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, 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 August 9, 1996.
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Balance Sheet - September 30, 1995 and June 30, 1996 2 and 3
Statement of Operations - For the Three Months Ended
June 30, 1995 and 1996 4
Statement of Operations - For the Nine Months Ended
June 30, 1995 and 1996 5
Statement of Stockholders' Equity - For the Nine Months
Ended June 30, 1996 6
Statement of Cash Flows - For the Nine Months Ended
June 30, 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
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1995 and June 30, 1996
(Unaudited)
ASSETS
------
September June
--------- ----
Current assets:
Cash, including interest bearing
accounts of $166,616 (September)
and $51,809 (June) $ 236,404 $ 144,507
Accounts receivable, less allowance
for doubtful accounts of $0 175,281 160,122
Inventories (Note 2) 178,154 177,760
Investment in contract (Note 4) - 500,000
Income taxes refundable 12,000 720
Deferred tax asset (Note 3) 5,000 -
Other current assets - 923
---------- -------
Total current assets 606,839 984,032
Furniture and equipment, at cost:
Office furniture and equipment 98,278 106,006
Equipment under service contracts 1,207,529 1,343,435
---------- ---------
1,305,807 1,449,441
Less accumulated depreciation 848,617 906,251
---------- ---------
Net furniture and equipment 457,190 543,190
Other assets:
Investment in contract (Note 4) - 125,000
Deposits and other 19,947 50,030
Software licenses 16,882 16,882
Software development costs 205,692 252,069
--------- -------
242,521 443,981
Less accumulated amortization 147,237 176,426
--------- -------
Net other assets 95,284 267,555
--------- -------
$1,159,313 $1,794,777
========== ==========
See accompanying notes.
2
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1995 and June 30, 1996
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
September June
--------- ----
Current liabilities:
Notes payable - bank (Note 5) $ - $ 600,000
Warranty reserve 7,300 5,100
Deferred revenue 62,521 66,135
---------- ---------
Total current liabilities 69,821 671,235
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 42,179
--------- ---------
Total stockholders' equity 1,080,492 1,106,542
--------- ---------
$1,159,313 $1,794,777
========== ==========
See accompanying notes.
3
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 1995 and 1996
(Unaudited)
1995 1996
---- ----
Revenues:
Sales $ 138,931 $ 41,625
Service contract income 226,307 283,363
Parking ticket collections - 229,965
--------- ---------
365,238 554,953
Costs and expenses:
Cost of sales 47,342 19,406
Contract support costs 56,992 95,564
Cost of parking ticket collections - 235,261
General and administrative 142,300 106,238
Depreciation and amortization 63,266 69,768
Research and development 6,356 8,136
Loss on disposal of fixed assets 500 168
-------- --------
Total costs and expenses 316,756 534,541
-------- -------
Income from operations 48,482 20,412
Other income (expense)
Interest income 1,481 983
Interest expens - (16,327)
Total other income (expense) 1,481 (15,344)
------- --------
Income before provision for income taxes 49,963 5,068
Current income tax expense
(Note 3) - 341
------- -------
Net income $ 49,963 $ 4,727
========= =========
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
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
For the Nine Months Ended June 30, 1995 and 1996
(Unaudited)
1995 1996
---- ----
Revenues:
Sales $ 192,191 $ 135,011
Service contract income 740,184 733,913
Parking ticket collections - 229,965
--------- ---------
932,375 1,098,889
Costs and expenses:
Cost of sales 72,385 44,767
Cost of parking ticket collections - 235,261
Contract support costs 166,705 198,353
General and administrative 350,932 344,299
Depreciation and amortization 187,481 188,852
Research and development 23,582 36,112
Loss on disposal of fixed assets 500 4,720
-------- --------
Total costs and expenses 801,585 1,052,364
-------- ---------
Income from operations 130,790 46,525
Other income (expense)
Interest income 2,628 4,193
Interest expense (206) (16,327)
-------- --------
Total other income (expense) 2,422 (12,134)
-------- --------
Income before provision for income taxes 133,212 34,391
-------- --------
Current income tax expense
(Note 3) - 8,341
-------- --------
Net income $ 133,212 $ 26,050
========= ==========
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
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended June 30, 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
nine months ended
June 30, 1996 - - - 26,050
----------- ------- ---------- --------
Balance June 30, 1996 336,889,149 $33,689 $1,030,674 $ 42,179
=========== ======= ========== ========
See accompanying notes.
6
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Nine Months Ended June 30, 1995 and 1996
(Unaudited)
1995 1996
---- ----
Cash flows from operating activities:
Net income $133,212 $ 26,050
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 187,481 313,852
Decrease (increase) in deferred revenue (41,741) 3,614
Decrease in accounts receivable 172,016 15,159
Decrease (increase) in inventories (2,211) 394
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)
Increase (decrease) in warranty reserve 7,300 (2,200)
Decrease in accounts payable and
accrued liabilities (15,580) -
Loss on disposal of fixed assets 500 4,720
-------- -------
Total adjustments 307,765 356,129
------- -------
Net cash provided by operating activities 440,977 382,179
Cash flows from investing activities:
Acquisition of furniture and equipment,
software development costs and
patent costs (86,022) (293,993)
Investment in contract - (750,000)
Increase in deposits and other (8,445) (30,083)
-------- ---------
Net cash used in investing activities (94,467) (1,074,076)
Cash flows from financing activities:
Borrowings from bank - 650,000
Repayment of notes payable - bank (59,530) (50,000)
-------- --------
Net cash provided by (used in)
financing activities (59,530) 600,000
-------- -------
Increase (decrease) in cash 286,980 (91,897)
Cash at beginning of period 44,705 236,404
------- --------
Cash at end of period $331,685 $ 144,507
======== ==========
See accompanying notes.
7
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 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
June 30, 1996, and the results of operations and cash flows for the
periods ended June 30, 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 eighteen month period to
which the payments relate.
2. Inventories
Inventories consist of the following at:
September 30, June 30,
1995 1996
---- ----
Finished goods $ 8,800 $ 8,888
Work in process 2,587 62,216
Purchased parts and supplies 166,767 106,656
--------- --------
$178,154 $177,760
======== ========
3. Income taxes
The provision for income taxes for the three months and nine months
ended June 30, 1996 is based on the expected tax rate for the year.
As of September 30, 1995 and June 30, 1996, total deferred tax
assets and liabilities are as follows:
September 30, June 30,
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
<PAGE>
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 a total of $750,000 for
commissions and amounts due the Town which represents the contract
amount payable by the Company for each eighteen months of the
agreement including extensions. Such amount is being amortized
monthly on a straight-line basis over the respective eighteen month
period of the agreement commencing April 1, 1996. The agreement
contains a renewal option based on eighteen month intervals through
February 14, 2002. The agreement is cancelable by either party
upon 30 days notice with all fees pro rated. 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
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
September 25, 1996 including interest at 9.75% per annum.
9
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
Material Changes in Financial Condition
---------------------------------------
At June 30, 1996 the Company had working capital of $312,797
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 June 30, 1996, 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. Hertz Corporation, Oklahoma City, OK, Berkeley, CA,
and Yonkers, NY each represented in excess of 5% of total revenues.
New clients added to customer base during this period are Estes
Park Colorado, Chicago Motor Coach, and Buffalo, NY.
The Cicero project has generated $229,965 in revenues for the
quarter ended June 30, 1996. Management anticipates parking ticket
collection revenues to increase for the next quarter due to
implementation of a collection program for backlog tickets. Also,
costs of parking ticket collections should remain stable.
Revenue for the three months and nine months in 1996 were
substantially higher than the prior year's periods, because of
ticket revenues from the Cicero project. The Company, however,
reported net income of $4,727 and $26,050 for the three and nine
months in 1996, respectively, as compared to net income of $49,963
and $133,212 for the prior year's periods, respectively. Net
income for the period decreased because the Company experienced
considerable start-up costs with the Cicero project and continues
to have substantial R & D costs with its new printer and
intelligent terminal.
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 June 30, 1996 the Registrant has
filed no reports on Form 8-K.
10
<PAGE>
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 9, 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
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACED FROM FORM 10-QSB FOR PERIOD ENDED 6/30/96
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10-QSB FOR PERIOD ENDED 6/30/96
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 144,507
<SECURITIES> 0
<RECEIVABLES> 160,122
<ALLOWANCES> 0
<INVENTORY> 177,760
<CURRENT-ASSETS> 1,109,032
<PP&E> 1,449,441
<DEPRECIATION> 906,251
<TOTAL-ASSETS> 1,794,777
<CURRENT-LIABILITIES> 671,235
<BONDS> 0
0
0
<COMMON> 33,689
<OTHER-SE> 1,072,853
<TOTAL-LIABILITY-AND-EQUITY> 1,794,777
<SALES> 0
<TOTAL-REVENUES> 1,098,889
<CGS> 0
<TOTAL-COSTS> 1,052,364
<OTHER-EXPENSES> 12,134
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,327
<INCOME-PRETAX> 34,391
<INCOME-TAX> 8,341
<INCOME-CONTINUING> 26,050
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,050
<EPS-PRIMARY> 0
<EPS-DILUTED> 0<F1>
<FN>
<F1>
</FN>
</TABLE>
