U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 - FOR THE QUARTERLY PERIOD ENDED MARCH 31, 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
---------------------------------------------------------------
(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)
1240 Dielman Industrial Court, 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 April 23, 2002
----------------------------------------------------------------------
Common, $.01 par value 3,405,805
Transitional Small Business Disclosure Format Yes [ ] No [X]
File Number
0-25380
ULTRADATA SYSTEMS, INCORPORATED
FORM 10-QSB
March 31, 2002
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Unaudited Financial Statements
Balance Sheets at March 31, 2002 and December 31, 2001 3.
Statements of Operations for the three months ended
March 31, 2002 and 2001 4.
Statements of Cash Flows for the three months ended
March 31, 2002 and 2001 5.
Notes to Financial Statements 6.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7.
PART II - OTHER INFORMATION 11.
Signatures 11.
ULTRADATA SYSTEMS, INCORPORATED
Balance Sheets
As of March 31, 2002 and December 31, 2001
March 31, December 31,
2002 2001
(Unaudited)
Assets
----------------------------------------------------------------------------
Current assets:
Cash and cash equivalents $ 274,874 $ 164,682
Trade accounts receivable, net of allowance
for doubtful accounts of $365,287 591,419 376,429
Inventories 943,467 1,346,492
Prepaid expenses and other current assets 16,523 11,649
--------- ---------
Total current assets 1,826,283 1,899,252
--------- ---------
Property and equipment, net 366,761 413,270
--------- ---------
Total property and equipment 366,761 413,270
--------- ---------
Notes receivable - long term 225,394 225,394
Other assets 5,444 5,444
--------- ---------
Total assets $ 2,423,882 $ 2,543,360
========= =========
Liabilities and Stockholders' Equity
---------------------------------------------------------------------------
Current liabilities:
Accounts payable $ 227,048 $ 96,133
Accrued expenses and other liabilities 165,624 272,146
Notes payable - current 109,028 110,991
--------- ---------
Total current liabilities 501,700 479,270
--------- ---------
Long term liabilities:
Notes payble - long term 584,940 616,007
--------- ---------
Total liabilities 1,086,640 1,095,277
--------- ---------
Stockholders' equity
Preferred Stock, $0.01 par value,
4,996,680 shares authorized, none outstanding - -
Series A convertible preferred stock,
3,320 shares authorized, 1,606 shares
outstanding with a stated value of $1,000 16,000 16,000
Common stock, $.01 par value; 10,000,000
shares authorized; 3,731,976 shares issued
and outstanding March 31,2002; 3,698,350 shares
issued and outstanding December 31, 2001 37,320 36,983
Additional paid-in capital 9,576,004 9,573,281
Accumulated deficit (7,177,230) (7,049,202)
Treasury stock (326,171 shares at cost) (942,311) (942,311)
Notes receivable issued for purchase of
common stock (172,541) (186,668)
--------- ---------
Total stockholders' equity 1,337,242 1,448,083
--------- ---------
Total liabilities and stockholders' equity $ 2,423,882 $ 2,543,360
========= =========
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADATA SYSTEMS, INCORPORATED
Statements of Operations
Three months ended March 31, 2002 and 2001
2002 2001
(Unaudited)
---------------------------------------------------------------------------
Net sales $ 995,719 $ 185,842
Cost of sales 714,722 146,190
-------- --------
Gross profit 280,997 39,652
-------- --------
Selling expense 38,885 51,010
General and administrative expenses 296,964 454,067
Research and development expense 58,357 128,794
-------- --------
Operating loss (113,209) (594,219)
Other income (expense):
Interest and dividend income 4,906 33,702
Interest expense (19,815) -
Equity in earnings of affiliates - 46,767
Other, net 90 146
-------- --------
Total other (loss) income (14,819) 80,615
-------- --------
Loss before income tax expense (128,028) (513,604)
Income tax expense - -
-------- --------
Net loss $ (128,028) $ (513,604)
-------- --------
Less preferred stock dividends - (45,450)
Net loss available to common
shareholders $ (128,028) $ (559,054)
======== ========
Loss per share:
Basic and diluted $ (0.04) $ (0.18)
======== ========
Weighted Average Shares Outstanding:
Basic and diluted 3,380,772 3,193,772
========= =========
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADATA SYSTEMS, INCORPORATED
Statements of Cash Flows
Three months ended March 31, 2002 and 2001
2002 2001
(Unaudited)
---------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (128,028) $ (513,604)
Adjustments to reconcile net loss to
net cash provided by (used in) operating
activities:
Depreciation and amortization 48,429 49,979
Inventory writedown 31,130 -
Equity in earnings of unconsolidated
affiliates - (46,767)
Non-cash compensation expense - 2,544
Increase (decrease) in cash due to changes
in operating assets and liabilities:
Trade accounts receivable, net (214,990) 483,905
Inventories 371,895 (301,044)
Prepaid expenses and other current assets (4,874) (15,242)
Accounts payable 130,915 (48,278)
Accrued expenses and other liabilities (106,522) (67,516)
Deferred rent - (1,866)
Deferred compensation trust liability - (15,673)
-------- --------
Net cash provided by (used in) operating
activities 127,955 (473,562)
-------- --------
Cash flows from investing activities:
Deferred compensation trust investments - (16)
Capital expenditures (1,920) (34,919)
-------- --------
Net cash used in investing activities (1,920) (34,935)
-------- --------
Cash flows from financing activities:
Subscription payments 14,127 -
Payments on note payable (29,970) -
Restricted cash - (89)
-------- --------
Net cash used in financing activities (15,843) (89)
-------- --------
Net increase (decrease) in cash and
cash equivalents 110,192 (508,586)
Cash and cash equivalents at beginning
of period 164,682 $1,842,983
-------- ---------
Cash and cash equivalents at end of period $ 274,874 $1,334,397
======== =========
Supplemental Disclosure of Non-Cash and Financial Activities:
During March 2002, the Company converted $3,060 of notes payable into
33,626 shares of common stock
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADATA SYSTEMS, INCORPORATED
March 31, 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
periods ended March 31, 2002 and 2001, 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, 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:
March 31, December 31,
2002 2001
-----------------------------
Raw Materials, net of obs. $ 558,378 $ 831,318
Work in Process , net of obs. -
Finished Goods, net of obs. 385,089 515,174
-------- ---------
Total $ 943,467 $1,346,492
======== =========
Obsolete inventory on hand $ 449,186 $ 434,487
Note 3. Accrued Expenses and Other Liabilities
Accrued expenses and other liabilities consist of the following:
March 31, December 31,
2002 2001
------------------------------
Accrued sales commissions
and royalties $ 88,366 $ 141,811
Payroll and payroll-related
liabilities 39,488 69,061
Accrued advertising 67 -
Other 37,703 61,274
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$ 165,624 $ 272,146
======= =======
Note 4. Debt Conversion
During March 2002, convertible debt holders converted $3,060 of convertible
debt into 33,626 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 impede Ultradata in
its efforts to develop and market its products. Among these factors are:
* 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.
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.
* During the first quarter of 2001 we shipped the first 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. The production release of this
product is scheduled for the second quarter 2002.
* We have completed development of the CarPad, which installs in the
visor over the driver's seat in an automobile and provides door-to-
door directions. The CarPad also contains organizer functions such as
phone numbers, addresses, appointments, and to do lists on a large-text
display. We intend to introduce CarPad to the market in 2002 at a
retail price of approximately $50.
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 the three largest retail mass-market chains in the country
plus many other locations. The new TRAVEL*STAR 24 is 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 Months Ended March 31, 2002 Compared to Three Months Ended March 31,
2001
Operating results for the first quarter of 2002 were significantly improved
over the first quarter of 2001.
Sales. During the first three months of 2002, net sales totaled $995,719, as
compared with $185,842 in sales recorded in the first quarter of 2001,
representing a 436% increase. Replenishment of customer inventory, which
finally sold through during the slow year of 2001, represented the bulk of
sales in the first quarter, which is generally a period of minimal sales after
the holiday season.
Gross Profit. Gross profit margin for the current quarter was $280,997, or
28.2% of sales compared to $39,652, or 21.3% of sales for the first quarter
of 2001. Although improved, gross profit in early 2002 still suffered from
higher cost of microchips remaining in inventory from the chip shortage in
2000. First-quarter sales volume has exhausted the higher-priced chips in
inventory, and margins in future quarters should improve because of the reduced
price currently paid for microchips. Our goal is to achieve a gross profit
equaling 50% of sales.
S,G&A Expense. Selling expenses amounted to $38,885, or 3.9% of sales, for
the first quarter of 2002 as compared with $51,010, or 27.4% of sales for the
first quarter of 2001. The dollar value of the expense decreased 23.8%, and,
as a percent of sales, selling expense dropped by a factor of 7. The
percentage drop is primarily because of fixed selling costs and much higher
volume in 2002, but it also represents improved efficiency in selling and
promotion. General and administrative expenses were $296,964 for the first
quarter of 2002 as compared with $454,067 for the same quarter in 2001,
representing a decrease of 34.6%, reflecting reduced personnel and office
space effected in the last quarter of 2001.
R&D Expense. Research and development expense in the first quarter of 2002
was $58,357 as compared to $128,794 for the same quarter of 2001, representing
a decrease of 54.7% due primarily to the completion of the TRAVEL*STAR 24
software and reduction in R&D personnel.
The Company posted a net loss from operations of ($113,209) for the quarter
ended March 31, 2002 compared to a net loss from operations of ($594,219) for
the quarter ended March 31, 2001. Continuing losses in spite of improved
sales and lower SG&A and R&D expenses is due to the low margins realized on
first-quarter sales.
Other Income (Expense). Other income (expense) for the first quarter of 2002
amounted to an expense of ($14,815) compared with income of $80,615 for the
same period in 2001. The changes to our business that took place in 2001 are
reflected in this difference. In 2001 we included profits derived from our
interest in Talon Research and Development in New Zealand, which we sold in
the last quarter of 2001. In the current quarter we include interest expenses
on the debt derived from the conversion of the preferred stock to debt in the
third quarter of 2001.
As a result of the foregoing, the Company posted a net loss available to
common shareholders of ($128,028), or ($0.04) per basic and diluted common
share, for the three-month period ended March 31, 2002, compared to a net loss
available to common shareholders of ($559,054), or ($0.18) per basic and
diluted common share, for the three-month period ended March 31, 2001. The
Company was required to record an imputed dividend of $45,450 during the three-
month period ended March 31, 2001 as a result of its sale of Series A
redeemable convertible preferred stock in May of 2000.
FINANCIAL CONDITION AND LIQUIDITY
At March 31, 2002, the Company had $274,874 in cash and cash equivalents,
compared to $164,682 at December 31, 2001. The Company's operating activities
provided cash totaling $127,955. Accounts receivable increased by $214,990
due to late quarter sales. Accounts payable increased $130,915 for the same
reason. Inventories decreased by $371,895 in the same period.
Net cash used in investing activities for the quarter ended March 31, 2002
totaled ($1,920) as compared to ($34,935) in the first quarter of 2001,
reflecting reductions in cash outlays for capitalized self-constructed assets.
Net cash used in financing activities for the quarter ended March 31, 2002
was $15,843 compared to a negligible sum in 2001. The pay down of the
outstanding long-term debt is the major contributor.
Our operating losses over the past three years have had an adverse effect on
our working capital. Nevertheless, at March 31, 2002 we still had over $1.3
million 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 during 2001. In July 2001,
Management obtained a $500,000 credit facility with KBK Financial, an asset-
based lender, to finance production for purchase orders expected for the
fourth quarter. Because fourth-quarter orders were below expectations, it
was not necessary to utilize the facility in 2001. Our plan is to meet the
liquidity requirements to fund the late-quarter production in 2002 with the
use of the credit facility from KBK Financial, if necessary.
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:
10-a(2) Lease Addendum dated October 5, 2001 for premises at
1240-1244 Dielman Industrial Court, St. Louis, Missouri.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
May 9, 2002 /s/ Monte Ross
------------------------
Monte Ross, CEO
(Chief executive officer)
/s/ Ernest Clarke
-------------------------
Ernest Clarke, President
(Principal financial and
accounting officer)
* * * * * * * *
EXH. 10-a(2)
Addendum # 2 to Original Lease Dated May 23, 1990 between
Ultradata Systems, Inc., and
Samuel B Murphy Revocable Living Trust/Samuel B Murphy Unified Credit Trust
(formerly referred to as Samuel B. Murphy Living Trust), Landlord
The following terms and conditions shall become effective November 1, 2001
Tenant: Ultradata Systems, Inc.
Premises: Approximately 5,039 square feet located at 1240-1244
Dielman Industrial Court and the temporary space
located at 9367 Dielman Industrial Drive, St. Louis,
Missouri 63132
Lease Term: The new revised term would commence on November 1,
2001, and expire October 31, 2003, being a two (2)
year term.
Base Lease Rate: $9.00 psf gross, "as is", being $3,779.25 per month
Security Deposit: Landlord shall require a Security Deposit of
$5,000.00 to be held for the term of the lease. The
current security deposit of $9,000.00 shall be reduced
by $4,000.00, which amount shall be returned to the
tenant.
Base Year: To remain 1995.
Tenant Improvements: By tenant; no contribution from Landlord.
Renewal Option: Landlord will grant one two (2) year renewal option
at market rate.
Option to Expand: Upon any contiguous space being vacated, Landlord
shall give Ultradata Systems, Inc., first Right of
Refusal.
Real Estate Commission/
Brokers: Landlord shall pay any Real Estate Commission due.
Landlord and Tenant agree that no other real estate
broker was involved in this transaction but Bell &
Associates, Inc., representing the Landlord.
Lease Termination: Tenant shall have the right to cancel this lease,
upon the following conditions: a) Three month written
notice, and b) Penalty payment of $10,000.
Tenant Finish: Any new tenant improvements must be approved by the
Landlord prior to construction.
Signage: Landlord shall allow tenant, at tenant's expense to
relocate the current Ultradata signage to the side
of the building facing Dielman Industrial Court.
Any required approvals by the City of Olivette will
be obtained by the Tenant. Tenant shall make all
necessary repairs to the current location of sign
after moving it to the new location.
Sublease: Landlord agrees to allow Tenant the right to sublease
all or a portion of the premises with Landlord's
written approval.
Temporary Warehouse
Space: Landlord agrees to allow Tenant to continue to occupy,
on a monthly basis, the approximately 2,040 (subject
to final measurement) square foot warehouse space to
the south of the subject premises, at the annual rate
of $7.50 psf, being $1,275.00 per month. Tenant
agrees to vacate the space within 30 days following
notification by the Landlord that a new occupant for
the space has been found. Otherwise, the space will
be rented on a month-by-month basis, and Tenant will
provide 30 day notification to Landlord when the space
will no longer be needed.
Required Improvements: Tenant shall close off the two openings now in place
between the "new" lease space, and the area being
vacated. All improvements shall be approved by the
Landlord.
Agreed and Accepted:
Ultradata Systems, Inc., Samuel B. Murphy Revocable Living Trust/Samuel
Tenant B. Murphy Unified Credit Trust,
Landlord
By: /s/ Monte Ross By: /s/ Stephen Murphy
--------------- ---------------------
Monte Ross Stephen Murphy
Title: CEO Title: Trustee
Date: 10/11/01 Date: 10/22/01