<PAGE> 1
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, 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 (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 July 31, 1998
Common, $.01 par value 3,317,493
Transitional Small Business Disclosure Format Yes_____ No X
<PAGE> 2
File Number
0-25380
ULTRADATA SYSTEMS, INCORPORATED
FORM 10-QSB
INDEX
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets at
June 30, 1998 and December 31, 1997 3.
Consolidated Statements of Operations
for the three months ended June 30, 1998 and 1997
and for the six months ended June 30, 1998 and 1997 4.
Consolidated Statements of Cash Flows
for the six months ended June 30, 1998 and 1997 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 11.
Item 6. Exhibits and Reports on Form 8-K 11.
Signatures 11.
<PAGE> 3
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
Consolidated Balance Sheets
June 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------
June 30, December 31,
ASSETS 1998 1997
(unaudited)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,705,391 5,075,968
Trade accounts receivable, net of allowance for doubtful accounts of
$15,879 and $34,190 at June 30, 1998 and December 31, 1997, respectively 1,512,812 1,672,041
Costs and estimated earnings on long-term contracts 410,702 528,620
Inventories 3,218,280 3,504,835
Deferred tax assets 63,815 63,815
Prepaid expenses and other current assets 1,075,903 700,902
- ----------------------------------------------------------------------------------------------------------------------------
Total current assets 9,986,903 11,546,181
- ----------------------------------------------------------------------------------------------------------------------------
Property and equipment, net 724,594 784,906
Deferred compensation trust 126,740 126,740
Investment in affiliate 299,740 -
Other assets 473,233 340,867
- ----------------------------------------------------------------------------------------------------------------------------
Total assets $ 11,611,210 12,798,694
- ----------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ----------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Notes payable 150,000 -
Accounts payable 241,934 509,338
Accrued expenses and other liabilities 284,450 429,263
- ----------------------------------------------------------------------------------------------------------------------------
Total current liabilities 676,384 938,601
Deferred rent 19,904 16,172
Deferred compensation liability 126,740 126,740
Deferred tax liabilities 57,612 57,612
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities 880,640 1,139,125
- ----------------------------------------------------------------------------------------------------------------------------
Stockholders' equity:
Common stock, $.01 par value; 10,000,000 shares authorized;
and 3,410,000 shares issued and outstanding
at June 30, 1998 and December 31, 1997, 34,100 34,100
Additional paid-in capital 9,799,936 9,799,936
Retained earnings 1,781,509 2,366,095
Treasury stock at cost 92,500 shares and 23,000 shares (479,475) (130,062)
at June 30, 1998 and December 31, 1997, respectively
Notes receivable issued for purchase of common stock (405,500) (410,500)
- ----------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 10,730,570 11,659,569
- ----------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 11,611,210 12,798,694
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 4
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
Consolidated Statements of Operations
For the three month and six month periods ended June 30, 1998 and 1997
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Three Months ended June 30, Six Months ended June 30,
1998 1997 1998 1997
(unaudited) (unaudited)
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales:
Consumer products $ 1,313,225 3,626,742 2,247,382 6,473,581
Contract 66,033 194,352 233,285 276,723
- ---------------------------------------------------------------------------------------------------------------------------
Total net sales 1,379,258 3,821,094 2,480,667 6,750,304
- ---------------------------------------------------------------------------------------------------------------------------
Cost of sales:
Consumer products 595,597 1,512,482 983,772 2,609,091
Contract 54,304 86,204 130,694 133,585
- ---------------------------------------------------------------------------------------------------------------------------
Total cost of sales 649,901 1,598,686 1,114,466 2,742,676
- ---------------------------------------------------------------------------------------------------------------------------
Gross profit 729,357 2,222,408 1,366,201 4,007,628
Selling expense 744,253 1,090,764 1,033,314 2,137,047
General and administrative expenses 600,219 530,481 1,137,137 1,024,854
Research and development expense 119,581 240,448 251,025 508,816
- ---------------------------------------------------------------------------------------------------------------------------
Income/(loss) from operations (734,696) 360,715 (1,055,275) 336,911
- ---------------------------------------------------------------------------------------------------------------------------
Other income (expense):
Interest expense (34) (51) (34) (104)
Interest income 47,339 61,373 103,972 110,751
Equity in income of affiliated company 17,404 - 17,404 -
Other, net 495 222 (272) (265)
- ---------------------------------------------------------------------------------------------------------------------------
Total other income, net 65,204 61,544 121,069 110,382
- ---------------------------------------------------------------------------------------------------------------------------
Income/(loss) before income tax expense (669,492) 422,259 (934,206) 447,293
Income tax expense/(benefit) (247,804) 156,484 (349,618) 156,454
- ---------------------------------------------------------------------------------------------------------------------------
Net income/(loss) $ (421,688) 265,775 (584,588) 290,839
- ---------------------------------------------------------------------------------------------------------------------------
Earnings per share:
Basic $ (0.13) 0.08 (0.18) 0.09
Weighted average common shares outstanding 3,323,093 3,403,493 3,334,361 3,403,493
- ---------------------------------------------------------------------------------------------------------------------------
Earnings per share:
Fully Diluted $ (0.13) 0.08 (0.18) 0.08
Weighted average common shares outstanding 3,323,093 3,430,293 3,334,361 3,430,293
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE> 5
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
Consolidated Statements of Cash Flows
Six Month Period ended June 30,
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
1998 1997
(unaudited) (unaudited)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income/(loss) $ (584,588) 290,839
Adjustments to reconcile net income to net cash provided by (used in)
operating activities:
Depreciation and amortization 124,560 89,823
Deferred income tax provision
Increase (decrease) in cash due to changes in operating assets and liabilities:
Trade accounts receivable, net 159,229 2,762,188
Costs and estimated earnings on long-term contracts 117,918 30,778
Inventories 286,555 251,868
Prepaid expenses and other current assets (375,000) 99,095
Other assets (132,365) (141,676)
Accounts payable (267,403) (926,088)
Accrued expenses and other liabilities (144,813) (245,272)
Deferred rent 3,732 3,732
- -----------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (812,175) 2,215,287
- -----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Investment in and earnings of Talon Research & Development Ppty. Ltd. (299,740) -
Capital expenditures (64,249) (190,870)
- -----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (363,989) (190,870)
- -----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Borrowings against line of credit 150,000 -
Acquisition of treasury stock (349,413) -
Proceeds from repayment of notes receivable to
purchase common stock 5,000 -
- -----------------------------------------------------------------------------------------------------------------
Net cash used in financing activities (194,413) -
- -----------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (1,370,577) 2,024,417
Cash and cash equivalents at beginning of period 5,075,968 3,960,577
- -----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 3,705,391 5,984,994
- -----------------------------------------------------------------------------------------------------------------
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 34 171
Cash paid during the period for taxes - 275,569
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 6
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1998
NOTE 1 - BASIS OF PRESENTATION
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 majority-owned subsidiary, POIS, Inc. (POIS)for 1997. POIS operations were
terminated as of December 31, 1998 and consolidated with Ultradata operations at
its St. Louis location. All significant intercompany balances and transactions
have been eliminated in consolidation. The Company's investment in Talon
Research and Development, Ppty., Auckland, NZ Ltd. of 18.9% is accounted for
using the equity method, with financial data included on a one month lag.
In the opinion of management, the information furnished for the quarter and six
month periods ended June 30, 1998 and 1997, 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, 1998. It is suggested that the interim
financial statements be read in conjunction with the audited consolidated
financial statements for the year ended December 31, 1997, as filed with the
Securities and Exchange Commission on Form 10-KSB (Commission File Number
0-25380).
NOTE 2 - EARNINGS PER SHARE
<TABLE>
<CAPTION>
For the three months ended For the six months ended
June 30, June 30,
1998 1997 1998 1997
Numerator:
<S> <C> <C> <C> <C>
Net Income $ (421,688) 265,775 (584,588) 290,839
Numerator for
basic earnings
per share - income
available to common
shareholders $ (421,688) 265,775 (584,588) 290,839
</TABLE>
<PAGE> 7
<TABLE>
Denominator:
<S> <C> <C> <C> <C>
Denominator for basic
earnings per share -
weighted average
shares 3,323,493 3,403,493 3,323,493 3,403,493
Effect of dilutive
securities: Employee
stock options - 26,800 - 26,800
--------- --------- --------- ---------
Denominator for diluted
earnings per share per
share-adjusted weighted
average shares and assumed
conversions 3,323,493 3,430,293 3,323,493 3,430,293
========= ========= ========= =========
</TABLE>
Options to purchase 67,600 shares of common stock at prices between $5.50 and
$7.00 per share were outstanding as of June 30, 1998, but were not included in
diluted earnings per share because the options' exercise price was greater than
the market price of the common shares.
NOTE 3 - INCENTIVE STOCK OPTION PLAN
As of June 30, 1998, the company's outstanding stock options totaled 274,100
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 - PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets at June 30, 1998 and December 31, 1997
include the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
Prepaid income taxes $ 316,585 $ -
Prepaid advertising expense 156,300 191,814
Interest income receivable 99,181 93,157
Other expenses payable 503,937 415,931
---------- ---------
Total $1,075,903 $700,902
========== =========
</TABLE>
NOTE 5 - ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities at June 30, 1998 and December 31, 1997
include the following:
<PAGE> 8
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
<S> <C> <C>
Income tax payable $ - $ 27,278
Commissions & royalties payable 32,042 90,003
Accrued advertising 148,324 51,850
Other expenses payable 104,084 260,132
--------- --------
Total $ 284,450 $429,263
========= ========
</TABLE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward Looking Statements: No Assurances Intended
Item 2 contains certain forward-looking statements regarding the Company, its
business, prospects and results of operations that are subject to certain risks
and uncertainties posed by many factors and events that could cause the
Company's actual business, prospects and results of operations to differ
materially from those that may be anticipated by such forward-looking
statements. Factors that may affect such forward-looking results, including
statements about backlog, the Company's ability to successfully develop new
products for new markets; customer acceptance of new products; the possibility
of the Company losing a large customer or key personnel; the Company's ability
to manage growth and to successfully integrate recent strategic marketing and
product development alliances; the impact of competition, delays in the
Company's introduction of new products; and the possibility of the Company
failing to keep pace with emerging technologies. Accordingly, no assurances can
be given that events or results mentioned in any such forward-looking statements
will in fact occur. When used in this discussion, words such as "believes", and
phrases such as "potential mass market opportunities", "should expand" and
similar expressions are intended to identify forward-looking statements, but are
not the exclusive means of identifying forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this report. The Company
undertakes no obligation to revise any forward-looking statements in order to
reflect events or circumstances that may subsequently arise. Readers are urged
to carefully review and consider the various disclosures made by the Company in
this report and in the Company's reports filed with the Securities and Exchange
Commission.
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, 1998 were
<PAGE> 9
$1,379,258 and $2,480,667, respectively, compared to $3,821,094 and
$6,750,304 for the quarter and six months ended June 30, 1997,
representing a 63.9% decrease for the quarter and a 63.3% decrease for the six
months, respectively. The following shows a quarterly and six months breakdown
and comparison of these revenues:
<TABLE>
<CAPTION>
Three months ended Increase Six months ended Increase
June 30, (Decrease) June 30, (Decrease)
REVENUES 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C>
Consumer products
$1,313,225 $ 3,626,742 (63.8%) $ 2,247,382 $ 6,473,581 (65.3%)
Contract revenues
$ 66,033 $ 194,352 (66.0%) $ 233,285 $ 276,723 (15.7%)
Total
$1,379,258 $ 3,821,094 (63.9%) $ 2,480,667 $ 6,750,304 (63.3%)
</TABLE>
The decrease in Consumer Products revenue is primarily due to shipments for
custom travel computers totaling $2,266,283, for the three months ended June 30,
1997 and $4,166,791 for the six months ended June 30, 1997, with no comparable
program in 1998.
Commitments for a promotion of up to 90,000 standard travel computers through a
television shopping network, 50,000 units committed to a mass market retailer,
and the planned launch of Travel*Star GPS by a large, nationwide electronics
chain, planned for August 1998, will strengthen sales during the second half of
1998. Current projected sales patterns will show significant second half
seasonality, as occurred prior to 1997, however, increased distribution in mass
market retail and electronics outlets initiated in 1998, custom products in new
distribution channels and more emphasis on new GPS products should combine to
reduce seasonality in future years.
Contract revenues for the quarter were down by 66% or $128,319 from the quarter
ended June 30, 1997. For the six months, contract revenues were down by 16% or
$43,438 over the comparable six months ended June 30, 1997. The lower contract
revenues were associated with a long term production contract for 12 laser
pointing and tracking systems (PATS) installations. This contract was largely
completed in the prior year. The revenues for this period reflect completion
against additions to the contract negotiated during 1997. 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
$717,628 or 54.6% of consumer product sales as compared to $2,114,260 or 58.3%
for the second quarter of 1997. For the six month period ended June 30, 1998
gross profit totaled $1,263,610 or 56.2% of consumer product sales compared to
$3,864,490 or 59.7% of sales for the six months ended June 30, 1997. The
decrease in gross margin is primarily due to the promotional program sales in
1997 discussed above. The Company continues to refine product offerings and
utilize off-shore contract manufacturing to reduce costs, and enable the Company
to profitably position products in mass retail markets. Gross margins on
<PAGE> 10
contract sales for the quarter ended June 30, 1998 and 1997 respectively, were
$114,000 (46.9%) and $143,128 (51.7%). For the six months ended June 30, 1998
and 1997, respectively gross margins on contract sales were $102,591 (44.0%) and
$143,138 (51.7%), reflecting slightly higher costs in during final completion of
work products.
Selling expenses for the current quarter totaled $744,253 as compared to
$1,090,764 for the same quarter last year, or a 31.8% decrease. For the current
six months, selling expenses totaled $1,033,314 compared to $2,137,047,
representing a 51.6% decrease. Sales commissions, primarily related to the 1997
custom promotional orders, for the current quarter decreased from $573,791 to
$49,974 and for the six months ended June 30, 1997 and 1998 respectively,
decreased from $1,076,742 for the six months ended June 30, 1997 to $67,888 for
the same period in 1998. Advertising and marketing expenditures for the quarter
were increased by $102,669 to $567,106; for the six months advertising and
marketing expenses decreased $106,300 to $778,995. Advertising and marketing
expenses, primarily in the cost of mailings with credit card statements, were
incurred to expand sales of consumer products division. This reflects the
company's strategy to increase its name recognition and to broaden distribution
channels.
General and administrative expenses for the second quarter of 1998 increased by
$69,738 (13.1%) to $600,219 primarily through increased personnel and salaries,
primarily to strengthen engineering, customer service and marketing functions,
legal and public relations expenses. For the six months ended June 30, 1998
administrative and general expenses increased $112,283 (11.0%) to $1,187,137,
with the bulk of the increase due in selective personnel increases in
engineering and marketing, and legal and public relations services.
Research and development expense decreased from $240,448 to $119,583
during the quarter ended June 30, 1998 as compared to the same period last year.
For the six month period, research and development decreased by $257,791 to
$251,025 as compared to $508,816 for the six months ended June 30, 1997. A major
factor in the decreased spending is the closure of POIS operations in December
1997. For the quarter and six months ended June 30, 1997, POIS research and
development expenses were $97,612 and $243,530, respectively and were not, in
management's judgement, adequately contributing to growth and profitability.
Therefore, those activities were consolidated at the St. Louis facility. During
the quarter and six months ended June 30, 1997, respectively, research and
development activities were closely focused on Travel*Star GPS for initiation of
the national electronic chain distribution planned in August 1998 The Company
will also finalize development of the Palm-Net and E@sy Mail products. For the
quarter and the year-to-date, these two research efforts accounted for over 90%
of all research and development expenditures.
In June of 1998, the Company was informed by IntelliData Corporation of
IntelliData's intent to reorganize operations. This reorganization included
termination of the Internet service provider, with which the Company had been
jointly developing the E@sy Mail product. In exchange
<PAGE> 11
for dissolution of the joint venture, the Intellidata will provide to the
Company rights to all software and documentation related to providing Internet
connection and service for Palm-Net and E@sy-Mail, which had been part of the
joint development project and compensation for uncompleted development costs
approximating $15,000. The Company will purchase from IntelliData the computer
equipment to provide internet services. The Company is negotiating with a new
service provider who would lease the acquired equipment, and purchase the
internet service software from the Company to provide for rapid and effective
testing and marketing of these products. The Company anticipates continuing this
program, providing it is able to successfully conclude negotiations with the new
Internet service provider.
Interest income for the quarter ended June 30, 1998 totaled $47,339, as
compared to $61,373 for the quarter ended June 30, 1997 and $103,972 for the six
months ended compared to $110,751 for the six months ended June 30, 1997.
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.
As a result of the foregoing, the Company reported a net loss of $421,688 or
($0.13) per fully diluted share for the quarter ended June 30, 1998 versus a net
income of $265,775, or $0.08 per fully diluted share for the quarter ended June
30, 1997. For the six months ended June 30, 1998, the Company reported a net
loss of $584,588 or ($0.18) per fully diluted share as compared to net income of
$290,839 or $0.08 per fully diluted share for the six months ended June 30,
1997.
BACKLOG
The current backlog of consumer products was approximately $1.4 million at June
30, 1998 consisting primarily of orders for standard and custom travel
computers. Backlog represents contracts which are cancelable by customers and
may not be indicative of revenue for future periods. The June 30, 1997 backlog,
which totaled approximately $2.2 million consisted primarily of orders for
custom travel computers. Essentially all of the June 30, 1998 backlog is
scheduled to be shipped over the next four months to existing customers.
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 borrowings, and
from cash generated by operations. At June 30, 1998, the Company had $3,705,392
in cash and cash equivalents. The Company's operating activities used cash of
$812,175 for the six months ended June 30, 1998. The primary uses of cash by
operating activities resulted from a $584,588 operating loss for the period and
reduction in accounts payable of $267,403 which were by reductions in accounts
receivable and inventories of $159,229 and $286,555, respectively.
Net cash used by investing activities totaled $363,989 including the investment
and earnings in Talon Research and Development Ppty. Ltd of $299,740 and
<PAGE> 12
capital expenditures, primarily for tooling new product production of $64,249.
Under a plan established by the Company in September 1997, the Company may
repurchase up to 200,000 shares of stock as part of an efficient means of cash
management and increasing shareholder value, accordingly, the Company purchased
92,500 shares valued at $349,413 during the six months ended June 30, 1998.
Borrowings against the Company's line of credit totaled $150,000 as of June 30,
1998, primarily to bridge maturity dates on other short-term investments
resulting in a net use of funds by financing activities of $194,413.
Working capital decreased from $10,607,580 at December 31, 1997 to $9,310,519 at
June 30, 1998. The Company's current ratio at June 30, 1998 was 27.0 to 1 as
compared to 12.3 to 1 at December 31, 1997. Inventories decreased $286,555 from
the December 31, 1997 level to $3,218,280 as of June 30, 1998. Capital
expenditures for the six months ended June 30, 1998 totaled $64,249. These
expenditures included leasehold improvements, purchases of office furniture, and
the purchase of additional production tooling and equipment.
The Company has an unsecured line of credit totaling $2.0 million plus a
$500,000 facility for letters of credit, bringing the total credit facility to
$2.5 million. As of June 30, 1998 the borrowing against this line of credit was
$150,000, compared to no outstanding borrowings at December 31, 1997. As a
result of operating losses, the Company is in violation of one of the covenants
of its borrowing agreement for the line of credit. The lender has granted a
waiver through the end of 1998. 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 in subsequent quarters will be
sufficient to meet the Company's operating and capital requirements for the next
twelve months.
<PAGE> 13
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:
On August 6, 1998 the Company filed a report on Form
8-K/A to report, pursuant to Item 4 thereof, a change in
principal accountant.
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 14, 1998 /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-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 3,705,392
<SECURITIES> 0
<RECEIVABLES> 1,528,691
<ALLOWANCES> (15,879)
<INVENTORY> 3,218,280
<CURRENT-ASSETS> 9,986,903
<PP&E> 1,400,647
<DEPRECIATION> (676,052)
<TOTAL-ASSETS> 11,611,210
<CURRENT-LIABILITIES> 676,384
<BONDS> 0
0
0
<COMMON> 34,100
<OTHER-SE> 10,696,469
<TOTAL-LIABILITY-AND-EQUITY> 11,611,210
<SALES> 2,254,797
<TOTAL-REVENUES> 2,480,667
<CGS> 1,114,465
<TOTAL-COSTS> 2,241,477
<OTHER-EXPENSES> (121,103)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34
<INCOME-PRETAX> (934,206)
<INCOME-TAX> (349,618)
<INCOME-CONTINUING> (584,588)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (584,588)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
