UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2004
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-31511
AT ROAD, INC.
| 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 April 30, 2004 there were 54,196,579 shares of the registrant’s Common Stock outstanding.
1
INDEX
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
AT ROAD, INC.
| March 31, | December 31, | |||||||
| 2004 |
2003 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 14,610 | $ | 103,669 | ||||
Short-term investments |
93,628 | 2,000 | ||||||
Accounts receivable, net |
6,105 | 7,109 | ||||||
Inventories |
4,019 | 2,425 | ||||||
Deferred product costs |
11,507 | 11,921 | ||||||
Prepaid expenses and other |
1,642 | 1,269 | ||||||
Total current assets |
131,511 | 128,393 | ||||||
Property and equipment, net |
2,300 | 2,298 | ||||||
Deferred product costs |
7,312 | 7,270 | ||||||
Intangible assets, net |
18 | 28 | ||||||
Other assets |
1,300 | 1,027 | ||||||
Total assets |
$ | 142,441 | $ | 139,016 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 4,747 | $ | 5,057 | ||||
Accrued liabilities |
5,621 | 5,465 | ||||||
Deferred revenue and customer deposits |
9,859 | 9,751 | ||||||
Total current liabilities |
20,227 | 20,273 | ||||||
Deferred revenue |
6,391 | 6,582 | ||||||
Other long-term liabilities |
17 | 33 | ||||||
Total liabilities |
26,635 | 26,888 | ||||||
Commitments and contingencies (Note 8) |
||||||||
Stockholders’ equity: |
||||||||
Preferred stock, $0.0001 par value,
10,000,000 shares authorized, shares
issued and outstanding: none at March 31,
2004 and December 31, 2003 |
— | — | ||||||
Common stock, $0.0001 par value,
250,000,000 shares authorized, shares
issued and outstanding:53,864,085 at
March 31, 2004, 53,700,445 at December 31, 2003 |
228,956 | 228,441 | ||||||
Deferred stock compensation |
— | (4 | ) | |||||
Notes receivable from stockholders |
(37 | ) | (87 | ) | ||||
Accumulated other comprehensive loss |
(1 | ) | — | |||||
Accumulated deficit |
(113,112 | ) | (116,222 | ) | ||||
Total stockholders’ equity |
115,806 | 112,128 | ||||||
Total liabilities and stockholders’ equity |
$ | 142,441 | $ | 139,016 | ||||
See notes to consolidated financial statements
3
At Road, Inc.
| Three Months Ended | ||||||||
| March 31, |
||||||||
| 2004 |
2003 |
|||||||
Revenues: |
||||||||
Service |
$ | 14,027 | $ | 10,603 | ||||
Product |
3,865 | 3,138 | ||||||
Total revenues |
17,892 | 13,741 | ||||||
Costs and expenses: |
||||||||
Cost of service revenue (excluding intangibles amortization
included below) |
3,963 | 3,792 | ||||||
Cost of product revenue |
4,405 | 4,637 | ||||||
Intangibles amortization |
10 | 424 | ||||||
Sales and marketing |
3,111 | 2,597 | ||||||
Research and development |
1,367 | 1,336 | ||||||
General and administrative |
2,182 | 2,218 | ||||||
Stock compensation(*) |
4 | 192 | ||||||
Total costs and expenses |
15,042 | 15,196 | ||||||
Income (loss) from operations |
2,850 | (1,455 | ) | |||||
Other income, net: |
||||||||
Interest income, net |
254 | 148 | ||||||
Other income, net |
6 | 4 | ||||||
Total other income, net |
260 | 152 | ||||||
Net income (loss) |
$ | 3,110 | $ | (1,303 | ) | |||
Net income (loss) per share: |
||||||||
Basic |
$ | 0.06 | $ | (0.03 | ) | |||
Diluted |
$ | 0.05 | $ | (0.03 | ) | |||
Shares used in calculating net income (loss) per share: |
||||||||
Basic |
53,771 | 47,577 | ||||||
Diluted |
58,298 | 47,577 | ||||||
(*)Stock compensation: |
||||||||
Cost of service revenue |
$ | — | $ | 5 | ||||
Cost of product revenue |
— | 10 | ||||||
Sales and marketing |
1 | 5 | ||||||
Research and development |
1 | 35 | ||||||
General and administrative |
2 | 137 | ||||||
Total |
$ | 4 | $ | 192 | ||||
See notes to condensed consolidated financial statements.
4
At Road, Inc.
| Common Stock |
Deferred Stock |
Notes Receivable from |
Accumulated Other Comprehensive |
Accumulated | Stockholders’ | Total Comprehensive |
||||||||||||||||||||||||||
| Shares |
Amount |
Compensation |
Stockholders |
Loss |
Deficit |
Equity |
Income (Loss) |
|||||||||||||||||||||||||
BALANCES, January 1, 2003 |
47,747,156 | $ | 170,610 | $ | (491 | ) | $ | (2,068 | ) | $ | — | $ | (117,884 | ) | $ | 50,167 | ||||||||||||||||
Net loss |
(1,303 | ) | (1,303 | ) | $ | (1,303 | ) | |||||||||||||||||||||||||
Exercise of stock options |
203,432 | 263 | 263 | |||||||||||||||||||||||||||||
Collection of notes receivable from stockholders |
26 | 26 | ||||||||||||||||||||||||||||||
Deferred stock compensation |
5 | (5 | ) | — | ||||||||||||||||||||||||||||
Reversal of deferred stock compensation due to employee
terminations |
(10 | ) | 10 | — | ||||||||||||||||||||||||||||
Amortization of deferred stock
compensation |
— | — | 192 | — | — | — | 192 | |||||||||||||||||||||||||
BALANCES, March 31, 2003 |
47,950,588 | $ | 170,868 | $ | (294 | ) | $ | (2,042 | ) | $ | — | $ | (119,187 | ) | $ | 49,345 | ||||||||||||||||
Net income |
2,965 | 2,965 | $ | 2,965 | ||||||||||||||||||||||||||||
Common stock issued through secondary public offering, net
of issuance costs |
4,000,000 | 51,889 | 51,889 | |||||||||||||||||||||||||||||
Shares issued through employee stock purchase plan |
563,295 | 1,484 | 1,484 | |||||||||||||||||||||||||||||
Exercise of stock options |
1,186,562 | 4,215 | 4,215 | |||||||||||||||||||||||||||||
Collection of notes receivable from stockholders |
1,955 | 1,955 | ||||||||||||||||||||||||||||||
Reversal of deferred stock compensation due to employee
terminations |
(15 | ) | 15 | — | ||||||||||||||||||||||||||||
Amortization of deferred stock
compensation |
— | — | 275 | — | — | — | 275 | |||||||||||||||||||||||||
BALANCES, December 31, 2003 |
53,700,445 | $ | 228,441 | $ | (4 | ) | $ | (87 | ) | $ | — | $ | (116,222 | ) | $ | 112,128 | ||||||||||||||||
Net income |
3,110 | 3,110 | $ | 3,110 | ||||||||||||||||||||||||||||
Unrealized loss on short-term investments
|
(1 | ) | (1 | ) | (1 | ) | ||||||||||||||||||||||||||
Exercise of stock options |
163,640 | 515 | 515 | $ | 3,009 | |||||||||||||||||||||||||||
Collection of notes receivable from stockholders |
50 | 50 | ||||||||||||||||||||||||||||||
Amortization of deferred stock
compensation |
— | — | 4 | — | — | — | 4 | |||||||||||||||||||||||||
BALANCES, March 31, 2004 |
53,864,085 | $ | 228,956 | $ | — | $ | (37 | ) | $ | (1 | ) | $ | (113,112 | ) | $ | 115,806 | ||||||||||||||||
See notes to consolidated financial statements.
5
At Road, Inc.
| Three Months Ended | ||||||||
| March 31, |
||||||||
| 2004 |
2003 |
|||||||
Cash flows from operating activities: |
||||||||
Net income (loss) |
$ | 3,110 | $ | (1,303 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
||||||||
Depreciation and amortization |
300 | 1,142 | ||||||
Loss on disposal of property and equipment |
(2 | ) | 4 | |||||
Amortization of deferred stock compensation |
4 | 192 | ||||||
Provision for inventory reserves |
(14 | ) | 60 | |||||
Provision for doubtful accounts |
(98 | ) | 43 | |||||
Change in assets and liabilities: |
||||||||
Accounts receivable |
1,102 | 801 | ||||||
Inventories |
(1,580 | ) | 593 | |||||
Deferred product costs |
372 | (1,762 | ) | |||||
Prepaid expenses and other |
(373 | ) | 21 | |||||
Accounts payable |
(310 | ) | 297 | |||||
Accrued and other liabilities |
140 | (526 | ) | |||||
Deferred revenue and customer deposits |
(83 | ) | 1,614 | |||||
Net cash provided by (used in) operating activities |
2,568 | (1,176 | ) | |||||
Cash flows from investing activities: |
||||||||
Purchase of property and equipment |
(290 | ) | (104 | ) | ||||
Purchases of short-term investments |
(91,628 | ) | — | |||||
Purchases of restricted short-term investments |
— | (4 | ) | |||||
Other assets |
(274 | ) | (28 | ) | ||||
Net cash used in investing activities |
(92,192 | ) | (136 | ) | ||||
Cash flows from financing activities: |
||||||||
Net proceeds from sale of common stock |
515 | 263 | ||||||
Proceeds from payments on notes receivable issued to stockholders |
50 | 26 | ||||||
Net cash provided by financing activities |
565 | 289 | ||||||
Net increase (decrease) in cash and cash equivalents |
(89,059 | ) | 1,329 | |||||
Cash and cash equivalents: |
||||||||
Beginning of period |
103,669 | 35,659 | ||||||
End of period |
$ | 14,610 | $ | 36,988 | ||||
Non-cash investing and financing activities: |
||||||||
Deferred stock compensation |
$ | — | $ | 5 | ||||
Reversal of deferred stock compensation |
$ | — | $ | 10 | ||||
See notes to condensed consolidated financial statements.
6
At Road, Inc.
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 (consisting only of normal recurring 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 to be expected 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 for the year ended December 31, 2003(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.
Note 2 — Basic and Diluted Net Income (Loss) per Share
Basic net income (loss) per share excludes the effect of dilutive securities and is computed by dividing net income (loss) by the weighted average common shares outstanding (excluding shares subject to repurchase). Diluted net income per share is computed by dividing net income by the weighted average common shares outstanding plus the weighted average number of common shares resulting from the assumed conversion of outstanding stock options and employee stock plan shares. 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, except per share data):
| Three Months Ended | ||||||||
| March 31, |
||||||||
| 2004 |
2003 |
|||||||
Net income (loss), basic and diluted |
$ | 3,110 | $ | (1,303 | ) | |||
Shares (denominator): |
||||||||
Basic |
||||||||
Weighted average common shares outstanding |
53,795 | 47,876 | ||||||
Weighted average common shares outstanding subject
to repurchase |
(24 | ) | (299 | ) | ||||
Shares used
in computation of basic net income (loss) per
share |
53,771 | 47,577 | ||||||
Diluted |
||||||||
Dilution impact from option equivalent shares |
4,317 | N/A | ||||||
Dilution impact from employee stock purchase plan |
18 | N/A | ||||||
Add back weighted average common
shares subject to repurchase |
24 | N/A | ||||||
Shares used in computation of
diluted net income (loss) per
share |
58,298 | 47,577 | ||||||
Basic net income (loss) per share |
$ | 0.06 | $ | (0.03 | ) | |||
Diluted net income (loss) per share |
$ | 0.05 | $ | (0.03 | ) | |||
The total number of options and restricted stock subject to repurchase excluded from the diluted net loss per share computation were as follows (in thousands):
7
| Three Months Ended | ||||||||
| March 31, |
||||||||
| 2004 |
2003 |
|||||||
Shares of common stock subject to
repurchase |
— | 209 | ||||||
Outstanding options |
— | 8,018 | ||||||
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):
| March 31, | December 31, | |||||||
| 2004 |
2003 |
|||||||
Raw materials |
$ | 1,691 | $ | 1,294 | ||||
Work in process |
314 | 177 | ||||||
Finished goods |
2,014 | 954 | ||||||
Total |
$ | 4,019 | $ | 2,425 | ||||
Deferred revenue and customer deposits consist of the following (in thousands):
| March 31, | December 31, | |||||||
| 2004 |
2003 |
|||||||
Deferred revenue |
$ | 9,372 | $ | 9,341 | ||||
Customer deposits |
487 | 410 | ||||||
Total |
$ | 9,859 | $ | 9,751 | ||||
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 as if the Company had 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 | ||||||||
| March 31, |
||||||||
| 2004 |
2003 |
|||||||
Stock Option Plans: |
||||||||
Risk free interest rate |
2.79 | % | 2.78 | % | ||||
Expected volatility |
105.9 | % | 119.0 | % | ||||
Expected life (in years) |
5 | 5 | ||||||
Expected dividend |
$ | 0.00 | $ | 0.00 | ||||
8
| Three Months Ended | ||||||||
| March 31, |
||||||||
| 2004 |
2003 |
|||||||
Employee Stock Purchase Plan: |
||||||||
Risk free interest rate |
1.02 | % | 1.30 | % | ||||
Expected volatility |
71.3 | % | 105.9 | % | ||||
Expected life (in years) |
0.5 | 0.5 | ||||||
Expected dividend |
$ | 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 net 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 | ||||||||
| March 31, |
||||||||
| 2004 |
2003 |
|||||||
Net income (loss) as reported |
$ | 3,110 | $ | (1,330 | ) | |||
Less: stock based employee compensation
expense included in reported net loss |
4 | 186 | ||||||
Add: stock-based employee compensation
expense determined under fair value based
method |
(2,343 | ) | (1,792 | ) | ||||
Pro forma net income (loss) |
$ | 771 | $ | (2,909 | ) | |||
Basic net income (loss) per share: |
||||||||
As reported |
$ | 0.06 | $ | (0.03 | ) | |||
Pro forma |
$ | 0.01 | $ | (0.06 | ) | |||
Diluted net income (loss) per share: |
||||||||
As reported |
$ | 0.05 | $ | (0.03 | ) | |||
Pro forma |
$ | 0.01 | $ | (0.06 | ) | |||
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 March 31, 2004 |
At December 31, 2003 |
|||||||||||||||||||||||
| Carrying | Accumulated | Carrying | Accumulated | |||||||||||||||||||||
| Amount |
Depreciation |
Net | ||||||||||||||||||||||