UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: September 30, 2000
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, including area code)
N/A
(Former name, former address and former fiscal year,
if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act: None
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, and
(2) has been subject to such filing requirements for the past 90 days.
(1) Yes X No
(2) Yes X No
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Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B, and no disclosure will
be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendments to
this Form 10-KSB. [X]
The Company's revenues for its most recent fiscal year were
$1,665,393. The aggregate market value of the voting stock held
by nonaffiliates (based upon the average of the bid and asked
price of these shares on the over-the-counter market) as of
December 27,2000 was approximately $3,856,392.
Class Outstanding at December 27, 2000
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Common stock, $.0001 par value 344,128,623 shares
Documents incorporated by reference: None
Transitional Small Business Disclosure Format:
Yes No X
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CLANCY SYSTEMS INTERNATIONAL, INC.
FORM 10-KSB
PART I
Item 1. Description of Business
(a) Business Development. In April 1987 Oxford Financial,
Inc. (Oxford) merged with Clancy Systems International, Inc.
(Old Clancy). Oxford, as the surviving company in the merger,
changed its name to Clancy Systems International, Inc. (the
Company or Registrant). Oxford was organized under the laws
of the State of Colorado on March 3, 1986. Old Clancy was
organized under the laws of the State of Colorado on June 28,
1984.
The Company designs, develops and manufactures automated
parking enforcement systems primarily for lease to
municipalities, universities and institutions, including a
ticket writing system and other enforcement systems.
The Company has installed numerous parking enforcement
systems for various clients, towns and universities. The
Company also has installed numerous systems through joint
venture relationships. See "Phoenix Group Systems" and "Urban
Transit Solutions" below. To augment the enforcement element of
the system, the Company markets the original Denver Boot and
other enforcement tools. By utilizing an integrated approach,
the Company offers a complete parking citation processing system
including tracking, enforcement, collection and automatic
identification of delinquent violators in an effective and
efficient manner.
The Company has also developed or acquired several stand
alone computer programs for special niche operations including
ID Badge.com, Whatsimportantnow.com, Virtualpermit.com, Remit-
online.com and Expo1000.com. Although the Company acquired
Expo1000.com and Remit-online.com during fiscal year 2000, the
terms are based on minutes of the board of directors of November
1999, and have not been set forth in a written agreement.
The Company also provides hardware and software for special
projects for Hertz Corporation including a project called Fleet
Control. Fleet Control was developed in 1987 as an internal
security system used by Hertz to track the transfer of cars
between locations.
The Company's principal executive offices are located at
2250 S. Oneida Street, #308, Denver, Colorado 80224 and its
telephone number is (303) 753-0197.
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(b) Business of the Issuer.
(b),(1),(2) Principal Products or Services and Markets and
Distribution Methods. The Company's parking enforcement system
is an automated system which generates parking citations. The
system consists of a hand-held, light-weight, portable data
entry terminal, a light-weight printer to generate the parking
citation and a data collection computer system to store parking
citation data at the end of each day. The data entry terminal
includes features such as large keys for use with gloved hands,
easily readable liquid crystal display, phosphorescent keypad
for illuminated night use and a large memory. The printer
contains a "no-wait" buffer which acts to eliminate delay in
entering citation data. The printer has been streamlined and
along with the hand-held terminal weighs only three and one-half
pounds and is battery charged to last for at least eight hours
with overnight recharging capability. The citations are printed
on a continuous fan fold flat form. The data collection
computer is used for uploading and downloading data and contains
the capacity for interfacing directly, or data transfer to a
user's mainframe computer. There are currently approximately
1650 ticket-writing units in operation.
The Company's system also includes a complete back office
processing and filing system. The Company provides computers,
printers and software to enable the user to do state Department
of Motor Vehicle lookups, maintain citation information storage
and recall, generate delinquent notices and have immediate
access to files of all tickets previously written. In addition,
the Company's system maintains a current, readily accessible
list of vehicles with multiple outstanding citations, stolen
vehicles, or vehicles otherwise wanted by local law enforcement
officials. The system also generates reports of citations by
number and officer, revenues collected, names of scofflaws,
officer productivity and other reports as deemed necessary or
valuable to the agency.
The Company offers Internet payment processing of tickets
and clearing of funds for its clients and industry affiliates.
The program accepts credit cards and checks at its Remit-online
Web site 24 hours a day. As the items are accepted, email
notification goes immediately to the client for notification and
posting of payment. Settlement of funds is weekly or monthly
per contract arrangement.
The Company's contracts for its parking enforcement systems
generally provide that the Company will provide the
ticketwriters, a back office processing system, custom software
and training and support in consideration of a fee per citation
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issued, a monthly fee for computer equipment rental and/or a set
monthly fee. Occasionally, the Company will provide its system
through an outright sale rather than through its typical lease
arrangement. The Company generally warrants its equipment,
provides updating and improvements to its system hardware and
software and provides customary indemnification. The Company
also contract's its systems under a privatization program
whereby the Company provides a complete facilities management
program for the client. The operation includes personnel to
operate the system, issue tickets, and take care of enforcement
tasks, along with the collection of ticket revenues, backlog
ticket collections and other related duties. These programs are
offered under a revenue guarantee or revenue split contract.
The Company currently has systems installed in municipalities
and universities representing approximately 8,000,000 tickets
issued per year.
The Denver Boot
The Denver Boot is a metal clamp which is fastened around a
wheel which effectively prevents a vehicle from being moved.
The Denver Boot is removed by unlocking a padlock. The Company
acquired all rights to the product in a transaction with Grace
Berg in June of 1994. The Company paid Mrs. Berg a royalties
on all sales for a period extending through June 1999. The
Denver Boot is used by a number of law enforcement agencies on
vehicles with multiple offenses. The Denver Boot can be
integrated into the Company's parking control and enforcement
system or may be sold separately.
Fleet Control
The Company sells charger/communication cradles to the
Hertz Corporation for its fleet control project and maintains
the equipment for Hertz under a maintenance service contract
agreement.
Remit-online.com
Remit-online.com is an Internet based payment processing
system which allows for credit card and check payments to be
made for parking citations and other payment processing
activities. The business was developed independent of Clancy
and funded by Stanley Wolfson, the President of Clancy. Upon a
vote of the board of directors on November 18, 1999, it was
approved to acquire Remit-online (with another Web business
opportunity) from Wolfson in exchange for 17,489,315 shares
of Clancy Systems International, Inc. restricted stock. Said
shares to be issued and the final agreement signed in early
2001.
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Remit-online.com has been expanding and is being offered to
all clients of the Company as well as to other parking industry
businesses. A strategic alliance with iBill, Inc. has automated
the card processing. A strategic alliance with AmeriNet, Inc.
has expanded the services to include on-line check payments. The
company receives a processing fee for each transaction. As each
transaction is processed, notification is sent to the paid
agency by email so that posting of the account can be made
promptly as parking citations are date critical regarding amount
due and potential late fees. Settlement of collected funds
between the Company and the agency is made based on contractual
agreement either weekly or monthly.
Expo1000.com
Expo1000.com is an Internet based industry guide that is
structured as a virtual trade show with links to the actual
exhibitors Web sites. Expo1000.com was developed and funded
independent of the Company, and acquired from Stanley J. Wolfson
with the Remit-online business on November 18, 1999. The final
agreement and issuance of shares will take place in early 2001.
The business is being developed for specific industries
with focus at this time on Parking and Mobile Computing. Other
expos are being developed. Expo1000.com contains an internal
search engine which searches key words industry specific.
Client company listings are available by company name, product,
as well as search engine within the industry. The listings will
be subscription based and billed annually. To make the site
viable, the primary focus in addition to selling the listings is
to increase the visits and exposure to sites. The Expo1000.com
site highlights "what's new" for the industry (press releases,
new product announcements, new service announcements). The site
contains a message board and an email services to its
subscribers and its visitors.
What's Important Now
This is a PC based messaging program which allows user to
send critical data and messages to pagers and cell phones. This
program is marketed as a stand alone product and is sold for $79
per license. While available for purchase to outside customers,
this program is made available to the Company's clients and is
used extensively in house. The URL (registered Internet site)
for this application is www.whatsimportantnow.com.
ID Badgemaker
This is a PC based badge and security ID program that is
used in conjunction with digital photos to allow user to easily
and inexpensively make two-sided ID badges (with critical
information and bar codes). The program is sold as a stand
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alone program and has been marketed directly to our clients as
well as through several on-line software product/download sites
such as Download.com. The product sells for $199 per license.
The download version can be used for demonstration with the word
DEMO stamped across any badge produced. The Company has had a
great deal of interest in the program and sales are commencing
on a regular basis. The program receives "excellent" ratings at
download.com. The URL for this application is www.idbadge.com.
Virtual Permit
This program is a paperless permit system now being used by
many of the Company's clients. It includes monitoring lots and
garages, inventory of spaces, and can validate active or lapsed
permits. The URL for this application is www.virtualpermit.com.
Phoenix Group Systems
In joint venture with Phoenix Group, of Torrance,
California, the Company has installed computerized parking
citation issuance systems at Phoenix Group client locations. The
data is then sent to Phoenix Group for ticket collection. These
clients write approximately 400,000 tickets per year.
(b)(3) Status of Publicly-Announced New Product or
Services.
The Company has become a 60% equity owner in a partnership
with Urban Transit Solutions (UTS), San Juan, Puerto Rico. UTS
offers parking system privatization to cities in Puerto Rico.
At September 30, 2000, UTS had contracts in Mayaguez, Puerto
Rico; Caugas, Puerto Rico; and Humacao, Puerto Rico. The
Mayaguez project included the installation of 600 parking
meters. Meter revenue collection began in August, 1998. For
Cauguas, parking lots will be monitored and meters will be
installed. Revenue collection began in Cauguas December 1998.
(b)(4) Competition. The Registrant is aware of several
other companies that currently offer an automated ticket writing
system: Enforcement Technologies, Inc.; Cardinal; Com-Plus; DMS;
Radix-T-2, and others. The Company believes that it is able to
compete effectively in the field because of its fee per citation
and leased system marketing approach which eliminates any
significant capital expenditures by the user, its excellent
program for customer support and because of the various
enforcement products which it offers to complement its system.
Initially, the Company provides potential parking control
clients with consulting services to analyze the client's
ticketing and enforcement needs. The Company then develops a
proposal based upon those needs, which indicates how the
Company's system and related products would aid the client in
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achieving the two primary goals of ticket writing and
enforcement: creation of an equitable enforcement policy and an
increase in revenues. The Company believes that a system which
is perceived by the public to provide a greater certainty of
enforcement will result in a greater willingness upon the part
of the public to promptly and consistently pay fines, thus
increasing the flow of revenues to the client. Depending upon
the size of the client, the Company's services may range from
the simple sale of hardware (i.e., the Denver Boot) to providing
a ticketing and enforcement system and related equipment through
a lease or sale arrangement, training users and handling data
processing of tickets and the collection of fines. The Internet
based services added to client programs as well as the Remit-
online.com payment processing program makes the Company's system
more comprehensive and advantageous than competitor systems.
Although a few of the Company's systems provide for the
purchase of systems or fees based on set monthly amounts, the
Company has been marketing its system and other products to
municipalities, universities, colleges, institutions and parking
companies primarily under a professional services contract
geared to a transactional or per citation basis. The Company
supplies all hardware, software, training, supplies and
maintenance for the system, thus eliminating all significant
capital expenditures by the user.
The Company markets its ticket writing and enforcement
system directly to municipalities, universities, colleges,
institutions and parking companies through commissioned sales
representatives and members of management. The Company
currently has marketing alliances with three organizations
throughout the United States. The Company's management attends
trade shows and makes direct sales calls.
(b)(5) Raw Materials and Principal Suppliers. The Company
purchases its hand-held computers from outside vendors and the
Company builds the printer units that incorporate the hand-held
terminal. The hand-held terminals for the parking enforcement
system and rental car return system are identical and the hand-
held terminals for the rental car inventory control system are
different only in that they have an expanded memory and a bar
code wand for identifying vehicles for inventory control
purposes. The printer units for the various systems are the
same. The Company's latest generation printers feature
injection molded cases and an automatic top-of-form feature for
the paper feed. Other new technology for the electronics enable
interfacing with auxiliary hardware such as radio communications
devices, magnetic credit card readers and other peripheral
devices. The Company obtained a patent on its printer in April
1991. The Company purchases its hand-held terminals from several
different vendors who sell computers that are all comparable in
quality.
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Component parts for the Company's products are purchased
from various sources. The Company has established relationships
with various vendors for such parts. The Company is not reliant
on sole source vendors for any item which provides alternative
sources of supply to ensure availability.
The Company's paper products are purchased from outside
vendors. Should any of these vendors be unable to supply these
specialized products, the Company believes that there are many
other available sources of supply.
The Company introduced a new line of printers which are
manufactured in "hot" colors of clear plastic in the colors
berry, watermelon, lime, mango, grape and clear. Another new
item is the short range RF printer which is a cordless model
with RF interface to handheld terminals. The Company has begun
the engineering of a new printer to interface to Palm Computing
devices. In January 2001, several prototypes will be put into
the field for testing. The product should be in production by
July 2001.
New software products introduced by the Company during
2000, which complement the parking citation issuance programs,
include: ID BADGEMAKER (which is sold for $199 per license) and
PalmTicketer which is a program to issue special event tickets.
The Company has enhanced features on its ticket processing
system; digital photo system; virtual permit system which is a
fully operational permit issuance, payment and tracking system
which reduces paperwork, decal distribution and employee time to
administer a parking permit program; a daily permit one use
parking permit program for short duration parking validation; an
employee badge ID system which can be used by parking systems,
rental car systems, and other industries; a management alert
system which is an automated data analysis program which emails
information and alerts directly to management to reveal such
information as permit violations, ticket issuance productivity
numbers, revenue numbers and other strategic and timely
information.
(b)(6) Significant Customers. Presently, the Company has
112 customers. The Registrant in general is greatly dependent
on these customers, but the Company is particularly dependent on
its contracts with Oklahoma City, Oklahoma; the City of
Berkeley, California; the City of Yonkers, the Phoenix Group;
and the City of Inglewood which together represented
approximately 20% of the Company's total revenues for the year
ended September 30, 2000. The Company continually updates the
hardware and software products provided to these and all of its
customers in an effort to ensure quality service and customer
satisfaction.
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Oklahoma City, Oklahoma. The Company has provided a fully
implemented automated parking ticket writing, processing and
enforcement system to Oklahoma City, Oklahoma, its first parking
enforcement system, since June 1986. Under the current contract
the Company receives a monthly fee for leasing equipment and
providing supplies and support. The contract may be terminated
by either party upon 15 days written notice and may be extended
for two additional 12-month terms upon mutual agreement of the
parties on terms to be negotiated. The current contract with
the City of Oklahoma expires June 30, 2001. Under the contract,
the Company has agreed to indemnify the City of Oklahoma, its
officers, agents and employees against any claims resulting from
acts or omissions of the Company or its officers, employees,
representatives or agents. During fiscal year 2000, the
revenues from the Oklahoma City system represented approximately
4.8% of the Company's total revenues.
Berkeley, California. On September 8, 1989 the Company
entered into a contract with the City of Berkeley, California to
provide a parking enforcement system to issue citations,
assemble data and interface to the City's database. Under the
contract the Company provides hardware, custom software,
maintenance, training and support. The Company receives a fee
per valid citation issued. The contract term has been extended
through January 31, 2001. The Company has agreed to warrant all
hardware and to replace or repair any broken hardware free of
charge. The Company has agreed to indemnify the City, its
officers, agents and employees against any claims arising out of
the Company's performance under the contract. The City has the
right to terminate the contract with 30 days written notice.
The system currently provides hardware for 30 parking control
officers. During fiscal year 2000, the revenues from the City of
Berkeley system represented approximately 6.7% of the Company's
total revenues.
Yonkers, NY. On July 1, 1995, the Company entered into a
contract with Yonkers, NY to provide a parking ticket issuance
system for its Parking Violations Bureau and its Yonkers Parking
Authority. The Company provides hardware, custom software,
maintenance, support and supplies. The Company receives a fee
for each citation form purchased. During fiscal year 2000,
revenues from the City of Yonkers system represented
approximately 5.2% of the Company's total revenues.
Phoenix Group, Torrance, CA. In a joint venture
arrangement with Phoenix Group, Clancy provides ticket issuance
systems to Phoenix Group clients based on transactional pricing
schedules related to ticket issuance volume. All billings go
through Phoenix Group, although Clancy services the clients
directly. In the year ended September 30, 2000, sales to
Phoenix Group represented 7.6 of the Company's total revenues.
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Privatization Contracts. In a contract for privatization,
the Company provided a full facilities management operation for
the Village of Maywood, IL, through September, 1999. The
Village resumed ticket issuance responsibilities and has engaged
the Company to provide noticing, payment processing and
collection operations for the Village for an indefinite period
of time. The Village purchased the backlog tickets from the
Company in May, 2000 for $144,559. In a contract for
privatization, the Company provides a full facilities management
operation for the city of Logan, UT. The Company provides
personnel, vehicles, an office, ticket issuance and ticket
payment processing. The contract provided for a $35,000 annual
revenue guarantee to the city for the first year. For
subsequent years, the Company pays the City a 50/50 split after
all expenses are paid.
Urban Transit Solutions, Puerto Rico. In February 1998, the
Company acquired 60% ownership in a partnership with Urban
Transit Solutions (UTS). The Company committed to $500,000 in
funding to UTS between January 20, 1998 and April 30, 1999. At
September 30, 2000, the Company had paid $500,000 to UTS. UTS
currently has contracts in Mayaguez, Humacao and Cauguas Puerto
Rico. In Mayaguez, UTS has installed 600 parking meters and
will be responsible for collection of parking meter revenues.
In Cauguas, UTS leases a parking facility from the City and
collects the parking revenues from the lot. In Humacao, UTS will
install meters and collect revenues from the meters. UTS
anticipates additional contracts in Puerto Rican cities for
meter installation and collections. Their marketing approach
has been to bring Puerto Rican cities into the 21st century by
organizing parking operations and providing current technology
to modernize city operations. The Company reported a loss of
$1,669 at September 30, 2000 on its ownership of the UTS
partnership.
(b)(7) Patents and Licenses. The Company obtained a
patent (#5,006,002) for its printer used in its parking
enforcement, rental car return and inventory control systems in
April 1991. This patent expires April 2008.
The company also obtained a patent for a printer latch on
June 27, 2000. The patent expires in June 2019.
(b)(8) Need for Governmental Approval. None.
(b)(9) Effect of Governmental Regulations. None.
(b)(10) Research and Development. In order to keep its
products and systems from becoming obsolete, the Company
regularly modifies and updates its hardware and software. In
order to streamline its ticket writing and car rental equipment,
the Company has redesigned the printer so that it weighs only
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two and three quarters pounds. New battery technology has also
allowed the Company to reduce the weight in the printers.
During fiscal 1999/2000, Clancy began production of a new
printer to interface to Palm handheld devices. The printer is
ready for beta testing in January 2001 and the Company estimates
it will be in production in July 2001. It will incorporate a
state of the art print mechanism, light weight battery
technology and flat forms.
Management keeps informed of new developments in components
so that the printer is up-to-date, fast and suits user
requirements. The Company communicates with vendors on a regular
and ongoing basis so that management is aware of upgraded
components, new components and new processes to upgrade its
hardware. By adapting its equipment to user needs and keeping
current of the latest technology, the Company anticipates that
its enforcement ticket writing and rental car systems will not
become obsolete. The company is currently developing new
applications with the new printer and Palm computing devices
which will move outside the parking and rental car industries.
The Company's software is developed in-house by four full-time
programmers and by Stanley J. Wolfson, the Company's President
and a director.
The Company's software is maintained and updated on a
regular basis. The software for the enforcement system
ticketwriter and rental car return systems were developed by
Stanley Wolfson. The software for the Fleet Control inventory
control system initially was developed by Mr. Wolfson in his
capacity as an officer and employee of Stan Wolfson and
Associates, Inc., and subsequently was transferred to the
Company. The software allows the ticketing, rental and
inventory information to be entered and stored and the tickets,
rental agreements and inventory information to be printed. The
user of the enforcement system also may use the computer to look
up information relating to possible stolen or multiple violation
vehicles.
The office computer software allows the daily ticket and
rental and inventory information to be transferred from the
portable units to a central computer. The information is
compiled and then processed further according to user
requirements.
Through sophisticated communications software, the Company
is able to update, modify, repair, enhance and change most
software at the client's location via a modem and the Internet.
The Company's Lot and Street Survey programs have been
provided to clients for use with their parking systems.
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The Company spent $52,185 and $59,170 on research and
development activities for the fiscal years ended September 30,
1999 and 2000, respectively. None of the cost of such
activities was borne directly by the customers.
(b)(11) Compliance with Environmental Laws. Compliance
with federal, state and local provisions regulating the
discharge of materials into the environment or otherwise
relating to the protection of the environment will have no
material effect on the capital expenditures, earnings and
competitive position of the Company. The Company has entered
into an arrangement with RBRC for the recycling of all
batteries.
The Company donates its used Computer equipment to various
churches. The program has been very successful as the computers
are capable of early computer training programs even though they
are no longer acceptable to operate the Company's systems.
(b)(12) Employees. The Company currently has thirteen
employees in Company operations and 6 employees in privatization
projects, all of whom are employed on a full time basis.
Item 2. Description of Properties.
The Company is leasing approximately 1,700 square feet of
office space located at 2250 South Oneida Street, #308, Denver,
Colorado for its corporate offices for $2283 per month pursuant
to a lease agreement with an unaffiliated party which expires
May 31, 2002.
The Company also leases approximately 3,000 square feet of
manufacturing space located at 5789 S. Curtice, Littleton,
Colorado, from an unaffiliated party. Rental payments are $600
per month pursuant to a lease agreement that expires August 1,
2001.
The Company leases an office in Logan, Utah which is
approximately 700 square feet from an unaffiliated party.
Rental payments are $578 per month plus utilities pursuant to a
lease agreement which expires June 10, 2001.
The Company believes that these facilities are suitable and
adequate for its needs.
Item 3. Legal Proceedings.
On November 19, 1999 a complaint was filed in Denver
District Court (Colorado) by Lorraine E. Salazar, Francis
Salazar, Philip B. Davis and Barry Fey against the Company,
Stanley J. Wolfson, Lizabeth M. Wolfson and Mark G. Lawrence.
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The complaint alleged intentional misrepresentations,
concealment of facts, breach of implied duty of good faith and
breach of fiduciary duty by the defendants as officers and
directors of the Company. The plaintiffs sought relief in the
form of damages to be proven at trial, relinquishment of
positions as directors, and that the directors' stock be placed
in trust. The Company and the officers and directors believed
the claims were without merit and responded to the complaint
accordingly.
The suit was dismissed with prejudice in favor of the
Company in January 2000 with all costs awarded to the Company.
In August 2000, the Company hired the law firm ofBingham
Dana Ltd to commence actions on behalf of the Company against
several John Does that bashed the company by posting false
information about the Company and its officers and directors on
the Raging Bull Internet chat room site and other chat rooms.
The company is currently negotiating a settlement with one
individual who posted as Anthrax3 and Gasattack. On September
19, 2000, the Company filed an action in Suffolk Superior Court
against John Short, Syracuse NY, who posted as Darth4, MrDarth4
and possible other aliases. Relief sought includes monetary
damages for harm done to the Company and its officers in an
amount not yet determined, retraction of false and damaging
statements and for the subject to cease and desist posting or
discussing the Company, its officers and any activities related
thereto. The Company is currently pursuing identities of and
subsequent action against several other John Does.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
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PART II
Item 5(a). Market for Company's Common Stock and Related
Security Holder Matters.
The principal market on which the Registrant's Common Stock
is traded is the over-the-counter market and the Registrant's
Common Stock is quoted in the OTC Bulletin Board.
The range of high and low bid quotations for the
Registrant's Common Stock for the last two fiscal years are
provided below. The quotations are obtained daily from
Yahoo.com stock quotations via the Internet. These
over-the-counter market quotations reflect inter-dealer prices
without retail markup, markdown or commissions and may not
necessarily represent actual transactions.
High bid Low bid
10/1/98 - 12/31/98 .005 .005
1/1/99 - 3/31/99 .05 .015
4/1/99 - 6/30/99 .033 .015
7/1/99 - 9/30/99 .023 .0153
10/1/99 - 12/31/99 .025 .007
1/1/00 - 3/31/00 .510 .019
4/1/00 - 6/30/00 .200 .050
7/1/00 - 9/30/00 .090 .040
On December 27, 2000 the reported bid and asked prices for
the Company's Common Stock were $.025 and $.026, respectively.
The approximate number of record holders of the
Registrant's Common Stock on December 27, 2000 was 602.
The Registrant has paid no dividends with respect to its
Common Stock.
There are no contractual restrictions on the Registrant's
present or future ability to pay dividends.
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Item 6. Management's Discussion and Analysis or Plan of
Operation
From fiscal 1999 to fiscal 2000 revenues decreased by
approximately 10.5%. This is primarily due to the conclusion of
the privatization project in Maywood IL which ended 9/30/99.
The Company's parking enforcement systems research and
development costs increased from $52,185 to $59,170, or 13.4%
from fiscal 1999 to fiscal 2000. General and Administrative
costs decreased by 4.1% from 1999 to fiscal 2000. The decrease
in General and Administrative costs is related to decrease in
expenses related to the Maywood privatization project. The
Company reported an after tax profit of $163,836 for fiscal 1999
as compared to an after tax profit of $201,400 for fiscal 2000.
From fiscal 1998 to fiscal 1999 revenues increased
approximately 23%. This was due primarily to the Maywood
privatization project. The Company's parking enforcement
research and development costs increased from $48,127 to $52,185
or 8%, from fiscal 1998 to 1999. General and administrative
costs increased by 23% from fiscal 1998 to fiscal 1999. The
Company reported a profit of $163,836 for fiscal 1999 as
compared to a loss of $28,028 for fiscal 1998.
Since November 1986, the Company has had a professional
services contract with Oklahoma City to provide a ticket
writing system for a set monthly fee. For the fiscal years
ended September 30, 1999 and 2000, the contract with Oklahoma
City accounted for 4.4% and 4.8%, respectively, of the Company's
total revenue. See Part I, Item 1 (b)(6).
During the fiscal year ended September 30, 1989 the Company
entered into a contract with the City of Berkeley, California to
provide its parking enforcement system. For the fiscal years
ended September 30, 1998 and 1999, the contract with the City of
Berkeley accounted for 5.2% and 6.7% of the Company's total
revenue.
During the fiscal years ended September 30, 1999 and 2000,
the Company had in place a total of approximately 104 and 112
systems, respectively, representing both systems installed
directly by the Company and systems installed through joint
venture relationships.
At September 30, 2000, the Company had working capital of
$681,445 as compared to $524,881 at September 30, 1999. The
Company's current ratio increased from 3.21 to 1 to 4.03 to 1
from September 30, 1999 to September 30, 2000.
-14-
<PAGE>
The Company anticipates using its working capital to fund
ongoing operations, including general and administrative
expenses, equipment purchases, equipment manufacturing, travel,
marketing and research and development. The Company anticipates
having sufficient working capital to fund operations for the
fiscal year ending September 30, 2001.
The Company provided a total financial investment of
$500,000 to Urban Transit Solutions between March 1998 and
April 1999. UTS has been generating revenue since August 1998.
Collections from parking lot fees from Cauguas commenced in
January of 1999. The Company's loans to its primary bank and a
private lender will be paid back by Company revenue and UTS
revenue payments to the Company.
The Company has continually been modifying its printer
models and has marketed its printers as a stand-alone product to
delivery services and vendors who have a need for computer-
generated receipts. During the 1996 fiscal year, the Company
developed a new printer utilizing thermal line print technology.
The Company also made significant upgrades to its standard
printer. The Company believes there continues to exists a
market for the printer as it is able to print bar code symbology
(PDF 417) which is expected to become an industry standard in
the next few years. This product may increase
future revenues; however, there can be no assurance that the
Company's marketing efforts will be successful. Upgrades to this
model printer include new packaging in high tech colors and a
short range RF (radio frequency) model.
In August 2000, the Company began design of a new printer
to work with Palm devices. The printer is currently in beta
testing. The Company anticipates having the product in full
production by July, 2001.
Client Upgrades
During the fiscal year ended September 30, 1997, the
Company completed a total revision of its ticket system (and
other systems) software which includes total operations in a
Windows environment and complete capability for the handling of
the year 2000 date issue. All new clients installed beginning
January 1, 1997 are operating on the new system and pre-existing
clients were converted to the new system. As of November, 1999,
all clients were fully operational on the year 2000 compliant
system. In addition to the software, computer equipment was
upgraded for existing clients as well. The equipment
requirement for the Windows system required faster computing
capability with more memory along with the need for new bios to
handles year 2000 dating on the computer itself. The Company
experienced no year 2000 problems with its system.
-15-
<PAGE>
During fiscal year ended September 30, 2000, the Company
upgraded the remainder of its clients to its new year 2000
compliant software and hardware. Costs associated with the
software portion of the year 2000 upgrade were insignificant
because the Company is continually upgrading and improving its
software for its clients as a normal course of business. There
were few hardware replacement costs during fiscal 2000.
The Company has experienced a large number of inquiries
about its system related to the total program and special
features and anticipates growth in this area in the next fiscal
year. In addition, the Company has had a significant growth in
interest in the Denver Boot for vehicles as well as for security
on other mobile devices including construction trailers and
communications generators. The Company has experienced a
pattern of growth with this product and anticipates future sales
to increase significantly. Management believes exposure via the
Internet has been favorable for this product.
Jubilee LLC
On November 18, 1999, the company entered into a Letter of
Intent with Jubilee LLC for possible investment in the Company
by Jubilee and acquisition of Jubilee business opportunities and
contracts by the Company. The business of Jubilee was in
communications services. Jubilee did not meet its deadlines for
capital investment or obtaining the contracts that were pending.
It was the conclusion of the Board of Directors and the Company
attorney to withdraw the Letter of Intent.
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
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 made 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.
-16-
<PAGE>
Chat Room Disclaimer
This forum of exposure to publicly traded companies
presents a venue for the public to inquire about companies from
other individuals as well as post opinions.
The Company has no way to regulate postings nor monitor,
affirm or dispute information disclosed on these boards.
Management can only provide information to shareholders and
potential shareholders when contacted directly and such
information can only be provided when it is based on fact and
has been filed as required by law with the Securities and
Exchange Commission and other regulatory agencies.
-17-
<PAGE>
Item 7. Financial Statements.
The following financial statements are filed as a part of
this Form 10-KSB and are included immediately following the
signature page.
Report of Independent Certified Public Accountants
Balance Sheet - September 30, 1999 and September 30, 2000
Statement of Operations - Years ended September 30, 1999
and 2000
Statements of Stockholders' Equity - Years ended September
30, 1999 and 2000
Statements of Cash Flows - Years ended September 30, 1999
and 2000
Notes to Financial Statements
Item 8. Changes in and Disagreements With Accountants on
Accounting and Financial Disclosure.
Not applicable.
-18-
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control
Persons; Compliance with Section 16(a) of the Exchange
Act.
(a)(1),(2),(3) Identification of Directors and Executive
Officers.
Name Position
Dates of held with Company Age
service
Stanley J. Wolfson President, Chief Executive 57
1987
Officer and Director
Lizabeth M. Wolfson Secretary-Treasurer and 55
1987
Chief Financial and Chief
Accounting Officer and Director
Mark G. Lawrence (*) Director 51
1986
*Mr. Lawrence resigned from the Board of Directors effective
October 1, 2000. The vacancy created by his resignation has
not yet been filled.
(a)(4) The business experience of the Registrant's
officers and directors is as follows:
Stanley J. Wolfson, President, Chief Executive Officer and
a director of the Company since February 1987. Mr. Wolfson
attended the University of Colorado at Boulder and the
University of Colorado at Denver. Mr. Wolfson had been president
and a director of Clancy from inception until its merger into
the Company in April 1987. Since 1967 Mr. Wolfson has been
president and director of Portion Controlled Foods, Inc. d/b/a
Stan Wolfson and Associates, Inc., a data processing systems
consulting firm located in Denver, Colorado which employs two
persons on a part-time basis. His firm's clients include The
Hertz Corporation that utilizes Stan Wolfson and Associates,
Inc.'s hand-held data entry equipment as part of its on-site
national inventory control system. The Hertz Corporation has
been a major customer of the Company. See Part I, Item 1. Mr.
Wolfson has served as remote data acquisition consultant for
AT&T as well as a consultant for a number of small local
companies. Mr. Wolfson is the husband of Lizabeth Wolfson, an
officer of the Company.
-19-
<PAGE>
Lizabeth M. Wolfson, Secretary-Treasurer and Chief Financial
and Chief Accounting Officer of the Company since February 1987.
Mrs. Wolfson attended the University of Colorado at Boulder and
the University of Colorado at Denver. Mrs. Wolfson had been
secretary and treasurer of Clancy from 1986 and a director since
June 1999. Since 1978, Mrs. Wolfson has served as secretary of
Stan Wolfson and Associates, Inc. She is the wife of Stanley
J. Wolfson, President, Chief Executive Officer and a director of
the Company.
Mark G. Lawrence, a director of the Company from April 1986
through October 1, 2000. Mr. Lawrence served as Chairman of the
Board of Directors and Secretary of the Company from April 1986
until February 1987 when the Exchange took place with Clancy.
Since March 1988 Mr. Lawrence has served as executive vice
president and a partner of Vintage Marketing Group, Inc., a
company engaged in the sales and marketing of residential real
estate. He graduated from the University of Denver in 1971 with
a B.A. degree in social sciences and attended the University of
the Americas in Mexico City in 1969. Mr. Lawrence is a member
of the Home Builders Association, the Sales and Marketing
Council of Metropolitan Denver and the National Sales and
Marketing Council.
(a)(5) Directorships Held in Reporting Companies. None.
(b) Identification of Certain Significant Employees.
None.
(c) Family Relationships. Lizabeth M. Wolfson,
Secretary-Treasurer and Chief Financial and Chief Accounting
Officer of the Registrant, is the wife of Stanley J. Wolfson,
President, Chief Executive Officer and a director of the
Registrant.
(d) Involvement in Certain Legal Proceedings.
None
Compliance with Section 16(a) of the Exchange Act
Not Applicable.
Item 10. Executive Compensation.
(a) General. For the fiscal year ended September 30, 2000
the Company paid a ten percent sales commission totaling $2,551
to Stanley J. Wolfson, the President, Chief Executive Officer
and a director of the Company, based upon gross sales (excluding
supplies) to the Hertz Corporation. In addition, Mr. Wolfson
received a salary of $50,400 for the most recent fiscal year
ended.
-20-
<PAGE>
(b) Summary Compensation Table.
(a) (b) (c) (e)
Name and Other annual
principal position Year Salary compensation
Stanley J. Wolfson 2000 $50,400 $2,551
President and Chief 1999 50,400 3,034
Executive Officer 1998 50,400 2,276
(c) Option/SAR Grants. None.
(d) Option/SAR Exercises and Fiscal Year End Option/SAR
Values. Not applicable.
(e) Long-Term Incentive Plan. None.
(f) Compensation of Directors. None.
(g) Employment Contracts and Arrangements. None.
(h) Report on Repricing of Options/SARs. Not applicable.
Item 11. Security Ownership of Certain Beneficial Owners and
Management.
(a), (b) Security Ownership of Beneficial Owners and
Management. The following table sets forth information as of
December 28, 2000 with respect to the ownership of the Company's
Common Stock for all directors, individually, all officers and
directors as a group, and all beneficial owners of more than
five percent of the Common Stock.
Name and address Number of
of beneficial owner shares
Percentage
Stanley J. Wolfson and
Lizabeth M. Wolfson 113,398,464 (1) 33%
2250 S. Oneida Ste. 308
Denver, Colorado 80224
Mark G. Lawrence 5,989,474 1.8%
2250 S. Oneida Ste. 308
Denver, Colorado 80224
Robert M. Brodbeck 73,109,608 21.5%
All officers and directors 192,497,546 (1) 56.3 %
as a group (three persons)
and beneficial owners
-21-
<PAGE>
(1) Includes 4,075,642 shares of Common Stock owned of record
by Lizabeth M. Wolfson and 109,722,822 owned by Stanley J.
Wolfson. This does not include 17,489,315 shares yet to be
issued to Mr. Wolfson in connection with the Company's
acquisition of Expo1000.com and Remit-online.com.
(c) Changes in Control.
The Registrant knows of no arrangement, the operation of
which may, at a subsequent date, result in change in control of
the Registrant.
Item 12. Certain Relationships and Related Transactions.
Stanley Wolfson, President and Chief Executive Officer,
receives a 10% commission on all sales to Hertz Corporation
based on an agreement made between the Company and Mr. Wolfson
in 1986.
On November 18, 1999 the board of directors of the Company
approved the acquisition of two Internet business opportunities
funded and developed independent of the Company by Mr. Wolfson.
The final acquisition documents for Expo1000.com and Remit-
online.com have not been completed, the it is anticipated that
the agreement will be signed and the shares issued in early
2001.
Stanley Wolfson and Lizabeth Wolfson have guaranteed the
Company's loan with Mountain States Bank personally, and have
pledged personal collateral in the form of certificate of
deposit to secure a portion of the loan. In 1999, Lizabeth
Wolfson lent the Company $120,000 pursuant to 5 notes payable.
The notes bear interest at 8% and 9% annually. The balance due
on the notes is $45,000 and have been extended to June 30, 2001.
The notes may be extended.
-22-
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
(a) Exhibits. The following is a complete list of
exhibits filed as a part of this Report on Form 10-KSB and are
those incorporated herein by reference.
Exhibit Number Title of Exhibit
3.1 Articles of Incorporation filed with the
Colorado Secretary of State on March 3, 1986 (2)
3.1(a) Articles of Amendment to Articles of Incorporation
(2)
3.3 Bylaws (2)
10.1 Partnership agreement between the Company and
Urban Transit Solutions
10.6 Indemnification Agreements between the Registrant
and Robert M. Brodbeck, Stanley J. Wolfson and
Lizabeth M. Wolfson dated February 26, 1987 (1)
10.12 Indemnity Agreements between Registrant and
Stanley J. Wolfson, Robert M. Brodbeck, Mark G.
Lawrence and Lizabeth M. Wolfson (3)
(1) Incorporated by reference from exhibit 2.1 filed with the
Registrant's current report on Form 8-K dated February 26,
1987.
(2) Incorporated by reference from the like numbered exhibits
filed with the Registrant's Registration Statement on Form
S-18, SEC File No. 33-4882-D.
(3) Incorporated by reference from the like numbered exhibits
filed with the Company's Annual Report on Form 10-K for
the year ended September 30, 1987.
(b) Reports on Form 8-K. During the last quarter of the
period covered by this report the Registrant filed no
reports on form 8-K.
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED
PURSUANT TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE
NOT REGISTERED SECURITIES PURSUANT TO SECTION 12 OF THE ACT.
None.
-23-
<PAGE>
SIGNATURES
In accordance with the requirements of Section 13 or 15(d)
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.
CLANCY SYSTEMS INTERNATIONAL, INC.
By /s/ Stanley J. Wolfson
Stanley J. Wolfson, President
Date: December 28, 2000
In accordance with the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Date: December 28, 2000 /s/ Stanley J. Wolfson
Stanley J. Wolfson, resident,
Chief Executive Officer and a
Director
Date: December 28, 2000 /s/ Lizabeth M. Wolfson
Lizabeth M. Wolfson, Secretary-
Treasurer and Chief Financial
and Chief Accounting Officer
-24-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Clancy Systems International, Inc.
We have audited the balance sheet of Clancy Systems International,
Inc. as of September 30, 1999 and 2000, and the related statements
of operations, stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform
the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.
An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Clancy
Systems International, Inc. at September 30, 1999 and 2000, and the
results of its operations and its cash flow for the years then ended,
in conformity with generally accepted accounting principles.
Denver, Colorado
December 7, 2000 CAUSEY DEMGEN & MOORE INC.
F-1
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1999 and 2000
ASSETS
1999 2000
---- ----
Current assets:
Cash, including interest bearing accounts
of $60,605 (1999) and $63,230 (2000) $ 315,579 $ 435,238
Accounts receivable 277,155 294,521
Inventories (Note 2) 160,582 164,252
Prepaid expenses 9,167 12,100
---------- ----------
Total current assets 762,483 906,111
Furniture and equipment, at cost:
Office furniture and equipment 153,085 154,285
Equipment under service contracts (Note 10) 1,167,393 1,270,655
----------- ----------
1,320,478 1,424,940
Less accumulated depreciation 926,987 1,096,481
---------- ----------
Net furniture and equipment 393,491 328,459
Other assets:
Investment in partnership (Note 4) 435,535 432,801
Note receivable - employee - 10,618
Deposits and other 17,058 3,769
Software development costs, net of accumulated
amortization of $185,615 (1999) and $247,018
(2000) 143,195 128,693
---------- ----------
Total other assets 595,788 575,881
---------- ----------
$1,751,762 $1,810,451
========== ==========
See accompanying notes.
F-2
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1999 and 2000
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 2000
---- ----
Current liabilities:
Notes payable - shareholder (Note 5) $ 120,000 $ 45,000
Accounts payable 12,537 9,496
Income taxes payable 7,300 46,000
Deferred revenue 97,765 124,170
---------- ----------
Total current liabilities 237,602 224,666
Long-term note payable - bank (Note 5) 240,000 90,000
Deferred tax liability (Note 6) 6,000 11,000
Commitments (Notes 9 and 10)
Stockholders' equity (Note 8):
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 (1999)
334,128,623 shares (2000) issued and
outstanding 33,689 34,413
Additional paid-in capital 1,030,674 1,045,175
Retained earnings 203,797 405,197
---------- ----------
Total stockholders' equity 1,268,160 1,484,785
---------- ----------
$1,751,762 $1,810,451
========== ==========
See accompanying notes.
F-3
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF OPERATIONS
For the Years Ended September 30, 1999 and 2000
1999 2000
---- ----
Revenues:
Sales $ 267,391 $ 176,151
Service contract income (Notes 10 and 11) 1,148,023 1,161,545
Parking ticket collections (Notes 10 and 11) 448,324 327,697
--------- ---------
Total revenues 1,863,738 1,665,393
Costs and expenses:
Cost of sales 121,126 82,924
Cost of services (Note 3) 547,387 509,968
Cost of parking ticket collections (Note 10) 244,476 140,057
General and administrative 572,363 548,804
Research and development 52,185 59,170
--------- ---------
Total costs and expenses 1,537,537 1,340,923
--------- ---------
Income from operations 326,201 324,470
Other income (expense):
Loss on disposal of assets (38,370) -
Interest income 2,328 9,847
Interest expense (34,143) (22,018)
--------- ---------
Total other income (expense) (70,185) (12,171)
--------- ---------
Income before provision for income taxes and
loss in equity-basis partnership 256,016 312,299
Provision for income taxes (Note 6):
Current expense 51,300 104,230
Deferred expense 20,840 5,000
--------- ---------
Total income tax expense 72,140 109,230
Loss in equity-basis partnership (net of tax
benefit of $9,840, 1999 and $1,065, 2000)
(Note 4) (20,040) (1,669)
--------- ---------
Net income $ 163,836 $ 201,400
========= =========
Basic net income per common share (Note 7) $ * $ *
========= =========
* Less than $.01 per share
See accompanying notes.
F-4
<PAGE>
<TABLE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Years Ended September 30, 1999 and 2000
<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 year
ended September 30, 1999 - - 163,836 - ----------- ---
------------ ------- ---------- --------
Balance, September 30,
1999 336,889,149 33,689 1,030,674 203,797
Issuance of stock for
services 4,350,000 435 14,790 -
Exercise of stock options
by cashless exercise of
stock options 2,889,474 289 (289)
Net income for the year ended
September 30, 2000 - - 201,400
---------- ------- ---------- --------
Balance, September 30,
2000 344,128,623 $34,413 $1,045,175 $405,197
=========== ======= ========== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Years Ended September 30, 1999 and 2000
1999 2000
---- ----
Cash flows from operating activities:
Net income $163,836 $201,400
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss on disposal of assets 38,370 -
Depreciation and amortization 230,192 231,327
Deferred income tax expense 11,000 5,000
Issuance of common stock for services - 15,225
Loss in equity basis partnership 29,880 2,734
Increase in accounts receivable (9,373) (17,366)
Decrease (increase) in inventories 30,378 (3,670)
Decrease in income taxes refundable 16,000 -
Increase in prepaid expenses (9,167) (2,933)
Decrease in accounts payable (25,462) (3,041)
Increase in income taxes payable 7,300 38,700
Increase in deferred revenue 9,794 26,405
-------- --------
Total adjustments 328,912 292,381
-------- --------
Net cash provided by operating activities 492,748 493,781
Cash flows from investing activities:
Acquisition of furniture and equipment (130,823) (104,462)
Increase in software licenses and software
development costs (42,278) (46,900)
Increase in note receivable-employee - (10,618)
Investment in partnership (135,500) -
Increase in deposits and other assets - 12,858
-------- --------
Net cash used in investing activities (308,601) (149,122)
Cash flows from financing activities:
Proceeds from notes payable - shareholder 120,000 -
Payments on note payable - shareholder - (75,000)
Payments on note payable - bank (80,000) (150,000)
--------- --------
Net cash provided by (used in) financing
activities 40,000 (225,000)
-------- --------
Increase in cash and cash equivalents 224,147 119,659
Cash and cash equivalents at beginning of year 91,432 315,579
--------- --------
Cash and cash equivalents at end of year $315,579 $435,238
======== ========
(Continued on following page)
See accompanying notes.
F-6
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Years Ended September 30, 1999 and 2000
(Continued from preceding page)
Supplemental disclosure of cash flow information:
1999 2000
---- ----
Cash paid during the year for interest $ 34,143 $ 21,685
======== ========
Cash paid during the year for income taxes $ 28,000 $ 57,165
======== ========
Depreciation and amortization expense is
allocated as follows:
Cost of services $206,858 $231,327
Cost of parking ticket collections 23,334 -
-------- --------
$230,192 $231,327
======== ========
See accompanying notes.
F-7
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 and 2000
1. Organization and summary of significant accounting policies
Organization:
The Company was organized in Colorado on June 28, 1984. The Company
is in the business of developing and marketing ticket writing
systems, rental car return systems, internet payment remittance
systems, and internet industry guides. The Company's revenues are
derived primarily from cities, universities and car rental companies
throughout the United States and Canada.
Use of estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ
from those estimates.
Accounts receivable:
No provision for doubtful accounts was deemed necessary at September
30, 1999 or 2000.
Inventories:
Inventories are carried at the lower of cost (first-in, first-out) or
market. Inventory costs include materials, labor and manufacturing
overhead. Inventories consist primarily of computer and printer parts
and supplies and are subject to technical obsolescence.
Computer software:
Costs incurred to establish the technological feasibility of
computer software are research and development costs, which are charged
to expense as incurred. Software development costs incurred subsequent
to establishment of technological feasibility are capitalized and
subsequently amortized based on the greater of the straight line method
over the remaining estimated economic life of the product (generally
five years) or the estimate of current and future revenues for the
related software product. Amortization expense for the years ended
September 30, 1999 and 2000 amounted to $58,484 and $61,402,
respectively.
F-8
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 and 2000
1. Organization and summary of significant accounting policies
(continued)
Furniture and equipment:
Furniture and equipment are stated at cost.
Depreciation is provided by the Company on the straight line and
accelerated methods over the assets' estimated useful lives of five
years. Property and equipment consists primarily of computers and
printers which are subject to technical obsolescence.
Sales and retirements of depreciable property are recorded by
removing the related cost and accumulated depreciation from the
accounts. Gains and losses on sales and retirements of property are
reflected in results of operations.
Other assets:
Software license agreements are being amortized over a five-year
period, the period estimated by management to be benefited.
Research and development costs:
Company funded research and development costs are charged to
expense as incurred.
Revenue recognition:
Revenue derived from professional service contracts on equipment and
support services is included in income as earned over the contract
term; related costs consist mainly of depreciation, supplies and sales
commissions.
The Company defers revenue for equipment and services under service
contracts that are billed to customers on a quarterly, semi-annual,
annual or other basis.
Revenue from the issuance of parking tickets is recognized on a
cash basis when received.
Advertising costs:
The Company expenses the costs of advertising as incurred.
Advertising expense was $6,261 and $12,238 for the years ended
September 30, 1999 and 2000, respectively.
F-9
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 and 2000
1. Organization and summary of significant accounting policies
(continued)
Income taxes:
The Company accounts for income taxes under Statement of Financial
Accounting Standards No. 109 ("FASB No. 109"). Temporary differences
are differences between the tax basis of assets and liabilities and
their reported amounts in the financial statements that will result in
taxable or deductible amounts in future years. The Company's temporary
differences consist primarily of tax operating loss carry forwards,
depreciation differences and capitalized ss.263A costs.
Cash equivalents:
For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Fair value of financial instruments:
All financial instruments are held for purposes other than
trading. The following methods and assumptions were used to estimate
the fair value of each financial instrument for which it is practicable
to estimate that value.
For cash, cash equivalents and notes payable, the carrying amount is
assumed to approximate fair value due to the short-term
maturities of these instruments.
Concentrations of credit risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of cash and trade
receivables. The Company places its cash with high quality financial
institutions. At September 30, 2000 and at various times during
the year, the balance at one of the financial institutions exceeded
FDIC limits.
The Company provides credit, in the normal course of business, to
customers throughout the United States, Canada and England. The
Company performs ongoing credit evaluations of its customers. A
significant portion of the Company's revenues are derived from
contracts with universities, car rental companies and municipalities.
F-10
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 and 2000
2. Inventories
Inventories consist of the following at September 30:
1999 2000
---- ----
Finished goods $ 7,160 $ 7,800
Work in process 1,052 -
Purchased parts and supplies 152,370 156,452
-------- --------
$160,582 $164,252
======== ========
3. Related party transactions
The Company pays a 10% sales commission to an officer and
director of the Company for gross sales (excluding supplies) to The
Hertz Corporation. For the years ended September 30, 1999 and 2000,
commissions of $3,034 and $2,746 have been paid under this agreement,
respectively.
4. Investment in partnership
On January 31, 1998, the Company entered into a partnership
agreement (the Partnership) with Urban Transit Solutions of Puerto
Rico UTS). The Partnership was formed to contract with cities and
towns in Puerto Rico for the privatization of their parking ticket
management and collection services.
As provided in the partnership agreement, the Company has
contributed $500,000 in exchange for a 60% ownership in the Partnership
and will share in the net income and losses of the partnership based
on their percentage of ownership. Pursuant to the partnership
agreement, substantially all management authority is retained by UTS,
and consequently, the Company accounts for their investment in the
Partnership using the equity method.
The Company's investment in the net assets of the Partnership
accounted for under the equity method amounted to $435,535 and
$432,801 at September 30, 1999 and 2000, respectively. The condensed
results of the operations and financial position of the Partnership
are summarized below:
F-11
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 and 2000
4. Investment in partnership (continued)
Condensed statement of operations
For the year ended For the year ended
September 30, 1999 September 30, 2000
-------------------- --------------------
Total revenues $261,756 $685,740
Total costs and expenses (310,572) (690,296)
-------- --------
Net loss $(48,816) $ (4,556)
======== ========
Condensed balance sheet September 30, September 30,
1999 2000
------------- -------------
Current assets $ 37,952 $ 42,704
Non-current assets 442,032 982,139
Current liabilitiies (27,113) (129,764)
Long-term liabilities (44,529) (464,267)
-------- --------
Partnership capital $408,342 $430,812
======== ========
As of September 30, 2000 the Company and UTS were in the
process of renegotiating the terms of the partnership agreement.
5. Notes payable
Notes payable - bank:
On October 15, 1998, the Company executed a one-year note
payable for $320,000 refinancing two previously executed notes. The
note bears interest at 9% with interest payable monthly and outstanding
principal due on October 15, 2000. In October 2000, the bank extended
the due date to October 15, 2001. The note is secured by a
certificate of deposit in the name of two officers of the Company.
Notes payable - shareholder:
During the year ended September 30, 1999, the Company executed five
notes payable from a major shareholder of the Company for a total of
$120,000. The notes bear interest at 8 and 9% annually, and mature
through February 29, 2000. During the year ended September 30, 2000,
the due dates of two of the notes for a total of $45,000 were extended
to May 1 and June 30, 2001.
Interest in the amount of $6,953 and $5,850 was paid to the
shareholder during the years ended September 30, 1999 and 2000,
respectively.
F-12
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 and 2000
6. Income taxes
The components of the Company's deferred tax assets and
liabilities at September 30 are as follows:
1999 2000
---- ----
Non current deferred tax assets $ 60,000 $ 74,000
Non current deferred tax liabilities (66,000) (85,000)
------- --------
$ (6,000) $(11,000)
======== ========
1999 2000
---- ----
Deferred tax assets:
Loss on equity investment $ 21,000 $ 26,000
Section 263A Capitalization 34,000 47,000
Other 5,000 1,000
-------- --------
60,000 74,000
Deferred tax liabilities:
Depreciation and amortization (66,000) (85,000)
-------- --------
Net non-current deferred taxes $ (6,000) $(11,000)
======== ========
7. Basic net income per common share
Basic net income per common share is based on the weighted average
number of shares outstanding during the years ended September 30,
1999 and 2000 of 336,889,149 shares and 340,348,532 shares respectively.
8. Stockholders' equity
During December 1999, the Company issued to a director, options to
purchase 3,000,000 shares of the Company's common stock, exercisable
at $.0035 per share. In May 2000, the director exercised these options
by having the Company withhold 110,256 shares of common stock as
payment of the purchase price of the stock.
During the year ended September 30, 2000, the Company issued
3,100,000 shares of common stock to a director of the Company and
1,250,000 shares of common stock to three employees of the Company
for services performed valued at $15,225 ($.0035 per share which
was based on an average between public and private transactions).
F-13
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 and 2000
8. Stockholders' equity (continued)
Stock options:
The Company has adopted the disclosure - only provisions of
Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation. Accordingly, no compensation cost has
been recognized for the stock options issued. Had compensation
costs for the stock option been determined based on the fair value at
the grant date for the award during the year ended September 30, 2000,
in accordance with the provisions of SFAS No.123, the Company's net
income and income per share would have been reduced to the pro forma
amounts indicated below.
1999 2000
---- ----
Net income - as reported $ 163,836 $ 201,400
Net income - pro forma $ 163,836 $ 182,014
Income per share - as reported $ * $ *
Income per share - pro forma $ * $ *
* less than $.01 per share
The fair value of the option grant is estimated on the date
of the grant using the Black-Scholes option-pricing model with the
following assumptions; dividend yield of 0%; expected volatility of
53%; risk-free interest rate of 6.5%; and expected life of 5 years.
9. Lease agreements - as lessee
The Company leases office space in Denver, Colorado under a 24
month lease through May 31, 2002 and is party to various other short
term leases for office and warehouse space. Total rent expense for the
years ended September 30, 1999 and 2000 amounted to $34,687 and $39,181,
respectively.
The future minimum lease payments under these obligations are as
follows:
Year ending September 30,
2001 $32,017
2002 18,262
-------
$50,279
=======
10.Professional service contracts
The Company provides equipment and support services under
12 month professional service contracts. At September 30, 2000, all of
the contracts contained cancellation provisions requiring notice of 30
days or less.
F-14
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999 and 2000
10.Professional service contracts (continued)
The cost of the equipment provided in the contracts and related
accumulated depreciation are as follows at September 30:
1999 2000
---- ----
Equipment under service contracts $1,167,393 $1,270,655
Less accumulated depreciation (804,241) (955,889)
---------- ----------
$ 363,152 $ 314,766
========== =========
Parking citation collection services:
The Company has formed agreements with the towns of Logan, Utah
for the period of June 1998 through May 1999, and Maywood, Illinois for
the period of May 1997 through September 1999, for the purpose of
providing parking citation issuance, ticket processing, meter
collections and maintenance, and ticket collections. In conjunction
with the contracts, the Company and the Towns each receive half of
all revenues after payment of all associated costs related to the
collections. In May 1998, the Company paid a non-refundable
guarantee of $35,000 to Logan which was amortized monthly on a
straight-line basis over the period of the agreement.
The terms of the agreements can be extended or discontinued with
30 days written notice. At September 30, 2000 the Logan, Utah agreement
was still in effect.
11.Export sales
The Company's export sales for the years ended September 30, by
geographic area, are as follows:
1999 2000
---- ----
Canada $115,000 $ 99,000
England 15,000 -
-------- --------
$130,000 $ 99,000
======== ========
12. Letter of intent
In November 1999, the Company entered into a letter of intent to
acquire two website related businesses owned and developed by the
Company's president and major shareholder for shares of the
Company's common stock valued at $255,344 (17,489,315 shares of
common stock at $.0146 per share). The businesses will be recorded at
the president's historical cost basis in the trademarks and
proprietary technology related to the websites which
approximates the par value of the shares to be issued of $1,748. The
shares are to be issued during January 2001.
F-15
