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, 2006
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
incorporation or organization) Identification 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 14, 2007 is 382,617,938 shares, $.0001 par value.
Transitional Small Business Disclosure Format: Yes No X
Indicate by check mark whether the Registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes No X
CLANCY SYSTEMS INTERNATIONAL, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Consolidated Balance Sheets - September 30, 2006
and December 31, 2006 (unaudited) 2 and 3
Consolidated Statements of Income - For the Three
Months Ended December 31, 2005 and 2006 (unaudited) 4
Consolidated Statement of Stockholders' Equity - For
the Three Months Ended December 31, 2006 (unaudited) 5
Consolidated Statements of Cash Flows - For the Three
Months Ended December 31, 2005 and 2006 (unaudited) 6 and 7
Notes to Unaudited Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Controls and Procedures 16
PART II. OTHER INFORMATION 16
Item 1. Legal Proceedings 16
Item 6. Exhibits 16
-1-
CLANCY SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, December 31,
2006 2006
(Unaudited)
Current assets: ------------ -----------
Cash and cash equivalents $ 387,663 $ 1,107,274
Accounts receivable, net of allowance
for doubtful accounts 642,056 578,520
Income tax receivable 23,264 1,187
Inventories 104,224 112,803
Prepaid expenses 89,124 62,158
---------- ----------
Total current assets 1,246,331 1,861,942
---------- ----------
Furniture and equipment, at cost:
Office furniture and equipment 226,011 226,011
Computers and equipment
under service contracts 2,638,800 2,704,561
Leasehold improvements 81,424 81,424
Vehicles, including vehicles
under capital leases 149,886 149,885
--------- ---------
3,096,121 3,161,881
Less accumulated depreciation (2,250,994) (2,323,875)
---------- ---------
Net furniture and equipment 845,127 838,006
---------- ----------
Other assets:
Deferred tax asset 65,100 48,400
Investment in marketable securities 588,212 588,212
Deposits and other 21,740 21,096
Goodwill 404,547 404,547
Software development costs, net of
accumulated amortization 221,878 225,048
--------- --------
Total other assets 1,301,477 1,287,303
--------- ---------
$ 3,392,935 $ 3,987,251
=========== ===========
See accompanying notes to consolidated financial statements.
-2-
CLANCY SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED BALANCE SHEETS (Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
September 30, December 31,
2006 2006
(Unaudited)
------------ -----------
Current liabilities:
Accounts payable $ 27,826 $ 418,673
Accrued expenses 376,075 342,516
Income taxes payable - 40,122
Current portion of obligations under
capital leases 3,279 3,335
Deferred revenue 128,853 111,890
--------- --------
Total current liabilities 536,033 916,536
Obligations under capital leases,
net of current portion 9,941 8,998
--------- -------
Total liabilities 545,974 925,534
--------- -------
Commitments
Stockholders' equity:
Preferred stock, $.0001 par value;
100,000,000 shares authorized,
none issued - -
Common stock, $.0001 par value;
800,000,000 shares authorized,
382,617,938 shares issued and
outstanding 38,262 38,262
Additional paid-in capital 1,359,797 1,359,797
Retained earnings 1,448,902 1,663,658
--------- ---------
Total stockholders' equity 2,846,961 3,061,717
----------- -----------
$ 3,392,935 $ 3,987,251
=========== ===========
See accompanying notes to consolidated financial statements.
-3-
CLANCY SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Three Months Ended December 31, 2005 and 2006
(Unaudited)
December December
31, 2005 31, 2006
Revenues: -------- --------
Sales $ 36,463 $ 38,962
Service contract income 679,006 712,797
Parking ticket collections 146,775 304,780
---------- ----------
Total revenues 862,244 1,056,539
---------- ----------
Costs and expenses:
Cost of sales 36,177 9,376
Cost of services 164,198 152,778
Cost of parking ticket
collections 25,636 24,156
General and administrative 479,222 554,769
Research and development 14,650 -
--------- ---------
Total costs and expenses 719,883 741,079
--------- ---------
Income from operations 142,361 315,460
-------- ---------
Other income (expense):
Interest income 7,033 10,803
Interest expense (6,552) ( 948)
Other Income 1,838 -
--------- ---------
Total other income (expense) 2,319 9,855
--------- ---------
Income before provision for
income taxes 144,680 325,315
--------- ----------
Provision for income taxes:
Current expense (benefit) 21,509 93,859
Deferred expense (benefit) 14,600 16,700
---------- ---------
Total income tax expense (benefit) 36,109 110,559
---------- ---------
Net income $ 108,571 $ 214,756
=========== ==========
Basic and diluted
net income per common
share $ * $ *
========== ===========
Weighted average number of
shares outstanding 382,617,938 382,617,938
============ ===========
*Less than $.01 per share
See accompanying notes to consolidated financial statements.
-4-
CLANCY SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Months Ended December 31, 2006
(unaudited)
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings
------ ------ --------- --------
Balance,
September 30, 2006 382,617,938 $ 38,262 $ 1,359,797 $ 1,448,902
Net income for the
three months ended
December 31, 2006 - - - 214,756
---------- --------- ---------- ----------
Balance, December
31, 2006 382,617,938 $ 38,262 $ 1,359,797 $ 1,663,658
=========== ========= ============= ===========
See accompanying notes to consolidated financial statements.
-5-
CLANCY SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended December 31, 2005 and 2006
(Unaudited)
December December
31, 2005 31, 2006
------- -------
Cash flows from operating activities:
Net income $ 108,571 $ 214,756
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 107,596 95,967
Deferred income tax expense 14,600 16,700
Changes in assets and liabilities:
Accounts receivable 16,100 63,536
Inventories (9,594) (8,579)
Income taxes refundable (14,505) 22,077
Prepaid expenses 20,519 26,966
Accounts payable 57,370 390,847
Accounts payable, related party (1,530) -
Accrued expenses (46,310) (33,559)
Income taxes payable (92,753) 40,122
Deferred revenue (7,002) (16,963)
---------- ---------
Total adjustments 44,491 597,114
---------- ---------
Net cash provided by operating
activities 153,062 811,870
---------- ---------
Cash flows from investing activities:
Acquisition of furniture and equipment (34,330) (65,760)
Increase in software licenses and
software development costs (20,561) (25,111)
Increase in investments in
marketable securities (84,242) -
Decrease in deposits and other
assets 10,374 (501)
---------- ---------
Net cash(used in) investing
activities (128,759) (91,372)
---------- ---------
Cash flows from financing activities:
Payments on long-term debt and capital
leases (3,895) (887)
---------- ----------
Net cash (used in) financing
activities (3,895) (887)
----------- ----------
See accompanying notes to consolidated financial statements.
-6
CLANCY SYSTEMS INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
For the three months ended December 31, 2005 and 2006
(Unaudited)
December December
31, 2005 31, 2006
------- -------
Increase in cash and
cash equivalents 20,408 719,611
Cash and cash equivalents at beginning
of period 533,485 387,663
---------- ---------
Cash and cash equivalents at end
of period $ 553,893 $ 1,107,274
========== ==========
See accompanying notes to consolidated financial statements.
-7-
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
1. Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in
the United States of America for interim financial information and with
the instructions to Form 10-QSB and Item 310 of Regulation S-B. Accordingly,
they do not include all of the information and footnotes required by
accounting principles generally accepted in the United States of America
for complete financial statements. The accompanying unaudited consolidated
financial statements reflect all adjustments that, in the opinion of
management, are considered necessary for a fair presentation of the
financial position, results of operations, and cash flows for the periods
presented. The results of operations for such periods are not necessarily
indicative of the results expected for the full fiscal year or for any
future period. The accompanying unaudited consolidated financial statements
should be read in conjunction with the audited consolidated financial
statements of Clancy Systems International, Inc. and Subsidiary included
in the Form 10-KSB for the fiscal year ended September 30, 2006.
The Company's subsidiary, Urban Transit Solutions, Inc. ("UTS") was
incorporated under the Laws of the Commonwealth of Puerto Rico. The
financial statements of UTS have been prepared on the basis of accounting
principles generally accepted in the United States of America and are
denominated in U.S. dollars. Therefore, there are no amounts recorded
for foreign currency translation or for transactions denominated in a
foreign currency. The Company has consolidated the financial results of
UTS with those of the Company for the three months ended December 31, 2005
and 2006. All significant intercompany transactions and balances have been
eliminated in consolidation.
2. Inventories
Inventories consist of the following at:
September 30, December 31
2006 2006
------------ -----------
Finished goods $ 15,574 $ 15,064
Work in process 2,962 46,297
Purchased parts and supplies 85,688 51,442
---------- ---------
$ 104,224 $ 112,803
========== =========
-8-
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
3. Income taxes
The provision for income taxes for three months ended December 31, 2005
and 2006 is based on the expected rate for the tax year.
The components of the Company's deferred tax assets and liabilities are
as follows:
September 30, December 31,
2006 2006
------------ -----------
Non-current deferred tax assets $ 132,700 $ 122,200
Non-current deferred tax liabilities (67,600) (73,800)
------------ -----------
$ 65,100 $ 48,400
============ ===========
4. Recent Accounting Pronouncements
SFAS 157, "Fair Value Measurements", defines fair value,
establishes a framework for measuring fair value in generally
accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statement applies under
other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those
pronouncements that fair value is the relevant measurement
attribute. Accordingly, this Statement does not require any new
fair value measurements. However, for some entities, the
application of this Statement will change current practice.
Management has not evaluated the impact of this statement.
The effective date for SFAS 157 is effective for years beginning
after November 15, 2007.
FIN No. 48, "Accounting for Uncertainty in Income Taxes - an
interpretation of FASB Statement No. 109 (Issued 6/06)." This
Interpretation clarifies the accounting for uncertainty in income
taxes recognized in an enterprise's financial statements in
accordance with FASB Statement No. 109, Accounting for Income
Taxes. This Interpretation prescribes a recognition and
measurement of a tax position taken or expected to be taken
in a tax return. The enterprise determines whether it is more
likely than not that a tax position will be sustained upon
examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the
position. A tax position that meets the more likely than not
recognition threshold is measured to determine the amount
of benefit to recognize in the financial statements.
-9-
CLANCY SYSTEMS INTERNATIONAL, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2006
(continued)
This Interpretation also provides guidance on derecognition,
classification, interest and penalties, accounting in interim
periods, disclosure, and transition. This Interpretation is
effective for fiscal years beginning after December 15, 2006.
Management does not expect adoption of FIN No. 48 to have a
material impact on our financial statements.
Item. 2
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's Statement Regarding 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 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 maintain its
competitive position in the parking enforcement business by continuing
to offer competitive products and services, (iii) the ability of the
Company to reduce costs and thereby maintain adequate profit margins.
At December 31, 2006, the Company had consolidated working capital of
$945,406 derived primarily from contract sales and contract service. 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, 2007. The company
settles funds for permit collections after the end of each month.
Occasionally this overlaps into a next quarter. This is reflected in
an accounts payable amount of $418,673 and an increase in revenues
by approximately the same amount. The timing of the payout is
captured as a an accounts payable amount if it falls into a
subsequent quarter by a few days.
COMPARISON OF RESULTS FOR THE THREE MONTHS ENDED December 31, 2005
AND 2006
REVENUES. From the quarter ended December 31, 2005 to the quarter
ended December 31, 2006 revenues increased by $194,295 or 22.5%
from $862,244 to $1,056,539. The increase in revenues is due
to the addition of new customers and products during the quarter ended
December 31, 2006. Clancy's Remit-online.com service has processed
54,198 transactions totaling $2,238,410 for the quarter ended December
31, 2006. Revenues are generated based on a per transaction fee less
bank processing costs. Parking ticket collections under revenues have
more than doubled compared to the same period last year due to an
increase in transactions resulting in an increase in transaction fees
booked through Remit-online services.
-10-
The gross amount of cash flowing through Remit-online.com cannot
be presented as revenue based on the SEC accounting guidance.
The Company only presents its net profit from each transaction as
revenue in the statements of operations.
COST OF SERVICES. From the quarter ended December 31, 2005 to
the quarter ended December 31, 2006, cost of services decreased by
$11,420 or 7.0% from $164,198 to $152,778 for the Company. Cost
of services as a percentage of service contract income was 24.2%
for the 2005 quarter and 21.4% for the 2006 quarter.
RESEARCH AND DEVELOPMENT. The Company's parking enforcement systems
research and development costs decreased from $14,650 to $0, or
100%, from the quarter ended December 31, 2005 to 2006. Product development
and improvement is still paramount to the Company, and costs will be
incurred for development of new items.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased
by $75,547 or 15.8% from $479,222 to $554,769 the for quarter ended December
31, 2005 and 2006, respectively. The increase relates primarily to
increased rent, salaries, office supplies and repairs and maintenance
expenses at UTS from opening of new office locations.
NET INCOME. For the quarter ended December 31, 2006, the Company reported
net income of $214,756 compared to $108,571 for the quarter ended December
31, 2005. The primary reason for the increase in net income relates to
an increase in permit processing, online payments, and ticket collections.
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 redesigned the printer so that it weighs less than two pounds.
New battery technology has also allowed the Company to reduce the size
and weight of the printers. During the quarter ended December 31, 2005,
the Company began production of a printer using wireless Bluetooth
technology.
The Company manufactures a printer to interface to Palm handheld
devices. It incorporates a state of the art print mechanism, light
weight battery technology, and flat forms. The Company has also
developed a keyboard cradle for the Palm devices. The Palm keyboard
has a 45 key full alpha/numeric keypad with function keys and
assignable function keys.
Management keeps informed of new developments in components so that
the printer and keypads are up-to-date, fast and suit user requirements.
The Company communicates with vendors on a regular and ongoing basis so
that management is aware of upgraded components, new technologies and
processes that can be used to upgrade its hardware.
The Company has a relationship with an engineer, who, although he works
as an independent contractor, dedicates as much time as the Company
requires to develop and enhance its products. The engineer also
performs research and development for the Company and makes
prototype boards for testing and evaluation.
-11-
The Company's software is developed in-house by four full- time programmers
and by the Company's President, Stanley Wolfson, and is maintained and
updated on a regular basis.
Clancy is a qualified Microsoft Certified Partner. This relationship allows
the Company to receive pre-releases of software products which gives
the Company a leading edge on upgrading programs and embedding new services
into our systems.
The office computer software allows daily ticket, rental and inventory
information to be transferred from the portable data entry units to a
central computer database. The information is compiled and then
processed further according to user requirements.
Through sophisticated communications software developed internally, the
Company is able to update, modify, repair, enhance and change programs
at the client's location via modem and the Internet.
The Company has developed numerous Internet based parking programs which
include payment processing, permit registrations, and pre-paid parking
and parking reservations, special event parking and permitting, and its
Expo1000 Parking Industry Guide.
URBAN TRANSIT SOLUTIONS
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 1999. Collections from parking
lot fees from Cauguas commenced in January 1999.
In September 2005, the Company acquired all outstanding shares of UTS
stock in exchange for shares of the Company's common stock.
Damaris Carasquillo is the operations manager. The UTS Board of Directors
includes Kenneth Stewart, Stanley Wolfson, and Lizabeth Wolfson. UTS
has funded its operations primarily by loans and cash flows. During
fiscal 2005-2006 UTS consolidated all of its loans into one note
payable to the Company. The note is a five year note payable in
monthly installments.
UTS continues to add new clients. For the city of Ponce, UTS will
install 800 meters. For the city of Aqua Buena, UTS will install
500 meters. For the city of Isabela, UTS will install 500 meters.
These installations will be completed by June 2007.
TRENDS AND CONDITIONS
The Company anticipates no major impact as a result of trends of the past
few years. A further discussion appears below. If current trends continue,
the Company's liquidity will continue to improve on a short-term and a
long-term basis.
The Company anticipates that its expenses shall increase as a direct
result of the Sarbanes-Oxley Act of 2002 as it pertains to additional
accounting and auditing procedures for compliance with new corporate
governance mandates. The Company now utilizes three different
accounting firms for preparation of financial statements, reviews
and auditing functions.
-12-
Director and Officer insurance premiums are consistent with the industry
as a result of the public company irregularities of several years ago.
The Company is able to qualify for Directors and Officers insurance when
many companies are no longer able to qualify.
The Company's newest equipment has proven to be a capital intensive program.
The Company has designed its printer board to work and fit in both its
current model case as well as its new case, which will prove to be a cost
savings. While the Company has adequate cash flow to accomplish the upgrades
without incurring debt, it is anticipated that the ongoing upgrades and
tooling for newer products shall continue to require a large capital
commitment. Municipalities are in search of additional revenues and the
installation and implementation of means to efficiently and effectively
collect parking ticket revenues as a viable source of such additional
revenues for many locales.
In addition, the Company supplies all hardware, software, training,
supplies and maintenance for the system, thus eliminating all significant
capital expenditures by the user.
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.
Uncertainties that can impact revenues from the Company's service contract
agreements would be related to dramatic weather changes and municipal
disaster occurrences (i.e. September 11, 2001). As parking ticket issuance
operations are primarily "out-of-doors" tasks, severe weather such as a
major blizzard, hurricane, or rains could impact ticket production for a
limited period in certain locales. While such reductions are temporary,
they can impact revenues as the Company bills most clients on a fee-per-
ticket basis. The meter collections for UTS could be temporarily reduced
during a hurricane or tropical storm. Further, as the Company is contracting
primarily with City government agencies, a deployment of personnel to other
duties during a disaster could temporarily reduce ticket issuance activities.
Internal and external sources of liquidity
The Company anticipates using its working capital to fund ongoing operations,
including general and administrative expenses, 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, 2007.
UTS has funded its operations primarily by cash flows, bank debt, and
advances from the Company. It has notes payable and capital lease
obligations arising from borrowings for working capital and purchases
and installation of meter equipment. With UTS under new management,
the Company anticipates that UTS will be profitable for the year ending
September 30, 2007.
The Company manufactures and markets the Denver Boot for vehicles
as well as for security on other mobile devices including construction
trailers and communications generators. There is a demand
for the Denver Boot for enforcement on private property. Exposure
on the Internet has been favorable for sales of this product.
-13-
The Company has experiences interest in its IDBadgemaker software.
The program is utilized by news services, janitorial companies, social
service agencies, private clubs and others for security and identification
purposes. The program receives "excellent" ratings at download.com.
Remit-on-line.com has grown as a ticket payment site. It is offered to
Clancy ticket system clients and other companies in parking industry
businesses. Remit processes an average of $720,000 per month in
transactions. The Company has observed a continuing increase in
activity monthly. The Company generates revenue from Remit-online.com
based on a per transaction fee.
In addition, outstanding ticket fines of approximately
$2,720,255 for UTS and $738,670 for Clancy, have not been recognized
as revenue at December, 31, 2006 based on SEC accounting guidance.
CRITICAL ACCOUNTING POLICIES
The Company has identified the accounting policies described below as
critical to its business operations and the understanding of the
Company's results of operations. The impact and any associated risks
related to these policies on the Company's business operations is
discussed throughout this section where such policies affect the
Company's reported and expected financial results.
The preparation of financial statements requires the Company to make
estimates and assumptions that affect the reported amount of assets
and liabilities of the Company, revenues and expenses of the Company
during the reporting period and contingent assets and liabilities as
of the date of the Company's financial statements. There can be no
assurance that the actual results will not differ from those estimates.
REVENUE RECOGNITION: Revenue derived from professional service contracts
on equipment and support services is included in income ratably 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 and are included in income ratably over the
expected term of the contract.
Revenue from the issuance of parking citations for the Company's
privatization projects is recognized on a cash basis when received
as collectibility is not reasonably assured.
Revenue derived from professional service contracts on parking meter
and lot fees collections is recognized net of municipalities' fees as
services are provided. Related costs consist mainly of depreciation
and lot rents.
Revenue derived from professional service contracts for permit fulfillment
and remit-online services is recognized based on add-on fees earned for
each transaction.
-14-
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
information posed on these boards. Management can only provide accurate
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.
Item 3. Controls and Procedures
An evaluation was performed under the supervision and with the participation
of the Company's management, including the Chief Executive Officer and Chief
Financial Officer of the effectiveness of the design and operation of the
Company's disclosure controls and procedures within 90 days before the filing
date of this quarterly report.
Based on that evaluation, the Company's management, including the CEO and CFO,
concluded that the Company's disclosure controls and procedures were effective.
There have been no changes in the Company's internal controls or
in other factors that could significantly affect internal controls subject
to their evaluation.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
No changes in legal proceedings occurred during the quarter
ended December 31, 2006.
Item 6. Exhibits
(a) Exhibits
Exhibit 31.1 Section 302 Certification by Chief Executive Officer
Exhibit 31.2 Section 302 Certification by Chief Financial Officer
Exhibit 32.1 Section 906 Certification by Chief Executive Officer
Exhibit 32.2 Section 906 Certification by Chief Financial Officer
Filed herewith.
-16-
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 20, 2007 CLANCY SYSTEMS INTERNATIONAL, INC.
(Registrant)
By: /s/ Stanley J. Wolfson
Stanley J. Wolfson, President
and Chief Executive Officer
-17-