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, 1999
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 22, 2000 is 336,889,149 shares, $.0001 par value.
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Balance Sheet - September 30, 1999 and December 31, 1999
(unaudited) 2 and 3
Income Statement - For the Three Months Ended December 31, 1998
and 1999 (unaudited) 4
Statement of Stockholders' Equity - For the Three Months Ended
December 31, 1999 (unaudited) 5
Statement of Cash Flows - For the Three Months Ended
December 31, 1998 and 1999 (unaudited) 6
Notes to Unaudited Financial Statements 7
Management's Discussion and Analysis of Financial Condition and
Results of Operations 9
PART II. OTHER INFORMATION 9
1
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CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1999 and December 31, 1999
(Unaudited)
ASSETS
September December
--------- --------
Current assets:
Cash and cash equivalents $ 315,579 $ 234,857
Accounts receivable 277,155 297,312
Inventories (Note 2) 160,582 155,331
Prepaid expenses 9,167 6,416
---------- ----------
Total current assets 762,483 693,916
Furniture and equipment, at cost:
Office furniture and equipment 153,085 153,085
Equipment under service contracts 1,167,393 1,197,196
---------- ----------
1,320,478 1,350,281
Less accumulated depreciation 926,987 972,532
---------- ----------
Net furniture and equipment 393,491 377,749
Other assets:
Investment in partnership 435,535 441,535
Deposits and other 17,058 17,058
Software development costs 143,195 149,560
---------- ----------
Total other assets 595,788 608,153
---------- ----------
$1,751,762 $1,679,818
========== ==========
See accompanying notes.
2
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CLANCY SYSTEMS INTERNATIONAL, INC.
BALANCE SHEET
September 30, 1999 and December 31, 1999
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY
September December
---------- ----------
Current liabilities:
Notes payable - related party (Note 4) $ 120,000 $ 65,000
Note payable - bank (Note 4) 240,000 200,000
Accounts payable 12,537 1,293
Income taxes payable 7,300 16,150
Deferred revenue 97,765 111,384
---------- ----------
Total current liabilities 477,602 393,827
Deferred tax liability (Note 3) 6,000 4,650
Stockholders' equity (Note 5):
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 203,797 216,978
---------- ----------
Total stockholders' equity 1,268,160 1,281,341
---------- ----------
$1,751,762 $1,679,818
========== ==========
See accompanying notes.
3
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CLANCY SYSTEMS INTERNATIONAL, INC.
INCOME STATEMENT
For the Three Months Ended December 31, 1998 and 1999
(Unaudited)
1998 1999
---- ----
Revenues:
Sales $ 102,564 $ 15,806
Service contract income 281,410 319,786
Parking ticket collections 84,242 45,403
---------- ----------
Total revenues 468,216 380,995
Costs and expenses:
Cost of sales 16,475 22,955
Cost of services 142,807 132,334
Cost of parking ticket collections 87,938 31,867
General and administrative 137,318 160,751
Research and development 12,046 11,927
---------- ----------
Total costs and expenses 396,584 359,834
---------- ----------
Income from operations 71,632 21,161
Other income (expense);
Interest income 593 408
Interest expense (6,828) (6,888)
---------- ----------
Total other income (expense) (6,235) (6,480)
---------- ----------
Income before provision for income taxes and gain
(loss) in equity-basis partnership 65,397 14,681
Provision for income taxes 23,000 5,400
Gain (loss) in equity basis partnership (net of tax
provision of $(4,500)-1998 and $2,100-1999) (8,880) 3,900
---------- ----------
Net income $ 33,517 $ 13,181
========== ==========
Basic net income per common share $ * $ *
========== ==========
Weighted average number of shares outstanding 336,900,000 336,900,000
=========== ===========
See accompanying notes.
4
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<TABLE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Months Ended December 31, 1999
(Unaudited)
<CAPTION>
Additional
Common stock paid-in Retained
Shares Amount capital earnings
------ ------ ---------- --------
<S> <C> <C> <C> <C>
Balance, September 30, 1999 336,889,149 $33,689 $1,030,674 $203,797
Net income for the three months ended
December 31, 1999 - - - 13,181
----------- ------- ---------- --------
Balance, December 31, 1999 336,889,149 $33,689 $1,030,674 $216,978
=========== ======= ========== ========
</TABLE>
See accompanying notes.
5
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
STATEMENT OF CASH FLOWS
For the Three Months Ended December 31, 1998 and 1999
(Unaudited)
1998 1999
---- ----
Cash flows from operating activities:
Net income $33,517 $ 13,181
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 68,344 60,846
Deferred income tax (benefit) expense 2,500 (1,350)
Increase in accounts receivable (86,883) (20,157)
Decrease (increase) in inventories (10,736) 5,251
Decrease in prepaid expenses - 2,751
Loss (gain) in equity basis partnership 13,380 (6,000)
Decrease in accounts payable (37,999) (11,244)
Decrease in income taxes refundable 16,000 -
Increase in income taxes payable - 8,850
Increase in deferred revenue 42,028 13,619
------- --------
Total adjustments 6,634 52,566
------- --------
Net cash provided by operating activities 40,151 65,747
Cash flows from investing activities:
Acquisition of furniture and equipment - net (30,923) (29,803)
Increase in software development costs (8,450) (21,666)
Investment in partnership (55,000) -
------- --------
Net cash used in investing activities (94,373) (51,469)
Cash flows from financing activities:
Payments on note payable - bank (40,000)
Proceeds from note payable - related party 55,000 -
Payments on note payable - related party - (55,000)
------- --------
Net cash provided by (used in) financing activities 55,000 (95,000)
------- --------
Increase (decrease) in cash and cash equivalents 778 (80,722)
Cash and cash equivalents at beginning of period 91,432 315,579
------- --------
Cash and cash equivalents at end of period $92,210 $234,857
======= ========
See accompanying notes.
6
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 1999
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, 1999 and
December 31, 1999, and the results of operations and cash flows for the
periods ended December 31, 1998 and 1999.
2. Inventories
Inventories consist of the following at:
September 30, December 31,
1999 1999
---- ----
Finished goods $ 7,160 $ 7,767
Work in process 1,052 15,533
Purchased parts and supplies 152,370 132,031
-------- --------
$160,582 $155,331
======== ========
3. Income taxes
The provision for income taxes for the three months ended December 31,
1998 and 1999 is based on the expected tax rate for the year.
As of September 30, 1999 and December 31, 1999, total deferred tax assets
and liabilities are as follows:
September 30, December 31,
1999 1999
---- ----
Deferred tax assets $60,000 $ 56,100
Deferred tax liabilities (66,000) (60,750)
------- --------
$(6,000) $ (4,650)
======= ========
4. Notes payable
Related party:
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. The notes will be extended by mutual
consent of the parties. The remaining balance at December 31, 1999 is
$65,000.
7
<PAGE>
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
December 31, 1999
4. Notes payable (continued)
Bank:
In October 1999, the Company extended the due date of its note payable
- bank to October 15,2000. The note bears interest at 9%, with
interest payable monthly and is secured by a certificate of
deposit in the name of two officers of the Company.
5. Letters of intent
In November 1999, the Company entered into a letter of intent to
sell 158,000,000 shares of its common stock to an unrelated company, in
exchange for $570,000 in cash.
Also 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 80,703,013 shares of the
Company's common stock. The businesses will be recorded by the Company
at the president's historical cost basis in those assets.
Both transactions are expected to be consummated in February 2000.
8
<PAGE>
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Material Changes in Financial Condition
At December 31, 1999, the Company had working capital of $300,089
derived primarily from contract sales, as compared to working capital of
$284,881 at September 30, 1999. 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, 1999, 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.
Revenues during the quarter were lower than the prior year's
quarter by 19% which is primarily due to the completion of the Maywood
ticket issuance contract which was completed as of September 30, 1999.
Expenses decreased by 11% under the prior year's quarter due to
elimination of expenses related to the Maywood contract. The Company
reported a profit of $13,181 for the 1999 quarter as compared to a net
profit of $33,517 for the prior year's quarter.
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.
Chat Room Disclaimer
This new 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 information
disclosed on these boards.
9
<PAGE>
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The District Court, City and County of Denver, State of Colorado
granted a motion to dismiss in the case filed against Stanley J. Wolfson,
Lizabeth M. Wolfson, Mark G. Lawrence and Clancy Systems International,
Inc. filed by Lorraine E. Salazar, Francis Salazar, Barry Fey and Philip
B. Davis. The order states that the Plaintiffs fail to state a claim
upon which relief can be granted. Further, the court granted defendants
reimbursement for attorney's fees and costs.
Item 2. Changes In Securities and Use of Proceeds
In November 1999, the Company entered into a letter of intent with Jubilee
Community LLC (an unrelated Company) to sell 158,000,000 shares of its common
stock in exchange for $570,000 in cash. This transaction is exempt from
registration under Section 4(2) of the Securities Act of 1933.
Also in November 1999, the Company entered into a letter of intent to acquire
two website related businesses owned and developed by Stanley J. Wolfson, the
Company's president and major shareholder for 80,703,013 shares of the
Company's common stock. The businesses will be recorded by the Company at
the president's historical cost basis in those assets. This transaction is
exempt from registration under Section 4(2) of the Securities Act of 1933.
Both transactions are expected to be consummated in February 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule (1)
(b) During the quarter ended December 31, 1999, the
Registrant has filed no reports on Form 8-K
(1) Filed herewith
10
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Date: February 22, 2000 CLANCY SYSTEMS INTERNATIONAL, INC.
(Registrant)
By: /s/ Stanley J. Wolfson
Stanley J. Wolfson, President
and Chief Executive Officer
By: /s/ Lizabeth M. Wolfson
Lizabeth M. Wolfson, Secretary-
Treasurer and Chief Financial
and Chief Accounting Officer
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-QSB STATEMENTS FOR PERIOD ENDED 12/31/99 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH 10-QSB FOR PERIOD ENDED 12/31/99
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 234,857
<SECURITIES> 0
<RECEIVABLES> 297,312
<ALLOWANCES> 0
<INVENTORY> 155,331
<CURRENT-ASSETS> 693,916
<PP&E> 1,350,281
<DEPRECIATION> 972,532
<TOTAL-ASSETS> 1,679,818
<CURRENT-LIABILITIES> 393,827
<BONDS> 0
0
0
<COMMON> 33,689
<OTHER-SE> 1,247,652
<TOTAL-LIABILITY-AND-EQUITY> 1,679,818
<SALES> 15,806
<TOTAL-REVENUES> 380,995
<CGS> 22,955
<TOTAL-COSTS> 187,156
<OTHER-EXPENSES> 172,678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,888
<INCOME-PRETAX> 14,681
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,181
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
