UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 1996.
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD
FROM
_____________________________ TO _________________________________.
Commission File Number: 0-17773
___________________________ATS Money Systems, Inc._______________________
(Exact name of small business issuer as specified in its charter)
____________Nevada________________________13-3442314_______________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
25 Rockwood Place________Englewood, New Jersey________07631______________
(Address of principal executive offices) (Zip Code)
________________________201/894-1700___________________________________
(Issuer's telephone number)
Check whether the issuer (1) filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act
during the past 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.
__X__Yes _____No
State the number of shares outstanding of each of the
issuer's classes of common equity, as of the latest practicable
date:
As of November 11, 1996, - 5,891,911 shares of common stock, $.001 par value.
Transitional Small Business Disclosure Form Yes_____ No __X__
Part I. FINANCIAL INFORMATION
Item I. Financial Statements
<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 DECEMBER 31
ASSETS: 1996 1995
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,109,819 $ 164,548
Trade accounts receivable, less allowance
for doubtful accounts of $74,183 in 1996
and $92,363 in 1995 1,282,415 1,560,626
Inventories 401,082 520,996
Prepaid expenses and other current assets 456,405 172,221
Total current assets 3,249,721 2,418,391
PROPERTY - At Costs:
Office furniture 90,561 52,912
Office machinery and equipment 139,408 100,520
Subtotal 229,969 153,432
Less Accumulated depreciation 93,233 68,796
Property - net 136,736 84,636
OTHER ASSETS:
Software costs, less accumulated amortization
of $513,778 in 1996 and $361,641 in 1995 765,156 631,568
Deposits 50,676 65,073
Total other assets 815,832 696,641
_________ _________
TOTAL $ 4,202,289 $ 3,199,668
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 97,748 $ 155,808
Accrued expenses 694,502 418,058
Deferred revenue 700,984 247,602
Other liabilities 52,997 115,636
___________ __________
Total current liabilities 1,546,231 937,104
LONG-TERM-Deferred Credit, less amortization of
$60,598 in 1996 and $39,211 in 1995 224,570 245,956
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock - $.001 par value, 25,000,000
shares authorized, 5,876,486 shares issued
at September 30, 1996 and 5,835,794 shares
issued at December 31, 1995 5,876 5,836
Additional paid-in capital 2,370,075 2,319,920
Retained earnings 55,637 ( 309,048)
Treasury stock - 100,000 shares at par value ( 100) ( 100)
___________ ___________
Total stockholders' equity 2,431,488 2,016,608
___________ ___________
TOTAL $ 4,202,289 $ 3,199,668
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
SEPTEMBER 30 SEPTEMBER 30
1996 1995
<S> <C> <C>
REVENUE:
Equipment and systems sales $ 1,177,971 $ 1,572,095
Equipment maintenance and service revenue 561,392 599,998
Total revenue 1,739,363 2,172,093
COST AND EXPENSES:
Cost of goods sold and service expense:
Equipment and systems 579,820 689,686
Equipment maintenance and service 227,211 252,742
Selling, general and administrative expenses 921,174 1,353,393
Total costs and expenses 1,728,205 2,295,821
INCOME(LOSS)FROM OPERATIONS 11,158 ( 123,728)
INTEREST INCOME 13,363 5,369
INCOME(LOSS)BEFORE INCOME TAXES 24,521 ( 118,359)
INCOME TAXES 11,000 ( 17,545)
NET INCOME (LOSS) $ 13,521 $ ( 100,814)
EARNING PER COMMON SHARE:
Primary and fully diluted $.00 ( $.02)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 5,925,972 5,866,347
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
SEPTEMBER 30 SEPTEMBER 30
1996 1995
<S> <C> <C>
REVENUE:
Equipment and systems sales $ 4,222,008 $ 4,316,570
Equipment maintenance and service revenue 1,770,305 1,750,944
Total revenue 5,992,313 6,067,514
COSTS AND EXPENSES:
Cost of goods sold and service expense:
Equipment and systems 1,853,710 1,942,118
Equipment maintenance and service 720,047 743,011
Selling, general and administrative expenses 2,869,106 3,129,377
Total costs and expenses 5,442,863 5,814,506
INCOME FROM OPERATIONS 549,450 253,008
INTEREST INCOME 33,235 21,303
INCOME BEFORE INCOME TAXES 582,685 274,311
INCOME TAXES 218,000 78,000
NET INCOME $ 364,685 $ 196,311
EARNINGS PER COMMON SHARE:
Primary and fully diluted $.06 $.03
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 5,927,942 5,848,233
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995
(UNAUDITED)
SEPTEMBER 30 SEPTEMBER 30
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 364,685 $ 196,311
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 155,188 153,858
Compensation expense recorded for common
stock issued under stock option plan* 50,000 -
Changes in current assets and liabilities:
Trade accounts receivable - net 278,211 ( 441,467)
Inventories 119,914 ( 111,118)
Prepaid service contract costs - ( 172,789)
Prepaid expenses and other assets ( 284,184) ( 128,769)
Accounts payable - trade ( 58,060) ( 40,937)
Accrued expenses 276,444 265,668
Deferred revenue 453,382 290,571
Deposits to suppliers 14,397 0
Other liabilities ( 62,639) 157,566
Net cash provided by operating activities 1,307,338 168,894
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalization of software development costs ( 285,724) ( 243,040)
Property additions ( 76,538) ( 25,379)
Net cash used in investing activities ( 362,262) ( 268,419)
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of stock options: 195 2,153
Net cash used provided by financing
activities 195 2,153
NET INCREASE IN CASH AND
CASH EQUIVALENTS 945,271 ( 97,372)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 164,548 527,369
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,109,819 $ 429,997
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Income Taxes $ 328,234 $ 124,507
*Non cash transactions - common stock
issued under stock option plan $ 50,000 $ -
See notes to consolidated financial statements.
</TABLE>
ATS MONEY SYSTEMS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
September 30, 1996
Note 1 - Unaudited Information:
The accompanying unaudited consolidated financial
statements have been prepared in accordance with
the instructions to Form 10-QSB and Item 310(b) of
Regulation SB. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, the accompanying unaudited financial
statements reflect all adjustments (which comprise only normal
recurring accruals) necessary to present fairly the Company's
consolidated financial position as of September 30, 1996, and
the results of its operations for the three month and nine month
periods ended September 30, 1996 and 1995 and cash flows for the
nine month periods ended September 30, 1996 and 1995. Operating
results for the three month and nine month periods ended
September 30, 1996 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 31,
1996. Information included in the consolidated balance sheet as
of December 31, 1995 has been derived from the Company's audited
financial statements in its Annual Report on Form 10-KSB for the
year ended December 31, 1995, to which reference is made.
Certain reclassifications were made to the December 31, 1995 and
September 30, 1995 amounts to conform to current period
presentations.
Note 2 - Inventories
Inventories are stated at the lower of cost or
market. Cost is determined by the first-in, first-out method
for machine parts and specific identification for machines held
for sale.
Note 3 - Capitalized Software Costs
The Company capitalizes computer software development
costs in accordance with the provisions of Statement of
Financial Accounting Standards No. 86, "Accounting for the Costs
of Computer Software to be Sold, Leased or Otherwise Marketed".
Costs incurred to establish the technological feasibility of
computer software are expensed as incurred. Costs incurred for
product enhancements, subsequent to establishing technological
feasibility, are capitalized and stated at the lower of cost or
net realizable value. Capitalized costs are amortized using the
straight-line method over five years, which approximates the
estimated remaining useful life of the product. Amortization of
computer software costs amounted to $152,157 and $124,254 for
the nine month periods ended September 30, 1996 and 1995,
respectively, and $54,869 and $41,668 for the three month
periods ended September 30, 1996 and 1995, respectively.
Note 4 - Revenue Recognition
Revenue from equipment and systems sales is
recognized upon shipment to the buyer and satisfaction of
related obligations by the Company. Revenue from software
licensing is recognized on delivery of the software if
collectibility is probable and any remaining insignificant
obligations of the Company are accounted for by deferring a pro
rata portion of revenue and recognizing it either ratably as the
obligations are fulfilled or on completion of performance or by
recording a current year expense for the remaining costs
associated with completing the project.
Note 5 - Equipment Maintenance and Service Revenue
Equipment maintenance and service revenue is
recognized as earned over the term of the contract, which is
generally a maximum of one year in length. Deferred revenue
represents the unearned portion of equipment maintenance and
service fees.
Note 6 - Income Taxes
The Company accounts for income taxes under the
provision of Statement of Financial Accounting Standards No. 109
("SFAS 109"), "Accounting for Income Taxes".
Deferred income taxes reflect the net tax effect of
temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts
used for income tax purposes, and operating loss carryforwards.
The income tax provision for the nine month periods
ended September 30, 1996 and 1995 was $218,000 and $78,000,
respectively. For the three month period ended September 30,
1996 and 1995, the provision was $11,000 and ($17,545),
respectively. Provisions in 1996 related solely to current and
deferred federal and state income tax expenses whereas, in 1995,
they included a change in valuation allowances from utilization
of a net operating loss carryforward.
Note 7 - Stockholders' Equity
Common Stock - The authorized capital stock of the
Company consists of 25,000,000 shares of noncumulative, voting,
common stock, with a par value of $.001 per share.
Stock Option Plans - In 1993, the Company adopted a
common stock incentive option plan (the "Plan"), which, as
amended, authorizes the issuance, within ten years, of options
covering up to 480,000 shares of common stock to certain
employees and other individuals of importance to the Company.
Options granted under the Plan may be either "incentive stock
options" or "non-qualified stock options."
In 1995, the Company adopted the ATS Money Systems,
Inc., 1995 Director Stock Plan pursuant to which the Company's
non-employee directors, upon first being elected to the Board
are granted 10,000 shares of common stock, and thereafter, on
each re-election, are granted options to purchase 5,000 shares
of common stock with an exercise price equal to the then fair
market value of such shares. The non-employee directors were
granted 30,000 shares effective October 31, 1995, which were
issued on January 2, 1996. Another 10,000 shares were granted
and issued on February 27, 1996.
On February 3, 1996, when the fair market value of
the common stock was $1.03125 per share, the Company granted
46,001 incentive stock options at such price ($1.1344 per share
for one employee). During 1996, 692 of the incentive stock
options were exercised at a price of $.28125 per share. At
September 30, 1996, there were 226,301 options outstanding at
prices ranging from $.28125 to $1.375 per share, of which
139,666 were then exercisable.
Note 8 - Commitments and Contingencies
At September 30, 1996, the Company was committed
under noncancelable, operating leases for office space,
automobiles and office equipment, expiring at various dates
through April 2000, requiring minimum rental payments as follows:
<TABLE>
<CAPTION>
Year Ending December 31:
<S> <C>
1996 (balance of year) $ 77,385
1997 290,184
1998 276,964
1999 123,525
2000 32,852
TOTAL $ 800,910
</TABLE>
Rental expense for the nine month periods ended
September 30, 1996 and 1995 was $253,359 and $231,740,
respectively.
For the three month periods ended September 30, 1996
and 1995, the rental expense was $83,395 and $75,873,
respectively.
Note 9 - Use of Estimates
The Company's financial statements include the use of
estimates and assumptions which have been developed by
management based on available facts and information. Actual
results could differ from those estimates.
Note 10 - Earnings Per Common Share
For purposes of calculating earnings per common
share, for the three month and nine month periods ended
September 30, 1996 and 1995, the Company used the
weighted average number of shares of common stock outstanding
during the periods applied to the net income. The exercise of
stock options was assumed in the calculation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Reference is made to Item 6 - "Management's
Discussion and Analysis or Plan of Operation," contained in the
Company's Annual Report on Form 10-KSB for its year ended
December 31, 1995 for a discussion of the Company's financial
condition as of December 31, 1995, including a discussion of the
Company's anticipated liquidity and working capital requirements
during 1996.
COMPARISON OF CONSOLIDATED OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1996 TO THE NINE MONTHS SEPTEMBER 30,1995.
Revenues for the first nine months of 1996 were
$5,992,313, which was a decrease of $75,201 (1.2%) from the
first nine months of 1995. Equipment and system sales declined
$94,562 (2.2%) while maintenance revenue increased $19,361
(1.1%). The Company's subsidiary, Innovative Electronics, Inc.,
("IEI") system sales revenue declined $239,307 which was
partially offset by a $144,745 increase from ATS Parent
Company. IEI's maintenance revenue declined $26,141
while ATS Parent Company maintenance increased $45,502.
Cost of equipment and system sales, as a percentage
of sales, declined from 45.0% in the first nine months of 1995
to 43.9% in the first nine months of 1996 primarily due to ATS
Parent Company sales of more profitable systems. Combined
maintenance costs, as a percentage of maintenance revenue, also
declined from 42.4% in 1995 to 40.7% in 1996, as a result of a
change in third party maintenance vendors.
Selling, general and administrative expenses were
$2,869,106 in the first nine months of 1996 compared to
$3,129,377 in the comparable period of 1995. This was a
decrease of $260,271 or (8.3%). Legal expenses were $80,795 in
1996 compared to $409,411 in 1995. During 1995, the Company
entered into a Settlement Agreement which resolved a potential
proxy contest and legal expenses connected therewith were
$349,007; no comparable legal expenses were incurred in the
first nine months of 1996. All other selling, general and
administrative expenses increased $88,736 and were primarily due
to an increase in professional fees.
Interest income for the first nine months of 1996 was
$33,235 compared to $21,303 in the first nine months of 1995 due
to a larger amount of short term investments.
As a result of the foregoing, the first nine months
of 1996 produced income before taxes of $582,685 compared to
$274,311, an increase of $308,374 (112.4%). The provision for
income taxes for the first nine months of 1996 was $218,000 with
a net profit of $364,685. This was $168,374 (85.8%) greater
than the first nine months of 1995.
COMPARISON OF CONSOLIDATED OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1996, TO THE THREE MONTHS ENDED SEPTEMBER 30, 1995.
Revenues for the three month period ended September
30, 1996, were $1,739,363, a decrease of $432,730 (19.9%) from
the three month period ended September 30, 1995. Equipment and
system sales declined $394,124 (25.1%) primarily due to a
$360,252 fall off in IEI's system sales. The Parent Company also
realized a decline of $33,872. Maintenance revenues of $561,392
for the third quarter of 1996 were $38,606 (6.4%) below the
comparable quarter of 1995. Both companies experienced
declines, Innovative ($33,010) and ATS Parent Company ($5,596).
Cost of equipment and systems, as a percentage of
sales, increased from 43.9% in the three month period ended
September 30, 1995, to 49.2% in the comparable quarter of 1996.
Engineering costs at IEI were 66.9% of the low sales volume
compared to 48.0% of a higher sales volume in the 1995 quarter.
Maintenance costs of ATS Parent Company fell from 47.7% of
revenue in the third quarter of 1995 to 44.5% of revenue in the
third quarter of 1996. This was primarily due to lower costs
from a new third party maintenance vendor.
Selling, general and administrative expenses for the
three month period ended September 30, 1996 were $921,174,
compared to $1,353,393 in the 1995 quarter. During 1995, the
Company entered into a Settlement Agreement which resolved a
potential proxy contest Legal expenses connected therewith
were $349,007. There were no comparable expenses in 1996.
Interest income was $13,363 for the three months
ended September 30, 1996, compared to $5,369 for the third
quarter of 1995. This was due to a larger amount of short term
investments.
The provision for income taxes in the current quarter
was $11,000 compared to a $17,545 tax benefit in the three month
period of 1995.
As a result of the foregoing, the net income for the
three month period ended September 30, 1996 was $13,521 compared
to a loss of $100,814 in the three month period ended September
30, 1995.
Financial Condition
At September 30, 1996, cash and cash equivalents
amounted to approximately $1,110,000 and, in addition, the
Company did not have any outstanding borrowings.
In April 1996, First Union National Bank renewed a
$750,000 discretionary line of credit for the Company's
short-term needs, at an interest rate equal to such bank's base
rate plus 1/2%. All advances under this line of credit are
required to be secured by a lien on substantially all of the
Company's assets. The Company has not drawn against this line
of credit.
Other
The Company is considering expanding its operations
and has been negotiating a possible acquisition for shares of
the Company's common stock. As of the date of this filing,
there can be no assurance that an agreement will be reached.
PART II - OTHER INFORMATION
Item 5. Other Information.
On October 25, 1996, Michael M. Smith submitted his
resignation as a director of the Company to the Company's Board
of Directors, which resignation was accepted on such date.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
11. Statement re: computation of per share earnings - not
required since such computation can be earlier determined from
the material contained in this report on Form 10-QSB.
27. Financial Data Schedule.
(b) No reports on Form 8-K were filed during the
quarter for which this report was filed.
SIGNATURES
In accordance with the requirements of the Exchange
Act, the registrant caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ATS Money Systems, Inc.
(Registrant)
__________November 11, 1996______ ______________________________
(Date) Gerard F. Murphy
Chief Executive Officer
President
__________November 11, 1996______ ______________________________
(Date) Joseph M. Burke
Vice President - Finance
(Principal Accounting and
Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet as of September, 30, 1996 and the Consolidated
Statement of Operations for the nine months ended September 30, 1996 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 1,109,819
<SECURITIES> 0
<RECEIVABLES> 1,282,415
<ALLOWANCES> 74,183
<INVENTORY> 401,082
<CURRENT-ASSETS> 3,252,721
<PP&E> 229,969
<DEPRECIATION> 93,233
<TOTAL-ASSETS> 4,205,289
<CURRENT-LIABILITIES> 1,546,231
<BONDS> 0
<COMMON> 5,876
0
0
<OTHER-SE> 2,428,612
<TOTAL-LIABILITY-AND-EQUITY> 4,205,289
<SALES> 4,222,008
<TOTAL-REVENUES> 5,992,313
<CGS> 1,853,710
<TOTAL-COSTS> 2,573,757
<OTHER-EXPENSES> 2,887,286
<LOSS-PROVISION> 18,180
<INTEREST-EXPENSE> 33,235
<INCOME-PRETAX> 582,685
<INCOME-TAX> 218,000
<INCOME-CONTINUING> 364,685
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 364,685
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
