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 June 30, 1998
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:
The number of shares outstanding of the issuer's common stock, as of
August 10, 1998 was 336,889,149 shares, $.0001 par value.
Transitional Small Business Disclosure Format: Yes ___No X
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Balance Sheet - September 30, 1997 and June 30, 1998 (unaudited) 2 and 3
Statement of Operations - For the Three Months Ended June 30, 1997
and 1998 (unaudited) 4
Statement of Operations - For the Nine Months Ended June 30, 1997
and 1998 (unaudited) 5
Statement of Stockholders' Equity - For the Nine Months Ended
June 30, 1998 (unaudited) 6
Statement of Cash Flows - For the Nine Months Ended
June 30, 1997 and 1998 (unaudited) 7
Notes to Unaudited Financial Statements 8
Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II. OTHER INFORMATION 9
1
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1997 and June 30, 1998
(Unaudited)
ASSETS
September June
--------- ----
Current assets:
Cash and cash equivalents $ 199,195 $ 190,283
Accounts receivable 196,646 279,209
Inventories (Note 2) 210,608 188,492
Prepaid expenses - 32,084
Income taxes refundable 1,970 1,970
Deferred tax asset (Note 1,000 -
---------- ----------
Total current assets 609,419 692,038
Furniture and equipment, at cost:
Office furniture and equipment 228,680 233,580
Equipment under service contracts 1,182,632 1,363,198
---------- ----------
1,411,312 1,596,778
Less accumulated depreciation 994,732 1,140,724
---------- ----------
Net furniture and equipment 416,580 456,054
Other assets:
Deposits and other 26,835 103,310
Software licenses 16,882 16,882
Software development costs 286,763 335,237
---------- ----------
330,480 455,429
Less accumulated amortization 167,415 208,054
---------- ----------
Net other assets 163,065 247,375
---------- ----------
$1,189,064 $1,395,467
========== ==========
See accompanying notes.
2
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1997 and June 30, 1998
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September June
--------- -----
Current liabilities:
Other accrued expenses $ 2,286 $ -
Note payable - bank - 100,000
Warranty reserve 400 -
Income taxes payable - 39,000
Deferred revenue 52,026 22,128
---------- ----------
Total current liabilities 54,712 161,128
Deferred tax liability (Note 3) 2,000 4,000
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 67,989 165,976
---------- ----------
Total stockholders' equity 1,132,352 1,230,339
---------- ----------
$1,189,064 $1,395,467
=========== ==========
See accompanying notes.
3
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
For the Three Months Ended June 30, 1997 and 1998
(Unaudited)
1997 1998
---- ----
Revenues:
Sales $ 28,036 $ 36,416
Service contract income 337,882 304,995
Parking ticket collections 20,994 64,777
-------- ----------
Total revenues 386,912 406,188
Costs and expenses:
Cost of sales 20,096 12,828
Cost of services 154,327 119,404
Cost of parking ticket collections 18,849 49,189
General and administrative 141,863 94,720
Research and development 5,019 11,509
-------- --------
Total costs and expenses 340,154 287,650
-------- --------
Income from operations 46,758 118,538
Other income (expense);
Interest income 985 678
Interest expens (1,631) -
-------- --------
Total other income (expense) (646) 678
-------- --------
Income before provision for income taxes 46,112 119,216
Provision for income taxes 10,000 35,000
-------- --------
Net income $ 36,112 $ 84,216
======== ========
Basic 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, 1997 and 1998
(Unaudited)
1997 1998
---- ----
Revenues:
Sales $ 98,054 $ 178,887
Service contract income 872,760 813,821
Parking ticket collections 286,289 129,227
---------- ----------
Total revenues 1,257,103 1,121,935
Costs and expenses:
Cost of sales 65,662 102,225
Cost of services 419,782 404,186
Cost of parking ticket collections 301,234 98,738
General and administrative 349,904 336,387
Research and development 24,310 37,024
---------- ----------
Total costs and expenses 1,160,892 978,560
---------- ----------
Income from operations 96,211 143,375
---------- ----------
Other income (expense);
Interest income 1,795 5,950
Interest expense (14,063) (8,507)
---------- ----------
Total other income (expense) (12,268) (2,557)
---------- ----------
Income before provision for income taxes 83,943 140,818
Provision for income taxes 20,000 42,831
---------- ----------
Net income $ 63,943 $ 97,987
========== ==========
Basic 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>
<TABLE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Nine Months Ended June 30, 1998
(Unaudited)
<CAPTION>
Additional
Common stock paid-in Retained
Shares Amount capital earnings
<S> <C> <C> <C> <C>
Balance, September 30, 1997 336,889,149 $ 33,689 $ 1,030,674 $ 67,989
Net income for the nine months ended
June 30, 1998 - - - 97,987
----------- -------- ----------- --------
Balance, June 30, 1998 336,889,149 $ 33,689 $ 1,030,674 $ 165,976
=========== ========= =========== =========
</TABLE>
See accompanying notes.
6
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Nine Months Ended June 30, 1997 and 1998
(Unaudited)
1997 1998
---- ----
Cash flows from operating activities:
Net income $ 63,943 $ 97,987
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 591,549 186,631
Increase in accounts receivable (20,111) (82,563)
Decrease (increase) in inventories (13,819) 22,116
Increase in prepaid expense - (32,084)
Decrease/increase in deferred tax
asset/liability 5,000 3,000
Decrease in accounts payable (6,774) -
Decrease in accrued expenses - (2,286)
Increase in income taxes payable 10,000 39,000
Decrease in deferred revenue 14,098 (29,898)
Decrease in warranty reserve (2,700) (400)
--------- -------
Total adjustments 577,243 103,516
--------- -------
Net cash provided by operating
activities 641,186 201,503
Cash flows from investing activities:
Acquisition of furniture and equipment - net (121,421) (185,466)
Increase in software development costs (69,709) (48,474)
Decrease (increase) in deposits and other
assets 23,975 (76,475)
--------- --------
Net cash used in investing activities (167,155) (310,415)
Cash flows from financing activities:
Proceeds from note payable - bank - 100,000
Payments on note payable - bank (393,000) -
--------- -------
Net cash provided by (used in) financing
activities (393,000) 100,000
--------- -------
Increase (decrease) in cash and cash equivalents 81,031 (8,912)
Cash and cash equivalents at beginning of year 90,510 199,195
--------- -------
Cash and cash equivalents at end of year $ 171,541 $ 190,283
========== =========
See accompanying notes.
7
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
June 30, 1998
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, 1997 and June 30, 1998,
and the results of operations and cash flows for the periods ended June 30,
1997 and 1998.
2. Inventories
Inventories consist of the following at:
September 30, June 30,
1997 1998
---- ----
Finished goods $ - $ 18,849
Work in process 13,570 75,397
Purchased parts and supplies 197,038 94,246
--------- ---------
$ 210,608 $ 188,492
========= =========
3. Income taxes
The provision for income taxes for the three months and nine months
ended June 30, 1997 and 1998 is based on the expected tax rate for the
year.
As of September 30, 1997 and June 30, 1998, total deferred tax assets
and liabilities are as follows:
September 30, June 30,
1997 1998
Deferred tax assets $ 1,000 $ -
Deferred tax liabilities (2,000) (4,000)
-------- --------
$ (1,000) $ (4,000)
======== ========
8
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Material Changes in Financial Condition
At June 30, 1998, the Company had working capital of $530,910 derived
primarily from contract sales, as compared to working capital of $554,707
at September 30, 1997. 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, 1998, the Company generated revenues
from contract sales from its professional services contracts,
sales, and privatization. Berkeley, CA and Oklahoma City, OK each
generated revenues in excess of 5% of total revenues. New clients added
during the quarter include Logan, UT; West Los Angeles College; and Fresno
County.
Revenues for the 1998 quarter were higher than the prior year's
quarter. Expenses for the 1998 quarter decreased by 15% over the prior
year's quarter due to a decrease in cost of services which corresponds to
the decrease in service contract income and a decrease in general and
administrative expenses due to employee turnover. The Company reported
a net profit of $84,216 for the 1998 quarter as compared to a net profit of
$36,112 for the prior year's quarter.
Parking ticket collection revenues for the nine month period ended June 30,
1998 decreased by 55% or $157,062 which was attributable to the
conclusion of the Cicero, IL contract. Also because of the conclusion of
the Cicero, IL contract,the cost of parking ticket collections
decreased by $202,496, or 67%, as compared to the prior year's nine
month period.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation filed with the Colorado Secretary of
State on March 3, 1986.
3.1(a) Articles of Amendment to Articles of Incorporation
3.3 Bylaws
27.1 Financial Data Schedule (1)
(b) During the quarter ended June 30, 1998, the Registrant has filed
no reports on Form 8-K
(1) Filed herewith
9
<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: 8/14/98 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
10
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
10-QSB STATEMENTS FOR PERIOD ENDED 6/30/98 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH 10-QSB FOR THE PERIOD ENDED 6/30/98.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 190,283
<SECURITIES> 0
<RECEIVABLES> 279,209
<ALLOWANCES> 0
<INVENTORY> 188492
<CURRENT-ASSETS> 692038
<PP&E> 1,596,778
<DEPRECIATION> 1,140,724
<TOTAL-ASSETS> 1,395,467
<CURRENT-LIABILITIES> 161,128
<BONDS> 0
0
0
<COMMON> 33,689
<OTHER-SE> 1,196,650
<TOTAL-LIABILITY-AND-EQUITY> 1,395,467
<SALES> 178,887
<TOTAL-REVENUES> 1,121,935
<CGS> 102,225
<TOTAL-COSTS> 605,149
<OTHER-EXPENSES> 373,411
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,507
<INCOME-PRETAX> 140,818
<INCOME-TAX> 42,831
<INCOME-CONTINUING> 97,987
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,987
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
