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 MARCH 31, 1998.
( ) 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 . 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
Section13 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 April 30, 1997
Common, $.01 par value 3,359,834
Transitional Small Business Disclosure Format Yes_____ No X
File Number
0-25380
ULTRADATA SYSTEMS, INCORPORATED
FORM 10-QSB
March 31, 1998
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Consolidated Balance Sheets at
March 31, 1998 and December 31, 1997 3.
Consolidated Statements of Operations
for the three months ended March 31, 1998 and 1997 4.
Consolidated Statements of Cash Flows
for the three months ended March 31, 1997 and 1996 5.
Notes to Consolidated Financial Statements 6.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7.
PART II - OTHER INFORMATION 10.
Signatures 10.
Item 1. Financial Statements
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
Consolidated Balance Sheets
March 31, December 31,
1998 1997
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 4,428,466 $ 5,075,968
Trade accounts receivable, net
of allowance for doubtful accounts
of $15,879 and $34,190 at March 31,
1998 and December 31, 1997,
respectively 674,518 1,672,041
Costs and estimated earnings on
long-term contracts 695,872 528,620
Inventories 3,518,438 3,504,835
Deferred tax assets 63,815 63,815
Prepaid expenses and other
current assets 753,752 700,902
Total current assets 10,134,861 11,546,181
Property and equipment, net 767,095 784,906
Deferred compensation trust 126,740 126,740
Investment in subsidiary 282,500 -
Other assets 395,415 340,867
Total assets $ 11,706,612 $ 12,798,694
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 222,122 $ 509,338
Accrued expenses and other
liabilities 119,555 429,263
Total current liabilities 341,677 938,601
Deferred rent, less current portion 18,038 16,172
Deferred compensation liability 126,740 126,740
Deferred tax liabilities 57,612 57,612
Total liabilities 544,067 1,139,125
Stockholders' equity:
Common stock, $.01 par value; 10,000,000
shares authorized; 3,359,834 and
3,410,000 shares issued and
outstanding at March 31,1998 and
December 31, 1997 34,100 34,100
Additional paid-in capital 9,799,936 9,799,936
Retained earnings 2,203,195 2,366,095
Treasury stock (469,188) (130,062)
Notes receivable issued for purchase
of common stock (405,500) (410,500)
Total stockholders' equity 11,162,544 11,659,569
Total liabilities and stockholders'
equity $ 11,706,612 $ 12,798,694
See accompanying notes to consolidated financial statements.
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31,
1998 1997
(Unaudited)
Net sales
Consumer products $ 934,157 $ 2,846,839
Contract 167,252 82,371
Total net sales 1,101,409 2,929,210
Cost of sales
Consumer products 388,175 1,096,608
Contracts 76,390 47,381
Total cost of sales 464,565 1,143,989
Gross profit 636,844 1,785,221
Selling expenses 289,060 1,072,203
General & administrative
expenses 536,919 468,373
Research & development
expenses 131,443 268,368
Operating loss (320,579) (23,723)
Other income (expense)
Interest expense - (53)
Interest income 56,633 49,376
Other, net (769) (583)
Total other income 55,864 48,740
Income (loss) before income
tax benefit (264,714) 25,017
Income tax benefit (101,814) -
Net income (loss) $ (162,900) $ 25,017
Earnings (loss) per share:
basic and diluted ($0.05) $0.01
Weighted average common and
common equivalent shares
outstanding: Basic 3,359,834 3,403,493
Diluted 3,359,834 3,430,293
See Accompanying Notes to Consolidated Financial Statements.
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months ended March 31,
1998 1997
(unaudited)
Cash flows from operating activities.
Net income (loss) (162,900) 25,017
Adjustments to reconcile net income
(loss) to net cash provided by
operations:
Depreciation 62,280 33,747
Increase (decrease) in cash due to changes
in operating assets and liabilities:
Trade accounts receivable, net 997,523 1,264,096
Costs and estimated earnings on
long term contracts (167,252) 225,130
Inventories (13,603) 95,059
Prepaid expenses and other current assets (52,850) 100,285
Other assets (54,548) (59,943)
Accounts payable (287,216) (706,192)
Accrued expenses and other liabilities (309,708) (71,098)
Deferred rent 1,866 (8,708)
Net cash provided by operating activities 13,592 897,393
Cash flows from investing activities:
Capital expenditures (44,469) (49,595)
Acquisition of interest in subsidiary (282,500) -
Net cash used in investing activities (326,969) (49,595)
Cash flows from financing activities:
Purchase of treasury stock (339,125) -
Proceeds from payment of notes
to employees 5,000 -
Net cash used in financing activities (334,125) -
Net increase (decrease) in cash
and cash equivalents $ (647,502) $ 847,798
Cash and cash equivalents at beginning
of period $ 5,075,968 $ 3,960,577
Cash and cash equivalents at end
of period $ 4,428,466 $ 4,808,375
Supplemental disclosures of cash flow information:
Cash paid during the period
for interest - $ 97
Cash paid during the period
for taxes - $ 31,509
See Accompanying Notes to Consolidated Financial Statements.
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1998
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,
1997, 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 wholly-owned subsidiary, POIS, Inc. (POIS).
All significant intercompany balances and transactions have been eliminated
in consolidation.
In the opinion of management, the information furnished for the quarters
ended March 31, 1998 and 1997 include 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, 1998. It is suggested that the interim financial statements be
read in conjunction with the audited consolidated financial
nded December 31, 1997, 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
Earnings per common share are based on the weighted average number of shares
outstanding, in the calculation of basic earnings per share, and assuming the
addition of shares issuable upon the assumed exercise of share options, by
using the treasury stock method, in the calculation of diluted earnings per
share.
NOTE 3 - INCENTIVE STOCK OPTION PLAN
As of March 31, 1998, the company's outstanding stock options totaled 300,792
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.
NOTE 4 - ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities include the following:
March 31, December 31,
1998 1997
Income tax payable $ (68,781) $ 27,278
Commissions and royalties
payable 12,769 90,003
Accrued advertising 24,904 51,850
Other expenses payable 150,663 260,132
Total $ 119,555 $ 429,263
NOTE 5 - TALON ACQUISTION
On March 23, 1998, the Company purchased an 18.9% interest in Talon Research
and Development Ltd. of Auckland, New Zealand, an international manufacturer
of Global Positioning Satellite (GPS) receivers. The Company's investment in
Talon Research & Development Ltd. will be accounted for by the equity method
on a one month lag, accordingly, no results for the period March 23 through
31, 1998 are reflected in the above statements. The Company has an option to
acquire the remaining 81.1% of Talon at any time during 1998 and through June
30, 1999. If such option were exercised during 1998, results for Talon would
be included on a prospective basis.
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 ended March 31, 1998 were $1,101,409, compared to
$2,929,210 for the quarter ended March 31, 1997, representing a 62.4%
decrease from quarter to quarter. The following shows a breakdown of these
sales.
Three Months Ended INCREASE
March 31, (DECREASE)
1998 1997
Consumer products $ 934,157 $ 2,846,839 ( 67.2%)
Contract 167,252 82,371 103.0%
TOTAL: $ 1,101,409 $ 2,929,210 (62.4%)
Consumer Products revenue for the quarter ended March 31, 1998 decreased by
$1,912,682 from the quarter ended March 31, 1997. The decrease in revenue is
largely attributed to shipments of custom unit orders totaling approximately
$1.8 million that shipped from December 31, 1996 backlog during the first
quarter of 1997. At March 31, 1998 the backlog totaled approximately $ 0.4
million compared to $6.4 million as of March 31, 1997. The decrease relates
primarily to orders for customized promotional products, with no
corresponding program in 1998. Initial shipments of TravelStar GPS were made
late in March 1998, and are a significant portion of the backlog at March 31,
1998.
Contract revenues for the quarter were up $ 84,881 or 103.0% from the
quarter ended March 31, 1997. The higher contract revenues for the quarter
reflect the near completion of the original contract of $1.7 million for
production of a laser pointing and tracking systems (PATS). In addition, the
Company realized revenue on an override clause in the original contract for
two additional delivery orders valued at $337,888. Contract revenues are
recorded on a percentage of completion method pursuant to the terms the
contract.
Gross profit for consumer products totaled $ 545,992 or 58.4% of sales for
the quarter ended March 31, 1998, as compared to $1,750,231 or 61% for the
quarter ended March 31, 1997. The decreased margin dollars and gross profit
percentage are primarily due to the larger sales volume and higher average
prices realized for custom products during the first quarter of 1997.
The increased margins on the custom products were somewhfor evolutionary
improvements to TravelStar GPS, based on initial favorable customer reaction
to the product.
General and Administrative expenses were $ 536,919 for the quarter compared
to $ 468,373 in the 1997 period. The increase in 1998 is primarily due to
St. Louis based personnel costs of $192,740 in 1998, as compared to $148,970
for the same period in 1997. Legal and professional services primarily
related to contract issues, other than the Talon acquisition and the
resolution of certain issues related to the discontinuance of POIS operations
totaled $76,012 for period ended March 31, 1998 compared to $38,450 for the
same period last year.
Research and development (R&D) expense decreased from $268,368 for the
quarter ended March 31, 1997 to $131,443 for the comparable quarter in 1998.
Significant expense was incurred in the first quarter of 1997 in the
development of custom hand held products for Sears, the garden market, and
several customized Road Whiz items which continue in distribution. Also,
expenses in 1997 included research related to POIS models and TripLink, a PC
downloadable handheld unit which have been discontinued. The Trip link
research results in 1997 were, however, incorporated into the development of
TravelStar GPS. The Company's research and development efforts for 1998 have
focused primarily on two major projects: $47,735 to enhance the E@syMail and
PalmNet products to achieve better performance and increase utility; and
$69,862 for evolutionary improvements to TravelStar GPS, based on initial
favorable customer reaction to the product.
Interest income for the quarter ended March 31, 1998 totaled $56,633, as
compared to $49,376 for the quarter ended March 31, 1997. The increase is
attributable to slightly higher average yields on invested balances of cash as
compared to the same period last year.
As aresult of the foregoing, the Company had a net loss of $192,900, or
diluted earnings per share of ($0.05) compared to net income of $25,017 or
$0.01 of diluted earnings per share for the quarter ended March 31, 1997.
On March 23, 1998, the Company purchased an 18.9% interest in Talon Research &
Development Ltd of Aukland, New Zealand, an international manufacturer of
Global Positioning Satellite (GPS) receivers. The Company's investment in Talon
Research & Development Ltd. will be accounted for by the equity method on a
one month lag, accordingly, no results for the the period March 23 through 31,
1998 are reflected in the above statements. The Company has an option to
acquire the remaining 81.1% of Talon at any time durig 1998 and through
June 30, 1999. If such option were exercised during 1998, results for Talon
would be included on a prospective basis.
FINANCIAL CONDITION AND LIQUIDITY
The company has funded its recent operations primarily through the sale of
Common Stock in ad initial public offering, from the 1996 exerciseof warrants
for common stock and from cash generated by operations. At March 31, 1998
the Company had $4,428466 in cash and cash equivalents compared to $4,808,375
at March 31, 1997. The Company's operating activities provided $13,592 for
the quarter ended March 31, 1998 compared to $897,393 provided for the quarter
ended March 31, 1997. Net cash used in investing activities totaled $329,969
primarily due to the Talon acquisition. Capital expenditures totaled $44,469
for the quarter compared to $49,595 for the same period in 1997. The
expenditures included purchases of office equipment, additional production
equipment and tooling. Net cash used for financing activities totaled $334,125
primarily due to the purchase of treasury stock for $339,125.
Working capital decreased from $10,607,580 at December 31, 1997 to
$ 9,793,184 at March 31,1998 primarily due to lower sales resulting in a
reduction from December 31, 1997of $997,523 in accounts receivable. The
Company's current ratio at March 31, 1998 was 29.7 to 1 as compared
to 12.3 to 1 at December 31, 1997.
Inventories increased slightly from $3,504,835, at December 31, 1997
to $3,518,438 as of March 31, 1998. This primarily reflects inventory buildup
needed to meet demand for higher unit cost TravelStar GPS units.
Accounts receivable decreased $997,523 from $1,672,041 at December 31, 1997
to $674,518 at March 31, 1998. Accounts receivable generally decrease during
the first quarter as higher fourth quarter product sales
are collected during the first quarter of the next year. During 1997, the
Company experienced an exception to this pattern, due to the custom orders
noted above.
The Company has an unsecured line of credit with its lender at $2.0
million plus a $500,000 facility for letters of credit, bringing the total
credit facility to $2.5 million. The current line of credit will expire
April 30, 1998 and management expects to renew the credit facility. As of
March 31, 1998 there were no borrowings outstanding.
The Company believes that the liquidity provided by its existing cash and
cash equivalents, available lines of credit, and the cash generated from
operations will be sufficient to meet the Company's operating and capital
requirements for the next twelve months. Additional capital expenditures are
expected to occur for tooling and production equipment in conjunction with
new product development for the next twelve months.
SAFE HARBOR STATEMENT
This management discussion contains forward-looking statements that involve
risk and uncertainties, including timely development, acceptance and pricing
of new products, the impact of competitive products and pricing, general
economic conditions as they affect the Company's customers, as well as other
risks detailed from time to time in the Company's SEC reports, including the
annual report on Form 10KSB for the year ended December 31, 1997.
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:
None
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.
May 14, 1997 /s/ Monte Ross
Monte Ross, President and CEO
(Duly authorized officer and
principal financial officer)
