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, 2004
( ) 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 May 3, 2004
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Common, $.01 par value 6,158,187
Transitional Small Business Disclosure Format Yes [ ] No [X]
File Number
0-25380
ULTRADATA SYSTEMS, INCORPORATED
FORM 10-QSB
March 31, 2004
INDEX
PART I - FINANCIAL INFORMATION PAGE
Item 1. Condensed Unaudited Financial Statements
Condensed Balance Sheets at
March 31, 2004 and December 31, 2003 3.
Condensed Statements of Operations
for the three months ended March 31, 2004 and 2003 4.
Condensed Statements of Cash Flows
for the three months ended March 31, 2004 and 2003 5.
Notes to Condensed Financial Statements 6.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8.
PART II - OTHER INFORMATION 11.
Signatures 11.
ULTRADATA SYSTEMS, INCORPORATED
Condensed Balance
Sheets
As of March 31, 2004 and December 31, 2003
March 31, December 31,
2004 2003
Assets (Unaudited)
Current assets:
Cash $ 144,709 $ 2,926
Trade accounts receivable, net of allowance
for doubtful accounts of $100 and $14,703,
respectively 1,016,561 627,490
Inventories, net 69,699 55,594
Prepaid expenses 19,704 5,166
--------- ---------
Total current assets 1,250,673 691,176
--------- ---------
Property and equipment, net 22,606 25,958
Other assets 5,444 5,444
--------- ---------
Total assets $ 1,278,723 $ 722,578
========= =========
Liabilities and Stockholders' Equity (Deficiency)
Current liabilities:
Accounts payable $ 527,011 $ 460,701
Accrued liabilities 95,503 90,792
Notes payable - current 100,000 173,802
--------- ---------
Total current liabilities 722,514 725,295
--------- ---------
Stockholders' equity (deficiency)
Preferred Stock, $0.01 par value,
4,996,680 shares authorized,
none outstanding - -
Series A convertible preferred stock,
3,320 shares authorized, no shares
outstanding with a stated value of $1,000 - -
Common stock, $.01 par value; 10,000,000
shares authorized; 6,158,187 shares
issued and outstanding March 31,2004;
5,783,840 shares issued and outstanding
December 31, 2003 61,582 57,838
Additional paid-in capital 8,947,572 8,916,685
Accumulated deficit (8,452,945) (8,977,240)
--------- ---------
Total stockholders' equity (deficiency) 556,209 (2,717)
--------- ---------
Total liabilities and stockholders' equity
(deficiency) $ 1,278,723 $ 722,578
========= =========
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADATA SYSTEMS, INCORPORATED
Condensed Statements of Operations
Three months ended March 31, 2004 and 2003
2004 2003
----------------------------
(Unaudited)
Net sales $ 1,753,499 $ 351,956
Cost of sales 895,608 196,545
--------- ---------
Gross profit 857,891 155,411
--------- ---------
Selling expense 48,593 25,036
General and administrative expenses 260,208 244,035
Research and development expense 19,669 22,428
--------- ---------
Total operating expenses 328,470 291,499
--------- ---------
Operating profit (loss) 529,421 (136,088)
--------- ---------
Other income (expense):
Interest and dividend income - 6,236
Interest expense (5,257) (50,809)
Other, net 131 17,853
--------- ---------
Total other expense (5,126) (26,720)
--------- ---------
Income (loss) before income tax expense 524,295 (162,808)
Income tax expense - -
--------- ---------
Net income (loss) $ 524,295 $ (162,808)
========= =========
Income (loss) per share:
Basic $ 0.09 $ (0.04)
========= =========
Income (loss) per share:
Fully Diluted $ 0.08 $ (0.04)
========= =========
Weighted Average Shares Outstanding:
Basic 6,056,928 4,487,025
========= =========
Weighted Average Shares Outstanding:
Fully Diluted 6,195,646 4,487,025
========= =========
See accompanying summary of accounting policies and notes to financial
statements.
ULTRADATA SYSTEMS, INCORPORATED
Condensed Statements of Cash Flows
Three months ended March 31, 2004 and 2003
2004 2003
----------------------------
(Unaudited)
Cash flows from operating activities:
Net income (loss) $ 524,295 $ (162,808)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization 3,352 8,915
Provision for doubtful accounts 43 -
Inventory reserved for obsolescence - 7,586
Stock issued for services - 4,500
Non-cash interest expense - 31,457
Non-cash accrued interest receivable - (6,198)
Increase (decrease) in cash due to
changes in operating assets and liabilities:
Trade accounts receivable, net (389,114) 4,908
Inventories (14,105) (9,278)
Prepaid expenses and other current assets (14,538) (13,442)
Accounts payable 66,310 (65,082)
Accrued expenses and other liabilities 4,711 37,420
-------- --------
Net cash provided by (used in) operating
activities 180,954 (162,022)
-------- --------
Cash flows from investing activities:
Capital expenditures - (10,150)
-------- --------
Net cash used in investing activities - (10,150)
-------- --------
Cash flows from financing activities:
Exercise of employee stock options 7,031 -
Subscription payments - 29,336
Payments on notes payable (211,202) (30,062)
Note Payable - short-term 165,000 91,600
Common stock - 76,700
-------- --------
Net cash (used in) provided by financing
activities (39,171) 167,574
-------- --------
Net increase (decrease) in cash 141,783 (4,598)
Cash at beginning of period 2,926 37,842
-------- --------
Cash at end of period $ 144,709 $ 33,244
======== ========
See accompanying summary of accounting policies and notes to financial
statements.
During the three months ended March 31, 2004, the Company issued 273,906
shares of common stock to satisfy convertible debt aggregating to $27,600
ULTRADATA SYSTEMS, INCORPORATED
Notes to Condensed Financial Statements
March 31, 2004 (Unaudited)
Summary of Significant Accounting Policies
Basis of Presentation
The accompanying interim condensed 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, 2004 and 2003, 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, 2004. It is suggested that
the interim financial statements be read in conjunction with the audited
financial statements for the year ended December 31, 2003, as filed with the
Securities and Exchange Commission on Form 10-KSB (Commission File Number
0-25380), from which these statements were derived.
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. Inventories
Inventories consist of the following:
March 31, December 31,
2004 2003
---------------------------------
Raw Materials, net of obsolete $ 24,681 $ 3,738
Finished Goods, net of obsolete 45,018 51,856
-------- --------
Total $ 69,699 $ 55,594
======== ========
Obsolete inventory on hand $ 716,507 $ 816,150
Note 2. Prepaid Expenses
Prepaid expenses consist of the following:
March 31, December 31,
2004 2003
--------------------------------
Prepaid insurance $ 11,973 $ 5,166
Prepaid advertising 7,731 -
-------- --------
$ 19,704 $ 5,166
======== ========
Note 3. Convertible Notes Payable
At December 31, 2003 the Company had outstanding convertible debt in the
principal amount of $173,802. A portion of the notes payable in the amount of
$27,600 was converted to 273,906 shares of common stock during the first week
of January 2004. Subsequently, during the quarter ending March 31, 2004, the
convertible debt was retired by payment in full of the outstanding balance
$146,202 plus all accrued interest.
Note 4. Income (Loss) Per Share
For the three months ended March 31,
Basic 2004 2003
Numerator:
Net income (loss) $ 524,295 $ (162,808)
-------- ---------
Numerator for basic income
(loss) per share $ 524,295 $ (162,808)
======== =========
Denominator:
Weighted average common shares 6,056,928 4,487,025
--------- ---------
Denominator for basic income
(loss) per share 6,056,928 4,487,025
========= =========
Basic income (loss) per share $ 0.09 $ (0.04)
Fully Diluted
Numerator:
Net income (loss) $ 524,295 $ (162,808)
--------- ---------
Numerator for fully diluted
income (loss) per share $ 524,295 $ (162,808)
========= =========
Denominator:
Weighted average common shares 6,056,928 4,487,025
Common stock equivalents 138,718 -
Denominator for fully diluted --------- ---------
income (loss) per share 6,195,646 4,487,025
========= =========
Fully diluted income (loss) per
share $ 0.08 $ (0.04)
========= =========
Note 5. Notes Payable
During 2004, the Company sold a nine-month note payable in the amount of
$150,000 to a shareholder of the Company. The note earned interest at 12%
APR and was unsecured. The unpaid balance at March 31, 2004, was $100,000.
During April 2004, the Company paid off the remainder of the note payable.
Note 6. Loans Payable - Related Parties
During 2004, the Company received a loan of $15,000 from its Chief
Executive Officer to fund operations. The outstanding balance of the loan
was paid in full as of March 31, 2004.
Note 7. Common Stock
During the first quarter of 2004, employees exercised stock options to
purchase 100,441 shares of common stock for $7,031.
Note 8. AAA Agreement Amendment
In January 2004, the Company reached an agreement with AAA National to
terminate the existing agreement for private branding of the AAA Talking Road
NavigatorTM as of March 27, 2004. This termination occurred at the request of
AAA National for internal business reasons and not for cause or non-performance
by the Company, in accordance with the terms for cancellation of the agreement
by either party. The termination only applies to the 2003 agreement for the
Talking Road NavigatorTM and does not affect the agreement with regard to the
AAA TripWizardTM.
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 introduce new products to the market, to expand
our customer base, to develop products based on a GPS/Internet technology,
and to return our company to profitability. 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 against Ultradata in its efforts to
develop and market its products. Among these factors are:
* The fact that our financial resources are limited and will likely not
sustain us for more than one year without continued success of the
Talking Road WhizTM product line;
* The fact that our lack of capital severely limits our ability to
Market our products. As a result, the loss of a significant customer
could imperil the marketing of an entire product line;
* The difficulty of attracting mass-market retailers to a seasonal
product like the Talking Road WhizTM.
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, as there is a significant risk that we will not be
able to fulfill our expectations for Ultradata.
OVERVIEW
The Company mission is to aid the road traveler with useful information
with products easy to use and affordable in price. 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.
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 has developed a Talking Road WhizTM. Significant deliveries of this
product began in September of 2003 and, the Company received significant
revenue in the last four months of 2003 from sales of this new addition to
its product line. Company earnings in the fourth quarter of 2003 were
sufficient to offset losses in the first three quarters of 2003. This
success continued in the first quarter of 2004, which has traditionally been
a weak quarter for Ultradata.
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 have been in retail mass-market chains plus many other locations.
The new TRAVEL*STAR 24 is expected to be offered at retail for under $300,
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.
The goals of Company's research and development investments are targeted
at attaining the right product at the right price. There are over 125 million
drivers in the U. S., and there is a great demand for useful, easy-to-access
information for convenience and safety on the road. Low-cost products that
achieve these benefits have a significant niche in the marketplace. Thus far,
Management feels the Company has barely penetrated this huge, largely untapped
market. The Company expects to continue to exploit this niche over the next
few years by bringing new technology to bear on the goals stated above with
significant impact on Company sales and profits.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2004 Compared to Three Months Ended
March 31, 2003
Operating results for the first quarter of 2004 were significantly
improved over the first quarter of 2003.
Sales. During the first three months of 2004, net sales totaled
$1,753,499, as compared with $351,956 in sales recorded in the first quarter
of 2003, representing a 398% increase. 85.5% of the sales were made to one
customer, with the balance spread over a number of customers. This resulted
in an uncharacteristically strong first quarter for the Company.
Orders for our Talking Road WhizTM product continued strong from the
holiday period, when it was first introduced. The Company's backlog at March
31, 2004 was $1,296,993 as compared with $304,521 as of March 31, 2003. This
included over $500,000 ordered by one new customer, reflecting our efforts to
increase the number of our significant customers.
Gross Profit. Gross profit margin for the current quarter was $857,891,
or 48.9% of sales compared to $155,411, or 44.1% of sales for the first
quarter of 2003. Gross profit as a percent of sales in 2004 benefited from a
higher margin on the new product. In addition, because of the improved sales
performance over 2003, the gross profit amount increased 452% in the first
quarter of 2004 as compared with the same quarter in 2003.
S,G&A Expense. Selling expenses amounted to $48,593, or 2.8% of sales,
for the first quarter of 2004 as compared with $25,036, or 7.1% of sales for
the first quarter of 2003. Although within expected limits, selling expense
decreased as a percent of sales due to the fixed portion being spread over a
much larger sales base in the first quarter of 2004 as compared with 2003.
General and administrative expenses were $260,208 for the first quarter of
2004 as compared with $244,035 for the same quarter in 2003, representing an
increase of 6.6%. We expect general and administrative expense to increase
somewhat as our sales volume increases, but we believe the 6.6% first quarter
increase (compared to a 398% increase in sales) will be characteristic of the
effect of our sales growth on general and administrative expense.
R&D Expense. Research and development expense in the first quarter of
2004 was $19,669 as compared to $22,428 for the same quarter of 2003,
representing a slight decrease due primarily to the increased development
activity of the Talking Road WhizTM during the 2003 time frame.
The Company posted a net profit from operations of $529,421 for the
quarter ended March 31, 2004 compared to a net loss from operations of
($136,088) for the quarter ended March 31, 2003.
Other Expense. Other expense for the first quarter of 2004 amounted to
($5,126) compared with ($26,720) for the same period in 2003. The first
quarter of 2003, as compared to 2004, had the burden of $31,457 in non-cash
interest expense, primarily due to our issuance of common stock as an
inducement for loans at the beginning of 2003.
As a result of the foregoing, the Company posted a net profit of
$524,295, or $0.09 per basic common share and $0.08 per diluted common share,
for the three-month period ended March 31, 2004, compared to a net loss of
($162,808), or ($0.04) per basic and diluted common share, for the three-
month period ended March 31, 2003.
FINANCIAL CONDITION AND LIQUIDITY
The Company's financial status has improved significantly over the past
two quarters. In the quarter ended March 31, 2004, the Company's net income
of $524,295 resulted in cash-flow from operations of $180,954 after accounting
for an increase in accounts receivable of $389,114 and other small additions
and subtractions.
Financing activities used a net of $39,171 after paying down notes
payable in the amount of $211,202 and taking out a short-term loan of $165,000,
which was paid off in April out of operational cash flow. The Company had
$144,709 in cash on March 31, 2004 with accounts receivable of over $1 million.
The Company's current ratio at March 31, 2004 was 1.73:1 and its working
capital was $528,159.
ITEM 3. Controls and Procedures
Monte Ross, our Chief Executive Officer, and Ernest Clarke, our Chief
Financial Officer, performed an evaluation of the Company's disclosure controls
and procedures as of March 31, 2004. Based on their evaluation, they concluded
that the controls and procedures in place are sufficient to assure that material
information concerning the Company which could affect the disclosures in the
Company's quarterly and annual reports is made known to them by the other
officers and employees of the Company, and that the communications occur with
promptness sufficient to assure the inclusion of the information in the then-
current report.
There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect those controls subsequent
to the date on which Messrs. Ross and Clarke performed their evaluation.
ULTRADATA SYSTEMS, INCORPORATED
10QSB
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
None
Item 2. Changes in Securities and Small Business Issuer Purchase
of Equity 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:
31. Rule 13a-14(a) Certification
32. Rule 13a-14(b) Certification
Reports on Form 8-K:
Report dated January 9, 2004 including press release containing
financial information.
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 5, 2004 /s/ Monte Ross
-----------------------
Monte Ross, CEO
(Chief executive officer)
/s/ Ernest S. Clarke
---------------------------
Ernest S. Clarke, President
(Principal financial and accounting
officer)
* * * * *
EXHIBIT 31: Rule 13a-14(a) CERTIFICATION
I, Monte Ross, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Ultradata
Systems, Incorporated;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial
information included in this report fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The small business issuer's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures,
as of the end of the period covered by this report based on such evaluation;
and
c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter that has materially affected, or
is reasonably likely to materially affect, the small business issuer's
internal control over financial reporting.
5. The small business issuer's other certifying officers and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design
or operation of internal controls over financial reporting which are reasonably
likely to adversely affect the small business issuer's ability to record,
process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business issuer's
internal controls over financial reporting.
Date: May 5, 2004 /s/ Monte Ross
-----------------------------------
Monte Ross, Chief Executive Officer
I, Ernest Clarke, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Ultradata
Systems, Incorporated;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements and other financial
information included in this report fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;
4. The small business issuer's other certifying officers and I are
responsible for establishing and maintaining disclosure controls and procedures
(as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:
a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities
particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the small business issuer's
disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation; and
c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the small
business issuer's most recent fiscal quarter that has materially affected,
or is reasonably likely to materially affect, the small business issuer's
internal control over financial reporting.
5. The small business issuer's other certifying officers and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the
design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's ability to
record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the small business issuer's
internal control over financial reporting.
Date: May 5, 2004 /s/ Ernest S. Clarke
--------------------------------------
Ernest Clarke, Chief Financial Officer
EXHIBIT 32: Rule 13a-14(b) CERTIFICATION
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 Ultradata
Systems Incorporated.
A signed original of this written statement required by Section 906 has been
provided to Ultradata Systems, Incorporated and will be retained by Ultradata
Systems, Incorporated and furnished to the Securities and Exchange Commission
or its staff upon request.
May 5, 2004 /s/ Monte Ross
-----------------------
Monte Ross
(Chief executive officer)
/s/ Ernest S. Clarke
----------------------------
Ernest S. Clarke
(Chief financial officer)