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, 1999
( ) 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 August 2, 1999
Common, $.01 par value 3,153,793
Transitional Small Business Disclosure Format Yes ___ No X
File Number
0-25380
ULTRADATA SYSTEMS, INCORPORATED
FORM 10-QSB
June 30, 1999
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets at
June 30, 1999 and December 31, 1998 3.
Consolidated Statements of Income
for the three months ended June 30, 1999 and 1998
and for the six months ended June 30, 1999 and 1998 4.
Consolidated Statements of Cash Flows
for the three months ended June 30, 1999 and 1998
and for six months ended June 30, 1999 and 1998 5.
Notes to Consolidated Financial Statements 6.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8.
PART II - OTHER INFORMATION 13.
Signatures 13.
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
Balance Sheets
June 30, December 31,
1999 1998
----------- -----------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 1,289,557 $ 1,254,091
Trade accounts receivable, net of allowance
for doubtful accounts of $9,520 at June 30,
1999 and December 31, 1998 731,123 3,103,965
Receivable due from affiliated company 312,534 -
Costs and estimated earnings on long-term
contracts 9,761 95,534
Inventories 2,617,538 3,121,003
Taxes Receivable 277,434 231,227
Prepaid expenses and other current assets 140,513 794,252
--------- ---------
Total current assets 5,378,460 8,600,072
Property and equipment, net 701,162 835,307
Deferred tax asset 453,793 500,000
Deferred compensation trust 150,702 150,702
Investment in affiliated companies 1,130,780 820,355
Advances to affiliates 263,343 250,000
Other assets 58,707 64,212
--------- ---------
Total assets 8,136,947 11,220,648
========= ==========
Liabilities and Stockholders Equity
Current liabilities:
Accounts payable 215,121 940,222
Accrued expenses and other liabilities 322,441 1,621,331
-------- ---------
Total current liabilities 537,562 2,561,553
Deferred rent 17,416 21,148
Deferred compensation liability 150,702 150,702
-------- ---------
Total liabilities 705,680 2,733,403
Stockholders equity:
Common stock, $.01 par value; 10,000,000 shares
authorized; 3,410,000 shares issued and
outstanding at June 30, 1999 and December 31,
1998 respectively 34,100 34,100
Additional paid-in capital 9,718,152 9,799,936
(Accumulated Deficit) Retained earnings (1,186,145) 59,039
Treasury stock (326,171 and 255,200 shares
at cost as of June 30, 1999 and December 31,
1998, respectively) (942,311) (900,281)
Notes receivable issued for purchase of
common stock (192,529) (505,549)
---------- ----------
Total stockholders equity 7,431,267 8,487,245
---------- ----------
Total liabilities and stockholders equity $ 8,136,947 $ 11,220,648
========== ===========
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADAA SYSTEMS, INCORPORATED AND SUBSIDIARY
Consolidated Statements of Operations
Three months and six months ended June 30, 1999 and 1998
Three months ended June 30, Six months ended June 30,
1999 1998 1999 1998
---------- ----------- ---------- ---------
(unaudited) (unaudited)
Net sales:
Consumer products $1,170,931 $1,313,225 $2,254,722 $2,247,382
Contract - 66,033 - 233,285
--------- --------- --------- ---------
Total net sales 1,170,931 1,379,258 2,254,722 2,480,667
Cost of sales:
Consumer products 701,736 595,597 1,238,490 983,772
Contract - 54,304 - 130,694
--------- --------- --------- ---------
Total cost of sales 701,736 649,901 1,238,490 1,114,466
Gross profit 469,195 729,357 1,016,232 1,366,201
Selling expense 457,504 744,253 1,176,014 1,033,314
General and administrative
expenses 497,377 600,219 1,032,868 1,137,137
Research and development
expense 121,487 119,581 220,713 251,025
-------- --------- --------- ---------
Operating loss (607,173) (734,696) (1,413,363) (1,055,275)
Other income (expense):
Interest expense - (34) - (34)
Interest income 17,325 47,339 35,233 103,972
Equity in affiliated
company 43,019 17,404 97,103 17,404
Other, net 467 495 35,843 (273)
------- ------- --------- ---------
Total other income, net 60,811 65,204 168,179 121,069
Loss before income tax
expense (546,362) (669,492) (1,245,184) (934,206)
Income tax benefit - 247,804 - 349,618
Net loss $(546,362) $(421,688) $(1,245,184) $(584,588)
======== ======== ========== =======
Loss per share:
Basic $ (0.17) $ (0.13) $ (0.39) $ (0.18)
Diluted $ (0.17) $ (0.13) $ (0.39) $ (0.18)
Weighted Average Shares Outstanding:
Basic 3,167,577 3,323,093 3,161,130 3,334,361
Diluted 3,167,577 3,323,093 3,161,130 3,334,361
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
Consolidated Statements of Cash Flows
Six Months Ended June 30, 1999 and 1998
1999 1998
----------- ----------
(unaudited)
Cash flows from operating activities:
Net loss $ (1,245,184) $ (584,588)
Adjustments to reconcile net (loss)income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 134,785 124,560
Deferred income tax provision 46,207 -
Inventory reserve 49,977 -
Equity in earnings of unconsolidated affiliate (97,039) (17,240)
Note Receivable Reserve 15,500 -
Increase (decrease) in cash due to changes
in operating assets and liabilities:
Trade accounts receivable, net 2,372,842 159,229
Receivable due from affiliate company (312,534) -
Costs and estimated earnings on long-term
contracts 85,773 117,918
Inventories 453,488 286,555
Taxes Receivable (46,207) -
Prepaid expenses and other current assets 616,227 (375,000)
Other assets 5,505 (132,365)
Accounts payable (725,101) (267,403)
Accrued expenses and other liabilities (1,298,890) (144,813)
Deferred rent (3,732) 3,732
---------- ----------
Net cash (used in) provided by operating
activities 51,617 (829,415)
Cash flows from investing activities:
Investment in affiliated companies (13,386) (282,500)
Capital expenditures (640) (64,249)
---------- ----------
Net cash used in investing activities (14,026) (346,749)
Cash flows from financing activities:
Borrowing against line of credit - 150,000
Repurchase of common stock at cost (2,125) (349,413)
Proceeds from repayment of notes receivable to
purchase common stock - 5,000
---------- -----------
Net cash used in financing activities (2,125) (194,413)
Net(decrease) increase in cash and cash
equivalents 35,466 (1,370,577)
Cash and cash equivalents at beginning
of year 1,254,091 5,075,968
--------- ---------
Cash and cash equivalents at end of period $ 1,289,557 $ 3,705,391
========= =========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest - 34
Cash paid during the period for taxes - -
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADATA SYSTEMS, INCORPORATED
June 30, 1999
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim financial statements included herein have been
prepared by Ultradata Systems, Incorporated (the "Company"), without audit,
except for the balance sheet at December 31, 1998, 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 Company s investment in Talon Research and Development Co.,
Ltd., Auckland, NZ, of 18.9% through March 31, 1999, and 24.9%, thereafter,
is accounted for using the equity method.
In the opinion of management, the information furnished for the three-
month and six-month periods, respectively, ended June 30, 1999 and 1998,
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, 1999. It is
suggested that the interim financial statements be read in conjunction with
the audited consolidated financial statements for the year ended December 31,
1998, as filed with the Securities and Exchange Commission on Form 10KSB.
Use of Estimates
The financial statements have been prepared in conformity with generally
accepted accounting principles and, as such, include amounts based on
informed estimates and adjustments by management, with consideration given to
materiality. Actual results could vary from those estimates.
Note 1. Nature Of Operations
The principal business activity of Ultradata Systems, Incorporated (the
Company), located in St. Louis, Missouri, is the design, manufacture, and
sale of hand-held electronic information products.
Note 2. Earnings Per Share
A reconciliation of the numerator and denominator of the earnings per
share calculations is provided for all periods presented. The numerator for
basic and diluted earnings per share is net loss for all periods presented.
The denominator for basic and diluted earnings per share for 1999 and 1998,
as follows:
For the three months ended For the six months ended
June 30 June 30
1999 (a) 1998 (b) 1999 (a) 1998 (b)
-------- -------- -------- ---------
Numerator:
Net Loss $ (546,362) $ (421,688) $(1,245,184) $ (584,588)
Numerator for basic
and diluted loss
per share - loss
available to
common shareholders $ (546,362) $ (421,688) $(1,245,184) $ (584,588)
Denominator:
Denominator for basic loss
per share - weighted
average shares 3,167,577 3,323,493 3,161,130 3,334,361
Basic Loss Per Share $ (0.17) $ (0.13) $ (0.39) $ (0.18)
Effect of dilutive
securities: Employee
stock options - - - -
Denominator for diluted loss per share -
Adjusted weighted
average shares and
assumed conversions 3,167,577 3,323,493 3,161,130 3,334,361
Diluted Loss per Share $ (0.17) $ (0.13) $ (0.39) $ (0.18)
(a) Options to purchase 310,192 shares of common stock at prices between $3.00
and $7.39 per share were outstanding at June 30,1999, but were not included
in the computation of diluted loss per share because the options' exercise
price was greater than the average market price of common shares.
(b) Options to purchase 274,100 shares of common stock at prices between $4.00
and $7.39 per Share were outstanding at June 30, 1998, but were not included
in the computation of diluted loss per share because the options' exercise
price was greater than the average market price of common shares.
Note 3. Incentive Stock Option Plan
As of June 30, 1999, the Company s outstanding stock options totaled
310,192 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
Prepaid expenses at June 30, 1999 and December 31, 1998 consist of the
following:
June 30, December 31,
1999 1998
---- ----
Prepaid advertising $ 55,075 $ 554,784
Other prepaid expenses 85,438 239,468
------- -------
$ 140,513 $ 794,252
========= =========
Note 5. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities at June 30, 1999 and December 31,
1998 consist of the following:
1999 1998
---- ----
Accrued sales commissions
and royalties $ 19,819 $ 80,143
Accrued advertising 192,527 1,361,085
Other 110,095 180,103
--------- ---------
$ 322,441 $ 1,621,331
========= ===========
Note 6. Advances To Affiliates
The Company has purchased certain electronic components used in
Travel*Star and other GPS applications and sold those components to Talon
Research and Development Co., Ltd. At June 30, 1999 a receivable from Talon
of $312,534 resulted from those transactions. Talon will repay all amounts
due during 1999.
Note 7. Supplemental Cash Flow Information
On August 12, 1998, the Company purchased an option to acquire additional
shares in Talon Research and Development Company, Ltd., for $314,162. On
April 1, 1999, the parties agreed to apply the option proceeds, to increase
the Company s investment in Talon from 18.9% to 24.9%.
On May 8, 1999, the Company formed a joint venture with Influence
Content, LLC. to form Influence Data, LLC. The joint venture will establish
an internet marketing site called Next-Exit.com featuring the Company s
travel computers. In exchange for the Company's one-third (33.3%) interest in
the venture, was funded by the issuance of 80,000 common shares, valued at
$200,000. These were treasury shares previously purchased in the open market
by the Company for such use.
On June 11, 1999 certain officers and directors of the Company surrendered
149,971 shares of common stock. The surrendered shares were used to reduce
principal and accrued interest on loans made by the Company. The shares are
held in the treasury.
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 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 include:
the Company's ability to successfully develop new products for new markets
such as the American Automobile Association (AAA) Trip Wizard, and
Travel*Star 24; customer acceptance of new products; the possibility of the
Company losing a large customer, or key personnel; new or terminated custom
product promotions; the Company's ability to manage growth and to
successfully integrate recent strategic marketing and product development
alliances, including the AAA Trip Wizard project; the impact of
competition on the Company's revenues; delays in the 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 "are expected" 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 on Form 10-KSB
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
financial statements, including the notes thereto.
OVERVIEW
Since 1987, the Company has engaged in the development, manufacturing
and marketing of easy to use, portable data retrieval devices that employ the
Company s proprietary data compression technology for storing large
quantities of information on and retrieving it rapidly from a microprocessor
memory chip. These portable devices known as Road Whiz and
other tradenames, which retail for prices between $19.95 and $49.95, have
been primarily been sold through specialty retailers, television shopping
networks, promotional marketers, and premium sales organizations.
Beginning in 1998, the Company introduced Travel*Star GPS which
incorporates both proprietary data technology and global positioning
satellite technology to provide location for proximate services. This item
retails at $249 to $349 depending on the features of the specific unit. The
GPS driven products have had limited sales to date. As a result of customer
feedback and the rapid development of the GPS market, the Company has
decided to re-engineer the product to provide more features and functionality
with TravelStar GPS 24. TravelStar GPS 24 integrates the GPS antenna and
receiver with the travel computer and display into one case and provides a
unique set of features comparable to in-car GPS systems, generally costing
$1,000 and higher. These features include route calculations and turn-by-turn
directions, with audible output, to service locations and sites across the
country. Management expects to bring the product to market at a retail
price of approximately $300. Preliminary interest from retailers based on
demonstrations of working prototypes has been encouraging.
Strategic Partnerships
The Company has entered into a joint venture with Influence Content,
LLC., a website developer and marketer for e-commerce, and is one-third
owner of the joint venture, Influence Data, LLC . The new entity is
developing a web site denoted Next-Exit.com. Influence LLC, which has
developed web sites for Compaq Computer and Express Script, among
others, is configuring Next-Exit.com as a comprehensive road-travel portal.
Users can purchase road travel products and services and access road-travel-
related information. Examples of services to be provided include routing,
free e-mail while traveling, and hotel discounts and reservations. Related
information includes weather and road conditions and emergency roadside
assistance. A variety of travel-related products, in addition to Ultradata
products, will be sold through the web site and its links to other sites.
The initial site will be operational in August 1999 with full operation
scheduled for October 1999.
The Company has entered into an agreement with the American Automobile
Association, (AAA) to incorporate AAA restaurant, lodging and service
facilities into a proprietary database that will also indicate the AAA
rating for each establishment. The unit will be called the AAA Trip Wizard.
The strong identity of AAA, and distribution through AAA member clubs, will
establish much stronger product identity in the marketplace. Initial
shipments of the AAA Trip Wizard were made in April 1999 to AAA affiliated
clubs, and orders have been received from specialty retailers for the unit.
Initial sales are exceeding planned levels. The Missouri AAA is planning a
test program using the Trip Wizard as a premium incentive to renew or upgrade
membership. If successful, this program could be expanded to other AAA
branches.
In May the Company received approval of a patent application which
combines Global Positioning Satellite technology with radar detection devices
to provide a unit which is more accurate and less susceptible to false
readings that products currently on the market. Discussions are ongoing with
potential marketing partners to bring this concept to the market.
RESULTS OF OPERATIONS
Net sales for the three months and six months ended June 30, 1999 were
$1,170,931 and $2,254,722, respectively compared to $1,379,258 and $2,480,667
for the three months and six months ended June 30, 1998, representing a 15%
decrease for the quarter and a 9% decrease for the year-to-date. There was no
revenue realized for laser system contracts for the quarter and six months
ended June 30,1999, as compared to net sales of $66,033 and $233,285 for the
quarter and six months ended June 30, 1998, respectively. The following
shows a breakdown and comparison of net sales:
Net Sales
Three Months Ended June 30, Six Months Ended June 30,
-------------------------- ------------------------
1999 1998 Increase/ 1999 1998 Increase/
Decrease Decrease
Consumer Products $1,170,931 $1,313,225 (12%) $2,254,722 $2,247,382 -0-%
Laser System
Contracts - 66,033 (100%) - 233,285 (100%)
---------- --------- ----- --------- --------- -----
$1,170,931 $1,379,258 (18%) $2,254,722 $2,480,667 (9%)
Consumer Products revenue for the three ended months June 30, 1999
decreased by $142,294 (10.8%) from the comparable period ended June 30, 1998,
but increased by $7,340(0.3%) from the six month period in 1998. The decrease
in consumer product sales is primarily due to lower sales through direct
mail credit card insert programs.
Contract revenues for the three months and six months ended June 30,
1999, decreased by $66,033 and $233,285, respectively, compared to the
comparable periods in 1998. The decrease reflects the near completion of the
single remaining government contract. One site remains to be completed,
pending customer preparations that will permit completion, and another system
has been shipped and is awaiting contractor approval of an installation date.
Gross profit for the consumer product group for the three months ended
June 30, 1999 totaled $469,195 or 40.1% of sales as compared to $717,628 or
54.6% of sales for the three months ended June 30, 1998. For the six months
ended June 30, 1999 gross profit totaled $1,016,232 or 45.1% of sales as
compared to $1,263,610 or 56.2% of sales. The reduction in margins is
primarily due to lower selling prices for mass merchandise retail units and
credit card insert units.
Selling expenses for the three months and six months ended June 30, 1999
totaled $457,504 and $1,176,014, respectively, compared to $744,253 and
$1,033,314, respectively for the comparable periods ended June 30, 1998.
For the six months, this amount represents an increase of $142,700, or 13.8%.
The year-to-date increase is due primarily to advertising costs relating to
the late mailing of certain fourth quarter 1998 programs, the cost of which
heavily impacted expenses in January and February 1999. The reduction in
second quarter costs is primarily related to the conversion of credit card
insert programs to wholesale accounts with the syndicator paying for all
advertising costs, and reductions in postage costs reflecting individual
shipments of credit card program orders in 1998.
General and administrative expenses, for the three months and six months
ended June 30, 1999, were $497,377 and $1,032,868 respectively, compared to
$600,219 and $1,137,137, respectively for the comparable periods in 1998.
For the three months ended June 30, 1998, administrative expense decreased
by $102,842 or (17.1%). This decrease was achieved through reductions in
professional service costs and senior management salary reductions.
For the six months, administrative expenses decreased by $104,269 or (9.2%)
from the six- month period ended June 30, 1998. The decrease reflects senior
management salary reductions and significant reductions in professional
services, but does not fully reflect additional personnel reductions made
in June 1999.
Research and development expense for the three months and six months
ended June 30, 1999, were $121,487 and $220,713, respectively, compared to
the same periods in 1998, which were $119,581 and $251,025 respectively. The
Company's research and development efforts continue to be focused on AAA
Trip Wizard and Travel*Star 24 which accounted for approximately 85% of
research and development spending for each of the three and six months
periods ended June 30, 1999.
Other income for the three months and six months ended June 30, 1999
totaled $60,811 and $168,179, respectively, compared to $65,204 and $121,069
for the comparable periods ended June 30, 1998. The increase for the quarter
is primarily due to the Company s equity interest (24.9%) in the earnings of
Talon of $43,019, compared to $17,404 in 1998. Talon earnings in 1998 are
reflected for only the months of May and June 1998, and the Company had an
18.9% interest in the Company for that period. For 1999, the Company
increased its interest in Talon to 24.9% effective in April 1999. Other
income for the six months ended June 30, 1999 also include, $35,000 received
in settlement of an agreement by the Company to forego certain tradenames
related to portable information devices. Smaller investable balances were
available during the first and second quarters of 1999, resulting in a
decrease in interest income of $68,739 and $30,014 respectively, compared to
the six months and three months ended June 30, 1998.
As a result of the foregoing, the Company posted a net loss of ($546,362)
or ($0.17) per diluted common share for the three months ended June 30, 1999,
compared to a net loss of ($421,688), or ($0.13) per diluted common share for
the three months ended June 30, 1998. The Company lost $(1,245,184) or
($0.39) per diluted common share for the six months ended June 30, 1999, as
compared to a loss of ($584,588) or ($0.18) per diluted share for the six
months ended June 30, 1998. The results for the three months and six months
ended June 30, 1998 are net of a provision for an income tax benefit of
$247,804 and $349,618, respectively. Deferred taxes related to the three
months ended June 30, 1999 are fully reserved, and have no impact on earnings
for the quarter.
The Company has significantly reduced its personnel and other operating
expenses for the second half of the year. A increase in sales is required for
restore net income, however. With existing and expected purchase orders,
management expects a stronger fourth quarter, which will substantially
reduce the losses for 1999. The Company has purchase orders, written
commitments, and planned advertising promotions from major retailers for
versions of the Road Whiz. Together with AAA TripWizard sales, these
programs will result in a sharp increase in sales. In addition, most of these
sales will occur with units made through a lower-cost foreign manufacturer,
which will improve gross margins. These lower-cost units will begin to
arrive and be shipped during the fourth quarter.
Management believes that through improved marketing partnerships, such
as AAA, Kmart and Target, and new marketing relationships being pursued for
Travel*Star 24, the Company is positioned to establish stronger market
presence. In addition, these relationships have created opportunities to
reduce product costs through use of chip-on-board assembly techniques, which
will improve gross margin contribution. Management has also taken steps to
reduce costs, including staff reductions, salary reductions for senior
management and reductions in operating and outside service costs.
FINANCIAL CONDITION AND LIQUIDITY
The Company has funded its operations primarily through the sale of
Common Stock and historically through periodic borrowings, and from cash
generated by operations. At June 30, 1999, the Company had $1,289,557 in
cash and cash equivalents, compared to $1,254,091 at December 31, 1998. The
Company's operating activities through June 30, 1999 provided cash totaling
$51,617, primarily reflecting the operating loss for the six months of
$1,245,184, and reductions of $725,101 and $1,298,890 in accounts payable and
accrued liabilities, respectively. These amounts were offset by increases to
cash of $2,372,842 in collection from accounts receivable and $453,488 in
inventory reductions.
Net cash used by investing activities totaled $14,026, which included
$13,386 for certain legal and administrative expenses pertaining to the
Company s investment in Talon Research and Development Co., Ltd.
Net cash used by financing activities consists of $2,125 spent to
acquire the Company s common stock in the open market.
Inventories decreased $453,488 from the December 31, 1998 level to
$2,617,538, net of reserves for obsolescence of $519,186 as of June 30, 1999.
The Company is committed to reducing inventory levels during 1999 to increase
available cash for operations. Trade accounts receivable decreased by
$2,372,842 from $3,103,965 at December 31, 1998.
As a result, net working capital decreased from $6,038,519 at December
31, 1998 to $4,840,898 at June 30, 1999. The Company's current ratio at June
30, 1999 was 10.0 to 1, as compared to 3.4 to 1 at December 31, 1998.
The Company has a secured line of credit with Southwest Bank of St.
Louis totaling $1.0 million including a $400,000 facility for a standby
letter of credit, as part of a lending agreement between Talon and a New
Zealand bank. Other than the standby letter of credit, the Company has no
borrowings as of June 30, 1999. The credit facility is secured by the
Company's s accounts receivable, inventories and equipment, with an interest
rate of 1% over Prime Rate. The Company believes that the liquidity provided
by existing cash and cash equivalents, the new borrowing arrangement
described above, and the cash generated from operations should be sufficient
to meet the Company's operating and capital requirements for the remainder of
the year.
YEAR 2000 ISSUES
The Company has implemented plans to address Year 2000 issues. The
primary focus includes: Company information technology systems; other support
systems; the readiness of Company suppliers and customers. Although Company
products include computerized components, the data bases are not date
sensitive, and the Company believes that there are no additional
contingencies or warranties related to its product resulting from Year 2000
issues. Expenses related to determination of Year 2000 compliance have been
expensed and incurred and have not been material to the financial results of
the Company.
With respect to the Company s information technology systems, the
Company s primary accounting, electronic commerce and related systems are
Year 2000 compliant and the software is certified as such by the vendors.
The Company has acquired and installed software updates, as such are made
available, under technical support contracts, with the software vendors.
Primary product support databases have been tested and will recognize
years from 2000 and higher in the correct century. Non-information
technology systems, including telecommunications have been tested and appear
to be Year 2000 compliant.
The Company has developed information by structured questionnaires sent
to key customers and vendors. The Company continues to receive responses from
vendors and customers. To date, nothing has come to the Company s attention t
hat Year 2000 problems will interrupt the Company s operations. However, the
Company is assessing the implications of respondents readiness, to develop a
plan to monitor progress for any respondents not as yet indicating Year 2000
compliance, and to develop appropriate contingency plans for any situations
found which may have a adverse impact.
An interruption of the Company s ability to conduct its business due to
a Year 2000 problem could have a material adverse effect on the Company. The
Company is not presently aware of any such significant exposure. However,
there can be no guarantee that the systems of third parties, such as
customers or suppliers, on which the Company relies, will be converted in a
timely manner, or that failure to convert would not have a material
adverse effect on the Company.
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.
August 16, 1999 /s/ Monte Ross
-----------------------------
Monte Ross, President and CEO
(Duly authorized officer and
principal financial officer)
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