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, 2002
[ ] 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
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(Exact name of small business issuer as specified in its charter)
Delaware 43-1401158
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1240 Dielman Industrial Court, St. Louis, MO 63132
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(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 30, 2002
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Common, $.01 par value 3,432,591
Transitional Small Business Disclosure Format Yes [ ] No [X]
File Number
0-25380
ULTRADATA SYSTEMS, INCORPORATED
FORM 10-QSB
June 30, 2002
INDEX
PART I - UNAUDITED FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Balance Sheets at June 30, 2002 and December 31, 2001 3.
Statements of Operations for the three month and six
month periods ended June 30, 2002 and 2001 4.
Statements of Cash Flows for the six months ended
June 30, 2002 and 2001 5.
Notes to Financial Statements 6.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10.
PART II - OTHER INFORMATION 16.
Signatures 18.
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ULTRADATA SYSTEMS, INCORPORATED
Balance Sheets
As of June 30, 2002 and December 31, 2001
June 30, December 31,
2002 2001
Assets (Unaudited)
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Current assets:
Cash and cash equivalents $ 350,988 $ 164,682
Trade accounts receivable, net of
allowance for doubtful accounts of
$365,287 27,926 376,429
Inventories 880,641 1,346,492
Prepaid expenses and other current assets 13,838 11,649
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Total current assets 1,273,393 1,899,252
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Property and equipment, net 327,982 413,270
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Total property and equipment 327,982 413,270
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Notes receivable - long term 225,394 225,394
Other assets 5,444 5,444
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Total assets $ 1,832,213 $ 2,543,360
========== =========
Liabilities and Stockholders' Equity
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Current liabilities:
Accounts payable $ 43,408 $ 96,133
Accrued expenses and other liabilities 163,127 272,146
Notes payable - current 110,700 110,991
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Total current liabilities 317,235 479,270
Long term liabilities:
Notes payble - long term 554,740 616,007
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Total liabilities 871,975 1,095,277
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Stockholders' equity:
Preferred Stock, $0.01 par value,
4,996,680 shares authorized, none
outstanding - -
Series A convertible preferred stock,
3,320 shares authorized, 16 shares
outstanding with a stated value of $1,000 16,000 16,000
Common stock, $.01 par value; 10,000,000
shares authorized;
3,758,762 shares issued June 30,2002;
3,698,350 shares issued December 31, 2001 37,588 36,983
Additional paid-in capital 9,578,736 9,573,281
Accumulated deficit (7,572,934) (7,049,202)
Treasury stock (326,171 shares at cost) (942,311) (942,311)
Notes receivable issued for purchase of
common stock (156,841) (186,668)
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Total stockholders' equity 960,238 1,448,083
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Total liabilities and stockholders' equity $ 1,832,213 $ 2,543,360
========= =========
See accompanying summary of accounting policies and notes to financial
statements.
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ULTRADATA SYSTEMS, INCORPORATED
Statements of Operations
Three months ended Six months ended
June 30, June 30,
2002 2001 2002 2001
(Unaudited) (Unaudited)
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Net sales: $ 78,684 $ 510,612 $ 1,074,403 $ 696,454
Cost of sales: 68,563 268,460 783,285 414,650
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Gross profit 10,121 242,152 291,118 281,804
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Selling expense 21,351 154,972 60,236 205,982
General and administrative
expenses 312,829 686,753 609,793 1,140,820
Research and development
expense 55,012 96,566 113,369 225,360
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Total operating expenses 389,192 938,291 783,398 1,572,162
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Operating loss (379,071) (696,139) (492,280) (1,290,358)
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Other (expense) income:
Interest and dividend income 2,315 12,341 7,221 46,043
Interest expense (19,003) - (38,818) -
Equity in (losses) earnings
of affiliates - (41,199) - 5,568
Other, net 54 (22,249) 144 (22,103)
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Total other income, net (16,634) (51,107) (31,453) 29,508
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Loss before income taxes (395,705) (747,246) (523,733) (1,260,850)
Income tax expense - - - -
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Net loss (395,705) (747,246) (523,733) (1,260,850)
Less deemed dividends on
preferred shares - (46,219) - (91,669)
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Net loss available to
common shareholders $(395,705) $ (793,465) $ (523,733) $(1,352,519)
=================================================
Loss per share-basic and
diluted $ (0.12) $ (0.25) $ (0.15) $ (0.42)
=================================================
Weighted Average Shares
Outstanding:
Basic and diluted 3,415,224 3,234,422 3,398,093 3,214,209
==================================================
See accompanying summary of accounting policies and notes to financial
statements.
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ULTRADATA SYSTEMS, INCORPORATED
Statements of Cash Flows
Six months ended June 30, 2002 and 2001
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2002 2001
(Unaudited)
-----------------------------------
Cash flows from operating activities:
Net loss $ (523,733) $(1,260,850)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 90,142 99,130
Inventory writdown 65,077 60,000
Equity in (earnings) losses of
unconsolidated affiliates - (5,568)
Realized loss (gain) on investments - 13,045
Non-cash compensation expense - 2,544
Gain on disposal of fixed asset - 1,715
Increase (decrease) in cash due to
changes in operating assets and liabilities:
Trade accounts receivable 348,503 236,963
Inventories 400,774 (433,859)
Prepaid expenses and other current assets (2,189) (45,529)
Accounts payable (52,724) (116,316)
Accrued expenses and other liabilities (109,018) (10,956)
Deferred rent - (3,732)
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Net cash provided by (used in) operating
activities 216,832 (1,463,413)
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Cash flows from investing activities:
Capital expenditures (4,854) (27,711)
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Net cash used in investing activities (4,854) (27,711)
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Cash flows from financing activities:
Repurchase of preferred shares - (120,000)
Subscription payments 29,826 -
Payments on notes payable (55,498) -
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Net cash used in financing activities (25,672) (120,000)
Net increase (decrease) in cash and
cash equivalents 186,306 (1,611,124)
Cash and cash equivalents at beginning
of period 164,682 1,842,983
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Cash and cash equivalents at end of
period $ 350,988 $ 231,859
========= =========
Non-cash investing and financing
Redemption of Rabbi Trust $ - $ 87,329
========= =========
Conversion of preferred stock $ - $ 28,000
========= =========
Conversion of convertible debt $ 6,060 -
========= =========
See accompanying summary of accounting policies and notes to financial
statements.
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ULTRADATA SYSTEMS, INCORPORATED
June 30, 2002
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 in
accordance with generally accepted accounting principles and pursuant to the
rules and regulations of the Securities and Exchange Commission for interim
financial information. 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.
In the opinion of management, the information furnished for the three-
month and six-month periods ended June 30, 2002 and 2001, 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, 2002. It is suggested that the
interim financial statements be read in conjunction with the audited
consolidated financial statements for the year ended December 31, 2001, as
filed with the Securities and Exchange Commission on Form 10-KSB (Commission
File Number 0-25380).
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. Inventories
Inventories consist of the following:
June 30, December 31,
2002 2001
--------------------------
Raw Materials $ 301,967 $ 831,318
Work in Process - -
Finished Goods 578,674 515,174
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Total Net $ 880,641 $1,346,492
==========================
Obsolete inventory on hand $ 465,066 $ 434,487
==========================
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Note 3. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
June 30, December 31,
2002 2001
--------------------------
Accrued sales commissions
and royalties $ 63,367 $ 141,811
Payroll and payroll-related
liabilities 49,538 69,061
Accrued advertising 6,254 -
Other 43,968 61,274
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$ 163,127 $ 272,146
========================
Note 4. Convertible Debt Conversion
During the three months ended June 30, 2002, the holders of the Company's
Senior Convertible Notes converted $3,000 of convertible debt into 26,786
shares of common stock.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
YOU SHOULD NOT RELY ON FORWARD LOOKING STATEMENTS
This quarterly report contains a number of forward-looking statements
regarding our future prospects. Among the forward-looking statements are
descriptions of our plans to restructure the marketing program for the Road
Whiz(tm) line of products, to introduce Triplink(tm) and GPS products to the
market, and to develop products based on a GPS/Internet technology. These
forward-looking statements are a true statement of our present intentions,
but are neither predictions of the future nor assurances that any of our
intentions will be fulfilled. Many factors beyond our control could act to
thwart Ultradata in its efforts to develop and market its products. Among
these factors are:
* The fact that our limited financial resources may be insufficient to
permit us to develop products and introduce them to the market;
* The difficulty of attracting mass-market retailers to a seasonal
product like the Road Whiz(tm);
* The breadth and depth of competition in the GPS market, which will
make introduction of our product with a limited marketing budget
difficult;
* The difficulty of attracting qualified engineering and marketing
personnel to our company.
There may also be factors that we have not foreseen which could interfere
with our plans. In addition, changing circumstances may cause us to determine
that a change in plans will be in the best interests of Ultradata. For this
reason, you should not place undue reliance on any of the forward-looking
statements in this report.
Readers are urged to carefully review and consider the various disclosures
made by the Company in this report and in the Company's report 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.
-7-
OVERVIEW
Since 1987 we have been engaged in the business of manufacturing and
marketing handheld computers that provide travel information. The products
are based upon a data compression technology that we developed, portions of
which we have patented. Recent developments in communications technology have
opened up new opportunities for us to use our technology. Therefore, we still
sell our handheld computers, but over the past three years we have been
expanding the scope of our operations:
* In 2001 we introduced, in joint venture with Rand McNally, the Rand
McNally Triplink(tm), a handheld computer that enables the user to
download travel information from the Rand McNally Website.
* In the second quarter of 2002 we shipped the reprogrammed beta-test
units of our Travel*Star 24(tm), which combines our travel information
with a GPS antenna to enable a driver to obtain his location and
directions to his destination while he drives. Improved performance
was obtained, but the tests revealed several software bugs which are
being resolved, and we expect to be in production in the second half
of the year.
* The Company has sold over 3 million of its low-cost handheld travel
computers, demonstrating that there is a market for travel information
products. To re-awaken that market with an improved product that
speaks, the Company is developing a Talking Road Whiz. This product
is expected to be available at the beginning of 2003. The Company is
introducing for the holiday season a very low-cost gift item called
Road Rage Relief that produces one-line voice comments about driving
upon the press of a button. The product provides a simple means of
fastening to an interior surface of the car and can be activated
without taking one's eyes off the road.
Each of our consumer products is designed to allow the consumer to
access useful information stored in a convenient manner. Our handheld
computers generally sell at retail prices between $19.95 and $49.95 per unit.
The products are in retail mass-market chains plus many other locations. The
new TRAVEL*STAR 24 will be offered at retail for about $400, which should make
it very competitive in the auto aftermarket. Its portability and the fact
that it requires no elaborate installation offer advantages over the more
expensive in-car systems.
RESULTS OF OPERATIONS
Three and Six Months Ended June 30, 2002 Compared to Three and Six Months
Ended June 30, 2001
Operating results for the first half of 2002 were significantly improved
over the first half of 2001.
Sales. During the three and six months ended June 30,2002, net sales
totaled $78,684 and $1,074,403, respectively, compared with $510,612 and
$696,454, respectively for the same periods in 2001. These figures represent
a decrease of 84.6% for the three-month period and an increase of 54.3% for
the six-month period. The figures are somewhat distorted by the fact that a
significant order was shipped on the last day of the first quarter. Had that
order been booked in the second quarter, there would have been increased sales
for both the three-month and the six-month periods as compared with 2001.
Backlog. As of June 30, 2002, the Company had a backlog of $258,412 for
purchase orders to be fulfilled in the third quarter 2002, as compared to
$134,061 for June 30, 2001.
Gross Profit. Gross profit margin for the three- and six-month periods
ending June 30, 2002 were 12.8% and 27.1%, respectively, representing a
reduction from the corresponding periods of 2001 of 34.6% and 13.4%,
respectively. Gross profit in 2002 is still low primarily due to higher cost
of microchips in inventory for these sales. The higher-priced chips are now
out of inventory, paving the way for improved margins on future sales.
S,G&A Expense. Selling expenses for the three- and six-month periods
ended June 30, 2002 were $21,351 and $60,236, respectively, compared with
$154,972 and $205, 982, respectively, for the corresponding periods in 2001.
These figures represent reductions of 86.2% and 70.8%, respectively, for the
three- and six-month periods in 2002 versus 2001. General and administrative
expenses for the three- and six-month periods ended June 30, 2002 were
$312,829 and $609,793, respectively, compared with $686,753 and $1,140,820,
respectively, for the corresponding periods in 2001. These figures represent
reductions of 54.4% and 46.5%, respectively, for the three- and six-month
periods in 2002 versus 2001. These reductions reflect success in our on-
going effort to reduce expenses.
-8-
R&D Expense. Research and development expense in the three- and six-
month periods ended June 30,2002 also decreased 43.0% and 49.7%, respectively,
from the corresponding periods of 2001.
The Company posted a loss from operations of ($379,071) and ($492,280)
for the three- and six-month periods ended June 30, 2002, respectively,
compared to a loss from operations of ($696,140) and ($1,290,359) for the
corresponding periods in 2001.
Other Income. Other income (expense) for the three- and six-month periods
ended June 30, 2002 totaled ($16,634) and ($31,453), respectively, compared
with ($51,107) and $29,508, respectively, for the corresponding periods of
2001. The primary sources of the differences in these results stems from the
sale of Talon and the conversion of preferred shares to debt - both of which
took place in the fourth quarter of 2001.
As a result of the foregoing, the Company posted a net loss available to
common shareholders of ($395,705), or ($0.12) per basic and diluted common
share, for the three-month period ended June 30, 2002, compared to a net loss
available to common shareholders of ($793,465), or ($0.25) per basic and
diluted common share, for the three-month period ended June 30, 2001. The
Company posted a net loss available to common shareholders of ($523,733), or
($0.15) per basic and diluted common share, for the six-month period ended
June 30, 2002, compared to a net loss available to common shareholders of
($1,352,519), or ($0.42) per basic and diluted common share, for the six-month
period ended June 30, 2001. The Company was required to record an imputed
dividend as a result of its sale of Series A redeemable convertible preferred
stock in May of 2000 of $46,219 and $91,669 during the three- and six-month
periods ended June 30, 2001, respectively. No such dividend was applicable
in 2002 since the preferred shares were converted to debt in the fourth
quarter of 2001.
FINANCIAL CONDITION AND LIQUIDITY
At June 30, 2002, the Company had $350,988 in cash and cash equivalents,
compared to $164,682 at December 31, 2001. The Company's operating activities
in the six months ended June 30, 2002, provided cash totaling $216,832 from
reductions of inventory and accounts receivable that outweighed losses and
other uses of cash. Accounts receivable decreased by $348,503 due to
collections on sales in the first quarter of 2002. Inventories decreased by
$400,774 due to second quarter deliveries, and accounts payable decreased by
$52,724.
Net cash used in investing activities for the six-month period ended
June 30, 2002 totaled ($4,854) compared to ($27,711) for the same period in
2001, all for capital expenditures.
Net cash used in financing activities for the quarter ended June 30, 2002
was ($25,672) and amounted to the difference between cash outlays to repay
long-term debt and cash received in payments from employees against
outstanding loans. In the comparable period of 2001, net cash used in
financing activities was ($120,000), primarily due to the repurchase of 106
shares of Series A Preferred Stock.
Our operating losses over the past three years have had an adverse effect
on our working capital. Nevertheless, at June 30, 2002 we still had over
$956,000 in working capital. Management believes we have sufficient working
capital to sustain our operations and introduce our new products, provided
that we can realize our sales projections in our handheld business through
our strategy of developing mass-market customers and opening new distribution
channels.
Because the Company has stabilized the cash requirements of our handheld
business, its working capital and cash reserves appear to be sufficient to
sustain over the coming year the level of business activity during 2001.
-9-
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:
Exhibits:
None
Reports on Form 8-K:
None
SIGNATURES AND CERTIFICATION
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.
The undersigned officers certify that this report fully complies with the
requirements of Section 13(a) of the Securities Exchange Act of 1934, and
that the information contained in the report fairly presents, in all material
respects, the financial condition and results of operations of the Registrant.
August 9, 2002 /s/ Monte Ross
-------------------
Monte Ross, CEO
(Chief executive officer)
/s/ Ernest S. Clarke
---------------------------
Ernest S. Clarke, President
(Principal financial and accounting officer)
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