10QSB 1 a10qc.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 December 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 Mr. 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 February 14, 2002 is 361,617,938 shares, $.0001 par value. CLANCY SYSTEMS INTERNATIONAL, INC. INDEX Page No. PART I. FINANCIAL INFORMATION ------------------------------------------------------------------------- Balance Sheet - September 30, 2001 and December 31, 2001 (unaudited) 2 and 3 Statement of Income - For the Three Months Ended December 31, 2000 and 2001 (unaudited) 4 Statement of Stockholders' Equity - For the Three Months Ended December 31, 2001 (unaudited) 5 Statement of Cash Flows - For the Three Months Ended December 31, 2000 and 2001 (unaudited) 6 Notes to Unaudited Financial Statements 7 Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION 9 1 CLANCY SYSTEMS INTERNATIONAL, INC. BALANCE SHEET September 30, 2001 and December 31,2001 (Unaudited) ASSETS ------ September December ---------- --------- Current assets: Cash and cash equivalents $ 385,491 $ 456,992 Accounts receivable 342,323 287,143 Income tax refund receivable 55,346 48,316 Inventories (Note 2) 144,602 147,494 Prepaid expenses 14,645 10,436 ---------- --------- Total current assets 942,407 950,381 Furniture and equipment, at cost: Office furniture and equipment 97,501 114,501 Equipment under service contracts 982,290 995,323 ---------- --------- 1,079,791 1,109,824 Less accumulated depreciation (811,211) (843,478) ---------- --------- Net furniture and equipment 268,580 266,346 Other assets: Investment in partnership 454,159 446,431 Deferred tax asset (Note 3) 46,400 41,900 Note receivable - employee 10,277 10,242 Deposits and other 3,194 3,050 Software development costs, net of accumulated amortization 146,035 138,690 --------- --------- Total other assets 660,065 640,313 --------- --------- $ 1,871,052 $ 1,857,040 ========= ========= See accompanying notes. 2 CLANCY SYSTEMS INTERNATIONAL, INC. BALANCE SHEET September 30, 2001 and December 31,2001 (Unaudited) LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------- September December --------- --------- Current liabilities: Accounts payable $ 16,008 $ - Deferred revenue 114,266 102,284 --------- --------- Total current liabilities 130,274 102,284 Stockholders' equity: Preferred stock, $.0001 par value; 100,000,000 shares authorized, none issued - - Common stock, $.0001 par value; 800,000,000 shares authorized, 361,617,938 shares issued and outstanding 36,162 36,162 Additional paid-in capital 1,131,397 1,131,397 Retained earnings 573,219 587,197 --------- --------- Total stockholders' equity 1,740,778 1,754,756 --------- --------- $ 1,871,052 $ 1,857,040 ========= ========= See accompanying notes. 3 CLANCY SYSTEMS INTERNATIONAL, INC. INCOME STATEMENTS For the Three Months Ended December 31, 2000 and 2001 (Unaudited) 2000 2001 -------- ------- Revenues: Sales $ 13,537 $ 39,395 Service contract income 369,122 342,319 Parking ticket collections 23,919 21,230 --------- --------- Total revenues 406,578 402,944 Costs and expenses: Cost of sales 33,281 34,538 Cost of services 119,846 114,238 Cost of parking ticket collections 28,632 26,274 General and administrative 130,817 181,408 Research and development 10,423 14,123 --------- --------- Total costs and expenses 322,999 370,581 --------- --------- Income from operations 83,579 32,363 Other income (expense): Interest income 3,748 951 Interest expense (2,818) - --------- --------- Total other income (expense) 930 951 --------- --------- Income before provision for income taxes and gain in equity-basis partnership 84,509 33,314 Provision for income taxes (22,914) (14,545) Gain (loss) in equity basis partnership (net of tax expense of $1,151 -2000 and tax benefit of $2,936 -2001) 2,047 (4,791) --------- --------- Net income $ 63,642 $ 13,978 ========= ========= Basic net income per common share $ * $ * ========= ========= Weighted average number of shares outstanding 337,600,000 361,600,000 =========== =========== * Less than $.01 per share See accompanying notes. 4
CLANCY SYSTEMS INTERNATIONAL, INC. STATEMENT OF STOCKHOLDERS' EQUITY For the Three Months Ended December 31, 2001 (Unaudited) Common stock Additional paid-in Retained Shares Amount capital earnings ------ ------ ---------- -------- Balance, September 30, 2001 361,617,938 $ 36,162 $ 1,131,397 $ 573,219 Net income for the three months ended December 31, 2001 - - - 13,978 ------------ ----------- --------------- ----------- Balance, December 31, 2001 361,617,938 $ 36,162 $ 1,131,397 $ 587,197 ============ =========== =============== ============= See accompanying notes. 5
CLANCY SYSTEMS INTERNATIONAL, INC. STATEMENT OF CASH FLOWS For the Three Months Ended December 31, 2000 and 2001 (Unaudited) 2000 2001 ------- -------- Cash flows from operating activities: Net income $ 63,642 $ 13,978 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 49,527 47,431 Loss (gain) in equity basis partnership (3,198) 7,728 Deferred income tax expense 3,000 4,500 Changes in assets and liabilities: Accounts receivable (51,477) 55,180 Inventories (11,108) (2,892) Prepaid expenses 3,484 4,209 Accounts payable (9,496) (16,008) Income taxes payable (45,795) 7,030 Deferred revenue 8,403 (11,982) _________ _________ Total adjustments (56,660) 95,196 --------- --------- Net cash provided by operating activities 6,982 109,174 Cash flows from investing activities: Acquisition of furniture and equipment - net (40,288) (30,033) Receipts from note receivable 31 35 Increase in software development costs (18,181) (7,675) Net cash used in investing activities (58,438) (37,673) -------- ------- Cash flows from financing activities: Payments on note payable - bank (20,000) - ---------- --------- Net cash used in financing activities (20,000) - ---------- --------- Increase (decrease) in cash and cash equivalents (71,456) 71,501 Cash and cash equivalents at beginning of period 435,238 385,491 ---------- --------- Cash and cash equivalents at end of period $ 363,782 $ 456,992 ========== ========= See accompanying notes. 6 CLANCY SYSTEMS INTERNATIONAL, INC. NOTES TO UNAUDITED FINANCIAL STATEMENTS December 31, 2001 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, 2001 and December 31, 2001, and the results of operations and cash flows for the periods ended December 31, 2000 and 2001. 2. Inventories Inventories consist of the following at: September 30, December 31, 2001 2001 --------- --------- Finished goods $ 24,233 $ 46,986 Work in process 1,885 20,102 Purchased parts and supplies 118,484 80,406 --------- --------- $ 144,602 $ 147,494 ========= ========= 3. Income taxes The provision for income taxes for the three months ended December 31, 2000 and 2001 is based on the expected tax rate for the year. As of September 30, 2001 and December 31, 2001, total deferred tax assets and liabilities are as follows: September 30, December 31, 2001 2001 ------------ ------------- Deferred tax assets $ 118,100 $ 125,800 Deferred tax liabilities (71,700) (83,900) ------------ ------------- $ 46,400 $ 41,900 ============ ============= 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Material Changes in Financial Condition At December 31, 2001, the Company had working capital of $848,097 derived primarily from contract sales, as compared to working capital of $812,133 at September 30, 2001. 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 December 31, 2001, the Company generated revenues from contract sales from its professional services contracts, sales, remit-online payment processing, and privatization contract. New contracts signed during the quarter included Fairfax County, Virginia; Middlesex Sheriff's Department; and River Falls, Wisconsin. Revenues during the quarter were lower than the prior year's quarter by 1%. Expenses increased by 15% over the prior year's quarter, primarily attributed to legal expenses and capturing an operating loss from the Company's equity based investment in Urban Transit Solutions. The Company reported a profit of $13,978 for the quarter as compared to a net profit of $63,642 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 posted 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. 8 PART II - OTHER INFORMATION Item 1. Legal Proceedings On September 19, 2000, the Company filed an action in Suffolk County Superior Court against Mr. John Mr. Short, Syracuse, New York, who posted as Darth4, MrDarth4, and other aliases on Raging Bull and other message boards. Relief sought includes monetary damages for harm done to the Company and its officers in an amount not yet determined, retraction of false and damaging statements and for the subject to cease and desist posting or discussing the Company, its officers, and any activities related thereto. In a judgment rendered by the Superior Court Department of the Trial Court of Suffolk County, a default judgment against Mr. Short was entered on October 31, 2001. The Judgment orders Mr. Short to pay the Company attorney's fees and costs of $16,699.61 and an additional fine of $50,000 for his willful failure to comply with a Court order of June 28, 2001. Mr. Short filed an appeal on December 2, 2001, 3 days late of the 30 day appeal period. The appeal was not allowed and the Court judgment of October 31, 2001 stands as issued. Item 2. Changes in Securities and Use of Proceeds None Item 6. Exhibits and Reports on Form 8-K None 9 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 14, 2002 CLANCY SYSTEMS INTERNATIONAL, INC. (Registrant) By: /s/ Stanley J. Wolfson ---------------------------------- Stanley J. Wolfson, President and Chief Executive Officer 10