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
SEPTEMBER 30,1998.
( ) 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 13, 1998, - 5,690,047 shares of common stock,
$.001 par value.
Transitional Small Business Disclosure Form Yes _____ No __X__
Part I. FINANCIAL INFORMATION
Item I. Financial Statements
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ATS MONEY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30 DECEMBER 31
1998 1997
(UNAUDITED)
ASSETS:
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 272,431 $ 424,168
Trade accounts receivable, less allowance
for doubtful accounts of $102,795 in 1998
and $100,118 in 1997 1,748,995 2,281,677
Inventories 718,047 562,681
Prepaid expenses and other current assets 113,661 83,492
_________ __________
Total current assets 2,853,134 3,352,018
PROPERTY - At cost:
Office furniture 96,659 95,994
Office machinery and equipment 226,816 216,267
_________ ________
Subtotal 323,475 312,261
Less Accumulated depreciation 183,105 148,320
_________ _________
Property - net 140,370 163,941
OTHER ASSETS:
Software costs, less accumulated amortization
of $1,162,530 in 1998 and $788,531 in 1997 1,671,052 1,519,991
Deposits 76,380 52,280
__________ _________
Total other assets 1,747,432 1,572,271
__________ _________
TOTAL $ 4,740,936 $ 5,088,230
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 39,978 $ 664,726
Accrued expenses 288,288 794,519
Deferred revenue 766,125 206,799
Deferred income taxes 43,561 43,561
Other liabilities 3,649 126,804
___________ __________
Total current liabilities 1,141,601 1,836,409
LONG-TERM-Deferred Credit, less amortization of
$117,606 in 1998 and $96,241 in 1997 167,542 188,926
STOCKHOLDERS' EQUITY:
Common stock - $.001 par value, 25,000,000
shares authorized, 5,941,547 shares issued
at September 30, 1998 and 5,922,731 issued
at December 31, 1997 5,941 5,923
Additional paid-in capital 2,243,615 2,383,033
Accumulated earnings 1,182,468 674,039
Treasury stock - 231,500 shares at ( 231) ( 100)
September 30, 1998 and 100,000 shares
at December 31, 1997, at par value ___________ ___________
Total stockholders' equity 3,431,793 3,062,895
___________ __________
TOTAL $ 4,740,936 $ 5,088,230
See notes to consolidated financial statements.
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<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
SEPTEMBER 30 SEPTEMBER 30
1998 1997
<S> <C> <C>
REVENUE:
Equipment and systems sales $ 8,614,203 $ 4,567,328
Equipment maintenance and service revenue 1,958,395 1,849,708
__________ _________
Total revenue 10,572,598 6,417,036
COST AND EXPENSES:
Cost of goods sold and service expense:
Equipment and systems 5,395,511 2,044,040
Equipment maintenance and service 828,621 752,521
Selling, general and administrative expenses 3,542,776 3,149,578
__________ __________
Total costs and expenses 9,766,908 5,946,139
__________ __________
INCOME FROM OPERATIONS 805,690 470,897
INTEREST INCOME 27,739 48,801
__________ __________
INCOME BEFORE INCOME TAXES 833,429 519,698
INCOME TAXES 325,000 208,000
__________ __________
NET INCOME $ 508,429 $ 311,698
EARNINGS PER COMMON SHARE:
Basic and diluted $.09 $.05
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 5,866,615 5,793,911
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
SEPTEMBER 30 SEPTEMBER 30
1998 1997
<S> <C> <C>
REVENUE:
Equipment and systems sales $ 1,779,650 $ 1,266,760
Equipment maintenance and service revenue 665,117 648,667
___________ ___________
Total revenue 2,444,767 1,895,427
COST AND EXPENSES:
Cost of goods sold and service expense:
Equipment and systems 769,665 649,975
Equipment maintenance and service 261,056 266,783
Selling, general and administrative expenses 1,091,101 1,035,477
__________ _________
Total costs and expenses 2,121,822 1,952,235
__________ _________
INCOME (LOSS) FROM OPERATIONS 322,945 ( 56,808)
INTEREST INCOME 5,099 16,318
__________ __________
INCOME (LOSS) BEFORE INCOME TAXES 328,044 (40,490)
INCOME TAXES 128,000 (10,000)
___________ ___________
NET INCOME (LOSS) $ 200,044 $ (30,490)
EARNINGS (LOSS) PER COMMON SHARE:
Basic and diluted $.03 ( $.01)
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 5,812,381 5,885,448
See notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTH PERIODS ENDED SEPTEMBER 30, 1998 AND 1997
(UNAUDITED)
SEPTEMBER 30 SEPTEMBER 30
1998 1997
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 508,429 $ 311,698
Adjustments to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 387,402 267,392
Changes in current assets and liabilities:
Trade accounts receivable - net 532,682 476,856
Inventories ( 155,366) ( 136,559)
Prepaid expenses and other current assets ( 30,169) 116,486
Accounts payable - trade ( 624,748) ( 134,177)
Deposits ( 24,100)
Accrued expenses ( 506,231) 514,403
Deferred revenue 559,326 473,384
Other liabilities ( 123,155) ( 89,818)
___________ _________
Net cash provided by operating activities 524,070 1,799,665
___________ _________
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalization of software development costs ( 525,062) ( 781,693)
Additions to property ( 11,214) ( 73,728)
____________ __________
Net cash used in investing activities ( 536,276) ( 855,421)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repurchase of Company Common Stock ( 145,364) -
Proceeds from the issuance of common stock 5,833 3,375
Net cash (used in) provided by financing ___________ __________
activities ( 139,531) 3,375
NET INCREASE (DECREASE) IN CASH AND ___________ __________
CASH EQUIVALENTS ( 151,737) 947,619
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 424,168 308,138
___________ __________
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 272,431 $ 1,255,757
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 660 $ -
Income Taxes (Refund) $ 569,045 $( 5,790)
See notes to consolidated financial statements.
</TABLE>
ATS MONEY SYSTEMS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
SEPTEMBER 30, 1998
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 September 30,
1998, the results of its operations for the three month and nine
month periods ended September 30, 1998 and 1997 and its cash
flows for the nine month periods ended September 30, 1998 and
1997. Information included in the consolidated balance sheet as
of December 31, 1997 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, 1997, to which reference
is made. Operating results for the three month and nine month
periods ended September 30, 1998 are not necessarily indicative
of the results that may be expected for the year ending
December 31, 1998.
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 products. It is possible
that the estimated economic life of the products and related
carrying values could be reduced in the near term due to
competitive pressures. Amortization of computer software costs
amounted to $373,999 and $257,768 for the nine month periods
ended September 30, 1998 and 1997, respectively, and $132,376
and $87,988 for the three month periods ended September 30, 1998
and 1997, respectively.
Note 4 - Revenue Recognition
Revenue from equipment and system sales is recognized upon
shipment to the buyer and satisfaction of related obligations by
the Company. Revenue from software licensing is recognized on
either delivery of the software if collectibility is probable or
upon completion of the majority of the product, which equates to
reaching a milestone in accordance with the contract agreement,
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. The Company has completed its analysis of the effect
of (SOP) 97-2, "Software Revenue Recognition" and has determined
that this SOP does not have a material effect on the
consolidated financial statements.
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.
Director Stock Plan - In 1995, the Company adopted the 1995
Director Stock Plan pursuant to which, as amended, 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 reelection, are granted non-qualified stock options to
purchase 10,000 shares of common stock of an exercise price
equal to the then fair market value of such shares. In 1995,
the non-employee directors were granted an aggregate of 40,000
shares of common stock under this plan, all of which were issued
during 1996.
<TABLE>
<CAPTION>
A summary of the details of all stock options granted and
outstanding balances are presented below:
Option Options Options Outstanding
Grant Price Exercised Canceled September 30, December 31,
1998 1997
<S> <C> <C> <C> <C> <C>
1993
140,869 .28125 35,941 4,184 - -
30,820 69,924 69,924
18,816 .31 18,816 - 18,816
15,315 .28125 15,315 15,315
1994
21,000 1.25 9,000 - -
12,000 - -
15,000 1.375 15,000 15,000
1996
37,626 1.03125 3,081 - -
4,640 29,905 29,905
8,375 1.1344 8,375 8,375
2,500 1.1344 2,500 - -
1997
34,000 .71 6,000 28,000 28,000
20,000* .8281 20,000 20,000
10,000* .9109 10,000 10,000
1998
19,200 .92 19,200 -
6,000 1.01 6,000 -
30,000* .95 30,000 -
________ _______ ________ _______
Total 85,577 41,405 251,719 215,335
*Non-Employee Directors
</TABLE>
Accounting for Grant of Stock Options - In connection with the
adoption of SFAS 123, "Accounting for Stock-Based Compensation,"
which was effective in 1996, the Company elected to continue to
account for its stock options using the method prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees". Under SFAS 123 earnings per share
would not be affected, although the proforma effect would have
reduced net income by approximately $21,600 for the year ended
December 31, 1997.
Common Stock Warrants - In connection with services to be
rendered by an investment banker, as of April 7, 1997, the
Company granted to the investment banker warrants to purchase
80,000 shares of common stock exercisable at $.75 per share;
agreed to grant and granted to the investment banker on April 8,
1998, warrants to purchase an additional 80,000 shares of common
stock exercisable at $1.25 per share and, unless the agreement
is canceled by the Company before April 8, 1999, agreed to grant
to the investment banker on such date warrants to purchase an
additional 80,000 shares of common stock exercisable at $1.25
per share. All of the warrants will expire on April 7, 2001,
unless exercised prior thereto. Based upon the fair value of
the warrants at the grant date, no expense was recognized in
1997 or the first nine months of 1998.
Repurchase of Common Stock - On May 22, 1998, the Board of
Directors authorized the Company to repurchase up to 500,000
shares of its common stock. As of September 30, 1998, the
Company had repurchased 131,500 shares at prices ranging from
$1.03 per share to $1.15 per share.
Note 7 - Commitments and Contingencies
At September 30, 1998, the Company was committed under
noncancelable, operating leases for office space, automobiles
and office equipment, expiring at various dates through February
28, 2004 requiring minimum rental payments as follows:
<TABLE>
<CAPTION>
Year Ending December 31:
<S> <C>
1998 (Balance of year) $ 80,484
1999 371,750
2000 291,660
2001 251,610
2002 249,612
2003 249,612
2004 41,602
$1,536,330
</TABLE>
Note 8 - Earnings Per Common Share
The Company has adopted Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings per Share", which was
effective for financial statements issued after December 31,
1997. The pronouncement simplifies the calculation of earnings
per share in that a calculation of "basic" earnings per share is
reported in lieu of primary earnings per share. Basic earnings
per share includes only the weighted average number of common
shares outstanding for the periods and does not consider the
dilutive effect of stock options or warrants. The effects of
dilutive stock options and warrants, and the adoption of SFAS
No. 128 did not change earnings per share.
Note 9 - Other
In June 1997, SFAS No. 131, "Disclosure About Segments of an
Enterprise and Related Information" was issued. This Statement
is effective for fiscal years beginning after December 15, 1997.
The Company has determined that this Statement has no effect on
the consolidated financial statements.
In February 1998, SFAS No. 132, "Employer's Disclosures About
Pensions and Other Postretirement Benefits" was issued. This
Statement revises and standardizes pension and other benefit
plan disclosures that are to be included in the employer's
financial statements. SFAS No. 132 is effective for fiscal
years beginning after December 15, 1997. This Statement will
not change the measurement or recognition of these costs.
In June 1998, SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities" was issued. This Statement
is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999. The Company has determined that this
Statement has no effect on the consolidated financial statements
as the Company has not entered into, nor does it have any plans
to enter into derivative instrument contracts.
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, 1997, for a discussion of the Company's financial condition
as of December 31, 1997, including a discussion of the Company's
anticipated liquidity and working capital requirements during
1998.
This Quarterly Report on Form 10-QSB contains, in addition to
historical information, certain forward-looking statements that
involve significant risks and uncertainties. Such
forward-looking statements are based on management's belief as
well as assumptions made by, and information currently available
to, management pursuant to the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995.
Forward-looking statements can generally be identified as such
because the context of the statement may include words such as
the Company "believes," "expects" or words of similar import.
Similarly, statements that describe the Company's future plans,
objectives, estimates or goals are also forward-looking
statements. Such statements address future events and
conditions concerning capital expenditures, earnings, sales,
liquidity and capital resources, and accounting matters. The
Company's actual results could differ materially from those
expressed in or implied by the forward-looking statements
contained herein. Factors that could cause or contribute to
such differences include, but are not limited to, those
discussed in "Financial Condition" below and in Item 1 -
"Description of Business" and elsewhere in the Company's Annual
Report on Form 10-KSB for the fiscal year ended December 31,
1997, as well as factors such as future economic conditions and
economic conditions in the industries in which the Company's
customers compete, a determination by the Company's customers to
prolong their test cycles of the Company's equipment, software
and software support services, a determination by the Company's
customers to modify or change their underlying computer and cash
reporting systems, acceptance by customers of the Company's
products, changes in customer demand, legislative, regulatory
and competitive developments in markets in which the Company
operates and other circumstances affecting anticipated revenues
and costs. The Company undertakes no obligation to release
publicly the result of any revisions to these forward-looking
statements that may be made to reflect events or circumstances
after the date of this Quarterly Report on Form 10-QSB or to
reflect the occurrence of other unanticipated events.
COMPARISON OF CONSOLIDATED OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 (THE "1998 PERIOD") TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1997 (THE "1997 PERIOD").
Total revenues for the 1998 Period were $10,572,598, an increase
of $4,155,562 (64.8%). Equipment and system sales increased
$4,046,875 (88.6%) to $8,614,203 in the 1998 Period. This was
primarily due to a large order from a single retail chain.
Maintenance and service revenues were $1,958,395 for the 1998
Period. This was an increase of $108,687 (5.9%) from the 1997
Period as a result of additional systems under contract during
the 1998 Period.
Cost of equipment and system sales rose from 44.8% of sales in
the 1997 Period to 62.6% of sales in the 1998 Period due to the
significant increase in equipment sales which carry lower
margins than system sales, which include related software. Cost
of maintenance and service increased from 40.7% in the 1997
Period to 42.3% in the 1998 Period primarily due to increased
time spent in support of maintenance.
Selling, general and administrative expenses were $3,542,776 in
the 1998 Period compared to $3,149,578 in the 1997 Period. This
was an increase of $393,198 (12.5%) and was primarily
attributable to increased commissions on increased sales and
greater salary expense.
Interest income for the 1998 Period was $27,739 compared to
$48,801 for the 1997 Period. This decrease of $21,062 (43.2%)
was due to a decrease in available invested cash resulting from
less cash received in advance from maintenance customers and a
slower turnover of receivables as well as our Stock Repurchase
Plan.
Incomes taxes were $325,000 in the 1998 Period compared to
$208,000 in the 1997 Period. This increase of $117,000 (56.3%)
was due to a increase in income from operations.
As a result of the foregoing, net income was $508,429 for the
1998 Period compared to $311,698 for the 1997 Period. This was
an increase of $196,731 (63.1%).
COMPARISON OF CONSOLIDATED OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 1998 (THE "1998 QUARTER") TO THE THREE MONTHS
ENDED SEPTEMBER 30, 1997 (THE "1997 QUARTER").
Total revenues for the 1998 Quarter were $2,444,767 an increase
of $549,340 (29.0%). System and equipment sales increased
$512,890 (40.5%) to $1,779,650 for the 1998 Quarter due to
shipments to two major retailers. Maintenance and service
revenues were $665,117 for the 1998 Quarter. This was an
increase of $36,450 (5.8%) from the 1997 Quarter.
Cost of equipment and system sales fell from 51.3% of sales in
the 1997 Quarter to 43.2% of sales in the 1998 Quarter due to
the increase in system sales (which includes related software)
and which have higher margins than equipment sales. Cost of
maintenance and service decreased from 42.4% in the 1997 Quarter
to 39.2% in the 1998 Quarter primarily due to lower costs from a
third party maintenance provider.
Selling, general and administrative expenses were $1,091,101 in
the 1998 Quarter compared to $1,035,477 in the 1997 Quarter.
This was an increase of $55,624 (5.4%) and was attributable to
increased commissions on increased sales and increased salary
expense.
Interest income for the 1998 Period was $5,099 compared to
$16,318 for the 1997 Quarter. This decrease of $11,219 (68.8%)
was attributable to a decrease in available invested cash
resulting from less cash received from maintenance customers who
previously paid a full year in advance as well as our Stock
Repurchase Plan.
Income taxes were $128,000 in the 1998 Quarter compared to an
income tax benefit of $10,000 in the 1997 Quarter. This
increase of $138,000 was due to income from operations in the
1998 Quarter, while a loss from operations was sustained in the
1997 Quarter.
As a result of the foregoing, net income was $200,044 for the
1998 Quarter compared to a $30,490 net loss for the 1997
Quarter.
Financial Condition:
At September 30, 1998, the Company had working capital of
$1,711,533 (an increase of $195,924 from $1,515,609 at December
31, 1997) and cash and cash equivalents (including short-term
investments) of $272,431 (as compared to $424,168 at December
31, 1997). At September 30, 1998, the Company did not have any
outstanding borrowings.
During the first nine months of 1998, operating activities
provided $524,070 of net cash, primarily from customers who
prepay their annual maintenance contracts. Investing
activities used $536,276 of net cash primarily for software
development and financing activities used $139,531 of net cash
as a result of the net repurchasing of common stock. As at
October 23, 1998, the Company has repurchased 151,500 shares of
stock. The Company plans to repurchase additional stock in
accordance with its repurchase policy.
In April 1998, 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 borrowed $240,000 on January 21, 1998, and repaid
it, in full, on February 3, 1998.
The Company believes that its current working capital, together
with anticipated funds from operations, will be sufficient to
meet the Company's projected operating needs and capital
expenditures for the foreseeable future.
The Company leases its facilities. As of September 30, 1998,
the Company had no material commitments for capital expenditures.
Impact of the Year 2000 Issue
Many computer systems currently record years in a two-digit
format. Such computer systems, if not modified, will be unable
to properly recognize dates beyond the year 1999. This
inability to recognize the year 2000 is commonly referred to as
the "Year 2000 Issue".
The Company has reviewed its internal computer systems and has
determined that such internal systems will not have a Year 2000
issue (i.e., the Company's internal systems are Year 2000
compliant).
Many of the stand-alone products sold by the Company do not
contain a dating mechanism and such systems, therefore, are
deemed to be Year 2000 compliant. The Company's CP-4000 Retail
Cash Office Management System is designed to be Year 2000
compliant. However, several of the older systems sold by the
Company, such as its CP-2000 Deposit/Register Verification
System and CP-3000 Retail Cash Office Management System, which
contain internal dating mechanisms, are not currently Year 2000
compliant. The Company's warranties on these systems do not
require the Company to enhance such systems to resolve the Year
2000 Issue, although the Company believes that certain of its
customers who do not desire to upgrade such systems before the
Year 2000 may request that the Company supply hardware or
software to make such systems Year 2000 compliant.
The Company has identified all significant applications that
will require modification to ensure Year 2000 compliance. Some
of such applications relate to standard computer hardware
supplied to the Company for resale to its customers by third
party manufacturers, and the Company anticipates that such third
party manufacturers will furnish appropriate modifications to
their computer hardware in the normal course to ensure timely
Year 2000 compliance, although there can be no assurance that
such will occur. To the extent that Year 2000 compliance
requires a hardware remedy, external clock and dating mechanisms
to interface with existing computer hardware are commercially
available at the present time at minimal cost and can be
supplied by the Company if requested by its customers.
The Company has not yet prepared enhancements of the software in
its older systems to the extent that Year 2000 compliance
requires a software modification; however, the Company intends
to take such action if it determines that such action will be
requested by its customers. The cost to the Company of such
software enhancements is not anticipated to be material to the
Company's financial position or future results of operations in
any given year, although there can be no assurance that
presently unforeseen computer programming difficulties will not
arise. The Company believes that it will be able to recoup its
software enhancement costs from its customers who request that
their older systems be modified to be Year 2000 compliant.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
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)
___________________________ _________________________________
November 13, 1998 Gerard F. Murphy
(Date) Chief Executive Officer
President
(Principal Executive Officer)
____________________________ ___________________________________
November 13, 1998 Joseph M. Burke
(Date) 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, 1998 AND THE
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 272,431
<SECURITIES> 0
<RECEIVABLES> 1,851,790
<ALLOWANCES> 102,795
<INVENTORY> 718,047
<CURRENT-ASSETS> 2,853,134
<PP&E> 323,475
<DEPRECIATION> 183,105
<TOTAL-ASSETS> 4,740,936
<CURRENT-LIABILITIES> 1,141,601
<BONDS> 0
<COMMON> 5,941
0
0
<OTHER-SE> 3,425,852
<TOTAL-LIABILITY-AND-EQUITY> 4,740,936
<SALES> 8,614,203
<TOTAL-REVENUES> 10,572,598
<CGS> 5,395,511
<TOTAL-COSTS> 6,224,132
<OTHER-EXPENSES> 3,542,776
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,739
<INCOME-PRETAX> 833,429
<INCOME-TAX> 325,000
<INCOME-CONTINUING> 508,429
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 508,429
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
