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, 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: 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 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 15, 1999 is 336,889,149 shares, $.0001 par value.
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Balance Sheet - September 30, 1998 and December 31, 1998
(unaudited) 2 and 3
Income Statement - For the Three Months Ended December 31, 1997
and 1998 (unaudited) 4
Statement of Stockholders' Equity - For the Three Months Ended
December 31, 1998 (unaudited) 5
Statement of Cash Flows - For the Three Months Ended
December 31, 1997 and 1998 (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
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CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1998 and December 31, 1998
(Unaudited)
ASSETS
September December
--------- --------
Current assets:
Cash and cash equivalents $ 91,432 $ 92,210
Accounts receivable 244,448 331,331
Inventories (Note 2 190,960 201,696
Investment in contract, net 23,334 14,584
Income taxes refundable 16,000 -
---------- ----------
Total current assets 566,174 639,821
Furniture and equipment, at cost:
Office furniture and equipment 235,180 235,180
Equipment under service contracts 1,442,295 1,473,218
---------- ----------
1,677,475 1,708,398
Less accumulated depreciation 1,204,775 1,250,537
---------- ----------
Net furniture and equipment 472,700 457,861
Other assets:
Investment in partnership 329,915 371,535
Deposits and other 28,310 28,310
Deferred tax asset (Note 3) 5,000 2,500
Software licenses 16,882 -
Software development costs 356,353 364,803
736,460 767,148
Less accumulated amortizati 225,040 221,990
---------- -----------
Net other assets 511,420 545,158
---------- ----------
$1,550,294 $1,642,840
========== ==========
See accompanying notes.
2
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CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1998 and December 31, 1998
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September December
--------- --------
Current liabilities:
Accounts payable $ 37,999 $ -
Note payable - bank - 320,000
Note payable - related party (Note 4) - 55,000
Deferred revenue 87,971 129,999
---------- ----------
Total current liabilities 125,970 504,999
Long-term note payable - bank 320,000 -
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 39,961 73,478
---------- ----------
Total stockholders' equity 1,104,324 1,137,841
---------- ----------
$1,550,294 $1,642,840
========== ==========
See accompanying notes.
3
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CLANCY SYSTEMS INTERNATIONAL, INC.
INCOME STATEMENT
For the Three Months Ended December 31, 1997 and 1998
(Unaudited)
1997 1998
---------- ----------
Revenues:
Sales $ 83,003 $ 102,564
Service contract income 230,228 281,410
Parking ticket collections 5,415 84,242
---------- ---------
Total revenues 318,646 468,216
Costs and expenses:
Cost of sales 36,377 16,475
Cost of services 126,226 142,807
Cost of parking ticket collections 20,719 87,938
General and administrative 101,459 137,318
Research and development 14,325 12,046
----------- ----------
Total costs and expenses 299,106 396,584
----------- ----------
Income from operations 19,540 71,632
Other income (expense);
Interest income 2,075 593
Interest expens - (6,828)
----------- ----------
Total other income (expense) 2,075 (6,235)
----------- ----------
Income before provision for income taxes and
loss in equity-basis partnership 21,615 65,397
Provision for income taxes 7,000 23,000
Loss in equity basis partnership (net of tax
benefit of $4,500) - 8,880
----------- ----------
Net income $ 14,615 $ 33,517
=========== ==========
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
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<TABLE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Months Ended December 31, 1998
(Unaudited)
<CAPTION>
Additional
Common stock paid-in Retained
Shares Amount capital earnings
----------- ------ ---------- --------
<S> <C> <C> <C> <C>
Balance, September 30, 1998 336,889,149 $ 33,689 $ 1,030,674 $ 39,961
Net income for the three months ended
December 31, 1998 - - - 33,517
----------- -------- ----------- --------
Balance, December 31, 1998 336,889,149 $ 33,689 $ 1,030,674 $ 73,478
============ ========= ============ ========
</TABLE>
See accompanying notes.
5
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Three Months Ended December 31, 1997 and 1998
(Unaudited)
1997 1998
--------- ---------
Cash flows from operating activities:
Net income $ 14,615 $ 33,517
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 59,062 68,344
Deferred income tax expense 1,000 2,500
Increase in accounts receivabl (50,736) (86,883)
Decrease (increase) in inventories 4,074 (10,736)
Loss in equity basis partnership - 13,380
Decrease in accounts payable - (37,999)
Decrease in accrued expenses (2,286) -
Decrease in income taxes refundabl - 16,000
Increase in income taxes payable 6,000 -
Increase in deferred revenue 4,493 42,028
Decrease in warranty reserve (400) -
----------- ---------
Total adjustments 21,207 6,634
----------- ---------
Net cash provided by operating activities 35,822 40,151
Cash flows from investing activities:
Acquisition of furniture and equipment - net (80,580) (30,923)
Increase in software development costs (17,960) (8,450)
Investment in partnership - (55,000)
----------- ----------
Net cash used in investing activities (98,540) (94,373)
Cash flows from financing activities:
Proceeds from note payable - bank 190,000 -
Proceeds form note payable - related party - 55,000
----------- ----------
Net cash provided by financing activities 190,000 55,000
----------- ----------
Increase in cash and cash equivalents 127,282 778
Cash and cash equivalents at beginning of period 199,195 91,432
----------- ----------
Cash and cash equivalents at end of period $ 326,477 $ 92,210
=========== ==========
See accompanying notes.
6
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 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, 1998 and
December 31, 1998, and the results of operations and cash flows for
the periods ended December 31, 1997 and 1998.
2. Inventories
Inventories consist of the following at:
September 30, December 31,
1998 1998
------------ -----------
Finished goods $ 19,690 $ 10,085
Work in process - 20,170
Purchased parts and supplies 171,270 171,441
-------- --------
$190,960 $201,696
======== ========
3. Income taxes
The provision for income taxes for the three months ended December 31,
1997 and 1998 is based on the expected tax rate for the year.
As of September 30, 1998 and December 31, 1998, total deferred tax
assets and liabilities are as follows:
September 30, December 31,
1998 1998
------------- ------------
Deferred tax assets $10,000 $ 2,500
Deferred tax liabilities (5,000) -
------- -------
$ 5,000 $ 2,500
======= =======
4. Notes payable - related party
On October 1, 1998, the Company executed a one-year note payable
for $25,000 with an officer of the Company. The note is
unsecured, bears interest at 8%, and is due on October 1, 1999.
On December 1, 1998, the Company executed a one-year note payable
for $30,000 with an officer of the Company. The note is
unsecured, bears interest at 8%, and is due on December 1, 1999.
7
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Material Changes in Financial Condition
At December 31, 1998, the Company had working capital of $134,822
derived primarily from contract sales, as compared to working capital of
$440,204 at September 30, 1998. The Company received an additional loan
of $55,000 from a Company officer for investment in the Urban Transit
Solutions partnership. In addition, the $320,000 bank loan is now classified
as a short term obligation because it is due October 15, 1999. These two
liabilities - notes from the officer and note from the bank are reflected
in the change in working capital. 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, 1998, the Company generated revenues
from contract sales from its professional services contracts,
sales, and privatization contracts. Berkeley, CA and Oklahoma City,
OK each generated revenues in excess of 5% of total revenues. New clients
added during the quarter include Charleston, WV, and McAllen, TX.
Revenues during the quarter were 47% higher than the prior year's
quarter. Expenses increased by 33% over the prior year's quarter due to
costs associated with generating additional revenue. The Company reported a
profit of $33,517 for the 1998 quarter as compared to a net profit of
$14,615 for the prior year's quarter.
During the fiscal year ended September 30, 1998, the Company upgraded 70%
of its clients to its new year 2000 compliant software and hardware.
The Company anticipates that by June 30, 1999, all client upgrades will
have been completed. Costs associated with the software portion of the
year 2000 upgrade have been insignificant because the Company is
continually upgrading and improving its software for its clients as a
normal course of business. Management estimates costs associated with
completing replacement of hardware to be approximately $65,000
during fiscal year 1999.
8
<PAGE>
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule (1)
(b) During the quarter ended December 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: February 15, 1999 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 THE REGISTRANT'S FORM 10-QSB FOR THE QUARTER ENDED
DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY TO SUCH FORM
10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 92,210
<SECURITIES> 0
<RECEIVABLES> 331,331
<ALLOWANCES> 0
<INVENTORY> 201,696
<CURRENT-ASSETS> 639,821
<PP&E> 1,708,398
<DEPRECIATION> 1,250,537
<TOTAL-ASSETS> 1,642,840
<CURRENT-LIABILITIES> 504,999
<BONDS> 0
0
0
<COMMON> 33,689
<OTHER-SE> 1,104,152
<TOTAL-LIABILITY-AND-EQUITY> 1,137,841
<SALES> 102,564
<TOTAL-REVENUES> 468,216
<CGS> 16,475
<TOTAL-COSTS> 247,220
<OTHER-EXPENSES> 149,364
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,828
<INCOME-PRETAX> 65,397
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 33,517
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
