757 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 133,386 101,981 Deferred income tax (benefit) expense 2,700 (11,000) Common stock issued for services and for aquisition of web sites 14,350 61,624 Changes in assets and liabilities: Accounts receivable (62,570) (4,508) Income taxes receivable - (59,472) Inventories (2,846) (4,726) Prepaid expenses 5,500 6,967 Gain in equity basis partnership (11,274) (24,728) Accounts payable (7,382) (5,721) Income taxes payable 7,784 (46,000) Deferred revenue (9,239) (17,716) ------- ------- Total adjustments 70,409 ( 3,299) ------- ------- Net cash provided by operating activities 118,057 122,458 Cash flows from investing activities: Acquisition of furniture and equipment - net (54,635) (53,209) Increase in deposits and other - - Increase in deposits and other (14,127) 63 Increase in software development costs (26,261) (38,439) Investment in partnership - - ------- ------- Net cash used in investing activities (95,023) (91,585) Cash flows from financing activities: Payments on note payable - bank (40,000) (70,000) Proceeds from note payable - related party - - Payments on note payable - shareholder (65,000) - ------- ------- Net cash used in financing activities (105,000) (70,000) Decrease in cash and cash equivalents (81,966) (39,127) Cash and cash equivalents at beginning of period 315,579 435,238 ------- ------- Cash and cash equivalents at end of period $233,613 $396,111 ======== ======== See Accompanying Footnotes 7 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, 2000 and March 31, 2001, and the results of operations and cash flows for the periods ended March 31, 2000 and 2001. 2. Inventories Inventories consist of the following at: September 30, March 31, 2000 2001 ------------ --------- Finished goods $ 7,800 $ 8,449 Work in process - 25,347 Purchased parts and supplies 156,452 135,182 ----------- ---------- $ 164,252 $ 168,978 =========== =========== 3. Income taxes The provision for income taxes for the six months ended March 31, 2000 and 2001 is based on the expected tax rate for the year. As of September 30, 2000 and March 31, 2001, total deferred tax assets and liabilities are as follows: September 30, March 31, 2000 2001 ------------ --------- Deferred tax assets $ 74,000 $ 58,000 Deferred tax liabilities (85,000) (58,000) ----------- ----------- $ (11,000) $ - =========== ============ 4. Notes payable Related party: During the year ended September 30, 1999, the Company executed five notes payable from a major shareholder of the Company for a total of $120,000. The notes bear interest at 8 and 9% annually. During the year ended September 30, 2000, the due dates of two of the remaining notes for a total of $45,000 were extended to May 1 and June 30, 2001. 8 4. Notes payable (continued) Bank: In October 2000, the Company extended the due date of its note payable - bank to October 15, 2001. The note bears interest at 9%, with interest payable monthly and is secured by a certificate of deposit in the name of two officers of the Company. 5. Stockholders' equity In November 1999, the Company entered into a letter of intent to acquire two website related businesses owned and developed by the Company's president and major shareholder for shares of the Company's common stock valued at $255,344 (17,489,315 shares of common stock at $.0146 per share). The businesses were acquired in February 2001 and were recorded by the Company at the president's historical cost basis in the trademarks and proprietary technology related to the websites which approximates the par value of the shares to be issued of $1,749. This has been included on the balance sheet under software developmehnt costs. The income tax benefit to be derived from the amortization of the tax basis of the web sites is recorded as an addition of $61,624 to additional paid-in capital. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Material Changes in Financial Condition At March 31, 2001, the Company had working capital of $753,494 derived primarily from contract sales, as compared to working capital of $681,445 at September 30, 2000. 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, 2001, 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. Revenues during the quarter were higher than the prior year's quarter by 2% which is primarily due to a larger client base. Expenses increased by 2% over the prior year's quarter due to an increase in general and administrative expenses. The Company reported net income of $62,115 for the 2001 quarter as compared to a net profit of $34,467 for the prior year's quarter. 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. 10 PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities and Use of Proceeds (c) The Company issued 17,489,315 shares of its common stock to Stanley J. Wolfson, an officer and director, in exchange for 2 web sites developed by him. The shares were issued pursuant to an exemption under Section 4(2) of the Securities Act of 1933. No commissions or finders fees were paid on the transaction. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits None (b) During the quarter ended March 31, 2001, the Registrant has filed one report on Form 8-K dated March 6, 2001, reporting on an Item 2 event. 11 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 14, 2001 CLANCY SYSTEMS INTERNATIONAL, INC. (Registrant) By: /s/ Stanley J. Wolfson Stanley J. Wolfson, President and Chief Executive Officer 12