UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997.
( ) 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 May 1, 1997, - 5,791,911 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
MARCH 31 DECEMBER 31
1997 1996
(UNAUDITED)
ASSETS:
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 2,496,055 $ 308,138
Trade accounts receivable, less allowance for
doubtful accounts of $74,183 in 1997 and 1996 940,512 1,264,521
Inventories 646,747 567,420
Prepaid expenses and other current assets 80,533 219,922
Total current assets 4,163,847 2,360,001
PROPERTY - At cost:
Office furniture 94,512 91,011
Office machinery and equipment 154,134 146,021
Subtotal 248,646 237,032
Less Accumulated depreciation 112,520 102,432
Property - net 136,126 134,600
OTHER ASSETS:
Software costs, less accumulated amortization
of $580,749 in 1997 and $511,790 in 1996 1,046,124 908,586
Deposits 76,176 50,677
_________ _________
Total other assets 1,122,300 959,263
_________ _________
TOTAL $ 5,422,273 $ 3,453,864
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 104,805 $ 148,921
Accrued expenses 657,651 210,160
Deferred revenue 1,715,323 322,125
Deferred income taxes 4,732 4,732
Other liabilities 107,624 161,963
___________ __________
Total current liabilities 2,590,135 847,901
LONG-TERM-Deferred Credit, less amortization of
$74,856 in 1997 and $67,727 in 1996 210,311 217,440
STOCKHOLDERS' EQUITY:
Common stock - $.001 par value, 25,000,000
shares authorized, 5,891,911 shares issued
at March 31, 1997 and December 31, 1996 5,892 5,892
Additional paid-in capital 2,374,397 2,374,397
Accumulated earnings 241,638 8,334
Treasury stock - 100,000 shares at par value ( 100) ( 100)
__________ __________
Total stockholders' equity 2,621,827 2,388,523
___________ ___________
TOTAL $ 5,422,273 $ 3,453,864
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
MARCH 31 MARCH 31
1997 1996
<S> <C> <C>
REVENUE:
Equipment and systems sales $ 1,829,942 $ 1,526,515
Equipment maintenance and service revenue 573,649 644,618
__________ __________
Total revenue 2,403,591 2,171,133
COST AND EXPENSES:
Cost of goods sold and service expense:
Equipment and systems 751,721 635,820
Equipment maintenance and service 274,583 257,963
Selling, general and administrative expenses 1,002,245 962,310
__________ __________
Total costs and expenses 2,028,549 1,856,093
__________ __________
INCOME FROM OPERATIONS 375,042 315,040
INTEREST INCOME 14,265 3,684
__________ __________
INCOME BEFORE INCOME TAX EXPENSE 389,307 318,724
INCOME TAX EXPENSE 156,000 121,000
__________ __________
NET INCOME $ 233,307 $ 197,724
========== ==========
EARNING PER COMMON SHARE:
Primary and fully diluted $.04 $.03
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 5,970,487 5,883,836
=========== ==========
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTH PERIODS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED)
MARCH 31 MARCH 31
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 233,307 $ 197,724
Adjustments to reconcile net income to cash
provided by (used in) operating activities:
Depreciation and amortization 71,918 47,024
Changes in current assets and liabilities:
Compensation expense recorded for common stock
issued under Director Stock Plan - 50,000
Trade accounts receivable - net 324,009 ( 894,894)
Inventories ( 79,327) ( 5,766)
Prepaid expenses and other assets 113,890 ( 252,406)
Accounts payable - trade ( 44,116) ( 20,770)
Accrued expenses 447,491 416,898
Deferred revenue 1,393,198 1,306,378
Deposits ( 65,000) 198
Other liabilities 10,658 18,646
__________ __________
Net cash provided by operating activities 2,406,028 863,032
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalization of software development costs ( 206,497) ( 74,757)
Additions to property ( 11,614) ( 33,756)
___________ ___________
Net cash used in investing activities ( 218,111) ( 108,513)
----------- -----------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 2,187,917 754,519
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 308,138 164,548
__________ __________
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,496,055 $ 919,067
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ - $ -
========== ==========
Income Taxes $ 33,410 $ 90,000
========== ==========
See notes to consolidated financial statements.
</TABLE>
ATS MONEY SYSTEMS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
March 31, 1997
Note 1 - Unaudited Information:
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-QSB
and Item 310(b) of Regulation S-B. 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 March 31, 1997, and the results
of its operations and cash flows for the three month periods ended
March 31, 1997 and 1996. Information included in the consolidated
balance sheet as of December 31, 1996 has been derived from the
Company's audited financial statements contained in its Annual Report
on Form 10-KSB for the year ended December 31, 1996, to which reference
is made. Operating results for the three month period ended March 31,
1997 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1997.
Certain prior year amounts have been reclassified in order to
conform with the 1997 financial statement presentation.
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
$68,959 and $47,255 for the three month periods ended March 31, 1997
and 1996, 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 - 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.
Common Stock Incentive Plan - In 1993, the Company adopted a common stock
incentive 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.
The Plan is intended to provide incentive to continued employment of
certain employees and other individuals by enabling them to acquire a
proprietary interest in the Company. Options granted under the Plan may
be either "incentive stock options" or "non-qualified stock options."
Incentive stock options, granted only to certain employees of the Company,
expire within ten years (five years for a 10% beneficial owner of the
Company's securities) from the date granted and are exercisable from time
to time, after the first year, in accordance with the terms of such
options. The exercise price of an incentive stock option must be at
least equal to the fair market value of the common stock on the date
of grant (110% for a 10% beneficial owner of the Company's securities).
Nonqualified stock options can be granted to certain employees of the
Company and advisors and consultants to the Company. Such stock options
are exercisable on or after the date of grant and the exercise price is
not limited and may be below fair market value.
On September 14, 1993, when the fair market value of the common stock
was $.28125 per share, the Company granted 159,685 incentive stock
options at such price ($.31 per share for one employee) and 65,315
nonqualified stock options (15,315 granted at $.28125 per share and
50,000 granted at $.001 per share). During 1993, 50,000 nonqualified
options were exercised at a price of $.001 per share.
During 1994, the Company granted 36,000 incentive stock options (21,000
granted at $1.25 per share and 15,000 granted at $1.375 per share).
Also during 1994, 4,171 options were exercised at a price of $.28125
per share.
The Company did not grant any options in 1995. During 1995,
15,653 options were exercised at a price of $.28125 per share.
On February 2, 1996, the Company granted 46,001 incentive stock options
(37,626 granted at $1.03125 per share and 8,375 granted at $1.1344
per share). On June 4, 1996, the Company granted 2,500 incentive stock
options at $1.344 per share. Also during 1996, 16,117 options were
exercised at a price of $.28125 per share.
At December 31, 1996, there were 207,295 options outstanding at prices
ranging from $.28125 to $1.375 per share, of which 165,619 were then
exercisable.
On February 14, 1997, the Company granted 34,000 incentive stock
options at $.71 per share.
As of March 31, 1997, there were 240,375 options outstanding at prices
ranging from $.28125 to $1.375 per share, of which 180,168 were then
exercisable.
Note 7 - Commitments and Contingencies
At March 31, 1997, 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>
1997 (balance of year) $ 228,667
1998 293,908 293,908
1999 132,705
2000 34,184
________
$ 689,464
</TABLE>
Note 8 - Earnings Per Common Share
For purposes of calculating earnings per common share, the Company used
the weighted average number of shares of common stock outstanding during
the year applied to the net income. The exercise of stock options (See
Note 6) was assumed in the calculation. In February 1997, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards ("SFAS 128"), "Earnings per Share", which is effective for
periods ending after December 15, 1997. This statement establishes
standards for computing and presenting earnings per share and applies
to entities with publicly held common stock or potential common stock.
The adoption of SFAS 128 is not expected to have a material effect on
the Company's financial statements.
For the three month's ended March 31, 1996, the weighted average number
of shares outstanding (both primary and fully diluted) were reported
incorrectly, which did not affect the per share earnings.
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 fiscal year ended December 31, 1996 for a discussion of
the Company's financial condition as of December 31, 1996, including a
discussion of the Company's anticipated liquidity and working capital
requirements during 1997.
COMPARISON OF CONSOLIDATED OPERATIONS FOR THE THREE MONTHS ENDED
MARCH 31, 1997 TO THE THREE MONTHS ENDED MARCH 31, 1996.
Total revenues for the first quarter of 1997 were $2,403,591, which was
an increase of $232,458 (10.7%) over the first three month of 1996.
System and equipment sales increased $303,427 (19.9%) to $1,829,942 for
the quarter. This increase was comprised of ATS Money Systems, Inc.
(parent company) with an increase of $263,254 (33.6%) and Innovative
Electronics, Inc., with an increase of $40,173 (5.4%). Maintenance
revenues were $573,649 for the first quarter of 1997. This was a
decrease of $70,969 (11.0%) from the prior year's first quarter and was
primarily due to the loss of an equipment hardware maintenance contract
after the first quarter of 1996.
Cost of equipment and system sales remained fairly constant at 41.7% of
sales in the first three months of 1996 and 41.1% in the current period.
Cost of maintenance increased from 40.0% of revenues in the first quarter
of 1996 to 47.9% in the first three months of 1997 primarily due to a
larger proportion of maintenance revenues attributable to ATS Money
Systems, Inc. The costs attributable to ATS Money Systems, Inc.
maintenance obligations is higher than such costs attributable to
Innovative Electronics, Inc. maintenance obligations.
Selling, general and administrative expenses were $1,002,245 in the
first quarter of 1997 compared to $962,310 in the comparable period of
1996. This is an increase of $39,935 (4.2%) and is comprised of a
$10,575 increase at ATS Money Systems, Inc., and a $29,360 increase
at Innovative Electronics, Inc. Most of the increase comes from
salary and travel expenditures.
Interest income for the first quarter of 1997 was $14,265 compared to
$3,684 in the first quarter of 1996. This increase of $10,581 (287.2%)
was due to greater amounts available for investment, primarily due to
prepayments by customers of their annual maintenance contracts.
As a result of the foregoing, the first three months of 1997 produced
income before taxes of $389,307 compared to $318,724 in the first
quarter of 1996. The provision for income taxes in the current quarter
was $156,000, with an after tax profit of $233,307, compared to a tax
provision of $121,000 and an after tax profit of $197,724 in the
comparable three months of 1996.
Financial Condition
At March 31, 1997, cash and cash equivalents amounted to approximately
$2,496,000 and, in addition, the Company did not have any outstanding
borrowings. During the first three months of the year, many customers
prepay their annual maintenance contracts which increases the Company's
cash and, correspondingly, its deferred revenue liability.
In April 1997, 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.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
11. Computation of Per Share Earnings.
27. Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter for
which this report is 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)
___________May 5. 1997________________ ________________________________
(Date) Gerard F. Murphy
Chief Executive Officer
President
(Principal Executive Officer)
___________May 5. 1997________________ ________________________________
(Date) Joseph M. Burke
Vice President - Finance
(Principal Accounting and
Financial Officer)
<TABLE>
<CAPTION>
EXHIBIT 11 - COMPUTATION OF PRIMARY AND FULLY DILUTED EARNINGS
PER SHARE
Three Months Ended
March 31 March 31
1997 1996
(Unaudited)
<S> <C> <C>
Net Earnings $ 233,307 $ 197,724
Primary earnings per share:
Weighted average number of
common shares outstanding 5,891,911 5,769,589
Add: Shares arising from the assumed
exercise of stock options (as determined
under the Treasury Stock Method)
0 0
Weighted average of common and
equivalent shares
5,891,911 5,769,589
Primary earnings per share $.04 $.03
Fully diluted earnings per share:
Weighted average number of common shares
outstanding (as determined for the Primary
earnings per share calculation above) 5,891,911 5,769,589
Add: Additional shares arising from the assumed
exercise of stock options (as determined
under the Treasury Stock Method) 78,576 114,247
Weighted average of common and equivalent
shares
5,970,487 5,883,836
Fully diluted earnings per share $.04 $.03
</TABLE>
<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 March, 31, 1997 and the Consolidated
Statement of Operations for the three months ended March 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,496,055
<SECURITIES> 0
<RECEIVABLES> 1,014,695
<ALLOWANCES> 74,183
<INVENTORY> 646,747
<CURRENT-ASSETS> 4,163,847
<PP&E> 248,646
<DEPRECIATION> 112,520
<TOTAL-ASSETS> 5,422,273
<CURRENT-LIABILITIES> 2,590,135
<BONDS> 0
<COMMON> 5,892
0
0
<OTHER-SE> 2,615,935
<TOTAL-LIABILITY-AND-EQUITY> 5,422,273
<SALES> 1,829,942
<TOTAL-REVENUES> 2,403,591
<CGS> 751,721
<TOTAL-COSTS> 1,026,304
<OTHER-EXPENSES> 1,002,245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,265
<INCOME-PRETAX> 389,307
<INCOME-TAX> 156,000
<INCOME-CONTINUING> 233,307
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 233,307
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
