U.S. 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 EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________TO_______________
COMMISSION FILE NUMBER 0-25380
ULTRADATA SYSTEMS, INCORPORATED
(Exact name of small business issuer as specified in its charter)
Delaware 43-1401158
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
9375 Dielman Industrial Drive, St. Louis, MO 63132
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (314) 997-2250
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities 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.
Yes X No_____
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date.
Class Outstanding as of September 30, 1996
Common, $.01 par value 3,403,493
Transitional Small Business Disclosure Format Yes_____ No X
<PAGE>
File Number
0-25380
ULTRADATA SYSTEMS, INCORPORATED
FORM 10-QSB
September 30, 1996
INDEX
PART 1 - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets at
September 30, 1996 and December 31, 1995 3.
Consolidated Statements of Operations
for the quarters and nine months
ended September 30, 1996 and 1995 4.
Consolidated Statements of Cash Flows
for the nine months ended September 30, 1996 and 1995 5.
Notes to Consolidated Financial Statements 6.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7.
PART 11 - OTHER INFORMATION 10.
Signatures 11.
<PAGE>
Item 1. Financial Statements
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
Consolidated Balance Sheets
September 30, December 31,
1996 1995
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 5,598,648 $ 15,065
Marketable securities - 800,000
Trade accounts receivable, net of allowance for
doubtful accounts of $13,405 and $15,000 at
September 30, 1996 and December 31, 1995
respectively 1,180,910 2,794,254
Costs and estimated earnings on long-
term contracts 821,192 612,317
Inventories 3,237,156 1,954,584
Deferred tax assets 49,515 49,515
Prepaid expenses and other current assets 279,469 122,852
Total current assets 11,166,890 6,348,587
Property and equipment, net 591,750 403,023
Deferred compensation trust 83,164 83,164
Other assets 19,000 17,538
Total assets $11,860,804 $ 6,852,312
Liabilities and Stockholders' Equity
Current liabilities:
Note payable to bank $ - $ 448,000
Accounts payable 1,234,236 673,216
Accrued expenses and other liabilities (217,736) 588,732
Total current liabilities 1,016,500 1,709,948
Deferred rent, less current portion 6,842 1,244
Deferred compensation liability 83,164 83,164
Deferred tax liabilities 23,060 23,060
Total liabilities 1,129,566 1,817,416
Stockholders' equity:
Common stock, $.01 par value; 10,000,000 shares
authorized; 3,403,493 and 2,351,171 shares
issued and outstanding at September 30, 1996
and December 31, 1995, respectively. $ 34,035 $ 23,512
Additional paid-in capital 9,771,898 3,601,030
Retained earnings 1,335,805 1,820,854
Notes receivable issued for purchase of common
stock (410,500) (410,500)
Total stockholders' equity 10,731,238 5,034,896
Total liabilities and stockholders'
equity $11,860,804 $ 6,852,312
See accompanying notes to consolidated financial statements.
<PAGE>
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter Ended September 30 Nine months Ended September 30
1996 1995 1996 1995
(Unaudited) (Unaudited)
Net sales
Consumer products $1,328,977 $1,858,372 $3,332,905 $5,293,709
Contract revenues 122,181 66,066 723,979 113,471
Total net sales 1,451,158 1,924,438 4,056,884 5,407,180
Cost of sales
Consumer products 594,571 862,223 1,543,904 2,522,622
Contracts 72,221 46,455 312,643 80,205
Total cost of sales 666,792 908,678 1,856,547 2,602,827
Gross profit 784,366 1,015,760 2,200,337 2,804,353
Selling, general &
administrative expenses 784,831 511,470 2,402,553 1,525,969
Research & development
expenses 273,350 145,442 762,170 424,924
Operating (loss) income (273,815) 358,848 (964,386) 853,460
Other income (expense)
Interest expense (844) (1,489) (3,307) (6,849)
Interest income 29,040 34,395 71,803 118,192
Other, net 16 (1,011) (3,517) (8,378)
Total other income 28,212 31,895 64,979 102,965
(Loss) income before
income tax (benefit)
expense (245,603) 390,743 (899,407) 956,425
Income tax (benefit)
expense (127,759) 118,470 (414,358) 344,207
Net (loss) income $ (117,844) $ 272,273 $ (485,049) $ 612,218
Earnings (loss) per common
and common equivalent share
primary ($0.04) $0.10 ($0.19) $0.24
fully Diluted ($0.04) $0.10 ($0.19) $0.24
Weighted average common and
common equivalent shares
outstanding 2,726,554(1) 2,953,437 2,489,285(1) 2,897,135
(1) For the quarters and nine months ended September 30, 1996, the inclusion
of the common share options and warrants were antidilutive and were excluded
from the computation.
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30
1996 1995
(unaudited)
Cash flows from operating activities.
Net (loss) income $ (485,049) $ 612,218
Adjustments to reconcile net (loss) income
to net cash provided by operations:
Depreciation 48,750 32,400
Discount accretion - (81,752)
Loss on marketable securities - 104
Decrease in accounts receivable, net 1,613,344 (151,955)
Increasee in inventories (1,282,572) (1,242,051)
(Increase) decrease in deferred
offering costs 21,500 183,208
Increase in prepaid expenses and other
current assets (178,117) (37,515)
Increase in costs and estimated earnings
on long-term contracts (208,875) (51,393)
Increase in accounts payable 561,020 95,620
Decrease in accrued expenses
and other liabilities (806,468) (92,301)
Increase (decrease) in deferred rent 5,598 (2,325)
Increase in deferred income
taxes, net - 10,910
(Increase) decrease in other assets (1,462) 17,326
Net cash used in
operating activities (712,331) (707,506)
Cash flows from investing activities:
Purchase of marketable securities - (2,499,457)
Capital expenditures (237,477) (146,782)
Sale of marketable securities 800,000 1,300,000
Sale of certificates of deposit - 100,000
Net cash provided by (used in) investing
activities 562,523 (1,246,239)
Cash flows from financing activities:
(Repayment) borrowing on line of credit (448,000) 8,000
Repayment of bridge loan financing - (135,000)
Increase in deferred compensation trust - (12,500)
Conversion of note receivable 500
Proceeds from sale of stock 6,181,391 1,492,572
Net cash provided by financing
activities 5,733,391 1,353,572
Net increase (decrease) in cash and
cash equivalents 5,583,583 (600,173)
Cash and cash equivalents at beginning of
period 15,065 636,550
Cash and cash equivalents at end of period $ 5,598,648 $ 36,377
Supplemental disclosurs of cash flow information:
Cash paid during the period for interest $ 5,388 $ 6,488
Cash paid during the period for taxes 377,850 315,000
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 - INTERIM FINANCIAL STATEMENTS
The accompanying consolidated interim financial statements included herein
have been prepared by Ultradata Systems, Incorporated (the "Company"),
without audit, except for the consolidated balance sheet at December 31,
1995, in accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures made are adequate to make the information presented not
misleading.
The consolidated financial statements include the accounts of Ultradata
Systems, Incorporated and its majority-owned subsidiary, POIS, Inc.(POIS).
As a result of operating losses incurred by POIS, the consolidated financial
statements include 100% of the POIS accounts since the minority interest does
not currently have the ability to absorb these losses. All significant
intercompany balances and transactions have been eliminated in consolidation.
In the opinion of management, the information furnished for the quarters ended
September 30, 1996 and 1995, respectively, includes all adjustments, consisting
solely of normal recurring accruals necessary for a fair presentation of the
financial results for the respective interim periods and is not necessarily
indicative of the results of operations to be expected for the entire fiscal
year ending December 31, 1996. It is suggested that the interim financial
statements be read in conjunction with the audited consolidated financial
statements for the year ended December 31, 1995, as filed with the Securities
and Exchange Commission on Form 10-KSB (Commission File Number 0-25380).
NOTE 2 - EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
For the quarter and nine months ended September 30, 1996, the loss per
common share is based on the weighted average number of common shares
outstanding. For the quarternand nine months ended September 30, 1995,
earnings per common share and common equivalent share are based on the weighted
average number of common shares outstanding plus shares issuable upon the
assumed exercise of dilutive common share options by using the Treasury Stock
Method. For the quarter and nine months ended September 30, 1996, the loss per
common share is computed using 2,726,554 and 2,489,285 common shares
outstanding. For the quarter and nine months ended September 30, 1995, the
earnings per common and common equivalent share are computed using 2,953,437
and 2,897,135 common and common equivalent shares outstanding, respectively.
NOTE 3 - INCENTIVE STOCK OPTION PLAN
As of September 30, 1996, the company's outstanding stock options totaled
172,692 shares. These options have been issued to key employees, officers,
directors and consultants of the Company. The Company is authorized to issue
350,000 shares of incentive stock options or non-qualified stock options.
On September 7, 1996 the Board of Directors granted 10,000 Incentive Stock
Options to James R. Solakian, the Company's Investor Relations Counsel. All
outstanding stock options were exercisable at September 30, 1996 at prices
ranging from $5.00 to $7.39 per share.
<PAGE>
NOTE 4 - ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities at September 30, 1996 include the
following: Other liabilities $14,535; Income tax payable ($368,061); Accrued
sales tax $610; Accrued commissions $53,173; Accrued royalties $9,417; and
Accrued expenses of $72,590. The negative amount of ($368,061) Income tax
payable represents the tax benefit from the resulting loss for the nine month
period ending September 30, 1996. This benefit will be utilized in subsequent
quarters. Accrued expenses and other liabilities at December 31, 1995
include the following: Other liabilities $14,535; Income tax payable $405,204;
Interest payable $2,081; Accrued sales tax $18,770; Accrued commissions $73,147;
Accrued royalties $21,901; and Accrued expenses $53,904.
NOTE 5 - WARRANT CONVERSION
During the quarter ended September 30, 1996 the Company called for redemption
all outstanding Class A Warrants, including underwriters warrants, at
a redemption value of $0.05 per warrant. As a result, certain warrant holders
exercised their options for 1,022,887 shares. Net proceeds totaled $6,181,391
after deducting expenses totaling $126,728.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The analysis of the Company's financial condition, capital resources and
operating results should be viewed in conjunction with the accompanying
consolidated financial statements, including the notes thereto.
RESULTS OF OPERATIONS
Net sales for the quarter and nine month period ended September 30, 1996 were
$1,451,158 and $4,056,884, respectively, compared to $1,924,438 and $5,470,180
for the quarter and nine month period ended September 30, 1995, representing
a 25% decrease for the quarter and a 25% decrease for the nine months,
respectively. The following shows a breakdown and comparison of these revenues:
Three months ended Increase Six months ended Increase
September 30, (Decrease) September 30, (Decrease)
REVENUES 1996 1995 1996 1995
Consumer products $1,328,977 $1,858,372 (28%) $3,332,905 $5,293,709 (37%)
Contract revenues 122,181 66,066 85% 723,979 113,471 538%
Total $1,451,158 $1,924,438 (25%) $4,056,884 $5,407,180 (25%)
Consumer Products revenue for the quarter ended September 30, 1996 decreased by
$529,395 which represents a 28% increase from the quarter ending September 30,
1995. The decrease in revenue is attributed to a decrease in the number of
appearances and resulting sales with The QVC Network. Third quarter sales to
The QVC Network totaled $430,157 compared to $890,450 for the third quarter last
year, representing a 52% decrease. For the nine months The QVC Network sales
are down $1,751,378, representing a 63% decrease from the $2,799,319 sales for
the equivalent nine months ended September 30, 1995.
<PAGE>
Contract revenues for the quarter were up $56,115 from the quarter ended
September 30, 1995. For the nine months, contract revenues were up $610,508
over the comparable period last year. The lower contract revenues for the
prior year were associated with the completion of a systems research and
development contract that resulted in a $1.7 million production contract for
laser pointing and tracking systems (PATS). Revenues for this contract are
recorded on a percentage of completion method pursuant to the terms of the
contract.
Gross profit for the current quarter for the consumer product group totaled
$734,406 or 55% of consumer product sales for the current quarter as
compared to $996,149 or 54% for the third quarter of 1995. For the nine
month period, gross profit totaled $1,789,001 or 54% of consumer product
sales compared to $2,771,087 or 52% of sales for the nine months ended September
30, 1995. The current backlog of consumer products has increased by 288% from
$1,478,407 last year to $5,737,698 this year, representing a record level. The
current backlog includes routine orders from The QVC Network, a special POIS
order, and a large order for a customized product. This backlog is scheduled
to be shipped over the the next nine months, with approximately $3 million
scheduled for shipment in the fourth quarter.
Selling, general and administrative (SG&A) expenses for the quarter totaled
$784,831 as compared to $511,470 for the same quarter last year, representing
a 53%. For the nine months, SG&A totaled $2,402,553 versus $1,525,969,
representing a 57% increase. Advertising and marketing expenditures for the
first nine months were increased by $348,867 to broaden the sales base for
consumer products. SG&A expenses were increased for the quarter and nine months
as a result of strategic initiatives taken by management. Higher advertising
and marketing expenses, including new product literature and brochures, were
incurred to expand the retail channels for the consumer products division.
This reflects the company's strategy to increase its name recognition and to
support new product offerings. Such strategies were executed consistent with
the additional equity made available from the initial public offering.
Staffing has increased in a number of key areas, including data research,
finance, and marketing. Employee census at September 30, 1996 totaled twenty
nine full-time employees versus twenty five full-time one year ago.
Additional facility expense were incurred for increased office and warehouse
space.
Research and development expense increased $127,908, or 88%, to $273,350
during the quarter ended September 30, 1996 as compared to the same quarter
last year. For the nine month period, research and development increased
$337,246 or 79% to $762,170 as compared to $424,924 for the nine months ended
September 30, 1995. The Company's research and development efforts have
focused on six new products. These six new products are: (1) TRIPLINK, a
travel computer to be sold with a CD ROM for use with personal computers
configured with CD ROM drives (2) TIME TRACKER, an electronic device which
attaches to a cellular phone and enables users to track their actual phone
costs (3) EUROROAD, the Company's first entry into the European market with a
multiple language travel computer (4) TOWN & COUNTRY, an expanded Road Whiz
Ultra which includes U.S. highway as well as interstate highway data to be
marketed exclusively by The QVC Network (5) the POIS 496 Navigator System,
introducing the Company's first onboard navigation product and (6) KID'S ROAD
WHIZ, designed to include word games and details on roller coasters,
amusement parks, etc.in addition to the normal ROAD WHIZ interstate data. Of
these products, TOWN & COUNTRY has been completed and initial sales
deliveries were made prior to the close of the quarter. Orders for
TIMETRACKER and KID'S ROAD WHIZ will begin with initial deliveries scheduled
for the fourth quarter. KID'S ROAD WHIZ is scheduled for introduction on The
QVC Network in December. EUROROAD is completed and is ready to be produced.
The remaining products are expected to be completed in the next several months,
with revenues from these products expected to occur in 1997. Research and
development expense attributed to POIS for the quarter totaled $122,486 or
45% of the $273,350 total expenditures.
Interest income for the quarter ended September 30, 1996 totaled $29,040, as
compared to $34,395 for the quarter ended September 30, 1995 and $71,803 for
the nine months ended as compared to $118,192 for the period ended September
30, 1995. Smaller investable balances were available during most of the third
quarter of this year. Generally, the Company invests its surplus funds in
more liquid investment instruments in order to avoid short term borrowing
against the bank line of credit. These more liquid short term investments
carry a lower interest yield.
<PAGE>
As a result of the foregoing, the Company incurred a net loss of $117,844, or
$0.04 per share for the quarter ended September 30, 1996 versus a net income
of $272,273, or $0.10 per share for the quarter ended September 30, 1995. For
the nine months ended September 30, 1996, the Company incurred a net loss of
$485,049 or $0.19 per share as compared to a net income of $612,218 or $0.24
per share for the nine months ended September 30, 1995.
FINANCIAL CONDITION AND LIQUIDITY
The Company has funded its operations primarily through the sale of Common
Stock in an initial public offering, and historically through periodic
boorowings, and from cash generated through operations. During the quarter
ended September 30, 1996, the Company completed a warrant redemption that
resulted in raising $6.2 million in additional capital. At September 30, 1996
the Company had $5,598,648 in cash and cash equivalents. The Company's
operating activities used $712,331 for the first three quarters, exclusive of
depreciation and other non-cash expenses. Net cash totaling $562,523 was
provided from investing activities. Net cash used by financing activities
totaled $5,733,391 net of a $448,000 repayment of bank borrowings.
Working capital increased from $4,638,639 at December 31, 1995 to $10,150,390
at September 30, 1996. The Company's current ratio at September 30, 1996 was
11.0 to 1 as compared to 3.7 to 1 at December 31, 1995.
Inventories increased $1,282,582 from the December 31, 1995 level to $3,237,156
as of September 30, 1996. The Company's business remains very seasonal in
nature. In fiscal year 1995, 44% of total consumer sales were recorded in the
fourth quarter. Typically, inventories will build during the second and third
quarters and decrease in the fourth quarter. The utilization of a second and
third sources of foreign manufacturing has added approximately four weeks to
the lead time required for receiving finished products. Accounts receivable
decreased $1,613,344 from the December 31, 1995 balance to $1,181,910 at
September 30, 1996. This decrease is also a seasonal occurrence as higher
fourth quarter product sales are collected during the first quarter of the
following year.
Capital expenditures for the nine month period ended September 30, 1996, which
totaled $237,477 included leasehold improvements, purchases of office
furniture, and the purchase of additional production equipment.
The Company has amended its unsecured line of credit with its lender increasing
its line to $2.0 million plus a $500,000 facility for letters of credit,
bringing the total credit facility to $2.5 million. As of September 30, 1996
the borrowings against this line of credit was zero.
The Company believes that the liquidity provided by its existing cash and cash
equivalents, the borrowing arrangement described above, and the cash generated
from operations will be sufficient to meet the Company's operating and capital
requirements for the next twelve months.
<PAGE>
ULTRADATA SYSTEMS, INCORPORATED
10QSB
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
None
Item 2. Changes in Securities:
None
Item 3. Defaults upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
At the Company's Annual Meeting of Shareholders on July 26, 1996,
the shareholders (1) elected Monte Ross, Mark L. Peterson, Steven H. Akre, Esq.,
Bruce L. Miller, and John J. Clancy to serve as directors until the 1997 Annual
Meeting; (2) approved an amendment to the Certificate of Incorporation to
increase the authorized capital stock from 10,000,000 to 15,000,000, to include
5 million shares od Preferred Stock, $0.01 par value, to be issued with such
voting powers, designations, preferences, rights, qualifications, limitations
and restrictions as may be fixed by the Company's Board of Directors; and (3)
approved the 1996 Incentive Stock Option Plan under which the Board is
authorized to grant options to purchase up to 175,000 shares of stock to key
employees, officers, directors and consultants of the Company.
The chart below na,es each director nominated by the shareholders
at the 1996 Annual Meeting, the number of votes cast for, against or withheld
and the number of broker nonvotes with respect to each such person:
Votes Cast Broker
Nominee For Against Withheld Nonvotes
Monte Ross 1,982,792 250 0 397,564
Mark L. Peterson 1,982,792 250 0 397,564
Ernest Clarke 1,982,792 250 0 397,564
Steven H. Akre, Esq. 1,982,792 250 0 397,564
Bruce L. Miller 1,982,792 250 0 397,564
John J. Clancy 1,982,792 250 0 397,564
With respect to the ratification of the Amendment To The Articles of
Incorporation, the number of votes cast for was 1,389,768 against 32,414 and the
number of abstention was 42,553 and the number of broker nonvotes was 915,871.
With respect to the ratification of the 1996 Incentive Stock Option Plan, the
number of votes cast for was 1,418,654 against 23,810 and the number of
abstention was 22,271 and the number of broker nonvotes was 915,871.
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
Exhibit No. Description of Exhibit
(a) Reports on Form 8-K - Call For Redemption of Class A
Warrants dated August 6, 1996.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
November 13, 1996 /s/ Monte Ross
Monte Ross, President and CEO
(Duly authorized officer and principal
financial officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 5,598,648
<SECURITIES> 0
<RECEIVABLES> 1,194,315
<ALLOWANCES> (13,405)
<INVENTORY> 3,237,156
<CURRENT-ASSETS> 11,166,890
<PP&E> 881,631
<DEPRECIATION> (289,881)
<TOTAL-ASSETS> 11,860,804
<CURRENT-LIABILITIES> 1,016,500
<BONDS> 0
0
0
<COMMON> 34,035
<OTHER-SE> 10,697,203
<TOTAL-LIABILITY-AND-EQUITY> 11,860,804
<SALES> 4,056,884
<TOTAL-REVENUES> 4,128,687
<CGS> 1,856,547
<TOTAL-COSTS> 3,164,723
<OTHER-EXPENSES> 3,517
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,307
<INCOME-PRETAX> (899,407)
<INCOME-TAX> (414,358)
<INCOME-CONTINUING> (485,049)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (485,049)
<EPS-PRIMARY> (0.19)
<EPS-DILUTED> (0.19)
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