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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<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 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
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM 10-QSB STATEMENTS FOR PERIOD ENDED 6/30/97 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH 10-QSB FOR PERIOD ENDED
6/30/97.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 171,541
<SECURITIES> 0
<RECEIVABLES> 307,042
<ALLOWANCES> 0
<INVENTORY> 204074
<CURRENT-ASSETS> 689,657
<PP&E> 1,526,751
<DEPRECIATION> 1,075,289
<TOTAL-ASSETS> 1,296,584
<CURRENT-LIABILITIES> 111,357
<BONDS> 0
0
0
<COMMON> 33,689
<OTHER-SE> 1,127,538
<TOTAL-LIABILITY-AND-EQUITY> 1,296,584
<SALES> 98,054
<TOTAL-REVENUES> 1,257,103
<CGS> 65,662
<TOTAL-COSTS> 721,016
<OTHER-EXPENSES> 374,214
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,063
<INCOME-PRETAX> 83,943
<INCOME-TAX> 20,000
<INCOME-CONTINUING> 63,943
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,943
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
