As filed with the Securities and Exchange Commission on June 3, 2005
                                      An Exhibit List can be found on page II-4.
                                                     Registration No. 333-123764



                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549

                          -----------------------------


                                 AMENDMENT NO. 2
                                       TO
                                    FORM SB-2
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933


                          -----------------------------

                         ULTRADATA SYSTEMS, INCORPORATED
                 (Name of small business issuer in its charter)

   Delaware                        3579                          43-1401158
(State or other        (Primary Standard Industrial          (I.R.S. Employer
Jurisdiction of         Classification Code Number)          Identification No.)
Incorporation or
 Organization)

                          1240 DIELMAN INDUSTRIAL COURT
                            ST. LOUIS, MISSOURI 63132
                                 (314) 997-2250
              (Address and telephone number of principal executive
                    offices and principal place of business)


                       MONTE ROSS, CHIEF EXECUTIVE OFFICER
                         ULTRADATA SYSTEMS, INCORPORATED
                          1240 DIELMAN INDUSTRIAL COURT
                            ST. LOUIS, MISSOURI 63132
                                 (314) 997-2250
            (Name, address and telephone number of agent for service)

                                   Copies to:
                             GREGORY SICHENZIA, ESQ.
                       SICHENZIA ROSS FRIEDMAN FERENCE LLP
                     1065 AVENUE OF THE AMERICAS, 21ST FLR.
                            NEW YORK, NEW YORK 10018
                                 (212) 930-9700
                              (212) 930-9725 (FAX)

                APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC:
     From time to time after this Registration Statement becomes effective.

If any securities  being  registered on this Form are to be offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other
than   securities   offered  only  in  connection   with  dividend  or  interest
reinvestment plans, check the following box: |X|




If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the  Securities  Act,  check the following box and list the
Securities  Act  registration   statement   number  of  the  earlier   effective
registration statement for the same offering. ________

If this Form is a  post-effective  amendment filed pursuant to Rule 462(c) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. _________

If this Form is a  post-effective  amendment filed pursuant to Rule 462(d) under
the  Securities  Act,  check  the  following  box and  list the  Securities  Act
registration  statement number of the earlier effective  registration  statement
for the same offering. _________

If delivery  of the  prospectus  is  expected  to be made  pursuant to Rule 434,
please check the following box. _________


                                       2


                         CALCULATION OF REGISTRATION FEE




------------------------------- -------------------- ---------------- ------------------ --------------------
                                                        PROPOSED
                                                        MAXIMUM           PROPOSED
                                                        OFFERING          MAXIMUM
   TITLE OF EACH CLASS OF          AMOUNT TO BE        PRICE PER         AGGREGATE           AMOUNT OF
 SECURITIES TO BE REGISTERED      REGISTERED (1)         SHARE         OFFERING PRICE     REGISTRATION FEE
------------------------------- -------------------- ---------------- ------------------ --------------------
                                                                                        
      Common stock, $0.01 par        3,000,000 (2)     $  .41 (3)         $1,230,000            $144.77
          value issuable upon
     conversion of debentures
------------------------------- -------------------- ---------------- ------------------ --------------------
      Common Stock, $0.01 par          100,000 (4)     $10.00 (5)        $1,000,000             $117.70
 value issuable upon exercise
                  of warrants
------------------------------- -------------------- ---------------- ------------------ --------------------
                        Total            3,100,000                       $2,230,000.00          $262.47 (6)
------------------------------- -------------------- ---------------- ------------------ --------------------



(1) Includes shares of our common stock,  $0.01par value per share, which may be
offered pursuant to this registration statement,  which shares are issuable upon
conversion of  convertible  debentures  and the exercise of warrants held by the
selling  stockholder.  In  addition  to the shares  set forth in the table,  the
amount to be registered includes an indeterminate number of shares issuable upon
conversion of the debentures and exercise of the warrants, as such number may be
adjusted as a result of stock splits,  stock dividends and similar  transactions
in  accordance  with Rule 416. The number of shares of common  stock  registered
hereunder  represents  a good  faith  estimate  by us of the number of shares of
common stock issuable upon conversion of the debentures and upon exercise of the
warrants.  For purposes of estimating the number of shares of common stock to be
included in this registration  statement, we calculated a good faith estimate of
the number of shares of our common stock that we believe  will be issuable  upon
conversion  of the  debentures  and upon exercise of the warrants to account for
market  fluctuations,   and  antidilution  and  price  protection   adjustments,
respectively.  Should the  conversion  ratio  result in our having  insufficient
shares,  we will not rely  upon  Rule  416,  but  will  file a new  registration
statement  to cover the resale of such  additional  shares  should  that  become
necessary.  In addition,  should a decrease in the exercise price as a result of
an issuance or sale of shares below the then current market price, result in our
having insufficient  shares, we will not rely upon Rule 416, but will file a new
registration statement to cover the resale of such additional shares should that
become necessary.

(2)  Includes  a good  faith  estimate  of  the  shares  underlying  convertible
debentures to account for market fluctuations.

(3)  Estimated  solely for  purposes  of  calculating  the  registration  fee in
accordance with Rule 457(c) under the Securities Act of 1933,  using the average
of the high and low price as reported on the Over-The-Counter  Bulletin Board on
March 29, 2005, which was $.41 per share.

(4) Includes a good faith estimate of the shares underlying warrants exercisable
at  $10.00  per  share  to  account  for   antidilution   and  price  protection
adjustments.

(5)  Estimated  solely for  purposes  of  calculating  the  registration  fee in
accordance with Rule 457(g) under the Securities Act of 1933, using the exercise
price of $10.00.


(6) Fee previously paid.


      THE REGISTRANT HEREBY AMENDS THIS  REGISTRATION  STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER  AMENDMENT  WHICH  SPECIFICALLY  STATES  THAT  THIS  REGISTRATION
STATEMENT SHALL  THEREAFTER  BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE  SECURITIES  ACT OF 1933 OR UNTIL THE  REGISTRATION  STATEMENT  SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION,  ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE. A.


                                       3



        PRELIMINARY PROSPECTUS SUBJECT TO COMPLETION, DATED JUNE 3, 2005


                         ULTADATA SYSTEMS, INCORPORATED
                               3,100,000 SHARES OF
                                  COMMON STOCK


      This prospectus relates to the resale by the selling  stockholder of up to
3,100,000 shares of our common stock, including up to 3,000,000 shares of common
stock underlying convertible debentures and up to 100,000 shares of common stock
issuable upon the exercise of common stock purchase  warrants.  The  convertible
debentures are  convertible  into the number of our shares of common stock equal
to the principal amount of the debentures being converted multiplied by 11, less
the  product of the  conversion  price  multiplied  by the dollar  amount of the
debenture  being  converted;  and the  product  thereof  shall be divided by the
conversion  price.  The conversion  price for the convertible  debentures is the
lesser of (i) $1.25 or (ii)  eighty  percent of the of the  average of the three
lowest volume weighted  average prices during the twenty (20) trading days prior
to the  conversion.  If the volume  weighted  average  price is below $0.50 on a
conversion  date,  we have the right to pre-pay the amount of the  debenture the
holder  elects to convert,  plus  accrued and unpaid  interest,  at 125% of such
amount; however, if we elect to pre-pay in this situation,  the debenture holder
has the right to withdraw the notice of conversion. Also, if the volume weighted
average  price is below  $0.50 at any point  during a month,  the  holder is not
obligated  to convert  any  portion of the  debenture  during  that  month.  The
warrants are exercisable at $10.00 per share.


      The selling  stockholder  may sell  common  stock from time to time in the
principal market on which the stock is traded at the prevailing  market price or
in negotiated transactions. The selling stockholder may be deemed an underwriter
of the shares of common stock, which it is offering. We will pay the expenses of
registering these shares.


      Our common  stock is  registered  under  Section  12(g) of the  Securities
Exchange Act of 1934 and is listed on the Over-The-Counter  Bulletin Board under
the symbol  "ULTR".  The last reported sales price per share of our common stock
as reported by the Over-The-Counter Bulletin Board on June 1, 2005, was $0.25.


INVESTING IN THESE  SECURITIES  INVOLVES  SIGNIFICANT  RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 7.

         Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus  is truthful or  complete.  Any  representation  to the contrary is a
criminal offense.

                  The date of this prospectus is _______, 2005.

      THE  INFORMATION  IN THIS  PROSPECTUS  IS NOT COMPLETE AND MAY BE CHANGED.
THIS  PROSPECTUS  IS INCLUDED IN THE  REGISTRATION  STATEMENT  THAT WAS FILED BY
ULTRADATA SYSTEMS,  INCORPORATED,  WITH THE SECURITIES AND EXCHANGE  COMMISSION.
THE SELLING  STOCKHOLDERS  MAY NOT SELL THESE  SECURITIES UNTIL THE REGISTRATION
STATEMENT  BECOMES  EFFECTIVE.  THIS  PROSPECTUS  IS NOT AN OFFER TO SELL  THESE
SECURITIES AND IS NOT  SOLICITING AN OFFER TO BUY THESE  SECURITIES IN ANY STATE
WHERE THE SALE IS NOT PERMITTED.


                                       4


                               PROSPECTUS SUMMARY

      The following summary highlights  selected  information  contained in this
prospectus.  This  summary  does not  contain  all the  information  you  should
consider  before  investing  in the  securities.  Before  making  an  investment
decision,  you should read the entire prospectus carefully,  including the "risk
factors"  section,  the  financial  statements  and the  notes to the  financial
statements.

                         ULTRADATA SYSTEMS, INCORPORATED

      Our  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  and speech technology have opened up new opportunities for us to
integrate our technology and create new products merging these technologies with
our own. We are  completing  development of several new products which are based
on adding significant  features to the successful Talking Road Navigator such as
a Spanish-speaking unit and a voice-recognition unit which allows for hands-free
operation.  These new products are consistent  with our goal of improved ease of
use by the consumer. The Spanish-speaking unit was completed in 2004 and initial
deliveries to customers have been made.


      For the years ended  December 31, 2004 and 2003,  we generated  revenue in
the  amounts  of  $3,970,434  and  $2,863,258,  respectively,  and net income of
$317,822 and  $109,965,  respectively.  For the quarter ended March 31, 2005, we
generated  revenue  in the amount of $83,825  and a net loss of  $123,601.  As a
result of a major customer, who accounted for 55.4% of sales during 2004, having
experienced deteriorating operations during 2004, which resulted in the customer
ceasing to order products from us during the second quarter and our  terminating
of our  agreements  with AAA for the sale of our products  using the AAA logo to
AAA retail  locations,  our independent  registered  public  accounting firm, in
their report dated March 5, 2005,  have  expressed  substantial  doubt about our
ability to continue as a going concern.


      Our principal  offices are located at 1240 Dielman  Industrial  Court, St.
Louis,  Missouri 63132,  and our telephone  number is (314)  997-2250.  We are a
Delaware corporation.

The Offering

Common stock offered by
selling stockholder....................Up to 3,100,000  shares,  including  the
                                       following:

                                        -   up to  3,000,000  shares  of  common
                                            stock     underlying     convertible
                                            debentures in the  principal  amount
                                            of  $300,000  (includes a good faith
                                            estimate  of the  shares  underlying
                                            convertible  debentures  to  account
                                            for market fluctuations antidilution
                                            and  price  protection  adjustments,
                                            respectively), and

                                        -   up to 100,000 shares of common stock
                                            issuable upon the exercise of common
                                            stock   purchase   warrants   at  an
                                            exercise  price of $10.00  per share
                                            (includes  a good faith  estimate of
                                            the shares  underlying  warrants  to
                                            account for  antidilution  and price
                                            protection              adjustments,
                                            respectively).

                                            This number represents 32.60% of our
                                            current outstanding stock.


                                       5


Common stock to be outstanding
after the offering.....................Up to 9,510,187 shares


Use of proceeds........................We will not  receive any  proceeds  from
                                       the sale of the common  stock.  However,
                                       we will  receive up to  $1,000,000  upon
                                       exercise of the  warrants by the selling
                                       stockholders.  We  are  registering  the
                                       resale of up to 100,000 shares of common
                                       stock underlying the warrants,  although
                                       the selling  stockholder  is entitled to
                                       exercise up to 300,000  shares of common
                                       stock underlying the warrant.  We expect
                                       to use the  proceeds  received  from the
                                       exercise of the  warrants,  if any,  for
                                       general   working   capital    purposes.
                                       However, the selling stockholder will be
                                       entitled to exercise  the  warrants on a
                                       cashless  basis if the  shares of common
                                       stock  underlying  the  warrants are not
                                       registered   pursuant  to  an  effective
                                       registration  statement  within one year
                                       from  issuance.  In the  event  that the
                                       selling   stockholder    exercises   the
                                       warrants  on a cashless  basis,  then we
                                       will not receive any  proceeds  from the
                                       exercise of those warrants. In addition,
                                       we have received gross proceeds $100,000
                                       from the sale of the secured convertible
                                       debentures of which the  investors  have
                                       withheld  $50,000  for  the  payment  of
                                       professional  fees and the investors are
                                       obligated   to   provide   us   with  an
                                       additional  $200,000 within five days of
                                       this    prospectus     being    declared
                                       effective.  The proceeds  received  from
                                       the  sale  of  the  secured  convertible
                                       debentures  will  be used  for  business
                                       development  purposes,  working  capital
                                       needs,  payment of consulting  and legal
                                       fees and purchasing inventory.


Over-The-Counter Bulletin Board
Symbol.................................ULTR


      The above  information  regarding common stock to be outstanding after the
offering is based on 6,410,187 shares of common stock  outstanding as of June 1,
2005 and assumes the subsequent conversion of our issued convertible  debentures
and exercise of warrants by our selling stockholder.


      To obtain funding for our ongoing operations, we entered into a Securities
Purchase Agreement with an accredited investor on February 14, 2005, and amended
on February 17, 2005, for the sale of (i) $300,000 in convertible debentures and
(ii) warrants to buy 300,000 shares of our common stock. This prospectus relates
to the resale of the common stock  underlying these  convertible  debentures and
warrants.

      The investors are obligated to provide us with an aggregate of $300,000 as
follows:

      o     $50,000 was disbursed to us on February 14, 2005;

      o     $50,000 has been  retained for  services  provided to our company by
            various  professionals,  which shall be disbursed upon effectiveness
            of this registration statement; and

      o     $200,000 will be released upon  effectiveness  of this  registration
            statement.


                                       6



      The debentures bear interest at 4 3/4%,  mature two years from the date of
issuance,   and  are   convertible   into  our  common  stock,  at  the  selling
stockholder's option. The convertible debentures are convertible into the number
of our shares of common stock equal to the  principal  amount of the  debentures
being  converted  multiplied  by 11,  less the product of the  conversion  price
multiplied  by the  dollar  amount of the  debenture  being  converted;  and the
product thereof shall be divided by the conversion  price.  The conversion price
for the convertible  debenture is the lesser of (i) $1.25 or (ii) eighty percent
of the of the average of the three lowest volume weighted  average prices during
the twenty (20) trading  days prior to the  conversion.  If the volume  weighted
average price is below $0.50 on a conversion  date, we have the right to pre-pay
the amount of the  debenture  the holder  elects to  convert,  plus  accrued and
unpaid interest, at 125% of such amount; however, if we elect to pre-pay in this
situation,  the  debenture  holder  has the  right to  withdraw  the  notice  of
conversion.  Also,  if the volume  weighted  average price is below $0.50 at any
point during a month,  the holder is not obligated to convert any portion of the
debenture  during  that  month.  Accordingly,  there  is in fact no limit on the
number of shares  into which the  debenture  may be  converted.  For a period of
twenty  days  after  the  date  that the  outstanding  principal  amount  of the
debenture is less than  $100,000,  we may redeem the  debenture in whole in cash
for the  outstanding  principal  amount  plus  accrued and unpaid  interest.  In
addition,   the  selling  stockholder  is  obligated  to  exercise  the  warrant
concurrently  with  the  submission  of  a  conversion  notice  by  the  selling
stockholder.  The warrant is exercisable  into 300,000 shares of common stock at
an exercise price of $10.00 per share.


      The conversion  provisions of the convertible  debentures and the exercise
provisions of the warrant are correlated so that the convertible debentures will
be converted and the warrant exercised in like  proportions.  The result is that
in any month in which the holder  converts the 3% minimum it will also  exercise
the 3% minimum  under the  warrant,  which will result in it  purchasing  common
stock for $99,000 ($90,000 paid in cash and $9,000 of the convertible debentures
principal converted). In total, the conversion of the convertible debentures and
exercise of the warrant will result in Golden Gate  purchasing  our common stock
for up to $3,300,000  ($3,000,000  paid in cash and $300,000 of the  convertible
debentures  principal converted) during the period between the effective date of
the registration statement and February 14, 2007.

      There are four  conditions  that may reduce the aggregate  purchase  price
paid by Golden Gate below $3,300,000:

      1. If Golden Gate only converts the 3% minimum per month, the February 14,
2007  payment  date  for the  convertible  debentures  will  occur  before  full
conversion and exercise have occurred;

      2. The conversion and exercise  provisions of the securities  provide that
at no  time  may  Golden  Gate  acquire  ownership  of  more  that  9.9%  of our
outstanding common stock;

      3. If at the time of a conversion/exercise,  the conversion price would be
less than $.40,  then  either  (a) we may opt to redeem the amount of  principal
that the holder  presents for  conversion  at 125% of face value,  or (b) if the
conversion/exercise  date is later than November 11, 2005,  the holder may elect
to convert up to $100,000 of the convertible  debentures  without exercising the
warrant,  either of which events would reduce the aggregate  purchases under the
convertible  debentures  and  warrant  by 900% of the amount  redeemed  by us or
converted without exercise.

      4. When the principal  amount of the  convertible  debentures  falls below
$100,000,  we may redeem the  remaining  principal  for its face value.  In that
event,  the  aggregate  purchase  price paid by Golden Gate for our common stock
would be only $2,200,000.

      The selling  stockholder has contractually  agreed to restrict its ability
to convert or exercise its warrants and receive  shares of our common stock such
that the  number of shares of  common  stock  held by them and their  affiliates
after such  conversion  or exercise does not exceed 9.99% of the then issued and
outstanding  shares of common stock.  See the "Selling  Stockholders"  and "Risk
Factors" sections for a complete description of the convertible debentures.


                                       7



EXPLANATORY  NOTE: ON FEBRUARY 14, 2005,  WE ENTERED INTO A SECURITIES  PURCHASE
AGREEMENT, AND AMENDED ON FEBRUARY 17, 2005 WITH GOLDEN GATE INVESTORS, INC. ANY
ISSUANCE OF SHARES OF COMMON STOCK PURSUANT TO THIS AGREEMENT THAT WOULD REQUIRE
US TO ISSUE SHARES OF COMMON STOCK IN EXCESS OF OUR  AUTHORIZED  CAPITAL IS ALSO
CONTINGENT  UPON US OBTAINING  SHAREHOLDER  APPROVAL TO INCREASE OUR  AUTHORIZED
SHARES OF COMMON STOCK FROM  10,000,000 TO 50,000,000 AND FILING THE CERTIFICATE
OF AMENDMENT TO OUR CERTIFICATE OF INCORPORATION.  ON APRIL 22, 2005, WE FILED A
DEFINITIVE PROXY STATEMENT WITH THE SECURITIES AND EXCHANGE COMMISSION, IN WHICH
WE HAVE SET JUNE 14, 2005 AS THE DATE OF THE STOCKHOLDERS  MEETING,  AT WHICH WE
ARE ASKING A MAJORITY OF OUR SHAREHOLDERS TO AUTHORIZE AN INCREASE IN THE NUMBER
OF SHARES OF COMMON STOCK WE ARE  AUTHORIZED  TO ISSUE.  WE INTEND ON FILING THE
CERTIFICATE  OF AMENDMENT TO OUR  CERTIFICATE  OF  INCORPORATION  AS SOON AS THE
INCREASE IN AUTHORIZED STOCK IS APPROVED BY OUR SHAREHOLDERS. WE ARE REGISTERING
3,100,000 SHARES OF COMMON STOCK PURSUANT TO THIS PROSPECTUS THAT ARE UNDERLYING
THE CONVERTIBLE DEBENTURES AND WARRANTS ISSUED IN CONNECTION WITH THE SECURITIES
PURCHASE AGREEMENT. UPON FILING THE CERTIFICATE OF AMENDMENT, WE WILL AMEND THIS
PROSPECTUS  TO  INCLUDE  ADDITIONAL  SHARES OF COMMON  STOCK  THAT ARE  ISSUABLE
PURSUANT TO THIS AGREEMENT.



                                       8


                                  RISK FACTORS

      This  investment  has a high degree of risk.  Before you invest you should
carefully  consider the risks and  uncertainties  described  below and the other
information in this  prospectus.  If any of the following  risks actually occur,
our business,  operating results and financial condition could be harmed and the
value of our stock  could go down.  This  means you could  lose all or a part of
your investment.

RISKS RELATING TO OUR BUSINESS:

IF WE ARE UNABLE TO OBTAIN  ADDITIONAL  FUNDING OUR BUSINESS  OPERATIONS WILL BE
HARMED AND IF WE DO OBTAIN ADDITIONAL  FINANCING OUR THEN EXISTING  SHAREHOLDERS
MAY SUFFER SUBSTANTIAL DILUTION

      Additional  capital may be required to effectively  support the operations
and to otherwise implement our overall business strategy.  However, there can be
no assurance  that  financing  will be  available  when needed on terms that are
acceptable to us. The inability to obtain  additional  capital will restrict our
ability to grow and may  reduce our  ability  to  continue  to conduct  business
operations.  If we are unable to obtain additional financing,  we will likely be
required to curtail our marketing and  development  plans and possibly cease our
operations.  Any additional equity financing may involve substantial dilution to
our then existing shareholders.

MANY OF OUR  COMPETITORS  ARE  LARGER  AND  HAVE  GREATER  FINANCIAL  AND  OTHER
RESOURCES  THAN WE DO AND THOSE  ADVANTAGES  COULD MAKE IT  DIFFICULT  FOR US TO
COMPETE WITH THEM

      The general market for our products and services is extremely  competitive
and includes several companies which have achieved  substantially greater market
shares than we have, and have longer operating  histories,  have larger customer
bases, have substantially greater financial, development and marketing resources
than we do. If overall demand for our products  should  decrease it could have a
materially adverse affect on our operating results.

A SUBSTANTIAL  PORTION OF OUR NET SALES AND GROSS PROFIT IS DERIVED FROM A SMALL
NUMBER OF LARGE CUSTOMERS.

      Our five largest customers  accounted for approximately 89% and 77% of our
gross  sales  during  fiscal  years  ending 2004 and 2003,  respectively.  Media
Solutions  Services  accounted  for  approximately  55.4% and 56.2% of our gross
sales in fiscal  years 2004 and 2003,  respectively.  Office Max  accounted  for
approximately  14.1%% of our gross sales for fiscal year 2004. QVC accounted for
approximately  12.2% and 16.8% of our gross sales in fiscal years 2004 and 2003,
respectively.  We do  not  enter  into  long-term  agreements  with  any  of our
customers.  Instead,  we  enter  into a  number  of  individual  purchase  order
commitments with our customers.  A decision by the controlling  owner of a group
of stores or any other  significant  customer,  whether motivated by competitive
conditions,  financial  difficulties  or  otherwise,  to decrease  the amount of
merchandise  purchased from us, or to change their manner of doing business with
us, could have a material adverse effect on our financial  condition and results
of operations.

A   MANUFACTURER'S   INABILITY   TO  PRODUCE  OUR  GOODS  ON  TIME  AND  TO  OUR
SPECIFICATIONS COULD RESULT IN LOST REVENUE AND NET LOSSES

      We do not own or operate any manufacturing facilities and therefore depend
upon independent  third parties for the manufacture of all of our products.  Our
products  are  manufactured  to our  specifications  by a foreign  manufacturer.
During fiscal 2004, all of our products were  manufactured by one  manufacturer.
The  inability  of a  manufacturer  to ship  orders of our  products in a timely
manner or to meet our quality standards could cause us to miss the delivery date
requirements   of  our  customers  for  those  items,   which  could  result  in
cancellation of orders,  refusal to accept deliveries or a reduction in purchase
prices,  any of which could have a material adverse effect as our revenues would
decrease and we would incur net losses as a result of sales of the  product,  if
any sales  could be made.  Further,  because  quality is a leading  factor  when
customers  and retailers  accept or reject goods,  any decline in quality by our
third-party  manufacturers  could be detrimental not only to a particular order,
but also to our future relationship with that particular customer.


                                       9


IF WE NEED TO REPLACE  MANUFACTURERS,  OUR EXPENSES COULD INCREASE  RESULTING IN
SMALLER PROFIT MARGINS

      We  compete  with  other  companies  for the  production  capacity  of our
manufacturer.  Some of  these  competitors  have  greater  financial  and  other
resources  than we have, and thus may have an advantage in the  competition  for
production.  If we  experience  a  significant  increase  in  demand,  or if our
existing  manufacturer  of ours  must be  replaced,  we may have to  expand  our
third-party  manufacturing  capacity.  We cannot assure you that this additional
capacity will be available  when required on terms that are  acceptable to us or
similar to existing  terms which we have with our current  manufacturer,  either
from a production standpoint or a financial standpoint.  We typically enter into
a purchase order  commitment,  which is good for 90 days,  specifying a time for
delivery,  method  of  payment,  design  and  quality  specifications  and other
standard  industry  provisions,  but do not have a long-term  contract  with our
manufacturer. The manufacturer we use does not produce our products exclusively.

      Should we be forced to replace our current manufacturer,  who we rely upon
for all of our production  needs,  then we may  experience an adverse  financial
impact, or an adverse  operational impact, such as being forced to pay increased
costs  for such  replacement  manufacturing  or  delays  upon  distribution  and
delivery  of our  products  to our  customers,  which  could  cause  us to  lose
customers or lose revenues because of late shipments.

IF A MANUFACTURER OF OURS FAILS TO USE ACCEPTABLE LABOR PRACTICES, WE MIGHT HAVE
DELAYS IN  SHIPMENTS  OR FACE  JOINT  LIABILITY  FOR  VIOLATIONS,  RESULTING  IN
DECREASED REVENUE AND INCREASED EXPENSES

      While we require our  independent  manufacturers  to operate in compliance
with  applicable  laws and  regulations,  we have no control  over the  ultimate
actions  of  our  independent  manufacturers.  While  our  internal  and  vendor
operating guidelines promote ethical business practices and our staff and buying
agents  periodically  visit  and  monitor  the  operations  of  our  independent
manufacturers,  we do not control these  manufacturers or their labor practices.
The violation of labor or other laws by an independent  manufacturer of ours, or
by  one  of  our  licensing  partners,  or  the  divergence  of  an  independent
manufacturer's  or licensing  partner's  labor  practices  from those  generally
accepted as ethical in the United States, could interrupt,  or otherwise disrupt
the shipment of finished products to us or damage our reputation.  Any of these,
in turn,  could have a material  adverse  effect on our financial  condition and
results of operations.

ANY INABILITY TO ADEQUATELY  PROTECT OUR PROPRIETARY  TECHNOLOGY  COULD HARM OUR
ABILITY TO COMPETE

      Our  future  success  and  ability  to  compete  depends  in part upon our
proprietary technology, patents and trademarks, which we attempt to protect with
a combination of patent, copyright,  trademark and trade secret laws, as well as
with our  confidentiality  procedures and  contractual  provisions.  These legal
protections  afford only limited protection and are time-consuming and expensive
to obtain and/or  maintain.  Further,  despite our efforts,  we may be unable to
prevent third parties from infringing upon or misappropriating  our intellectual
property.

      We have been issued four patents by the United States Patent and Trademark
Office. Any patents that are issued to us could be invalidated,  circumvented or
challenged. If challenged, our patents might not be upheld or their claims could
be narrowed.  Our  intellectual  property may not be adequate to provide us with
competitive  advantage or to prevent  competitors  from entering the markets for
our  products.   Additionally,   our  competitors  could  independently  develop
non-infringing  technologies  that are competitive  with,  equivalent to, and/or
superior to our technology.  Monitoring  infringement and/or misappropriation of
intellectual property can be difficult,  and there is no guarantee that we would
detect any infringement or  misappropriation  of our proprietary rights. Even if
we do  detect  infringement  or  misappropriation  of  our  proprietary  rights,
litigation to enforce these rights could cause us to divert  financial and other
resources away from our business operations.

OUR PRODUCTS MAY INFRINGE UPON THE  INTELLECTUAL  PROPERTY  RIGHTS OF OTHERS AND
RESULTING  CLAIMS  AGAINST  US COULD BE  COSTLY  AND  REQUIRE  US TO ENTER  INTO
DISADVANTAGEOUS LICENSE OR ROYALTY ARRANGEMENTS

      The handheld  computer  industry is  characterized  by the  existence of a
large number of patents and frequent  litigation  based on allegations of patent
infringement  and the violation of  intellectual  property  rights.  Although we
attempt to avoid infringing upon known proprietary  rights of third parties,  we
may be subject to legal proceedings and claims for alleged infringement by us or
our licensees of third-party proprietary rights, such as patents, trade secrets,
trademarks or copyrights,  from time to time in the ordinary course of business.
Any claims relating to the infringement of third-party  proprietary rights, even
if not  successful or  meritorious,  could result in costly  litigation,  divert
resources  and our  attention  or require  us to enter  into  royalty or license
agreements which are not  advantageous to us. In addition,  parties making these
claims may be able to obtain  injunctions,  which could  prevent us from selling
our  products.  Furthermore,  former  employers of our employees may assert that
these   employees  have   improperly   disclosed   confidential  or  proprietary
information  to us.  Any of these  results  could harm our  business.  We may be
increasingly  subject  to  infringement  claims as the  number of, and number of
features of, our products grow.


                                       10


IF WE ARE UNABLE TO RETAIN THE SERVICES OF MESSRS.  ROSS, CLARKE AND PETERSON OR
IF WE ARE UNABLE TO SUCCESSFULLY RECRUIT QUALIFIED PERSONNEL, WE MAY NOT BE ABLE
TO CONTINUE OUR OPERATIONS.

      Our success depends to a significant  extent upon the continued service of
Mr. Monte Ross, our Chief Executive  Officer,  Mr. Ernest Clarke,  our President
and Chief  Financial  Officer,  and Mr. Mark L.  Peterson,  our Vice President -
Engineering  and  Secretary.  Loss of the  services of Messrs.  Ross,  Clarke or
Peterson  could have a material  adverse  effect on our  growth,  revenues,  and
prospective  business.  We do not  maintain  key-man  insurance  on the  life of
Messrs.  Ross,  Clarke  or  Peterson.  In  addition,  in order  to  successfully
implement and manage our business plan, we will be dependent  upon,  among other
things,  successfully recruiting qualified personnel.  Competition for qualified
individuals is intense.  There can be no assurance that we will be able to find,
attract and retain existing  employees or that we will be able to find,  attract
and retain qualified personnel on acceptable terms.

RISKS RELATING TO OUR CURRENT FINANCING ARRANGEMENT:

THERE ARE A LARGE NUMBER OF SHARES  UNDERLYING  OUR  CONVERTIBLE  DEBENTURES AND
WARRANTS  THAT MAY BE AVAILABLE FOR FUTURE SALE AND THE SALE OF THESE SHARES MAY
DEPRESS THE MARKET PRICE OF OUR COMMON STOCK.


      As of June 1, 2005,  we had  6,410,187  shares of common  stock issued and
outstanding,  convertible  debentures  outstanding that may be converted into an
estimated  5,965,285  shares  of  common  stock at  current  market  prices  and
outstanding warrants to purchase100,000 shares of common stock. Additionally, we
have an obligation to sell secured convertible  debentures that may be converted
into an estimated 11,930,569 shares of common stock at current market prices and
issue warrants to purchase 200,000 shares of common stock in the near future. In
addition,  the number of shares of common stock issuable upon  conversion of the
outstanding convertible debentures may increase if the market price of our stock
declines.  All  of  the  shares,  including  all of  the  shares  issuable  upon
conversion of the  debentures  and upon  exercise of our  warrants,  may be sold
without  restriction.  The sale of these shares may adversely  affect the market
price of our common stock.


THE  CONTINUOUSLY   ADJUSTABLE  CONVERSION  PRICE  FEATURE  OF  OUR  CONVERTIBLE
DEBENTURES  COULD REQUIRE US TO ISSUE A SUBSTANTIALLY  GREATER NUMBER OF SHARES,
WHICH WILL CAUSE DILUTION TO OUR EXISTING STOCKHOLDERS.


      If we are unable to make  repayment  of the  convertible  debentures  on a
monthly basis, our obligation to issue shares upon conversion of our convertible
debentures is essentially  limitless.  The following is an example of the amount
of  shares  of our  common  stock  that are  issuable,  upon  conversion  of our
convertible debentures (excluding accrued interest), based on market prices 25%,
50% and 75% below the market price, as of June 1, 2005 of $0.25.

                                                    Number            % of
% Below       Price Per       With Discount       of Shares        Outstanding
Market          Share            at 20%            Issuable           Stock
------         ------            ------           ----------         ------
25%            $.1875             $.15            21,700,000         77.20%
50%            $.125              $.10            32,700,000         83.61%
75%            $.0625             $.05            65,700,000         91.11%
                        
                          
      As  illustrated,  the  number  of shares of  common  stock  issuable  upon
conversion of our  convertible  debentures  will increase if the market price of
our stock declines, which will cause dilution to our existing stockholders.


                                       11


THE  CONTINUOUSLY   ADJUSTABLE  CONVERSION  PRICE  FEATURE  OF  OUR  CONVERTIBLE
DEBENTURES  MAY  ENCOURAGE  INVESTORS  TO MAKE SHORT SALES IN OUR COMMON  STOCK,
WHICH COULD HAVE A DEPRESSIVE EFFECT ON THE PRICE OF OUR COMMON STOCK.

      The convertible debentures are convertible into shares of our common stock
at a 20%  discount  to the  trading  price  of the  common  stock  prior  to the
conversion.  The significant  downward pressure on the price of the common stock
as Golden Gate  Investors  converts and sells  material  amounts of common stock
could  encourage  short sales by investors.  This could place  further  downward
pressure  on the price of the common  stock.  Golden Gate  Investors  could sell
common  stock  into the market in  anticipation  of  covering  the short sale by
converting its securities,  which could cause the further  downward  pressure on
the stock price. In addition, not only the sale of shares issued upon conversion
or exercise of debentures and warrants,  but also the mere perception that these
sales could occur, may adversely affect the market price of the common stock.

THE  ISSUANCE  OF SHARES  UPON  CONVERSION  OF THE  CONVERTIBLE  DEBENTURES  AND
EXERCISE OF OUTSTANDING WARRANTS MAY CAUSE IMMEDIATE AND SUBSTANTIAL DILUTION TO
OUR EXISTING STOCKHOLDERS.

      The issuance of shares upon conversion of the  convertible  debentures and
exercise of warrants  may result in  substantial  dilution to the  interests  of
other  stockholders  since the selling  stockholders may ultimately  convert and
sell the full amount issuable on conversion.  Although Golden Gate Investors may
not convert their convertible  debentures and/or exercise their warrants if such
conversion  or  exercise  would  cause  them  to  own  more  than  9.99%  of our
outstanding  common  stock,  this  restriction  does  not  prevent  Golden  Gate
Investors  from  converting  and/or  exercising  some of their holdings and then
converting the rest of their holdings.  In this way, Golden Gate Investors could
sell more than this limit while never holding more than this limit.  There is no
upper  limit on the  number of shares  that may be  issued  which  will have the
effect of further diluting the proportionate equity interest and voting power of
holders of our common stock, including investors in this offering.

IN THE EVENT THAT OUR STOCK PRICE DECLINES, THE SHARES OF COMMON STOCK ALLOCATED
FOR CONVERSION OF THE  CONVERTIBLE  DEBENTURES  AND REGISTERED  PURSUANT TO THIS
PROSPECTUS  MAY NOT BE  ADEQUATE  AND WE MAY BE  REQUIRED  TO FILE A  SUBSEQUENT
REGISTRATION  STATEMENT  COVERING  ADDITIONAL  SHARES.  IF THE  SHARES  WE  HAVE
ALLOCATED AND ARE  REGISTERING  HEREWITH ARE NOT ADEQUATE AND WE ARE REQUIRED TO
FILE AN ADDITIONAL  REGISTRATION  STATEMENT,  WE MAY INCUR  SUBSTANTIAL COSTS IN
CONNECTION THEREWITH.

      Based on our current market price and the potential decrease in our market
price as a result of the issuance of shares upon  conversion of the  convertible
debentures,  we have made a good  faith  estimate  as to the amount of shares of
common stock that we are required to register and allocate for conversion of the
convertible  debentures.  Accordingly,  we are registering  3,000,000  shares to
cover the conversion of the convertible debentures.  In the event that our stock
price decreases,  the shares of common stock we have allocated for conversion of
the convertible debentures and are registering hereunder may not be adequate. If
the shares we have allocated to the registration  statement are not adequate and
we are  required  to file an  additional  registration  statement,  we may incur
substantial  costs  in  connection  with  the  preparation  and  filing  of such
registration statement.

IF WE  ARE  REQUIRED  FOR  ANY  REASON  TO  REPAY  OUR  OUTSTANDING  CONVERTIBLE
DEBENTURES,  WE WOULD BE REQUIRED TO DEPLETE OUR WORKING CAPITAL,  IF AVAILABLE,
OR RAISE ADDITIONAL FUNDS. OUR FAILURE TO REPAY THE CONVERTIBLE  DEBENTURES,  IF
REQUIRED,  COULD RESULT IN LEGAL ACTION AGAINST US, WHICH COULD REQUIRE THE SALE
OF SUBSTANTIAL ASSETS.

      In February 2005, we entered into a Securities  Purchase Agreement for the
sale of an aggregate of $300,000 principal amount of convertible debentures. The
convertible debentures are due and payable, with 4 3/4% interest, two years from
the date of issuance,  unless sooner  converted into shares of our common stock.
In  addition,  any event of default  could  require the early  repayment  of the
convertible  debentures  at a price  equal to 125% of the  amount  due under the
debentures.  We anticipate that the full amount of the  convertible  debentures,
together  with accrued  interest,  will be  converted  into shares of our common
stock,  in accordance with the terms of the  convertible  debentures.  If we are
required to repay the  convertible  debentures,  we would be required to use our
limited working capital and raise  additional  funds. If we were unable to repay
the debentures when required,  the debenture holders could commence legal action
against us and  foreclose  on all of our assets to recover the amounts  due. Any
such action would require us to curtail or cease operations.


                                       12


RISKS RELATING TO OUR COMMON STOCK:

IF WE FAIL TO REMAIN CURRENT ON OUR REPORTING REQUIREMENTS,  WE COULD BE REMOVED
FROM THE OTC BULLETIN BOARD WHICH WOULD LIMIT THE ABILITY OF  BROKER-DEALERS  TO
SELL OUR SECURITIES AND THE ABILITY OF STOCKHOLDERS TO SELL THEIR  SECURITIES IN
THE SECONDARY MARKET.

      Companies trading on the OTC Bulletin Board, such as us, must be reporting
issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and
must be current in their reports  under  Section 13, in order to maintain  price
quotation  privileges on the OTC Bulletin Board. If we fail to remain current on
our reporting requirements,  we could be removed from the OTC Bulletin Board. As
a result,  the market liquidity for our securities  could be severely  adversely
affected by limiting the ability of  broker-dealers  to sell our  securities and
the ability of stockholders to sell their securities in the secondary market.

OUR  COMMON  STOCK IS  SUBJECT  TO THE  "PENNY  STOCK"  RULES OF THE SEC AND THE
TRADING MARKET IN OUR  SECURITIES IS LIMITED,  WHICH MAKES  TRANSACTIONS  IN OUR
STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.

      The  Securities  and  Exchange  Commission  has  adopted  Rule 15g-9 which
establishes the definition of a "penny stock," for the purposes  relevant to us,
as any equity  security  that has a market price of less than $5.00 per share or
with an  exercise  price of less  than  $5.00  per  share,  subject  to  certain
exceptions.  For any  transaction  involving a penny stock,  unless exempt,  the
rules require:

      o     that a broker or dealer approve a person's  account for transactions
            in penny stocks; and

      o     the broker or dealer  receive from the investor a written  agreement
            to the  transaction,  setting forth the identity and quantity of the
            penny stock to be purchased.

In order to approve a person's  account for  transactions  in penny stocks,  the
broker or dealer must:

      o     obtain financial information and investment experience objectives of
            the person; and

      o     make a  reasonable  determination  that  the  transactions  in penny
            stocks are  suitable  for that person and the person has  sufficient
            knowledge  and  experience  in  financial  matters  to be capable of
            evaluating the risks of transactions in penny stocks.

The broker or dealer  must also  deliver,  prior to any  transaction  in a penny
stock, a disclosure  schedule prescribed by the Commission relating to the penny
stock market, which, in highlight form:

      o     sets  forth  the  basis on  which  the  broker  or  dealer  made the
            suitability determination; and

      o     that the broker or dealer received a signed,  written agreement from
            the investor prior to the transaction.

Generally,  brokers may be less willing to execute  transactions  in  securities
subject  to the  "penny  stock"  rules.  This  may  make it more  difficult  for
investors to dispose of our common stock and cause a decline in the market value
of our stock.

      Disclosure  also has to be made  about  the  risks of  investing  in penny
stocks  in  both  public  offerings  and in  secondary  trading  and  about  the
commissions payable to both the broker-dealer and the registered representative,
current  quotations for the securities and the rights and remedies  available to
an  investor  in cases of fraud in penny stock  transactions.  Finally,  monthly
statements  have to be sent  disclosing  recent price  information for the penny
stock held in the account and information on the limited market in penny stocks.


                                       13


                                 USE OF PROCEEDS


      This prospectus  relates to shares of our common stock that may be offered
and sold from time to time by the selling  stockholder.  We will not receive any
proceeds from the sale of shares of common stock in this offering.  However,  we
will  receive  the  sale  price  of any  common  stock  we sell  to the  selling
stockholder  upon exercise of the warrants.  We are registering the resale of up
to 100,000 shares of common stock underlying the warrants,  although the selling
stockholder  is  entitled  to  exercise  up to  300,000  shares of common  stock
underlying the warrant. We expect to use the proceeds received from the exercise
of the warrants,  if any, for general working  capital  purposes.  However,  the
selling  stockholder  will be entitled to  exercise  the  warrants on a cashless
basis if the shares of common stock  underlying  the warrants are not registered
pursuant to an effective  registration  statement within one year from issuance.
In the event that the selling  stockholder  exercises the warrants on a cashless
basis,  then we will  not  receive  any  proceeds  from  the  exercise  of those
warrants. In addition, we have received gross proceeds $100,000 from the sale of
the secured convertible  debentures of which the investors have withheld $50,000
for the payment of professional  fees and the investors are obligated to provide
us with an  additional  $200,000  within  five  days  of this  prospectus  being
declared  effective.  The  proceeds  received  from  the  sale  of  the  secured
convertible  debentures will be used for business development purposes,  working
capital needs, payment of consulting and legal fees and purchasing inventory.


            MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

      Our  common  stock is quoted on the OTC  Bulletin  Board  under the symbol
"ULTR." For the periods  indicated,  the following table sets forth the high and
low bid prices per share of common stock.  These prices  represent  inter-dealer
quotations  without  retail  markup,   markdown,   or  commission  and  may  not
necessarily represent actual transactions.

                                                  Low        High
                                                  ---        ----
              2003
              ----
              First Quarter                        .13       .32
              Second Quarter                       .05       .19
              Third Quarter                        .10       .22
              Fourth Quarter                       .12       .35

              2004
              ----
              First Quarter                        .11      1.65
              Second Quarter                      1.45      2.20
              Third Quarter                        .60      1.80
              Fourth Quarter                       .37      1.01

              
              2005
              ----
              First Quarter                        .37       .69
              Second Quarter (1)                   .21       .55

(1) As of June 1, 2005


HOLDERS


      As of June 1, 2005, we had  approximately 124 holders of our common stock.
The number of record  holders was  determined  from the records of our  transfer
agent and does not include  beneficial  owners of common  stock whose shares are
held in the names of various security brokers,  dealers, and registered clearing
agencies.  The transfer agent of our common stock is American Stock Transfer and
Trust Company.



                                       14


      We have never declared or paid any cash dividends on our common stock.  We
do not anticipate  paying any cash dividends to  stockholders in the foreseeable
future. In addition,  any future  determination to pay cash dividends will be at
the  discretion  of the  Board  of  Directors  and  will be  dependent  upon our
financial condition, results of operations, capital requirements, and such other
factors as the Board of Directors deem relevant.


                                       15


           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS

      Some  of the  information  in  this  Form  SB-2  contains  forward-looking
statements that involve  substantial risks and  uncertainties.  You can identify
these  statements  by  forward-looking  words such as "may,"  "will,"  "expect,"
"anticipate," "believe," "estimate" and "continue," or similar words. You should
read statements that contain these words carefully because they:

      o     discuss our future expectations;

      o     contain  projections  of our future  results of operations or of our
            financial condition; and

      o     state other "forward-looking" information.

      We believe it is important to communicate our expectations. However, there
may be events in the future that we are not able to  accurately  predict or over
which we have no control.  Our actual  results and the timing of certain  events
could  differ  materially  from  those  anticipated  in  these   forward-looking
statements as a result of certain factors, including those set forth under "Risk
Factors," "Business" and elsewhere in this prospectus. See "Risk Factors."

OVERVIEW


      The  downward  sales  trend  was  reversed  in 2003 due to the  successful
introduction  of the  Talking  Road  WhizTM in the third  quarter  of 2003.  The
success of this new  product  enabled us to  overcome  losses in the first three
quarters  of the year with a superb  fourth  quarter and be  profitable  for the
year. In 2004, this trend continued  through the first two quarters of the year.
In the second half of the year, sale declined due to internal problems at two of
our major customers. Our major customer, who accounted for 55.4% of sales during
2004,  experienced  deteriorating  operations during 2004, which resulted in the
customer ceasing to order products from us during the second quarter of 2004. In
addition,  we  terminated  our  agreement  with AAA for the sale of our products
using the AAA logo to AAA  retail  locations.  These  major  events  lead to our
independent  registered  public  accounting firm, in their report dated March 5,
2005,  to express  substantial  doubt  about our  ability to continue as a going
concern.  This has resulted in a  significant  decline in revenue and has placed
increased  pressure on our company to develop new  customers.  We are working to
rectify that situation by expanding our channels of distribution and introducing
new products we hope are attractive to the marketplace.


RESULTS OF OPERATIONS  FOR THE YEAR ENDED DECEMBER 31, 2004 COMPARED TO THE YEAR
ENDED DECEMBER 31, 2003

Sales

      Sales for 2004 increased  38.7% to $3,970,434  from $2,863,258 in 2003 due
to the success of the Talking Road WhizTM in the first half of 2004. Our plan is
to continue to pursue mass-market  outlets for both our traditional  products as
well as new products  and to grow sales in this  fashion.  In addition,  we have
engaged the services of new  representative  organizations in an effort to reach
new retail sales channels with which they have significant contacts.

Gross Profit

      Because of the increase in sales of new products, our gross profit in 2004
was $1,943,678, or 49.0% of sales, compared to $1,376,716, or 48.1% of sales, in
2003.

Selling Expenses

      During  2004,  we incurred  $329,137,  or 8.3% of sales,  in  advertising,
promotion,  and marketing program expenses,  as compared to $253,564, or 8.9% of
sales,  in 2003. The reduced  percentage is primarily due to the increased sales
base.

Research and Development Expenses

      Our research and  development  expenses in 2004 were  $140,507 as compared
with $63,156 in 2003, an increase of $77,351,  or 122.5%. The primary reason for
the increase was the fact that an  additional  engineer was hired to develop the
software for the Road GenieTM, the Spanish Talking Road Navigator, and for other
R&D activities.  We will continue to perform research and development in our own
niche market,  which we anticipate will lead to improved  products.  R&D work in
early  2005  will be  devoted  to  completing  the Road  Genie,  pursuing  other
applications  of this new  speech-recognition  technology,  and  developing  the
cell-phone Road Whiz.


                                       16


General and Administrative Expenses

      Our  general  and  administrative  expenses  were  $1,151,439  in  2004 as
compared to $876,528 in 2003,  representing  an increase of $274,911,  or 31.4%.
This increase is primarily due to the recognition an unexpected bad-debt expense
of $170,000  that we are  continuing to pursue  through  legal  action.  Another
source of increased  expense is the resumption of our employee  matching savings
plan that we had suspended throughout most of 2003.

Other Expense

      During 2004,  other expense was ($4,773)  compared to ($73,773) in 2003, a
decrease of $69,000, or 93.5%. This reduction was due to the elimination of most
of the interest-bearing debt that had burdened this item in 2003.

Net Income

      As a result of the foregoing, net income for 2004 was $317,822 as compared
to $109,695 for 2003. Net income  available to common  stockholders for 2004 was
$317,822, or $0.05 per basic and diluted share, compared with $104,505, or $0.02
per basic and diluted share in 2003, including $5,190 of preferred dividends.


RESULTS OF  OPERATIONS  FOR THE THREE  MONTHS  ENDED MARCH 31, 2005  COMPARED TO
THREE MONTHS ENDED MARCH 31, 2004

      Operating results for the first quarter of 2005 were  significantly  lower
than the first quarter of 2004.

Sales

      During the first  three  months of 2005,  net sales  totaled  $83,825,  as
compared  with  $1,753,499  in sales  recorded  in the  first  quarter  of 2004,
representing  a  95.2%  decrease.   Although  the  first  quarter  of  2004  was
uncharacteristically  strong, the 2005 results are weak by historical standards.
Orders for our Talking Road WhizTM product in early 2004  continued  strong from
the  holiday  period,  when it was  first  introduced.  The  loss  of two  major
customers  in the  latter  half of 2004  continue  to affect  our sales  pending
introduction of the Road Genie in the second quarter of 2005.

Gross Profit

      Gross profit margin for the current quarter was $39,923, or 47.6% of sales
compared to  $857,891,  or 48.9% of sales for the first  quarter of 2004.  Gross
profit as a percent of sales was comparable on a lower base of sales.

S,G&A Expense

      Selling  expenses  amounted to $22,410,  or 26.7% of sales,  for the first
quarter of 2005 as compared with $48,593, or 2.8% of sales for the first quarter
of 2004.  The small base of sales,  coupled  with  expenses in  preparation  for
marketing the Road Genie, has increased this cost out of proportion to sales. We
expect  selling costs to be higher in 2005 due to taking on the marketing  tasks
previously  performed by  large-volume  customers  who garnered a higher  margin
while absorbing the costs of advertising in various channels. However, the ratio
of selling  costs to sales  revenue  should drop below 10% due to higher  retail
margins for the Road Genie accruing directly to us.

      General and administrative  expenses were $99,584 for the first quarter of
2005 as compared  with  $260,208  for the same quarter in 2004,  representing  a
decrease  of 61.7%.  This  dramatic  drop was due to the  settlement  of a large
outstanding bad debt that had been fully reserved in 2004 of $176,475. We expect
general and  administrative  expense to return to previous  levels in subsequent
quarters.  Without this settlement,  general and  administrative  expenses would
have been $276,059.



                                       17



R&D Expense

      Research and development  expense in the first quarter of 2005 was $35,201
as compared to $19,669 for the same quarter of 2004,  reflecting the development
activities  associated  with the Road  Genie  and  software  for the  cell-phone
application  of our Road Whiz  product.  Work has also  proceeded  to  develop a
low-cost  digital  voice  recorder  both  as a  stand-alone  product  and  as an
additional feature of the Road Genie.

      We posted a net loss from  operations of ($117,272)  for the quarter ended
March 31,  2005  compared to a net profit from  operations  of $529,421  for the
quarter ended March 31, 2004.

Other Expense

      Other expense for the first quarter of 2005 amounted to ($6,329)  compared
with ($5,126) for the same period in 2004.

      As a result  of the  foregoing,  we  posted a net loss of  ($123,601),  or
($0.02) per basic and diluted  common  share,  for the three- month period ended
March 31, 2005, compared to 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.

LIQUIDITY AND CAPITAL RESOURCES

      As of March 31, 2005,  total current  assets were  $540,410  consisting of
cash and cash  equivalents  of $113,568,  accounts  receivable of $180,973,  net
inventories of $113,251 and prepaid expenses of $132,618.

      Total current  liabilities were $137,423 as of March 31, 2005,  consisting
of accounts payable of $56,527 and accrued liabilities of $80,896.

      We had net working capital of $402,987 as of March 31, 2005.

      We did not  have any cash  flows  from  investing  activities  during  the
quarter ended March 31, 2005.

      Net cash used in financing  activities was $1,366 during the quarter ended
March 31, 2005, consisting of capital expenditures.


      A major customer of ours experienced  deteriorating operations during 2004
and during the second  quarter ceased  ordering  products from us. This customer
accounted 55.4% of sales during 2004. In addition,  we terminated our agreements
with  AAA for  the  sale  of our  products  using  the  AAA  logo to AAA  retail
locations.  As a result,  our independent  registered public accounting firm, in
their report dated March 5, 2005,  have  expressed  substantial  doubt about our
ability to continue as a going concern.

      Our ability to  continue  as a going  concern is  dependent  upon  several
factors. These factors include our ability to:

      o     further implement our business plan;

      o     obtain additional financing or refinancing as may be required; and

      o     generate revenues.

      To obtain funding for our ongoing operations, we entered into a Securities
Purchase Agreement with an accredited investor on February 14, 2005, and amended
on February 17, 2005, for the sale of (i) $300,000 in convertible debentures and
(ii) warrants to buy 300,000 shares of our common stock. This prospectus relates
to the resale of the common stock  underlying these  convertible  debentures and
warrants.


                                       18


      The investors are obligated to provide us with an aggregate of $300,000 as
follows:

      o     $50,000 was disbursed to us on February 14, 2005;

      o     $50,000 has been  retained for  services  provided to our company by
            various  professionals,  which shall be disbursed upon effectiveness
            of this registration statement; and

      o     $200,000 will be released upon  effectiveness  of this  registration
            statement.


      The debentures bear interest at 4 3/4%,  mature two years from the date of
issuance,   and  are   convertible   into  our  common  stock,  at  the  selling
stockholder's option. The convertible debentures are convertible into the number
of our shares of common stock equal to the  principal  amount of the  debentures
being  converted  multiplied  by 11,  less the product of the  conversion  price
multiplied by the dollar amount of the debenture;  and the product thereof shall
be divided by the conversion  price.  The conversion  price for the  convertible
debenture  is the  lesser  of (i)  $1.25 or (ii)  eighty  percent  of the of the
average of the three lowest  volume  weighted  average  prices during the twenty
(20) trading days prior to the conversion.  If the volume weighted average price
is below $0.50 on a conversion  date, we have the right to pre-pay the amount of
the debenture the holder elects to convert, plus accrued and unpaid interest, at
125% of such  amount;  however,  if we elect to pre-pay in this  situation,  the
debenture  holder has the right to withdraw the notice of  conversion.  Also, if
the volume  weighted  average  price is below $0.50 at any point during a month,
the holder is not obligated to convert any portion of the debenture  during that
month. Accordingly, there is in fact no limit on the number of shares into which
the  debenture  may be  converted.  In  addition,  the  selling  stockholder  is
obligated  to  exercise  the  warrant  concurrently  with  the  submission  of a
conversion  notice by the selling  stockholder.  The warrant is exercisable into
300,000 shares of common stock at an exercise price of $10.00 per share.

      Golden Gate Investors has contractually committed to convert not less than
3% of the original face value of the debenture monthly beginning the month after
the  effective  date of the  Registration  Statement.  Golden Gate  Investors is
required to exercise  warrants  concurrently  with the  exercise of a conversion
notice  under the  debenture  and is  committed  to  exercise at least 3% of the
warrants per month after the effective date of the  Registration  Statement.  In
the event that Golden Gate  Investors  breaches the minimum  restriction  on the
debenture and warrant,  Golden Gate will not be entitled to collect  interest on
the debenture for that month. If Golden Gate submits a conversion notice and the
volume  weighted  average  price is less  then $.50 per  share,  then we will be
entitled to prepay the portion of the debenture that is being  converted at 125%
of such  amount.  If we elect to  prepay,  then  Golden  Gate may  withdraw  its
conversion  notice.  For a  period  of  twenty  days  after  the  date  that the
outstanding  principal  amount of the  debenture is less than  $100,000,  we may
redeem the debenture in whole in cash for the outstanding  principal amount plus
accrued and unpaid interest.

      The conversion  provisions of the convertible  debentures and the exercise
provisions of the warrant are correlated so that the convertible debentures will
be converted and the warrant exercised in like  proportions.  The result is that
in any month in which the holder  converts the 3% minimum it will also  exercise
the 3% minimum  under the  warrant,  which will result in it  purchasing  common
stock for $99,000 ($90,000 paid in cash and $9,000 of the convertible debentures
principal converted). In total, the conversion of the convertible debentures and
exercise of the warrant will result in Golden Gate  purchasing  our common stock
for up to $3,300,000  ($3,000,000  paid in cash and $300,000 of the  convertible
debentures  principal converted) during the period between the effective date of
the registration statement and February 14, 2007.

      There are four  conditions  that may reduce the aggregate  purchase  price
paid by Golden Gate below $3,300,000:

      1. If Golden Gate only converts the 3% minimum per month, the February 14,
2007  payment  date  for the  convertible  debentures  will  occur  before  full
conversion and exercise have occurred;

      2. The conversion and exercise  provisions of the securities  provide that
at no  time  may  Golden  Gate  acquire  ownership  of  more  that  9.9%  of our
outstanding common stock;

      3. If at the time of a conversion/exercise,  the conversion price would be
less than $.40,  then  either  (a) we may opt to redeem the amount of  principal
that the holder  presents for  conversion  at 125% of face value,  or (b) if the
conversion/exercise  date is later than November 11, 2005,  the holder may elect
to convert up to $100,000 of the convertible  debentures  without exercising the
warrant,  either of which events would reduce the aggregate  purchases under the
convertible  debentures  and  warrant  by 900% of the amount  redeemed  by us or
converted without exercise.


                                       19


      4. When the principal  amount of the  convertible  debentures  falls below
$100,000,  we may redeem the  remaining  principal  for its face value.  In that
event,  the  aggregate  purchase  price paid by Golden Gate for our common stock
would be only $2,200,000.


      Golden Gate has further  contractually  agreed to restrict  its ability to
convert the  debenture  or exercise  their  warrants  and receive  shares of our
common  stock  such  that  the  number  of  shares  held by the  Holder  and its
affiliates  after such  conversion or exercise does not exceed 9.99% of the then
issued and outstanding shares of our common stock.


      We believe that we can operate at our current  level of liquidity  for the
next twelve months.  In addition to the money raised  pursuant to the Securities
Purchase Agreement,  it is imperative that we raise an additional  $1,000,000 of
capital in order to implement  our business  plan.  We are  attempting  to raise
additional  funds  through debt and/or  equity  offerings.  We intend to use any
funds raised to pay down debt and to provide us with working capital.  There can
be no assurance  that any new capital  would be available to us or that adequate
funds for our operations, whether from our revenues, financial markets, or other
arrangements  will be available when needed or on terms  satisfactory to us. Any
additional financing may involve dilution to our then-existing shareholders.  At
this time, no additional  financing has been secured or  identified.  We have no
commitments from officers, directors or affiliates to provide funding. If we are
unable  to  obtain  debt  and/or  equity  financing  upon  terms  that  we  deem
sufficiently  favorable,  or at all, it would have a materially  adverse  impact
upon our  ability to pursue our  business  strategy  and  maintain  our  current
operations.  As a result, it may require us to delay, curtail or scale back some
or all of our  operations.  We do not currently have  commitments for capital at
this time.

BACKLOG

      As of May 9, 2005 our total  backlog was $16,492,  as compared to $791,360
at the same time in 2004. The large  reduction in backlog results from the large
bulk sales in 2004 which  have not yet  materialized  in 2005 due to the loss of
our  agreement  with AAA in 2004 and we have not yet  introduced  a new product,
which we anticipate releasing in the near future. With the introduction of a new
product, we anticipate generating new sales that will increase our backlog.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      In preparing our financial statements we are required to formulate working
policies  regarding  valuation  of our  assets  and  liabilities  and to develop
estimates of those values.  In our  preparation of the financial  statements for
2004,  there were  estimates  made which  were (a)  subject to a high  degree of
uncertainty and (b) material to our results. Those were:

      -     Estimating returns and allowances;

      -     Estimating allowance for doubtful accounts;

      -     Estimating reserve for excess and obsolete inventory; and

      -     Estimating a tax asset valuation allowance.

      With  regards  to  estimating  a tax asset  valuation  allowance,  (1) our
determination,  detailed in Note 11 to the audited financial  statements for the
year ended  December 31, 2004,  which are included in this  prospectus,  that we
should record a valuation allowance for the full value of the deferred tax asset
created by our net  operating  loss  carryforward.  The  primary  reason for the
determination  was our  lack of  certainty  as to  whether  we  would  carry  on
profitable  operations in the future, and (2) the reserving of a receivable that
has required us to file a collection  suit. The aging of the  receivable  from a
company  undergoing some business problems has led us to be in significant doubt
as to its collectibility.

      We made  no  material  changes  to our  critical  accounting  policies  in
connection with the preparation of financial statements for 2004.


                                       20


ESTIMATING RETURNS AND ALLOWANCES

      Net revenue consists of product revenue reduced by estimated sales returns
and allowances.  To estimate sales returns and allowances, we analyze, both when
we initially  establish  the  reserve,  and then each quarter when we review the
adequacy of the reserve,  the following  factors:  historical  returns,  current
economic  trends,  levels of  inventories of our products held by our customers,
and changes in customer  demand and  acceptance  of our  products.  This reserve
represents  a reserve of the gross  margin on  estimated  future  returns and is
reflected as a reduction to accounts receivable in the accompanying consolidated
balance  sheet.  Increases  to the  reserve are  recorded as a reduction  to net
revenue equal to the expected customer credit memo and a corresponding credit is
made to cost of sales equal to the estimated cost of the returned  product.  The
net  difference,  or gross  margin,  is recorded as an addition to the  reserve.
Because the reserve for sales  returns and  allowances is based on our judgments
and estimates,  particularly  as to future customer demand and acceptance of our
products,  our reserves  may not be adequate to cover  actual sales  returns and
other  allowances.  If our  reserves are not  adequate,  our future net revenues
could be adversely affected.

ESTIMATING ALLOWANCE FOR DOUBTFUL ACCOUNTS

         As needed  based on specific  customers'  circumstances  affecting  his
      probability of payment, we reserve an allowance for losses we may incur as
a result of our customers' inability to make required payments. Any increase in
the  allowance   results  in  a  corresponding   increase  in  our  general  and
administrative expenses. In establishing this allowance, and then evaluating the
adequacy  of the  allowance  for  doubtful  accounts  each  quarter,  we analyze
historical  bad  debts,  customer  concentrations,  customer  credit-worthiness,
current  economic  trends and  changes in our  customer  payment  terms.  If the
financial condition of one or more of our customers  deteriorates,  resulting in
their inability to make payments, or if we otherwise underestimate the losses we
incur as a result of our customers' inability to pay us, we could be required to
increase our allowance for doubtful  accounts which could  adversely  affect our
operating  results.  We have a case whereby the aging of the  receivable  from a
company  undergoing some business problems has led us to be in significant doubt
as to its  collectibility  and has caused us to institute legal  proceedings for
collection. This situation has caused the allowance to be unusually large in the
present financial statements.

ESTIMATING RESERVE FOR EXCESS AND OBSOLETE INVENTORY

      We identify  excess and obsolete  products and analyze  historical  usage,
forecasted  production based on demand forecasts,  current economic trends,  and
historical write-offs when evaluating the adequacy of the reserve for excess and
obsolete inventory. This reserve is reflected as a reduction to inventory in the
accompanying consolidated balance sheet, and an increase in cost of revenues. If
actual market  conditions  are less favorable  than our  assumptions,  we may be
required to take additional  reserves,  which could adversely impact our cost of
revenues and operating results.

ESTIMATING A TAX ASSET VALUATION ALLOWANCE

      Note 11 to the  Financial  Statements  details our  determination  that we
should record a valuation allowance for the full value of the deferred tax asset
created by our net  operating  loss  carryforward.  The  primary  reason for the
determination  was our lack of certainty as to whether  Ultradata would carry on
profitable operations in the future.

OFF-BALANCE SHEET ARRANGEMENTS

      We do not  have  any  off-balance  sheet  arrangements  that  have  or are
reasonably likely to have a current or future effect on our financial  condition
or results of operations.

      There were no recent accounting pronouncements that have had or are likely
to have a material effect on our financial position or results of operations.


                                       21


                                    BUSINESS

OVERVIEW

      Our  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  and speech technology have opened up new opportunities for us to
integrate our technology and create new products merging these technologies with
our own. We are  completing  development of several new products which are based
on adding significant  features to the successful Talking Road Navigator such as
a Spanish-speaking unit and a voice-recognition unit which allows for hands-free
operation.  These new products are consistent  with our goal of improved ease of
use by the consumer. The Spanish-speaking unit was completed in 2004 and initial
deliveries  to customers  have been made. We expect the  voice-recognition  unit
should  be  completed  and  available  for sale  before  June  2005.  The  voice
recognition  product is called the Road Genie Audio  Navigation  System and will
result in greater user convenience.

      We have sold over 3 million of our  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,  we have developed a
Talking Road WhizTM.  Significant  deliveries of this product began in September
of 2003 and we received significant revenue in the last four months of 2003 from
sales of this new  addition  to our  product  line.  Our  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 two  quarters of 2004,  which have
traditionally been weak quarters for us. Our growth was stalled, however, in the
second half of 2004, when our primary  distributor and one significant  customer
both ceased placing orders.  We are now engaged in efforts to replace those lost
sales.

      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 $59.95 per unit. The products
have been available in retail mass-market chains, catalogs, credit-card inserts,
and other channels.

      The goals of our  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, we
feel we have barely  penetrated this market. We hope to continue to exploit this
niche over the next few years by bringing the results of merged  technologies to
bear on the goals stated above with significant impact on our sales and profits.
Ease  of  use  and  low   cost   are   major   considerations.   With   the  new
voice-recognition   unit,  we  hope  to  further  penetrate  this  market.   The
introduction  of expensive GPS navigation  systems has brought more awareness to
this category.  However,  most consumers do not wish to pay over $500 or monthly
fees for  directions.  Our low-cost  user-friendly  products offer an affordable
alternative.

HANDHELD TRAVEL COMPUTERS

The Road Whiz(TM) Line of Products

      Our core business is a line (currently 7 products) of hand-held  computers
that utilize our proprietary data compression technology to provide a library of
information  in  a  pocket-size   box.  Most  of  the  products  contain  travel
information,  customized to specific markets,  and so the flagship products have
carried variations of the trademark "Road Whiz(TM)." Within the chip that powers
a Road Whiz(TM) can be found  information  regarding  over 100,000  services and
amenities  along the U.S.  Interstate  Highway  System and  directions on how to
reach the service or amenity of choice.  Some versions of the Road Whiz(TM) also
contain  information about services and attractions  within the cities linked by
the Interstate  Highway System,  and some versions include U.S. highways as well
as Interstates.  The products also provide distances between major U. S. cities,
with over 100,000  pre-calculated  routes. The service information provided by a
Road Whiz(TM) product includes  directions and mileage to gas stations,  hotels,
motels, hospitals, and 24-hour restaurants,  as well as highway patrol emergency
numbers.   We   sell   our   handheld   products   through   independent   sales
representatives,  mass  merchandise  retailers,  catalog  companies,  department
stores,  office  supply  stores,  direct  mail  promotions,  luggage  stores and
selected television shopping channels.


                                       22


      We have  achieved a significant  advance in the  technology in our product
with the  introduction  of the Talking Road WhizTM.  The unit speaks in a clear,
loud, real voice  appropriate  prompts for the user's next action as well as the
information presented on the display.  This technological  improvement makes the
unit  easier  to use and more  attractive  to buy,  and  paves the way for other
applications  of  this  new  technology  such  as the new  Road  Genie(R)  Audio
Navigation  System.  This  new  product  enables  the user to  operate  the unit
hands-free  with eyes on the road. It will recognize  voice commands and respond
with appropriate recorded voice responses - not computer-generated voice.

      Among the other hand-held products we currently offer are the following:

      Road Whiz(TM)  Plus  provides  complete  routing  information  for over 90
cities,  giving  driving  distances,  driving  time and detailed  directions.  A
similar  product made by is is sold by one of our major  distributors  under the
name Auto PilotTM.  Our products are designed to be marketed by mass merchandise
retailers.

      The Road Whiz(TM) RV Special adds to the standard  Road Whiz(TM)  features
useful  for  an RV  owner,  such  as the  location  of  dump  stations  and  the
availability of parking for  recreational  vehicles at restaurants,  and is sold
through RV magazines and Camping World stores.  It contains over 60,000 services
and stored routes between 250 cities.

OUR MARKETING STRATEGY

      After our initial  public  offering of securities in 1995, we were able to
commence  widespread  marketing of the handheld products.  We priced them to the
upper  range gift market  ($49 to $129) and  focused  our  marketing  efforts on
direct  sales  through  television  and print  ads,  as well as  through a sales
representative  network. That strategy was successful in expanding our sales for
three years,  while the products were new to the market. The expansion of sales,
however, did not bring with it a proportionate expansion of profits. Too many of
our marketing  techniques were only marginally  profitable,  and as our products
lost some of their newness, marketing techniques such as direct mailing produced
diminishing  returns.  For that  reason,  beginning  late in 1998 we revised our
marketing strategy.  Products without the voice feature now generally retail for
$19.95 to $29.95.  At this price point, we expected to gain sufficient volume to
achieve economies of scale with new low-cost manufacturing  methods,  permitting
us to  operate  profitably  at a lower  level  of  annual  sales.  We have  been
successful in reducing the cost of marketing as well as other  operating  costs.
In addition,  we successfully  increased the volume of sales in 2003 and reached
profitability.


      In 2004, we expected to have the entire year for Talking Road WhizTM sales
as compared with only the last four months of 2003.  However,  market forces and
business  problems  for some of our biggest  customers  truncated  Talking  Road
WhizTM sales to those customers in the latter half of the year. A major customer
of ours, Media Solutions Services,  experienced  deteriorating operations during
2004 and  during the second  quarter  ceased  ordering  products  from us.  This
customer  accounted for 55.4% of sales during 2004. We are working to bring this
customer  back to our  products as their  fortunes  improve in the coming  year,
although no assurances can be given that they will have increased  operations or
that they will place orders with us in the future.  As a result,  we have worked
to diversify our customer base and develop new customers.  As as a result of our
increased  focus  on  other  customers,  we have had  discussions  with  another
distributor and also retail sales organizations, from which we expect to receive
orders from major retailers this summer for fall delivery.

      In addition,  at the request of AAA corporate  office,  we terminated  our
agreements  with  AAA for the use of the AAA  logo on  certain  versions  of our
products.  The effect of this development is difficult to quantify,  but the AAA
imprimatur  doubtless had a positive effect on the sales of these  products.  We
realized about 4% of sales from AAA stores in 2003 and 2004. We are consequently
considering  other  branding  sources  and have a  product  in the  market  with
Automobile  Clubs of America  (ACA)  brands.  As  mentioned  above,  we are also
attempting to broaden the markets for our products in 2005 and are taking on the
tasks of promoting products,  such as Road Genie - tasks that traditionally have
been  performed by our  customers.  This  development  will add to our marketing
costs in 2005 but  should  permit us to  command a higher  margin  than we could
otherwise  realize.  In the past wholesalers or distributors  were burdened with
these marketing costs, which will fall to us on the new products.  Consequently,
our sales  price will be higher.  We do not yet know what  effect,  if any,  the
higher sales prices will have on the number of sales we make.



                                       23


      Distribution through mass merchandise channels accounted for almost 75% of
our revenue in 2004. We expect that a small group of  mass-market  channels will
continue to be an important source of sales for our handheld computer  products.
We also  expect to  increase  the  share of direct  sales as result of these new
marketing  initiatives  mentioned above. The following table identifies the most
significant  customers  on the  basis of sales in the past two  years as well as
other  mass-market  retailers that carry our products.  In 2002,  sales emphasis
shifted from mass-market  retailers to other channels of mass  distribution that
require far less marketing costs.  This approach  continued  throughout 2003 and
2004.

--------------------------    ------------  ----------  ------------  ----------
Channel of Distribution        2004 Sales   % of Sales   2003 Sales   % of Sales
--------------------------    ------------  ----------  ------------  ----------
Media Solutions Services      $  2,200,642    55.4%     $  1,608,052     56.2%
--------------------------    ------------  ----------  ------------  ----------
Office Max                    $    560,352    14.1%              --        --
--------------------------    ------------  ----------  ------------  ----------
QVC                           $    484,219    12.2%     $    481,619     16.8%
--------------------------    ------------  ----------  ------------  ----------
AAA Clubs                     $    162,220     4.1%     $    118,657      4.1%
--------------------------    ------------  ----------  ------------  ----------
DMD, LLC                      $    129,263     3.2%               --       --
--------------------------    ------------  ----------  ------------  ----------

      Central to the  marketing  strategy  is our effort to develop a variety of
distribution  paths, so as to maximize our  penetration of the potential  market
for our products. Our 2005 success depends on steering our marketing thrust more
to direct sales  through TV  advertising  and to use those inroads to pull sales
through retail channels in response to the TV ads.

      The objective of this  marketing  strategy is an increase in sales revenue
and gross margin with  attendant  increases in selling  expenses.  With expected
success of existing proven products as well as new products soon to be available
in the marketplace,  we expect to continue the  profitability  begun in 2003 and
exhibited in 2004.

MANUFACTURING

      We do not  manufacture  any of  our  products.  We  retain  assemblers  to
manufacture  the  products.  At present,  there is one  manufacturer  to whom we
contracted all of our assembly work in 2004. Each year, the manufacturer  quotes
prices to us based upon estimated  annual  quantities.  Exact pricing is usually
good for 90 days.  Significant  changes in chip prices result in similar changes
from our manufacturer.  Then we place individual purchase orders for production.
Our arrangements  with this manufacturer - up to the point of a purchase order -
are terminable at will by either party. If the manufacturer  becomes unavailable
to us, alternate sources would be readily  available.  Nevertheless,  the sudden
loss of our  manufacturer  or  unanticipated  interruptions  or delays  from our
present  manufacturer  would likely  result in a temporary  interruption  to our
planned operations.

BACKLOG


      As of May 9, 2005 our total  backlog was $16,492,  as compared to $791,360
at the same time in 2004. The large  reduction in backlog results from the large
bulk sales in 2004 which  have not yet  materialized  in 2005 due to the loss of
our  agreement  with AAA in 2004 and we have not yet  introduced  a new product,
which we anticipate releasing in the near future. With the introduction of a new
product, we anticipate generating new sales that will increase our backlog.


PATENTS

      We own four patents - two that are  utilized in our present Road  Whiz(TM)
products.  They  provide  us a  technological  advantage  which,  to  date,  has
prevented any similar  product from  appearing.  One patent covers our method of
compressing data relating to travel  information.  This  compression  technology
permits our travel  products  to store more data on smaller  and less  expensive
memory devices. The second patent covers the methodology that enables our travel
devices to account  for  changes  that occur when the  traveler  crosses a state
border. We have another patent involving electronic coupons while traveling that
we believe  would be  valuable  for future use in  up-scale  travel  information
products.

      We hold two  additional  patents that have  potential  utility in the road
navigation  market and cover the  delivery of  electronic  coupons in a handheld
computer for  discounts  of  services.  The  technology  can be combined  with a
location function to cause time and site-specific coupons to be delivered to the
driver  offering,  for example,  a discount at the upcoming  hotel. We would, of
course, receive a fee for each customer that the hotel gained in this fashion.


                                       24


      The other related patent,  which was awarded in May 1999,  covers a method
of  integrating a GPS receiver  into a radar  detection  device.  By use of this
patented  technology,  it  becomes  practical  to  eliminate  many  false  radar
detection alarms, as well as to provide audible warnings of speed zones.

      Our patents issued are as follows:

---------------------------------------------   -------------  -----------------
Patent Name                                     Patent Number  Patent Issue Date
---------------------------------------------   -------------  -----------------
Highway Information System                          5,021,961       June 4, 1991
---------------------------------------------   -------------  -----------------
Highway Information System                          5,229,947      July 20, 1993
---------------------------------------------   -------------  -----------------
Electronic  coupon  storage and  retrieval
system  correlated to highway exit service
availability information                            5,943,653    August 24, 1999
---------------------------------------------   -------------  -----------------
Radar detector responsive to vehicle speed          5,977,884  November 2, 1999
---------------------------------------------   -------------  -----------------

DATABASE RESEARCH

      A broad and accurate database is essential to the success of our products.
For this reason,  we have  developed a systematic  approach to updating our ROAD
WHIZ(TM) database.  A significant part of the ROAD WHIZ(TM) database is gathered
and verified by "Road  Helpers." Road Helpers are generally  retirees and others
that  travel  extensively  and  report  to  us  regarding  the  facilities  they
encounter.  The data  provided  by the Road  Helpers is, in turn,  reviewed  and
augmented at our  corporate  headquarters  along with use of publicly  available
information from chains and states on businesses and facilities.

COMPETITION

      We face significant  competition from a number of different sources. There
are companies that make handheld PDA's  (personal  digital  assistants)  such as
Sharp and Casio, or Palm computer products such as Palm, HP and others make, and
then there are GPS  (global  positioning  system)  handhelds  made by Garmin and
Magellan. Although we have specialized in travel data, all of these products can
offer some overlapping  information and compete for the consumer  dollar.  It is
not clear that the voice  recognition and talk features we are emphasizing  will
distinguish   ourself   sufficiently   from  other  products  to  be  successful
considering  the wide  array of  different  handheld  computer  products  on the
market.

      We believe that the  following  factors  will help us compete  within this
market:

      o     Our data compression technology is patented;

      o     Our database is unique, and would be time-consuming to replicate it;

      o     We have fourteen  years of  experience  in  developing  this line of
            products;

      o     Our products are less expensive than others on the market.

RESEARCH AND DEVELOPMENT

      We perform ongoing research and  development,  seeking to improve existing
products and to develop new products.  These activities are primarily  conducted
at our corporate headquarters,  although we periodically engage outside computer
system design consultants to expedite the completion of the development and test
stages.  The success of the  Talking  Road  WhizTM  came  directly  from our R&D
efforts,  and we plan to  carry  the  product  line to the  next  level of voice
recognition. This feature promises to further simplify product use and attract a
wider market by requiring less of the user to access valuable information.


                                       25


      In 2004, we incurred  $140,507 in research and development  costs compared
to $63,156  in 2003.  Research  activities  for 2004 were  primarily  focused on
continued  development of the Talking Road WhizTM  products and the Road GenieTM
Audio Navigation  System.  In 2005, we plan to add features to the Road GenieTM,
which will enhance its  usefulness  to the road  traveler.  We plan to develop a
digital voice recorder feature to be added in late 2005.  Further,  we have been
developing  a cell-phone  application  that would make our software and database
available to a cell-phone user who opts to subscribe to this service thought his
service provider.  We see this channel as a new opportunity for revenue from our
patents.  Thus, two different paths to enhance profitability will be advanced in
2005:  the  voice-activated  Road GenieTM with a digital voice  recorder and the
cell-phone Road Whiz application.

EMPLOYEES

      We currently have 8 full-time employees,  including four officers,  all of
whom are  located at our  headquarters  in St.  Louis,  Missouri.  We employ two
people in  sales,  customer  service  and  shipping,  two  people  in  executive
management and administration, two people in product development, and two people
in inventory  management  and  accounting.  None of our  employees  belongs to a
collective  bargaining union. In addition, a number of part-time consultants are
retained  for  database  research,  website  development  and  maintenance,  and
software development.  We have not experienced a work stoppage and believes that
our employee relations are good.

                            DESCRIPTION OF PROPERTIES

      We maintain our principal  office at 1240 Dielman  Industrial  Court,  St.
Louis, Missouri 63132. Our telephone number at that office is (314) 997-2250 and
our facsimile number is (314) 997-1281. We lease approximately 5,000 square feet
of office  space.  The lease  expires on October 31,  2005.  The monthly rent is
$3,569.29  plus 16% of all  building  expenses.  We  maintain  no  manufacturing
operations  on  site  and  employ  outside  contractors  to  perform  all of our
manufacturing  requirements.  We  believe  that our  current  office  space  and
facilities  are  sufficient to meet our present needs and do not  anticipate any
difficulty  securing  alternative  or  additional  space,  if  needed,  on terms
acceptable to us.

                                LEGAL PROCEEDINGS

      From  time to time,  we may  become  party to  litigation  or other  legal
proceedings  that  we  consider  to be a part  of  the  ordinary  course  of our
business.  We are  not  involved  currently  in  legal  proceedings  that  could
reasonably  be  expected  to have a  material  adverse  effect on our  business,
prospects,  financial condition or results of operations. We may become involved
in material legal proceedings in the future.


                                       26


                                   MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

      The  following  information  sets  forth  the  names of our  officers  and
directors, their present positions with us, and their biographical information.

    NAME               AGE        POSITION

Monte Ross              72       Chief Executive Officer, Director
Ernest Clarke           65       President & Chief Financial Officer, Director
Mark L. Peterson        48       Vice President-Engineering, Secretary, Director
Donald Rattner          72       Director
H. Krollfeifer, Jr.     64       Director
Matthew Klapman         35       Director

Directors hold office until the election and  qualification  of their successors
at a meeting of the Company's  stockholders.  Officers  hold office,  subject to
removal at any time by the Board,  until  their  successors  are  appointed  and
qualified.

Background of Directors and Executive Officers:

      MONTE  ROSS  founded  our  company  in 1986 and has  served  as our  Chief
Executive  Officer and  Chairman  since  inception.  He also served as President
until April 2001. For over 20 years prior to founding our company,  Mr. Ross was
employed  by  McDonnell  Douglas  Corporation  (now  Boeing)  in  a  variety  of
positions.  When he left  McDonnell  Douglas,  Mr.  Ross was  Director  of Laser
Systems,  responsible  for the  group  of  approximately  400  employees,  which
developed  the first  space  laser  communication  system and first  space laser
radar.  Mr.  Ross is a Fellow of the  Institute  of  Electrical  and  Electronic
Engineers  and the  past  President  of the  International  Laser  Communication
Society.  Mr.  Ross was  awarded  a  Master  of  Science  degree  in  Electrical
Engineering by Northwestern  University in 1962. He is the father-in-law of Mark
L. Peterson, the Company's Vice President-Engineering.

      ERNEST  CLARKE has been a Director of ours since we were  founded in 1986.
From August 1990 to June 1999 he served as Vice President - Government Programs.
He then served as our Vice President - Controller  from June of 1999 until April
2001.  He was elevated to  President  in April 2001.  For over 20 years prior to
joining  us, Mr.  Clarke was  employed by  McDonnell  Douglas  Corporation  (now
Boeing) in a variety of positions.  When he left McDonnell  Douglas,  Mr. Clarke
was its Laser Product  Development Manager with responsibility to supervise over
40 engineers.  Mr.  Clarke was awarded a Master of Science  degree in Electrical
Engineering by Stanford University in 1966.

      MARK L.  PETERSON  has been a Director  of ours  since we were  founded in
1986.  He has served as our Vice  President  of  Engineering  since 1988.  He is
responsible  for the  design of our  hand-held  products.  During the four years
prior to joining us, Mr. Peterson was employed by McDonnell Douglas  Corporation
as an  electronics  engineer  for  fiber  optic  products  and  satellite  laser
cross-link  programs.  Mr.  Peterson  was awarded a Master of Science  degree in
Electrical Engineering by Washington University in 1980. He is the son-in-law of
Monte Ross.

      DONALD  RATTNER  joined  us in 1999 to serve as a member  of the  Board of
Directors. Mr. Rattner is a member/partner in BrookWeiner,  LLC, a Chicago-based
accounting  firm,  and a member of the American  Institute  of Certified  Public
Accountants and the Illinois CPA Society. He has served on the boards of several
corporations.

      H. KROLLFEIFER, JR. joined us in 2000 to serve as a member of the Board of
Directors.  Mr.  Krollfeifer is retired after 35 years in the equipment  leasing
and financing industry.  He has worked closely with The American  Association of
Equipment  Lessors  (AAEL),  an  industry  trade  group for which he served as a
speaker,  lecturer,  and teacher for various  educational  programs  starting in
1986.  That  organization  evolved into The  Equipment  Leasing  Association  of
America  (ELA),  and Mr.  Krollfeifer  was added to their  training  faculty  in
January 2000 where he continues to serve on a part-time basis.


                                       27


      MATTHEW  KLAPMAN  joined  us in 2002 to serve as a member  of the Board of
Directors. Mr. Klapman is the CEO of Future Vision Technologies,  Inc., which he
co-founded 1990. He has maintained a strong career in technological  innovation,
business  strategy,  negotiation,  and  team  management.  He has  invented  and
developed a myriad of products in the video,  3-D  graphics,  and  communication
fields.  As a Director at  Motorola,  he  developed  the  computer  graphics and
marketing  strategy for its corporate  strategy  office and  broadband  wireless
communications  sector. In addition, as Director of Research and Development for
Motorola's  Personal  Communications  Sector, he spearheaded the creation of the
new user  interface  platform that is the basis for all of  Motorola's  cellular
phones. He has developed  products and designs that have earned several industry
awards.  He  received  a  B.S.  in  Computer  Engineering  and a J.D.  from  the
University of Illinois at Urbana. He holds 4 issued and 7 pending patents.

                                 AUDIT COMMITTEE

      The Board of Directors has appointed an Audit Committee of the Board.  The
present  members of the Audit  Committee are Donald Rattner and H.  Krollfeifer,
Jr. The Board of Directors has  determined  that Donald  Rattner is qualified to
serve as an "audit committee financial expert", as defined in the Regulations of
the  Securities  and  Exchange  Commission.   Mr.  Rattner  is  an  "independent
director",  as  defined  in the  Regulations  of  the  Securities  and  Exchange
Commission.

                                 CODE OF ETHICS

      The Company has adopted a "Code of Business Ethics for Ultradata  Systems,
Inc." The Code is  applicable  to all  employees of the Company,  including  its
principal executive officer,  principal financial officer,  principal accounting
officer,  or persons performing  similar  functions.  The Company will provide a
copy of the Code of Ethics,  without charge, to any person who submits a request
in writing to the President of the Company.

EXECUTIVE COMPENSATION

      The following tables set forth certain  information  regarding our CEO and
each of our most highly-compensated executive officers whose total annual salary
and bonus for the fiscal years ending  December 31, 2004, 2003 and 2002 exceeded
$100,000:

                           SUMMARY COMPENSATION TABLE

                               ANNUAL COMPENSATION



                                                                   Other
                                                       Annual    Restricted  Options   LTIP
   Name & Principal                 Salary    Bonus   Compen-     Stock       SARs    Payouts   All Other
       Position            Year      ($)       ($)   sation ($)   Awards($)    (#)      ($)    Compensation
------------------------  -------  --------  ------  ----------  ----------  -------  -------  ------------
                                                                            
Monte Ross                 2004    167,880      0       --           --       25,000    --          --
  Chief Executive          2003    157,367      0       --           --           --    --          --
  Officer                  2002    152,938      0       --           --      121,813    --          --
------------------------  -------  --------  ------  ----------  ----------  -------  -------  ------------
Ernest Clarke              2004    111,040      0       --           --       25,000    --          --
   President               2003    103,695      0       --           --           --    --          --
                           2002    103,783      0       --           --       66,423    --          --
------------------------  -------  --------  ------  ----------  ----------  -------  -------  ------------
Mark Peterson              2004    101,152      0       --           --       30,000    --          --
   Vice President--        2003     93,101      0       --           --           --    --          --
   Engineering             2002     97,877      0       --           --       87,511    --          --


EMPLOYMENT AGREEMENTS

      Messrs. Ross, Peterson,  and Clarke have individual  employment agreements
with us beginning  September 1, 1994.  Except as noted herein,  the terms of the
employment agreements are substantially  identical. The agreements were extended
in 1997 by action of the Board of Directors  to October 31, 2000,  again in 2000
to October  31,  2003,  and again in 2003 to October  1,  2005.  The  agreements
provide  for  base  salaries,  which  are  adjusted  annually  by the  Board  of
Directors.  If the  majority of the Board  cannot  agree as to a level of salary
adjustment,  the salary will increase by 10% for Mr. Clarke and Mr. Peterson and
5% for Mr. Ross. The employment  agreements restrict each officer from competing
with us for one  year  after  the  termination  of his  employment  unless  that
employee  establishes  that his employment by a competitor  will not involve the
use of any information considered confidential by us.


                                       28


STOCK OPTION AWARDS

         The following tables set forth certain information  regarding the stock
options  acquired by the Company's Chief  Executive  Officer and Chief Financial
Officer  during the year ended  December 31, 2004 and those options held by each
of them on December 31, 2004.

                      Option Grants in the Last Fiscal Year

                                 Percent
                                 of total
               Number of         options
               securities        granted to
               underlying        employees        Exercise
               option            in fiscal        Price             Expiration
Name           granted           year             ($/share)         Date
----           ------------      -----------      ---------         ------------
M. Ross           25,000             25             $.72             12/11/2014
E. Clarke         25,000             25             $.72             12/11/2014
                                                                 

                    Aggregated Fiscal Year-End Option Values

             Number of securities underlying   Value of unexercised in-the-money
             unexercised options at fiscal     options at fiscal year-end ($)
Name         year-end (#) (All exercisable)    (All exercisable)
-----------  ------------------------------    ---------------------------------
M. Ross                  146,813                              $43,853
E. Clarke                 91,423                              $23,912
                                                        
REMUNERATION OF DIRECTORS

Outside  Directors receive $500 per meeting and are reimbursed for out-of-pocket
expenses  incurred on the Company's  behalf.  From time to time they are granted
stock and options as recommended  and approved by the inside  directors.  During
2004, the outside  directors  each received  4,000 options for Ultradata  common
stock with a strike price of $.72 that are exercisable within ten years.

STOCK OPTION PLANS

The information set forth in the table below regarding equity compensation plans
(which  includes  individual  compensation  arrangements)  was  determined as of
December 31, 2004.

EQUITY COMPENSATION PLAN INFORMATION



                                                        Number of                 Weighted          Number of securities
                                                  securities to be issued      average exercise      remaining available
                                                      upon exercise of       price of outstanding    for future issuance
                                                    outstanding options,       options, warrants         under equity
                                                    warrants and rights           and rights          compensation plans
                                                                                                           
Equity compensation plans approved by security
holders.......................................                  280,747                    $.14                     0
Equity compensation plans not approved by
security holders..............................                  116,000*                   $.72                    --
                Total.........................                  427,663                    $.17                     0



                                       29


*     Represents  non-qualified  stock options  given to the  Company's  outside
      directors and employees in 2004. The options expire on December 11, 2014.

      We have two stock option plans:  the 1994 Incentive  Stock Option Plan and
the 1996  Incentive  Stock  Option  Plan,  both of which  were  approved  by our
shareholders.  The material terms of the Plans are identical. In aggregate,  the
Plan  authorize  the issuance of options for 500,000  shares,  all of which have
been issued. Of those,  options have been exercised to purchase 94,523 shares of
common stock. These plans have now expired.

      We approved a new stock option plan, the 2004  Non-Qualified  Stock Option
Plan,  which is similar to our  previous  plans.  This plan  authorized  500,000
shares for options,  of which 238,236  options have been granted as of March 31,
2005.


                                       30


                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      During the first  quarter of 2004,  Monte Ross loaned us $15,000,  with no
interest. We paid off the loan by March 31, 2004.

      We have no policy  regarding  entering into  transactions  with affiliated
parties.


                                       31


SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT


      The following table sets forth certain  information  regarding  beneficial
ownership of our common stock as of June 1, 2005


      o     by each person who is known by us to  beneficially  own more than 5%
            of our common stock;

      o     by each of our officers and directors; and

      o     by all of our officers and directors as a group.




Name and Address                    Amount and Nature            Percent Prior     Percent After
Of Beneficial Holder                of Beneficial Ownership (1)  to Offering (2)    Offering (3)
--------------------                -----------------------       -------------     ----------

                                                                               
Monte Ross                              485,813 (4)                7.41%              5.03%
1240 Dielman Industrial Court
St. Louis, MO 63132

Ernest Clarke                           222,275 (5)                3.42%              2.31%
1240 Dielman Industrial Court
St. Louis, MO 63132

Mark Peterson                           254,893 (6)                3.94%              2.66%
1240 Dielman Industrial Court
St. Louis, MO 63132

Donald Rattner                           66,000 (7)                1.02%                *
1240 Dielman Industrial Court
St. Louis, MO 63132

K. Krollfeifer, Jr.                      32,000 (8)                   *                 *
1240 Dielman Industrial Court
St. Louis, MO 63132


Matthew Klapman                           4,000 (9)                   *                 *
1240 Dielman Industrial Court
St. Louis, MO 63132


Executive Officers and Directors      1,077,481 (10)              15.89%             10.90%
As A Group (6 persons)


Harley Brixey                           650,000 (11)              10.14%              6.83%
4389 Winding Oaks Drive
Mulberry, FL 33860 

* Less then one percent.


(1)  Beneficial  Ownership is  determined  in  accordance  with the rules of the
Securities and Exchange  Commission and generally  includes voting or investment
power with respect to  securities.  Shares of common stock subject to options or
warrants  currently  exercisable or  convertible,  or exercisable or convertible
within  60 days of June  1,  2005  are  deemed  outstanding  for  computing  the
percentage  of the person  holding  such  option or  warrant  but are not deemed
outstanding for computing the percentage of any other person.


(2) Percentage based on 6,410,187 shares of common stock outstanding.

(3) Percentage based on 9,510,187 shares of common stock outstanding.

(4)  Includes  100,000  shares owned by the Harriet Ross  Revocable  Trust,  and
174,000 shares owned by the Monte Ross Revocable Trust. Also includes options to
purchase 146,813 shares.

(5) All shares are owned jointly with Mr. Clarke's spouse. Also includes options
for 91,423 shares.

(6) Includes options for 62,000 shares.


                                       32


(7) Includes options for 29,000 shares.

(8)  Includes  24,000  shares  owned by D&H  Enterprises,  Inc.,  of  which  Mr.
Krollfeifer is a principal. Also includes options for 4,000 shares.

(9) Includes options for 4,000 shares.

(10) Includes options for 371,747 shares.


(11) As reflected by Mr. Brixey's Form 4, filed May 9, 2005.



                                       33


                            DESCRIPTION OF SECURITIES

COMMON STOCK


      We are authorized to issue up to 10,000,000 shares of Common Stock,  $0.01
par value.  As of June 1,  2005,  there were  6,410,187  shares of common  stock
issued and outstanding. Holders of the common stock are entitled to one vote per
share on all  matters  to be voted upon by the  stockholders.  Holders of common
stock are entitled to receive ratably such dividends, if any, as may be declared
by the Board of Directors  out of funds  legally  available  therefor.  Upon the
liquidation,  dissolution,  or winding up of our company,  the holders of common
stock are  entitled  to share  ratably  in all of our assets  which are  legally
available for distribution  after payment of all debts and other liabilities and
liquidation  preference of any outstanding common stock. Holders of common stock
have  no  preemptive,   subscription,   redemption  or  conversion  rights.  The
outstanding  shares  of  common  stock  are  validly  issued,   fully  paid  and
nonassessable.


      We have engaged  American Stock  Transfer & Trust Company,  as independent
transfer agent or registrar.

PREFERRED STOCK


      We are authorized to issue 5,000,000 shares of preferred stock,  $0.01 par
value per share.  As of June 1, 2005,  there were no shares of  preferred  stock
issued and  outstanding.  The shares of preferred stock may be issued in series,
and shall have such voting powers,  full or limited,  or no voting  powers,  and
such  designations,  preferences and relative  participating,  optional or other
special rights,  and  qualifications,  limitations or restrictions  thereof,  as
shall be stated and expressed in the resolution or resolutions providing for the
issuance of such stock adopted from time to time by the board of directors.  The
board of directors is expressly  vested with the  authority to determine and fix
in the resolution or resolutions  providing for the issuances of preferred stock
the voting powers, designations, preferences and rights, and the qualifications,
limitations or restrictions  thereof, of each such series to the full extent now
or hereafter permitted by the laws of the State of Delaware.


WARRANTS

      In connection  with a Securities  Purchase  Agreement dated February 2005,
the accredited investor was issued 300,000 warrants to purchase shares of common
stock. The warrants are exercisable until two years from the date of issuance at
a purchase price of $10.00 per share.

OPTIONS

      We currently have 238,236 options outstanding,

CONVERTIBLE SECURITIES

      To obtain funding for our ongoing operations, we entered into a Securities
Purchase Agreement with an accredited investor on February 14, 2005, and amended
on February 17, 2005, for the sale of (i) $300,000 in convertible debentures and
(ii) warrants to buy 300,000 shares of our common stock. This prospectus relates
to the resale of the common stock  underlying these  convertible  debentures and
warrants.

      The  investor is  obligated to provide us with an aggregate of $300,000 as
follows:

      o     $50,000 was disbursed to us on February 14, 2005;

      o     $50,000 has been  retained for  services  provided to our company by
            various  professionals,  which shall be disbursed upon effectiveness
            of this registration statement; and

      o     $200,000 will be released upon  effectiveness  of this  registration
            statement.


                                       34



      The debentures bear interest at 4 3/4%,  mature two years from the date of
issuance,   and  are   convertible   into  our  common  stock,  at  the  selling
stockholder's option. The convertible debentures are convertible into the number
of our shares of common stock equal to the  principal  amount of the  debentures
being  converted  multiplied  by 11,  less the product of the  conversion  price
multiplied  by the  dollar  amount of the  debenture  being  converted;  and the
product thereof shall be divided by the conversion  price.  The conversion price
for the convertible  debenture is the lesser of (i) $1.25 or (ii) eighty percent
of the of the average of the five lowest volume  weighted  average prices during
the twenty (20) trading  days prior to the  conversion.  If the volume  weighted
average price is below $0.50 on a conversion  date, we have the right to pre-pay
the amount of the  debenture  the holder  elects to  convert,  plus  accrued and
unpaid interest, at 125% of such amount; however, if we elect to pre-pay in this
situation,  the  debenture  holder  has the  right to  withdraw  the  notice  of
conversion.  Also,  if the volume  weighted  average price is below $0.50 at any
point during a month,  the holder is not obligated to convert any portion of the
debenture  during  that  month.  Accordingly,  there  is in fact no limit on the
number of shares  into which the  debenture  may be  converted.  For a period of
twenty  days  after  the  date  that the  outstanding  principal  amount  of the
debenture is less than  $100,000,  we may redeem the  debenture in whole in cash
for the  outstanding  principal  amount  plus  accrued and unpaid  interest.  In
addition,   the  selling  stockholder  is  obligated  to  exercise  the  warrant
concurrently  with  the  submission  of  a  conversion  notice  by  the  selling
stockholder.  The warrant is exercisable  into 300,000 shares of common stock at
an exercise price of $10.00 per share.

      The conversion  provisions of the convertible  debentures and the exercise
provisions of the warrant are correlated so that the convertible debentures will
be converted and the warrant exercised in like  proportions.  The result is that
in any month in which the holder  converts the 3% minimum it will also  exercise
the 3% minimum  under the  warrant,  which will result in it  purchasing  common
stock for $99,000 ($90,000 paid in cash and $9,000 of the convertible debentures
principal converted). In total, the conversion of the convertible debentures and
exercise of the warrant will result in Golden Gate  purchasing  our common stock
for up to $3,300,000  ($3,000,000  paid in cash and $300,000 of the  convertible
debentures  principal converted) during the period between the effective date of
the registration statement and February 14, 2007.

      There are four  conditions  that may reduce the aggregate  purchase  price
paid by Golden Gate below $3,300,000:

      1. If Golden Gate only converts the 3% minimum per month, the February 14,
2007  payment  date  for the  convertible  debentures  will  occur  before  full
conversion and exercise have occurred;

      2. The conversion and exercise  provisions of the securities  provide that
at no  time  may  Golden  Gate  acquire  ownership  of  more  that  9.9%  of our
outstanding common stock;

      3. If at the time of a conversion/exercise,  the conversion price would be
less than $.40,  then  either  (a) we may opt to redeem the amount of  principal
that the holder  presents for  conversion  at 125% of face value,  or (b) if the
conversion/exercise  date is later than November 11, 2005,  the holder may elect
to convert up to $100,000 of the convertible  debentures  without exercising the
warrant,  either of which events would reduce the aggregate  purchases under the
convertible  debentures  and  warrant  by 900% of the amount  redeemed  by us or
converted without exercise.

      4. When the principal  amount of the  convertible  debentures  falls below
$100,000,  we may redeem the  remaining  principal  for its face value.  In that
event,  the  aggregate  purchase  price paid by Golden Gate for our common stock
would be only $2,200,000.

      Golden Gate Investors has contractually committed to convert not less than
3% of the original face value of the debenture monthly beginning the month after
the  effective  date of the  Registration  Statement.  Golden Gate  Investors is
required to exercise  warrants  concurrently  with the  exercise of a conversion
notice  under the  debenture  and is  committed  to  exercise at least 3% of the
warrants per month after the effective date of the  Registration  Statement.  In
the event that Golden Gate  Investors  breaches the minimum  restriction  on the
debenture and warrant,  Golden Gate will not be entitled to collect  interest on
the debenture for that month. If Golden Gate submits a conversion notice and the
volume  weighted  average  price is less  then $.50 per  share,  then we will be
entitled to prepay the portion of the debenture that is being  converted at 125%
of such  amount.  If we elect to  prepay,  then  Golden  Gate may  withdraw  its
conversion notice.


      Golden Gate has further  contractually  agreed to restrict  its ability to
convert the  debenture  or exercise  their  warrants  and receive  shares of our
common  stock  such  that  the  number  of  shares  held by the  Holder  and its
affiliates  after such  conversion or exercise does not exceed 9.99% of the then
issued and outstanding shares of our common stock.


                                       35


      In the event that the registration  statement is not declared effective by
the  required  deadline,  which  is 150 days  from  the  date of the  Securities
Purchase Agreement, Golden Gate may demand repayment of the Debenture of 150% of
the face amount outstanding,  plus all accrued and unpaid interest,  in cash. If
the  repayment  is  accelerated,  we are also  obligated to issue to Golden Gate
50,000  shares of common  stock and $15,000 for each 30-day  period,  or portion
thereof,  during  which the face amount,  including  interest  thereon,  remains
unpaid.  If Golden  Gate  does not elect to  accelerate  the  debenture,  we are
required to  immediately  issue to Golden Gate 50,000 shares of common stock and
$15,000  for each  30-day  period,  or portion  thereof,  during  which the face
amount, including interest thereon, remains unpaid.

SAMPLE CONVERSION CALCULATION


      The convertible  debentures are convertible  into the number of our shares
of common stock equal to the principal  amount of the debentures being converted
multiplied  by 11, less the product of the  conversion  price  multiplied by the
dollar amount of the debenture being converted; and the product thereof shall be
divided  by the  conversion  price.  The  conversion  price for the  convertible
debentures  is the  lesser of (i)  $1.25 or (ii)  eighty  percent  of the of the
average of the three lowest  volume  weighted  average  prices during the twenty
(20) trading days prior to the  conversion.  As of June 2, 2005,  the average of
the three  lowest  intraday  trading  prices  for our  common  stock  during the
preceding 20 trading days as reported on the Over-The-Counter Bulletin Board was
$.2267 and, therefore,  the conversion price for the convertible  debentures was
$.18136.  For example,  assuming conversion of $300,000 of debentures on June 2,
2005, a conversion  price of $0.18136 per share,  the number of shares  issuable
upon conversion would be:

($300,000 x 11) - ($0.18136 x $300,000)  = 3,245,592/$0.18136 = 17,895,854

      The  following  is an example of the amount of shares of our common  stock
that are issuable,  upon  conversion of the principal  amount of our convertible
debentures,  based on market prices 25%, 50% and 75% below the market price,  as
of June 1, 2005 of $0.25.

                                                    Number            % of
% Below       Price Per       With Discount       of Shares        Outstanding
Market          Share            at 20%            Issuable           Stock
------         ------            ------           ----------         ------
25%            $.1875            $.15             21,700,000         77.20%
50%            $.125             $.10             32,700,000         83.61%
75%            $.0625            $.05             65,700,000         91.11%


                 INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

      Our  Certificate  of  Incorporation,  as  amended,  provide to the fullest
extent  permitted  by Delaware  law,  our  directors  or  officers  shall not be
personally  liable to us or our  shareholders  for  damages  for  breach of such
director's  or officer's  fiduciary  duty.  The effect of this  provision of our
Certificate  of  Incorporation,  as amended,  is to eliminate our rights and our
shareholders (through  shareholders'  derivative suits on behalf of our company)
to recover  damages  against a director or officer  for breach of the  fiduciary
duty of  care as a  director  or  officer  (including  breaches  resulting  from
negligent  or grossly  negligent  behavior),  except  under  certain  situations
defined  by  statute.  We believe  that the  indemnification  provisions  in our
Certificate of  Incorporation,  as amended,  are necessary to attract and retain
qualified persons as directors and officers.

      Insofar as  indemnification  for liabilities  arising under the Securities
Act of 1933 may be permitted to directors,  officers or persons  controlling  us
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange  Commission,  such indemnification is
against public policy as expressed in the Act and is, therefore,  unenforceable.

                              PLAN OF DISTRIBUTION

      The selling  stockholders  and any of their respective  pledgees,  donees,
assignees and other  successors-in-interest  may, from time to time, sell any or
all of their  shares of common  stock on any stock  exchange,  market or trading
facility on which the shares are traded or in private transactions.  These sales
may be at fixed or negotiated prices.  The selling  stockholders may use any one
or more of the following methods when selling shares:


                                       36


      o     ordinary  brokerage  transactions  and  transactions  in  which  the
            broker-dealer solicits the purchaser;

      o     block  trades in which the  broker-dealer  will  attempt to sell the
            shares as agent but may  position  and resell a portion of the block
            as principal to facilitate the transaction;

      o     purchases  by  a  broker-dealer  as  principal  and  resale  by  the
            broker-dealer for its account;

      o     an  exchange  distribution  in  accordance  with  the  rules  of the
            applicable exchange; 

      o     privately-negotiated transactions;

      o     broker-dealers  may agree with the  selling  stockholders  to sell a
            specified number of such shares at a stipulated price per share;

      o     through the writing of options on the shares

      o     a combination of any such methods of sale; and

      o     any other method permitted pursuant to applicable law.

      The selling  stockholders  may also sell  shares  under Rule 144 under the
Securities  Act, if available,  rather than under this  prospectus.  The selling
stockholders  shall  have the sole and  absolute  discretion  not to accept  any
purchase  offer or make any sale of shares if they deem the purchase price to be
unsatisfactory at any particular time.

      The selling stockholders or their respective pledgees, donees, transferees
or other  successors  in interest,  may also sell the shares  directly to market
makers  acting  as  principals  and/or   broker-dealers  acting  as  agents  for
themselves or their customers.  Such broker-dealers may receive  compensation in
the form of discounts,  concessions or commissions from the selling stockholders
and/or the purchasers of shares for whom such  broker-dealers  may act as agents
or to whom they sell as principal or both, which compensation as to a particular
broker-dealer  might be in excess of customary  commissions.  Market  makers and
block  purchasers  purchasing the shares will do so for their own account and at
their own risk. It is possible that a selling  stockholder  will attempt to sell
shares  of  common  stock  in  block  transactions  to  market  makers  or other
purchasers  at a price per share which may be below the then market  price.  The
selling stockholders cannot assure that all or any of the shares offered in this
prospectus will be issued to, or sold by, the selling stockholders.  The selling
stockholders and any brokers,  dealers or agents, upon effecting the sale of any
of the shares offered in this prospectus,  may be deemed to be "underwriters" as
that term is  defined  under the  Securities  Act of 1933,  as  amended,  or the
Securities  Exchange Act of 1934, as amended, or the rules and regulations under
such acts. In such event,  any commissions  received by such  broker-dealers  or
agents  and any  profit on the  resale of the  shares  purchased  by them may be
deemed to be underwriting commissions or discounts under the Securities Act.

      We are required to pay all fees and expenses  incident to the registration
of the  shares,  including  fees and  disbursements  of counsel  to the  selling
stockholders, but excluding brokerage commissions or underwriter discounts.

      The selling stockholders,  alternatively,  may sell all or any part of the
shares offered in this prospectus through an underwriter. No selling stockholder
has entered into any agreement  with a prospective  underwriter  and there is no
assurance that any such agreement will be entered into.

      The selling  stockholders  may pledge their shares to their  brokers under
the margin provisions of customer agreements. If a selling stockholders defaults
on a margin loan, the broker may, from time to time,  offer and sell the pledged
shares. The selling stockholders and any other persons participating in the sale
or  distribution  of the shares will be subject to applicable  provisions of the
Securities Exchange Act of 1934, as amended, and the rules and regulations under
such act,  including,  without  limitation,  Regulation M. These  provisions may
restrict  certain  activities of, and limit the timing of purchases and sales of
any of the shares by, the selling  stockholders or any other such person. In the
event  that  the  selling  stockholders  are  deemed  affiliated  purchasers  or
distribution  participants  within the meaning of Regulation M, then the selling
stockholders  will not be  permitted  to engage in short sales of common  stock.
Furthermore, under Regulation M, persons engaged in a distribution of securities
are prohibited from  simultaneously  engaging in market making and certain other
activities with respect to such securities for a specified  period of time prior
to the commencement of such  distributions,  subject to specified  exceptions or
exemptions.  In regards to short sells, the selling stockholder is contractually
restricted  from engaging in short sells.  In addition,  if a such short sale is
deemed to be a stabilizing  activity,  then the selling  stockholder will not be
permitted  to  engage  in a  short  sale  of our  common  stock.  All  of  these
limitations may affect the marketability of the shares.


                                       37


      We have agreed to indemnify the selling stockholders, or their transferees
or assignees,  against  certain  liabilities,  including  liabilities  under the
Securities  Act of 1933,  as amended,  or to  contribute to payments the selling
stockholders  or  their  respective  pledgees,   donees,  transferees  or  other
successors in interest, may be required to make in respect of such liabilities.

      If  the  selling   stockholders  notify  us  that  they  have  a  material
arrangement  with a  broker-dealer  for the resale of the common stock,  then we
would be required to amend the  registration  statement of which this prospectus
is a part, and file a prospectus  supplement to describe the agreements  between
the selling stockholders and the broker-dealer.

PENNY STOCK

      The  Securities  and  Exchange  Commission  has  adopted  Rule 15g-9 which
establishes the definition of a "penny stock," for the purposes  relevant to us,
as any equity  security  that has a market price of less than $5.00 per share or
with an  exercise  price of less  than  $5.00  per  share,  subject  to  certain
exceptions.  For any  transaction  involving a penny stock,  unless exempt,  the
rules require:

      o     that a broker or dealer approve a person's  account for transactions
            in penny stocks; and

      o     the broker or dealer  receive from the investor a written  agreement
            to the  transaction,  setting forth the identity and quantity of the
            penny stock to be purchased.

      In order to approve a person's  account for  transactions in penny stocks,
the broker or dealer must

      o     obtain financial information and investment experience objectives of
            the person; and

      o     make a  reasonable  determination  that  the  transactions  in penny
            stocks are  suitable  for that person and the person has  sufficient
            knowledge  and  experience  in  financial  matters  to be capable of
            evaluating the risks of transactions in penny stocks.

      The broker or dealer  must also  deliver,  prior to any  transaction  in a
penny stock, a disclosure  schedule prescribed by the Commission relating to the
penny stock market, which, in highlight form:

      o     sets  forth  the  basis on  which  the  broker  or  dealer  made the
            suitability determination; and

      o     that the broker or dealer received a signed,  written agreement from
            the investor prior to the transaction.

      Disclosure  also has to be made  about  the  risks of  investing  in penny
stocks  in  both  public  offerings  and in  secondary  trading  and  about  the
commissions payable to both the broker-dealer and the registered representative,
current  quotations for the securities and the rights and remedies  available to
an  investor  in cases of fraud in penny stock  transactions.  Finally,  monthly
statements  have to be sent  disclosing  recent price  information for the penny
stock held in the account and information on the limited market in penny stocks.


                                       38


                              SELLING STOCKHOLDERS

      The table below sets forth information concerning the resale of the shares
of common  stock by the selling  stockholders.  We will not receive any proceeds
from the resale of the common stock by the selling stockholders. We will receive
proceeds from the exercise of the warrants.  Assuming all the shares  registered
below are sold by the selling  stockholders,  none of the  selling  stockholders
will continue to own any shares of our common stock.

      The  following  table  also  sets  forth  the name of each  person  who is
offering the resale of shares of common stock by this prospectus,  the number of
shares of common stock  beneficially  owned by each person, the number of shares
of common  stock that may be sold in this  offering  and the number of shares of
common stock each person will own after the offering,  assuming they sell all of
the shares offered.




------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
                                          Total
                      Total Shares of   Percentage                                                          Percentage
                       Common Stock     of Common     Shares of                                 Beneficial   of Common
                       Issuable Upon      Stock,     Common Stock   Beneficial  Percentage of   Ownership   Stock Owned
                       Conversion of     Assuming     Included in   Ownership   Common Stock    After the      After
        Name        Debentures, Notes      Full       Prospectus    Before the  Owned Before    Offering     Offering
                      and/or Warrants   Conversion       (1)        Offering*     Offering*        (4)          (4)
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------
                                                                                            
Golden Gate           18,195,854 (3)      73.63%       Up to         711,451       9.99%           --            --
  Investors,                                         3,100,000
  Inc.(2)                                            shares of
                                                    common stock
------------------- ----------------- ------------- ------------- ------------ -------------- ------------ -------------


* These columns  represent the aggregate maximum number and percentage of shares
that the  selling  stockholders  can own at one time (and  therefore,  offer for
resale at any one time) due to their 9.99% limitation.


      The number and  percentage of shares  beneficially  owned is determined in
accordance  with Rule  13d-3 of the  Securities  Exchange  Act of 1934,  and the
information is not necessarily  indicative of beneficial ownership for any other
purpose.  Under such rule,  beneficial ownership includes any shares as to which
the selling stockholders has sole or shared voting power or investment power and
also any shares,  which the selling stockholders has the right to acquire within
60 days.  The  actual  number  of  shares  of  common  stock  issuable  upon the
conversion of the convertible  debentures is subject to adjustment depending on,
among other factors,  the future market price of the common stock,  and could be
materially less or more than the number estimated in the table.


(1) Includes a good faith estimate of the shares issuable upon conversion of the
convertible debentures and exercise of warrants, based on current market prices.
Because the number of shares of common stock  issuable  upon  conversion  of the
convertible  debentures is dependent in part upon the market price of the common
stock prior to a  conversion,  the actual  number of shares of common stock that
will be issued upon  conversion will fluctuate daily and cannot be determined at
this time.  Under the terms of the  convertible  debentures,  if the convertible
debentures had actually been  converted on June 2, 2005,  the  conversion  price
would have been $.18136.  The actual number of shares of common stock offered in
this  prospectus,  and  included  in the  registration  statement  of which this
prospectus is a part,  includes such additional number of shares of common stock
as may be issued or issuable upon conversion of the  convertible  debentures and
exercise of the related warrants by reason of any stock split, stock dividend or
similar  transaction  involving  the common stock,  in accordance  with Rule 416
under  the  Securities  Act of  1933.  However  the  selling  stockholders  have
contractually  agreed to restrict  their  ability to convert  their  convertible
debentures  or exercise  their  warrants and receive  shares of our common stock
such that the number of shares of common stock held by them in the aggregate and
their  affiliates after such conversion or exercise does not exceed 9.99% of the
then issued and  outstanding  shares of common stock as determined in accordance
with Section  13(d) of the Exchange  Act.  Accordingly,  the number of shares of
common  stock set forth in the table for the  selling  stockholders  exceeds the
number of  shares  of  common  stock  that the  selling  stockholders  could own
beneficially  at any given  time  through  their  ownership  of the  convertible
debentures and the warrants.  In that regard,  the  beneficial  ownership of the
common stock by the selling stockholder set forth in the table is not determined
in  accordance  with Rule 13d-3 under the  Securities  Exchange Act of 1934,  as
amended.



                                       39


(2) The selling  stockholder is an unaffiliated  third party. In accordance with
rule 13d-3 under the Securities  Exchange Act of 1934, Norman Lizt may be deemed
a control person of the shares owned by the selling stockholder.


(3)  Includes   17.895.854  shares  of  common  stock  underlying  our  $300,000
convertible debenture and 300,000 shares of common stock underlying common stock
purchase warrants issued to Golden Gate Investors, Inc.


(4) Assumes that all securities registered will be sold.

TERMS OF CONVERTIBLE DEBENTURES

      To obtain funding for our ongoing operations, we entered into a Securities
Purchase Agreement with an accredited investor on February 14, 2005, and amended
on February 17, 2005, for the sale of (i) $300,000 in convertible debentures and
(ii) warrants to buy 300,000 shares of our common stock.

      This prospectus relates to the resale of the common stock underlying these
convertible debentures and warrants.

      The investors are obligated to provide us with an aggregate of $300,000 as
follows:

      o     $50,000 was disbursed to us on February 14, 2005;

      o     $50,000 has been  retained for  services  provided to our company by
            various  professionals,  which shall be disbursed upon effectiveness
            of this registration statement; and

      o     $200,000 will be released upon  effectiveness  of this  registration
            statement.


      The debentures bear interest at 4 3/4%,  mature two years from the date of
issuance,   and  are   convertible   into  our  common  stock,  at  the  selling
stockholder's option. The convertible debentures are convertible into the number
of our shares of common stock equal to the  principal  amount of the  debentures
being  converted  multiplied  by 11,  less the product of the  conversion  price
multiplied by the dollar amount of the debenture;  and the product thereof shall
be divided by the conversion  price.  The conversion  price for the  convertible
debenture  is the  lesser  of (i)  $1.25 or (ii)  eighty  percent  of the of the
average of the three lowest  volume  weighted  average  prices during the twenty
(20) trading days prior to the conversion.  If the volume weighted average price
is below $0.50 on a conversion  date, we have the right to pre-pay the amount of
the debenture the holder elects to convert, plus accrued and unpaid interest, at
125% of such  amount;  however,  if we elect to pre-pay in this  situation,  the
debenture  holder has the right to withdraw the notice of  conversion.  Also, if
the volume  weighted  average  price is below $0.50 at any point during a month,
the holder is not obligated to convert any portion of the debenture  during that
month. Accordingly, there is in fact no limit on the number of shares into which
the debenture may be converted.  For a period of twenty days after the date that
the outstanding  principal amount of the debenture is less than $100,000, we may
redeem the debenture in whole in cash for the outstanding  principal amount plus
accrued and unpaid interest.  In addition,  the selling stockholder is obligated
to exercise the warrant  concurrently with the submission of a conversion notice
by the selling  stockholder.  The warrant is exercisable  into 300,000 shares of
common stock at an exercise price of $10.00 per share.

      The conversion  provisions of the convertible  debentures and the exercise
provisions of the warrant are correlated so that the convertible debentures will
be converted and the warrant exercised in like  proportions.  The result is that
in any month in which the holder  converts the 3% minimum it will also  exercise
the 3% minimum  under the  warrant,  which will result in it  purchasing  common
stock for $99,000 ($90,000 paid in cash and $9,000 of the convertible debentures
principal converted). In total, the conversion of the convertible debentures and
exercise of the warrant will result in Golden Gate  purchasing  our common stock
for up to $3,300,000  ($3,000,000  paid in cash and $300,000 of the  convertible
debentures  principal converted) during the period between the effective date of
the registration statement and February 14, 2007.

      There are four  conditions  that may reduce the aggregate  purchase  price
paid by Golden Gate below $3,300,000:


                                       40


      1. If Golden Gate only converts the 3% minimum per month, the February 14,
2007  payment  date  for the  convertible  debentures  will  occur  before  full
conversion and exercise have occurred;

      2. The conversion and exercise  provisions of the securities  provide that
at no  time  may  Golden  Gate  acquire  ownership  of  more  that  9.9%  of our
outstanding common stock;

      3. If at the time of a conversion/exercise,  the conversion price would be
less than $.40,  then  either  (a) we may opt to redeem the amount of  principal
that the holder  presents for  conversion  at 125% of face value,  or (b) if the
conversion/exercise  date is later than November 11, 2005,  the holder may elect
to convert up to $100,000 of the convertible  debentures  without exercising the
warrant,  either of which events would reduce the aggregate  purchases under the
convertible  debentures  and  warrant  by 900% of the amount  redeemed  by us or
converted without exercise.

      4. When the principal  amount of the  convertible  debentures  falls below
$100,000,  we may redeem the  remaining  principal  for its face value.  In that
event,  the  aggregate  purchase  price paid by Golden Gate for our common stock
would be only $2,200,000.

      Golden Gate Investors has contractually committed to convert not less than
3% of the original face value of the debenture monthly beginning the month after
the  effective  date of the  Registration  Statement.  Golden Gate  Investors is
required to exercise  warrants  concurrently  with the  exercise of a conversion
notice  under the  debenture  and is  committed  to  exercise at least 3% of the
warrants per month after the effective date of the  Registration  Statement.  In
the event that Golden Gate  Investors  breaches the minimum  restriction  on the
debenture and warrant,  Golden Gate will not be entitled to collect  interest on
the debenture for that month. If Golden Gate submits a conversion notice and the
volume  weighted  average  price is less  then $.50 per  share,  then we will be
entitled to prepay the portion of the debenture that is being  converted at 125%
of such  amount.  If we elect to  prepay,  then  Golden  Gate may  withdraw  its
conversion notice.


      Golden Gate has further  contractually  agreed to restrict  its ability to
convert the  debenture  or exercise  their  warrants  and receive  shares of our
common  stock  such  that  the  number  of  shares  held by the  Holder  and its
affiliates  after such  conversion or exercise does not exceed 9.99% of the then
issued and outstanding shares of our common stock.

      In the event that the registration  statement is not declared effective by
the  required  deadline,  which  is 150 days  from  the  date of the  Securities
Purchase Agreement, Golden Gate may demand repayment of the Debenture of 150% of
the face amount outstanding,  plus all accrued and unpaid interest,  in cash. If
the  repayment  is  accelerated,  we are also  obligated to issue to Golden Gate
50,000  shares of common  stock and $15,000 for each 30-day  period,  or portion
thereof,  during  which the face amount,  including  interest  thereon,  remains
unpaid.  If Golden  Gate  does not elect to  accelerate  the  debenture,  we are
required to  immediately  issue to Golden Gate 50,000 shares of common stock and
$15,000  for each  30-day  period,  or portion  thereof,  during  which the face
amount, including interest thereon, remains unpaid.

SAMPLE CONVERSION CALCULATION


      The convertible  debentures are convertible  into the number of our shares
of common stock equal to the principal  amount of the debentures being converted
multiplied  by 11, less the product of the  conversion  price  multiplied by the
dollar amount of the debenture being converted; and the product thereof shall be
divided  by the  conversion  price.  The  conversion  price for the  convertible
debentures  is the  lesser of (i)  $1.25 or (ii)  eighty  percent  of the of the
average of the three lowest  volume  weighted  average  prices during the twenty
(20) trading days prior to the  conversion.  As of June 2, 2005,  the average of
the three  lowest  intraday  trading  prices  for our  common  stock  during the
preceding 20 trading days as reported on the Over-The-Counter Bulletin Board was
$.2267 and, therefore,  the conversion price for the convertible  debentures was
$.18136.  For example,  assuming conversion of $300,000 of debentures on June 2,
2005, a conversion  price of $0.18136 per share,  the number of shares  issuable
upon conversion would be:

($300,000 x 11) - ($0.18136 x $300,000)  = 3,245,592/$0.18136 = 17,895,854


                                       41


      The  following  is an example of the amount of shares of our common  stock
that are issuable,  upon  conversion of the principal  amount of our convertible
debentures,  based on market prices 25%, 50% and 75% below the market price,  as
of June 1, 2005 of $0.25.

                                                    Number            % of
% Below       Price Per       With Discount       of Shares        Outstanding
Market          Share            at 20%            Issuable           Stock
------         ------            ------           ----------         ------
25%            $.1875            $.15             21,700,000         77.20%
50%            $.125             $.10             32,700,000         83.61%
75%            $.0625            $.05             65,700,000         91.11%


                                  LEGAL MATTERS

      Sichenzia  Ross  Friedman  Ference LLP,  New York,  New York will issue an
opinion with respect to the validity of the shares of common stock being offered
hereby.

                                     EXPERTS

      Webb & Company,  P.A., Independent Registered Public Accounting Firm, have
audited,  as set forth in their report thereon appearing  elsewhere herein,  our
financial  statements at December 31, 2004 and 2003 and for the years then ended
that appear in the prospectus.  The financial  statements  referred to above are
included in this prospectus with reliance upon the Independent Registered Public
Accounting Firm's opinions based on their expertise in accounting and auditing.

                              AVAILABLE INFORMATION

      We have filed a  registration  statement on Form SB-2 under the Securities
Act of 1933, as amended, relating to the shares of common stock being offered by
this  prospectus,  and reference is made to such  registration  statement.  This
prospectus constitutes the prospectus of Ultradata Systems, Incorporated,  filed
as part of the registration  statement,  and it does not contain all information
in the  registration  statement,  as  certain  portions  have  been  omitted  in
accordance  with the  rules  and  regulations  of the  Securities  and  Exchange
Commission.

      We  are  subject  to the  informational  requirements  of  the  Securities
Exchange Act of 1934 which  requires us to file reports,  proxy  statements  and
other  information  with the Securities and Exchange  Commission.  Such reports,
proxy  statements  and other  information  may be inspected at public  reference
facilities of the SEC at Judiciary Plaza, 450 Fifth Street N.W., Washington D.C.
20549. Copies of such material can be obtained from the Public Reference Section
of the SEC at Judiciary Plaza, 450 Fifth Street N.W., Washington,  D.C. 20549 at
prescribed rates. Because we file documents electronically with the SEC, you may
also  obtain  this  information  by  visiting  the  SEC's  Internet  website  at
http://www.sec.gov.


                                       42


                          INDEX TO FINANCIAL STATEMENTS

                         ULTRADATA SYSTEMS, INCORPORATED

                              FINANCIAL STATEMENTS


For the Years Ended December 31, 2004 and December 31, 2003

      Reports of Independent Registered Public Accounting Firm      F-1
      Balance Sheets                                                F-2 to F-3
      Statements of Operations                                      F-3
      Statement of Stockholders' Equity (Deficit)                   F-4
      Statements of Cash Flows                                      F-5 to F-6
      Notes to Financial Statements                                 F-7 to F-22
    


For the Quarter Ended March 31, 2005

      Condensed Balance Sheets                                      F-23
      Condensed Statements of Operations                            F-24
      Condensed Statements of Cash Flows                            F-25
      Notes to Condensed Financial Statements                       F-26 to F-27



                                       43



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of:
  Ultradata Systems, Inc.

We have audited the accompanying balance sheet of Ultradata Systems,  Inc. as of
December  31,  2004,  and the  related  statements  of  operations,  changes  in
stockholders'  equity  (deficiency)  and cash flows for the years ended December
31, 2004 and 2003.  These  financial  statements are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

We conducted our audits in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly in all
material  respects,  the  financial  position of Ultradata  Systems,  Inc. as of
December 31, 2004 and the results of its  operations  and its cash flows for the
years ended December 31, 2004 and 2003 in conformity with accounting  principles
generally accepted in the United States of America.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in Note 13 to the
financial   statements,   a  major  customer  of  the  Company  has  experienced
deteriorating  operations  during  2004 and  during the  second  quarter  ceased
ordering products from the Company.  This customer  accounted for 55.4% of sales
during 2004. In addition the Company  terminated its agreements with AAA for the
sale of its products using the AAA logo to AAA retail  locations.  These factors
raise  substantial  doubt  about its  ability to  continue  as a going  concern.
Management's  plans  concerning  this matter are also  described in Note 13. The
accompanying  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.


/s/ WEBB & COMPANY, P.A.
------------------------

Boynton Beach, Florida
March 5, 2005


                                      F-1


                         ULTRADATA SYSTEMS, INCORPORATED
                                  BALANCE SHEET
                             AS OF DECEMBER 31, 2004


                                                                                               
                                     ASSETS
CURRENT ASSETS
 Cash                                                                                             $   385,966
 Trade accounts receivable, net of allowance for doubtful accounts of $179,575                         38,459
 Inventories, net                                                                                      89,890
 Prepaid expenses                                                                                      41,515
                                                                                                  -----------
       Total Current Assets                                                                           555,830

PROPERTY AND EQUIPMENT - NET                                                                           30,458

OTHER ASSETS                                                                                            5,444
                                                                                                  -----------

TOTAL ASSETS                                                                                      $   591,732
                                                                                                  ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
 Accounts payable                                                                                 $   126,019
 Accrued liabilities                                                                                   55,967
                                                                                                  -----------

TOTAL CURRENT LIABILITIES                                                                             181,986
                                                                                                  -----------

STOCKHOLDERS' EQUITY
 Preferred stock, $0.01 par value, 4,996,680 shares authorized, none issued and outstanding                --
 Series A convertible preferred stock, 3,320 shares authorized, none issued and outstanding                --
 Common stock, $0.01 par value, 10,000,000 shares authorized, 6,410,187 issued and outstanding         64,102
 Additional paid-in capital                                                                         9,121,022
 Accumulated deficit                                                                               (8,659,418)
 Deferred stock compensation                                                                         (115,960)
                                                                                                  -----------

TOTAL STOCKHOLDERS' EQUITY                                                                            409,746
                                                                                                  -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                        $   591,732
                                                                                                  ===========


                See accompanying notes to financial statements.


                                      F-2


                         ULTRADATA SYSTEMS, INCORPORATED
                            STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003



                                                              2004            2003
                                                           -----------     -----------
                                                                     
NET SALES                                                  $ 3,970,434     $ 2,863,258

COST OF SALES                                                2,026,756       1,486,542
                                                           -----------     -----------

GROSS PROFIT                                                 1,943,678       1,376,716
                                                           -----------     -----------

OPERATING EXPENSES
  Selling                                                      329,137         253,564
  General and administrative                                 1,151,439         876,528
  Research and development                                     140,507          63,156
                                                           -----------     -----------
       Total Operating Expenses                              1,621,083       1,193,248
                                                           -----------     -----------

OPERATING INCOME                                               322,595         183,468
                                                           -----------     -----------

OTHER INCOME (EXPENSE)
  Interest and dividend income                                   1,620           6,402
  Interest expense                                              (6,408)       (155,801)
  Loss on early retirement of note receivable                       --         (57,813)
  Settlement of legal dispute                                       --         127,000
  Other, net                                                        15           6,439
                                                           -----------     -----------
       Total Other Income (Expense)                             (4,773)        (73,773)
                                                           -----------     -----------

INCOME BEFORE INCOME TAX EXPENSE                               317,822         109,695
  Income tax expense                                                --              --
                                                           -----------     -----------

NET INCOME                                                 $   317,822     $   109,695
                                                                           -----------
                                                           -----------     -----------

INCOME PER SHARE
  Net income                                               $   317,822     $   109,695
  Preferred stock dividends                                         --          (5,190)
                                                           -----------     -----------

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS                $   317,822     $   104,505
                                                           ===========     ===========

Income per share - basic and diluted                       $      0.05     $      0.02
                                                           ===========     ===========

Weighted average shares outstanding - basic and diluted      6,225,304       4,872,026
                                                           ===========     ===========


                See accompanying notes to financial statements.


                                      F-3


                         ULTRADATA SYSTEMS, INCORPORATED
                 STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIENCY)
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003



                                                                                                        Notes
                                                                                      Additional     Receivable
                                 Preferred Stock             Common Stock               paid-in          For
                                 Shares   Amount        Shares           Amount         capital     Common Stock
----------------------------------------------------------------------------------------------------------------
                                                                                   
Balance at December 31, 2002       16    $16,000       4,224,456     $    42,244     $ 9,631,750     $  (102,369)
Conversion of preferred
    stock to note payable         (16)   (16,000)                                         (8,790)
Conversion of notes payable
    to common stock                                    1,372,555          13,726         141,494
Issuance of common stock to
    non-employee for services
    performed                                             30,000           3,000           4,200
Exercise of employee stock
    options                                                3,000              30             180
Stock issued as part of
    short-term loan offering                             480,000           4,800          86,900
Payments on notes receivable
    to purchase common stock                                                                             102,369

Retirement of treasure                                  (326,171)         (3,262)       (939,049)
shares

Net income, 2003
                               ------    -------     -----------     -----------     -----------     -----------

Balance at December 31, 2003       --         --       5,783,840          57,838       8,916,685              --
Conversion of notes payable
    to common stock                                      273,906           2,739          24,861
Issuance of common stock to
    non-employee for services
    performed                                            223,000           2,230         171,710
Exercise of employee stock
    options                                              100,441           1,005           6,026
Exercise of director stock
    options                                               29,000             290            1740
Net income, 2004
                               ------    -------     -----------     -----------     -----------     -----------

Balance at December 31, 2004       --    $    --       6,410,187     $    64,102     $ 9,121,022     $        --


                                                                                                         Total
                                                                                    Deferred         Stockholders'
                                         Treasury Stock         Accumulated           Stock             Equity
                                      Shares       Amount          deficit         Compensation       (Deficiency)
------------------------------------------------------------------------------------------------------------------
                                                                                        
Balance at December 31, 2002          326,171   $  (942,311)    $(9,086,935)        $        --        $  (441,621)
Conversion of preferred
    stock to note payable                                                                                  (24,790)
Conversion of notes payable
    to common stock                                                                                        155,220
Issuance of common stock to
    non-employee for services
    performed                                                                                                4,500
Exercise of employee stock
    options                                                                                                    210
Stock issued as part of
    short-term loan offering                                                                                91,700
Payments on notes receivable
    to purchase common stock                                                                               102,369

Retirement of treasure               (326,171)      942,311                                                     --
shares

Net income, 2003                                                                        109,695            109,695
                                  -----------   -----------     -----------         -----------        -----------

Balance at December 31, 2003               --            --      (8,977,240)                                (2,717)
Conversion of notes payable
    to common stock                                                                                         27,600
Issuance of common stock to
    non-employee for services
    performed                                                                          (115,960)            60,010
Exercise of employee stock
    options                                                                                                  7,031
Exercise of director stock
    options                                                                                                  2,030
Net income, 2004                                                    317,822                                317,882
                                  -----------   -----------     -----------         -----------        -----------

Balance at December 31, 2004               --   $        --     $(8,659,418)        $  (115,960)       $   409,746


                See accompanying notes to financial statements.


                                      F-5


                         ULTRADATA SYSTEMS, INCORPORATED
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003



                                                                                                      2004              2003
                                                                                                    ---------         ---------
                                                                                                                
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                                                                         $ 317,822         $ 109,695
 Adjustments to reconcile net income to net cash provided by (used in) operating activities:
  Depreciation and amortization                                                                        14,976            32,308
  Write-down of inventory                                                                              30,457            17,673
  Stock issued for services                                                                            57,980             4,500
  Loss on early settlement of notes receivable                                                             --            57,813
  Provision for doubtful accounts                                                                     176,848              (693)
  Non-cash accrued interest receivable                                                                     --           (12,397)
  Changes in assets and liabilities:
    Trade accounts receivable, net                                                                    412,182          (485,198)
    Inventories                                                                                       (64,752)           29,219
    Prepaid expenses and other assets                                                                 (36,349)             (604)
    Accounts payable                                                                                 (334,682)          182,872
    Accrued liabilities                                                                               (34,826)          (98,032)
                                                                                                    ---------         ---------
        Net Cash Provided By (Used In) Operating Activities                                           539,656          (162,844)
                                                                                                    ---------         ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Proceeds from early settlement of notes receivable                                                     --           202,517
    Capital expenditures                                                                              (19,475)          (12,834)
                                                                                                    ---------         ---------
        Net Cash (Used In) Provided By Investing Activities                                           (19,475)          189,683
                                                                                                    ---------         ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Proceeds from exercising stock options                                                              9,061                --
    Payments on notes payable                                                                        (311,202)         (338,844)
    Dividends paid to preferred stockholders                                                               --            (8,790)
    Proceeds from notes payable                                                                       165,000            91,600
    Proceeds from sale of common stock                                                                     --            91,910
    Payments received on subscriptions, net                                                                --           102,369
                                                                                                    ---------         ---------
        Net Cash Used In Financing Activities                                                        (137,141)          (61,755)
                                                                                                    ---------         ---------

NET INCREASE (DECREASE) IN CASH                                                                       383,040           (34,916)

CASH - BEGINNING OF YEAR                                                                                2,926            37,842
                                                                                                    ---------         ---------

CASH - END OF YEAR                                                                                  $ 385,966         $   2,926
                                                                                                                      ---------
                                                                                                    =========         =========

SUPPLEMENTAL DISCLOSURE OF CASH-FLOW INFORMATION
Interest paid during the year                                                                       $   6,408         $  48,204
                                                                                                    =========         =========


                See accompanying notes to financial statements.


                                      F-6


                         ULTRADATA SYSTEMS, INCORPORATED
                            STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

During  2004,  a portion  of the notes  payable  in the  amount of  $27,600  was
converted to 273,906 shares of common stock.

During  2003,  a portion  of the notes  payable in the  amount of  $155,220  was
converted to 1,312,535 shares of common stock.

During 2003, the Company retired 326,171 shares of Treasury Stock with a cost of
$942,311.

                See accompanying notes to financial statements.


                                      F-6


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      (A) NATURE OF OPERATIONS

      Ultradata  Systems,  Incorporated  (the "Company") was incorporated in the
      State of Missouri  in March 1986 under the name of Laser Data  Technology,
      Inc. The Company  subsequently  merged into its wholly  owned  subsidiary,
      Ultradata  Systems,  Incorporated,  incorporated in the State of Delaware,
      and Laser Data was  dissolved.  The  principal  business  activity  of the
      Company,  located in St. Louis,  is the design,  manufacture,  and sale of
      hand-held electronic  information products. The Company sells the products
      in  the  United  States  through  direct   marketing,   independent  sales
      representatives, mail order catalogs, and mass market retailers.

      (B) USE OF ESTIMATES

      The financial  statements have been prepared in conformity with accounting
      principles  generally  accepted  in the United  States of America  and, as
      such,  include  amounts  based on informed  estimates and  assumptions  by
      management, with consideration given to materiality.  Actual results could
      vary from those estimates.

      (C) CASH AND CASH EQUIVALENTS

      Cash includes deposits at financial  institutions with maturities of three
      months or less.  The  Company at times has cash in banks in excess of FDIC
      insurance  limits and  places its  temporary  cash  investments  with high
      credit quality financial  institutions.  At December 31, 2004, the Company
      had  approximately  $285,800 in cash  balances at  financial  institutions
      which were in excess of the FDIC insured limits.

      (D) REVENUE RECOGNITION

      Net sales are  recognized  when  products  are  shipped.  The  Company has
      established programs, which, under specified conditions,  enable customers
      to return  product.  The Company  establishes  liabilities  for  estimated
      returns at time of shipment. In addition,  accruals for customer discounts
      and rebates are recorded when revenues are recognized.

      (E) INVENTORIES

      Inventories are valued at the lower of cost or market.  Cost is determined
      using the first-in,  first-out  (FIFO) method.  Provision for  potentially
      obsolete or slow moving  inventory is made based on management's  analysis
      of inventory levels and future sales forecasts.


                                      F-7


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT')

      (F) PROPERTY AND EQUIPMENT

      Property and equipment are stated at cost less  accumulated  depreciation.
      The Company capitalizes  certain software  development costs in accordance
      with the American Institute of Certified Public  Accountants  Statement of
      Position  No.  98-1,  "Accounting  for the Costs of Software  Developed or
      Obtained  for  Internal   Use."   Depreciation   is  provided   using  the
      straight-line  basis  over  the  estimated  useful  lives  of the  assets,
      generally  five  years.  Leasehold  improvements  are  amortized  over the
      shorter  of  the  term  of  the  related   lease  or  their  useful  life.
      Expenditures  for  maintenance  and  repairs  are  charged  to  expense as
      incurred.  The Company  continually  reviews  property  and  equipment  to
      determine that the carrying values are not impaired.

      (G) LONG-LIVED ASSETS

      The  Company  accounts  for  long-lived  assets  under the  Statements  of
      Financial  Accounting  Standards Nos. 142 and 144 "Accounting for Goodwill
      and Other Intangible Assets" and "Accounting for Impairment or Disposal of
      Long-Lived  Assets" ("SFAS No. 142 and 144").  In accordance with SFAS No.
      142  and  144,  long-lived  assets,   goodwill  and  certain  identifiable
      intangible assets held and used by the Company are reviewed for impairment
      whenever  events or changes in  circumstances  indicate  that the carrying
      amount of an asset may not be recoverable.  For purposes of evaluating the
      recoverability of long-lived  assets,  goodwill and intangible assets, the
      recoverability test is performed using undiscounted net cash flows related
      to the long-lived assets.

      (H) ADVERTISING

      The Company  expenses the production  costs of advertising  the first time
      advertising takes place, except for direct response advertising,  which is
      capitalized  and amortized  over its expected  period of future  benefits.
      Advertising  expense  totaled  $95,664  and  $60,950  for the years  ended
      December 31, 2004 and 2003, respectively.

      (I) RECLASSIFICATION

      Certain  amounts from prior periods have been  reclassified  to conform to
      the current year presentation.


                                      F-8


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT')

      (J) FAIR VALUE OF FINANCIAL INSTRUMENTS

      Statement of Financial  Accounting  Standards No. 107,  "Disclosure  About
      Fair  Value  of  Financial   Instruments,"  requires  certain  disclosures
      regarding  the  fair  value  of  financial  instruments.   Trade  accounts
      receivable, accounts payable, and accrued liabilities are reflected in the
      financial  statements at fair value because of the short-term  maturity of
      the instruments.

      (K) RESEARCH AND DEVELOPMENT COSTS

      Research and development costs consist primarily of expenditures  incurred
      bringing  a new  product  to market or  significantly  enhancing  existing
      products.  The Company expenses all research and development costs as they
      are incurred  unless they are associated  with the development of tools or
      processes for production used in-house  rather than for product  delivered
      to a customer.

      (L) ROYALTY EXPENSE

      Royalty expense is recognized on a pro rata basis as units are sold during
      the same period in which the related unit sales were recognized.

      (M) INCOME TAXES

      The Company  accounts  for income  taxes under the  Statement of Financial
      Accounting Standards No. 109, "Accounting for Income Taxes", ("SFAS 109").
      Under SFAS 109, deferred tax assets and liabilities are recognized for the
      future tax consequences  attributable to differences between the financial
      statement  carrying  amounts of existing  assets and liabilities and their
      respective  tax bases and  operating  loss and tax credit  carry-forwards.
      Deferred tax assets and  liabilities  are measured using enacted tax rates
      expected to apply to taxable income in the years in which those  temporary
      differences  are expected to be recovered or settled.  Under SFAS 109, the
      effect on deferred tax assets and  liabilities of a change in tax rates is
      recognized in income in the period that includes the enactment date.

      (N) INCOME PER SHARE

      Basic and diluted  income per share is  calculated  by dividing net income
      for the period (plus  preferred stock  dividends) by the weighted  average
      number of shares  of common  stock  outstanding  during  the  period.  The
      assumed  exercise of stock  options and  warrants is only  included in the
      calculation of diluted earnings per share, if dilutive (see Note 10).


                                      F-9


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT')

      (O) STOCK-BASED COMPENSATION

      In accordance  with  Statement of Financial  Accounting  Standards No. 123
      (SFAS No.  123),  the Company  has  elected to account  for stock  options
      issued to employees under Accounting Principles Board Opinion No. 25 ("APB
      Opinion No. 25") and related  interpretations.  The Company  accounts  for
      stock options issued to  consultants  and for other services in accordance
      with SFAS No. 123.

      (P) NEW ACCOUNTING PRONOUNCEMENTS

      Statement of Financial  Accounting  Standards ("SFAS") No. 151, "Inventory
      Costs - an amendment of ARB No. 43, Chapter 4"" SFAS No. 152,  "Accounting
      for  Real  Estate  Time-Sharing   Transactions  -  an  amendment  of  FASB
      Statements No. 66 and 67," SFAS No. 153, "Exchanges of Non-monetary Assets
      - an amendment  of APB Opinion No. 29," and SFAS No. 123  (revised  2004),
      "Share-Based  Payment," were recently  issued.  SFAS No. 151, 152, 153 and
      123 (revised 2004) have no current  applicability  to the Company and have
      no effect on the financial statements.

      (Q) BUSINESS SEGMENTS

      The Company applies  Statement of Financial  Accounting  Standards No. 131
      "Disclosures about Segments of an Enterprise and Related Information." The
      Company operates in one segment and therefore  segment  information is not
      presented.

NOTE 2 INVENTORIES

      Inventories (net) at December 31, 2004 consist of the following:

      Raw materials                                                $ 4,966
      Finished goods                                                84,924
                                                                   -------
                                                                   $89,890
                                                                   =======

      At December  31,  2004,  the Company has  reserved  $738,826  for obsolete
      inventory.  During 2004 and 2003, the Company  recognized an impairment of
      $30,456 and $17,673 respectively.


                                      F-10


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 3 PROPERTY AND EQUIPMENT

      Property and equipment at December 31, 2004 consist of the following:
       Research and development equipment                      $  39,997
       Tooling and test equipment                                 86,112
       Office furniture and equipment                            219,025
       Sales displays                                             52,101
       Leasehold improvements                                     29,989
                                                               ---------
                                                                 427,224
       Less accumulated depreciation and amortization           (396,766)
                                                               ---------
                                                               $  30,458
                                                               =========

      Depreciation  and  amortization  expense for the years ended  December 31,
      2004 and 2003 totaled $14,976 and $32,308, respectively.

NOTE 4 ACCRUED LIABILITIES

      Accrued liabilities at December 31, 2004 consist of the following:
       Accrued payroll and related expenses                        10,961
       Accrued vacation                                            24,224
       Accrued expenses                                            19,818
       Other accrued liabilities                                      964
                                                                  -------
                                                                  $55,967
                                                                  =======

NOTE 5 NOTES PAYABLE

      On January 8, 2004, all remaining  convertible debt was retired by payment
      in full of the outstanding balance including all accrued interest. Between
      January 1, 2004,  and January 8, 2004,  a portion of the notes  payable in
      the amount of $27,600 was  converted  to 273,906  shares of common  stock.
      (See Note 8).

      On January 7, 2004,  the Company  issued a nine-month  note payable in the
      amount of $150,000.  The note earned interest at 12% APR and is unsecured.
      The note was fully repaid during 2004.

      During  2004,  the  Company  received  a loan of  $15,000  from its  Chief
      Executive  Officer to fund  operations  with no interest.  The outstanding
      balance of the loan was paid in full as of March 31, 2004.

      Interest expense for the years ended December 31, 2004 and 2003 was $6,408
      and $155,801, respectively.


                                      F-11


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 6 COMMITMENTS AND CONTINGENCIES

      (A) OPERATING LEASE

      The Company renewed its operating lease whereby it reduced the size of its
      corporate  facilities  as of November 1, 2001.  The lease is an  operating
      lease,  which expires  October 31, 2005.  The Company pays monthly rent of
      $3,779, plus 16% of all building expenses.

      Future minimum lease  payments  under the operating  lease at December 31,
      2004, consist of the following:

                        Year                             Amount
                        ----                             ------
                        2005                            $ 37,790

      Rent expense  totaled $45,500 and $47,299 for the years ended December 31,
      2004 and 2003, respectively.

      (B) ROYALTY AGREEMENTS

      On September  14, 1989,  the Company  entered into a  twenty-year  royalty
      agreement relating to its ROAD WHIZ(TM) product.  After the sale of 20,000
      ROAD WHIZ(TM) units,  the agreement  thereafter  provides for a 1% royalty
      payment  on net  sales  of the  ROAD  WHIZ(TM)  product  and  0.5%  on the
      Company's  other  products that  incorporate  the ROAD WHIZ(TM)  database.
      Royalty  payments are made quarterly until September 13, 2009.  During the
      years ended December 31, 2004 and 2003,  royalty  expense  totaled $35,799
      and $26,693, respectively.

      On September  15,  1998,  the Company  entered  into a three-year  royalty
      agreement  with AAA  related  to the AAA  TripWizard(TM).  The  terms  are
      automatically  renewable  for one year and amount to 10% of the  wholesale
      price on sales  other  than  through  AAA stores and $1.00 per unit on AAA
      sales. This agreement  recognizes the benefit of the AAA logo and data and
      their  promotion of the product  through their travel  stores.  On July 1,
      2002, the agreement was amended to provide a royalty of $1 per unit on all
      sales of the unit.

      In August of 2003, the Company  entered into a royalty  agreement with AAA
      for use of the AAA brand on the  Company's  Talking Road  Navigator.  This
      agreement is similar to the above  agreement  with regard to sales through
      AAA stores and royalties for other sales. Prior review and approval by AAA
      of  the  use  of  AAA  brands  in TV and  other  media  are a part  of the
      agreement.


                                      F-12


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 6 COMMITMENTS AND CONTINGENCIES (CONT')

      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.

      In May 2004, AAA notified the Company that it does not intend to renew the
      marketing agreement on the AAA TripWizard.  The Company,  per terms of the
      agreement,  can  continue to market the  product and divest  itself of its
      inventory during 2005.

      During the years ended December 31, 2004 and 2003, AAA royalty expense for
      both products totaled $45,837 and $39,821, respectively.

      On April 19, 2001, the Company entered into a three-year royalty agreement
      with Rand McNally. The agreement renews automatically for one-year periods
      up to a maximum of five additional years unless  terminated  earlier.  The
      agreement  calls for the  Company  to pay a royalty of 10% of net sales of
      the  TripLink  and Pocket  TripLink  devices that contain the Rand McNally
      logo or $1.50 for each device sold,  whichever  is greater.  For the first
      year of the  agreement,  the  Company  guarantees  a  minimum  payment  of
      $150,000, and must pay an additional $50,000 if 50,000 or more devices are
      sold. The guaranteed  annual minimum for each subsequent  anniversary year
      increases to 115% of the amount of the  royalties  due  (inclusive  of the
      guaranteed  annual  minimum) for the previous year. In addition to the per
      unit royalty,  the Company must pay (1) a royalty of $.01 to $.02 for each
      route  created  by  authorized  users  of  the  services  provided  by the
      agreement,  (2) a royalty  of $0.48 to $0.62 for each  Pocket  Road  Atlas
      ordered  from Rand  McNally,  and (3) a $0.12  license fee for each Pocket
      Road Atlas shipped to customers.

      On February 21, 2002, the royalty  agreement with Rand McNally was amended
      as follows:  (1) beginning  December 16, 2002,  either party may terminate
      the agreement  with sixty days written  notice,  (2) the Company may begin
      using the Rand McNally logo on additional products, (3) beginning March 1,
      2002, the Company shall pay twelve monthly  installments  of $8,333 to the
      remaining  balance of  $100,000  owed to Rand  McNally  for the first year
      minimum,  and (4) the  Company  shall  sell its  TripLink  device  to Rand
      McNally  for  $7.50 per unit  below the  normal  selling  price,  and this
      discount  shall be used as a credit  against  the  monthly  payment in (3)
      above.

      In February 2003,  the agreement with Rand McNally was further  amended to
      provide a new payment schedule and basis for the TripLink  royalties.  The
      Company  agreed to pay the remaining  balance for the TripLink  Program in
      accordance with the following terms:


                                      F-13


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 6 COMMITMENTS AND CONTINGENCIES (CONT')

      The beginning  balance of $52,251 on January 1, 2003,  shall bear interest
      at the rate of 6% APR. The payment  schedule  shall consist of $2,000 upon
      signing of the amendment  and $2,000 on the 15th of each month  commencing
      March 15, 2003. On or before  August 31, 2003, a final balloon  payment is
      required  equal  to the sum of the  outstanding  balance  and any  accrued
      unpaid  interest,  less any credits  resulting  from TripLink sales in the
      interim.  The agreement  was signed and the initial  payment of $2,000 was
      made in February 2003.

      In 2003, the Company paid $20,000,  including $2,341 in interest,  to Rand
      McNally and reduced the  balance to $27,045 on  December  31,  2003,  when
      credits  are also  taken into  account.  Since the  Company  was unable to
      retire the balance by August 31, 2003 as  planned,  the Company  continued
      monthly payments and accrual of interest.

      In 2004, the Company paid $510 in interest,  accrued $855 in credits,  and
      retired the balance of $26,802 in May 2004.

      During the years ended December 31, 2004 and 2003, royalty expense totaled
      $8 and $138, respectively.

      (D) STANTON WALKER CONSULTING AGREEMENT

      In September  2004, the Company signed a business  advisory and consulting
      services agreement with New York-based  Stanton Walker & Company.  Stanton
      Walker will assist in the development of certain strategic  initiatives of
      the Company.  These initiatives  include opening  discussions with several
      companies regarding licensing arrangements, joint ventures or distribution
      arrangements.   Stanton   Walker's   work  will  include  due   diligence,
      structuring transaction terms and providing consulting services throughout
      the process. Stanton Walker will also seek potential acquisition candidate
      companies that fit Ultradata Systems' business objectives.

      Stanton Walker & Company  provides a full range of strategic  operational,
      marketing,  financial  advisory  and M & A services  to public  companies.
      While  they  provide  assistance  in a wide array of  industries,  Stanton
      Walker is  especially  interested  in working with  companies  where their
      products  and/or  services  appear to offer the company's  stakeholders an
      opportunity for a significant return.

      Stanton Walker were issued 223,000 shares of Ultradata Common Stock with a
      prevailing  market  value  on the date of the  agreement  of  $173,940  in
      payment for their  services.  The Company is amortizing  the  compensation
      expense over the 12-month life of the agreement.  As of December 31, 2004,
      the Company  recognized  $57,980 of the consulting  expense related to the
      agreement and recorded deferred consulting fees of $115,960.


                                      F-14


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 7 STOCKHOLDERS' EQUITY (DEFICIENCY)

      (A) COMMON STOCK ISSUANCES

      During 2003, a portion of the notes  payable in the amount of $155,220 was
      converted  to  1,372,555  shares  of  common  stock.  No gain or loss  was
      recognized on this transaction.

      During 2003,  an aggregate of 30,000  shares of common stock having a fair
      value of $4,500 were issued to a consultant for services  rendered  during
      the year. The shares were valued based on the  prevailing  market price on
      the grant date.

      During 2003,  an  aggregate of 480,000  shares of common stock were issued
      for cash of $91,700 to holders of short-term notes.

      During 2003, a director  exercised  3,000 common stock options for cash of
      $210.

      During 2004,  a portion of the notes  payable in the amount of $27,600 was
      converted  to  273,906  shares  of  common  stock.  No gain  or  loss  was
      recognized on this transaction.

      During 2004, a director  exercised 29,000 common stock options for cash of
      $2,030.

      During  2004,  223,000  shares were issued to a  consultant  for  services
      rendered (see Note 6).

      During 2004,  employees exercised 100,441 common stock options for cash of
      $7,031.

      (B) CONVERTIBLE PREFERRED STOCK

      (i) Original Terms

            On May  16,  2000,  the  Company  issued  16  Series  A  Convertible
            Preferred Shares to a consultant as a commission.  These shares have
            no voting  rights.  The holder of the shares is not  entitled to any
            cash dividends.  However, they accrue an additional 11.25% per annum
            (or 22.5% if the Common  Stock is  de-listed by NASDAQ) for purposes
            of conversion,  redemption,  and liquidation ($6,529 at December 31,
            2002). The main points of the Preferred Shares were as follows:

            1.    The Preferred Shares have a liquidation  preference,  upon the
                  liquidation  of the Company or its bankruptcy or certain other
                  events,  equal to their  $1,000  face  value  plus an  accrued
                  amount equal to 11.25% from the date of their issuance  (22.5%
                  if the Common Stock is delisted by NASDAQ).


                                      F-15


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 7 STOCKHOLDERS' EQUITY (DEFICIENCY) (CONT')

            2.    The Preferred Shares,  combined with the additional 11.25% per
                  annum,  may be converted  into Common Stock at any time at the
                  option  of the  holders.  If  not  previously  converted,  the
                  Preferred Shares will automatically  convert into Common Stock
                  on May 15,  2003.  The  conversion  rate  will be the lower of
                  $3.50 or 75% of the 5-day average  closing bid price,  subject
                  to certain  anti-dilution rights and to the Floor. The "Floor"
                  was  originally  $2.50 and  applies  only  during the first 18
                  months after issuance of the Preferred Shares. Under the terms
                  of  the  Preferred  Shares,  the  floor  price  was  initially
                  adjusted to $2.00, then to $1.50. In March 2001, the floor was
                  eliminated.

            In May of 2003, the Company and the  shareholder  reached a mutually
            satisfactory  agreement  to convert  the shares to a note of $24,870
            rather than  converting in accordance  with the formula above.  This
            note was paid off completely by September 30, 2003.

NOTE 8 STOCK OPTIONS AND WARRANTS

      (A) STOCK OPTIONS ISSUED UNDER QUALIFIED STOCK OPTION PLANS

      Under  the 1994  Incentive  Stock  Option  Plan,  the  Company  may  grant
      incentive  stock  options  to  its  employees,  officers,  directors,  and
      consultants  of the  Company to  purchase  up to 175,000  shares of common
      stock.  Under the 1996  Incentive  Stock Option Plan the Company may grant
      incentive  stock  options  to  its  employees,  officers,  directors,  and
      consultants  of the  Company to  purchase  up to 175,000  shares of common
      stock. In July 2000, the Company's  shareholders  approved an extension of
      the 1996  Incentive  Stock Options plan to provide for 150,000  additional
      shares to be made  available  for  future  grant.  Under both  plans,  the
      exercise  price of each option  equals or exceeds the market  price of the
      Company's  stock on the date of grant,  and the  options'  maximum term is
      five  years.  Options  are  granted at various  times and are  exercisable
      immediately.

      During the year ended December 31, 2004, the Company granted 112,000 stock
      options to certain  employees  and  directors.  The  Company  applies  APB
      Opinion No. 25 and related interpretations in accounting for stock options
      issued to employees. Accordingly, no compensation cost has been recognized
      for options issued to employees.  Had  compensation  cost been  determined
      based on the fair  market  value at the grant date,  consistent  with SFAS
      123, the Company's net income would have changed to the pro-forma  amounts
      indicated below.


                                      F-16


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 8 STOCK OPTIONS AND WARRANTS (CONT')



                                                                     2004               2003
                                                                 -----------        -----------
                                                                           
      Net income available to common            As Reported      $   317,822        $   104,505
      shareholders
                                                Pro Forma        $   239,552            104,505

      Basic and diluted income per share        As Reported      $      0.05        $      0.02
                                                Pro Forma        $      0.04        $      0.02


      The fair  value of each  option  grant is  estimated  on the date of grant
      using the Black-Scholes  option pricing model with the following  weighted
      average  assumptions  used for  grants  in 2004:  dividend  yield of zero;
      expected  volatility of 132%,  risk-free interest rate of 5.40%;  expected
      lives of five years for both plans.

      A summary of the status of  Company's  two fixed stock  option plans as of
      December 31, 2004 and 2003, and the changes during the years then ended is
      presented below:



                                                                2004                             2003
                                                    ---------------------------        --------------------------
                                                                      Weighted                          Weighted
                                                                       Average                           Average
                                                                      Exercise                          Exercise
      Fixed Options                                   Shares            Price           Shares            Price
      --------------------------------              ---------         ---------        ---------        ---------
                                                                                            
      Outstanding at beginning of year                392,188         $    0.14          392,188        $    0.14
      Cancelled                                            --                --               --               --
      Granted                                              --         $      --               --        $      --
      Forfeited                                            --         $      --               --        $      --
      Expired                                         (11,000)        $    2.00               --        $      --
      Exercised                                      (100,414)        $     .07               --        $      --
                                                    ---------         ---------        ---------        ---------
      Outstanding at end of year                      280,747         $    0.10          392,188        $    0.14
                                                    =========         =========        =========        =========

      Options exercisable at year end                 280,747                            392,188
                                                    =========                          =========

      Weighted average fair value of options
       granted to employees during the year         $      --                          $      --
                                                    =========                          =========



                                      F-17


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 8 STOCK OPTIONS AND WARRANTS (CONT')



                             Options Outstanding                               Options Exercisable
     ---------------------------------------------------------------       ---------------------------
                                          Weighted
                            Number          Average        Weighted           Number         Weighted
                        Outstanding at     Remaining        Average        Exercisable        Average
        Range of         December 31,     Contractual      Exercise        at December       Exercise
     Exercise Price          2004             Life           Price           31, 2004          Price
     --------------     --------------    -----------      ---------       -----------       ---------
                                                                              
      $0.00 - 0.99          275,747              2.5       $    0.07          275,747        $    0.07
       1.00 - 1.99            5,000              1.0            1.50            5,000             1.50
       2.00 - 2.99               --               --              --               --               --
       3.00 - 3.99               --               --              --               --               --
       4.00 - 4.99               --               --              --               --               --
       5.00 - 5.56               --               --              --            1,658               --
                          ---------        ---------       ---------        ---------        ---------
                            280,405             2.47            0.10          280,405             0.10
                          =========        =========       =========        =========        =========


                             Options Outstanding                               Options Exercisable
     ---------------------------------------------------------------       ---------------------------
                                          Weighted
                            Number          Average        Weighted           Number         Weighted
                        Outstanding at     Remaining        Average        Exercisable        Average
        Range of         December 31,     Contractual      Exercise        at December       Exercise
     Exercise Price          2003             Life           Price           31, 2003          Price
     --------------     --------------    -----------      ---------       -----------       ---------
                                                                              
      $0.00 - 0.99          376,161              4.0       $    0.07          376,161        $    0.07
       1.00 - 1.99            5,000              2.0            1.50            5,000             1.50
       2.00 - 2.99           11,000              0.8            2.00           11,000             2.00
       3.00 - 3.99               --               --              --               --               --
       4.00 - 4.99               --               --              --               --               --
       5.00 - 5.56               --               --              --               --               --
                          ---------        ---------       ---------        ---------        ---------
                            392,188             3.88            0.14          392,188             0.14
                          =========        =========       =========        =========        =========



                                      F-18


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 8 STOCK OPTIONS AND WARRANTS (CONT')

      (B) NON-QUALIFIED STOCK OPTIONS ISSUED AND OUTSTANDING



                                                                                 2004           2003
                                                                                -------        -------
                                                                                         
      Stock options issued to a technical consultant at various times in          6,818          6,818
       the past. The term of the options is five years expiring in 2005
       and 2006. The options are exercisable at an average price of
       $2.53 per share

      Stock options issued to a former affiliate. The term of the option
       is five years expiring May 9, 2005. The options are exercisable
       at $4.00 and $5.00 per share                                             300,000        300,000

      Stock options issued to directors for services rendered. The term
       of the options is five years expiring November 18, 2007. The
       options are exercisable at $0.07 per share                                 4,000         33,000
                                                                                -------        -------
      Stock options issued to directors for services rendered. The term
       of the options is five years expiring December 11, 2009. The
       options are exercisable at $0.72 per share                                12,000             --

      Stock options issued to employees. The term of the options is ten
       years expiring December 11, 2014. The options are exercisable at
       $0.72 per share                                                          100,000             --
                                                                                -------        -------

      Total                                                                     422,818        339,818
                                                                                =======        =======


NOTE 9 INCOME PER SHARE

      A reconciliation  of the numerator and denominator of the income per share
      calculations  is provided for all periods  presented.  The  numerator  and
      denominator  for basic and  diluted  income per share for the years  ended
      December 31, 2004 and 2003, is as follows:



      Basic and fully diluted                                       2004               2003
      -----------------------                                    -----------        -----------
                                                                              
      Numerator:
       Net income                                                $   317,822        $   109,695
       Preferred Stock Dividends (a)                                      --             (5,190)
                                                                 -----------        -----------

                                                                 ===========        ===========
       Numerator for basic and diluted income per share          $   317,822        $   104,505
                                                                 ===========        ===========
      Denominator:
       Weighted average common shares                              6,225,304          4,872,026
       Denominator for basic and diluted income per share          6,225,304          4,872,026
                                                                 ===========        ===========

       Basic and diluted income per share                        $      0.05        $      0.02
                                                                 ===========        ===========


      (a) See Note 7(B)


                                      F-19


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 10 INCOME TAXES

      Income tax expense  (benefit)  for the years ended  December  31, 2004 and
      2003 consist of the following:

                                       2004
                      Current        Deferred         Total
                     --------        --------        -------
      Federal        $     --        $     --        $    --
      State                --              --             --
                     --------        --------        -------
                     $     --        $     --        $    --
                     ========        ========        =======

                                       2003
                      Current        Deferred         Total
                     --------        --------        -------
      Federal        $     --        $     --        $    --
      State                --              --             --
                     --------        --------        -------
                     $     --        $     --        $    --
                     ========        ========        =======

      Income tax expense for the years ended December 31, 2004 and 2003 differed
      from amounts  computed by applying the  statutory U. S. federal  corporate
      income tax rate of 34% to income  before income tax benefit as a result of
      the following:
      --------------------------------------------------------------------------



                                                                      2004              2003
                                                                    ---------         ---------
                                                                                
      Expected income tax (benefit) expense                         $ 108,059         $  37,296

      Increase (decrease) in income taxes resulting from:

      Valuation allowance decrease                                   (106,804)          (36,880)

      Nondeductible expenses for federal income tax purposes           (1,256)             (416)
                                                                    ---------         ---------
      Income tax expense (benefit)                                  $      --         $      --
                                                                    =========         =========


      The tax effects of  temporary  differences  that give rise to  significant
      portions of the deferred tax assets and  liabilities  at December 31, 2004
      and 2003 include the following:


                                      F-20


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 10 INCOME TAXES (CONT')



                                                                     2004                2003
                                                                  -----------         -----------
                                                                                
      Deferred tax assets:
       Net operating loss carryforward                            $ 3,347,346         $ 3,454,150
       Note receivable reserved for financial reporting
         Purposes                                                          --                  --
       Notes and accounts receivable reserves                           5,475               5,475
       Inventory reserves, principally due to accruals for
        financial reporting purposes and basis differences            277,491             277,491
       Other                                                               --                  --
                                                                  -----------         -----------
      Total deferred tax assets                                     3,630,312           3,989,776
                                                                  -----------         -----------

      Deferred tax liabilities
       Property, plant and equipment, principally due to
        differences in depreciation basis                             (10,837)            (12,385)
                                                                  -----------         -----------
      Total deferred tax liabilities                                       --             (12,385)
                                                                  -----------         -----------
      Gross deferred tax asset                                      3,619,475           3,977,391
          Valuation allowance                                      (3,619,475)         (3,977,391)
                                                                  -----------         -----------
      Net deferred tax asset                                      $        --         $        --
                                                                  ===========         ===========


      At December 31, 2004, the Company had net operating loss  carryforwards of
      $9,845,135  for income tax purposes,  available to offset  future  taxable
      income expiring on various dates through 2024. The valuation  allowance at
      December  31,  2003  was  $10,159,265.  The net  change  in the  valuation
      allowance  during  the year ended  December  31,  2004 was a  decrease  of
      $314,130.

NOTE 11 CONCENTRATIONS OF CREDIT RISK

      The Company relied on three customers for  approximately  82% of sales for
      the year ended December 31, 2004, and two customers for  approximately 70%
      of sales for the year ended  December  31,  2003.  At December  31,  2004,
      accounts receivable, net, from those three customers totaled $2,793.


                                      F-21


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 12 EMPLOYEE BENEFIT PLANS

      Effective January 1, 1998, the Board of Director's  approved a savings and
      retirement plan covering all full-time  employees.  Subject to approval by
      the Board of Directors,  the Company fully matches employee  contributions
      up to  3% of  total  compensation  paid  to  participating  employees  and
      one-third of one percent is matched for each  percentage of  participating
      employee contributions between 4% and 6% of total compensation. Because of
      the  Company's  financial  condition,   the  Company   contributions  were
      suspended  in late  2002 and  throughout  2003.  Expense  attributable  to
      Company  contributions  totaled $20,906 during the year ended December 31,
      2004.

NOTE 13 GOING CONCERN

      As reflected in the accompanying financial statements, a major customer of
      the  Company  has  experienced  deteriorating  operations  during 2004 and
      during the second quarter ceased ordering products from the Company.  This
      customer  accounted  55.4% of sales during  2004.  In addition the Company
      terminated its agreements  with AAA for the sale of its products using the
      AAA logo to AAA retail locations.  Although Management has a plan in place
      to replace these lost customers, it is not yet clear that the plan will be
      successful.  The ability of the Company to continue as a going  concern is
      dependent on the Company's ability to further implement its business plan,
      raise  capital and generate  revenues.  The  financial  statements  do not
      include any  adjustments  that might be necessary if the Company is unable
      to continue as a going concern.

      The Company has continued its product  design and  development  efforts to
      introduce  new products in 2005 and expects to introduce  its Road GenieTM
      in 2005.  Based on the  success of the  Talking  Road Whiz with  direct TV
      marketing,  the Company is proceeding with plans to market Road GenieTM by
      means of similar  commercials,  with the  Company  marketing  directly  to
      consumers.  This new product represents an increase in technology compared
      to the Talking  Road Whiz and, in  addition,  can be enhanced to include a
      digital voice recorder for additional  value to the customer.  The Company
      is also opening a new source of revenue by developing the cell-phone  Road
      Whiz  application.  Thus, the Company has two different methods in work to
      enhance sales revenue. In addition,  the Company has obtained a loan and a
      commitment for additional  equity capital for up to $3.3 million (see Note
      14). Management believes that actions presently taken to obtain additional
      funding  provide  the  opportunity  for the Company to continue as a going
      concern.


                                      F-22


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 14 SUBSEQUENT EVENTS

      CONVERTIBLE DEBENTURE FINANCING

      On  February  17,  2005  Ultradata  entered  into  a  Securities  Purchase
      Agreement dated February 14, 2005 with Golden Gate Investors,  Inc., which
      was modified by an Addendum  dated  February 17, 2005.  Ultradata  sold to
      Golden  Gate a 4 3/4%  Convertible  Debenture  and a Warrant  to  Purchase
      Shares of Common Stock, all for a purchase price of $300,000.  The Company
      received  proceeds of $100,000 of the purchase price,  except that $50,000
      of that sum is being held in escrow for payment of the costs of  preparing
      and filing a registration statement that will permit Golden Gate to make a
      public  resale of the shares into which the Debenture is  convertible  and
      for which the Warrant is exercisable (the "Registration Statement').  As a
      result of the warrants  issued  alongside the debenture,  the Company will
      record a discount on the  debenture  and  amortize it over the life of the
      debenture.  The  remainder  of the  purchase  price  is  payable  when the
      Securities and Exchange  Commission  declares the  Registration  Statement
      effective.

      Interest  that  accrues on the  Debenture,  at 4 3/4% per  annum,  will be
      payable  monthly.  The  principal  amount of the  Debenture  is payable on
      February 14, 2007.  However,  the holder of the Debenture has agreed that,
      in each month after the  Securities and Exchange  Commission  declares the
      Registration  Statement effective,  the holder will convert at least 3% of
      the face amount of the debenture into common stock. Similarly,  the holder
      of the Warrant is  required to purchase at least 3% of the shares  subject
      to the Warrant in each month after the Securities and Exchange  Commission
      declares the Registration Statement effective.

      The conversion  provisions of the Debenture and the exercise provisions of
      the Warrant are correlated so that the Debenture will be converted and the
      Warrant exercised in like proportions.  The result is that in any month in
      which the holder  converts  the 3% minimum  it will also  exercise  the 3%
      minimum under the Warrant, which will result in it purchasing common stock
      for $99,000  ($90,000 paid in cash and $9,000 of the  Debenture  principal
      converted).  The number of shares  that will be  purchased  will equal the
      purchase  price  divided  by the  lesser  of (a)  $1.25  or (b) 80% of the
      average of the three lowest  volume  weighted  average  prices  during the
      twenty  trading  days  preceding   conversion/exercise.   In  total,   the
      conversion  of the  Debenture  and  exercise of the Warrant will result in
      Golden  Gate  purchasing  Ultradata  common  stock  for  up to  $3,300,000
      ($3,000,000  paid  in  cash  and  $300,000  of  the  Debenture   principal
      converted)   during  the  period   between  the  effective   date  of  the
      Registration Statement and February 14, 2007.

      There are four  conditions  that may reduce the aggregate  purchase  price
      paid by Golden Gate below $3,300,000:


                                      F-23


                         ULTRADATA SYSTEMS, INCORPORATED
                          NOTES TO FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2004 AND 2003

NOTE 14 SUBSEQUENT EVENTS (CONT')

      1. If Golden Gate only converts the 3% minimum per month, the February 14,
      2007 payment date for the Debenture will occur before full  conversion and
      exercise have occurred.

      2. The conversion and exercise  provisions of the securities  provide that
      at no  time  may  Golden  Gate  acquire  ownership  of more  that  9.9% of
      Ultradata's outstanding common stock.

      3. If at the time of a conversion/exercise,  the conversion price would be
      less than $.40,  then either (a) Ultradata may opt to redeem the amount of
      principal  that the holder  presents for conversion at 125% of face value,
      or (b) if the  conversion/exercise  date is later than  November 11, 2005,
      the holder may elect to convert up to  $100,000 of the  Debenture  without
      exercising the Warrant,  either of which events would reduce the aggregate
      purchases  under the Debenture and Warrant by 900% of the amount  redeemed
      by Ultradata or converted without exercise.

      4.  When the  principal  amount of the  Debenture  falls  below  $100,000,
      Ultradata may redeem the remaining  principal for its face value.  In that
      event,  the  aggregate  purchase  price paid by Golden Gate for  Ultradata
      common stock would be only $2,200,000.


                                      F-24



                         ULTRADATA SYSTEMS, INCORPORATED

                            CONDENSED BALANCE SHEETS
                   AS OF MARCH 31, 2005 AND DECEMBER 31, 2004

                                                  March 31,        December 31,
                                                    2005               2004
                                                -----------        ------------
                                                (Unaudited)
Assets

Current assets:
 Cash                                           $   113,568         $   385,966
 Trade accounts receivable, net of
  allowance for doubtful accounts of
  $100 and $176,575, respectively                   180,973              38,459
 Inventories, net                                   113,251              89,890
 Prepaid expenses                                   132,618              41,515
                                                -----------         -----------
 Total current assets                               540,410             555,830

Property and equipment, net                          27,363              30,458

Other assets                                          5,444               5,444

Total assets                                    $   573,217         $   591,732
                                                ===========         ===========

Liabilities and Stockholders' Equity

Current liabilities:
 Accounts payable                               $    56,527         $   126,019
 Accrued liabilities                                 80,896             585,967
                                                -----------         -----------
 Total current liabilities                          137,423             181,986

Note payable - long term                              6,164                  --
                                                -----------         -----------
Total liabilities                                   143,587             181,986

Stockholders' equity
 Preferred Stock, $0.01 par value,
  4,996,680 shares authorized, none
  outstanding                                            --                  --
 Common stock, $.01 par value; 10,000,000
  shares authorized;  6,410,187 shares
  issued and outstanding March 31,2005
  and December 31, 2004                              64,102              64,102
 Additional paid-in capital                       9,221,022           9,121,022
 Accumulated deficit                             (8,783,019)         (8,659,418)
 Deferred stock compensation                        (72,475)           (115,960)
                                                -----------         -----------
Total stockholders' equity                          429,630             409,746
                                                -----------         -----------
Total liabilities and stockholders'
 equity                                         $   573,217         $   591,732
                                                ===========         ===========

See  accompanying   summary  of  accounting  policies  and  notes  to  financial
statements.



                                      F-25



                         ULTRADATA SYSTEMS, INCORPORATED

                       CONDENSED STATEMENTS OF OPERATIONS
                   Three months ended March 31, 2005 and 2004

                                                   2005                2004
                                               -----------         -----------
                                                         (Unaudited)

Net sales                                      $    83,825         $ 1,753,499
Cost of sales                                       43,902             895,608
                                               -----------         -----------
Gross profit                                        39,923             857,891

Selling expense                                     22,410              48,593
General and administrative expenses                 99,584             260,208
Research and development expense                    35,201              19,669
                                               -----------         -----------
Total operating expenses                           157,195             328,470
                                               -----------         -----------

Operating (loss) profit                           (117,272)            529,421

Other income (expense):
 Interest and dividend income                          379                  --
 Interest expense                                   (6,758)             (5,257)
 Other, net                                             50                 131
                                               -----------         -----------
Total other expense                                 (6,329)             (5,126)
                                               -----------         -----------

Income (loss) before income tax expense           (123,601)            524,295

Income tax expense                                      --                  --
                                               -----------         -----------
Net income (loss)                              $  (123,601)        $   524,295
                                               ===========         ===========

Income (loss) per share:
 Basic                                         $     (0.02)        $      0.09
                                               ===========         ===========
Income (loss) per share:
 Fully Diluted                                 $     (0.02)        $      0.08

Weighted Average Shares Outstanding:
 Basic                                           6,410,187           6,056,928
                                               ===========         ===========
Weighted Average Shares Outstanding:
 Fully Diluted                                   6,410,187           6,195,646
                                               ===========         ===========

See  accompanying   summary  of  accounting  policies  and  notes  to  financial
statements.



                                      F-26



                         ULTRADATA SYSTEMS, INCORPORATED

                       CONDENSED STATEMENTS OF CASH FLOWS
                   Three months ended March 31, 2005 and 2004

                                                       2005              2004
                                                    ---------         ---------
                                                            (Unaudited)

Cash flows from operating activities:
 Net (loss) income                                  $(123,601)        $ 524,295

Adjustments to reconcile net income
 (loss) to net cash provided by (used in)
 operating activities:
 Depreciation and amortization                          4,461             3,352
 Provision for doubtful accounts                     (176,282)               43
 Stock issued for services                             43,485                --
 Reserve for inventory impairment                       3,489                --
 Non-cash Amortization of note payable
  discount                                              6,164                --
  Increase (decrease) in cash due to
   changes in operating assets and
   liabilities:
   Trade accounts receivable, net                      33,768          (389,114)
   Inventories                                        (26,850)          (14,105)
   Prepaid expenses and other current assets          (91,103)          (14,538)
   Accounts payable                                   (69,492)           66,310
   Accrued expenses and other liabilities              24,929             4,711
                                                    ---------         ---------
 Net cash (used in) provided by operating
  activities                                         (371,032)          180,954
                                                    ---------         ---------
Cash flows from investing activities:
 Capital expenditures                                  (1,366)               --
                                                    ---------         ---------
 Net cash used in investing activities                 (1,366)               --
                                                    ---------         ---------
Cash flows from financing activities:
 Exercise of employee stock options                        --             7,031
 Payments on notes payable                                 --          (211,202)
 Note payable - short term                                 --           165,000
 Common stock                                         100,000                --
                                                    ---------         ---------
 Net cash provided by (used in) financing
  activities                                          100,000           (39,171)
                                                    ---------         ---------
Net (decrease) increase in cash                      (272,398)          141,783

Cash at beginning of period                           385,966             2,926
                                                    ---------         ---------
Cash at end of period                               $ 113,568         $ 144,709
                                                    =========         =========

See  accompanying   summary  of  accounting  policies  and  notes  to  financial
statements.



                                      F-27



                         ULTRADATA SYSTEMS, INCORPORATED
       NOTES TO CONDENSED FINANCIAL STATEMENTS MARCH 31, 2005 (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, 2005 and 2004,  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, 2005.  It is suggested  that the interim
financial   statements  be  read  in  conjunction  with  the  audited  financial
statements  for the year ended  December 31, 2004, 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,
                                          2005            2004
                                      -----------     ------------
                                      (Unaudited)

      Raw Materials, net of
       obsolete                         $ 24,576        $  4,966
      Finished Goods, net of
       obsolete                           88,675          84,924
                                        --------        --------
      Total                             $113,251        $ 89,890
                                        ========        ========

      Obsolete inventory on hand        $740,942        $738,826



                                      F-28



                         ULTRADATA SYSTEMS, INCORPORATED
       NOTES TO CONDENSED FINANCIAL STATEMENTS MARCH 31, 2005 (UNAUDITED)

NOTE 2. PREPAID EXPENSES

Prepaid expenses consist of the following:

                                 March 31,     December 31,
                                   2005            2004
                               -----------     ------------
                               (Unaudited)

      Prepaid insurance          $ 18,500        $  6,015
      Prepaid advertising          30,000              --
      Prepaid expenses             84,118          35,500
                                 --------        --------
                                 $132,618        $ 41,515
                                 ========        ========

NOTE 3. INCOME (LOSS) PER SHARE

                                        For the three months ended March 31,
                                              2005               2004

      Basic
      Numerator:
       Net (loss) income                  $  (123,601)        $   524,295
                                          -----------         -----------
       Numerator for basic
        loss) income per share            $  (123,601)        $   524,295
                                          ===========         ===========

      Denominator:
       Weighted average common
        shares                              6,410,187           6,056,928
                                          -----------         -----------
       Denominator for basic
        (loss) income per share             6,410,187           6,056,928
                                          ===========         ===========
       Basic (loss) income per
        share                             $     (0.02)        $      0.09

       Fully Diluted Numerator:
        Net (loss) income                 $  (123,601)        $   524,295
                                          -----------         -----------
       Numerator for fully diluted
        (loss) income per share           $  (123,601)        $   524,295
                                          ===========         ===========
       Denominator:
        Weighted average common
         shares                             6,410,187           6,056,928
        Common stock equivalents                   --             138,718
                                          -----------         -----------
        Denominator for fully
         diluted (loss) income
         per share                          6,410,187           6,195,646
                                          ===========         ===========
        Fully diluted (loss)
         income per share                 $     (0.02)        $      0.08


                                      F-29


                         ULTRADATA SYSTEMS, INCORPORATED
       NOTES TO CONDENSED FINANCIAL STATEMENTS MARCH 31, 2005 (UNAUDITED)

NOTE 4. NOTE PAYABLE

On February 17, 2005  Ultradata  entered into a  Securities  Purchase  Agreement
dated February 14, 2005 with Golden Gate Investors,  Inc., which was modified by
an Addendum  dated  February  17,  2005.  Ultradata  sold to Golden Gate a 43/4%
Convertible Debenture and Warrants to Purchase Shares of Common Stock, all for a
purchase  price of $300,000.  The Company  received  proceeds of $100,000 of the
purchase  price,  except  that  $50,000  of that sum is being held in escrow for
payment of the costs of preparing and filing a registration  statement that will
permit  Golden  Gate to make a  public  resale  of the  shares  into  which  the
Debenture  is  convertible  and  for  which  the  Warrant  is  exercisable  (the
"Registration  Statement").  As a result  of the  beneficial  conversion  of the
debenture,  the Company has  allocated  $100,000  of the  debenture  proceeds to
additional paid-in capital and recorded a discount of $100,000. The remainder of
the  purchase  price is payable  when the  Securities  and  Exchange  Commission
declares the Registration Statement effective.

Interest  that  accrues on the  Debenture,  at 43/4% per annum,  will be payable
monthly.  The  principal  amount of the Debenture is payable in full on February
14, 2007.  However,  the holder of the  Debenture has agreed that, in each month
after the Securities and Exchange Commission declares the Registration Statement
effective,  the  holder  will  convert  at least 3% of the  face  amount  of the
debenture into common stock. Similarly, the holder of the Warrant is required to
purchase  at least 3% of the shares  subject to the  Warrant in each month after
the  Securities  and Exchange  Commission  declares the  Registration  Statement
effective.

The  conversion  provisions of the Debenture and the exercise  provisions of the
Warrant are  correlated so that the Debenture  will be converted and the Warrant
exercised  in like  proportions.  The  result  is that in any month in which the
holder  converts the 3% minimum it will also  exercise the 3% minimum  under the
Warrant,  which will result in it purchasing  common stock for $99,000  ($90,000
paid in cash and $9,000 of the  Debenture  principal  converted).  The number of
shares  that will be  purchased  will equal the  purchase  price  divided by the
lesser  of (a)  $1.25  or (b) 80% of the  average  of the  three  lowest  volume
weighted  average prices during the twenty  trading days  preceding  conversion/
exercise.  In total, the conversion of the Debenture and exercise of the Warrant
will  result  in  Golden  Gate  purchasing  Ultradata  common  stock  for  up to
$3,300,000  ($3,000,000  paid in cash and  $300,000 of the  Debenture  principal
converted)  during the period  between the  effective  date of the  Registration
Statement and February 14, 2007.

There are four conditions  that may reduce the aggregate  purchase price paid by
Golden Gate below $3,300,000:

1. If Golden Gate only converts the 3% minimum per month,  the February 14, 2007
payment date for the Debenture  will occur before full  conversion  and exercise
have occurred.

2. The conversion and exercise  provisions of the securities  provide that at no
time  may  Golden  Gate  acquire  ownership  of more  that  9.9% of  Ultradata's
outstanding common stock.

3. If at the time of a  conversion/exercise,  the conversion price would be less
than $.40,  then either (a)  Ultradata may opt to redeem the amount of principal
that the holder  presents for  conversion  at 125% of face value,  or (b) if the
conversion/exercise  date is later than November 11, 2005,  the holder may elect
to convert up to $100,000  of the  Debenture  without  exercising  the  Warrant,
either of which events would reduce the aggregate  purchases under the Debenture
and Warrant by 900% of the amount  redeemed by Ultradata  or  converted  without
exercise.

4. When the principal  amount of the Debenture falls below  $100,000,  Ultradata
may redeem the  remaining  principal  for its face  value.  In that  event,  the
aggregate purchase price paid by Golden Gate for Ultradata common stock would be
only $2,200,000.

During the three months ended March 31, 2005,  the Company  amortized  $6,164 of
the note payable discount.

               Note payable - face            $100,000
               Note payable - discount          93,854
                                              --------
                                              $  6,164
                                              ========



                                      F-30



                         ULTRADATA SYSTEMS, INCORPORATED
       NOTES TO CONDENSED FINANCIAL STATEMENTS MARCH 31, 2005 (UNAUDITED)

NOTE 5. GOING CONCERN

As reflected in the accompanying  financial statements,  a major customer of the
Company  has  experienced  deteriorating  operations  during 2004 and during the
second quarter of 2004 ceased ordering products from the Company.  This customer
accounted  55.4% of sales during 2004.  In addition the Company  terminated  its
agreements  with  AAA for the  sale of its  products  using  the AAA logo to AAA
retail locations.  Although Management has a plan in place to replace these lost
customers, it is not yet clear that the plan will be successful.  The ability of
the Company to continue as a going concern is dependent on the Company's ability
to further implement its business plan, raise capital and generate revenues. The
financial  statements do not include any adjustments  that might be necessary if
the Company is unable to continue as a going concern.

The  Company  has  continued  its  product  design  and  development  efforts to
introduce  new  products in 2005 and expects to  introduce  its Road  GenieTM in
2005.  Based on the success of the Talking  Road Whiz with direct TV  marketing,
the Company is proceeding  with plans to market Road GenieTM by means of similar
commercials,  with the Company marketing directly to consumers. This new product
represents an increase in  technology  compared to the Talking Road Whiz and, in
addition,  can be enhanced to include a digital  voice  recorder for  additional
value to the  customer.  The Company is also  opening a new source of revenue by
developing  the  cell-phone  Road Whiz  application.  Thus,  the Company has two
different methods in work to enhance sales revenue. In addition, the Company has
obtained a loan and a commitment  for  additional  equity capital for up to $3.3
million (see Note 4). Management believes that actions presently taken to obtain
additional  funding  provide  the  opportunity  for the Company to continue as a
going concern.

NOTE 6. SETTLEMENT OF OFFICE MAX RECEIVABLE

On April 20, 2005 Office Max settled suit filed against them for the full amount
of the  disputed  receivable  without  interest.  The  first-quarter  financials
reflect the reversal of the bad-debt  expense of $176,475  recorded in 2004 when
collection was uncertain.



                                      F-31


                                     PART II

                     INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

      Our Articles of  Incorporation  limit, to the maximum extent  permitted by
Delaware  law, the personal  liability  of  directors  for monetary  damages for
breach of their  fiduciary  duties as a director.  Our Bylaws  provided  that we
shall  indemnify  our officers and directors and may indemnify our employees and
other agents to the fullest extent permitted by Delaware law.

      Section  145 of the  Delaware  General  Corporation  Law  provides  that a
corporation may indemnify a director, officer, employee or agent made a party to
an action by reason of that fact that he or she was a director, officer employee
or agent of the  corporation  or was serving at the  request of the  corporation
against  expenses  actually and reasonably  incurred by him or her in connection
with  such  action  if he or she  acted in good  faith and in a manner he or she
reasonably  believed  to be in, or not  opposed  to, the best  interests  of the
corporation and with respect to any criminal action,  had no reasonable cause to
believe his or her conduct was unlawful.

      Insofar as  indemnification  for liabilities  arising under the Securities
Act may be permitted to directors,  officers or persons  controlling us pursuant
to the  foregoing  provisions,  we have been  advised that in the opinion of the
Commission,  such  indemnification  is against public policy as expressed in the
Securities Act and is, therefore, unenforceable.

ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

      The following  table sets forth an itemization of all estimated  expenses,
all of which we will pay, in connection  with the issuance and  distribution  of
the securities being registered:

NATURE OF EXPENSE AMOUNT

      SEC Registration fee                             $   262.47
      Accounting fees and expenses                      20,000.00*
      Legal fees and expenses                           35,000.00*
      Miscellaneous                                      5,000.00
                                                       ----------
                                          TOTAL        $60,262.47*
                                                       ==========

* Estimated.


                                      II-1


ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.

      During the first quarter of 2003 the Company sold, in a private  offering,
12% promissory  notes in the principal  amount of $165,000 and 320,000 shares of
common stock.  The securities were sold in units,  each consisting of two shares
of common stock and a $1.00 note.  The aggregate  purchase price received by the
Company  was  $168,200.  The  securities  were  sold to 12  individuals  who are
accredited investors.  There was no underwriter.  The offering was made pursuant
to the exemption  from  registration  afforded by Section 4(6) of the Securities
Act of 1933 and SEC Rule 506.

      On July 31,  2003,  the Company  sold  150,000  shares of common  stock to
eleven  individuals who hold promissory notes issued by the Company.  The shares
were sold for $.01 per share and the agreement of the note holders to extend the
maturity date of their notes from July 31, 2003 to October 31, 2003.  The shares
were sold in reliance on Section  4(2) and Section 4(6) of the  Securities  Act,
since  the  note  holders  were  accredited  investors  and the  offer  was made
privately to them.

      From January 2004 through June 2004 the Company  employees  and  directors
exercised a total of 129,441 stock  options for 129,441  shares of common stock.
The shares were sold for $9,061 cash,  upon the  exercise of options  previously
granted to the  individuals.  The sales were exempt  pursuant to Section 4(2) of
the Act  since  the sales  were not made in a public  offering  and were made to
individuals  who had access to  detailed  information  about the Company and who
were acquiring the shares for their own accounts. There were no underwriters.

      To obtain funding for our ongoing operations, we entered into a Securities
Purchase Agreement with an accredited investor on February 14, 2005, and amended
on February 17, 2005, for the sale of (i) $300,000 in convertible debentures and
(ii) warrants to buy 300,000 shares of our common stock. This prospectus relates
to the resale of the common stock  underlying these  convertible  debentures and
warrants.

      The investors are obligated to provide us with an aggregate of $300,000 as
follows:

            o     $100,000 was disbursed to us on February 14, 2005;
            o     $50,000 has been retained for services provided to our company
                  by  various  professionals,  which  shall  be  disbursed  upon
                  effectiveness of this registration statement; and
            o     $150,000   will  be  released  upon   effectiveness   of  this
                  registration statement.


      The debentures bear interest at 4 3/4%,  mature two years from the date of
issuance,   and  are   convertible   into  our  common  stock,  at  the  selling
stockholder's option. The convertible debentures are convertible into the number
of our shares of common stock equal to the  principal  amount of the  debentures
being  converted  multiplied  by 11,  less the product of the  conversion  price
multiplied by the dollar amount of the debenture;  and the product thereof shall
be divided by the conversion  price.  The conversion  price for the  convertible
debenture  is the  lesser  of (i)  $1.25 or (ii)  eighty  percent  of the of the
average of the three lowest  volume  weighted  average  prices during the twenty
(20) trading days prior to the conversion.  If the volume weighted average price
is below $0.50 on a conversion  date, we have the right to pre-pay the amount of
the debenture the holder elects to convert, plus accrued and unpaid interest, at
125% of such  amount;  however,  if we elect to pre-pay in this  situation,  the
debenture  holder has the right to withdraw the notice of  conversion.  Also, if
the volume  weighted  average  price is below $0.50 at any point during a month,
the holder is not obligated to convert any portion of the debenture  during that
month. Accordingly, there is in fact no limit on the number of shares into which
the  debenture  may be  converted.  In  addition,  the  selling  stockholder  is
obligated  to  exercise  the  warrant  concurrently  with  the  submission  of a
conversion  notice by the selling  stockholder.  The warrant is exercisable into
300,000 shares of common stock at an exercise price of $10.00 per share.


      The selling  stockholder has contractually  agreed to restrict its ability
to convert or exercise its warrants and receive  shares of our common stock such
that the  number of shares of  common  stock  held by them and their  affiliates
after such  conversion  or exercise does not exceed 9.99% of the then issued and
outstanding  shares of common stock.  See the "Selling  Stockholders"  and "Risk
Factors" sections for a complete description of the convertible debentures.


                                      II-2


      In the event that the registration  statement is not declared effective by
the required deadline, Golden Gate may demand repayment of the debenture of 150%
of the face amount outstanding,  plus all accrued and unpaid interest,  in cash.
If the repayment is  accelerated,  we are also obligated to issue to Golden Gate
50,000  shares of common  stock and $15,000  for each 30 day period,  or portion
thereof,  during  which the face amount,  including  interest  thereon,  remains
unpaid.  If Golden  Gate  does not elect to  accelerate  the  debenture,  we are
required to  immediately  issue to Golden Gate 50,000 shares of common stock and
$15,000  for each 30 day  period,  or  portion  thereof,  during  which the face
amount, including interest thereon, remains unpaid.


      * All of the above offerings and sales were deemed to be exempt under rule
506 of Regulation D and Section 4(2) of the  Securities Act of 1933, as amended.
No advertising or general  solicitation was employed in offering the securities.
The  offerings and sales were made to a limited  number of persons,  all of whom
were  accredited  investors,  business  associates  of  Ultradata  or  executive
officers of  Ultradata,  and transfer was  restricted by Ultradata in accordance
with  the   requirements   of  the  Securities  Act  of  1933.  In  addition  to
representations  by the  above-referenced  persons,  we  have  made  independent
determinations  that all of the  above-referenced  persons  were  accredited  or
sophisticated  investors, and that they were capable of analyzing the merits and
risks of their  investment,  and that they understood the speculative  nature of
their investment. Furthermore, all of the above-referenced persons were provided
with access to our Securities and Exchange Commission filings.


      Except as expressly set forth above,  the individuals and entities to whom
we issued securities as indicated in this section of the registration  statement
are unaffiliated with the Company.


                                      II-3


      ITEM 27. EXHIBITS.

      The following exhibits are included as part of this Form SB-2.  References
to "the Company" in this Exhibit List mean Ultradata  Systems,  Incorporated,  a
Delaware corporation.

Exhibit #         Exhibit Name
---------         ------------

3.1               Certificate  of  Incorporation,  filed  as an  exhibit  to the
                  registration  statement on Form SB-2 (33-85218) filed with the
                  Commission and incorporated herein by reference. -

3.2               Certification  of Correction of Certificate of  Incorporation,
                  filed as an exhibit to the registration statement on Form SB-2
                  (33-85218) filed with the Commission and  incorporated  herein
                  by reference.

3.3               Amendment  to the  Certificate  of  Incorporation,  dated [ ],
                  1989,  filed as an exhibit to the  registration  statement  on
                  Form  SB-2   (33-85218)   filed   with  the   Commission   and
                  incorporated herein by reference.

3.4               Amendment to the Certificate of Incorporation,  dated March 4,
                  1991,  filed as an exhibit to the  registration  statement  on
                  Form  SB-2   (33-85218)   filed   with  the   Commission   and
                  incorporated herein by reference.

3.5               Amendment to the Certificate of Incorporation, dated March 22,
                  1994,  filed as an exhibit to the  registration  statement  on
                  Form  SB-2   (33-85218)   filed   with  the   Commission   and
                  incorporated herein by reference.

3.6               Amendment to the Certificate of Incorporation,  dated November
                  18, 1994, filed as an exhibit to the registration statement on
                  Form  SB-2   (33-85218)   filed   with  the   Commission   and
                  incorporated herein by reference.

3.7               Amendment to the Certificate of Incorporation,  dated July 26,
                  1996,  filed as an exhibit to the annual report on Form 10-KSB
                  filed with the  Commission  on April 1, 1998 and  incorporated
                  herein by reference.

3.8               By-laws,  filed as an exhibit to the registration statement on
                  Form  SB-2   (33-85218)   filed   with  the   Commission   and
                  incorporated herein by reference.

4.1               Specimen of Common Stock  Certificate,  filed as an exhibit to
                  the registration  statement on Form SB-2 (33-85218) filed with
                  the Commission and incorporated herein by reference.

4.2               Securities  Purchase Agreement dated February 14, 2005 entered
                  between the Company and Golden Gate Investors,  Inc., filed as
                  an  exhibit to the  current  report on Form 8-K filed with the
                  Commission  on February  22, 2005 and  incorporated  herein by
                  reference.

4.3               Securities  Purchase Agreement dated February 14, 2005 entered
                  between the Company and Golden Gate Investors,  Inc., filed as
                  an  exhibit to the  current  report on Form 8-K filed with the
                  Commission  on February  22, 2005 and  incorporated  herein by
                  reference.

4.4               Convertible  Debenture dated February 2005 entered between the
                  Company and Golden Gate Investors,  Inc.,  filed as an exhibit
                  to the current report on Form 8-K filed with the Commission on
                  February 22, 2005 and incorporated herein by reference.

4.5               Warrant to Purchase Common Stock dated February 2005 issued to
                  Golden  Gate  Investors,  Inc.,  filed  as an  exhibit  to the
                  current  report  on Form  8-K  filed  with the  Commission  on
                  February 22, 2005 and incorporated herein by reference.


                                      II-4


4.6               Registration  Rights  Agreement  dated  February  2005 entered
                  between Golden Gate Investors,  Inc. and the Company, filed as
                  an  exhibit to the  current  report on Form 8-K filed with the
                  Commission  on February  22, 2005 and  incorporated  herein by
                  reference.


5.1               Sichenzia Ross Friedman Ference LLP Opinion and Consent, filed
                  as an exhibit to the registration statement on Form SB-2 filed
                  with the Commission on May 12, 2005 and incorporated herein by
                  reference.


10.1              Lease dated May 23, 1990, as amended on November 31, 1993, for
                  premises  at  9375  Dielman   Industrial   Drive,  St.  Louis,
                  Missouri, filed as an exhibit to the registration statement on
                  Form  SB-2   (33-85218)   filed   with  the   Commission   and
                  incorporated herein by reference.

10.2              Lease  Addendum  dated October 17, 1995,  for premises at 9375
                  Dielman  Industrial  Drive, St. Louis,  Missouri,  filed as an
                  exhibit to the registration  statement on Form SB-2 (33-85218)
                  filed  with  the   Commission  and   incorporated   herein  by
                  reference.

10.3              Lease   Addendum  dated  October  5,  2001,  for  premises  at
                  1240-1244 Dielman Industrial Court, St. Louis, Missouri, filed
                  as an exhibit to the Company's Quarterly Report on Form 10-QSB
                  filed  with the  Commission  on May 9,  2002 and  incorporated
                  herein by reference.

10.4              1994  Stock   Option   Plan,   filed  as  an  exhibit  to  the
                  registration  statement on Form SB-2 (33-85218) filed with the
                  Commission and incorporated herein by reference.

10.5              Amended  and  Restated  1996 Stock  Option  Plan,  filed as an
                  exhibit to the  registration  statement on Form S-8 filed with
                  the  Commission on March 10, 2000 and  incorporated  herein by
                  reference.

10.6              Employment  Agreement with Monte Ross,  filed as an exhibit to
                  the registration  statement on Form SB-2 (33-85218) filed with
                  the Commission and incorporated herein by reference.

10.7              Extended  Employment  Agreement  between the Company and Monte
                  Ross,  filed as an exhibit to the annual report on Form 10-KSB
                  filed with the  Commission  on April 1, 1998 and  incorporated
                  herein by reference.

10.8              Employment  Agreement  with  Mark  L.  Peterson,  filed  as an
                  exhibit to the registration  statement on Form SB-2 (33-85218)
                  filed  with  the   Commission  and   incorporated   herein  by
                  reference.

10.9              Extended Employment  Agreement between the Company and Mark L.
                  Peterson,  filed as an exhibit  to the  annual  report on Form
                  10-KSB  filed  with  the  Commission  on  April  1,  1998  and
                  incorporated herein by reference.

10.10             Employment  Agreement with Ernest Clarke,  filed as an exhibit
                  to the  registration  statement on Form SB-2 (33-85218)  filed
                  with the Commission and incorporated herein by reference.

10.11             Extended  Employment  Agreement between the Company and Ernest
                  Clarke,  filed as an  exhibit  to the  annual  report  on Form
                  10-KSB  filed  with  the  Commission  on  April  1,  1998  and
                  incorporated herein by reference.

10.12             Royalty  Agreement  dated  September  14,  1989,  between  the
                  Company  and  Leonard  Missler,  filed  as an  exhibit  to the
                  registration  statement on Form SB-2 (33-85218) filed with the
                  Commission and incorporated herein by reference.

10.13             Modification  Agreement  dated  November  4, 1995,  to Royalty
                  Agreement  dated  September 14, 1989,  between the Company and
                  Leonard  Missler,  filed  as an  exhibit  to the  registration
                  statement on Form SB-2  (33-85218)  filed with the  Commission
                  and incorporated herein by reference.

10.14             Option Agreement between the Company and Influence  Incubator,
                  L.L.C.  dated  May  30,  2000 -  filed  as an  exhibit  to the
                  Company's  Current  Report on Form 8-K dated May 30,  2000 and
                  incorporated herein by reference.


                                      II-5


23.1              Consent of Webb & Company, P.A., Independent Registered Public
                  Accounting Firm

23.2              Consent of legal counsel (see Exhibit 5.1)

ITEM 28. UNDERTAKINGS.

The undersigned registrant hereby undertakes to:

(1) File,  during  any  period  in which  offers  or sales  are  being  made,  a
post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the "Securities Act");

(ii)  Reflect  in the  prospectus  any facts or events  which,  individually  or
together,  represent a fundamental change in the information in the registration
statement.  Notwithstanding the foregoing, any increase or decrease in volume of
securities  offered (if the total dollar value of the  securities  offered would
not exceed that which was registered) and any deviation from the low or high end
of the  estimated  maximum  offering  range  may be  reflected  in the  form  of
prospectus  filed  with  the  Commission  pursuant  to  Rule  424(b)  under  the
Securities Act if, in the aggregate,  the changes in volume and price  represent
no more than a 20% change in the maximum  aggregate  offering price set forth in
the  "Calculation  of  Registration  Fee"  table in the  effective  registration
statement, and

(iii) Include any  additional  or changed  material  information  on the plan of
distribution.

(2)  For   determining   liability   under  the   Securities   Act,  treat  each
post-effective  amendment  as a new  registration  statement  of the  securities
offered,  and the offering of the securities at that time to be the initial bona
fide offering.

(3) File a  post-effective  amendment  to remove  from  registration  any of the
securities that remain unsold at the end of the offering.

(4) For purposes of determining  any liability  under the Securities  Act, treat
the  information  omitted  from  the  form of  prospectus  filed as part of this
registration  statement  in reliance  upon Rule 430A and  contained in a form of
prospectus  filed by the registrant  pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act as part of this  registration  statement as of the time
it was declared effective.

(5)  For  determining  any  liability  under  the  Securities  Act,  treat  each
post-effective   amendment   that  contains  a  form  of  prospectus  as  a  new
registration statement for the securities offered in the registration statement,
and that  offering  of the  securities  at that  time as the  initial  bona fide
offering of those securities.

      Insofar as  indemnification  for liabilities  arising under the Securities
Act may be  permitted to  directors,  officers  and  controlling  persons of the
registrant pursuant to the foregoing  provisions,  or otherwise,  the registrant
has been advised that in the opinion of the Securities  and Exchange  Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable.

      In the event that a claim for  indemnification  against  such  liabilities
(other than the  payment by the  registrant  of  expenses  incurred or paid by a
director,  officer or  controlling  person of the  registrant in the  successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling  person in connection with the securities being  registered,  the
registrant  will,  unless in the  opinion  of its  counsel  the  matter has been
settled by controlling precedent,  submit to a court of appropriate jurisdiction
the question  whether such  indemnification  by it is against  public  policy as
expressed in the Securities  Act and will be governed by the final  adjudication
of such issue.


                                      II-6


                                   SIGNATURES


      In accordance  with the  requirements  of the  Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the  requirements  of filing on Form SB-2 and  authorizes  this  registration
statement  to be signed on its  behalf  by the  undersigned,  in the City of St.
Louis, State of Missouri, on June 3, 2005.


                        ULTRADATA SYSTEMS, INCORPORATED

                By: /s/ MONTE ROSS
                    ---------------------------------------

                    Monte Ross, Chief Executive Officer (Principal Executive
                    Officer) and Director


                By: /s/ ERNEST CLARKE
                    ---------------------------------------

                    Ernest Clarke, President, Chief Financial Officer
                    (Principal Financial Officer and Principal Accounting
                    Officer) and Director


      In accordance  with the  requirements  of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.



SIGNATURE                                   TITLE                                                DATE
                                                                                           


/s/ MONTE ROSS                              Chief Executive Officer and Director                 June 3, 2005

--------------------------------
    Monte Ross


/s/ ERNEST CLARKE                           President, Chief Financial Officer                   June 3, 2005
--------------------------------            and Director

    Ernest Clarke


/s/ MARK L. PETERSON                        Vice President - Engineering, Secretary              June 3, 2005
--------------------------------            and Director

    Mark L. Peterson


/s/ DONALD RATTNER                          Director                                             June 3, 2005

--------------------------------
    Donald Rattner


/s/ H. KROLLFEIFER, JR.                     Director                                             June 3, 2005

--------------------------------
    H. Krollfeifer, Jr.


/s/ MATTHEW KLAPMAN                         Director                                             June 3, 2005

--------------------------------
    Matthrew Klapman



                                      II-7