Research and Development
In 1996, 1997 and 1998, ATS invested $673,802, $1,772,537 and $610,782,
respectively, in research and development costs for the ATS products.
Y2K Compliance
Management believes that all of the ATS products, as well as its
internal systems, are fully "Y2K" compliant. ATS does not believe that Y2K
issues will adversely affect it. Rather, ATS believes that Y2K issues affecting
customers likely will enhance ATS' sales prospects. ATS has sought information
and assurances from its material third-party vendors and suppliers regarding
their Y2K readiness. ATS intends to continuously evaluate its vendor and
supplier relationships and to develop contingency plans to mitigate the negative
effects on ATS from the Y2K problems of its suppliers and vendors.
Employees
The Company employs 47 full time employees. None of the employees is
represented by a union.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The information in this section should be read together with the
consolidated financial statements and notes thereto that are included elsewhere
in this registration statement.
The Company has incurred losses since its inception during which time
it developed its two software applications and developed a level of experience
and resources which management believes should enable ATS to grow. The Company
anticipates earnings in 1999 resulting from installations at Fortune 1000
Companies in industries such as automotive supply, food processing,
entertainment and furniture manufacturing.
The Company has secured a reseller's agreement with EDS (Electronic
Data Systems). The focus of the agreement is to reach Automotive, Automotive
Supplier, Entertainment and other Clients EDS has under management. The Company
believes that the agreement provides not only credibility for ATS and
ATServer(R), but revenue growth potential as the relationship matures.
The non-proprietary Middleware sector of the software industry is in
its initial stages and is experiencing high growth. Management believes that
existing clients in the Time and Attendance Sector can be utilized for
introduction of its Middleware product. Successful entrance in the Middleware
market will further assist the Company's long-term growth potential by providing
two separate but compatible software products, ATServer(R) and ATLink(TM).
5
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RESULTS OF OPERATIONS
1998 compared to 1997
The Company generated revenue of $2,379,987 in 1998 compared to
$2,012,317 in 1997, as it moved from the development phase to the marketing
phase in its business cycle.
Research and Development expenses decreased from $1,772,537 in 1997 to
$314,587 in 1998, a net decrease of $1,457,950. In 1998, the Company increased
its focus on the development of its products through commercial implementations
and in-house developers rather than through third parties. Reaching
technological feasibility with ATLink(TM) allowed for capitalization of $296,195
of costs, also contributing to the decrease in development costs.
General and Administrative expenses increased to $2,294,668 in 1998
from $1,227,894 in 1997, an increase of $1,066,774. The increase was due
primarily to a greater number of employees, additional travel costs resulting
from increased business activity, and the moving of Corporate Headquarters to a
new facility to accommodate the Company's expansion. Also, in 1998 the Company
obtained Directors & Officers Insurance, saw an increase in depreciation costs
on the Company's assets, and incurred employee moving expenses related to
attracting and retaining key personnel.
Sales and Marketing expenses increased from $485,020 in 1997 to
$945,736 in 1998, an increase of $460,716. This was primarily due to a greater
number of sales personnel, larger commissions due to higher revenues and more
clients, and more intense marketing efforts both in house and through the
Company's third party consultants.
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