AT ROAD INC - 10-Q Quarterly Report

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 September 30, 2003


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)


Delaware (State or other jurisdiction of incorporation or organization)		94-3209170 (I.R.S. Employer Identification No.)

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 November 3, 2003 there were 53,559,091 shares of the registrant’s Common Stock outstanding.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements
		Condensed Consolidated Balance Sheets
		Condensed Consolidated Statements of Operations
		Condensed Consolidated Statements of Stockholders’ Equity
		Condensed Consolidated Statement of Cash Flows
		Notes To Condensed Consolidated Financial Statements
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
	Item 3. Quantitative and Qualitative Disclosures About Market Risk
	Item 4. Controls and Procedures
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings
	Item 4. Submission of Matters to a Vote of Security Holders
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
EXHIBIT 31.1
EXHIBIT 31.2
EXHIBIT 32.1
EXHIBIT 32.2

INDEX


PART I.		FINANCIAL INFORMATION
		Item 1. Financial Statements.
		Condensed Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002.
		Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2003 and 2002.
		Condensed Consolidated Statements of Stockholders’ Equity for the nine months ended September 30, 2003 and 2002 and the nine months ended December 31, 2002.
		Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2003 and 2002.
		Notes to Condensed Consolidated Financial Statements.
		Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
		Item 3. Quantitative and Qualitative Disclosures About Market Risk.
		Item 4. Controls and Procedures.
PART II.		OTHER INFORMATION
		Item 1. Legal Proceedings.
		Item 4. Submission of Matters to a Vote of Security Holders.
		Item 5. Other Information.
		Item 6. Exhibits and Reports on Form 8-K.

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

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


					September 30,			December 31,
					2003			2002

			ASSETS
Current assets:
	Cash and cash equivalents				$	98,395		$	35,659
	Restricted short-term investments					2,000			2,241
	Accounts receivable, net					6,848			7,407
	Inventories					2,330			5,399
	Deferred product costs and other current assets					12,538			9,937

				Total current assets		122,111			60,643
Property and equipment, net						2,171			2,500
Deferred product costs, intangibles and other assets						7,552			7,407

				Total assets	$	131,834		$	70,550

		LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
	Accounts payable				$	2,415		$	3,408
	Accrued liabilities					5,138			3,870
	Deferred revenue and customer deposits					9,214			7,594

				Total current liabilities		16,767			14,872
Deferred revenue						6,780			5,321
Other long-term liabilities						74			190

				Total liabilities		23,621			20,383
Stockholders’ equity:
	Preferred stock, $0.0001 par value, 10,000,000 shares authorized, shares issued and outstanding: none at September 30, 2003 and December 31, 2002					—			—
	Common stock, $0.0001 par value, 250,000,000 shares authorized, shares issued and outstanding: 53,219,785 at September 30, 2003 and 47,747,156 at December 31, 2002					226,649			170,610
	Deferred stock compensation					(30	)		(491	)
	Notes receivable from stockholders					(87	)		(2,068	)
	Accumulated deficit					(118,319	)		(117,884	)

				Total stockholders’ equity		108,213			50,167

				Total liabilities and stockholders’ equity	$	131,834		$	70,550

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)


					Three Months Ended					Nine Months Ended
					September 30,					September 30,

					2003		2002			2003			2002

Revenues:
	Service				$	13,113	$	8,657		$	35,851		$	23,865
	Product					3,503		2,659			10,275			7,609

		Total revenues				16,616		11,316			46,126			31,474

Costs and expenses:
	Cost of service revenue (excluding intangibles amortization included below)					3,782		3,440			11,840			9,974
	Cost of product revenue					5,249		4,265			15,078			12,015
	Intangibles amortization					11		418			445			1,246
	Sales and marketing					2,907		2,433			8,344			8,035
	Research and development					1,386		1,476			4,019			4,538
	General and administrative					2,189		1,873			6,847			6,705
	Stock compensation(*)					154		380			441			817

		Total costs and expenses				15,678		14,285			47,014			43,330

Profit (loss) from operations						938		(2,969	)		(888	)		(11,856	)

Other income (expense), net:
	Interest income, net					151		202			436			656
	Investment impairment charge					—		—			—			(1,035	)
	Other income (expense), net					6		4			17			15

		Total other income (expense), net				157		206			453			(364	)

Net income (loss)					$	1,095	$	(2,763	)	$	(435	)	$	(12,220	)

Basic net income (loss) per share:
	Basic				$	0.02	$	(0.06	)	$	(0.01	)	$	(0.27	)

	Diluted				$	0.02	$	(0.06	)	$	(0.01	)	$	(0.27	)

Shares used in calculating net income (loss) per share:
	Basic					50,689		46,355			48,821			45,849

	Diluted					55,813		46,355			48,821			45,849

(*)Stock compensation:
			Cost of service revenue		$	2	$	7		$	9		$	18
			Cost of product revenue			11		25			25			81
			Sales and marketing			13		36			23			52
			Research and development			36		83			86			274
			General and administrative			92		229			298			392

				Total	$	154	$	380		$	441		$	817

See notes to condensed consolidated financial statements.

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At Road, Inc.
Condensed Consolidated Statements of Stockholders’
Equity
For the nine months ended September 30, 2003 and 2002
and the three months ended December 31, 2002
(In thousands, except share amounts)
(unaudited)


													Accumulated
	Common Stock						Deferred			Notes Receivable			Other
							Stock			From			Comprehensive		Accumulated			Stockholders’
	Shares			Amount			Compensation			Stockholders			Income (Loss)		Deficit			Equity

BALANCES, January 1, 2002		46,499,451		$	169,148		$	(2,342	)	$	(2,748	)	$	—	$	(103,647	)	$	60,411
Net loss																(12,220	)		(12,220	)
Shares issued under employee stock purchase plan		259,725			508														508
Exercise of stock options		529,966			660														660
Collection of notes receivable from stockholders											554								554
Repurchase of unvested options exercised		(93,750	)		(126	)					126								—
Deferred stock compensation					17			(17	)										—
Reversal of deferred stock compensation due to employee terminations					(795	)		795											—
Amortization of deferred stock compensation		—			—			817			—			—		—			817

BALANCES, September 30, 2002		47,195,392			169,412			(747	)		(2,068	)		—		(115,867	)		50,730
Net loss																(2,017	)		(2,017	)
Shares issued under the employee stock purchase plan		293,676			590														590
Exercise of stock options		258,088			616														616
Deferred stock compensation					(2	)		2											—
Reversal of deferred stock compensation due to employee terminations					(6	)		6											—
Amortization of deferred stock compensation		—			—			248			—			—		—			248

BALANCES, December 31, 2002		47,747,156			170,610			(491	)		(2,068	)		—		(117,884	)		50,167
Net loss																(435	)		(435	)
Common stock issued through second public offering, net of issuance costs		4,000,000			51,850														51,850
Shares issued through employee stock purchase plan		287,545			595														595
Exercise of stock options		1,185,084			3,614														3,614
Collection of notes receivable from stockholders											1,981								1,981
Deferred stock compensation					5			(5	)										—
Reversal of deferred stock compensation due to employee terminations					(25	)		25											—
Amortization of deferred stock compensation		—			—			441			—			—		—			441

BALANCES, September 30, 2003		53,219,785		$	226,649		$	(30	)	$	(87	)	$	—	$	(118,319	)	$	108,213

Total comprehensive loss for the nine months ended September 30, 2003 and 2002 and the three months ended December 31, 2002 is equal to the net loss in each respective period.

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


					Nine Months Ended
					September 30,

					2003			2002

Cash flows from operating activities:
	Net loss				$	(435	)	$	(12,220	)
	Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
		Depreciation and amortization				1,862			3,534
		Loss on disposal of property and equipment				6			19
		Investment impairment charge				—			1,035
		Amortization of deferred stock compensation				441			817
		Provision for inventory reserves				1,071			718
		Provision for doubtful accounts and sales returns				(68	)		386
		Change in assets and liabilities:
			Accounts receivable			627			(2,049	)
			Inventories			1,998			1,278
			Deferred product costs			(3,253	)		(974	)
			Prepaid expenses and other			(215	)		(200	)
			Accounts payable			(993	)		(231	)
			Accrued and other liabilities			1,152			412
			Deferred revenue and customer deposits			3,079			1,360

				Net cash provided by (used in) operating activities		5,272			(6,115	)

Cash flows from investing activities:
	Purchase of property and equipment					(1,094	)		(445	)
	Proceeds from the sale of restricted short-term investments					241			—
	Interest received on restricted short-term investments					—			(19	)
	Other assets					277			(116	)

				Net cash used in investing activities		(576	)		(580	)
Cash flows from financing activities:
	Net proceeds from sale of common stock					56,059			1,168
	Proceeds from payments on notes receivable issued to stockholders					1,981			554

				Net cash provided by financing activities		58,040			1,722

Net increase (decrease) in cash and cash equivalents						62,736			(4,973	)
Cash and cash equivalents:
	Beginning of period					35,659			40,164

	End of period				$	98,395		$	35,191

Non-cash investing and financing activities:
	Deferred stock compensation				$	5		$	17

	Reversal of deferred stock compensation				$	25		$	795

	Repurchase of common stock through cancellation of notes receivable				$	—		$	126

See notes to condensed consolidated financial statements.

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At Road, Inc.
Notes To Condensed Consolidated Financial Statements
(Unaudited)

Note 1 — Basis of Presentation and Summary of Significant Accounting Policies

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 condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and notes thereto in its Form 10-K/A for the year ended December 31, 2002 (No. 000-31511), filed with the SEC.

Motorola is the sole supplier of microcontrollers used in the Company’s products. The Company expects to rely on Motorola as a source for this component for the next several years. Taiwan Semiconductor Manufacturing Company (TSMC) is the sole manufacturer of the Company’s Global Positioning System digital receiver chips used in some of the Company’s products. The Company expects to rely on TSMC as a source for this component for at least the next twelve months.

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

Note 2 — Basic and Diluted Net Income (Loss) per Share

Basic net income (loss) per share is computed by dividing the net income (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 income (loss) per share (in thousands):


	Three Months
	Ended						Nine Months Ended
	September 30,						September 30,

	2003			2002			2003			2002

Net income (loss), basic and diluted	$	1,095		$	(2,763	)	$	(435	)	$	(12,220	)
Weighted average common shares outstanding		50,797			47,135			49,016			46,895
Weighted average common shares outstanding subject to repurchase		(108	)		(780	)		(195	)		(1,046	)

Shares used in computation of basic net income (loss) per share		50,689			46,355			48,821			45,849

Weighted average common shares outstanding subject to repurchase		108			n/a			n/a			n/a

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	Three Months
	Ended					Nine Months Ended
	September 30,					September 30,

	2003		2002			2003			2002

Common shares issuable upon exercise of stock options and employee stock purchases (treasury stock method)		5,016		n/a			n/a			n/a
Shares used in computation of diluted net income (loss) per share		55,813		46,355			48,821			45,849

Basic net income (loss) per share	$	0.02	($	0.06	)	($	0.01	)	($	0.27	)

Diluted net income (loss) per share	$	0.02	($	0.06	)	($	0.01	)	($	0.27	)

The total number of options and restricted stock subject to repurchase excluded from the diluted net loss per share computation for the nine months ended September 30, 2003 and the three and nine months ended September 30, 2002 were as follows (in thousands):


	Three Months				Nine Months
	Ended				Ended
	September 30,				September 30,

	2003		2002		2003		2002

Shares of common stock subject to repurchase		—		607		79		607
Outstanding options		97		8,011		7,688		8,011

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):


	September 30,		December 31,
	2003		2002

Raw materials	$	1,182	$	3,183
Work in process		166		389
Finished goods		982		1,827

Total	$	2,330	$	5,399

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


	September 30,		December 31,
	2003		2002

Current deferred product costs	$	11,080	$	8,694
Prepaid expenses and other		1,458		1,243

Total	$	12,538	$	9,937

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


	September 30,		December 31,
	2003		2002

Purchased technology	$	38	$	483
Non-current deferred product costs		7,033		6,166
Other		481		758

Total	$	7,552	$	7,407

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


	September 30,		December 31,
	2003		2002

Deferred revenue	$	8,856	$	7,155
Customer deposits		358		439

Total	$	9,214	$	7,594

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:


		Three Months Ended						Nine Months Ended
		September 30,						September 30,

		2003			2002			2003			2002

Stock Option Plans:
	Risk free interest rate		2.85	%		3.56	%		2.79	%		3.56	%
	Expected volatility		115.00	%		124.00	%		116.00	%		124.00	%
	Expected life (in years)		5			5			5			5
	Expected dividend	$	0.00		$	0.00		$	0.00		$	0.00
Employee Stock Purchase Plan:
	Risk free interest rate		1.13	%		1.61	%		1.22	%		1.61	%
	Expected volatility		115.00	%		124.00	%		117.00	%		124.00	%
	Expected life (in years)		0.5			0.5			0.5			0.5
	Expected dividend	$	0.00		$	0.00		$	0.00		$	0.00

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, net income (loss) and basic and diluted income (loss) per share on a pro forma basis (as compared to such items as reported) would have been (in thousands, except per share amounts):


	Three Months Ended					Nine Months Ended
	September 30,					September 30,

	2003		2002			2003			2002

Net income (loss) as reported	$	1,095	$	(2,763	)	$	(435	)	$	(12,220	)

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		Three Months Ended						Nine Months Ended
		September 30,						September 30,

		2003			2002			2003			2002

Less: stock based employee compensation expense included in reported net loss			154			377			435			775
Add: stock-based employee compensation expense determined under fair value based method			(2,391	)		(2,341	)		(6,695	)		(6,288	)

Pro forma net loss		$	(1,142	)	$	(4,727	)	$	(6,695	)	$	(17,733	)

Basic net loss per share:
	As reported	$	0.02		$	(0.06	)	$	(0.01	)	$	(0.27	)

	Pro forma	$	(0.02	)	$	(0.10	)	$	(0.14	)	$	(0.39	)

Diluted net loss per share:
	As reported	$	0.02		$	(0.06	)	$	(0.01	)	$	(0.27	)

	Pro forma	$	(0.02	)	$	(0.10	)	$	(0.14	)	$	(0.39	)

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 asset is as follows (in thousands):


	At September 30, 2003							At December 31, 2002

	Carrying		Accumulated					Carrying		Accumulated
	Amount		Depreciation			Net		Amount		Depreciation			Net

Purchased technology	$	5,052	$	(5,014	)	$	38	$	5,052	$	(4,569	)	$	483

For the nine months ended September 30, 2003 and 2002, amortization of purchased technology was $445,000 and $1,246,000, respectively. The estimated amortization for subsequent years is as follows as of September 30, 2003 (in thousands):


		Amortization
		Expense

Remainder of year ending December 31, 2003		$	10
Year ended December 31, 2004			28

	Total	$	38

Note 6 — Segment Reporting

In the three and nine months ended September 30, 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 for the three and nine months ended September 30, 2003 and 2002 and had no significant long-lived assets deployed outside the United States at September 30, 2003.

Note 7 — Recently Issued Accounting Pronouncements

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

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adoption 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.

In November 2002, the EITF reached a consensus on the Issue No. 00-21, Accounting for Revenue Arrangements With Multiple Deliverables (EITF Issue No. 00-21). The EITF concluded that revenue arrangements with multiple elements should be divided into separate units of accounting if the deliverables in the arrangement have value to the customer on a standalone basis, if there is objective and reliable evidence of the fair value of the undelivered elements, and as long as there are no rights of return or additional performance guarantees by the seller. The provisions of EITF Issue No. 00-21 are applicable to revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The Company has determined the provisions of EITF Issue No. 00-21 will not have an impact on its operating results or financial condition.

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 currently estimates that as of June 30, 2004 the Company will have approximately 11,000 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 the Company’s 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.

In its Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2003, Verizon Wireless disclosed that it expects to cease operating its Cellular Digital Packet Data network at the end of 2005. We estimate that as of December 31, 2005 we will have 5,000 subscribers in their initial contract periods that are then using Verizon 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 Verizon Wireless’ Cellular Digital Packet Data network will have a material adverse impact on our 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, operating results and profitability, 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/A for the year ended December 31, 2002 (No. 000-31511), filed on July 29, 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/A for the year ended December 31, 2002, and in our other filings with the SEC.

Overview

We are a leading provider of mobile resource management (MRM) services, a rapidly growing category of business productivity solutions that enable the effective management of mobile resources. Our MRM services allow customers to improve productivity by enabling the effective management of the activities of their mobile workers

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and assets, and their goods and services. In addition, our services are designed to allow customers to increase the utility of their mobile resources and decrease costs of operations by facilitating business processes, such as event confirmation, signature verification, forms processing, project management and timekeeping while their workers are in the field. Our services also provide location, reporting, dispatch, messaging, and other management services and are designed to be easy to implement and use. Our customers can manage their mobile workers in several ways, including by logging onto our website, receiving their data directly into their existing software applications, using any wireline or wireless telephone to access our speech-to-text voice portal or requesting information from our data centers using application programming interfaces.

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 mobile resource management services. 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, including GeoManager, Pocket Edition; @Road Pathway; RoadREPORT; and RoadFORCE; and features to our services.

Our services provide current and historical data relating to a customer’s mobile resources in a variety of formats, including activity reports, maps and completed business forms. We provide these formats in a standard configuration, and customers can configure certain elements and views themselves to help achieve compliance with their internal business rules. Customers can choose to have reports delivered on a pre-scheduled basis, or they can submit queries to our databases to create reports and views on demand. Customers can also download reports to manipulate and store data as desired. Mobile resource data are typically stored by us for 14 days, unless the customer purchases our extended data storage services.

Our services are enabled by the deployment of a device, which we call a platform, to each of the customer’s mobile resources. We call each mobile resource with a platform a “subscriber.” Our services operate with three independent platforms. First, a mobile worker can use our proprietary hardware device embedded with software that integrates a GPS receiver with a wireless modem. Second, a mobile worker can use our proprietary hardware device embedded with software and an integrated GPS 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. Installation in any type of vehicle 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 installed with our software application.

These platforms send and receive a variety of information from time to time and on demand. Such data include location, velocity, time and operational diagnostics. These data are transmitted to our data centers 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.

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.

To date, we have not sold our services outside the United States and Canada; however, we intend to expand our service offerings to additional countries in the future. We do not expect that revenues from international sales will be material in 2004. From 1998 through 2002, no single customer or group of related customers comprised 10% or more of total revenues. For the nine months ended September 30, 2003, one customer, Verizon Communications, represented 16% of total revenues.

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. Other than

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the three months ended September 30, 2003, we have incurred losses in each quarter since inception and may incur net losses in the future. At September 30, 2003, we had an accumulated deficit of $118.3 million. Our limited operating history makes it difficult to forecast future operating results. Even though we achieved profitability for the three months ended September 30, 2003, 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 currently estimate that as of June 30, 2004 we will have approximately 11,000 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.

In its Report on Form 10-K filed with the Securities and Exchange Commission on March 27, 2003, Verizon Wireless disclosed that it expects to cease operating its Cellular Digital Packet Data network at the end of 2005. We estimate that as of December 31, 2005 we will have 5,000 subscribers in their initial contract periods that are then using Verizon 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 Verizon 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/A for the year ended December 31, 2002 (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 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 September 30, 2003, our services have been available only by using our platform or a location- or wireless application protocol-enabled mobile telephone. Accordingly, through September 30, 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.

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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.

RESULTS OF OPERATIONS

Three and nine months ended September 30, 2003 and 2002


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2003			2002			2003			2002

Service revenue	$	13,113		$	8,657		$	35,851		$	23,865
Cost of service revenue (excluding intangibles amortization included below)		3,782			3,440			11,840			9,974
Intangibles amortization		11			418			445			1,246
Stock compensation - cost of service revenue		2			7			9			18

Total cost of service revenue		3,795			3,865			12,294			11,238

Service gross margin	$	9,318		$	4,792		$	23,557		$	12,627

Service gross margin percentage		71	%		55	%		66	%		53	%

Service revenue

Service revenue increased 51% and 50% for the three months and nine months ended September 30, 2003 from the same periods in 2002, as a direct result of the growth in our installed base of subscribers to our services. Subscribers were 117,000, 109,000, and 90,000, at September 30, 2003, June 30, 2003, and December 31, 2002, respectively; subscribers were 84,000, 77,000, and 66,000 at September 30, 2002, June 30, 2002, and December 31, 2001, respectively. In addition to subscriber growth, our service revenue is affected by a number of factors, including the rate at which service features or add-ons are adopted and pricing associated with the size and term of customer contracts. Given the fixed nature of our arrangements with our customers and ratable revenue recognition, the impact on revenues of changes in current prices for products and services is tempered because revenues from new pricing are layered on top of revenues from existing subscribers. Price changes did not have a material impact on service revenue between periods. Achieved average monthly revenue per subscriber was approximately $38.68 for the three months ended September 30, 2003, up from $35.85 for the same period in 2002. Of the increase, approximately $0.92 was related to adoption of additional service capabilities and features by subscribers. The remaining increase of approximately $1.91 was the result of price changes associated with the types of services and size and term of contracts for new subscribers as those new revenues were layered on top of revenues from existing customers. Achieved average monthly revenue per subscriber was approximately $38.49 for the nine months ended September 30, 2003, up from $35.36 for the same period in 2002. Of the increase, approximately $0.93 was related to adoption of additional service capabilities and features by subscribers. The remaining increase of approximately $2.20 was the result of price changes associated with the types of services and size and term of contracts for new subscribers as those new revenues were layered on top of revenues from existing customers.

Cost of service revenue (excluding intangibles amortization)

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 related expenses and depreciation of our data centers. Cost of service revenue increased to $3.8 million from $3.4

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million for the three months ended September 30, 2003 and 2002, respectively. The increase in cost of service revenue resulted from an increase of $364,000 in direct service delivery expenses, consistent with growth in our installed base of subscribers, and an increase in employee-related costs of $171,000. These increases were offset by a reduction in depreciation expense of $220,000 as certain assets became fully depreciated. Cost of service revenue increased to $11.8 million from $10.0 million for the nine months ended September 30, 2003 and 2002, respectively. This increase in cost of service revenue resulted from increases in direct service delivery expenses of $1.7 million and in employee-related costs of $508,000. The increases are consistent with growth in our installed base of subscribers and were offset by a reduction in depreciation expense of $379,000 as certain assets became fully depreciated. Cost of service revenue headcount increased to 84 from 60 at September 30, 2003 and 2002, respectively. We believe that headcount increases during the next 12 months will be moderate. 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 revenue will be greater than the growth in cost of service revenue as we continue to add subscribers.

Service gross margin

During the three and nine months ended September 30, 2003 and 2002, service gross margins improved to 71% from 55% and to 66% from 53%, respectively, as a result of increased service revenue, associated with growth in our installed base of subscribers, and a smaller increase in overall cost of service revenue, including intangibles amortization. Average subscribers increased 40% and 38% for the three and nine months ended September 30, 2003 compared to the same periods in the prior year. Cost of service revenue includes fixed indirect expenses and, therefore, generally increases at rates slower than the growth in our installed base of subscribers.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2003			2002			2003			2002

Product revenue	$	3,503		$	2,659		$	10,275		$	7,609
Cost of product revenue (excluding intangibles amortization included below)		5,249			4,265			15,078			12,015
Stock compensation - cost of product revenue		11			25			25			81

Total cost of product revenue		5,260			4,290			15,103			12,096

Product gross deficit	$	(1,757	)	$	(1,631	)	$	(4,828	)	$	(4,487	)

Product gross deficit percentage		-50	%		-61	%		-47	%		-59	%

Product revenue

Product revenue increased 32% and 35% for the three and nine months ended September 30, 2003, respectively, from the same periods in 2002. This growth 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 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,

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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 new subscribers are added to our installed base, the amount of both deferred revenue and deferred costs recognized ratably increases. Upon completion of the initial term of a customer’s contract, recognition of both deferred product revenue and product cost is 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 rose to $5.2 million for the three months ended September 30, 2003 from $4.3 million for the same period in 2002. The increase in cost of product revenue resulted from an increase in product repair and refurbishment costs of $397,000, an increase in provisions for inventory valuation of $396,000, and an increase in deferred product cost recognized during the period of $194,000. Cost of product revenue rose to $15.1 million from $12.0 million for the nine months ended September 30, 2003 and 2002, respectively. The increase in cost of product revenue resulted from a $1.2 million increase in deferred product cost recognized during the period as well as increases in product repair and refurbishment costs of $1.1 million.

Product gross deficit

During the three and nine months ended September 30, 2003 and 2002, product gross deficit improved to (50)% from (61)% and to (47)% from (59%), respectively. Increases in product revenue from deferrals associated with the growth in our installed base of subscribers were greater than the related increases in product costs from deferrals. Other costs, including repair expenses, provisions for inventory valuation and the loss recognized on the excess of product cost over product revenue also increased between the three and nine months ended September 30, 2003 and 2002. While we expect the selling prices of our products to be approximately equal to or to exceed product costs in future periods, after considering other costs, such as those described in “Cost of product revenue” above, we do not expect to generate significant product gross margin during the next twelve months.

Sales and marketing expenses

Sales and marketing expenses consist of employee salaries, sales commissions and marketing and promotional expenses. Sales and marketing expenses increased to $2.9 million for the three months ended September 30, 2003 from $2.4 million for the same period in 2002. The increase was attributed to higher employee-related costs of $342,000, a result of a higher average sales and marketing headcount during the period, and increases in sales commissions of $122,000, associated with additions to our installed base of subscribers. Sales and marketing expenses increased to $8.3 million for the nine months ended September 30, 2003 from $8.0 million for the same period in 2002. The increase resulted from increases in sales commissions of $429,000, related to increased subscriber additions over the prior year, and increased employee-related costs of $404,000, resulting from a higher average sales and marketing headcount during the period. These increases were offset in part by decreases in travel expenses of $178,000 and decreases in depreciation of $174,000, as certain assets became fully depreciated. Sales and marketing headcount decreased to 81 at September 30, 2003 from 83 at September 30, 2002. We expect sales and marketing expenses to increase during the next twelve months 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 costs related to development personnel and consultants, as well as expenses associated with software and hardware development. Research and development expenses decreased to $1.4 million for the three months ended September 30, 2003 from $1.5 million for the same period in 2002. This decrease was the result of a $76,000 decline in depreciation expense as certain assets became fully depreciated. Research and development headcount decreased to 57 at September 30, 2003 from 61 at September 30, 2002. Research and development expenses declined to $4.0 million for the nine months ended September 30, 2003 from $4.5 million for the same period in 2002. This decrease was the result of a reduction in

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depreciation expense of $199,000, as certain assets became fully depreciated, decreases in employee salaries and costs of $189,000, associated with a reduction in average research and development headcount, and a decrease of $155,000 in indirect allocated costs. We anticipate, however, that research and development expenses will increase in future periods as we develop and introduce new products and services, including modest increases in consultant and employee-related expenses associated with those introductions.

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 and the provision for doubtful accounts. General and administrative expenses increased to $2.2 million for the three months ended September 30, 2003 from $1.9 million for the same period in 2002. The increase was the result of increases in professional fees of $140,000, higher employee-related costs of $124,000, resulting from an increase in average general and administrative headcount during the period, and increases in general operating expenses such as insurance, subscriptions and bank fees of $52,000. General and administrative expenses increased to $6.8 million for the nine months ended September 30, 2003 from $6.7 million for the same period in 2002. The increase was due to professional fees of $274,000, increases in tax provisions related to estimated sales and use tax liabilities of $200,000 and employee-related costs of $114,000. These increases were offset by a decrease in the provision for doubtful accounts of $493,000. General and administrative headcount increased to 51 at September 30, 2003 from 48 at September 30, 2002. We believe that general and administrative expenses, other than the provision for doubtful accounts, will increase during the next twelve months as we incur such expenses in anticipation of the growth of the business and increased costs of operating as a public company.

Intangibles amortization

Intangibles amortization relates to the intangible assets, purchased technology, that are being amortized over estimated useful lives of two to three years.

Stock compensation expense

Deferred stock compensation related to stock option grants to employees and consultants was $30,000 at September 30, 2003. Deferred stock compensation is amortized on an accelerated basis over the vesting period of individual awards. Amortization expense of deferred stock compensation decreased to $154,000 from $380,000 and to $441,000 from $817,000 for the three and nine months ended September 30, 2003 and 2002, respectively.

Interest income (expense), net

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 $151,000 from $202,000 and decreased to $436,000 from $656,000 in the three and nine months ended September 30, 2003 and 2002, respectively. The decreases resulted from lower interest rates on invested balances.

Other income (expense), net

During the three and nine month periods ended September 30, 2003 and 2002, other expense consisted primarily of 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.

Net income (loss)

Net income (loss) increased to $1.1 million from $(2.8) million for the three months ended September 30, 2003 and 2002, respectively. Net loss decreased to $435,000 for the nine months ended September 30, 2003 from

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$12.2 million for the same period in 2002. Our operating costs increased to $15.7 million from $14.3 million for the three months ended September 30, 2003 and 2002, respectively, and increased to $47.0 million from $43.3 million for the nine months ended September 30, 2003 and 2002, respectively. The impact of this increase in expenses was accompanied by an increase in revenues to $16.6 million from $11.3 million for the three months ended September 30, 2003 and 2002, respectively, and an increase in revenues to $46.1 million from $31.5 million for the nine months ended September 30, 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 September 30, 2003, we had $98.4 million of cash and cash equivalents and $2.0 million of restricted short-term investments. We held no available-for-sale securities at September 30, 2003.

We currently have a $2.0 million revolving line of credit facility against which there were no borrowings as of September 30, 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 at September 30, 2003 totaling $734,000 and expiring October 29, 2003 and December 31, 2003. This credit facility expires in November 2003.

Net cash provided by (used in) operating activities was $5.3 million and $(6.1) million for the nine months ended September 30, 2003 and 2002, respectively. This improvement in net cash provided by (used in) operating activities was primarily attributed to net income, net of non-cash expenses and charges (depreciation and amortization, loss on disposal of property and equipment, amortization of deferred stock compensation, provision for inventory reserves and provisions for doubtful accounts and sales returns) of $2.9 million for the nine months ended September 30, 2003 versus a net loss of $5.7 million on the same basis for the nine months ended September 30, 2002. Cash provided by operating activities during the nine months ended September 30, 2003 also increased in comparison to the prior year period due to decreases in accounts receivable and inventory. Improvements in accounts receivable collections as compared to increases in customer billings also contributed to increased operating cash flows in the nine months ended September 30, 2003 compared to the same period in the prior year.

At September 30, 2003 approximately $1.1 million of our gross accounts receivable were over 90 days old. We believe we have adequately provided allowances as of September 30, 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. We record 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. Deferred product costs are recorded at the time of shipment and deferred product revenue is recorded at the time of installation. As a result, deferred product costs will generally exceed deferred revenue as we continue to grow our business. At September 30, 2003, total deferred product costs of $18.1 million exceeded total deferred revenue by $2.5 million.

Net cash used in investing activities during the nine months ended September 30, 2003 was $576,000 and primarily resulted from purchases of $1.1 million of property and equipment, offset in part by the sale of restricted short-term investments and changes in other assets. Net cash used in investing activities during the nine months ended September 30, 2002 was $580,000 and resulted from purchases of $445,000 of property and equipment and changes in other assets.

Net cash provided by financing activities was $58.0 million and $1.7 million for the nine months ended September 30, 2003 and 2002, respectively. Cash provided was attributed to proceeds from the sale of common stock of $56.1 million and $1.2 million and proceeds from payments on notes receivable issued to stockholders of $2.0 million and $554,000 for the nine months ended September 30, 2003 and 2002, respectively.

We believe that our cash and cash equivalents will be sufficient to meet our anticipated cash needs for operating expenses, working capital and capital expenditures for at least the next eighteen 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.

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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.

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 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:

• changes in the market for mobile resource management services;

• 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 the productivity of our distribution channels;

• 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;

• general economic and political conditions;

• wireless networks, positioning systems and Internet infrastructure owned and controlled by others; and

• any need to migrate to new wireless networks, which could cause our products to be incompatible with new wireless networks or out of date.

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.

If, pursuant to its announcement, AT&T Wireless ceases to operate its Cellular Digital Packet Data network in 2004, we may lose subscribers and our revenues could decrease.

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 services to certain of our customers, our revenues would decrease and customer satisfaction would suffer.

If, pursuant to its announcement, Verizon Wireless ceases to operate its Cellular Digital Packet Data network by the end of 2005, we may lose subscribers and our revenues could decrease.

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Verizon Wireless has indicated that it expects to cease operating its Cellular Digital Packet Data network by the end of 2005. If the termination of Verizon Wireless’ Cellular Digital Packet Data network disrupts our ability to deliver services to certain of our customers, our revenues would decrease and customer satisfaction would suffer.

If wireless carriers on which we depend for service decide to abandon or do not continue to expand their wireless networks, we may lose subscribers and our revenues could decrease.

Currently our services function on General Packet Radio Services networks, Code Division Multiple Access 1XRTT networks, Integrated Digital Enhanced Networks and Cellular Digital Packet Data networks. These protocols cover only portions of the United States 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. 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 some of our services outside the current coverage area.

If one or more of the agreements we have with wireless carriers is terminated and as a result we are unable to offer services to our customers within a carrier’s coverage area, we may be unable to deliver our services, we may lose subscribers, and our revenues could decrease.

Our existing agreements with wireless carriers may in some cases be terminated upon as little as 15 days’ written notice or immediately upon the occurrence of certain conditions. In connection with ceasing operation of their Cellular Digital Packet Data networks, AT&T Wireless and/or Verizon Wireless may seek to terminate or not to renew their contracts 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 services to our customers in that coverage area.

If our customers do not have access to sufficient capacity on reliable wireless networks, we may be unable to deliver our services, we may lose subscribers, 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 tunnels 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.

We have historically incurred losses and we may incur losses in the future.

Other than for the three months ended September 30, 2003, we have not been profitable. At September 30, 2003, we had an accumulated deficit of $118.3 million. To become profitable and sustain profitability, we will need to generate significant revenues to offset our cost of revenues and our 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. 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. 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, we may be unprofitable.

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 continue to achieve profitability or continue to grow. We face a number of risks encountered by companies in the mobile resource management market, including:

• our need to respond to technological change and introduce reliable and robust products and

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services that meet the demanding needs of customers;

• the uncertainty of market acceptance of our services;

• our need to expand and manage the expansion of our marketing, sales and support organizations, as well as our distribution channels;

• our ability to anticipate and respond to market competition;

• wireless networks, positioning systems and Internet infrastructure owned and controlled by others; and

• any need to migrate to new wireless networks, which could cause our products to be incompatible with new wireless networks or out of date.

We may not successfully address these risks, and our business strategy may not be successful.

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. 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 revenues may decrease, we may not be able to recover our costs and our competitive position may be harmed.

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

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. 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. We cannot be sure that alternative sources for key components used in our products, such as 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. Our sole suppliers and manufacturers of key components include:

• Orient Semiconductor Electronics, our sole manufacturer of Internet Location Managers;

• Motorola, our sole supplier of wireless modems operable on Integrated Digital Enhanced Networks and of microcontrollers for our Internet Location Manager; and

• Taiwan Semiconductor Manufacturing Company, our sole manufacturer of our GPS digital receiver chips.

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

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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, which could reduce our revenues.

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 efficiently businesses or technologies acquired in the future with our pre-existing business or technologies;

• 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.

We face competition from internal development teams of potential customers and from existing and potential competitors, which could limit our ability to acquire subscribers and 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 and those of our competitors primarily on the basis of the functionality, ease of use, quality, price, geographic coverage of services and corporate financial strength. As the demand by businesses for mobile resource management services increases, the quality, functionality and breadth of competing products and services will likely improve and new competitors will likely enter our market. In addition, the widespread adoption of industry standards may make it easier for new market entrants or existing competitors to improve their existing services, to offer some or all of the services we offer or may offer in the future, or to offer new services that we do not offer. We also do not know to what extent network infrastructure developers and wireless network operators will seek to provide integrated wireless communications, Global Positioning System, software applications, transaction processing and Internet solutions, including access devices developed internally or through captive suppliers. If we are unable to compete successfully, it may harm our business, which in turn may limit our ability to acquire or retain subscribers, resulting in a loss of market share and revenues. We face competition from a number of different business productivity solutions, including:

• solutions developed internally by our prospective customers’ information technology staffs;

• discrete means of communication with mobile workers, such as pagers, two-way radios, handheld devices and wireless telephones;

• solutions targeted at specific vertical markets, such as services offered by Qualcomm that monitor assets in the long-haul transportation sector; and

• solutions offered by smaller market entrants.

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

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 wireless 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.

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 operations depend upon our ability to maintain and protect our computer systems at our co-located data centers in Ashburn, Virginia and Redwood City, California, which is on or near earthquake fault zones. 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. Within each of our data centers, we have fully redundant systems; however, in the event of a system or network failure, the process of shifting access to customer data from one data center to the other would be performed manually, and could result in a further disruption to our services. Any disruption to our services could cause us to lose customers or revenue, or face litigation, customer service or repair work that would involve substantial costs and distract management from operating our business.

We depend on Global Positioning System technology owned and controlled by others. If we do not have continued access to GPS technology or 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. GPS 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 to function and customer satisfaction would suffer.

In addition, the U.S. government could decide not to continue to operate and maintain GPS 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 GPS 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 GPS technology, our business will suffer.

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 MRM market. Products and services that address this market 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.

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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.

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 United States 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 United States. Therefore, the measures we take to protect our proprietary rights may not be adequate.

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 platforms or their deployment. 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 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.

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

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, 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 wireless carriers, independent sales agents and a limited number of distribution partners. These sales channel partners require training in selling our products and services and it will take time for these partners to achieve productivity, if at all. We may not be able to establish relationships

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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 may cause a loss in sales, impair our ability to effectively manage our operations or impair our ability to develop and support services and products.

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 expertise in wireless communications, Global Positioning Systems, hosted software applications, transaction processing and the Internet. 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.

Government regulations and standards could subject us to increased regulation, increase our costs of operations or reduce our opportunities to earn revenue.

In addition to regulations applicable to businesses in general, we may also be subject to direct regulation by U.S. governmental agencies, including the Federal Communications Commission and Department of Defense. These regulations may impose licensing requirements, privacy safeguards relating to certain subscriber information, 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 GPS 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.

Fluctuations in the value of foreign currencies could result in increased product costs and operating expenses.

We have suppliers and manufacturers that are located outside the United States. Some transactions relating to supply and development agreements may be conducted in currencies other than the U.S. dollar, and fluctuations in the value of foreign currencies relative to the U.S. dollar could cause us to incur currency exchange costs. In addition, some of our transactions denominated in U.S. dollars may be subject to currency exchange rate risk. We cannot predict the effect of exchange rate fluctuations on our future operating results. Should there be a sustained increase in average exchange rates for the local currencies in these countries, our suppliers and manufacturers may request a price increase at the end of the contract period.

Geopolitical, economic and military conditions, including terrorist attacks and other acts of war, may materially and adversely affect the markets on which our common stock trades, the markets in which we operate, our operations and our profitability.

Terrorist attacks and other acts of war, and any response to them, may lead to armed hostilities and such developments would likely cause instability in financial markets. Armed hostilities and terrorism may directly impact our facilities, personnel and operations which are located in the United States and India, as well as those of our clients. Furthermore, severe terrorist attacks or acts of war may result in temporary halts of commercial activity in the affected regions, and may result in reduced demand for our products. These developments could have a material adverse effect on our business and the trading price of our common stock.

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

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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 nature and growth rate of our business and the mobile resource management market, the market price of our common stock may rise and fall in response to:

• quarterly variations in operating results;

• failure to achieve operating results anticipated by securities analysts and investors;

• changes in estimates of our financial performance or changes in recommendations by securities analysts;

• announcements of technological or competitive developments;

• the gain or loss of a significant customer or order;

• disposition of shares of our common stock held by large investors; and

• acquisitions or strategic alliances by us or our competitors.

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.

As of November 3, 2003, a limited number of stockholders own approximately 35.4% of our stock and may act, or prevent certain types of corporate actions, to the detriment of other stockholders.

Our directors, officers and greater than 5% stockholders own, as of November 3, 2003, approximately 35.4% of our outstanding common stock. Accordingly, these stockholders may, if they act together, exercise significant influence over all matters requiring stockholder approval, including the election of a majority of the directors and the determination of significant corporate actions. This concentration could also have the effect of delaying or preventing a change in control that could otherwise be beneficial to our stockholders.

Our certificate of incorporation and bylaws and state law contain provisions that could discourage a takeover.

We have adopted a certificate of incorporation and bylaws, which in addition to state law, may discourage, delay or prevent a merger or acquisition that a stockholder may consider favorable. These provisions include the following:

• establishing a classified board in which only a portion of the total board members will be elected at each annual meeting;

• authorizing the board to issue preferred stock;

• prohibiting cumulative voting in the election of directors;

• limiting the persons who may call special meetings of stockholders;

• prohibiting stockholder action by written consent; and

• establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

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We have adopted a certificate of incorporation that permits our board to issue shares of preferred stock without stockholder approval, which means that our board could issue shares with special voting rights or other provisions that could deter a takeover. In addition to delaying or preventing an acquisition, the issuance of a substantial number of shares of preferred stock could adversely affect the price of our common stock and dilute existing stockholders.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Exchange

We transact business primarily in U.S. dollars. We are subject, however, to adverse movements in foreign currency exchange rates in those countries where we conduct business. To date, the effect of fluctuations in foreign currency exchange rates on expenses has not been material. Operating expenses incurred by our subsidiary in India are denominated in Indian rupees. This subsidiary was formed in November 1999 and provides research and development and customer service activities. We hold fixed-price agreements denominated in U.S. dollars with certain foreign-based suppliers: Orient Semiconductor Electronics, in Taiwan, manufactures the Internet Location Manager; Sierra Wireless, in Canada, provides a modem for the Internet Location Manager; Taiwan Semiconductor Manufacturing Company, in Taiwan, manufactures our Global Positioning System receiver chips; and Micronet, in Israel, supplies our Internet Data Terminal. Should there be a sustained increase in average exchange rates for the local currency in any of the foregoing countries, our suppliers may request increased pricing on any new agreements. If this were to occur for all of these currencies and with each of these suppliers, a 10 percent increase in average exchange rates could increase our product costs by approximately 1 percent.

We do not use derivative financial instruments for speculative trading purposes, nor do we currently hedge any foreign currency exposure to offset the effects of changes in foreign exchange rates. Similarly, we do not use financial instruments to hedge operating expenses of our subsidiary in India.

Item 4. Controls and Procedures.

Within 90 days prior to the date of this Report, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-14(c) and 15d-14(c) of the Securities Exchange Act of 1934 (the “Exchange Act”). Based upon that evaluation, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures are effective. Our disclosure controls and procedures are designed to provide a reasonable level of assurance of reaching our desired disclosure control objectives and are effective in doing so.

There were no significant changes in our internal controls or in other factors that could significantly affect these internal controls subsequent to the date of their evaluation.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we are subject to claims in legal proceedings arising in the normal course of our business. We do not believe that we are party to any pending legal action that could reasonably be expected to have a material adverse effect on our business, financial condition or operating results.

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Item 4. Submission of Matters to a Vote of Security Holders.

None.

Item 5. Other Information.

In the third quarter of 2003, we completed a public offering of 4,000,000 shares of newly issued common stock, and an additional 2,500,000 shares of common stock from certain selling stockholders, at a public offering price of $14.00 per share. We received from the offering, after underwriting discounts and selling expenses, net proceeds of approximately $51.9 million. We intend to use the net proceeds for capital expenditures, working capital and other general corporate purposes. We may use a portion of the net proceeds to acquire complementary products, technologies or businesses. The managing underwriters for the offering were UBS Securities LLC, U.S. Bancorp Piper Jaffray, Inc., Needham & Company, Inc. and Raymond James & Associates, Inc.

Item 6. Exhibits and Reports on Form 8-K.

(a) Exhibits


31.1		Rule 13a-14(a)/15d-14(a) Certification.
31.2		Rule 13a-14(a)/15d-14(a) Certification.
32.1		Section 1350 Certification.
32.2		Section 1350 Certification.

(b) The Company filed the following reports on Form 8-K during the three months ended September 30, 2003:

• A current report on Form 8-K was filed on July 3, 2003 pursuant to Item 5 (Other Events and Regulation FD Disclosure) and Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits).

• A current report on Form 8-K was filed on July 3, 2003 pursuant to Item 5 (Other Events and Regulation FD Disclosure) and Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits).

• A current report on Form 8-K was filed on July 24, 2003 pursuant to Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits) and Item 9 (Regulation FD Disclosure), as amended on Form 8-K/A filed on July 28, 2003.

• A current report on Form 8-K was filed on August 20, 2003 pursuant to Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits) and Item 9 (Regulation FD Disclosure).

• A current report on Form 8-K was filed on September 4, 2003 pursuant to Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits) and Item 9 (Regulation FD Disclosure).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AT ROAD, INC.

By: /s/ Thomas C. Hoster

Thomas C. Hoster
Chief Financial Officer
(Principal Financial and Accounting Officer)

Date: November 14, 2003

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Exhibit Index


Exhibits

31.1		Rule 13a-14(a)/15d-14(a) Certification.
31.2		Rule 13a-14(a)/15d-14(a) Certification.
32.1		Section 1350 Certification.
32.2		Section 1350 Certification.

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	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.


	As of November 3, 2003 there were 53,559,091 shares of the registrant’s Common Stock outstanding.

	•		changes in the market for mobile resource management services;

	•		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 the productivity of our distribution channels;

	•		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;

	•		general economic and political conditions;

	•		wireless networks, positioning systems and Internet infrastructure owned and controlled by others; and

	•		any need to migrate to new wireless networks, which could cause our products to be incompatible with new wireless networks or out of date.

			services that meet the demanding needs of customers;

	•		the uncertainty of market acceptance of our services;

	•		our need to expand and manage the expansion of our marketing, sales and support organizations, as well as our distribution channels;

	•		our ability to anticipate and respond to market competition;

	•		wireless networks, positioning systems and Internet infrastructure owned and controlled by others; and

	•		any need to migrate to new wireless networks, which could cause our products to be incompatible with new wireless networks or out of date.

	•		Orient Semiconductor Electronics, our sole manufacturer of Internet Location Managers;

	•		Motorola, our sole supplier of wireless modems operable on Integrated Digital Enhanced Networks and of microcontrollers for our Internet Location Manager; and

	•		Taiwan Semiconductor Manufacturing Company, our sole manufacturer of our GPS digital receiver chips.

	•		diversion of management’s attention from our core business objectives and other business concerns;

	•		failure to integrate efficiently businesses or technologies acquired in the future with our pre-existing business or technologies;

	•		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.

	•		solutions developed internally by our prospective customers’ information technology staffs;

	•		discrete means of communication with mobile workers, such as pagers, two-way radios, handheld devices and wireless telephones;

	•		solutions targeted at specific vertical markets, such as services offered by Qualcomm that monitor assets in the long-haul transportation sector; and

	•		solutions offered by smaller market entrants.

	•		quarterly variations in operating results;

	•		failure to achieve operating results anticipated by securities analysts and investors;

	•		changes in estimates of our financial performance or changes in recommendations by securities analysts;

	•		announcements of technological or competitive developments;

	•		the gain or loss of a significant customer or order;

	•		disposition of shares of our common stock held by large investors; and

	•		acquisitions or strategic alliances by us or our competitors.

	•		establishing a classified board in which only a portion of the total board members will be elected at each annual meeting;

	•		authorizing the board to issue preferred stock;

	•		prohibiting cumulative voting in the election of directors;

	•		limiting the persons who may call special meetings of stockholders;

	•		prohibiting stockholder action by written consent; and

	•		establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted on by stockholders at stockholder meetings.

	•		A current report on Form 8-K was filed on July 3, 2003 pursuant to Item 5 (Other Events and Regulation FD Disclosure) and Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits).

	•		A current report on Form 8-K was filed on July 3, 2003 pursuant to Item 5 (Other Events and Regulation FD Disclosure) and Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits).

	•		A current report on Form 8-K was filed on July 24, 2003 pursuant to Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits) and Item 9 (Regulation FD Disclosure), as amended on Form 8-K/A filed on July 28, 2003.

	•		A current report on Form 8-K was filed on August 20, 2003 pursuant to Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits) and Item 9 (Regulation FD Disclosure).

	•		A current report on Form 8-K was filed on September 4, 2003 pursuant to Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits) and Item 9 (Regulation FD Disclosure).