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, 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 May 13,
1998 is 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 March 31, 1998 (unaudited) 2 and 3
Statement of Operations - For the Three Months Ended March 31, 1997
and 1998 (unaudited) 4
Statement of Operations - For the Six Months Ended March 31, 1997
and 1998 (unaudited) 5
Statement of Stockholders' Equity - For the Six Months Ended
March 31, 1998 (unaudited) 6
Statement of Cash Flows - For the Six Months Ended
March 31, 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 March 31, 1998
(Unaudited)
ASSETS
September March
Current assets:
Cash and cash equivalents $ 199,195 $ 133,536
Accounts receivable 196,646 249,219
Inventories (Note 2) 210,608 209,453
Income taxes refundable 1,970 1,970
Deferred tax asset (Note 3) 1,000 -
------ ------
Total current assets 609,419 594,178
Furniture and equipment, at cost:
Office furniture and equipment 228,680 233,580
Equipment under service contracts 1,182,632 1,313,901
-------------------
1,411,312 1,547,481
Less accumulated depreciation 994,732 1,088,989
-----------------
Net furniture and equipment 416,580 458,492
Other assets:
Deposits and other 26,835 36,835
Software licenses 16,882 16,882
Software development costs 286,763 322,999
-------- -------
330,480 376,716
Less accumulated amortization 167,415 194,498
-------- -------
Net other assets 163,065 182,218
-------- -------
$ 1,189,064$1,234,888
=========== ==========
See accompanying notes.
2
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1997 and March 31, 1998
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September March
Current liabilities:
Other accrued expenses $ 2,286 $ -
Warranty reserve 400 -
Income taxes payable - 6,000
Deferred revenue 52,026 80,765
------- ------
Total current liabilities 54,712 86,765
Deferred tax liability (Note 3) 2,000 2,000
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 81,760
------- ------
Total stockholders' equity 1,132,352 1,146,123
---------- ---------
$ 1,189,064 $ 1,234,888
========== ===========
See accompanying notes.
3
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1997 and 1998
(Unaudited)
1997 1998
Revenues:
Sales $ 53,740 $ 59,468
Service contract income 246,291 278,598
Parking ticket collections 25,985 59,035
------- ------
Total revenues 326,016 397,101
Costs and expenses:
Cost of sales 30,179 53,020
Cost of services 129,789 158,556
Cost of parking ticket collections 26,700 28,830
General and administrative 109,451 140,208
Research and development 13,008 11,190
------- ------
Total costs and expenses 309,127 391,804
-------- -------
Income from operations 16,889 5,297
Other income (expense):
Interest income 381 3,197
Interest expense (4,296) (8,507)
------- -------
Total other income (expense) (3,915) (5,310)
------- -------
Income (loss) before provision for income taxes 12,974 (13)
Provision for income taxes 3,000 831
------ ---
Net income (loss) $ 9,974 $ (844)
======== =======
Net income (loss) 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 Six Months Ended March 31, 1997 and 1998
(Unaudited)
1997 1998
Revenues:
Sales $ 70,018 $ 142,471
Service contract income 534,878 508,826
Parking ticket collections 265,295 64,450
-------- ------
Total revenues 870,191 715,747
Costs and expenses:
Cost of sales 45,566 89,397
Cost of services 265,455 284,782
Cost of parking ticket collections 282,385 49,549
General and administrative 208,041 241,667
Research and development 19,291 25,515
------- ------
Total costs and expenses 820,738 690,910
-------- -------
Income from operations 49,453 24,837
Other income (expense):
Interest income 810 5,272
Interest expense (12,432) (8,507)
-------- -------
Total other income (expense) (11,622) (3,235)
-------- -------
Income before provision for income taxes 37,831 21,602
Provision for income taxes 10,000 7,831
------- -----
Net income $ 27,831 $ 13,771
========= ========
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 Six Months Ended March 31, 1998
(Unaudited)
<TABLE>
<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 six months ended
March 31, 1998 - - - 13,771
-- -- -- ------
Balance, March 31, 1998 336,889,149 $ 33,689 $ 1,030,674 $ 81,760
============ ======== ============ ========
</TABLE>
See accompanying notes.
6
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Six Months Ended March 31, 1997 and 1998
(Unaudited)
1997 1998
Cash flows from operating activities:
Net income $ 27,831 $ 13,771
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 330,254 121,340
Increase in accounts receivable (47,345) (52,573)
Decrease (increase) in inventories (5,350) 1,155
Decrease in deferred tax asset 5,000 1,000
Decrease in accounts payable (15,046) -
Decrease in accrued expenses - (2,286)
Increase in income taxes payable - 6,000
Increase (decrease) in deferred revenue (21,468) 28,739
Decrease in warranty reserve (1,800) (400)
------- -----
Total adjustments 244,245 102,975
-------- -------
Net cash provided by operating activities 272,076 116,746
Cash flows from investing activities:
Acquisition of furniture and equipment - net (82,604) (136,169)
Increase in software development costs (43,808) (36,236)
Recovery of investment in contract 185,484 -
Decrease (increase) in deposits and other assets 21,605 (10,000)
Net cash provided by (used in) investing
activities 80,677 (182,405)
Cash flows from financing activities:
Proceeds from note payable - bank - 190,000
Payments on note payable - bank (298,000) (190,000)
--------- ---------
Net cash used in financing activities (298,000) -
--------- ---------
Increase (decrease) in cash and cash equivalents 54,753 (65,659)
Cash and cash equivalents at beginning of year 90,510 199,195
------- -------
Cash and cash equivalents at end of year $ 145,263 $ 133,536
========== =========
See accompanying notes.
7
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 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 March 31, 1998,
and the results of operations and cash flows for the periods ended
March 31, 1997 and 1998.
2. Inventories
Inventories consist of the following at:
September 30 March 31,
1997 1998
Finished goods $ - $ 10,473
Work in process 13,570 52,363
Purchased parts and supplies 197,038 146,617
-------- -------
$ 210,608 $ 209,453
========== =========
3. Income taxes
The provision for income taxes for the three months and six months
ended March 31, 1997 and 1998 is based on the expected tax rate for the
year.
As of September 30, 1997 and March 31, 1998, total deferred tax
assets and liabilities are as follows:
September March 31,
1997 1998
Deferred tax assets $ 1,000 $ -
Deferred tax liabilities (2,000) (2,000)
------- -------
$ (1,000) $ (2,000)
========= =========
8
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Material Changes in Financial Condition
At March 31, 1998 the Company had working capital of $507,413 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 March 31, 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. Orlando, Fl, was
added as a new client during this quarter.
Revenues for the 1998 quarter were higher than the prior year's
quarter. Expenses for the 1998 quarter increased by 26% over the prior
year's quarter due to the costs of the ramp-up for Maywood, IL
privatization project and the capitalization of the Orlando project.
The Company reported a loss of $844 for the 1998 quarter as compared
to a net profit of $9,974 for the prior year's quarter.
Parking ticket collection revenues for the six month period ended March
31, 1998 decreased by 76% or $200,845 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 $232,836, or 82%, as compared to the prior year's six
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 March 31, 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: May 13, 1998 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 FORM 10-QSB STATEMENTS FOR PERIOD
ENDED 3/31/98 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-QSB FOR PERIOD ENDED 3/31/98
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 133,536
<SECURITIES> 0
<RECEIVABLES> 249,219
<ALLOWANCES> 0
<INVENTORY> 209,453
<CURRENT-ASSETS> 594,178
<PP&E> 1,547,481
<DEPRECIATION> 1,088,989
<TOTAL-ASSETS> 1,234,888
<CURRENT-LIABILITIES> 86,765
<BONDS> 0
0
0
<COMMON> 33,689
<OTHER-SE> 1,112,434
<TOTAL-LIABILITY-AND-EQUITY> 1,146,123
<SALES> 142,471
<TOTAL-REVENUES> 508,826
<CGS> 89,397
<TOTAL-COSTS> 423,728
<OTHER-EXPENSES> 267,182
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,507
<INCOME-PRETAX> 21,602
<INCOME-TAX> 7,831
<INCOME-CONTINUING> 13,771
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,771
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
