U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 - FOR THE QUARTERLY PERIOD ENDED September 30, 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 November 1, 1999
Common, $.01 par value 3,083,322
Transitional Small Business Disclosure Format Yes ___ No X
File Number
0-25380
ULTRADATA SYSTEMS, INCORPORATED
FORM 10-QSB
September 30, 1999
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Unaudited Financial Statements
Consolidated Balance Sheets at
September 30, 1999 and December 31, 1998 3.
Consolidated Statements of Income
for the three months ended September 30, 1999 and 1998
and for the nine months ended September 30, 1999 and 1998 4.
Consolidated Statements of Cash Flows
for the three months ended September 30, 1999 and 1998
and for nine months ended September 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
As of September 30, 1999 and December 31, 1998
September 30, December 31,
1999 1998
------------- ------------
Assets (unaudited)
Current assets:
Cash and cash equivalents $ 839,061 $1,254,091
Restricted cash 400,000 -
Trade accounts receivable,
net of allowance for doubtful
accounts of $9,520 at September
30, 1999 and December 31, 1998 462,589 3,103,965
Receivable due from affiliated company 195,466 -
Costs and estimated earnings on long-term
contracts 40,258 95,534
Inventories 2,879,340 3,121,003
Taxes Receivable - 231,227
Prepaid expenses and other current
assets 117,361 794,252
---------- ---------
Total current assets 4,934,075 8,600,072
Property and equipment, net 631,768 835,307
Deferred tax asset 393,421 500,000
Deferred compensation trust 114,539 150,702
Investment in affiliated companies 1,189,826 820,355
Advances to affiliates 268,012 250,000
Other assets 55,208 64,212
---------- ---------
Total assets $ 7,586,849 $11,220,648
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable 338,050 940,222
Accrued expenses and other liabilities 310,573 1,621,331
---------- ---------
Total current liabilities 648,623 2,561,553
Deferred rent 15,550 21,148
Deferred compensation liability 114,539 150,702
---------- ---------
Total liabilities 778,712 2,733,403
Stockholders' equity:
Common stock, $.01 par value;
10,000,000 shares authorized;
3,412,493 shares issued and
outstanding at September 30, 1999
and December 31, 1998 respectively 34,100 34,100
Additional paid-in capital 9,718,151 9,799,936
(Accumulated Deficit) Retained earnings (1,807,239) 59,039
Treasury stock (326,171 and 255,200
shares at cost as of September 30, 1999
and December 31, 1998, respectively) (942,311) (900,281)
Notes receivable issued for purchase of
common stock (194,564) (505,549)
--------- ----------
Total stockholders' equity 6,808,137 8,487,245
--------- ----------
Total liabilities and stockholders' equity $ 7,586,849 $ 11,220,648
========= ==========
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
Consolidated Statements of Operations
Three months and nine months ended September 30, 1999 and 1998
Three months ended Nine months ended
September 30, September 30,
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
Net sales:
Consumer products $ 591,987 $ 1,335,782 $ 2,846,709 $ 3,583,164
Contract - 240,271 - 240,271
-------- --------- --------- ---------
Total net sales 591,987 1,342,768 2,846,709 3,823,435
Cost of sales:
Consumer products 466,685 709.959 1,705,175 1,693,731
Contract - 68,579 - 199,273
-------- --------- --------- ----------
Total cost of sales 466,685 778,538 1,705,175 1,893,004
Gross profit 125,302 564,230 1,141,534 1,930,431
Selling expense 170,202 362,279 1,346,216 1,395,593
General and administrative
expenses 547,961 588,581 1,580,829 1,725,718
Research and development
expense 104,458 196,143 325,171 447,168
-------- -------- --------- ---------
Operating loss (697,319) (582,773) (2,110,682) (1,638,048)
Other income (expense):
Interest expense - (599) - (633)
Interest income 21,488 35,624 56,721 139,596
Equity in affiliated
company 55,234 27,608 152,337 45,012
Other, net (497) (3,382) 35,346 (3,655)
-------- ------- ---------- ---------
Total other income, net 76,225 59,251 244,404 180,320
-------- ------- ---------- ---------
Loss before income tax
expense (621,094) (523,522) (1,866,278) (1,457,728)
Income tax expense
(benefit) - (198,933) - (548,551)
-------- -------- ---------- ----------
Net loss $(621,904) $(324,589) $(1,866,278) $ (909,177)
======= ======= ========= ========
Loss per share:
Basic $ (.20) $ (.10) $ (0.60) $ (0.27)
======= ======= ======== =========
Diluted $ (.20) $ (.10) $ (0.60) $ (0.27)
======= ======= ======== =========
Weighted Average Shares Outstanding:
Basic 3,083,322 3,316,010 3,134,960 3,329,056
========= ========= ========= =========
Diluted 3,083,322 3,316,010 3,134,960 3,329,056
========= ========= ========= =========
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADATA SYSTEMS, INCORPORATED AND SUBSIDIARY
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1999 and 1998
1999 1998
-------- --------
(unaudited)
Cash flows from operating activities:
Net loss $ (1,866,278) $ (909,172)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 207,793 186,840
Deferred income tax provision 106,579 -
Inventory reserve 66,331 -
Equity in earnings of unconsolidated
affiliate (152,337) -
Note Receivable Reserve 23,250 -
Increase (decrease) in cash due to
changes in operating assets and
liabilities:
Trade accounts receivable, net 2,872,603 171,877
Receivable due from affiliate
company (195,466) -
Costs and estimated earnings on
long-term contracts 55,276 109,392
Inventories 175,332 (568,405)
Prepaid expenses and other current
assets 676,891 (472,352)
Other assets (42,962) -
Accounts payable (602,172) 369,277
Accrued expenses and other
liabilities (1,310,758) (201,656)
Deferred rent (5,598) 5,598
---------- ---------
Net cash (used in) provided by
operating activities 8,484 (1,308,601)
---------- ---------
Cash flows from investing activities:
Investment in affiliated companies (17,134) (328,105)
Option to purchase up to 51% interest in
Talon - (314,147)
Restricted cash (400,000) -
Other assets - (276,322)
Capital expenditures (4,255) (197,327)
--------- ----------
Net cash used in investing activities (421,389) (1,115,901)
--------- ---------
Cash flows from financing activities:
Repurchase of common stock at cost (2,125) (507,694)
Proceeds from repayment of notes
receivable to purchase common stock - 5,000
--------- ---------
Net cash used in financing activities (2,125) (502,694)
--------- ---------
Net(decrease) increase in cash and
cash equivalents (415,030) (2,927,196)
Cash and cash equivalents at beginning
of year 1,254,091 5,075,968
---------- ---------
Cash and cash equivalents at end of
period $ 839,061 $ 2,148,772
========== =========
Supplemental disclosure of cash flow information:
Cash paid during the period for
interest $ - $ 599
Cash paid during the period for taxes $ - $ -
See accompanying summary of accounting policies and notes to financial
statements.
<PAGE>
ULTRADATA SYSTEMS, INCORPORATED
September 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 nine-month periods ended September 30, 1999 and 1998, respectively,
includes all adjustments, consisting solely of normal recurring accruals
necessary for a fair presentation of the financial results for the respective
interim periods. This discussion 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 nine months ended
September 30 September 30
1999 (a) 1998 (b) 1999 (a) 1998 (b)
Numerator: -------- ---------- ----------- -----------
Net Loss ($621,094) ($324,589) ($1,866,278) ($909,177)
Numerator for basic
and diluted loss
per share loss
available to common
shareholders ($621,094) ($324,589) ($1,866,278) ($909,177)
Denominator:
Denominator for
basic loss per
share - weighted
average shares 3,083,322 3,316,010 3,134,960 3,329,056
Basic Loss Per
Share ($0.20) ($0.10) ($0.60) ($0.27)
Effect of dilutive
securities: Employee
stock options - - - -
Denominator for diluted
loss per share -
Adjusted weighted
average shares and
assumed
conversions 3,083,322 3,316,010 3,134,960 3,329,056
Diluted Loss per
Share ($0.20) ($0.10) ($0.60) ($0.27)
(a) Options to purchase 312,217 shares of common stock at prices between $2.00
and $7.39 per share were outstanding at September 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 272,592 shares of common stock at prices between $5.00
and $7.39 per share were outstanding at September 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 September 30, 1999, the Company's outstanding stock options totaled
312,217 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 September 30, 1999 and December 31, 1998 consist of
the following:
September 30, December 31,
1999 1998
Prepaid advertising $ 59,025 $ 554,784
Other prepaid expenses 58,336 239,468
--------- ----------
$ 117,361 794,252
========= =========
Note 5. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities at September 30, 1999 and December
31, 1998 consist of the following:
September 30, December 31,
1999 1998
Accrued sales commissions
And royalties $ 5,512 $ 80,143
Accrued advertising 109,675 1,361,085
Other 195,386 180,103
--------- ---------
$ 310,573 $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 September 30, 1999 a receivable from Talon of
$195,466 resulted from those transactions.
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. called Influence Data, LLC. The joint venture will establish an
Internet marketing site called DriveThere.com featuring the Company's travel
computers and other driving products and services. 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 loans
and accrued interest on loans made by the Company to purchase shares
previously issued. The shares, valued at $321,689, 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 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 include:
the Company's ability to successfully develop new products for new markets,
such as 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; 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 and other
periodic reports as 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 market research,
including customer feedback, and the expected rapid development of the GPS
auto after-market, the Company has decided to re-engineer the product to
provide more features and functionality with Travel*Star 24. Travel*Star 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.
Strategic Partnerships
In August, the Company finalized negotiations in association with
IdeaVillage.com LLC a fourth-quarter promotion with a major retailer.
IdeaVillage.com LLC will promote the Auto Pilot handheld travel computer in
a television campaign during the 1999 holiday season. Ultradata has provided
certain data components for 120,000 units and will receive a royalty of $1.25
per unit from IdeaVillage.com based on sales realized from the consumer
electronics retail chain in the fourth quarter of 1999.
The Company has entered into a joint venture with Influence Content, LLC,
a web site 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 DriveThere.com. Influence LLC has developed web sites for
numerous manufacturers and software clients and is configuring DriveThere.com
as a comprehensive road-travel portal. Users can purchase road travel products
and services and access road-travel-related information. Examples of road
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 web site went live on October 29, 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 also indicates the AAA rating for
each establishment. The unit is called the AAA Trip Wizard. Management believes
that the mass distribution capability and enhanced driver visibility garnered
through the AAA member clubs deliver strong product recognition in the
marketplace.
The Company received US Patent NO. 5,943,653 in August for electronic
coupons for highway services. We are having discussions with a company that
promotes discount coupons for travelers to jointly develop a synergistic
product.
In May the Company also received approval of a patent application which
combines Global Positioning Satellite (GPS) technology with radar detection
devices to provide a unit which is more accurate and less susceptible to
unwanted alarms than products currently on the market.
RESULTS OF OPERATIONS
Net sales for the three months and nine months ended September 30, 1999
were $591,987 and $2,846,709, respectively, compared to $1,342,768 and
$3,823,435 for the three months and nine months, respectively, ended September
30, 1998, representing a 55.9% decrease for the quarter and a 25.5% decrease
for the year-to-date.
Consumer Products revenue for the three months ended September 30, 1999
decreased by $743,795 (55.7%) from the comparable period ended September 30,
1998, and decreased by $736,455 (20.6%) from the nine month period in 1998.
For the quarter ended September 30, 1998, the Company filled a large Holiday
promotion order for a key customer. For the third quarter ended September
30, 1999, the Company shipped $583,000 of a $1.2 million 1998 Holiday purchase
order to a key customer. That customer ordered another $1.2 million during
July of 1999, but requested that the order be shipped in its entirety during
the fourth quarter of this year. This order was part of a $1.9 million backlog
as of September 30, 1999.
Contract revenues for the three months and nine months ended September
30, 1999 were zero, compared to revenues of $6,986 and $240,271 for the
quarter and nine months, respectively, ended September 30, 1998. The absence
of government work reflects the near completion of the single remaining
government contract that carried over from the prior year. One installation
remains to be completed, pending customer preparations that will permit
completion, and another system is awaiting customer readiness for installation.
The Company does not anticipate that government business will have significant
impact on future sales.
Gross profit for the consumer product group for the three months ended
September 30, 1999 totaled $125,302 or 21.2% of sales as compared to $625,823
or 47% of sales for the three months ended September 30, 1998. Margins were
adversely impacted by a number of unfavorable factors, including, (1) sale of
slow-moving inventory at low prices, (2) providing IdeaVillage.com with custom
data components, (3) adding to inventory obsolescence reserves, and (4)
incurring unusual in-bound shipping costs for inventory to ship in the fourth-
quarter. Exclusive of these events, the gross margin for consumer products
would have been 38.7%.
For the nine months ended September 30, 1999 gross profit totaled
$1,141,534 or 40.1% of sales as compared to $1,930,431 or 50.5% of sales for
the same period in 1998.
Selling expenses for the three months and nine months ended September
30, 1999 totaled $170,202 and $1,346,216, respectively, compared to $362,279
and $1,395,593, respectively for the comparable periods ended September 30,
1998. The decrease of $192,077 (53.0%) for the quarter generally reflects
lower sales commissions attributed to lower sales volume as well as some
savings attributed to an improved business model for sales and marketing
resource management. For the nine months, the decrease of $49,377, or 3.5%,
reflects the benefits of the new model. The nine-month results for this year
include realized advertising costs relating to delayed credit card program
mailings from the prior year, the cost of which heavily impacted expenses in
January and February 1999.
General and administrative expenses, for the three months and nine months
ended September 30, 1999, were $547,961 and $1,580,829 respectively, compared
to $588,581 and $1,725,718, respectively for the comparable periods in 1998.
For the three months ended September 30, 1999, administrative expense
decreased by $40,620 or (6.9%). This decrease was achieved through reductions
in professional service costs and senior management salaries. For the nine
months, administrative expenses decreased by $144,889 or (8.4%) from the
nine-month period ended September 30, 1998. The decrease reflects senior
management salary reductions, significant reductions in professional services,
and additional personnel reductions made in June 1999.
Research and development expense for the three months and nine months
ended September 30, 1999, were $104,458 and $325,171, respectively, compared
to the same periods in 1998, which were $196,143 and $447,168, respectively.
The Company's research and development efforts in the third quarter were
heavily focused on Travel*Star 24, which accounted for approximately 65% of
research and development spending for the quarter. For the nine months ended
September 30, 1999, significant emphasis was also placed on the AAA Trip
Wizard development, which was completed in the Spring.
Other income for the three months and nine months ended September 30,
1999 totaled $76,225 and $244,404, respectively, compared to $59,251 and
$180,320 for the comparable periods ended September 30, 1998. The increase
for the quarter is primarily due to the Company's equity interest (24.9%) in
the earnings of Talon of $55,234, compared to $27,608 in 1998. Smaller
investable cash balances were available during 1999, resulting in a decrease
in interest income of $14,136 and $82,875, respectively, compared to the three
months and nine months ended September 30, 1998.
As a result of the foregoing, the Company posted a net loss of ($621,094)
or ($0.20) per diluted common share for the three months ended September 30,
1999, compared to a net loss of ($324,589), or ($0.10) per diluted common
share for the three months ended September 30, 1998. The Company reported a
net loss of ($1,866,278) or ($0.60) per diluted common share for the nine
months ended September 30, 1999, as compared to a net loss of ($909,177) or
($0.27) per diluted share for the nine months ended September 30, 1998. The
results for the three months and nine months ended September 30, 1998 include
provisions for an income tax benefit of $198,933 and $548,551, or ($0.06) per
share and ($0.16) per share, respectively.
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 September 30, 1999, the Company had $839,061 in
cash and cash equivalents, plus $400,000 in restricted cash, compared to
$1,254,091 at December 31, 1998. The Company's operating activities through
September 30, 1999 provided cash totaling $8,484, primarily reflecting the
operating loss for the nine months of $1,866,278, and reductions of $602,172
and $1,310,758 in accounts payable and accrued liabilities, respectively, and
an increase in receivables due from affiliate company of $195,466. These
amounts were increased by cash generated from reductions in accounts
receivable of $2,872,603, a reduction of $676,891 in prepaid expenses, and
$175,332 generated from inventory reductions.
Net cash used by investing activities totaled $421,389 pertaining
primarily to the Company's investment in Talon Research and Development Co.,
Ltd. This total includes a $400,000 interest-bearing deposit removed from
operating cash and restricted as collateral for Talon s financing obligations,
and $17,134 for certain legal and administrative expenses pertaining to the
Talon share acquisition.
Net cash used by financing activities consists of $2,125 spent to
acquire the Company's common stock in the open market.
As a result, net working capital decreased from $6,038,519 at December
31, 1998 to $4,285,452 at September 30, 1999. The Company's current ratio at
September 30, 1999 was 7.6 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. At September 30, the line had been utilized to draw
two standby letters of credit totaling $650,000. The Company anticipates that
one letter of credit totaling $250,000 will expire during the fourth quarter,
releasing that amount for future borrowing against the $1.0 million line of
credit. Other than the letters of credit totaling $650,000, the Company has
$350,000 remaining on the line of which $164,408 is available to borrow as of
September 30, 1999. The credit facility is secured by the Company's accounts
receivable, inventories, and equipment, with an interest rate of 1% over Prime
Rate. The Company believes that the liquidity provided by current 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
that 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.
ULTRADATA SYSTEMS, INCORPORATED
10QSB
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
None
Item 2. Changes in Securities:
None
Item 3. Defaults upon Senior Securities:
None
Item 4. Submission of Matters to a Vote of Security Holders:
At the Company's Annual Meeting of shareholder's held on July 14,
1999, the shareholder's elected Monte Ross, Mark L. Peterson,
Steven H. Akre, Esq., Ernest S. Clarke, and John J. Clancy to serve
as directors until the 2000 annual meeting.
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.
November 15, 1999 /s/ Monte Ross
---------------------------------
Monte Ross, President and CEO
(Duly authorized officer and
principal financial officer)
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