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 JUNE 30, 2000
[ ] 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
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ATS MONEY SYSTEMS, INC.
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(Exact name of small business issuer as specified in its charter)
NEVADA 13-3442314
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
25 ROCKWOOD PLACE ENGLEWOOD, NEW JERSEY 07631
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(Address of principal executive offices) (Zip Code)
(201) 894-1700
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 of 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 AUGUST 4, 2000, - 5,642,895 shares of common stock, $.001 par value.
Transitional Small Business Disclosure Form Yes [ ] No [X]
1
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<CAPTION>
Part I. FINANCIAL INFORMATION
Item I. Financial Statements
ATS MONEY SYSTEMS, INC.
CONSOLIDATED BALANCE SHEETS
June 30 December 31
2000 1999
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS:
CURRENT ASSETS:
Cash and cash equivalents 1,707,530 $ 1,768,847
Trade accounts receivable, less allowance
for doubtful accounts of $173,269 in
2000 and in 1999 2,218,805 2,707,326
Inventories 1,158,389 719,704
Prepaid expenses and other current assets 226,622 90,921
Deferred income taxes 118,511 103,697
----------- -----------
Total current assets 5,429,857 5,390,495
----------- -----------
PROPERTY - At cost:
Office furniture 72,948 69,633
Office machinery and equipment 343,736 309,129
----------- -----------
Subtotal 416,684 378,762
Less accumulated depreciation 258,463 222,512
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Property - net 158,221 156,250
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OTHER ASSETS:
Software costs, less accumulated amortization of
$1,706,368 in 2000 and $1,380,672 in 1999 1,790,288 1,796,485
Deposits and other long-term assets 58,018 98,018
----------- -----------
Total other assets 1,848,306 1,894,503
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TOTAL $ 7,436,384 $ 7,441,248
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 843,152 $ 1,550,496
Deferred revenue 1,394,557 542,576
Other liabilities 90,732 255,167
----------- -----------
Total current liabilities 2,328,441 2,348,239
----------- -----------
LONG-TERM:
Deferred credit, less accumulated amortization of
$167,521 in 2000 and $153,265 in 1999 117,646 131,902
Deferred income taxes 258,258 256,592
----------- -----------
Total long-term liabilities 375,904 388,494
----------- -----------
COMMITMENTS and CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, non-cumulative, voting - $.001 par value,
25,000,000 shares authorized, 6,013,395 and 5,942,547
shares issued at June 30, 2000 and December 31,
1999, respectively 6,013 5,943
Additional paid-in capital 2,160,448 2,135,774
Accumulated earnings 2,565,934 2,563,142
Treasury stock - 355,500 shares, at par value
at June 30, 2000 and 343,500 December 31, 1999 (356) (344)
----------- -----------
Total stockholders' equity 4,732,039 4,704,515
----------- -----------
TOTAL $ 7,436,384 $ 7,441,248
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</TABLE>
See notes to consolidated financial statements.
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<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
June 30 June 30
2000 1999
----------- -----------
REVENUE:
<S> <C> <C>
Equipment and systems sales $1,651,277 $3,426,868
Equipment maintenance and service revenue 751,066 817,608
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Total revenue 2,402,343 4,244,476
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COST AND EXPENSES:
Cost of goods sold and service expense:
Equipment and systems 818,167 1,636,824
Equipment maintenance and service 233,320 327,013
Selling, general and administrative expenses 1,338,989 1,324,696
---------- ----------
Total costs and expenses 2,390,476 3,288,533
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INCOME FROM OPERATIONS 11,867 955,943
NET INTEREST INCOME 24,972 8,027
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INCOME BEFORE INCOME TAX EXPENSE 36,839 963,970
INCOME TAX EXPENSE 12,317 403,000
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NET INCOME $ 24,522 $ 560,970
========== ==========
EARNINGS PER COMMON SHARE:
Basic and diluted $ 0.00 $ 0.10
========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 5,649,438 5,701,487
========== ==========
</TABLE>
See notes to consolidated financial statements.
3
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<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
June 30 June 30
2000 1999
----------- -----------
REVENUE:
<S> <C> <C>
Equipment and systems sales $ 4,079,234 $ 6,118,776
Equipment maintenance and service revenue 1,387,089 1,416,343
----------- -----------
Total revenue 5,466,323 7,535,119
----------- -----------
COST AND EXPENSES:
Cost of goods sold and service expense:
Equipment and systems 2,251,636 2,916,713
Equipment maintenance and service 496,669 587,925
Selling, general and administrative expenses 2,729,033 2,680,713
----------- -----------
Total costs and expenses 5,477,338 6,185,351
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(LOSS) INCOME FROM OPERATIONS (11,015) 1,349,768
NET INTEREST INCOME 41,461 19,319
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INCOME BEFORE INCOME TAX EXPENSE 30,446 1,369,087
INCOME TAX EXPENSE 27,654 563,000
----------- -----------
NET INCOME $ 2,792 $ 806,087
=========== ===========
EARNINGS PER COMMON SHARE:
Basic and diluted $ 0.00 $ 0.14
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 5,633,518 5,711,350
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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<TABLE>
<CAPTION>
ATS MONEY SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999
(UNAUDITED)
June 30 June 30
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 2,792 $ 806,087
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization 347,391 300,100
Changes in current assets and liabilities:
Trade accounts receivable - net 488,521 1,161,904
Inventories (438,685) (165,745)
Prepaid expenses and other current assets (135,701) (34,741)
Accounts payable and accrued expenses (707,344) (1,041,585)
Deferred revenue 851,981 915,373
Other liabilities (164,435) 125,905
Deferred income taxes (14,814) (37,280)
Deposits and other long-term assets 40,000 20,230
Deferred income taxes 1,666 62,144
----------- -----------
Net cash provided by operating activities 271,372 2,112,392
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capitalization of software development costs (319,499) (331,276)
Additions to property (37,922) (60,997)
----------- -----------
Net cash used in investing activities (357,421) (392,273)
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CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of Common Stock 39,311 --
Repurchase of Company Common Stock (14,579) (32,208)
----------- -----------
Net cash provided by (used in) financing
activities 24,732 (32,208)
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NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (61,317) 1,687,911
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,768,847 286,368
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,707,530 $ 1,974,279
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ 603,947 $ 259,719
=========== ===========
Interest $ 1,875 $ 2,129
=========== ===========
</TABLE>
See notes to consolidated financial statements.
5
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ATS MONEY SYSTEMS, INC.
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 2000
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
June 30, 2000, and the results of its operations for the three and six month
periods ended June 30, 2000 and 1999 and its cash flows for the six month
periods ended June 30, 2000 and 1999. Information included in the consolidated
balance sheet as of December 31, 1999 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, 1999, to which reference is made. Operating results
for the three and six month periods ended June 30, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000.
Certain prior year amounts have been reclassified in order to conform with the
2000 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. 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 $325,696 and $287,923 for the six month periods ended June 30, 2000
and 1999, respectively, and $170,149 and $144,891 for the three month periods
ended June 30, 2000 and 1999.
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NOTE 4 - REVENUE RECOGNITION
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, 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.
In December 1999, the Securities and Exchange Commission issued Staff Accounting
Bulletin No. 101 - Revenue Recognition in Financial Statements. The Staff
Accounting Bulletin summarizes certain of the staff's views in applying
generally accepted accounting principles to revenue recognition in financial
statements. The staff is providing this guidance, due, in part, to the large
number of revenue recognition issues that registrants encounter. Implementation
of Staff Accounting Bulletin No. 101 must occur no later than the fourth fiscal
quarter of fiscal years beginning after December 15, 1999. The Company has not
yet evaluated the impact of the implementation of Staff Accounting Bulletin No.
101. As this Staff Accounting Bulletin is not intended to change current
guidance in the accounting literature, management of the Company believes that
the implementation of such will not have an impact on its financial statements.
However, implementation may require restatement of the Company's 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 - COMMITMENTS AND CONTINGENCIES
At June 30, 2000, the Company was committed under noncancelable, operating
leases for office space, automobiles and office equipment, expiring at various
dates through June 2004, requiring minimum rental payments as follows:
YEAR ENDING DECEMBER 31:
2000 $ 164,715 (Balance of Year)
2001 316,319
2002 303,940
2003 303,940
2004 60,224
----------
$1,149,138
==========
7
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NOTE 7 - EARNINGS PER COMMON SHARE
Basic earnings per common share is computed by dividing income available to
common stockholders by the weighted average number of common shares outstanding
during the period. The computation of diluted earnings per share is similar to
the computation of basic earnings per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the dilutive potential common shares had been issued. For the
three and six month periods ended June 30, 2000 and 1999, the dilutive effect on
earnings per common share was insignificant.
8
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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, 1999, for a discussion of the Company's financial condition
as of December 31, 1999, including a discussion of the Company's anticipated
liquidity and working capital requirements during 2000.
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 year ended December 31, 1999, 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.
9
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COMPARISON OF CONSOLIDATED OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2000
(THE "2000 QUARTER") TO THE THREE MONTHS ENDED JUNE 30, 1999 (THE "1999
QUARTER").
Total revenues for the 2000 Quarter were $2,402,343, a decrease of $1,842,133
(43.4%) from the 1999 Quarter. Equipment and systems sales decreased by
$1,775,591 (51.8%) to $1,651,277 for the 2000 Quarter, due primarily to
significant orders received in the 1999 Quarter which were not repeated in the
2000 Quarter. Maintenance and service revenue decreased $66,542 (8.1%) from
$817,608 in the 1999 Quarter to $751,066 in the 2000 Quarter, primarily due to a
change in the type of service provided to a major customer.
Cost of equipment and systems sales increased from 47.8% of sales in the 1999
Quarter to 49.5% of sales in the 2000 Quarter due to an unfavorable mix of
product. Cost of maintenance and service decreased from 40.0% in the 1999
Quarter to 31.1% due to less labor and lower costs from a third party vendor.
Selling, general and administrative expenses of $1,338,989 in the 2000 Quarter
were $14,293 (1.1%) higher than in the 1999 Quarter. Higher salaries and
additional staff in the 2000 Quarter were offset, in part, by a decrease in
commissions resulting from a decrease in sales.
Interest income of $24,972 in the 2000 Quarter was $16,945 (211.1%) more than in
the 1999 Quarter due to an increase in funds available for investment during the
2000 Quarter, as a result of prepayments of certain contracts, and higher
interest rates on investments.
Income tax expense for the 1999 Quarter was $403,000 compared to $12,317 in the
2000 Quarter. This decrease of $390,683 (96.9%) was due to the comparable
decrease in income from operations.
As a result of the foregoing, net income decreased by $536,488 (95.6%) to
$24,522 in the 2000 Quarter from $560,970 in the 1999 Quarter.
10
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COMPARISON OF CONSOLIDATED OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000
(THE "2000 PERIOD") TO THE SIX MONTHS ENDED JUNE 30, 1999 (THE "1999 PERIOD").
Total revenues for the 2000 Period were $5,466,323, a decrease of $2,068,796
(27.5%) from the 1999 Period. Equipment and system sales decreased by $2,039,542
(33.3%) to $4,079,234,in the 2000 Period, due primarily to significant orders
received in the 1999 Period which were not repeated in the 2000 Period.
Maintenance and service revenue decreased $29,254 (2.1%) from $1,416,343 in the
1999 Period to $1,387,089 in the 2000 Period, primarily due to a change in the
maintenance provided to a major customer.
Due to an unfavorable product mix, cost of equipment and system sales increased
to 55.2% in the 2000 Period compared to 47.7% in the 1999 Period. Cost of
maintenance and service decreased from 41.5% in the 1999 Period to 35.8% in the
2000 Period, primarily due to lower costs from third party vendors and reduced
labor.
Selling, general and administrative expenses of $2,729,033 in the 2000 Period
were $48,320 (1.8%) higher than in the 1999 Period. Higher salaries and
additional staff in the 2000 Period were offset, in part, by a decrease in
commissions resulting from a decrease in sales.
Interest income of $41,461 in the 2000 Period was $22,142 (114.6%) more than in
the 1999 Period due to an increase in funds available for investment in the 2000
Period, as a result of prepayments of certain contracts, and higher interest
rates on investments.
Income tax expense for the 2000 Period was $27,654 compared to $563,000 in the
1999 Period. This decrease was due to the comparable decrease in income from
operations.
As a result of the foregoing, net income decreased by $803,295 (99.7%) to $2,792
in the 2000 Period from $806,087 in the 1999 Period.
11
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FINANCIAL CONDITION:
-------------------
At June 30, 2000, the Company had working capital of $3,101,416 (an increase of
$59,160 from $3,042,256 at December 31, 1999) and cash and cash equivalents
(including short term investments) of $1,707,530 (as compared to $1,768,847 at
December 31, 1999).
During the first six months of 2000, operating activities provided $271,372 of
net cash, primarily from payments of maintenance contracts and collections of
receivables. Investing activities used $357,421 of net cash primarily for
software development.
The Company has a $750,000 discretionary line of credit for the Company's
short-term needs, at an interest rate equal to the bank's prime 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. Also, the Company has a standby term
line of credit for $150,000 (solely for the purchase of equipment) at an
interest rate equal to the bank's prime rate plus 1%. The Company has not
utilized the discretionary or standby lines of credit since February 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.
In 1998, the Company commenced a program to repurchase up to 500,000 shares of
its common stock from time to time in the over-the-counter market. The Company
is continuing such program during 2000 and, through August 4, 2000, the Company
purchased 270,500 shares of its common stock for an aggregate of $283,919.
The Company leases its facilities. As of June 30, 2000, the Company had no
material commitments for capital expenditures.
12
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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.
13
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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)
August 11, 2000 /s/ Gerard F. Murphy
--------------------------------- -------------------------------------
August 11, 2000 Gerard F. Murphy
(Date) Chief Executive Officer
President
(Principal Executive Officer)
August 11, 2000 /s/ Joseph M. Burke
--------------------------------- -------------------------------------
August 11, 2000 Joseph M. Burke
(Date) Vice President - Finance
(Principal Accounting and
Financial Officer)
14
