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 June 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 June 30, 1996
Common, $.01 par value 2,380,606
Transitional Small Business Disclosure Format Yes_____ No X
<PAGE>
File Number
0-25380
ULTRADATA SYSTEMS, INCORPORATED
FORM 10-QSB
June 30, 1996
INDEX
PART 1 - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets at
June 30, 1996 and December 31, 1995 3.
Consolidated Statements of Income
for the quarters and six months
ended June 30, 1996 and 1995 4.
Consolidated Statements of Cash Flows
for the six months ended June 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 8.
PART 11 - OTHER INFORMATION 11.
Signatures 12.
<PAGE>
Item 1. Financial Statements
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
Consolidated Balance Sheets
June 30, December 31,
1996 1995
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 582,324 $ 15,065
Marketable securities - 800,000
Trade accounts receivable, net of allowance for
doubtful accounts of $12,240 and $15,000 at
June 30, 1996 and December 31, 1995
respectively 776,733 2,794,254
Costs and estimated earnings on long-
term contracts 1,000,998 612,317
Inventories 2,132,329 1,954,584
Deferred tax assets 49,515 49,515
Prepaid expenses and other current assets 277,824 122,852
Total current assets 4,819,723 6,348,587
Property and equipment, net 518,649 403,023
Deferred compensation trust 83,164 83,164
Other assets 10,859 17,538
Total assets $ 5,432,395 $ 6,852,312
Liabilities and Stockholders' Equity
Current liabilities:
Note payable to bank $ - $ 448,000
Accounts payable 440,402 673,216
Accrued expenses and other liabilities (40,145) 588,732
Total current liabilities 400,257 1,709,948
Deferred rent, less current portion 4,976 1,244
Deferred compensation liability 83,164 83,164
Deferred tax liabilities 23,060 23,060
Total liabilities 511,457 1,817,416
Stockholders' equity:
Common stock, $.01 par value; 10,000,000 shares
authorized; 2,380,606 and 2,351,171 shares
issued and outstanding at June 30, 1996
and December 31, 1995, respectively. $ 23,926 $ 23,512
Additional paid-in capital 3,853,861 3,601,030
Retained earnings 1,453,651 1,820,854
Notes receivable issued for purchase of common
stock (410,500) (410,500)
Total stockholders' equity 4,920,938 5,034,896
Total liabilities and stockholders'
equity $ 5,432,395 $ 6,852,312
See accompanying notes to consolidated financial statements.
<PAGE>
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Quarter ended June 30 Six months ended June 30
1996 1995 1996 1995
(Unaudited) (Unaudited)
Net sales
Consumer products $1,501,622 $1,166,944 $2,003,928 3,435,337
Contract revenues 245,442 22,826 601,798 47,406
Total net sales 1,747,064 1,189,770 2,605,726 3,482,743
Cost of sales
Consumer products 712,260 546,177 949,333 1,660,399
Contracts 88,380 20,938 240,422 33,750
Total cost of sales 800,640 567,115 1,189,755 1,694,149
Gross profit 946,424 622,655 1,415,971 1,788,594
Selling, general &
administrative expenses 856,151 504,408 1,617,722 1,014,499
Research & development
expenses 282,781 197,873 488,820 279,482
Operating (loss) income (192,508) (79,626) (690,571) 494,613
Other income (expense)
Interest expense (1,045) (3,177) (2,463) (5,360)
Interest income 17,742 44,171 42,765 83,797
Other, net (4,122) (391) (3,535) (7,367)
Total other income 12,575 40,603 36,767 71,070
(Loss) income before
income tax (benefit)
expense (179,933) (39,023) (653,804) 565,683
Income tax (benefit)
expense (106,528) (18,769) (286,599) 225,737
Net (loss) income $ (73,405) $ (20,254) $ (367,205) $ 339,946
Earnings (loss) per common
and common equivalent share
primary ($0.03) ($0.01) ($0.15) $0.14
fully Diluted ($0.03) ($0.01) ($0.15) $0.14
Weighted average common and
common equivalent shares
outstanding 2,380,229(1) 2,266,719(1) 2,370,651(1) 2,868,984
(1) For the quarters ended June 30, 1996 and 1995 and the six months ended June
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
Six Month Period ended June 30,
1996 1995
(unaudited)
Cash flows from operating activities.
Net (loss) income $ (367,205) $ 339,946
Adjustments to reconcile net (loss) income
to net cash provided by operations:
Depreciation 32,500 21,600
Discount accretion - (56,450)
Loss on marketable securities - 104
Decrease in accounts receivable, net 2,017,521 375,787
Increasee in inventories (177,744) (558,331)
(Increase) decrease in deferred
offering costs (39,621) 183,208
Increase in prepaid expenses and other
current assets (115,352) (111,837)
Increase in costs and estimated earnings
on long-term contracts (388,681) -
Decrease in accounts payable (232,812) (182,529)
Decrease in accrued expenses
and other liabilities (628,877) (101,543)
Increase (decrease) in deferred rent 3,732 (1,550)
Increase in deferred income
taxes, net - 12,750
Decrease in other assets 6,679 22,650
Net cash provided by (used in)
operating activities 110,140 (56,195)
Cash flows from investing activities:
Purchase of marketable securities - (2,499,457)
Capital expenditures (148,126) (110,838)
Sale of marketable securities 800,000 500,000
Sale of certificates of deposit - 100,000
Net cash provided by (used in) investing
activities 651,874 (2,010,295)
Cash flows from financing activities:
(Repayment) borrowing on line of credit (448,000) 90,500
Repayment of bridge loan financing - (135,000)
Repurchase of stock - (12,500)
Proceeds from sale of stock 253,245 1,492,572
Net cash (used in) provided by financing
activities (194,755) 1,435,572
Net increase (decrease) in cash and
cash equivalents 567,258 (630,918)
Cash and cash equivalents at beginning of
period 15,065 636,550
Cash and cash equivalents at end of period $ 582,324 $ 5,632
Supplemental disclosurs of cash flow information:
Cash paid during the period for interes $ 4,230 $ 6,299
Cash paid during the period for taxes 359,000 315,000
See Accompanying Notes to Consolidated Financial Statements.
<PAGE>
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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
June 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 quarters ended June 30, 1996 and 1995 and for the six months ended
June 30, 1996, the loss per common share is based on the weighted average
number of common shares outstanding. For the six months ended June 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 and warrants by using the
Modified Treasury Stock Method. For the quarters ended June 30, 1996 and
1995, the loss per common is computed using 2,380,229 and 2,266,719 common
shares outstanding. For the six months ended June 30, 1996, loss per common
share is computed using 2,370,651 common shares outstanding. For the six
months ended June 30, 1995, the earnings per common and common equivalent
share are computed using 2,868,984 common and common equivalent shares
outstanding.
NOTE 3 - INCENTIVE STOCK OPTION PLAN
As of June 30, 1996, the company's outstanding stock options totaled 162,692
shares. These options have been issued to key employees, officers, directors
and consultants of the Company. The Company is authorized to issue 175,000
shares of incentive stock options or non-qualified stock options. All
outstanding stock options were exercisable at June 30, 1996 at prices
ranging from $5.00 to $6.75 per share.
<PAGE>
NOTE 4 - ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities at June 30, 1996 include the following:
Other liabilities $14,535; Income tax payable ($240,302); Interest payable
$314; Accrued sales tax $946; Accrued commissions $65,726; Accrued royalties
$12,946; and Accrued expenses of $105,690. The negative amount of ($240,302)
Income tax payable represents the tax benefit from the resulting loss for the
six month period ending June 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 - SUBSEQUENT EVENT
On August 6, 1996 the Company called for redemption its 964,400 outstanding
Class A Warrants at a redemption value of $0.05 per Warrant. The redemption
date is September 5, 1996. Each Class A Warrant entitles the Holder to purchase
one Common Share, $0.01 par value, of Ultradata Systems, Inc. common stock for
$6.00.
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 six month period ended June 30, 1996 were
$1,747,064 and $2,605,726, respectively, compared to $1,189,770 and
$3,482,743 for the quarter and six month period ended June 30, 1995,
representing a 47% increase for the quarter and a 25% decrease for the six
month period. The following shows a breakdown and comparison of these revenues:
Three months ended Increase Six months ended Increase
June 30, (Decrease) June 30, (Decrease)
REVENUES 1996 1995 1996 1995
Consumer products $1,501,622 $1,166,944 29% $2,003,928 $3,435,337 (42%)
Contract revenues 245,442 22,826 975% 601,798 47,406 1,169%
Total $1,747,064 $1,189,770 47% $2,605,726 $3,482,743 (25%)
Consumer Products revenue for the quarter ended June 30, 1996 increased by
$334,678 which represents a 29% increase from the quarter ending June 30,
1995. The increase in revenue is attributed to stronger sales in retail
channels exclusive of QVC. Sales to QVC, the Company's largest customer, for the
quarter were $159,465 versus a comparable number of $376,369 for the quarter
ending June 30, 1995. Six months Consumer Products revenue shows a decreas of
$1,431,409 which represents a 42% decrease from the six month period ending
June 30, 1995. This shortfall came primarily in the first quarter of this
fiscal year which was absent a QVC "Today's Special Value" (TSV) promotion that
totaled $1,012,500 or 63.4% of the quarters total sales to QVC
<PAGE>
of $1,597,500 in the prior year's first quarter. In contrast, this year's
first quarter sales to QVC totaled approximately $379,000.
Contract revenues for the quarter were up $222,616 from the quarter ended June
30, 1995. For the six months, contract revenues are up $554,392 over the
comparable period last year. The minimal contract revenues for the prior year
were associated with 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 consumer product group totaled $789,362 or 52.6% of
consumer product sales for the current quarter as compared to $620,767 or 53.2%
for the second quarter of 1995. For the six month period, gross profit totaled
$1,054,595 or 52.6% of consumer product sales for the six months compared to
$1,774,938 or 51.7% of sales for the six months ended June 30, 1995. Gross
margin as a percentage of sales has remained stable or shown a slight
improvement during the first six months of the year. Improved sales mix,
increased production efficiency, and offshore manufacturing are contributing
factors in maintaining stedy margins.
Selling, general and administrative (SG&A) expenses for the quarter totaled
$856,151 as compared to $504,408 for the same quarter last year, representing
a 69.7% increase over the same period last year. For the six months, SG&A
totaled $1,617,722 versus $1,014,499, representing a 59.4% increase. Advertising
and marketing expenditures for the six months were up $270,273 in an effort
to broaden the sales base for Ultradata Systems products. SG&A expenses have
increased as a result of strategic initiatives taken by management to
accommodate the continuing expansion of the Company, especially with respect
to increased capabilitites in sales, marketing and advertising. 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, to support new product offerings, and to maintain its market
leadership. 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 June 30, 1996 totaled 3 part-time and 26
full-time employees versus three part-time and sixteen full-time one year
ago. Additional expense was also incurred for increased office and warehouse
space that was not present in the prior year's quarterly results. On November
1, 1995 the Company almost doubled its warehouse and office space from 5,000
square feet to 9,952 square feet.
Research and development expense increased $84,908, or 42.9%, to $282,781
during the quarter ended June 30, 1996 as compared to the same period last
year. For the six month period, research and development increased $209,338
or 75% to $488,820 as compared to $279,482 for the six months ended June 30,
1995. The Company's research and development efforts have focused on five
new products which are scheduled for release in the latter half of this year.
These five 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 to be marketed
exclusively by the QVC Network and (5) the POIS 496 Navigator System,
introducing the Company's first onboard navigation product. Research and
development expense attributed to POIS for the quarter totaled $138,767 or
49.1% of the $282,781 total expenditures.
Interest income for the quarter ended June 30, 1996 totaled $17,742, as
compared to $44,171 for the quarter ended June 30, 1995 and $42,765 for the six
months ended as compared to $83,797 for the period ended June 30, 1995.
Smaller investable balances were available during the second quarter of this
year as more of the proceeds from the initial stock offering have been
expended within the business for increased sales and marketing, additional
staffing, and research and development. The Company has invested its surplus
funds in more liquid investment instruments in order to avoid short term
borrowing against the bank line of credit while awaiting invested funds to
reach their maturities. 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 $73,405, or
$0.03 per share for the quarter ended June 30, 1996 versus a net loss of
$20,254, or $0.01 per share for the quarter ended June 30, 1995. For the six
months ended June 30, 1996, the Company incurred a net loss of $367,205 or $0.15
per share as compared to a net income of $339,946 or $o.14 per share for the six
months ended June 30, 1995.
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
The Company has funded its operations primarily through the sale of Common
Stock in an initial public offering totaling $1,492,572 , net of expenses,
and through periodic borrowings, and, during the past three years, from cash
generated by operations. As of June 30, 1996, the Company had $582,324 in
cash and cash equivalents. The Company's operating activities provided
$110,140 for the first two quarters, exclusive of depreciation and other
non-cash expenses. Net cash totaling $651,874 was provided from investing
activities. Net cash used by financing activities totaled $194,755 which
included a $448,000 repayment of bank borrowings, offset by $253,245 net
proceeds from the exercise of Class A Stock Purchase Warrants. Due to the
operating loss incurred during the six months ended June 30, 1996, working
capital was reduced from $4,638,639 at December 31, 1995 to $4,419,466 at
June 30, 1996. The Company's current ratio at June 30, 1996 was 12.0 to 1 as
compared to 3.7 at December 31, 1995.
Inventories increased $177,745 from the December 31, 1995 level to $2,132,329
as of June 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 begin to build during the second and third
quarters and decrease significantly by year end. 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 $2,017,521 from the December 31, 1995 balance to
$776,733 at June 30, 1996. This decrease is also a seasonal occurrence as
consumer products sales that were recorded in the fourth quarter of last year
are collected during the first quarter of the current year.
Capital expenditures for the six month period ended June 30, 1996, which
totaled $148,126 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 with a $500,000 facility for letters of credit,
bringing the total credit facility to $2.5 million. As of June 30, 1996 the
borrowing against this line of credit was zero.
Based upon its current operating plan, 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:
None
Item 5. Other Information:
None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits -Following
Exhibit No. Description of Exhibit
10.13 Credit Agreement - Line of Credit
(b) 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.
August 12, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 582,324
<SECURITIES> 0
<RECEIVABLES> 789,133
<ALLOWANCES> (12,400)
<INVENTORY> 2,132,329
<CURRENT-ASSETS> 4,819,723
<PP&E> 792,280
<DEPRECIATION> (273,631)
<TOTAL-ASSETS> 5,432,395
<CURRENT-LIABILITIES> 400,257
<BONDS> 0
0
0
<COMMON> 23,926
<OTHER-SE> 4,897,012
<TOTAL-LIABILITY-AND-EQUITY> 5,432,395
<SALES> 2,605,726
<TOTAL-REVENUES> 2,648,491
<CGS> 1,189,755
<TOTAL-COSTS> 2,106,542
<OTHER-EXPENSES> 3,535
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,463
<INCOME-PRETAX> (653,804)
<INCOME-TAX> (286,599)
<INCOME-CONTINUING> (367,205)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (367,205)
<EPS-PRIMARY> (0.15)
<EPS-DILUTED> (0.15)
</TABLE>
Exhibit 10.13
CREDIT AGREEMENT - LINE OF CREDIT
This AGREEMENT made and entered into as of this 1st day of May 1996, by and
between ULTRADATA SYSTEMS, INC. a Missouri corporation (hereinafter called
"Borrower"), and THE BOATMEN'S NATIONAL BANK OF ST. LOUIS (hereinafter called
"Bank").
Witnesseth That:
Whereas, Borrower desires to borrow from Bank, in one or more advances, an
aggregate sum not to exceed $2,500,000.00 (hereinafter called the "Credit"); and
Whereas, Bank is willing to lend said sum, or such lesser amount as may be
desired by Borrower, to Borrower, subject to the terms and conditions
hereinafter set forth;
Now, therefore, in consideration of the premises and the mutual agreements
herein set forth, the parties hereto agree as follows:
1
TERMS OF CREDIT
.1 The proceeds of the Credit shall be available to Borrower at such times as
Borrower may request, so long as no Event of Default as herein defined shall
have occurred. Any unused portion of the Credit shall remain subject to
withdrawal until May 1, 1997.
.2 The Credit shall be evidenced by a note in substantially the form attached
hereto and marked Exhibit "B" (hereinafter called the "Note"). The Note shall
be payable on May 1, 1997 and shall be on the terms and conditions set forth
therein.
.3 Borrower has the right at any time to prepay the outstanding principal
balance of the Note. Any such prepayment shall increase the unused portion of
the Credit available for borrowing until maturity of the Note, whether by
acceleration or otherwise.
.4 The credit facility will be used to support outstanding letters of credit
and all advances on the line of credit will be available after the outstanding
letters of credit have been subtracted from the $2,500,000.00.
2
REPRESENTATIONS AND WARRANTIES
Borrower expressly represents and warrants that:
.1 It is a corporation duly organized and validly existing and in good standing
under the laws of the State of Delaware.
.2 It has corporate power and authority to own its property and to carry on
business as now being conducted, and it is duly qualified to do business and is
in good standing in every jurisdiction in which its business is conducted or its
ownership of property is such as to require such qualification.
.3 It has full corporate power and authority to execute this Agreement and the
Note and any other agreements and documents referred to herein (the "Documents")
and that the execution and delivery of the Documents by the officers of Borrower
who are executing and delivering the same have been duly and lawfully authorized
and that all corporate acts and proceedings necessary or proper in the premises
have been duly done, performed and taken, and the Documents constitute the
legal, valid and binding obligations of Borrower enforceable in accordance with
their respective terms, except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency or other similar laws affecting creditors'
rights generally.
.4 The executuon and delivery of the Documents and the compliance by Borrower
with their terms and conditions, will not violate the Articles of Incorporation
or by-laws of Borrower.
.5 The execution and delivery of the Documents and the compliance by Borrower
with their terms and conditions will not violate any contract to which Borrower
is a party, and will not violate any law, regulation, rule or order of any
governmental body or agency.
.6 It has good title to its property and assets, free and clear of all
mortgages , liens and encumbrances.
.7 It has filed all tax returns required to be filed with the United states or
any state or political subdivision therof or other taxing authority to which it
is known to be subject, and has paid all taxes, interest and penalties which
have or may become due pursuant to said returns or provided adequate reserves
for the payment therof.
.8 There are no suits or administrative proceedings pending or, to the
knowledge of Borrower threatened against or affecting Borrowwer which might have
a material adverse effect upon the financial condition or business of Borrower.
3
AFFIRMATIVE COVENANTS
So long as Bank is obligated to lend hereunder or any part of the Credit remains
outstanding, Borrower covenants and agrees that it will:
.1 Furnish to Bank within 90 days after the close of each fiscal year, audited
balance sheets and income statements for each fiscal year, prepared by a
certified public accountant satisfactory to Bank.
.2 Furnish to Bank within 45 days after the close of each fiscal quarter,
quarterly financial statements and The Certificate of Covenant Compliance
(Exhibit "A") cetified by Borrower's president or Borrower's CPA firm.
.3 Furnish to Bank other financial and operating information, and permit
representatives of Bank to examine its books and records, all as may be
reasonably requested by Bank from time to time.
.4 Maintain a ratio of total debt to tangible net worth (total debt divided by
tangible net worth) of not more than 1.0 : 1 determined in accordance with
generally accepted accounting principles consistently applied ("GAAP").
.5 Maintain a tangible net worth of at least $4,000,000 determined in
accordance with GAAP.
.6 Maintain a minimum cash flow coverage ratio of 10:1 (earnings before
interest expense and taxes divided by interest expense) determined in accordance
with GAAP for at least four fiscal quarters combined.
.7 Maintain a current ratio (current assets divided by current liabilities) of
1.5:1 determined in accordance with GAAP.
.8 Pay and discharge when due all taxes and claims which might result in a
lien, unless the same is being contested in good faith by Borrower in proper
proceedings and for which a sufficient reserve has been established.
.9 Cause tp be done all things necessary to preserve and keep in full force and
effect the corporate existence of Borrower, and comply with and cause to be
complied with all laws, ordinances and regulations applicable to Borrower,
including ERISA, if Borrower has a pension and/or profit sharing plan.
.10 Cause Borrower's shareholders to subordinate, pursuant to an agreement in
form and content acceptable to Bank, any indebtedness now or hereafter due to
them from Borrower, and cause Borrower's to deliver any subordinated notes to
Bank and Bank will maintain possession thereof through the term of the Credit.
.11 The line of credit will maintain a zero balance for a minimum period of 45
consecutive days during the term of this credit.
4
NEGATIVE COVENANTS
So long as Bank is obligated to lend hereunder or any part of the Credit remains
outstanding, Borrower covenants and agrees that it will not:
.1 Create or incur any indebtedness except (i) to Bank, (ii) to trade creditors
in the ordinary courses of business, or (iii) indebtedness outstanding as the
date here of and disclosed in writing to Bank.
.2 Mortgage, pledge or otherwise encumber or permit any lien to be placed upon
or against any assets now owned or hereinafter acquired, except as existing at
the date hereof and disclosed in writing to Bank.
.3 Declare or pay any dividends on its capital stock without Bank acceptance
and approval of such action in writing.
.4 Make any loans or advances to others, or guaranty or otherwise become,
directly or indirectly, liable for or upon the obligations of others, other than
in the ordinary course of business with customers of Borrower.
5
EVENTS OF DEFAULT
Each of the following shall severally be considered an "Event of Default" for
purposes of this agreement:
.1 Failure to pay any installment of principal or interest on the Note issued
hereunder when due, whether by acceleration or otherwise.
.2 If any fact or warranty made in this Agreement or in any other Documents
should prove to be untrue in any material respect, as of the date made.
.3 Default by Borrower in the performance or observance of any other covenant,
term or agreement contained in this Agreement or in any other of the Documents.
.4 Occurrence of any event or condition which constitutes, or upon lapse of
time or the giving of notice, or both, would constitute, a default or an event
of default under any other agreement or evidence of indebtedness relating to any
obligation of Borrower for borrowed money, or failure by Borrower to pay under
any obligation for borrowed money to which it is a party or which purports to be
binding upon it.
.5 Occurrence of any of the following:
(i) Adjudication by a court of competent jurisdiction that Borrower is a
bankrupt or insolvent or the appointment of a receiver for Borrower or for all
or any part of its respective property;
(ii) Filing by Borrower or by any of its creditors of a petition under the
provision of the Bankruptcy Code as now enacted or hereafter amended;
(iii) Making by Borrower of a general assignment for the benefit of
creditors or an admission in writing by Borrower of inability to pay
indebtedness.
.6 If any judgement against Borrower or any attachment or other levy against
any of its property for an amount in excess of $50,000 remains unpaid, unstayed
on appeal, undischarged, unbonded or undismissed for more than 10 days.
.7 Any Reportable Event that Bank determines in good faith would constitute
grounds for the termination of any Plan or for the appointment by the
appropriate United States District Court of a trustee to administer any Plan
shall have occurred and shall continue for 30 days after written notice to such
effect shall have been given to Borrower by Bank, or any Plan shall be
terminated, or a trustee shallbe appointed by an appropriate United States
District Court to administer any Plan, or the Pension Benefit Guaranty
Corporation shall institute proceedings to terminate any Plan or to appoint a
trustee to administer any Plan.
.8 Death of, incompetence of, insolvency of, appointment of a receiver for any
part of the property of, assignment for the benefit of creditors by, or
commencement of any proceeding under any bankruptcy or insolvency laws by or
against, any guarantor or surety hereunder for Borrower or the giving of any
notice, or the occurrence of any event, terminating the liability of any such
guarantor or surety as to any obligations of Borrower, including obligations not
then incurred.
.9 If the Bank for reasonable cause of any nature deems itself to be insecure.
.10 Any change or termination in current Cheif Executive Officer position of
the corporation. At the time of this agreement, the position is held by Monte
Ross.
6
RIGHTS AND REMEDIES IN THE EVENT OF DEFAULT
.1 Upon the occurrence of an Event of Default and at any time thereafter, Bank
may declare all of the indebtedness outstanding hereunder immediately due and
payable without demand or notice of any kind, the same being hereby expressly
waived, and such indebtedness shall thereupon be and become immediately due and
payable and the obligation of Bank to make additional advances shall cease.
.2 No failure on the part of Bank to exercise, and no delay in exercising, any
right hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by Bank of any right hereunder preclude any other or further
exercise thereof, or the exercise of any other right. Each and every right
granted to Bank hereunder or under any document delivered hereunder or in
connection therewith or allowed to it at law or in equity shall be deemed
cumulative and may be exercised from time to time.
.3 It is agreed by Borrower that any Event of Default will constitute an event
of default under all other agreements and evidences of indebtedness between
Borrower and the Bank whether now existing or hereafter executed and whether or
not such is an event of default specified therein.
7
MISCELLANEOUS
.1 No modification or waiver of any provision of this Agreement, nor consent
to any departure by Borrower herefrom, shall be effective unless the same shall
be in writing signed by an authorized officer of Bank, and then only in the
specific instance and for the purpose for which given. No notice to or demand
on Borrower in any case shall entitle Borrower to any other or further notice or
demand in similar or other circumstances.
.2 In case any one or more of the provisions contained in this Agreement, the
Note, or any other instrument or document delivered hereunder, shall be invalid,
illegal or unenforceable im any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby.
.3 This Agreement, the Note, and all other Documents shall be deemed contracts
under the laws of Missouri and for all purposes shall be construed in accordance
with the laws of Missouri. Exercise of any right or remedy in the event of
default shall likewise be governed by the laws of Missouri.
.4 Until written notic to the contrary actually received by either party, any
notice required to be sent hereunder shall be sent by certified mail, return
receipt requested as follows:
To Borrower:
Attention:
To Bank: THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
Attention:
7800 Forsythe
Clayton, MO 63105
.5 Statutory Notice. The following notice is given pusuant to Section 432.045
of the Missouri Revised Statutes; nothing contained in such notice shall be
deemed to limit or modify the terms of the Documents:
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING RERPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE. TO PROTECT YOU (BORROWER) AND US (BANK) FROM
MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING
TO MODIFY IT.
In witness whereof, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first written
above written.
ULTRADATA SYSTEMS, INC.
By: Monte Ross, President
THE BOATMEN'S NATIONAL BANK OF ST. LOUIS
By:
