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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2003
OR
o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

     For the transition period from                 to                

Commission file number 000-31511

AT ROAD, INC.
(Exact name of registrant as specified in its charter)

47200 Bayside Parkway
Fremont, CA 94538
(Address of principal executive offices, including zip code)

510-668-1638
(Registrant’s telephone number, including area code)

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes x No o

     As of May 2, 2003 there were 48,055,125 shares of the registrant’s Common Stock outstanding.

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INDEX

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At Road, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and par value amounts)
(unaudited)

See notes to condensed consolidated financial statements.

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At Road, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(unaudited)

See notes to condensed consolidated financial statements.

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At Road, Inc.
Condensed Consolidated Statements of Stockholders’
Equity
For the three months ended March 31, 2003 and 2002
and the nine months ended December 31, 2002
(In thousands, except share amounts)
(unaudited)

     Total comprehensive loss for the three months ended March 31, 2003, and 2002 and the nine months ended December 31, 2002 is equal to the net loss in each respective period.

See notes to condensed consolidated financial statements.

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At Road, Inc.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(unaudited)

See notes to condensed consolidated financial statements.

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Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 1 — Basis of Presentation

     The accompanying condensed consolidated financial statements were prepared by At Road, Inc., without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures which are made are adequate to make the information presented not misleading. In the opinion of management, the financial statements include all adjustments necessary to fairly present the financial condition, results of operations, and cash flows for such periods. Results of operations for the periods presented are not necessarily indicative of results for any other interim period or for the full year. These financial statements should be read in conjunction with the Company’s consolidated and audited financial statements and notes thereto in its Form 10-K (No. 000-31511), filed on March 31, 2003 with the SEC.

     Certain reclassifications have been made to the 2002 financial statements to conform to the 2003 presentation. These reclassifications had no effect on net loss or stockholders’ equity.

Note 2 — Basic and Diluted Net Loss Per Share

     Basic and diluted net loss per share is computed by dividing the loss attributable to common stockholders by the weighted average number of shares of common stock outstanding for the period (excluding shares subject to repurchase). Diluted loss per common share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock. Common share equivalents are excluded from the computation in loss periods, as their effect would be antidilutive.

     The following is a reconciliation of the denominators used in calculating basic and diluted net loss per share (in thousands):

     The total number of options and restricted stock subject to repurchase excluded from the diluted net loss per share computation for the three months ended March 31, 2003 and 2002 were as follows (in thousands):

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Note 3 — Balance Sheet Items

     Inventories consist of raw materials, work in process and finished goods, and are stated at the lower of cost (average cost) or market and consist of the following (in thousands):

     Deferred product costs and other current assets consist of the following (in thousands):

     Deferred product costs, intangibles, and other assets consist of the following (in thousands):

     Deferred revenue and customer deposits consist of the following (in thousands):

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Note 4 — Stock-Based Awards

     The Company accounts for stock-based awards to employees using the intrinsic value method in accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for Stock Issued to Employees, and its related interpretations. Accordingly, no compensation expense has been recognized in the financial statements for employee stock arrangements granted at fair market value.

     The Company accounts for equity instruments issued to non-employees in accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation, and Emerging Issues Task Force (EITF) Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services, which requires that the fair value of such instruments be recognized as an expense over the period in which the related services are received.

     SFAS No. 123 requires the disclosure of pro forma net income or loss had the Company adopted the fair value method. Under SFAS No. 123, the fair value of stock-based awards to employees is calculated through the use of option pricing models, even though such models were developed to estimate the fair value of freely tradable, fully transferable options without vesting restrictions, which significantly differ from the Company’s stock option awards. These models also require subjective assumptions, including expected time to exercise, which greatly affect the calculated values. The Company’s calculations are based on a single option valuation approach, and forfeitures are recognized as they occur. The Company used the following weighted average assumptions:

     If the computed minimum values of the Company’s stock-based awards to employees had been amortized to expense over the vesting period of the awards as specified under SFAS No. 123, loss attributable to common stockholders and basic and diluted loss per share on a pro forma basis (as compared to such items as reported) would have been (in thousands, except per share amounts):

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Notes 5 — Intangible Assets

     On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets. As the Company does not have any goodwill, only specifically identifiable intangible assets are assessed.

     In October 2002, the Company completed the acquisition of an additional $83,000 of purchased technology. This intangible asset is being amortized on a straight-line basis over an estimated useful life of two years.

     Information regarding the Company’s intangible assets is as follows (in thousands):

     For the three months ended March 31, 2003 and 2002, amortization of purchased technology was $424,000 and $414,000, respectively. As of March 31, 2003, the estimated amortization is as follows:

Note 6 — Segment Reporting

     In the three months ended March 31, 2003 and 2002, the Company operated in a single reportable segment. The Company plans to evaluate additional segment disclosure requirements as it expands its operations. The Company had no significant revenues from customers outside of the United States in the three months ended March 31, 2003 and 2002 and had no significant long-lived assets deployed outside the United States at March 31, 2003.

Note 7 — Recently Issued Accounting Pronouncements

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     In November 2002, the FASB issued FASB Interpretation No. 45 (“FIN 45”), Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others. FIN 45 requires that upon issuance of a guarantee, the guarantor must recognize a liability for the fair value of the obligation it assumes under that guarantee. The initial recognition and measurement provisions of FIN 45 apply on a prospective basis to guarantees issued or modified after December 31, 2002. The Company adopted the disclosure requirements of FIN 45 effective December 31, 2002. As the Company did not have any material guarantees outstanding, the issuance of FIN 45 did not have an effect on the Company’s financial statements.

     In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, which amends FASB Statement No. 123, Accounting for Stock-Based Compensation. SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to require prominent disclosure about the effects on reported net income of an entity’s accounting policy decision with respect to stock-based employee compensation, and requires disclosure about those effects in both annual and interim financial statements. SFAS No. 148 is effective for fiscal years ending after December 15, 2002. The Company does not expect to change to using the fair value based method of accounting for stock-based employee compensation; therefore, adoption of SFAS No. 148 is not expected to have an impact on the financial position, results of operations or cash flows of the Company.

Footnote 8 — Contingencies

     In the third quarter of 2002, AT&T Wireless announced that it expects to cease operating its Cellular Digital Packet Data network by June 30, 2004. The Company is currently in discussions with AT&T Wireless and other wireless carriers to minimize any disruption of the provision of its services to subscribers. On or about the actual termination date of AT&T Wireless’ Cellular Digital Packet Data network and where possible, certain affected subscribers would be transferred to alternate Cellular Digital Packet Data networks without a change to the hardware platform then used by those subscribers. However, the Company estimates that as of June 30, 2004 the Company will have 12,000 subscribers in their initial contract periods that are then using AT&T Wireless’ Cellular Digital Packet Data network and that would need to use an alternate wireless protocol to continue to use its services. To use an alternate wireless protocol, existing hardware platforms would have to be replaced for these subscribers. The Company does not expect to realize a loss on the sale of these replacement hardware platforms. While there is no assurance, the Company does not expect that the termination of AT&T Wireless’ Cellular Digital Packet Data network will have a material adverse impact on its financial results.

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.

     Except for the historical information contained herein, the matters discussed in this Form 10-Q are forward-looking statements involving risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. Potential risks and uncertainties include, but are not limited to, general economic and political conditions, our historical and future losses, limited operating history, the infancy of the wireless data industry where there is no established market for our products and services, our ability to adapt to rapid technological change and our dependence on wireless networks, network infrastructure and positioning systems owned and controlled by others. Further information regarding these and other risks is included in this Form 10-Q, in our annual report on Form 10-K

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(No. 000-31511), dated March 31, 2003 and in our other filings with the SEC. You should read the following description of our financial condition and results of operations in conjunction with our financial statements and notes thereto included in this Form 10-Q, in our Form 10-K for the year ended December 31, 2002 and in our other filings with the SEC.

Overview

     We integrate Global Positioning System technology, wireless communications, transaction processing, software applications and the Internet to enable companies to efficiently manage their mobile workers with location-relevant and time-sensitive information. Our services are designed to be easy-to-use, cost-effective, Internet-based tools for mobile resource management that provide location, reporting, dispatch, messaging, and other management services. Our services allow customers to use our website to manage the activities of their employees, vehicles, and goods and services, and provide for two-way communications between our customers and their mobile workers. Our services also allow customers to conduct business operations, such as event confirmation, signature verification, forms processing, project management and timekeeping while their workers are in the field. We believe our services provide significant value to our customers by decreasing the costs and increasing the efficiency of their operations.

     From July 1996 through June 1998, our operations consisted primarily of various start-up activities relating to our current business, including development of Global Positioning System technologies, recruiting personnel and raising capital. We did not recognize any revenues prior to June 1998, and our expenses consisted of research and development, sales and marketing and general and administrative expenses. In 1998, we expanded our strategy and redirected our focus to provide location-relevant and time-sensitive information services and solutions to companies managing mobile resources. In the second half of 1998, we introduced FleetASAP, now called GeoManager, a service that leverages existing infrastructure, including the Global Positioning System, wireless networks and the Internet along with integrated transaction processing and software applications, to enable companies to efficiently manage their mobile resources. Subsequent to the introduction of FleetASAP, we have introduced a number of additional services and features to our services, including two-way communications, MobileForms, ConnectBusiness and DirectData.

     Our services provide information to our customers in one or more of the following ways. First, a customer can use any Internet-connected computer to access our secure website, www.road.com. Second, a customer can use a wireline or wireless telephone to access our speech-to-text voice portal. The website and voice portal are connected to our Wireless Applications Processing Center, a network of secure servers, which receives, processes and stores data as well as serves data to our customers. Third, a customer can use our DirectData service, which streams pre-processed data from our Wireless Applications Processing Center directly to the customer’s legacy software applications. A customer can then execute collaborative processing, which is the combination of data provided by our services and data provided by the customer’s legacy software applications yielding an enhanced set of data. Fourth, a customer can configure certain third-party software applications, such as dispatching software, to access and obtain requested data from our Wireless Applications Processing Center using application programming interfaces.

     The information technology infrastructure and network application software used to provide our

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services reside at our Wireless Applications Processing Center. Accordingly, our customers do not need to make a substantial investment in acquiring and supporting capital equipment, such as hardware, software and data networking equipment, to use our services.

     Our services are enabled by the deployment of a platform to the customer’s mobile worker. Our services operate with three independent platforms. First, a mobile worker can use our proprietary hardware device embedded with software and which integrates a Global Positioning System receiver with a wireless modem. Second, a mobile worker can use our proprietary hardware device embedded with software and an integrated Global Positioning System receiver and which is tethered by cable to a wireless telephone. Each of these proprietary hardware devices is called an Internet Location Manager. The Internet Location Manager is installed in a mobile worker’s vehicle. Generally, the vehicle can be of any type. Installation typically takes less than an hour, and is completed by our subcontracted installation agents. Third, a mobile worker can use a location- or wireless application protocol-enabled mobile telephone embedded with our software application.

     These platforms receive signals from Global Positioning System satellites to determine location, velocity and time. From time to time, the platform also collects other information, such as operational diagnostics. These data are transmitted to our Wireless Applications Processing Center using wireless networks and the Internet. If a wireless connection is not available, then the platform will store up to five days of captured data and seek to transmit the data when a wireless connection is available. To use services such as two-way communications, MobileForms and ConnectBusiness, customers can provide mobile workers a ruggedized personal digital assistant or our Internet Data Terminal, which are connected to the Internet Location Manager, or, alternatively with some of our services, a wireless application protocol-enabled mobile telephone.

     Since 1998, we have derived substantially all of our revenues from the sale of our services and the associated product hardware. Our service revenue is composed of monthly fees. Our customers can contract to receive our services for terms of one, two or three years and can purchase enhanced service features for additional fees. As more customers use our services, the impact on our service revenue is compounded. Our product revenue consists of sales of the Internet Location Manager, Internet Data Terminal and ruggedized personal digital assistant.

     We recognize revenue when earned in accordance with applicable accounting standards including American Institute of Certified Public Accountants (“AICPA”) Statement of Position (“SOP”) No. 97-2, Software Revenue Recognition, as amended. Through March 31, 2003, our services have been available only by using our platforms or a location- or wireless application protocol-enabled mobile telephone. Accordingly, service revenue is recognized ratably over the minimum service contract period, which commences upon the installation of the platform. We defer product revenue from our platform at installation and recognize it ratably over the minimum service contract period. Product costs, not in excess of related product revenue, are deferred at the time of shipment and amortized ratably over the minimum service contract period. Where the selling prices of our products are below our costs, we expense the difference at the time of shipment of the related products. Allowances for sales returns are recorded at the time product revenue is recognized.

     To date, we have not sold our services outside the U.S. and Canada; however, we intend to expand our service offerings to additional countries in the future. We do not expect that revenues from

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international sales will be material in 2003.

     We will incur stock compensation expense in current and future periods, which represents non-cash charges incurred as a result of the issuance of stock options to employees and consultants. The charge related to options granted to employees is recorded based on the difference between the deemed fair value of the common stock and the option exercise price of such options at the date of grant, which is amortized over the option-vesting period. The charge related to options granted to consultants is calculated at the end of each reporting period using the Black-Scholes model, which approximates fair value and is amortized based on the term of the consulting agreement or service period. The amount of the charge for options granted to consultants in each period can fluctuate depending on our stock price and volatility. At March 31, 2003, deferred stock compensation expense was $294,000, which will be amortized in future periods.

     Since inception we have invested substantially in research and development, marketing, the building of our sales channels and our overall infrastructure. We anticipate that such investments may increase in the future. We have incurred losses in each quarter since inception and expect to incur net losses in the future. At March 31, 2003, we had an accumulated deficit of $119.2 million. Our limited operating history makes it difficult to forecast future operating results. Even if we were to achieve profitability in any period, we may not sustain or increase profitability on a quarterly or annual basis.

     In the third quarter of 2002, AT&T Wireless announced that it expects to cease operating its Cellular Digital Packet Data network by June 30, 2004. We are currently in discussions with AT&T Wireless and other wireless carriers to minimize any disruption of the delivery of our services to subscribers. On or about the actual termination date of AT&T Wireless’ Cellular Digital Packet Data network and where possible, certain affected subscribers would be transferred to alternate Cellular Digital Packet Data networks without a change to the hardware platform then used by those subscribers. However, we estimate that as of June 30, 2004 we will have 12,000 subscribers in their initial contract periods that are then using AT&T Wireless’ Cellular Digital Packet Data network and that would need to use an alternate wireless protocol to continue to use our services. To use an alternate wireless protocol, existing hardware platforms would have to be replaced for these subscribers. We do not expect to realize a loss on the sale of these replacement hardware platforms. While there is no assurance, we do not expect that the termination of AT&T Wireless’ Cellular Digital Packet Data network will have a material adverse impact on our financial results.

Critical Accounting Policies

     Financial Reporting Release No. 60, which was released by the SEC in January 2002, requires all companies to include a discussion of critical accounting policies or methods used in the preparation of financial statements. Included in Note 1 of the Notes to the Consolidated Financial Statements in our annual report on Form 10-K (No. 000-31511) is a summary of the significant accounting policies and methods we use. The following is a discussion of the more significant of these policies and methods.

Revenue Recognition

     In accordance with applicable accounting standards, including SOP No. 97-2, Software Revenue Recognition, as amended, we recognize revenue when earned. Specifically, we recognize revenue when

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the price is fixed and determinable, upon persuasive evidence of an agreement, when we have fulfilled our obligations under any such agreement and upon a determination that collection is probable.

     Through March 31, 2003, our services have been available only by using our platform or a location- or wireless application protocol-enabled mobile telephone. Accordingly, through March 31, 2003, service revenue, which is composed of monthly fees, was recognized ratably over the minimum service contract period, which commenced (a) upon installation where customers have installed our platform in mobile worker vehicles or (b) upon the creation of subscription licenses and a customer account on our website where customers have elected to use our services with a location-enabled mobile telephone.

     Our product revenue primarily consists of sales of the Internet Location Manager, Internet Data Terminal and ruggedized personal digital assistant. We defer product revenue at installation and recognize it ratably over the minimum service contract period, which generally is two or three years. Renewal rates for our services are not considered priced at a bargain in comparison to the initial sales price of an associated product (as described in Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements). Changes to the pricing of our products and services in the future could result in the recognition of product revenue over periods that extend beyond the minimum service contract period. Allowances for sales returns are recorded at the time product revenue is recognized.

     Historically, the selling prices of our products have often been at or below our costs. Product costs not in excess of related product revenue are deferred at the time of shipment and amortized ratably over the minimum service contract period. Where the selling prices of our products are below our costs, we expense the difference at the time of shipment of the related products.

Allowances for Doubtful Accounts

     Historically, we have had a significant number of small- to medium-sized companies utilizing our services. These customers are involved in diverse businesses. Our payment arrangements with customers generally provide 30-day payment terms. At the time that customers contract with us for our services, we assess their creditworthiness.

     During economic downturns, certain of our customers have had difficulty with their cash flows. The nature of our relationship with customers is inherently long-term and we have extended and may extend payment terms on an exception basis. We regularly review our customers’ ability to satisfy their payment obligations and provide an allowance for doubtful accounts for all specific receivables that we believe are not collectible. When these conditions arise, we suspend recognition of revenue until collection becomes probable or cash is collected. Beyond these specific customer accounts, we record an allowance based on the size and age of all receivable balances against which we have not established a specific allowance. These allowances are based on our experience in collecting such accounts.

     Although we believe that we can make reliable estimates for doubtful accounts, the size and diversity of our customer base, as well as overall economic conditions, may affect our ability to accurately estimate revenue and bad debt expense. Actual results may differ from those estimates.

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RESULTS OF OPERATIONS

Three Months Ended March 31, 2003 and 2002

Service Revenue

     Service revenue increased to $10.6 million from $7.3 million for the three months ended March 31, 2003 and 2002, respectively, as a direct result of the growth in our installed base of subscribers to our services.

Product Revenue

     Product revenue increased to $3.1 million from $2.4 million for three months ended March 31, 2003 and 2002, respectively, and is consistent with the growth in our installed base of subscribers. As new subscribers are added to our installed base, the amount of both deferred revenue and deferred costs recognized ratably over the minimum service contract period increases as well. Upon completion of the initial term of a customer’s contract, recognition of both deferred product revenue and product cost will be complete. Customers may then renew their agreements for future services without the purchase of new hardware and, therefore, we anticipate that product revenue will grow more slowly than service revenue.

Cost of Service Revenue

     Cost of service revenue consists of expenses related to the delivery and support of our services. Direct expenses are composed of costs associated with connecting our services to wireless networks and the Internet and royalty and subscription fees paid to others. Support and other delivery costs include such expenses as employee salaries and depreciation of our Wireless Applications Processing Center. Cost of service revenue increased to $3.8 million from $3.2 million in the three months ended March 31, 2003 and 2002, respectively. The increase in cost of service revenue was primarily the result of increases in direct service delivery expenses, accompanied by a smaller increase in employee related costs. Headcount increased to 74 from 51 at March 31, 2003 and 2002, respectively. Direct expenses generally increase at a rate proportional to the growth in subscribers using our services. Personnel costs and depreciation expense generally increase at a slower rate than the growth rate of subscribers to our services. As a result, we expect that the growth in service revenues will be greater than the growth in cost of service revenue as we continue to add subscribers.

Cost of Product Revenue

     Cost of product revenue consists of the cost of the Internet Location Manager, Internet Data Terminal, ruggedized personal digital assistant and related parts; costs associated with the final assembly, test, provisioning, delivery and installation of our products; and other costs such as provisions for inventory and repair costs. Historically, the selling prices of our products were often at or below our costs. Product costs not in excess of related product revenue are deferred at the time of shipment and amortized ratably over the minimum service contract period. Where the selling prices of our products are below our costs, we expense the difference at the time of shipment of the related products. Generally, we expect the selling prices of our products to be approximately equal to or exceed the product costs in future periods. The impact of selling products below our cost on future cash flow from operations is expected to be minimal as our service revenue stream expands and is renewed. As new

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subscribers are added to our installed base, the amount of both deferred revenue and deferred costs recognized ratably increases as well. Upon completion of the initial term of a customer’s contract, recognition of both deferred product revenue and product cost will be complete. Customers may then renew their agreements for future services without the purchase of new hardware and, therefore, we anticipate that product revenue and cost of product revenue will grow more slowly than service revenue.

     Cost of product revenue increased to $4.6 million from $4.0 million in the three months ended March 31, 2003 and 2002, respectively. The increase in the cost of product revenue was primarily the result of associated increases in product cost recognized from deferrals.

Sales and Marketing Expenses

     Sales and marketing expenses consist of employee salaries, sales commissions, and marketing and promotional expenses. Sales and marketing expenses decreased to $2.6 million in the three months ended March 31, 2003 from $3.0 million in the same period in 2002. The reduction in expenses was attributed to reductions in promotional expenses, travel and facilities costs. Sales and marketing headcount increased to 85 at March 31, 2003 from 84 at March 31, 2002. We expect that sales and marketing expenses will increase as we expand our sales and marketing efforts, including, but not limited to, modest headcount growth and promotional expenses related to new product and service offerings.

Research and Development Expenses

     Research and development expenses consist of employee salaries and expenses related to development personnel and consultants, as well as expenses associated with software and hardware development. Research and development expenses decreased to $1.3 million in the three months ended March 31, 2003 from $1.6 million in the three months ended March 31, 2002, primarily due to reductions in employee-related expenses and facilities costs. Headcount decreased to 55 at March 31, 2003 from 67 at March 31, 2002. We expect that research and development expenses will increase in future periods as we develop and introduce new products and services.

General and Administrative Expenses

     General and administrative expenses consist of employee salaries and related expenses for executive and administrative costs, accounting and professional fees, recruiting costs and provisions for doubtful accounts. General and administrative expenses decreased to $2.2 million from $2.8 million during the three months ended March 31, 2002 and 2003, respectively. The decrease in 2003 is primarily the result

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of reductions in the provisions for allowance for doubtful accounts. General and administrative headcount totaled 51 and 48 at March 31, 2003 and 2002, respectively.

Intangibles Amortization

     Intangibles amortization relates to the intangible assets (purchased technology) that are being amortized over an estimated useful life of three years.

Stock Compensation Expense

     Deferred stock compensation expense related to stock option grants to employees and consultants was $294,000 at March 31, 2003. Stock compensation expense is amortized on an accelerated basis over the vesting period of individual awards. Amortization of deferred stock compensation expense increased to $192,000 from $61,000 for the three months ended March 31, 2003 and 2002, respectively.

Interest Income and Interest Expense

     Interest income is composed primarily of interest income on cash, cash equivalents and short-term investments and interest expense relates to the short-term financing of insurance costs. Interest income net of interest expense decreased to $148,000 from $239,000 for the three months ended March 31, 2003 and 2002, respectively. The decreases resulted from lower interest rates on invested balances.

Other Expense, Net

     During the three month period ended March 31, 2003 and 2002, other expense consisted primarily of immaterial net foreign currency exchange gains related to our subsidiary in India.

Income Taxes

     Since inception, we have incurred net losses for federal and state tax purposes. Except for minimum state income and franchise taxes, we have not recognized any tax provision or benefit.

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Net Loss

     Net loss decreased to $1.3 million for the three months ended March 31, 2003 from $5.2 million for the same period in 2002. Our operating costs increased to $15.2 million from $15.1 million for the three months ended March 31, 2003 and 2002, respectively. The increase in operating costs was accompanied by an increase in revenues to $13.7 million from $9.7 million for the three months ended March 31, 2003 and 2002, respectively.

     We believe period-to-period comparisons of our operating results are not necessarily meaningful. You should not rely on them to predict our future performance. The amount and timing of our operating expenses may fluctuate significantly in the future as a result of a variety of factors.

LIQUIDITY AND CAPITAL RESOURCES

     As of March 31, 2003, we had $37.0 million of cash and cash equivalents and $2.2 million of restricted short-term investments. We held no available-for-sale securities at March 31, 2003.

     We currently have a $2.0 million revolving line of credit facility against which there were no borrowings as of March 31, 2003. The line, against which letters of credit have been issued, is collateralized by a restricted certificate of deposit of $2.0 million. There are two letters of credit outstanding under this revolving line of credit totaling $733,735 at March 31, 2003 and these letters of credit expire on October 29, 2003 and December 31, 2003. This credit facility expires in November 2003.

     Net cash provided by (used in) operating activities was $1.2 million and $(3.5) million for the three months ended March 31, 2003 and 2002, respectively. Cash provided by operating activities during the three months ended March 31, 2003, was attributed primarily due to an increase in deferred revenue and customer deposits, decreases in accounts receivable and inventory, depreciation and amortization, offset by net losses and an increase in deferred product costs. Cash used in operating activities during the three months ended March 31, 2002, was attributed primarily to net losses and increases in accounts receivable, offset in part by depreciation and amortization, provisions for bad debts and decreases in inventory and deferred product costs.

     Net cash used in investing activities during the three months ended March 31, 2003 and 2002 was $136,000 and $210,000, respectively. In both periods, cash used resulted primarily from purchases of property and equipment and other assets.

     Net cash provided by financing activities was $289,000 and $579,000 for the three months ended March 31, 2003 and 2002, respectively. In both periods, cash provided was attributed to the sale of common stock and proceeds from payments on notes receivable issued to stockholders.

     As of March 31, 2003 approximately $2.3 million of our gross accounts receivable were over 90 days old. We believe we have adequately provided allowances as of March 31, 2003 for any such amounts that may ultimately become uncollectible. We defer product costs at time of shipment and expense any amounts in excess of the related product revenue at that time. Generally, we record

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accounts receivable from our customers and defer related product revenue upon installation. Both deferred product cost and revenue are recognized ratably over the minimum service contract period. As we grow our business, deferred product costs will generally exceed deferred revenue due to our practice of recording deferred product costs at time of shipment versus deferred revenue at time of installation.

     We believe that our cash, cash equivalents and restricted short-term investments will be sufficient to meet our anticipated cash needs for operating expenses, working capital and capital expenditures for at least the next 12 months. If cash generated from operations is insufficient to satisfy our liquidity requirements, we may seek to obtain a larger credit facility or to sell additional equity or debt securities, which may not be available on commercially reasonable terms or at all, and which could dilute existing stockholders.

RISK FACTORS

     In addition to the other information contained in this Report, the following factors should be carefully considered in evaluating our business and prospects. The risks and uncertainties described below are intended to be ones that are specific to us or our industry and that we deem material, but they are not the only ones that we face.

Due to our limited operating history it is difficult to predict future operating results or our stock price.

     An evaluation of our business is difficult because we have a limited operating history. We commenced operations in July 1996 and commercially offered our first services in the second half of 1998. We may not achieve profitability or continue to grow. We face a number of risks encountered by companies in the Global Positioning System, wireless communications, transaction processing, software applications and Internet information industries, including:

	•		our need to introduce reliable and robust products and services that meet the demanding needs of customers;
	•		our need to expand our marketing, sales and support organizations, as well as our distribution channels;
	•		our ability to anticipate and respond to market competition and technological change;
	•		the uncertainty of market acceptance of our services;
	•		our need to manage expanding operations;
	•		our dependence on wireless carriers;
	•		limited coverage of wireless networks; and
	•		any need to migrate to new networks, which could cause our products to be incompatible with new networks or out of date.

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     Our business strategy may not be successful, and we may not successfully address these risks.

If we do not increase revenue from the sale of our services to new and existing customers, our business may not be successful.

     Our success depends on our ability to increase revenue from the sale of our services to new and existing customers and on market acceptance of our services. We may not be able to achieve widespread adoption of our services. Furthermore, changes such as increases in our pricing for products and services or the pricing of competing products and services may harm our ability to increase sales of our products and services to new and existing customers. If we are not able to expand our customer base and increase our revenue from new and existing customers, our business will be seriously harmed.

If, pursuant to its announcement, AT&T Wireless ceases to operate its Cellular Digital Packet Data network in 2004, or our other wireless carriers decide to abandon Cellular Digital Packet Data, Integrated Digital Enhanced Network, General Packet Radio Services or Code Division Multiple Access 1XRTT technologies or do not continue to expand their Cellular Digital Packet Data, Integrated Digital Enhanced Network, General Packet Radio Services or Code Division Multiple Access 1XRTT systems, we may be unable to deliver our services and our revenues would decrease.

     Our services function only on Cellular Digital Packet Data, General Packet Radio Services or Code Division Multiple Access 1XRTT networks or Integrated Digital Enhanced Networks. These protocols cover only portions of the U.S. and Canada, and may not gain widespread market acceptance. If wireless carriers abandon these protocols in favor of other types of wireless technology, we may not be able to provide services to our customers. Beginning March 31, 2003, AT&T Wireless discontinued new sales of Cellular Digital Packet Data service. AT&T Wireless has also indicated that it expects to cease operating its Cellular Digital Packet Data network by June 30, 2004. If the termination of AT&T Wireless’ Cellular Digital Packet Data network disrupts our ability to deliver our services to certain of our customers, our revenues would decrease and our customers’ satisfaction would suffer. In addition, if wireless carriers do not expand their coverage areas, we will be unable to meet the needs of customers who wish to use our services outside the current coverage area.

If one or more of the agreements we have with wireless carriers is terminated, we may be unable to offer our services to our customers within the carrier’s coverage area and our business may be harmed.

     Wireless carriers offering services compatible with our services have little overlap in their service coverage areas. Our existing agreements with wireless carriers may be terminated upon as little as fifteen-days written notice or immediately upon the occurrence of certain conditions. In connection with ceasing operation of its Cellular Digital Packet Data network, AT&T Wireless may seek to terminate or not to renew its contract for Cellular Digital Packet Data service with us. If one or more of our wireless carriers decides to terminate or not to renew its contract with us, we may incur additional costs relating to obtaining alternate coverage from another wireless carrier outside of its primary coverage area, or we may be unable to replace the coverage at all, causing a complete loss of service to our customers in that coverage area.

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We depend on a limited number of third parties to manufacture and supply critical components for our products and services.

     If these parties do not perform their obligations, or if they cease to manufacture and supply components critical for our products and services, we may be unable to find other suppliers or operate our business. A subscriber requires our Internet Location Manager or a location- or wireless application protocol-enabled mobile telephone to use our services. To use our services with two-way communications, a subscriber requires an Internet Location Manager and either an Internet Data Terminal or a ruggedized personal digital assistant. The Internet Location Manager, which we install in each subscriber’s vehicle, determines the worker’s location, velocity and orientation, and gathers other information about the subscriber’s activities. The Internet Data Terminal, when installed in a subscriber’s vehicle, adds the incremental ability to send and receive messages to and from the worker. We cannot be sure that alternative sources for key components used in the Internet Location Manager and the Internet Data Terminal will be available when needed, or if available, that these components will be available on commercially reasonable terms. We rely on sole suppliers and manufacturers for a number of key components for these products and do not have long-term agreements with any of these suppliers or manufacturers. Our sole suppliers and manufacturers of key components include:

	•		Taiwan Semiconductor Manufacturing Company, our sole manufacturer of Global Positioning System digital receiver chips;
	•		Valence Semiconductor, our sole supplier of radio frequency chips;
	•		Orient Semiconductor Electronics, our sole manufacturer of Internet Location Managers;
	•		Micronet, our sole supplier of Internet Data Terminals;
	•		Symbol Technologies, our sole supplier of ruggedized personal digital assistants;
	•		Motorola, our sole supplier of microcontrollers;
	•		Motorola, our sole supplier of wireless modems operable on Integrated Digital Enhanced Networks;
	•		Dallas Semiconductor, our sole supplier of combined clock and analog-to-digital conversion circuits;
	•		LG Innotek, our sole supplier of radio frequency filters; and
	•		Voxeo, our sole supplier of voice-based access services for use with our speech-to-text voice portal service.

     If our agreements with these or other suppliers and manufacturers are terminated or expire, if we are unable to obtain sufficient quantities of components critical for our products and services, if the quality of these components is inadequate, or if the terms for supply of these components become commercially unreasonable, our search for additional or alternate suppliers and manufacturers could result in significant delays, added expense and our inability to maintain or expand our subscriber base. Any of these events could require us to take unforeseen actions or devote additional resources to provide our products and services and could harm our ability to compete effectively.

We may establish alliances or acquire technologies or companies in the future, which could result in the dilution of our stockholders and disruption of our business.

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     We are continually evaluating business alliances and external investments in technologies related to our business. Acquisitions of companies, divisions of companies, businesses or products and strategic alliances entail numerous risks, any of which could materially harm our business in several ways, including:

	•		diversion of management’s attention from our core business objectives and other business concerns;
	•		failure to integrate the acquired company into our pre-existing business;
	•		potential loss of key employees from either our pre-existing business or the acquired business;
	•		dilution of our existing stockholders as a result of issuing equity securities; and
	•		assumption of liabilities of the acquired company.

     Some or all of these problems may result from current or future alliances, acquisitions or investments. Furthermore, we may not realize any value from these alliances, acquisitions or investments.

If we cannot deliver the features and functionality our customers demand, we will be unable to retain or attract new customers.

     Our success depends upon our ability to determine the features and functionality our customers demand and to design and implement services that meet their needs in an efficient manner. We cannot assure you that we can successfully determine customer requirements or that our future services will adequately satisfy customer demands. To date, the design of our services has been based on our internal efforts and feedback from our existing and potential customers. In addition, we may experience difficulties that could delay or prevent the successful development, introduction or marketing of new services and service enhancements. If we cannot effectively deploy, maintain and enhance our services, our expenses may increase, we may not be able to recover our costs and our competitive position may be harmed.

We have historically incurred losses and these losses may increase in the future.

     We have never been profitable. At March 31, 2003, we had an accumulated deficit of $119.2 million. In order to become profitable and sustain profitability, we will need to generate significant revenues to offset our cost of revenues, sales and marketing, research and development and general and administrative expenses. We may not achieve or sustain our revenue or profit goals and our losses may increase in the future. In order to facilitate the sale of our services, we have sold and may sell our hardware below our costs. As a result, we have experienced, and may continue to experience, negative gross margins on the sale of our hardware.

Our quarterly operating results are subject to fluctuations, and our stock price may decline if we do not meet the expectations of investors and analysts.

     Our quarterly revenues and operating results are difficult to predict and may fluctuate significantly

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from quarter to quarter due to a number of factors, many of which are outside our control. These factors include, but are not limited to:

	•		delays in market acceptance or implementation by customers of our services;
	•		changes in length of sales cycles of or demand by our customers for existing and additional services;
	•		changes in or cancellations of our agreements with wireless carriers;
	•		introduction of new services by us or our competitors;
	•		changes in our pricing policies or those of our competitors or suppliers;
	•		changes in our mix of sources of revenues;
	•		changes in the productivity of our distribution channels;
	•		changes in accounting standards, including standards relating to revenue recognition, business combinations and stock-based compensation;
	•		wireless data and Internet market conditions; and
	•		general economic and political conditions.

     Our expense levels are based, in part, on our expectation of future revenues. Additionally, a substantial portion of our expenses is relatively fixed. As a result, any shortfall in revenues relative to our expectations could cause significant changes in our operating results from quarter to quarter. We believe period-to-period comparisons of our revenue levels and operating results are not meaningful. You should not rely on our quarterly revenues and operating results to predict our future performance. In some future quarter our operating results may be below the expectations of public market analysts and investors and, as a result, the price of our common stock may fall.

Our stock price is volatile, which may cause you to lose money and result in costly litigation that could divert our resources.

     Stock markets have recently experienced dramatic price and volume fluctuations, particularly for shares of technology companies. These fluctuations can be unrelated to the operating performance of these companies. Broad market fluctuations may reduce the market price of our common stock and cause you to lose some or all of your investment. These fluctuations may be exaggerated if the trading volume of our common stock is low. In addition, due to the technology-intensive and emerging nature of our business and the mobile resource management sector, the market price of our common stock may rise and fall in response to:

•

announcements of technological or competitive developments;

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	•		acquisitions or strategic alliances by us or our competitors;
	•		the gain or loss of a significant customer or order;
	•		changes in estimates of our financial performance or changes in recommendations by securities analysts;
	•		security breaches; and
	•		disposition of shares of our common stock held by large investors.

     When the market price of a company’s stock drops significantly, stockholders often institute securities class action lawsuits against that company. A lawsuit against us could cause us to incur substantial costs and could divert the time and attention of our management and other resources from our business.

We have limited resources and may be unable to manage our anticipated growth in operations.

     If we fail to develop and maintain our services as we experience rapid growth, demand for our services could decrease, which would result in a decrease in our revenues. Our development and expansion have placed, and will continue to place, significant strain on our managerial, operational and financial resources. Due to the limited deployment of our services, we are unable to assess our ability to grow the business and manage a substantially larger number of customers and additional services.

We face competition from existing and potential competitors, which could reduce our market share and revenues.

     The market for our services is competitive and is expected to become even more competitive in the future. Our customers evaluate our services primarily on the basis of the functionality, ease of use, quality, price, geographic coverage of services and corporate financial strength and those of our competitors. If we are unable to compete successfully in these areas, competitive pressures may harm our business, resulting in a loss of market share and revenues. Our current and potential competitors include:

	•		other providers of vehicle-location services, such as QUALCOMM, whose OmniTRACS service uses satellite communication technology to manage fleets of trucks that travel long distances;
	•		other wireless Internet companies, such as Openwave, Research in Motion and Aether Systems;
	•		companies with solutions that integrate location, wireless communications and call centers, such as General Motors; and
	•		companies that provide wireless, location-relevant applications, or that are working on emergency-911 solutions, such as SignalSoft (a subsidiary of Openwave).

     Many of our existing and potential competitors have substantially greater financial, technical,

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marketing and distribution resources than we do. Additionally, many of these companies have greater name recognition and more established relationships with our target customers. Furthermore, these competitors may be able to adopt more aggressive pricing policies and offer customers more attractive terms than we can.

     Our services also compete with alternative means of communication between mobile workers and their managers, including wireless telephones, two-way radios and pagers. In addition, we expect that new competitors will enter the market for location-relevant wireless information as businesses and consumers increasingly demand information when they are mobile. Furthermore, the widespread adoption of industry standards may make it easier for new market entrants or existing competitors to offer the services we offer or may offer in the future.

Our success and ability to compete depends upon our ability to secure and protect patents, trademarks and other proprietary rights.

     Our success depends on our ability to protect our proprietary rights to the technologies used to implement and operate our services in the U.S. and in foreign countries. In the event that a third party breaches the confidentiality provisions or other obligations in one or more of our agreements or misappropriates or infringes on our intellectual property or the intellectual property licensed to us by third parties, our business would be seriously harmed. To protect our proprietary rights, we rely on a combination of trade secrets, confidentiality and other contractual provisions and agreements, and patent, copyright and trademark laws, which afford us only limited protection. Third parties may independently discover or invent competing technologies or reverse engineer our trade secrets, software or other technology. Furthermore, laws in some foreign countries may not protect our proprietary rights to the same extent as the laws of the U.S. Therefore, the measures we take to protect our proprietary rights may not be adequate.

A disruption of our services due to accidental or intentional security breaches may harm our reputation, cause a loss of revenues and increase our expenses.

     Unauthorized access, computer viruses and other accidental or intentional actions could disrupt our information systems or communications networks. We expect to incur significant costs to protect against the threat of security breaches and to alleviate problems caused by any breaches. Currently, the transmission of our customers’ proprietary information is not protected by encryption technology. If a third party were to misappropriate our customers’ proprietary information, we could be subject to claims, litigation or other potential liabilities that could seriously harm our revenues and result in the loss of customers.

System or network failures could reduce our sales, increase costs or result in liability claims and seriously harm our business.

     Any disruption to our services, information systems or communications networks or those of third parties could result in the inability of our customers to receive our services for an indeterminate period of time. Our services may not function properly if our systems fail, or if there is an interruption in the supply of power, or if there is an earthquake, fire, flood or other natural disaster, or an act of war or terrorism. Any disruption to our services could cause us to lose customers or revenue, or face litigation,

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customer service or repair work that would involve substantial costs and distract management from operating our business. We currently do not have fully redundant systems for uninterrupted services at an alternate site. Our operations depend upon our ability to maintain and protect our computer systems in our principal facilities in Redwood City, California, which are on or near earthquake fault zones, and Ashburn, Virginia.

We depend on Global Positioning System technology owned and controlled by others. If we do not have continued access to Global Positioning System technology and satellites, we will be unable to deliver our services and revenues will decrease.

     Our services rely on signals from Global Positioning System satellites built and maintained by the U.S. Department of Defense. Global Positioning System satellites and their ground support systems are subject to electronic and mechanical failures and sabotage. If one or more satellites malfunction, there could be a substantial delay before they are repaired or replaced, if at all, and our services may cease and customer satisfaction would suffer.

     In addition, the U.S. government could decide not to continue to operate and maintain Global Positioning System satellites over a long period of time or to charge for the use of the Global Positioning System. Furthermore, because of ever-increasing commercial applications of the Global Positioning System and international political unrest, U.S. government agencies may become increasingly involved in the administration or the regulation of the use of Global Positioning System signals in the future. If factors such as the foregoing affect the Global Positioning System, for example by affecting the availability, quality, accuracy or pricing of Global Positioning System technology, our business will suffer.

Our Global Positioning System technology depends on the use of radio frequency spectrum controlled by others.

     Global Positioning System technology is dependent on the use of radio frequency spectrum. An international organization known as the International Telecommunications Union controls the assignment of spectrum. If the International Telecommunications Union reallocates radio frequency spectrum, our services may become less useful or less reliable. This would, in turn, harm our business. In addition, emissions from mobile satellites and other equipment using other frequency bands may adversely affect the utility and reliability of our services.

We depend on wireless networks owned and controlled by others. If our customers do not have continued access to sufficient capacity on reliable networks, we may be unable to deliver services and our revenues could decrease.

     Our ability to grow and achieve profitability depends on the ability of wireless carriers to provide sufficient network capacity, reliability and security to our customers. Even where wireless carriers provide coverage to entire metropolitan areas, there are occasional lapses in coverage, for example due to tall buildings blocking the transmission of data to and from wireless modems used with our services. These effects could make our services less reliable and less useful, and customer satisfaction could suffer. Our financial condition could be seriously harmed if our wireless carriers were to increase the prices of their services, or to suffer operational or technical failures. If wireless carriers do not expand

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their coverage, we may be unable to offer our service to additional areas.

Defects or errors in our services could result in the cancellation or delays of our services, which would damage our reputation and harm our financial condition.

     We must develop our services quickly to keep pace with the rapidly changing Global Positioning System, wireless communications, transaction processing, software and Internet markets. Products and services that address these markets are likely to contain undetected errors or defects, especially when first introduced or when new versions are introduced. Our services may not be free from errors or defects, which could result in the cancellation or disruption of our services or dissatisfaction of customers. This would damage our reputation and result in lost revenues, diverted development resources, and increased service and warranty costs.

The reporting of inaccurate location-relevant information could cause the loss of customers and expose us to legal liability.

     The accurate reporting of location-relevant information is critical to our customers’ businesses. If we fail to accurately report location-relevant information, we could lose customers, our reputation and ability to attract new customers could be harmed, and we could be exposed to legal liability. We may not have insurance adequate to cover losses we may incur as a result of these inaccuracies.

Claims that we infringe third-party proprietary rights could result in significant expenses or restrictions on our ability to provide our services.

     Third parties may claim that our current or future products or services infringe their proprietary rights or assert other claims against us. As the number of entrants into our market increases, the possibility of an intellectual property or other claim against us grows. Any intellectual property or other claim, with or without merit, would be time-consuming and expensive to litigate or settle and could divert management attention from focusing on our core business. As a result of such a dispute, we may have to pay damages, incur substantial legal fees, develop costly non-infringing technology, if possible, or enter into license agreements, which may not be available on terms acceptable to us, if at all. Any of these results would increase our expenses and could decrease the functionality of our services, which would make our services less attractive to our current or potential customers. We have agreed in some of our agreements, and may agree in the future, to indemnify other parties for any expenses or liabilities resulting from claimed infringements of the proprietary rights of third parties.

From time to time we are or may be subject to litigation that could result in significant costs to us.

     From time to time, we are or may be subject to litigation in the ordinary course of business relating to any number or type of claims, including claims for damages related to errors and malfunctions of our services or hardware platform or their deployment. In addition, we currently are and may in the future be, subject to litigation alleging violations of various federal and state securities laws. A securities, product liability or other claim could seriously harm our business because of the costs of defending the lawsuit, diversion of employees’ time and attention, and potential damage to our reputation. Some of our agreements with our customers, suppliers and other third parties contain provisions designed to limit exposure to potential claims. Limitation of liability provisions contained in our agreements may not be

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enforceable under the laws of some jurisdictions. As a result, we could be required to pay substantial amounts of damages in settlement or upon the determination of any of these types of claims. Although we carry general liability and directors and officers insurance, our insurance may not cover potential claims or may not be adequate to cover all costs incurred in defense of potential claims or to indemnify us for all liability that may be imposed.

If the use of the Internet by businesses does not continue to grow, our business will be harmed.

     Our future success is dependent on continued growth in the use of the Internet by businesses. The use and acceptance of the Internet by businesses may not increase for a number of reasons, including the cost and availability of Internet access and concerns about privacy, security and reliability.

     Capacity constraints caused by growth in the use of the Internet may impede further development of the Internet to the extent that users experience delays, transmission errors and other difficulties. If the necessary infrastructure, products, services or facilities are not developed, or if the Internet does not become a viable and widespread commercial medium, we may not be able to grow our business.

Government regulations and standards may harm our business and could increase our costs or reduce our opportunities to earn revenues.

     In addition to regulations applicable to businesses in general, we may also be subject to direct regulation by governmental agencies, including the Federal Communications Commission and Department of Defense. These regulations may impose licensing requirements or safety standards, for example with respect to human exposure to electromagnetic radiation and signal leakage. A number of legislative and regulatory proposals under consideration by federal, state, provincial, local and foreign governmental organizations may lead to laws or regulations concerning various aspects of the Internet, wireless communications and Global Positioning System technology, including on-line content, user privacy, taxation, access charges and liability for third-party activities. Additionally, it is uncertain how existing laws governing issues such as taxation on the use of wireless networks, intellectual property, libel, user privacy and property ownership will be applied to our services. The adoption of new laws or the application of existing laws may expose us to significant liabilities and additional operational requirements, which could decrease the demand for our services and increase our cost of doing business. Wireless carriers who supply us with airtime are subject to regulation by the Federal Communications Commission, and regulations that affect them could also increase our costs or limit the provision of our services.

Our success depends on our ability to maintain and expand our sales channels.

     In order to increase our market awareness, customer base and revenues, we need to expand our direct and indirect sales operations. There is strong competition for qualified sales personnel in our business, and we may not be able to attract and retain sufficient new sales personnel to expand our operations. New sales personnel require training and it takes time for them to achieve full productivity, if at all. In addition, we believe that our success is dependent on expansion of our indirect distribution channels, including our relationships with wireless carriers, independent sales agents and distribution partners. To date, we have relationships with a limited number of these wireless carriers, independent sales agents and distribution partners. These sales channel partners require training in selling our products and

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services and it will take time for these partners to achieve productivity, if at all. We may not be able to establish relationships with additional distributors on a timely basis, or at all. Our distributors, many of which are not engaged with us on an exclusive basis, may not devote adequate resources to promoting and selling our services.

We depend on recruiting and retaining qualified personnel and our inability to do so would seriously harm our business.

     Because of the technical nature of our services and the market in which we compete, our success depends on the continued services of our current executive officers and our ability to attract and retain qualified personnel with Global Positioning System, wireless communications, transaction processing, software and Internet expertise. Competitors and others have in the past, and may attempt in the future, to recruit our employees. In addition, new employees generally require substantial training, which requires significant resources and management attention. Even if we invest significant resources to recruit, train and retain qualified personnel, we may not be successful in our efforts.