UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

          For the quarterly period ended November 30, 2004,

OR

          For the period from                     to                    

Commission file number 0-26140

REMOTE DYNAMICS, INC.

     Registrant’s telephone number, including area code            (972) 301-2000

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 þ No o

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS;

Indicate by check mark whether the registrant has filed all documents and reports required by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes þ No o

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

REMOTE DYNAMICS, INC. AND SUBSIDIARIES

Form 10-Q

INDEX

EXHIBITS:

2

REMOTE DYNAMICS, INC. AND SUBSIDIARIES

See accompanying notes to condensed consolidated financial statements.

3

REMOTE DYNAMICS, INC. AND SUBSIDIARIES

See accompanying notes to condensed consolidated financial statements.

4

REMOTE DYNAMICS, INC. AND SUBSIDIARIES

See accompanying notes to condensed consolidated financial statements.

5

REMOTE DYNAMICS, INC. AND SUBSIDIARIES

See accompanying notes to condensed consolidated financial statements.

6

REMOTE DYNAMICS, INC. AND SUBSIDIARIES

1. Business Overview, Reorganization and Going Concern

Business Overview

          Remote Dynamics, Inc., a Delaware corporation (the “Company”) markets, sells and supports automatic vehicle location (“AVL”) and mobile resource management solutions targeting companies that operate private vehicle fleets. Management believes the growth potential for AVL and mobile resource management solutions is significant. The Company estimates that there are currently approximately 21 million commercial fleet vehicles in operation in the United States and only one million AVL units are installed. Of the one million currently installed units, most are used on the long haul trucking and public transit segments, which the Company estimates are 30% -50% penetrated. Based on research conducted by the Company, management believes the market for AVL products may grow approximately 20% per year over the next three years.

          Management believes the marketplace of providers for AVL and mobile resource management solutions is fragmented with few players that are able to offer a high capacity platform, flexible software solutions and proven coast-to-coast service and support such as that provided by the Company. The Company believes to take advantage of the marketplace, it must bring to market new AVL and mobile resource management solutions that utilize wireless Internet protocol networks such as General Packet Radio System (“GPRS”) that provide the information, mapping and management reporting via a web-based and service bureau-based environment. Anticipated marketplace needs include; 1) ability for the AVL mobile device as a communications hub for personal computers and handheld devices, 2) ability to communicate with WiFi hotspots, 3) ability to integrate with a variety of in-vehicle sensors and 4) ability to integrate the AVL information into existing customer legacy applications.

          The Company began beta tests of its new product offering, REDIview™, during November 2004 with a full- scale commercial launch scheduled for the first calendar quarter of 2005. REDIview™ is an Internet and service bureau-based software application that provides an extensive array of real-time and accurate mapping, trip replay, and vehicle activity reports. In addition, REDIview™ includes a series of exception-based reports designed to highlight inefficiencies in the operations of a vehicle fleet. Utilizing Remote Dynamics’ proven, high-capacity network service center, customers may access their information securely through the Internet from any personal computer or certain other devices. REDIview™ incorporates technologies that allow for fast and effective integration into legacy applications operated by companies with vehicle fleets and mobile workers. This design allows companies to easily extend their existing supply chain management systems to the mobile workforce for transaction processing and customer fulfillment. REDIview™ was also designed to be hardware and network agnostic to provide the maximum flexibility in designing solutions that best fit the customer’s specific needs.

          The REDI 2000™ mobile data collection unit combines global positioning system (GPS) technologies along with the latest in wireless, Internet protocol-based communications to deliver, throughout the day, real-time location, speed, and other conditions of the vehicle on a minute-by-minute basis. In addition, the units may be configured to accept additional sensor inputs regarding operations of the vehicle and vehicle equipment.

          The Company believes introduction of these new products and associated web-based architecture will provide substantial savings in wireless transmission costs over the current GSM circuit-switched data Vehicle Management Information^TM (“VMI”) product and will further allow the Company to substantially reduce its customer support and maintenance costs by avoiding costly maintenance visits to customer premises to service the command and control center component of the VMI system. These new products form the basis of management’s business plan for the 2005 fiscal year and beyond and will be the foundation for expected growth in revenues and ultimately profitability for the Company. In addition, these products are designed to allow the Company to move to a recurring revenue model for the AVL marketplace, an important and necessary change to the Company’s revenue model to achieve overall sustained revenue growth and cash flow positive operations.

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Voluntary Bankruptcy Filing and Reorganization

          On February 2, 2004, (the “Commencement Date”), the Company and two of its wholly-owned subsidiaries, Caren (292) Limited (“Caren”) and Minorplanet Systems USA Limited (“Limited”) (the Company, Caren and Limited shall hereinafter collectively be referred to as the “Debtors”) filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the Northern District of Texas Dallas Division (the “Bankruptcy Court”), in order to facilitate the restructuring of their debt, trade liabilities, and other obligations. During the pendency of the bankruptcy, the Debtors remained in possession of their assets and operated as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of Bankruptcy Code, the Federal Rules of Bankruptcy Procedure and applicable court orders. On February 24, 2004, the United States Trustee appointed an official committee of unsecured creditors (the “Committee”) consisting of representatives of five (5) of the twenty (20) largest unsecured creditors.

          Under Section 362 of the Bankruptcy Code, the filing of the bankruptcy petition automatically stayed most actions against the Debtors including most actions to collect pre-petition indebtedness or exercise control over the property of the Debtors’ estate. The Bankruptcy Court established April 9, 2004 as the bar date for creditors and other parties-in-interest (other than governmental entities) to file their proofs of claims and proofs of interest. The bar date for governmental entities to file their proofs of claims and proofs of interest was May 10, 2004. On June 15, 2004, the Bankruptcy Court entered an order approving the Debtors’ motion for substantive consolidation of the estates of the Company, Caren and Limited.

          On May 24, 2004, the Bankruptcy Court entered an order approving the Debtors’ Second Amended Disclosure Statement (“Disclosure Statement”) for use to solicit the vote of creditors and equity interest holders on the acceptance or rejection of the Debtors’ plan of reorganization. The Bankruptcy Court also set the record date for purposes of voting on the Debtors’ plan of reorganization as May 21, 2004, approved solicitation/voting procedures of the plan of reorganization, and set hearing on the confirmation of the plan of reorganization.

          On June 17, 2004, the Debtors and the Committee reached a settlement agreement on several matters regarding the plan of reorganization subject to bankruptcy court approval (the “Committee Settlement”). The material terms of the Committee Settlement were as follows:

	•	For purposes of the Debtors’ plan of reorganization, the Debtors and Committee agreed that the value of the Debtors shall be equal to $25.3 million, such that holders of allowed unsecured claims under the plan of reorganization shall receive 75%, and prior equity holders shall receive 25%, of the 7,000,000 shares of new common stock issued upon confirmation of the plan of reorganization.
	•	The Debtors and the Committee reached agreement on the composition of the Board of Directors of the Company upon emergence from bankruptcy;
	•	The Debtors and the Committee reached agreement on the general terms and conditions of new employment agreements for senior management of the Company.
	•	The Debtors and the Committee reached agreement on the general terms and conditions under which restricted shares would be issued to senior management of the Company.
	•	The Debtors, HFS Minorplanet Funding LLC (“HFS”) and the Committee agreed to amend the April 15, 2004 letter agreement so that the price per share at which HFS may convert the unpaid principal and accrued interest due under the $1.575 million promissory note (later amended and increased to $2.0 million) into common stock of the Company, shall be set at $3.62 per share of common stock, provided that such amount shall be reduced (i) by twenty percent (20%) if such unpaid principal and accrued interest is converted within one (1) year after the date the promissory note was issued or (ii) by fifteen percent (15%) if such unpaid principal and accrued interest is converted more than one (1) year after the date the promissory note was issued.

          The Committee further agreed that it would not object to, and both the Committee and the Debtors, using their best efforts, would affirmatively support approval of the Debtors’ plan of reorganization, settlement and confirmation of the Debtors’ plan of reorganization, in the form as modified by the terms hereof. On June 22, 2004, the Debtors filed their Third Amended Joint Plan of Reorganization to incorporate the settlement terms reached with the Committee.

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          On June 29, 2004, the Bankruptcy Court entered an order confirming the Debtors’ Third Amended Joint Plan of Reorganization, as Modified (the “Plan”). The Bankruptcy Court also approved the Settlement Agreement between the Debtors and the Committee. The Bankruptcy Court further set the enterprise value of the Company at $25.3 million for purposes of distributions of new common stock under the Plan. The effective date of the Plan was set by the Debtors pursuant to the Plan as Friday, July 2, 2004 (the “Effective Date”). The Plan was substantially consummated on July 8, 2004.

          In general, pursuant to the Plan, as of the Effective Date:

	•	Holders of allowed administrative and priority claims will be paid in cash in the ordinary course as they come due or on such other terms as the parties may agree. Holders of allowed priority tax claims will receive periodic payments as provided under section 1129(a)(9)(C) of the Bankruptcy Code, unless the parties agree to other terms for the payment of such claims.
	•	Holders of allowed secured claims shall receive, at the election of the Debtors, either (i) payment in cash in an amount equivalent to the full amount of such holder’s allowed secured claim; (ii) deferred cash payments over a period of five (5) years after the initial distribution date totaling the amount of such holder’s allowed secured claim, with interest; (iii) the return of the collateral securing such allowed secured claim in full satisfaction of such claim, or (iv) such other treatment as may be agreed to in writing by such holder and the Debtors.
	•	Holders of allowed general unsecured claims received their pro rata share of seventy-five percent (75%) of seven million (7,000,000) shares of the new common stock of the Company on or as soon as practicable after the Effective Date.
	•	Each holder of an allowed convenience claim received cash in an amount equal to fifty percent (50%) of their allowed claims, up to an aggregate maximum of one hundred fifty thousand dollars ($150,000) for all such claims paid as soon as practicable after the Effective Date.
	•	All existing equity interests in the Debtors were extinguished as of the Effective Date. Each holder of an equity interest in the Company that was attributable to existing common stock received a pro rata share of twenty-five percent (25%) of seven million (7,000,000) shares of the new common stock that was not issued to holders of allowed general unsecured claims. The holders of equity interests in the Company, Limited and Caren, other than common stock, did not receive or retain any property under the Plan.
	•	The new common stock and the restricted shares were issued and distributed in accordance with the terms of the Plan without further act or action under applicable law, regulation, order or rule and are exempt from registration under applicable securities law pursuant to section 1145(a) of the Bankruptcy Code.
	•	The Debtors initially distributed 7,000,000 shares of new common stock to satisfy holders of allowed general unsecured claims and holders of equity interests in the Company that were attributable to existing common stock. The initial distribution of 7,000,000 shares of new common stock resulted in the satisfaction of approximately $17.6 million of allowed general unsecured claims. Subsequently, certain rejection claims and other disputed claims were settled and allowed by the bankruptcy court resulting in the issuance of an additional 271,043 shares of common stock. As of November 30, 2004, the Company had a remaining estimated liability for approximately $0.5 million associated with general unsecured claims, which could result in the issuance of additional shares of new common stock. Although the Company believes that some portion of its general unsecured claims objected to will be ultimately disallowed by the Bankruptcy Court, the Company cannot presently determine with certainty the total amount of claims objected to which will be allowed or disallowed.

          Caren and Limited, as a matter of law, were merged with and into the Company, ceasing to exist as separate entities as of the Effective Date. In addition,

•

The Company’s certificate of incorporation was amended and restated to change the Company’s corporate name to Remote Dynamics, Inc. on the Effective Date;

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	•	the size of the board was increased to seven (7) directors with four (4) new directors being appointed by the Official Unsecured Creditors’ Committee on behalf of the unsecured creditors and three (3) directors to be appointed by the Debtors;
	•	a new restricted stock plan for key executive officers was approved;
	•	the Company entered into two (2) year term employment agreements with the following key executive officers which included restricted stock grants to each officer:

	o	Dennis R. Casey – President and Chief Executive Officer
	o	J. Raymond Bilbao – Senior Vice President, General Counsel & Secretary
	o	W. Michael Smith – Executive Vice President, Chief Operating Officer, Chief Financial Officer & Treasurer

          The Plan received overwhelming acceptance with approximately 98.6% of the existing stockholders actually voting on the Plan, of which approximately 99.9% voted to accept the Plan. Additionally, approximately 75% of the unsecured creditors, who received their prorata share of 75% of the new common stock issued under the Plan, voted to accept the Plan. Under the Plan, holders of the Company’s 13.75% Interest Senior Notes due 2005 and holders of the Company’s common stock as of the close of trading on Friday, July 2, 2004 were entitled to receive their prorata distributions of new common stock under the Plan.

          Pursuant to Section 365 of the Bankruptcy Code, the Company assumed, assumed as modified or rejected certain pre-petition executory contracts and unexpired leases upon the Effective Date. With respect to executory contracts assumed, the Company was required to cure all pre-petition defaults, monetary and otherwise. With respect to executory contracts rejected, the Company is excused from further performance under such agreement and the Bankruptcy Code treats the rejected contract as if it were breached by the Company immediately prior to the Company’s filing of bankruptcy. The other contracting party was entitled to a prepetition, general unsecured claim for the damages sustained as a result of the “breach of contract” caused by the rejection.

Going Concern

          Historically, much of the Company’s revenues have been derived from products and services sold to the long-haul trucking industry, small to medium-sized companies through its VMI product line and to member companies of SBC Communications, Inc. (“SBC”). The Company expects revenues from these legacy customers to decline substantially during 2005, and for the Company to sustain ongoing business operations and ultimately achieve profitability, it must substantially increase its sales and penetration into the marketplace with competitive products and services such as REDIview™.

          Management currently does not expect to achieve profitability during its current fiscal year since the Company will be expanding its sales force and building a base of customers that purchase information and data services from the Company on a monthly recurring basis. Key to achieving profitability is to obtain a REDIview™ customer base that provides monthly recurring revenues and corresponding gross margins that exceed operating costs and expenses to support the REDIview™ customer base. Management currently estimates that for the Company to achieve profitability, it will need to have approximately 38,000 to 40,000 units of its REDIview™ products in service. However, there can be no assurance that the Company can achieve the required sales of REDIview™ to meet its profitability goals.

          The Company believes that the potential market opportunity for automatic vehicle location products in the United States, such as its GPRS-based REDIview product to be launched in the first calendar quarter of 2005, is significant. The Company currently believes that it will be positioned with its telematics product lines and proven operations support to take advantage of the significant market potential. In addition, the Company has renewed its service vehicle contract with SBC for an additional term that ends on December 31, 2005.

     Critical success factors in management’s plans to achieve positive cash flow from operations include:

	•	Ability to raise a minimum of $6 million in additional capital resources to fund the Company’s operations until revenues from REDIview™ are sufficient to fund ongoing operations.
	•	Significant market acceptance of REDIview™ in the United States.
	•	Maintaining and expanding the Company’s direct sales channel and expanding into new markets not currently served by the Company. New salespersons will require training and time to become productive. In addition, there is significant competition for qualified salespersons, and the Company must continue to offer attractive

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		compensation plans and opportunities to attract qualified salespersons.
	•	Maintaining and expanding indirect distribution channels.
	•	Securing and maintaining adequate third party leasing sources for customers who purchase the Company’s products.

          There can be no assurances that any of these success factors will be realized or maintained.

          SBC has selected an alternate vendor to supply its next generation AVL product; thus, management has revised its business plans and related forecasts taking into effect the declining revenue from SBC and the costs associated with the commercial launch of its new products. Based on current forecasts, management believes that it will need to raise a minimum of $6 million, in addition to the $4.6 million received from the sale of the Series A Preferred Stock in October of 2004 discussed in Note 4, by June 2005 to fund the launch of its new products and fund working capital as the SBC revenue declines during 2005. However, the timing of the deactivations by SBC as well as the ability to meet sales projections of the new AVL products heavily influences the capital requirements of the Company. Should SBC deactivate the Company’s units sooner than is currently anticipated in the Company’s projections, or the Company not meet its current sales projections, the amount of capital required may increase. Currently, management believes that should the required funding be obtained, it will be raised through issuance of debt or equity securities. However, there can be no assurance that the Company will be able to raise the funds necessary to sustain the Company’s operations until revenues from sales of REDIview™ are sufficient to sustain the Company’s operations and the failure to do so may have a material adverse effect upon the Company’s business, financial condition and results of operations.

          Although the Company believes that it has exited the Chapter 11 process as a stronger and more financially viable entity, at this time it is not possible to accurately predict the effect of the bankruptcy filing on its business. It is possible that because of operating performance or other factors, the Company may not be able to continue as a going concern. Accordingly, the Company urges that extreme caution be exercised with respect to existing and future investments in any of the Company’s securities. Should the Company not continue as a going concern, it may be unable to realize its assets and discharge its liabilities in the normal course of business. T