<PAGE>
As filed with the Securities and Exchange Commission on July 13, 2000
Registration No. 333-
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--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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AT ROAD, INC.
(Exact name of Registrant as specified in its charter)
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Delaware 7373 94-3209170
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification Number)
incorporation or Classification Code
organization) Number)
47200 Bayside Parkway
Fremont, CA 94538
(510) 668-1638
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
--------------
Krish Panu
President and Chief Executive Officer
At Road, Inc.
47200 Bayside Parkway
Fremont, CA 94538
(510) 668-1638
(Name, address including zip code, and telephone number including area code, of
agent for service)
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Copies to:
Tae Hea Nahm Mark A. Bertelsen
Gene Yoon Jose F. Macias
Flora Szilagyi Betsey Sue
Eric M. Bowen Wilson Sonsini Goodrich & Rosati
VENTURE LAW GROUP 650 Page Mill Road
A Professional Corporation Palo Alto, CA 94304
2800 Sand Hill Road
Menlo Park, CA 94025
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
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<CAPTION>
Title of each Class of Proposed Maximum
Securities to be Registered Aggregate Offering Price(1) Amount of Registration Fee
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<S> <C> <C>
Common Stock, par value.................... $88,550,000.00 $23,377.20
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(a) and 457(o) under the Securities
Act.
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The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the Registration Statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED JULY 13, 2000
Shares
[@ROAD LOGO]
Common Stock
--------
Prior to this offering, there has been no public market for our common stock.
The initial public offering price of the common stock is expected to be between
$ and $ per share. We have applied to list our common stock on the
Nasdaq Stock Market's National Market under the symbol "ARDI."
The underwriters have an option to purchase a maximum of
additional shares to cover over-allotments of shares.
Investing in our common stock involves risks. See "Risk Factors" on page 6.
<TABLE>
<CAPTION>
Underwriting
Price to Discounts and Proceeds to
Public Commissions @Road
-------- ------------- -----------
<S> <C> <C> <C>
Per Share.................................... $ $ $
Total........................................ $ $ $
</TABLE>
Delivery of the shares of common stock will be made on or about ,
2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
--------
Credit Suisse First Boston
Chase H&Q
U.S. Bancorp Piper Jaffray
The date of this prospectus is , 2000.
<PAGE>
[INSIDE FRONT COVER]
[COLOR ARTWORK]
DESCRIPTION OF COVER ARTWORK
Outside Front Gatefold:
In the top left corner, the text "THE @ROAD SERVICE" appears.
In the top left corner below the caption, there is a graphic that depicts a
satellite and has the text "GPS SATELLITE" to the immediate right of it.
Coming down from the satellite is a lightning bolt, which is implying data
being sent to the three vehicles below--the vehicle at the left is a mini-van,
the vehicle in the center is a limousine, and the vehicle on the right is a
bus. Each vehicle has an antenna attached to the roof of the vehicle. From the
vehicles moving in a diagonal direction up and to the right, there is a
lightning bolt to a steel tower that has the text "WIRELESS NETWORK" below it.
The tower has four concentric circles emanating from the top of the tower.
There are three legs to the tower. From the bottom of the right-most leg there
is an upward curving line to the right that goes into a cloud-like object that
has the text "INTERNET" in the center of it. The cloud has a dark outline with
a light interior. From the top and bottom of the cloud two additional lines
emerge. One line curves from the top middle of the cloud in an upwardly left
direction to three rectangular box-like structures meant to resemble computer
data servers with the text "@ROAD INTERNET SERVICE CENTER" to the left of the
structures. The three box-like structures cascade slightly up to the left.
From the bottom right of the cloud extends the second line, which moves down
to the right and back to the left. The line terminates in the back of a laptop
computer. On the screen of the computer is a graphical depiction of roads,
land and coastline, meant to illustrate an @Road website screen shot, as would
be seen by an @Road customer.
Inside Front Gatefold:
The gatefold is a two-page side-by-side display which depicts three different
screen shots from our website. Each is a different web page from our website.
In the top left corner of the gatefold is the first screen shot. It is a view
of a computer screen that is running Microsoft Internet Explorer. Down the
left-hand side of this screen shot is first the @Road logo, then a scrolling
menu that says above it "Display Vehicle" and would enable a user of this web
page to select a vehicle. Below this scrolling menu is another scrolling menu
that says above it "Update Position" and would enable a user of the web page
to select a vehicle. Immediately below this menu is a button that a user could
press that has the text "Apply" on it. Below this button are three additional
buttons, one below the next. The first button has the text "Settings" on it,
the second has the text "Locate," and the third has the text "Help." To the
right of this column is another column with a series of options that can be
selected. To the left of each option is a white box that if it were clicked on
would indicate that it had been selected with the appearance of an arrow in
the box. To the right of this column is a map. The map depicts the San
Francisco Bay Area. The map depicts water and land with major roadways and the
names of those roadways depicted. On the map there are light and dark diamonds
that indicate the location of a vehicle that is being tracked presently. One
of the vehicles is selected and additional information about that vehicle is
displayed, including the name of the vehicle, the date, the time and the
length of the current stop. The entire screen shot has a shadow behind it.
To the right of the first screen shot is the following text:
The location of a customer's vehicles can be displayed on a map.
Overlapping the bottom right corner of the first screen shot is the second
screen shot. This screen shot is of equal size as the first screen shot. It is
a view of a computer screen that is running Netscape Navigator. The page has
the text "Activity Report" in the upper left-hand corner. Underneath this text
is a second row of text "Vehicle Activity Report" and the text "from 3/16/2000
0:0:0 to 3/17/2000 0:0:0 0:0:59", which is meant to symbolize a report of this
vehicle's activity for this time period. Underneath this text in the next line
is text that reads "Vehicle: Vehicle3", meant to represent that the text
underneath this line refers to Vehicle3 of the customer's fleet. Underneath
this text in bold is the word "Summary:" with five lines of text underneath
one another. On the first line under "Summary" is "Total Time", the second
line is "Total Distance", the third line is "Number of Stops", the fourth line
is "Total Stop Time", the fifth line in bold is "Detail:" and directly
underneath it is a table that is eleven columns wide and eleven rows high that
provides information including the location of where each stop was made
including street address, closest cross street, city, state, zip code and
county. Under this table in the bottom left corner of the screen shot is text
that reads "Vehicle: Vehicle4", meant to represent that the text underneath
this text refers to Vehicle4 of the customer's fleet. Underneath this text in
bold is the word "Summary:" with five lines of text beneath one another. On
the first line under "Summary" is "Total Time", the second line is "Total
Distance", the third line is "Number of Stops", the fourth line is "Total Stop
Time", the fifth line is "Detail:" and directly underneath it is a table
similar to the table above but this table is on the web page and predominantly
below the screen shot. The entire screen shot has a shadow behind it.
To the right of the second screen shot is the following text:
We offer our customers comprehensive, detailed reporting of vehicle activity.
Overlapping the bottom right corner of the second screen shot is the third
screen shot. This screen shot is equal in size to the second screen shot. It
is a view of a computer screen that is running America Online and is titled
"@Road." Down the left-hand side of the screen shot is first the @Road logo,
directly below it is the text "Control Panel" in italics and then a group of
six buttons that a user could press. The first button is "Vehicle Status," the
second is "Map ViewPLUS," the third is "Reports," the fourth is "Messaging,"
the fifth is "Administration" and the sixth is "Support." Slightly below this
group of buttons is one more button that is a slightly lighter shade with the
text "Fleet Resources." To the right of this column is another frame with the
heading "Welcome." On the page are a series of sub-headings with related
hypertext links that if clicked on would enable a user of this web page to be
redirected to another desired website. The sub headings are: "Fleet & Driver
Services," "Supplies and Services," "Financial," "Fleet Equipment," "Fuel
Prices," "Shop," "Industry Related Services," and "Associations, Government
and Trade Magazines". The entire screen shot has a shadow behind it.
To the right of the third screen shot is the following text:
Our web-site offers online information and links to providers of goods and
services.
In the bottom left-hand corner of the gatefold is the @Road logo.
<PAGE>
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 16
Use of Proceeds.......................................................... 16
Dividend Policy.......................................................... 16
Capitalization........................................................... 17
Dilution................................................................. 18
Selected Consolidated Financial Data..................................... 19
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 20
Business................................................................. 28
</TABLE>
<TABLE>
<CAPTION>
Page
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<S> <C>
Management................................................................. 37
Related Party Transactions................................................. 46
Principal Stockholders..................................................... 48
Description of Capital Stock............................................... 50
Shares Eligible For Future Sale............................................ 52
Underwriting............................................................... 54
Notice To Canadian Residents............................................... 56
Legal Matters.............................................................. 57
Experts.................................................................... 57
Where You Can Find More Information........................................ 57
Index To Consolidated Financial Statements................................. F-1
</TABLE>
------------
You should rely only on the information contained in this document or to
which we have referred you. We have not authorized anyone to provide you with
information that is different. This document may only be used where it is legal
to sell these securities. The information in this document may only be accurate
on the date of this document.
Until , 2000 (25 days after the commencement of this offering),
all dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealer's obligation to deliver a prospectus when acting
as an underwriter and with respect to unsold allotments or subscriptions.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus.
You should read the entire prospectus carefully, including the financial data
and related notes, before making an investment decision.
@Road
We integrate Global Positioning System technology, wireless communications
and the Internet to enable companies to efficiently manage their mobile
resources with location-relevant and time-sensitive information. Our solution
is an easy-to-use, cost-effective, Internet-based service for vehicle
management that provides location, reporting, dispatch, messaging and
management services. Our service allows customers to use our website to track
the movement of their vehicles, employees, and goods and services, and enables
two-way messaging between our customers and their mobile workers. As a result,
we believe our service provides significant value to our customers by reducing
their costs of doing business and increasing the productivity of their mobile
resources.
The complex task of monitoring and tracking the movement of products and
people is critical to companies seeking to minimize resource requirements while
maximizing their profitability. Many businesses use inefficient and incomplete
systems such as wireless phones and pagers or systems based on proprietary
technologies requiring substantial and ongoing investments in information
technology and hardware.
Our service utilizes the following existing technologies: Global Positioning
System, wireless networks and the Internet. The Global Positioning System is a
worldwide radio-navigation system formed from a constellation of satellites and
ground systems that are used as reference points to calculate positions. Our
service includes a proprietary hardware device that integrates wireless
Internet connectivity with a Global Positioning System receiver. The device is
installed in each vehicle and receives signals transmitted from Global
Positioning System satellites to determine the location and velocity of the
vehicle. These data are transmitted over wireless networks and the Internet to
our Internet Service Center, a network of secure servers. Our customers can
retrieve the information through our website using an Internet browser. Because
the customer data and software reside at our Internet Service Center, our
customers do not need to make a substantial investment in acquiring and
supporting capital equipment such as proprietary hardware, software and data
networking equipment to use our services.
Our service offers the following benefits:
. Productivity enhancement. Customers can achieve enhanced productivity by
closely monitoring all their vehicles, routing vehicles more efficiently,
reducing vehicle downtime, and increasing the number of deliveries or
trips per vehicle.
. Differentiated service. Our customers can provide their customers with
more detailed information on the location of products and services and
allocate resources more efficiently to reduce wait times experienced by
their customers.
. Ease of implementation. The installation of our devices into a vehicle
takes less than an hour. Once installed, our customers can manage all
their vehicles through an Internet browser. As our customers' fleets
grow, our solution is easily scaleable by installing devices in
additional vehicles.
Our objective is to be the leading provider of location-relevant and time-
sensitive information services and solutions to businesses and organizations
managing mobile resources. Key elements of our strategy include:
. Establish @Road as the market leader in vehicle management services
. Increase the value of our solution by expanding the range of services we
provide
. Leverage partnerships to accelerate market acceptance
. Penetrate new markets and applications
. Maintain technology leadership
As of March 31, 2000, our service was being used with approximately 13,000
vehicles. Our customers' fleets range in size from two vehicles to over 350. We
market and sell our service to a broad range of customers that vary in size,
geographic location and industry including trucking companies, food and
beverage distributors, delivery services, and taxi cabs and limousines.
We commenced operations in July 1996, began to recognize revenues in June
1998 and reincorporated in Delaware on , 2000. Our address is 47200
Bayside Parkway, Fremont, CA 94538, and our telephone number is (510) 668-1638.
Our website is located at www.atroad.com. Information contained on our website
does not constitute part of this prospectus.
3
<PAGE>
The Offering
<TABLE>
<S> <C>
Common stock offered by
@Road.................. shares
Common stock to be out-
standing after the
offering............... shares
Use of proceeds......... For general corporate purposes, including working
capital and capital expenditures. See "Use of Proceeds."
Proposed Nasdaq National
Market symbol.......... ARDI
</TABLE>
The number of shares of common stock to be outstanding after this offering
is estimated based on the number of shares outstanding on March 31, 2000. The
table above excludes 3,611,641 shares subject to outstanding options at a
weighted average exercise price of $1.08 per share as of March 31, 2000, and
1,178,301 and 2,000,000 shares available for future issuance under our 1996
stock option plan and 2000 stock option plan, respectively. See "Management--
Stock Plans" and Notes 7 and 13 to notes to consolidated financial statements.
Summary Financial Data
<TABLE>
<CAPTION>
Period from
July 1, 1996 Three Months
(commencement Ended
of operations) Years Ended December 31, March 31,
to December 31, -------------------------- ---------------
1996 1997 1998 1999 1999 2000
--------------- ------- ------- -------- ------ -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues:
Service................ $ -- $ -- $ 4 $ 612 $ 7 $ 937
Product................ -- -- 64 294 24 253
Total revenues.......... -- -- 68 906 31 1,190
Stock compensation
expense................ -- -- -- 4,973 63 3,415
Total costs and
expenses............... 299 1,102 1,568 15,199 790 11,277
Net loss................ $ (274) $(1,004) $(1,410) $(13,489) $ (703) $(9,466)
Basic and diluted net
loss per share......... $ (0.12) $ (0.45) $ (0.62) $ (4.88) $(0.30) $ (2.64)
Shares used in
calculating basic and
diluted net loss per
share.................. 2,250 2,250 2,287 2,763 2,311 3,590
Pro forma basic and
diluted net loss per
share.................. $ (0.59) $ (0.31)
Shares used in
calculating pro forma
basic and diluted net
loss per share......... 22,882 30,088
</TABLE>
<TABLE>
<CAPTION>
As of March 31, 2000
---------------------------
Pro Pro forma
Actual forma as adjusted
------- ------- -----------
(in thousands)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents........................... $34,493 $54,493 $
Working capital..................................... 40,576 60,576
Total assets........................................ 55,062 75,062
Total stockholders' equity.......................... 45,812 65,812
</TABLE>
--------
. See Note 1 of the notes to consolidated financial statements for an
explanation of the determination of the number of shares and share
equivalents used in computing per share data.
. Pro forma information summarized above reflects the issuance of 2,000,000
shares of Series E convertible preferred stock at $10.00 per share for
proceeds of approximately $20,000,000 in June 2000.
. Pro forma as adjusted reflects the application of the net proceeds from the
sale of shares of our common stock at an assumed initial public
offering price of $ per share, after deducting the estimated underwriting
discount and the estimated offering expenses. It also reflects conversion of
all outstanding shares of preferred stock into common stock upon the closing
of the offering. See "Use of Proceeds" and "Capitalization."
4
<PAGE>
Except as otherwise indicated, information in this prospectus is based on
the following assumptions:
. our reincorporation in Delaware and concurrent name change from @Road,
Inc. to At Road, Inc. that occurred in 2000;
. the conversion of all outstanding shares of our preferred stock into
shares of common stock, on a one-for-one basis, immediately prior to the
closing of this offering;
. the filing of our amended and restated certificate of incorporation; and
. no exercise of the underwriters' over-allotment option.
@Road, At Road, the @Road logo, FleetASAP, StatASAP, Internet Location
Manager, Internet Data Terminal, iLM, iDT and www.atroad.com are trademarks
and/or service marks of At Road, Inc. All other brand names or trademarks
appearing in this prospectus are the property of their respective holders.
5
<PAGE>
RISK FACTORS
You should carefully consider these risk factors, together with all of the
other information included in this prospectus, before you decide to purchase
shares of our common stock. The risks and uncertainties described below are not
the only ones we face. Additional risks and uncertainties not presently known
to us or that we currently deem immaterial may also harm our business.
Risks Related to Our Business
We have a limited operating history, which makes it difficult to evaluate your
investment in our common stock.
Your evaluation of our business will be 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
grow or achieve profitability. We face a number of risks encountered by early-
stage companies in the Global Positioning System, wireless communications and
Internet information industries, including:
. the uncertainty of market acceptance of our services;
. our need to introduce reliable and robust products and services that meet
the demanding needs of customers;
. our need to expand our marketing, sales and support organizations, as
well as our distribution channels;
. our ability to anticipate and respond to market competition;
. our need to manage expanding operations;
. our dependence on wireless carriers;
. limited coverage of wireless networks; and
. migration to new networks, which could cause our products to be
incompatible or out of date.
Our business strategy may not be successful, and we may not successfully
address these risks.
We have historically incurred losses and these losses may increase in the
future.
We have never been profitable. As of March 31, 2000, we had an accumulated
deficit of $25.6 million. In order to become profitable and sustain
profitability, we will need to generate significant revenues to offset our cost
of revenues, and 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 grow in the future. In order to facilitate the sale of
our services, we often sell our hardware below cost. As a result, we have
experienced, and expect to continue to experience, negative gross margins on
the sale of our hardware. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."
If we do not increase revenue from the sale of our services to new and existing
customers, our business may not be successful.
Our success depends on our ability to increase revenue from the sale of our
services to new and existing customers and on market acceptance of our
services. We may not be able to achieve widespread adoption of our services. If
we are not able to expand our customer base and increase our revenue from new
and existing customers, our business will be seriously harmed.
Our success depends on our ability to maintain and expand our sales channels.
In order to increase our market awareness, customer base and revenues, we
need to expand our direct and indirect sales operations. There is strong
competition for qualified sales personnel in our business, and we may not be
able to attract and retain sufficient new sales personnel to expand our
operations. New sales personnel will
6
<PAGE>
require training and will take time to achieve full productivity. In addition,
we believe that our success is dependent on expansion of our indirect
distribution channels, including our relationships with wireless carriers and
independent sales agents. To date, we have relationships with a limited number
of these wireless carriers and independent sales agents. We may not be able to
establish relationships with additional distributors on a timely basis, or at
all, and our distributors may not devote adequate resources to promoting and
selling our services.
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 and our revenues could decrease. Our
development and expansion has 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.
If we cannot deliver the features and functionality our customers demand, we
will be unable to retain or attract new customers.
Our success depends upon our ability to determine the features and
functionality our customers demand and to design and implement services that
meet their needs in an efficient manner. We cannot assure you that we can
successfully determine customer requirements or that our future services will
adequately satisfy customer demands. To date, the design of our services has
been based on our internal efforts and feedback from a limited number of
existing and potential customers. In addition, we may experience difficulties
that could delay or prevent the successful development, introduction or
marketing of new services and service enhancements. If we cannot effectively
deploy, maintain and enhance our services, our expenses may increase, we may
not be able to recover our costs and our competitive position may be harmed.
We depend on wireless networks owned and controlled by others. If our customers
do not have continued access to sufficient capacity on reliable networks, we
may be unable to deliver services and our revenues could decrease.
Our ability to grow and achieve profitability depends on the ability of
wireless carriers to provide sufficient network capacity, reliability and
security to our customers. Even where wireless carriers provide coverage to
entire metropolitan areas, there are occasional lapses in coverage due to tall
buildings blocking the transmission of data to and from vehicles. This effect
could make our services less reliable and useful, and customer satisfaction
could suffer. Our financial condition could be seriously harmed if our wireless
carriers were to increase the prices of their services, or to suffer
operational or technical failures. If wireless carriers do not expand coverage,
we may be unable to offer our service to additional areas.
If one or more of the agreements we have with wireless carriers is terminated,
we may be unable to offer our services to our customers within the carrier's
coverage area.
There are a limited number of wireless carriers offering services compatible
with our service. These wireless carriers have little overlap in their primary
service coverage areas. Our existing agreements with wireless carriers may be
terminated upon as little as thirty-day written notice. If one or more of our
wireless carriers decides to terminate or not renew its contract with us, we
may incur additional costs relating to obtaining alternate coverage from
another wireless carrier outside of its primary coverage area, or we may be
unable to replace the coverage at all, causing a complete loss of service to
our customers in that coverage area.
We depend on a limited number of third parties to manufacture and supply
critical components for our services. If these parties do not perform their
obligations, we may be unable to find other suppliers or operate our business.
A customer requires an Internet Location Manager to use our service. To use
our service with two-way messaging, a customer requires an Internet Location
Manager and an Internet Data Terminal. The internet Location Manager, which we
install in a customer's vehicle, determines the vehicle's location, velocity
and
7
<PAGE>
orientation and gathers other information about the vehicle. The Internet Data
Terminal, when installed in a customer's vehicle, adds the incremental ability
to send and receive messages to and from the vehicle. We cannot be sure that
alternative sources for key components used in the Internet Location Manager
and the Internet Data Terminal will be available when needed, or if available,
that these components will be available on commercially reasonable terms. We
rely on sole suppliers and manufacturers for a number of key components for
these products and do not have long term agreements with any of these suppliers
and manufacturers. Our sole suppliers and manufacturers of key components
include:
. Taiwan Semiconductor Manufacturing Company, our sole manufacturer of
Global Positioning System receiver chips;
. Philsar Electronics, our sole manufacturer of radio frequency chips;
. Orient Semiconductor Electronics, our sole manufacturer of Internet
Location Managers; and
. Micronet, our sole supplier of Internet Data Terminals.
If our agreements with these suppliers and manufacturers are terminated or
expire, or if we are unable to obtain sufficient quantities of these
components, our search for additional or alternate suppliers and manufacturers
could result in significant delays, added expense and our inability to maintain
or expand our customer base. Any of these events could require us to take
unforeseen actions or devote additional resources to provide our services and
could harm our ability to compete effectively.
We depend on recruiting and retaining qualified personnel and our inability to
do so would seriously harm our business.
Because of the technical nature of our services and the market in which we
compete, our success depends on the continued services of our current executive
officers and our ability to attract and retain qualified personnel with Global
Positioning System, wireless communications and Internet software expertise.
Competition for qualified personnel in these industries is intense,
particularly in the San Francisco Bay Area. Competitors and others have in the
past, and may in the future, attempt 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.
We face competition from existing and potential competitors, which could reduce
our market share and revenues.
The market for our services is competitive and is expected to become even
more competitive in the future. Our customers choose our services primarily on
the basis of the functionality, price, ease of use, quality and geographic
coverage of our services. If we are unable to compete successfully in these
areas, competitive pressures may harm our business, resulting in a loss of
market share and revenues. Our current and potential competitors include:
. other providers of vehicle-location services, such as Qualcomm, whose
OmniTRACS service uses satellite communication technology to manage
fleets of trucks that travel long distances;
. other wireless Internet companies, such as Aether Systems, Phone.com and
Research in Motion;
. companies working on emergency-911 solutions, such as True Position;
. companies with solutions that integrate location, wireless communications
and call centers, such as General Motors; and
. companies that provide wireless, location-relevant applications, such as
SignalSoft.
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.
8
<PAGE>
Our services also compete with alternative means of communication between
vehicles and their managers, including wireless telephones, two-way radios and
pagers. In addition, we expect that new competitors will enter the market for
location-relevant wireless information as businesses and consumers increasingly
demand information when they are mobile. Furthermore, the widespread adoption
of industry standards may make it easier for new market entrants or existing
competitors to offer the services we offer or may offer in the future.
Our 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:
. delays in market acceptance or implementation by our customers of our
services;
. changes in demand by our customers for existing and additional services;
. changes in or cancellations of our agreements with wireless carriers;
. introduction of new services by us or our competitors;
. changes in our pricing policies or those of our competitors or suppliers;
. changes in our mix of sources of revenues; and
. changes in accounting standards, including standards relating to revenue
recognition, business combinations and stock-based compensation.
Our expense levels are based, in part, on our expectation of future
revenues. As a result, any shortfall in revenues relative to our expectations
could cause significant changes in our operating results from quarter to
quarter. We believe period-to-period comparisons of our revenue levels and
operating results are not meaningful. You should not rely on our quarterly
revenues and operating results to predict our future performance. In some
future quarter our operating results may be below the expectations of public
market analysts and investors and, as a result, the price of our common stock
may fall.
Our success and ability to compete depends upon our ability to secure and
protect patents, trademarks and other proprietary rights.
Our success depends on our ability to protect our proprietary rights to the
technologies used to implement and operate our services in the U.S. and in
foreign countries. In the event that a third party breaches the confidentiality
provisions in our contracts 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 patent, copyright and trademark laws, which afford us only
limited protection. Third parties may independently discover or invent
competing technologies or reverse engineer our trade secrets, software or other
technology. Furthermore, laws in some foreign countries may not protect our
proprietary rights to the same extent as the laws of the U.S. Therefore, the
measures we take to protect our proprietary rights may not be adequate. See
"Business--Intellectual Property."
A disruption of our services due to accidental or intentional security breaches
may harm our reputation, may cause a loss of revenues and may increase our
expenses.
Unauthorized access, computer viruses and other accidental or intentional
actions could disrupt our systems. We expect to incur significant costs to
protect against the threat of security breaches and to alleviate problems
caused by any breaches. Currently, the transmission of our customers'
proprietary information over the Internet 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.
9
<PAGE>
System failures could reduce our sales, increase costs or result in liability
claims and seriously harm our business.
Any disruption to our services, information systems or communications
networks could result in the inability of our customers to receive our services
for an indeterminate period of time. Our services may not function properly if
our systems fail, or if there is an earthquake, fire, flood or other natural
disaster, or an act of war. 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 currently do not have fully redundant systems for our services at
an alternate site. Our operations depend upon our ability to maintain and
protect our computer systems in our principal facilities in Fremont,
California, which are on or near earthquake fault zones.
We depend on Global Positioning System technology owned and controlled by
others. If we do not have continued access to Global Positioning System
technology and satellites, we will be unable to deliver our services and our
revenues will decrease.
Our services rely on signals from Global Positioning System satellites built
and maintained by the U.S. Department of Defense. Global Positioning System
satellites and their ground support systems are subject to electronic and
mechanical failures and sabotage. If one or more satellites malfunction, there
could be a substantial delay before they are repaired or replaced, if at all,
and our services may cease and customer satisfaction would suffer.
In addition, the U.S. government could decide not to continue to operate and
maintain Global Positioning System satellites over a long period of time or to
charge for the use of the Global Positioning System. Furthermore, because of
ever-increasing commercial applications of the Global Positioning System, other
U.S. government agencies may become involved in the administration or the
regulation of the use of Global Positioning System signals in the future. If
the foregoing factors affect the Global Positioning System, such as by
affecting the availability and pricing of Global Positioning System technology,
our business will suffer.
Our Global Positioning System technology depends on the use of radio frequency
spectrum controlled by others.
Global Positioning System technology is dependent on the use of radio
frequency spectrum. An international organization known as the International
Telecommunications Union controls the assignment of spectrum. If the
International Telecommunications Union reallocates radio frequency spectrum,
our services may become less useful or less reliable. This would, in turn, harm
our business. In addition, emissions from mobile satellites and other equipment
using other frequency bands may adversely affect the utility and reliability of
our services.
One third party has claimed that our services infringe on their intellectual
property and another third party has named us a defendant in a lawsuit arising
from the recruitment of employees. These and other claims which may arise could
result in significant expenses and distract our management.
We received a letter from the holder of two patents claiming that we
infringe its patents. We are currently in the process of reviewing these two
patents; however, the ultimate outcome of this matter cannot be determined at
this time. The patent holder has indicated that it may be willing to license
these patents to us. However, we cannot assure you that we would be able to
license these two patents on commercially reasonable terms, if at all. We may
also incur substantial legal fees, and our management would be distracted, if
the patent holder files a lawsuit against us. See "Business--Intellectual
Property."
We are a defendant in a lawsuit arising from the recruitment of employees
from another company. As a result of the lawsuit, we will incur legal fees, our
management may be distracted, and we may be required to pay damages.
Third parties may claim that our current or future products infringe their
proprietary rights or assert other claims against us. As the number of entrants
into our market increases, the possibility of an intellectual
10
<PAGE>
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. This would increase our expenses and could decrease the
functionality of our service, which would make our services less attractive to
our current or potential customers.
Defects or errors in our services could result in the cancellation or delays of
our services, which would damage our reputation and harm our financial
condition.
We must develop our services quickly to keep pace with the rapidly changing
Global Positioning System, wireless communications and Internet markets.
Products and services that address these markets are likely to contain
undetected errors or defects, especially when first introduced or when new
versions are introduced. Our services may not be free from errors or defects,
which could result in the cancellation or disruption of our services. This
would damage our reputation, and result in lost revenues, diverted development
resources, and increased service and warranty costs.
The reporting of inaccurate location-relevant information could cause the loss
of customers and expose us to legal liability.
The accurate reporting of location-relevant information is critical to our
customers' businesses. If we fail to accurately report location-relevant
information, we could lose customers, our reputation and ability to attract new
customers could be harmed, and we could be exposed to legal liability. We may
not have insurance adequate to cover losses we may incur as a result of these
inaccuracies.
We may be subject to product liability claims that could result in significant
costs to us.
We may be subject to claims for damages related to errors and malfunctions
of our hardware components or their installation. A product liability claim
could seriously harm our business because of the costs of defending against
this type of lawsuit, diversion of employees' time and attention, and potential
damage to our reputation. Some of our agreements with our customers contain
provisions designed to limit exposure to potential product liability 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.
Our acquisition of substantially all the assets of Differential Corrections and
acquisition of certain of the assets of Hynet Technologies may not deliver the
value we have paid and may result in excessive expenses if we do not
successfully integrate these assets or if the costs and management resources we
expend in connection with the integration exceed our expectations.
In April 2000, we acquired substantially all the assets of Differential
Corrections and in May 2000, we acquired certain of the assets of Hynet
Technologies. These acquisitions require integrating the assets and operations
of Differential Corrections and the assets of Hynet Technologies with our own.
We may not be able to successfully integrate the personnel, operations and
customers of Differential Corrections into our business. Additionally, we may
fail to achieve the anticipated synergies from the acquisition of Differential
Corrections and certain assets of Hynet Technologies, including marketing,
product development, location accuracy improvements, distribution and other
operational synergies.
The integration process may further strain our existing financial and
managerial controls, reporting systems and procedures. This may result in the
diversion of management and financial resources from our core business
objectives. We may also have to assume unanticipated liabilities related to the
acquired assets.
11
<PAGE>
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.
We are continually evaluating our 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 objective and
other business concerns;
. failure to integrate the acquired company into our pre-existing business;
. potential loss of key employees from either our pre-existing business or
the acquired business;
. dilution of our existing stockholders as a result of issuing equity
securities; and
. assumption of liabilities of the acquired company.
Some or all of these problems may result from current or future alliances,
acquisitions or investments. Furthermore, we may not realize any value from
these alliances, acquisitions or investments.
We may need and may not be able to obtain additional capital, which could
prevent us from carrying out our business strategy.
We anticipate that our available cash resources combined with the net
proceeds from this offering will be sufficient to fund our operating needs for
the next 18 months, including the expansion of sales and marketing and research
and development programs during that period. Thereafter, we expect to require
additional financing in an amount that we cannot determine at this time. If our
plans or assumptions change or are inaccurate, we may be required to seek
capital sooner than anticipated. We may need to raise funds through public or
private debt or equity financings. If we need to raise additional funds, we may
not be able to do so on commercially reasonable terms, or at all, and may not
be able to continue to fund our operations.
If our wireless carriers decide to abandon Cellular Digital Packet Data
technology or do not continue to expand their Cellular Digital Packet Data
networks, we may be unable to deliver our services and our sales could
decrease.
Our services function only on Cellular Digital Packet Data-enabled networks.
The Cellular Digital Packet Data protocol covers only portions of the U.S., is
not widely used and may not gain market acceptance. If wireless carriers decide
to abandon the Cellular Digital Packet Data protocol in favor of other types of
wireless technology, we may not be able to provide our current services to our
customers. In addition, if wireless carriers do not expand their Cellular
Digital Packet Data coverage areas, we will be unable to meet the needs of
customers who wish to use our services outside the current coverage area.
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 U.S. 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.
Risks Related to Our Market
Our business will be harmed if the demand for services based on wireless
communications does not grow.
The markets for wireless data services and related products and services are
still emerging, and continued growth in demand for, and acceptance of, these
services remains uncertain. Current barriers to market
12
<PAGE>
acceptance of these services include cost, reliability, functionality and ease
of use. We cannot be certain that these barriers will be overcome. Since the
market for our services is new and evolving, it is difficult to predict the
size of this market or its growth rate. Our financial performance will depend
in large part upon the continued demand for vehicle management services through
wireless technologies. We cannot assure you that a sufficient volume of
customers will demand these or other services based on these technologies. If
the market for wireless on-line vehicle management and other services grows
more slowly than we currently anticipate, our revenues may not grow.
If the use of the Internet by businesses does not continue to grow, our
business will be harmed.
Our future success is dependent on continued growth in the use of the
Internet by businesses. The use and acceptance of the Internet by businesses
may not increase for a number of reasons, including the cost and availability
of Internet access and concerns about privacy, security and reliability.
Capacity constraints caused by growth in the use of the Internet may impede
further development of the Internet to the extent that users experience delays,
transmission errors and other difficulties. If the necessary infrastructure,
products, services or facilities are not developed, or if the Internet does not
become a viable and widespread commercial medium, we may not be able to grow
our business.
Government regulations and standards may harm our business and could increase
our costs or reduce our opportunities to earn revenues.
In addition to regulations applicable to businesses in general, we may also
be subject to direct regulation by governmental agencies, including the Federal
Communications Commission and Department of Defense. These regulations may
impose licensing requirements or safety standards with respect to human
exposure to electromagnetic radiation and signal leakage. A number of
legislative and regulatory proposals under consideration by federal, state,
provincial, local and foreign governmental organizations may lead to laws or
regulations concerning various aspects of the Internet, wireless communications
and Global Positioning System technology, including on-line content, user
privacy, taxation, access charges and liability for third-party activities.
Additionally, it is uncertain how existing laws governing issues such as
taxation on the use of wireless networks, intellectual property, libel, user
privacy and property ownership, will be applied to our services. The adoption
of new laws or the application of existing laws may expose us to significant
liabilities and additional operational requirements, which could decrease the
demand for our services and increase our cost of doing business. Wireless
carriers who supply us with airtime are subject to regulation by the Federal
Communications Commission and regulations that affect them could also increase
our costs or limit the provision of our services.
Our platform contains encryption technology whose export is restricted by law,
which may slow our growth or result in significant costs.
The U.S. government generally limits the export of encryption technology,
which our services incorporate. Foreign countries may impose similar regulatory
requirements. If any export approval that we receive is revoked or modified, if
our technology is unlawfully exported or if the U.S. government adopts new
legislation or regulations restricting export of our services and encryption
technology, we may not be able to distribute our services to potential
customers outside the U.S., which may seriously harm our business. We may need
to incur significant costs and divert resources to develop replacement
technologies or may need to adopt inferior substitute technologies to satisfy
these export restrictions. These replacement or substitute technologies may not
be the preferred security technologies of our customers, in which case, our
business may not grow. In addition, we may suffer similar consequences if the
laws of any other country limit the ability of third parties to sell encryption
technologies to us.
13
<PAGE>
Risks Related to This Offering
Like many technology companies, our stock price is likely to be volatile, which
may cause you to lose your investment and may result in costly litigation that
could divert our resources.
Stock markets have recently experienced dramatic price and volume
fluctuations, particularly for shares of technology companies. These
fluctuations can be unrelated to the operating performance of these companies.
Broad market fluctuations may reduce the market price of our common stock and
cause you to lose some or all of your investment. These fluctuations may be
exaggerated if the trading volume of our common stock is low. In addition, due
to the technology-intensive and emerging nature of our business, the market
price of our common stock may rise and fall in response to:
. announcements of technological or competitive developments;
. acquisitions or strategic alliances by us or our competitors;
. the gain or loss of a significant customer or order;
. changes in estimates of our financial performance or changes in
recommendations by securities analysts; and
. security breaches.
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.
Our securities have no prior public market and our share price may decline
after this offering.
There has never been a public market for our common shares, and an active
public market for our common shares may not develop or be sustained after this
offering. If an active public market for our common shares does not develop,
the liquidity of your investment may be limited, and our share price may
decline below its initial public offering price. The initial public offering
price will be determined by negotiations between the underwriters and us and
may bear no relationship to the price that will prevail in the public market.
Future sales of common stock by our existing stockholders could cause our share
price to fall.
If our stockholders sell substantial amounts of our common stock in the
public market, the market price of our common stock could fall. The perception
among investors that these sales will occur could also produce this effect.
After this offering, based upon the number of common shares outstanding as of
March 31, 2000, we will have common shares outstanding. All
of the common shares we will issue in this offering will be
immediately available for resale in the public markets, other than shares
purchased by our affiliates. In accordance with applicable securities laws, the
common shares outstanding after this offering will be available for sale in the
public market, and additional common shares issuable upon the exercise of stock
options will be available for sale once we file a registration statement
relating to our stock option plans. Our directors, executive officers and the
majority of our existing stockholders have agreed not to sell any shares of our
common stock for a period of 180 days after this offering without the consent
of Credit Suisse First Boston. Credit Suisse First Boston may at its discretion
release these parties from that agreement. See "Shares Eligible for Future
Sale."
Our certificate of incorporation and bylaws and state law contain provisions
that could discourage a takeover.
Upon completion of this offering, we will adopt 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;
14
<PAGE>
. 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.
Upon completion of this offering, we will adopt a certificate of
incorporation that will permit our board to issue shares of preferred stock
without stockholder approval, which means that the 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 preferred shares could adversely affect the price of our
common stock and dilute existing stockholders. See "Management--Board
Composition" and "Description of Capital Stock."
A limited number of stockholders will collectively continue to own a majority
of our common stock after this offering and may act, or prevent certain types
of corporate actions, to the detriment of other stockholders.
Immediately after this offering, our directors, officers and greater than 5%
stockholders will own more than % of our outstanding common shares.
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 after this offering. This concentration could also have the
effect of delaying or preventing a change in control that could otherwise be
beneficial to our stockholders.
We will have broad discretion in how we use the proceeds from this offering,
and our use of these proceeds may not yield a favorable return.
We intend to use the proceeds from this offering for general corporate
purposes, including the development of our products and services and potential
acquisitions. Accordingly, we will have broad discretion in using these
proceeds. You will not have the opportunity to evaluate the economic, financial
or other information that we may use to determine how we use these proceeds.
Upon completion of this offering, you will experience immediate dilution.
Our tangible assets are readily identified assets such as property,
equipment, cash, securities and accounts receivable. The value of these assets
on our pro forma balance sheet minus the value of our liabilities equals $
per share, after giving effect to the completion of this offering. The offering
price exceeds this amount by $ per share. Therefore, you will be
paying more for a share of stock than the value reflected in our accounts of
tangible assets for that share. If we were forced to sell all our assets and
distribute the proceeds, you would not recover the amount you paid for your
shares unless we can sell the assets for more than the value we report for our
tangible assets. We also have outstanding a large number of stock options to
purchase common stock with exercise prices significantly below the price per
share in this offering. As a result, you will experience further dilution to
the extent these options are exercised.
15
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
All statements, trend analysis and other information contained in this
prospectus relating to markets for our services and trends in revenues, gross
margins and anticipated expense levels, as well as other statements including
words such as "anticipate," "believe," "plan," "estimate," "expect," "intend"
and other similar expressions constitute forward-looking statements. These
forward-looking statements are subject to business and economic risks and
uncertainties, and our actual results of operations may differ materially from
those contained in the forward-looking statements.
USE OF PROCEEDS
The net proceeds to us from the sale of shares of common stock in this
offering will be approximately $ million, $ million if the
underwriters' over-allotment option is exercised in full, at an assumed initial
public offering price of $ per share and after deducting estimated
underwriting discounts and commissions and the estimated offering expenses
payable by us.
We intend to use the net proceeds from this offering primarily for general
corporate purposes, including further development and commercialization of our
products, research and development, working capital and capital expenditures.
We may use a portion of the net proceeds from this offering to acquire or
invest in businesses, technologies or services that complement our business.
The amounts and timing of our actual expenditures for each of these purposes
will vary significantly depending on a number of factors, including the status
of our product development efforts, competition, marketing and sales activities
and market acceptance of our products. We will retain broad discretion in the
allocation and use of the net proceeds of this offering. Pending their use, we
intend to invest the net proceeds in short-term, interest-bearing, investment-
grade securities.
The principal purposes of this offering are to increase our working capital,
create a public market for our stock, increase our visibility and facilitate
our future access to public equity markets.
DIVIDEND POLICY
We have never declared or paid cash dividends on shares of our capital
stock. We currently intend to retain all available funds and any future
earnings for use in the operation of our business and do not anticipate paying
any cash dividends in the foreseeable future.
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<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of March 31, 2000:
. on an actual basis;
. on a pro forma basis to reflect the issuance of 2,000,000 shares of
Series E convertible preferred stock at $10.00 per share for proceeds of
approximately $20,000,000 in June 2000 and conversion of all outstanding
shares of preferred stock into shares of common stock upon the closing of
this offering; and
. on a pro forma as adjusted basis to reflect the receipt and application
of the net proceeds from the sale by us of shares of common stock
offered hereby at an assumed public offering price of $ , after
deducting estimated underwriting discounts and commissions and the
estimated offering expenses payable by us and the application of the net
proceeds from the offering. See "Use of Proceeds."
The following table excludes:
. an aggregate of 3,611,641 shares subject to outstanding options at a
weighted average exercise price of $1.08 per share as of March 31, 2000,
and
. 1,178,301 and 2,000,000 shares available for future issuance under our
1996 stock option plan and the 2000 stock option plan respectively. See
"Management--Stock Plans," "Related Party Transactions" and Note 7 of
notes to consolidated financial statements.
. 78,923 shares of Series D convertible preferred stock issued in
conjunction with the acquisition of substantially all assets of
Differential Corrections in April 2000, and 50,000 shares of common stock
issued in connection with the acquisition of certain assets of Hynet
Technologies in May 2000.
The capitalization information set forth in the table below is qualified by
and should be read in conjunction with our consolidated financial statements
and related notes appearing elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of March 31, 2000
--------------------------
Pro
Pro forma as
Actual forma adjusted
------- ------- --------
(in thousands, except
share data)
(unaudited)
<S> <C> <C> <C>
Cash and cash equivalents............................ $34,493 $54,493 $
======= ======= =======
Stockholders' equity:
Convertible preferred stock, $0.0001 par value;
authorized: 26,927,886 shares actual, none pro
forma and pro forma as adjusted; outstanding:
26,710,956 actual, none pro forma and pro forma as
adjusted.......................................... $62,675 $ -- $ --
Common stock, $0.0001 par value; authorized
48,072,114 shares actual, pro forma and pro forma
as adjusted; outstanding: 9,361,873 actual,
38,072,829 pro forma and pro forma as
adjusted.......................................... 30,191 112,866
Deferred stock compensation.......................... (18,330) (18,330) (18,330)
Notes receivable from stockholders................... (3,060) (3,060) (3,060)
Accumulated other comprehensive loss................. (21) (21) (21)
Accumulated deficit.................................. (25,643) (25,643) (25,643)
------- ------- -------
Total stockholders' equity and capitalization.... $45,812 $65,812 $
======= ======= =======
</TABLE>
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<PAGE>
DILUTION
Our pro forma net tangible book value, as of March 31, 2000, was
approximately $65.8 million or $ per share of common stock. Pro forma net
tangible book value per share represents the amount of our pro forma total
tangible assets less total liabilities divided by the total number of shares of
common stock outstanding, giving effect to issuance of 2,000,000 shares of
Series E convertible preferred stock at $10.00 per share for proceeds of
approximately $20,000,000 in June 2000 and the conversion of all outstanding
shares of preferred stock into common stock. After giving effect to the sale of
the shares of common stock offered by us at an assumed initial public
offering price of $ per share, our pro forma net tangible book value as of
March 31, 2000 would have been $ or $ per share. This represents an
immediate increase in net tangible book value of $ per share to existing
stockholders and an immediate dilution of $ per share to new investors. The
following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share........................ $
Pro forma net tangible book value per share before the offering...... $1.73
Increase per share attributable to new investors.....................
-----
Pro forma net tangible book value per share after the offering.........
---
Dilution per share to new investors.................................... $
===
</TABLE>
The following table summarizes on a pro forma basis, as of March 31, 2000,
the differences between the existing stockholders and new investors with
respect to the number of shares of common stock purchased from us, the total
consideration paid to us and the average price per share paid.
<TABLE>
<CAPTION>
Average
Price Per
Shares Purchased Total Consideration Share
------------------ ------------------- ---------
Number Percent Amount Percent
---------- ------- ----------- -------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 38,072,829 % $83,182,000 % $2.18
New investors..................
Totals....................... 100.0% $ 100.0%
========== ===== =========== ===== =====
</TABLE>
The information presented with respect to existing stockholders assumes no
exercise of outstanding options under the 1996 stock option plan. As of March
31, 2000 options to purchase 3,611,641 shares were outstanding under our 1996
stock option plan with a weighted average price of $1.08 per share. No options
were outstanding under our 2000 stock option plan.
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The selected consolidated financial data set forth below should be read in
conjunction with Management's Discussion and Analysis of Financial Condition
and Results of Operations, the consolidated financial statements, the related
notes and the other information contained in this prospectus. The selected
consolidated statement of operations data for the years ended December 31,
1997, 1998 and 1999 and the consolidated balance sheet data as of December 31,
1998 and 1999 have been derived from our audited consolidated financial
statements appearing elsewhere in this prospectus. The selected consolidated
balance sheet data as of December 31, 1997 are derived from audited
consolidated financial statements not included in this prospectus. The selected
consolidated statement of operations data for the period ended December 31,
1996 and the consolidated balance sheet data as of December 31, 1996 are
derived from unaudited consolidated financial statements not included in this
prospectus. The consolidated statements of operations data for the three months
ended March 31, 1999 and 2000, and the consolidated balance sheet data as of
March 31, 2000, are derived from unaudited consolidated financial statements
included elsewhere in this prospectus. In the opinion of management, such
unaudited financial statements have been prepared on the same basis as the
audited consolidated financial statements referred to above and include all
adjustments, consisting only of normal recurring adjustments, that we consider
necessary for the fair presentation of the information when read in conjunction
with the consolidated financial statements and notes thereto. The historical
results presented below are not necessarily indicative of future results. The
pro forma information in the following table gives effect to the automatic
conversion of all outstanding shares of our convertible preferred stock into
common stock upon the closing of this offering.
<TABLE>
<CAPTION>
Period from Three Months
July 1, 1996 Ended
(commencement Years Ended December 31, March 31,
of operations) to -------------------------- ---------------
December 31, 1996 1997 1998 1999 1999 2000
----------------- ------- ------- -------- ------ -------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Statements
of Operations Data:
Revenues:
Service................ $ -- $ -- $ 4 $ 612 $ 7 $ 937
Product................ -- -- 64 294 24 253
------- ------- ------- -------- ------ -------
Total revenues........ -- -- 68 906 31 1,190
------- ------- ------- -------- ------ -------
Costs and expenses:
Cost of service
revenue............... -- -- 27 681 9 639
Cost of product
revenue............... -- -- 87 1,777 30 1,273
Sales and marketing.... -- 107 266 3,530 176 2,744
Research and
development........... 204 745 731 2,109 203 1,611
General and
administrative........ 95 250 457 2,129 309 1,595
Stock compensation..... -- -- -- 4,973 63 3,415
------- ------- ------- -------- ------ -------
Total costs and
expenses............. 299 1,102 1,568 15,199 790 11,277
------- ------- ------- -------- ------ -------
Loss from operations.... (299) (1,102) (1,500) (14,293) (759) (10,087)
Interest income, net.... 25 98 90 804 56 621
------- ------- ------- -------- ------ -------
Net loss................ $ (274) $(1,004) $(1,410) $(13,489) $ (703) $(9,466)
======= ======= ======= ======== ====== =======
Basic and diluted net
loss per share......... $ (0.12) $ (0.45) $ (0.62) $ (4.88) $(0.30) $ (2.64)
======= ======= ======= ======== ====== =======
Shares used in
calculating basic and
diluted net loss per
share.................. 2,250 2,250 2,287 2,763 2,311 3,590
======= ======= ======= ======== ====== =======
Pro forma basic and
diluted net loss per
share.................. $ (0.59) $ (0.31)
======== =======
Shares used in
calculating pro forma
basic and diluted net
loss per share......... 22,882 30,088
======== =======
</TABLE>
<TABLE>
<CAPTION>
Three months
ended March 31,
Year ended ---------------
December 31, 1999 1999 2000
----------------- ---------------
(in thousands)
<S> <C> <C> <C>
Detail of stock compensation:
Cost of service revenue...................... $ 17 $ -- $ 41
Cost of product revenue...................... 52 -- 123
Sales and marketing.......................... 501 4 471
Research and development..................... 445 1 793
General and administrative................... 3,958 58 1,987
------ ------ --------
Total...................................... $4,973 $ 63 $ 3,415
====== ====== ========
</TABLE>
<TABLE>
<CAPTION>
As of December 31, As of
---------------------------- March 31,
1996 1997 1998 1999 2000
------ ------ ------ ------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents............... $2,170 $ 590 $5,356 $22,714 $34,493
Working capital......................... 2,126 1,078 5,599 38,758 40,576
Total assets............................ 2,271 1,305 6,006 45,174 55,062
Total stockholders' equity.............. 2,217 1,213 5,788 40,608 45,812
</TABLE>
19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and the related notes included in this prospectus. This
prospectus contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ significantly from those
projected in the forward-looking statements as a result of many factors,
including those discussed in "Risk Factors," "Business" and elsewhere in this
prospectus.
Overview
We integrate Global Positioning System technology, wireless communications
and the Internet to enable companies to efficiently manage their mobile
resources with location-relevant and time-sensitive information. Our solution
is an easy-to-use, cost-effective, Internet-based service for vehicle
management that provides location, reporting, dispatch, messaging and
management services. Our solution allows customers to use our website to track
the movement of their vehicles, employees, and goods and services, and enables
two-way messaging between our customers and their mobile workers. We believe
our solution provides significant value to our customers by reducing costs and
increasing efficiency.
From July 1996 through June 1998, our operations consisted primarily of
various start-up activities relating to our current business, including
development of Global Positioning System technologies, recruiting personnel and
raising capital. We did not recognize any revenues prior to June 1998, and our
expenses consisted of research and development, sales and marketing and general
and administrative expenses. In 1998, we expanded our strategy and redirected
our focus to provide location-relevant and time-sensitive information services
and solutions to companies managing mobile resources.
In the second half of 1998, we introduced FleetASAP, a cost-effective
solution that leverages existing infrastructure, including the Global
Positioning System, wireless networks and the Internet to enable companies to
efficiently manage their mobile resources. Our solution includes a proprietary
hardware and software platform that integrates wireless Internet connectivity
with a Global Positioning System receiver. The platform is installed in each
vehicle and receives signals transmitted from Global Positioning System
satellites to determine the location and velocity of the vehicle. These data
are transmitted over wireless networks and the Internet to our Internet Service
Center, a network of secure servers. Our customers can retrieve the information
through our website using an Internet browser. Because the customer data and
solution software reside on our Internet Service Center, our customers do not
need to make a substantial investment in acquiring and supporting capital
equipment such as proprietary hardware, software, and data networking equipment
to use our services.
Since 1998, we have derived substantially all of our revenues from the sale
of our service and the associated product hardware. Our service revenue is
comprised of monthly fees. Our customers can contract to receive our services
for terms of two or three years and can purchase enhanced features for
additional charges. As more customers use our service, the impact on our
service revenue is compounded. Our product revenue consists of sales of the
Internet Location Manager and the Internet Data Terminal. Since the selling
prices of our platforms are often below our costs, we defer platform costs (not
in excess of related deferred product revenue); as a result, we expense a
portion of the platform costs at the time of shipment and the remaining
deferred platform costs are amortized ratably over the minimum service contract
period.
We recognize revenue when earned in accordance with applicable accounting
standards, including American Institute of Certified Public Accountants (AICPA)
Statement of Position No. 97-2, Software Revenue Recognition, as amended. The
Company's service is only available through use of the Company's platform.
Accordingly, service revenue is recognized ratably over the minimum service
contract period, which commences upon the installation of the platform. In
addition, we defer product revenue from our platform at installation and
recognizes it ratably over the minimum service contract period. Allowances for
sales returns are recorded at the time product revenue is recognized.
20
<PAGE>
To date, we have not sold our service outside the U.S. and Canada; however,
we intend to expand our service offerings to additional countries during the
fourth quarter of the year 2000. We do not expect that revenues from
international sales will be material in 2000.
We will incur substantial stock compensation expense in future periods,
which represents non-cash charges incurred as a result of the issuance of stock
options to employees and consultants. The charge related to options granted to
employees is recorded based on the difference between the deemed fair value of
the common stock and the option exercise price of such options at the date of
grant, which is amortized over the option-vesting period. The charge related to
options granted to consultants is calculated at the end of each reporting
period based on the Black-Scholes model, which approximates fair value, is
amortized based on the term of the consulting agreement or service period. The
amount of the charge in each period can fluctuate depending on our stock price
and volatility. As of March 31, 2000, deferred stock compensation was $18.3
million, which will be amortized in future periods.
Since inception, we have invested substantially in research and development,
marketing, the building of sales channels, and our overall infrastructure. We
anticipate that such investments will continue to grow in the near future. We
have incurred losses in each year since inception and expect to incur net
losses in the foreseeable future. As of March 31, 2000, we had an accumulated
deficit of $25.6 million. Net losses have increased in each quarter in 1999 and
2000, and we expect this trend to continue. Our limited operating history makes
it difficult to forecast future operating results. Even if we were to achieve
profitability in any period, we may not sustain or increase profitability on a
quarterly or annual basis.
Results of Operations
Three months ended March 31, 1999 and 2000
Service Revenue
Our service revenue, which is comprised of monthly fees, increased from
$7,000 in the first three months of 1999 to $937,000 for the same period in
2000, a direct result of the growth in our installed base of subscribers. The
number of vehicles using our service totaled approximately 230 as of March 31,
1999 increasing to approximately 13,000 as of March 31, 2000.
Product Revenue
Our product revenue increased from $24,000 in the first three months of 1999
to $253,000 in the same period in 2000, consistent with the growth in our
installed base of subscribers.
Cost of Service Revenue
Cost of service revenue consists of employees' salaries and expenses related
to the delivery and support of our services, costs and expenses associated with
connecting our services to wireless networks and the Internet, and depreciation
of our Internet Service Center. Cost of service revenue increased from $9,000
in the first three months of 1999 to $639,000 in the first three months of
2000. The growth in cost of service revenue resulted from the associated
increase in service revenue and related service infrastructure and personnel
costs. Service headcount increased from one as of March 31, 1999 to 32 as of
March 31, 2000.
Cost of Product Revenue
Cost of product revenue consists of the cost of our platforms, including the
Internet Location Manager, internet Data Terminal and related parts, as well as
costs associated with the final assembly, test, delivery, and installation of
our products. The selling prices of our platforms are often below cost; we
defer platform costs (not in excess of related deferred product revenue) and as
a result, we expense a portion of the platform costs at
21
<PAGE>
the time of shipment and the remaining deferred product costs are amortized
ratably over the minimum service contract period. We expect this practice will
continue for the foreseeable future as we continue to expand our installed base
and as we view product installation as enabling our core service business. We
expect the impact of this practice on future liquidity will be minimal as our
service revenue stream expands and is renewed. Cost of product revenue
increased from $30,000 in the first three months of 1999 to $1.3 million for
the first three months of 2000. The increase in cost of product revenue was
attributable primarily to expansion of our services and the resulting increase
in the number of customers using our services.
Sales and Marketing Expenses
Sales and marketing expenses consist of employee salaries, sales
commissions, and marketing and promotional expenses. Sales and marketing
expenses grew from $176,000 in the first three months of 1999 to $2.7 million
in the first three months of 2000. Sales force headcount grew from six to 65
during the same period. Related increases in salaries and other compensation,
sales commissions and marketing awareness campaigns comprised the majority of
the increase. We expect that sales and marketing expenses will continue to
increase as we hire additional personnel, expand our sales and marketing
efforts and pay sales commissions.
Research and Development Expenses
Research and development expenses consist of employee salaries and expenses
related to development personnel and consultants, as well as expenses
associated with software and hardware development. Research and development
expenses grew from $203,000 in the first three months of 1999 to $1.6 million
in the first three months of 2000. Increased salaries and outside consultant
expenses accounted for the majority of the increase. Research and development
headcount increased from nine as of March 31, 1999 to 74 as of March 31, 2000.
We expect that research and development expenses will continue to increase in
future periods.
General and Administrative Expenses
General and administrative expenses consist of employee salaries and related
expenses for executive, administrative, accounting, and professional fees and
recruiting. These expenses increased from $309,000 in the first three months of
1999 to $1.6 million in the first three months of 2000. General and
administrative headcount grew from four to 21 during the same period. Increased
salaries and other compensation, recruiting expenses, and legal fees comprised
the majority of the increase. We expect that these expenses will increase as we
hire additional personnel and incur related expenses in anticipation of the
growth of the business and our operation as a public company.
Stock Compensation Expense
Deferred stock compensation related to the granting of stock options to
employees and consultants was $18.3 million as of March 31, 2000. Amortization
of deferred stock compensation expense increased from $63,000 in the first
three months of 1999 to $3.4 million in the first three months of 2000. We
expect total amortization of stock compensation of approximately $12.5 million,
$5.8 million, $2.6 million, $820,000 and $120,000 in the years ended December
31, 2000, 2001, 2002, 2003 and 2004 respectively, related to these options.
Interest Income, net
Net interest income is comprised primarily of interest earned on cash, cash
equivalents, and short-term investments. Net interest income increased from
$56,000 in the first three months of 1999 to $621,000 in the first three months
of 2000, due to investment in debt securities of the proceeds from our
convertible preferred stock financings completed in June and December 1999 and
January 2000.
22
<PAGE>
Income Taxes
Since inception, we have incurred net losses for federal and state tax
purposes and have not recognized any tax provision or benefit.
Net Loss
Net loss increased from $703,000 to $9,466,000 in the first three months of
2000 compared to the same period a year ago, as we continued to build our
infrastructure and installed base. These increases were primarily due to growth
in operating costs and expenses from $790,000 in the first three months of 1999
to $11.2 million in the first three months of 2000.
Years Ended December 31, 1997, 1998 and 1999
Service Revenue
Our service revenue increased from $4,000 in 1998 to $612,000 in 1999. The
increase in service revenue was attributable to the commercial release of our
FleetASAP service. Initial product installation and service commencement began
at the end of 1998 and, as a result, no revenue was recognized in 1997. The
number of vehicles utilizing our services has grown from 135 as of December 31,
1998 to over 7,000 as of December 31, 1999.
Product Revenue
Our product revenue increased from $64,000 in 1998 to $294,000 in 1999, in
line with the commercial release of our service. We did not recognize any
product revenue in 1997.
Cost of Service Revenue
Cost of service revenue increased from $27,000 in 1998 to $681,000 in 1999.
The growth in cost of service was due primarily to the commercial release and
expansion of our services, but also reflects increases in service
infrastructure, including personnel, in support of the FleetASAP service. We
did not record any cost of service revenue for 1997.
Cost of Product Revenue
Cost of product revenue increased from $87,000 in 1998 to $1.8 million in
1999. The increase in cost of product revenue was attributable primarily to the
commercial release and expansion of our services and the resulting increase in
the number of customers using our services. We did not record any cost of
product revenue for 1997.
Sales and Marketing Expenses
Sales and marketing expenses increased from $107,000 in 1997 to $266,000 in
1998, and to $3.5 million in 1999. Hiring of additional personnel, expansion of
sales channels, and activities related to development of market awareness of
our service in 1999 resulted in increases of $1.5 million, $566,000 and
$368,000, respectively. Sales and marketing headcount grew from three as of
December 31, 1998 to 39 as of December 31, 1999.
Research and Development Expenses
Research and development expenses were $745,000 in 1997, $731,000 in 1998,
rising to $2.1 million in 1999. Increased development salaries of $1.0 million
and outside consultant expense of $238,000 accounted for the change in 1999.
Research and development headcount increased from five as of December 31, 1998
to 30 as of December 31, 1999. In 1997, research and development expenses also
included prototype costs and testing expenses related to the development of our
Global Positioning System technology.
23
<PAGE>
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, or SOP 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use." This standard requires
companies to capitalize qualifying computer software costs that are incurred
during the application development stage and amortize them over the software's
estimated useful life. SOP 98-1 is effective for years beginning after December
15, 1998. We implemented this standard in 1999 and capitalized approximately
$242,000 of costs related to internally developed software systems.
General and Administrative Expenses
General and administrative expenses increased from approximately $250,000 in
1997, to $457,000 in 1998, and to $2.1 million in 1999. Of the increase in
1999, hiring of additional personnel and their related expenses accounted for
$1.4 million of the change. General and administrative headcount increased from
four as of December 31, 1998 to 15 as of December 31, 1999.
Stock Compensation Expense
Deferred stock compensation related to the granting of stock options to
employees and consultants was $11.6 million as of December 31, 1999. Stock
compensation expense in 1999 of $5.0 million represents the amortization of
deferred stock compensation related to the vesting of employee and consultant
stock options granted in 1999.
Interest Income, Net
Net interest income is comprised primarily of interest earned on cash and
cash equivalents and short-term investments, offset by interest expense related
to obligations under our line of credit. Net interest income was approximately
$98,000, $90,000 and $804,000 in 1997, 1998 and 1999, respectively. These
balances increased significantly during 1999 as a result of investment in debt
securities of the proceeds from our convertible preferred stock financings
completed in June and December 1999.
Income Taxes
Since inception, we have incurred net losses for federal and state tax
purposes and have not recognized any tax provision or benefit. As of December
31, 1999, we had approximately $10.3 million of both federal and state net
operating loss carryforwards to offset future taxable income. These
carryforwards, if not utilized, expire through 2019 and 2003, respectively.
Net Loss
Net loss increased from $1.0 million in 1997 to $1.4 million in 1998, and to
$13.5 million in 1999. These increases were principally due to operating costs
and expenses of $1.1 million in 1997, $1.6 million in 1998, and $15.2 million
in 1999.
24
<PAGE>
Quarterly Results of Operations
The following table sets forth our consolidated operating results for each
of the five quarters ended March 31, 2000. This data has been derived from
unaudited consolidated financial statements that, in the opinion of our
management, include all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such information when read in
conjunction with our annual audited consolidated financial statements and notes
thereto appearing elsewhere in this prospectus. These operating results are not
necessarily indicative of results of any future period.
<TABLE>
<CAPTION>
Quarters Ended
-------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31,
1999 1999 1999 1999 2000
--------- -------- --------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of
Operations Data:
Revenues:
Service................... $ 7 $ 35 $ 145 $ 425 $ 937
Product................... 24 32 80 158 253
----- ------- ------- ------- --------
Total revenues.......... 31 67 225 583 1,190
----- ------- ------- ------- --------
Costs and expenses:
Cost of service revenue... 9 61 154 457 639
Cost of product revenue... 30 192 613 942 1,273
Sales and marketing....... 176 424 1,133 1,797 2,744
Research and development.. 203 291 572 1,043 1,611
General and
administrative........... 309 381 477 962 1,595
Stock compensation........ 63 300 637 3,973 3,415
----- ------- ------- ------- --------
Total costs and
expenses............... 790 1,649 3,586 9,174 11,277
----- ------- ------- ------- --------
Loss from operations........ (759) (1,582) (3,361) (8,591) (10,087)
Interest income, net........ 56 76 351 321 621
----- ------- ------- ------- --------
Net loss.................... $(703) $(1,506) $(3,010) $(8,270) $ (9,466)
===== ======= ======= ======= ========
</TABLE>
During the five quarters ended March 31, 2000, both service and product
revenues increased period over period, a direct result of the commercial
release of our FleetASAP service and the increase of installed units from 135
as of December 31, 1998 to approximately 13,000 as of March 31, 2000. As more
customers use our service, the impact on our service revenue is compounded.
Cost of service revenue and cost of product revenue increased over the five
quarters ended March 31, 2000, as a result of the growth in revenues, as well
as increases in units shipped and expansion of our service infrastructure. This
expansion in service infrastructure was in anticipation of future service
demand.
Total employees grew from 14 as of December 31, 1998 to 228 as of March 31,
2000. As a result of the growth in the number of employees in our research and
development, sales and marketing, and general and administrative organizations,
operating expenses related to each of these functions increased on a quarter-
to-quarter basis.
We believe period-to-period comparisons of our operating results are not
necessarily meaningful. You should not rely on them to predict future
performance. The amount and timing of our operating expenses may fluctuate
significantly in the future as a result of a variety of factors. We face a
number of risks and uncertainties encountered by early stage companies,
particularly those in rapidly evolving markets. We may not be able to
successfully address these risks and difficulties. For a description of these
risks, see "Risk Factors."
25
<PAGE>
Liquidity and Capital Resources
Since our inception, we have financed operations primarily through private
sales of convertible preferred stock, which totaled $62.7 million in aggregate
net proceeds through March 31, 2000. As of March 31, 2000, we had $34.5 million
of cash and cash equivalents and $5.8 million of short-term investments
(including $2.0 million of restricted short-term investments), and working
capital of $40.6 million.
We currently have a $2.0 million revolving line of credit facility against
which there were no borrowings or letters of credit outstanding as of March 31,
2000. The line, against which letters of credit may be issued, is
collateralized by a restricted certificate of deposit of $2.0 million. The line
of credit agreement expires in March 2001.
Net cash used for operating activities was $1.0 million, $1.6 million, $8.2
million and $6.0 million for 1997, 1998 and 1999 and the three months ended
March 31, 2000, respectively. Cash used for operating activities was
attributable primarily to net losses and increases in accounts receivable,
inventory, and deferred product costs, offset in part by amortization of
deferred stock compensation, increases in accounts payable, accrued
liabilities, and deferred revenues.
Net cash provided by investing activities was $438,000 and $399,000 for 1997
and 1998, respectively, the result of proceeds from maturities of short-term
investments. For 1999, cash used in investing activities of $17.7 million
resulted from purchases of short-term investments of $20.0 million, offset by
proceeds from maturities of short-term investments of $4.0 million, and $1.6
million of purchases of property and equipment. Net cash provided by investing
activities in the three months ended March 31, 2000 was $6.6 million primarily
due to proceeds from maturities of short-term investments of $10.1 million
offset by purchases of $3.1 million of property and equipment.
Net cash provided by financing activities was $6.0 million and $43.3 million
for 1998 and 1999, respectively and $11.3 million in the first three months of
2000. Cash provided by financing activities in each period was attributable to
proceeds from the issuance of convertible preferred stock. There were no
financing activities in 1997.
On April 7, 2000, we completed the purchase of substantially all the assets
and certain liabilities of Differential Corrections for cash of $4.0 million
and 78,923 shares of series D convertible preferred stock.
On May 5, 2000, we completed the purchase of certain assets and liabilities
of Hynet Technologies for 50,000 shares of common stock. The acquired assets
were primarily technology and equipment.
Both of these transactions provide access to technology that will be used to
further enhance marketability and performance of our newly launched services.
Given the size of the workforce, cost structure, and existing revenue streams
of these companies, no significant impact on future earnings or cash flow is
anticipated.
On April 1, 2000, we invested $1.0 million in Cellport Systems under a
convertible secured subordinated promissory note. On May 10, 2000, the
principal and interest on the note converted into convertible preferred stock
of Cellport Systems. In connection with this investment, the parties entered
into an engineering and development agreement under which Cellport will develop
a hands-free interface for wireless telephones and our service in exchange for
$150,000.
In June 2000, we issued 2,000,000 shares of Series E convertible preferred
stock at $10.00 per share for proceeds of approximately $20,000,000.
As of March 31, 2000, we had no material commitments for capital
expenditures, although we anticipate a substantial increase in capital
expenditures and lease commitments consistent with our anticipated growth in
operations, infrastructure and personnel. We also may establish additional
operations as we expand globally.
26
<PAGE>
We believe that the net proceeds from this offering, together with our
current cash, cash equivalents and short-term investments, will be sufficient
to meet our anticipated cash needs for operating expenses, working capital and
capital expenditures for at least the next 18 months. If cash generated from
operations is insufficient to satisfy our liquidity requirements, we may seek
to sell additional equity or debt securities or to obtain a larger credit
facility. If additional funds are raised through the issuance of debt
securities, holders of these securities could have certain rights, preferences
and privileges senior to holders of common stock, and the terms of this debt
could restrict our operations. The sale of additional equity or convertible
debt securities could result in additional dilution to our existing
stockholders, and we cannot be certain that additional financing will be
available in amounts or on terms acceptable to us, if at all. If we are unable
to obtain additional financing, we may be required to reduce the scope of our
operations, which could harm our business, financial condition and operating
results.
Quantitative and Qualitative Disclosure of Market Risks
Short-Term Investments
At March 31, 2000, we held $5.8 million in short-term investments,
consisting of investment grade financial instruments with an original maturity
of from three to eighteen months. These available-for-sale securities are
subject to interest rate risk and will fall in value if market interest rates
increase. If market interest rates were to increase immediately and uniformly
by 10% from levels at March 31, 2000, the fair market value of the short-term
investments would decline by an immaterial amount. We generally expect to have
the ability to hold fixed income investments until maturity and therefore would
not expect operating results or cash flows to be affected to any significant
degree by a sudden change in market interest rates on short-term investments.
Foreign Currency Exchange Rate
We transact business primarily in U.S. dollars. We are subject to exposure,
however, from adverse movements in foreign currency exchange rates in those
countries where we conduct business. Operating expenses incurred by our
subsidiary in India are denominated in Indian rupees. This subsidiary was
formed in November 1999 to perform research and development activities. To
date, the effect of fluctuations in foreign currency exchange rates on expenses
has not been material.
We hold fixed-price agreements denominated in U.S. dollars with key foreign-
based suppliers. Orient Semiconductor Electronics, in Taiwan, manufactures the
Internet Location Manager; Novatel, in Canada, provides the modem for the
Internet Location Manager; Taiwan Semiconductor Manufacturing Company, in
Taiwan, manufactures our Global Positioning System receiver chips; Philsar
Electronics, in Canada, manufactures our radio frequency chips; and Micronet,
in Israel, supplies our Internet Data Terminal. Should there be a sustained
increase in average exchange rates for the local currencies in these 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%
increase in average exchange rates could increase our product costs by
approximately 9%.
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 Indian subsidiary.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
requires companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. SFAS No. 133 will
be effective for our year ending December 31, 2001. We believe that this
statement will not have a significant impact on our financial position, results
of operations or cash flows.
27
<PAGE>
BUSINESS
We integrate Global Positioning System technology, wireless communications
and the Internet to enable companies to efficiently manage their mobile
resources with location-relevant and time-sensitive information. Our solution
is an easy-to-use, cost-effective, Internet-based service for vehicle
management that provides location, reporting, dispatch, messaging, and
management services. Our solution allows customers to use our website to track
the movement of their vehicles, employees, and goods and services, and provides
for two-way messaging between our customers and their mobile workers. We
believe our solution provides significant value to our customers by reducing
costs and increasing efficiency.
Our service utilizes the following existing technologies, including the
Global Positioning System, wireless networks and the Internet. Our service
includes a proprietary hardware device that integrates wireless Internet
connectivity with a Global Positioning System receiver. The platform is
installed in each vehicle and receives signals transmitted from Global
Positioning System satellites to determine the location and velocity of the
vehicle. These data are transmitted over wireless networks and the Internet to
our Internet Service Center, a network of secure servers. Our customers can
retrieve the information through our website using an Internet browser. Because
the customer data and solution software reside at our Internet Service Center,
our customers do not need to make a substantial investment in acquiring and
supporting capital equipment and support such as proprietary hardware, software
and data networking equipment to use our services.
Industry Background
Growth of Wireless Communications
Wireless communications has grown rapidly due to declining usage costs, the
proliferation of wireless telephones and mobile computing devices, expanding
network coverage and the integration of enhanced features such as voice and
text messaging. Recent developments in wireless technology and deployments of
wireless networks have enabled the wireless transfer of data in packets.
Packet-based data transmission is more efficient and less expensive than
circuit-switched data transmission because it allows multiple users to share
the same bandwidth, eliminating the need for a dedicated circuit for each user.
Dataquest, an information technology market research and consulting firm,
estimates that the number of wireless data subscribers worldwide will grow from
approximately 14 million at the end of 1998 to approximately 102 million at the
end of 2003. There can be no assurances that this or the projections below will
be reached. We also expect business use of wireless communications to grow. As
global wireless coverage increases and broadband wireless transmission
technologies are deployed, more users will be able to access more data over
wireless networks, facilitating access to information management and e-business
applications to geographically-dispersed users.
Growth of Business Use of the Internet
The Internet has emerged as a global communications medium to deliver and
share information and to conduct business electronically. International Data
Corporation, a company that forecasts worldwide information technology market
trends, estimates that the number of web users worldwide will grow from
approximately 144 million users in 1998 to 602 million users by the end of
2003. The dramatic growth in the number of Internet users has led to the
proliferation of information and services available on the Internet, including
e-commerce, e-mail, financial services, news and other content. Businesses are
now using the Internet as a medium for managing business-critical functions
such as supply chain management, customer relationships, enterprise resource
planning and collaboration with business partners. We expect companies to
conduct an increasing amount of business transactions over the Internet.
Increasing Commercial Use of Global Positioning System Technology
The Global Positioning System is a worldwide radio-navigation system formed
from a constellation of satellites and ground systems that are used as
reference points to calculate positions accurately to a matter of meters.
Because of improvements in Global Positioning System receiver technology and
reductions in the cost of Global Positioning System enabling components, there
has recently been a proliferation of Global Positioning System devices for
commercial applications. Significant areas of growth for products and services
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enabled by the Global Positioning System are vehicle positioning and
navigation, mobile computing devices, wireless telephones and portable
recreational receivers, according to Allied Business Intelligence, a market
research firm researching Global Positioning System technologies. Due to the
global scale of the automotive industry, we expect vehicle location and
navigation to be one of the most promising areas of future deployment of Global
Positioning System technology.
Market Opportunity
The management of vehicles and other mobile resources is complex. Monitoring
and tracking the physical movement of products and people is critical to
companies seeking to minimize resource requirements while maximizing their
profitability. Many businesses use inefficient and incomplete systems such as
wireless telephones and pagers to manage mobile resources. A limited number of
businesses use systems based on proprietary technologies requiring substantial
and ongoing investments in information technology and hardware. Businesses and
organizations seek an easy-to-use, comprehensive, cost-effective solution for
managing their vehicles and other mobile resources. Bobit Publishing, a
provider of information for transportation market areas, reports that there
were approximately 9.6 million fleet cars in the U.S. in 1999. Based on this
number and U.S. Department of Transportation statistics on commercial trucks,
buses and trailers, the total number of vehicles and trailers in the U.S. fleet
market was approximately 40 million in 1999.
The @Road Solution
Our solution uses Global Positioning System technology, wireless
communications and the Internet to enable companies to efficiently manage their
mobile resources. To implement our solution, we developed FleetASAP, an easy-
to-use, comprehensive, cost-effective Internet-based management and e-business
service for companies with mobile resources. FleetASAP offers a comprehensive
turnkey solution for vehicle management by providing location, reporting,
dispatch, messaging, and management solutions to meet the needs of any size
fleet. FleetASAP allows customers to track the movement of their vehicles,
employees, and goods and services through our website and provides for two-way
messaging between our customers and their mobile workers. With our service,
customers can gather and use location-relevant information from mobile
resources and make informed decisions that enhance productivity and
profitability.
Our solution includes a proprietary hardware device embedded with software
that integrates wireless Internet connectivity with a Global Positioning System
receiver. Our basic hardware product is called the Internet Location Manager
and two-way text messaging is enabled with the addition of hardware called an
Internet Data Terminal. Customers can use our service with any number or type
of vehicles, including cars, rental cars, buses, school buses, vans, trucks,
trailers or limousines, by installing our Internet Location Manager, which
incorporates a Global Positioning System receiver, in each vehicle. The
internet Location Manager receives signals transmitted from Global Positioning
System satellites to determine the location, velocity and orientation of the
vehicle or device in which it is installed. These data are transmitted to the
@Road Internet Service Center, our network of secure servers, using wireless
networks and the Internet. Our customers can then retrieve the information from
our web site using an Internet browser. Customers can purchase an additional
messaging unit, the Internet Data Terminal, that uses the Internet and wireless
networks to send and receive messages to and from a vehicle enabled with an
Internet Data Terminal.
We have designed our solution to be easily adapted to other wireless
protocols in order to enable the global expansion of our service. We have
entered into strategic relationships with AT&T Wireless, Ameritech and Verizon
Wireless (formed from the combination of Bell Atlantic Mobile and GTE Wireless)
to provide wireless data connectivity between @Road-enabled vehicles and the
Internet over these companies' Cellular Digital Packet Data wireless networks.
Customers who adopt our solution find a variety of compelling benefits. Many
of these benefits translate into competitive advantages for our customers.
Benefits of our solution include the following:
. Productivity enhancement. Our solution allows our customers to track,
monitor, and manage their mobile resources more effectively and
efficiently. Customers can achieve enhanced productivity from
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their fleet operations by closely monitoring all vehicles in their fleet,
routing vehicles more efficiently, reducing vehicle downtime, and
increasing the number of deliveries or trips per vehicle. In addition,
these improvements to vehicle management can result in more efficient
vehicle maintenance and reduced misuse of vehicles.
. Differentiated service. Our customers can be more responsive to their
customers by more effectively managing their mobile resources. Because
our customers are able to track the location of each vehicle in their
fleet, they are able to provide their customers with more detailed
information on the location of products and services. At the same time,
our customers can allocate their limited resources more efficiently to
reduce wait times experienced by their customers. They can also provide
better customer service because we provide our customers with records
relating to the status and activity of their vehicles at relevant times.
. Ease of implementation. The installation of our platform, the Internet
Location Manager and the optional Internet Data Terminal, into a vehicle
takes less than an hour. Once installed, our customers can manage all
their vehicles through any Internet browser, such as Microsoft Explorer,
Netscape Navigator or that of America Online. Because we manage the
software services and customer data at our Internet Service Center, the
customer does not incur any incremental information technology costs
associated with the use of our services. As our customers' fleets grow,
our services are scaleable by installing our platform in additional
vehicles. Additionally, we implement software upgrades centrally on our
server and remotely over a wireless connection to the vehicle. Customers
benefit from these enhancements to our service without removing the
vehicle from service.
Strategy
Our objective is to be the leading provider of location-relevant and time-
sensitive information services and solutions to businesses and organizations
managing vehicles and mobile resources. Our service identifies the location of
a vehicle at a particular time. This enables us to deliver information and
services to that vehicle or about that vehicle which takes advantage of the
identity of the vehicle, the location and movement of the vehicle, and the time
when a vehicle is at a particular location. Key elements of our strategy
include:
. Establish @Road as the market leader in vehicle management services. We
believe our competitive advantages will establish us as the market leader
in providing vehicle management services to businesses and organizations.
Establishing this leadership position is a key element in successfully
penetrating new markets, creating new sources of revenues and growing our
overall business. We are one of the first companies to enter the vehicle
management services market with a comprehensive turnkey solution at a low
cost. We intend to aggressively grow our customer base and market
additional services to our existing customer base. We expect to expand
our existing distribution channels to continue to focus on small to mid-
size fleets and grow our direct sales force to target customers with
thousands of vehicles. Moreover, as wireless network coverage increases,
and new wireless networks are deployed, we expect to increase our selling
efforts into the worldwide market.
. Increase the value of our solution by expanding the range of services we
provide. We will add new features and functionality to our services to
enhance their value. We intend to offer services that synthesize the
information currently retrieved by our service. For example, we expect to
offer a service whereby customers can turn mileage data into a
maintenance schedule for their fleets. We expect to expand our use of
Internet content to provide business- and consumer-oriented mobile
commerce and additional content to our customers. In addition, we are
developing an open platform architecture, with application program
interfaces and enhanced web site features that will allow our partners to
integrate their applications with our services.
. Leverage partnerships to accelerate market acceptance. We believe that
leveraging the market presence, brand recognition, and distribution
resources of established vendors and wireless carriers will help us
establish broad business and consumer awareness and acceptance of our
services. We intend to
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partner with vehicle manufacturers, providers of vehicle maintenance and
support services, wireless telephone and personal digital assistant
manufacturers, wireless carriers, suppliers of consumer services, Internet
content and commerce providers, and other suppliers of goods and services.
We believe that the successful design and implementation of our
partnership strategy will facilitate the extension of our services to new
markets such as the consumer vehicle and mobile device markets.
. Penetrate new markets and applications. We intend to use our core
competencies and relationships with key partners and customers to develop
services for additional markets. We believe our technology is well suited
to many applications that can leverage location-relevant, time-sensitive
information and two-way messaging using wireless communications and the
Internet. To address expanding market opportunities, we have designed our
services to be carrier- and connectivity-independent, which will allow us
to rapidly deploy our services in additional geographic markets as
coverage of digital wireless packet-based data networks increases. In
addition, we intend to expand our services to include both commercial and
consumer applications.
. Maintain technology leadership. We have developed and patented technology
that integrates Global Positioning System technology, wireless
communications and the Internet. We also have substantial experience in
the design and deployment of products and services incorporating these
technologies. We believe that our existing intellectual property,
technological experience and expected continued investment in research
and development will provide us with significant competitive advantages,
enabling us to maintain our technological leadership position.
Services
Our FleetASAP service integrates the Global Positioning System, wireless
communications and the Internet to provide location, reporting, dispatch,
messaging, and other management services to our customers for managing and
tracking their mobile resources. Our service also allows two-way messaging
between managers of vehicles and their drivers. We believe that our services
provide significant value to our customers by reducing costs and increasing
efficiency. We have initially targeted companies with commercial vehicles.
The following features and benefits of FleetASAP give it a competitive
advantage over existing solutions:
. Cost-effective. The FleetASAP service is cost-effective for our customers
because we pass on to them the efficiencies we gain by using the Internet
and wireless networks developed by other companies and Global Positioning
System technology developed by the U.S. government. Our customers are not
required to make a substantial capital investment because the customer
data and our software reside at our Internet Service Center, and the
service is accessible through the Internet.
. Ease of implementation and use. The Internet Location Managers and
Internet Data Terminals are shipped to the customer fully configured and
ready to install, which typically takes an authorized technician less
than one hour. Once these devices are installed, our customers can use
our service by logging on to our web site. The user interface is
intuitive to use, requires minimal training and can be personalized to
meet the requirements of each of our customers. FleetASAP is designed to
be available to our customers through the Internet 24 hours a day, seven
days a week, with the exception of scheduled maintenance. Additionally,
our platform software is designed to be updated wirelessly, minimizing
vehicle downtime.
. Robust reporting capabilities. FleetASAP reports offer our customers
comprehensive, detailed reporting of vehicle activity, either
individually, or for all or a selected group of a customer's vehicles.
Reports can be personalized by customers and downloaded for additional
sorting and analysis. A customer's preferences are stored in our Internet
Service Center and can be altered at any time to meet their changing
needs. The location of each vehicle in a customer's fleet can be
displayed on a map, making vehicle location and tracking simple. Map
views can be personalized by customers to
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graphically display different information about their vehicles. Vehicle
tracking information is stored at our Internet Service Center, allowing
vehicle managers to monitor their vehicles over an extended period of
time. Reports can also be used to help our customers manage the
maintenance requirements of their vehicles.
. Return on investment. Our service results in a variety of cost savings to
our customers. Our customers can use FleetASAP to determine the location
of their vehicles at particular times and send the most appropriate
vehicle to the next job. In addition, customers can increase their
productivity by monitoring and managing the activities of their vehicles.
Effective managing, routing and dispatching of vehicles saves fuel and
time, decreases our customers' costs and increases their customers'
satisfaction. When we provide our customers with messaging capabilities
using Internet Data Terminals, which bundles two-way communications for a
flat rate, our customers can reduce their communications costs, including
cellular telephone fees, which are often usage-based.
. Scaleability. Our platform and software architecture are designed to
serve a growing number of users with increasing data transmission volumes
without compromising performance, delivery times or data accuracy of our
services. Because the three technology components of our solution are
designed to accommodate a practically unlimited number of users, as in
the case of the Global Positioning System, or can be expanded to
accommodate additional users, as in the case of wireless networks or the
Internet, we believe that we can support a significantly expanding
customer base.
. Global Positioning System-determined location. FleetASAP uses the Global
Positioning System to determine location, enabling reliable, accurate and
cost-effective location and tracking of our customers' vehicles. We
believe Global Positioning System technology is more reliable than other
positioning technologies because of its proven accuracy, the large number
of deployed satellites and its ability to determine location regardless
of velocity and altitude. The Global Positioning System uses pre-existing
infrastructure developed by the U.S. government, which reduces the cost
of the service.
. Wireless data connectivity. FleetASAP currently uses the Cellular Digital
Packet Data protocol to transmit data to and from customer vehicles. We
have agreements with four major wireless carriers to provide Cellular
Digital Packet Data service to our customers. Cellular Digital Packet
Data coverage includes more than 150 metropolitan areas in the U.S. Our
services are designed to be tolerant of network difficulties, with the
ability to confirm receipt of data and retransmit data if errors are
detected. Additionally, if a customer's vehicle is out of Cellular
Digital Packet Data coverage, the Internet Location Manager records up to
two days of information, which is then transmitted to our Internet
Service Center when the vehicle returns to Cellular Digital Packet Data
coverage.
. Messaging capabilities. Our customers may enhance our FleetASAP service
by purchasing an optional two-way messaging feature, the Internet Data
Terminal, that uses the Internet and wireless networks to enable our
customers to communicate regularly with their vehicles. Our customers can
pre-program each Internet Data Terminal with a specific set of reply
messages that can be sent with the press of a button, minimizing driver
distraction while on the road. An audit trail of messages, including the
driver's acknowledgment that a message was received, is stored at our
Internet Service Center for fourteen days.
. StatASAP. Our customers may enhance our FleetASAP service by purchasing
connecting sensors and additional reporting functions. StatASAP allows
the internet Location Manager to report the status of an event on the
vehicle. For example, a sensor attached to a school bus door reports to
the Internet Location Manager whether the door was opened or closed.
. Fleet Resources. Our Fleet Resources web page contains links to a number
of value-added retail and informational sites that we believe serve
additional needs of our customers. For example, our customers can
purchase new tires, office supplies and several other goods, and obtain
current information about traffic conditions and fuel prices.
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. Sturdy construction. The Internet Location Manager and the Internet Data
Terminal are designed and tested to withstand the harsh environment of
commercial vehicles, even off-road vehicles, including vibration, shock,
and extreme temperatures.
Customers
We market and sell FleetASAP to a broad range of customers that vary in
size, geographic location and industry. The number of vehicles utilizing our
services has grown from 135 as of December 31, 1998 to approximately 13,000 as
of March 31, 2000. Our customers' fleets range from two vehicles to over 350.
Currently we have customers in the following industries:
.Trucking companies .School buses
.Plumbing .Taxi cabs and limousines
.Commercial buses .Public works
.Construction .Landscaping
.Food and beverage distribution
.Waste management
.Delivery services .Industrial machinery
.Vehicle repair .Furniture delivery
.Courier services .Equipment rental
Research and Development
We concentrate our research and development activities on services and
platform engineering. To enhance our existing services and to introduce new
services to our existing and potential customers, we focus on the following key
areas:
. Services. We intend to continue to develop our services by offering new
features while enhancing existing features. For example, we launched a
service enabling customers to create personalized vehicle identifiers in
December 1999 and a service enabling customers to view summary vehicle
activity reports in February 2000. We intend to dedicate substantial
resources to expand our software development activities.
. Platform. We intend to continue to develop and release platform upgrades
to add new service features as well as to enhance existing features. For
example, we released the second-generation Internet Data Terminal in July
1999 and we released the second-generation Internet Location Manager in
December 1999. We also intend to work with component suppliers, contract
manufacturers and wireless network carriers to integrate our platform
into other devices and develop our platform as a leading technology in
the location-relevant information services market.
As of March 31, 2000, we had 74 employees and consultants in research and
development.
Technology
Our technology efforts focus on enhancing reliability, availability and
features in our service solution while maintaining scaleability. Our
proprietary technologies are designed to work with technologies from other
companies, including our partners, competitors, and other third parties.
Although our current service utilizes our patented Global Positioning System
chipset, our service has been designed to work with other location
technologies. Similarly, although we offer an embedded wireless modem in our
platform, our service is designed to work with a wide range of wireless
communications devices. Additionally, although our service is currently based
on delivering information through the Internet from our Internet Service
Center, the service is designed to provide any content available from the
Internet. We expect to develop additional proprietary
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technology where feasible and to purchase or license technology where cost-
effective. Our technology efforts focus on the following areas:
. Location Technology. The Global Positioning System is a worldwide radio-
navigation system formed from a constellation of satellites and ground
systems that are used as reference points to calculate positions. We have
designed a patented Global Positioning System chipset and algorithm with
four times the processing power of most other commercial Global
Positioning System receivers. As a result, our platform determines its
location in approximately half the time required by most other commercial
receivers. In addition, we are in the process of integrating differential
Global Positioning System technology, an error-correction technology that
generally increases the accuracy of vehicle location to better than ten
meters, which is a tenfold improvement over the Global Positioning
System.
. Wireless Technology. Our services currently operate over Cellular Digital
Packet Data networks. We also have laboratory-tested different versions
of our platform that are compatible with other wireless technologies and
protocols. Our goal is to bring to market a platform that is independent
of wireless connectivity protocols and hardware, allowing our customers
to connect wirelessly to our Internet Service Center using various
protocols and wireless carriers, using our platform, the customer's
existing wireless telephone, or other wireless devices.
. Internet Technology. Although our solution involves complex aggregation
and processing of customer data, the customer can access all the
functionality of our service through an Internet browser. Because our
application, reporting and customer data software are independent of one
another, each can be modified or upgraded without affecting the others.
In order to expand the services we provide to our customers, we have
developed an application programming interface that enables our customers
to integrate our vehicle location information into their applications. We
also expect to develop additional application programming interfaces that
will enable our customers to integrate our two-way messaging and landmark
locations into their applications.
. Information Technology. We have an information technology organization
distinct from our research and development organization that is dedicated
to building and maintaining our secure Internet Service Center. By
managing our service at our Internet Service Center, we relieve our
customers of the technology and operations burden of managing the
integration of complex Global Positioning System, wireless data and
Internet systems. Our Internet Service Center is located in Sunnyvale,
California and is backed up by a second facility in Fremont, California.
From our Internet Service Center, we maintain a variable capacity
connection to the Internet and dedicated connections to the wireless
networks we use. In the event of a power failure, our systems would be
powered by a backup power supply. In addition, by the third quarter of
this year we intend to establish a remote backup facility to provide
additional fault-tolerance, redundancy and capacity for planned future
growth.
Key Alliances and Relationships
We will continue to establish relationships with a number of companies to
accelerate the adoption of our services. We believe that establishing strategic
relationships will facilitate our technological leadership and provide early
access to emerging technologies and new customers. Some of our existing
relationships include the following:
. Wireless Carriers. We have established strategic relationships with AT&T
Wireless, Verizon Wireless and Ameritech to provide wireless connectivity
between @Road-enabled vehicles and the Internet. We contract directly
with AT&T Wireless for the provision of wireless communications, which
are bundled with our service. With Ameritech, our customers have separate
contracts for wireless communications with their carrier. With Verizon
Wireless, we contract directly in some geographic areas and in others our
customers have separate contracts for wireless communications.
. Manufacturers. We have an agreement with Intel Corporation, which grants
Intel a royalty-bearing license to our Global Positioning System chipset
technology. As part of this agreement, Intel and @Road have agreed to
cooperate on a variety of development activities. In addition, one of our
early investors, Orient Semiconductor Electronics, manufactures and tests
our Internet Location Manager.
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Sales and Marketing
Our sales and marketing objective is to achieve broad market penetration
through vertical marketing and targeted sales activities. As of March 31, 2000,
our sales and marketing team consisted of 65 employees. We currently market and
sell our solution through a combination of direct sales, wireless carrier
partners and agents.
. Direct sales force. We have deployed our direct sales force throughout
the U.S. in all major Cellular Digital Packet Data markets. Our direct
sales force calls on potential customers with large fleets and works with
our wireless carrier partners and independent sales agents to increase
our customer base.
. Wireless carrier partners. Our wireless carrier partners are AT&T
Wireless, Verizon Wireless and Ameritech. These partners market and
facilitate sales of our solution through their own sales channels as part
of their service offerings.
. Agent sales program. We recently launched an agent sales program, which
is designed to build a network of independent sales agents throughout the
U.S. to sell our service. The program provides independent sales
organizations fees for the sale, installation and ongoing support of our
solution. We believe that the agent sales program will substantially
increase the number of individuals and organizations selling the
FleetASAP service into the targeted customer base across the U.S.
Our marketing department is engaged in a wide variety of activities, such as
awareness and lead generation programs and product management. These activities
include public relations, seminars, direct mail, trade shows, and co-marketing
and co-branding with wireless carriers.
Competition
We compete with companies that offer the ability to obtain location-relevant
information about their mobile resources. We also compete with alternative
means of communication between vehicles and their managers, including wireless
telephones, two-way radios, and pagers. We compete primarily on the basis of
price, ease of use, functionality, quality and geographic coverage of our
services. As the demand by businesses and consumers for location-relevant
information increases, we anticipate that the quality, functionality and
breadth of our competitors' products and services will improve and that new
competitors will enter our market. In addition, the widespread adoption of
industry standards may make it easier for new market entrants or existing
competitors to improve existing services or offer some or all of the services
we offer or may offer in the future. It is unclear to what extent network
infrastructure developers and key network operators will seek to provide
integrated Global Positioning System, wireless data and Internet solutions,
including access devices developed internally or through captive suppliers.
OmniTRACS is a service from Qualcomm that uses satellite communication
technology to manage fleets of trucks that travel extended distances between
urban areas, referred to as long-haul trucking. Other potential competitors
include wireless Internet companies, such as Aether Systems, Phone.com and
Research in Motion, companies working on emergency-911 solutions, such as
TruePosition, companies with solutions that integrate location, wireless
communications and call centers, such as General Motors, and companies that
provide wireless, location-relevant applications, such as SignalSoft. 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. Further, the widespread adoption of
industry standards may make it easier for new market entrants or existing
competitors to offer the services we offer or may offer in the future.
Intellectual Property
We rely on a combination of patent, trade secret, trademark and copyright
laws, and nondisclosure and other contractual restrictions to protect our
proprietary technology. We have been granted two patents, one of
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which covers our Global Positioning System chipset technology and another that
covers the method and structure for distributing information over a network. In
addition, we have applied for three patents to further protect and extend our
technology leadership position. Although we have applied for patent protection
primarily in the U.S., we intend to file patent applications in other countries
where there is a strategic technological or business justification. As part of
our confidentiality procedures, we generally enter into nondisclosure
agreements with our employees, consultants, distributors and corporate partners
and limit access to and distribution of our software, documentation and other
proprietary information.
It may be possible for a third party to obtain and use our technology
without authorization, or to develop similar technology, particularly because
we license portions of our technology to certain customers, strategic partners,
suppliers and distributors. In addition, our services are licensed in foreign
countries and the laws of these countries may treat the protection of
intellectual property rights differently from, and may not protect our
intellectual property to the same extent as, the laws of the U.S. We also rely
on technology and other intellectual property licensed from third parties and
use third party software that may not be available to us on commercially
reasonable terms, if at all, in the future. Some of our license agreements are
non-exclusive, and therefore, our competitors may have access to the same
technology that is licensed to us. We received a letter from the holder of two
patents, claiming that we infringe its patents and requesting information about
our Global Positioning System chipset. We are currently in the process of
reviewing these two patents. The patent holder has indicated that it is willing
to license these patents to us. However, we cannot assure you that we would be
able to license these two patents on commercially reasonable terms, if at all.
We may also incur substantial legal fees and our management would be distracted
if the patent holder files a lawsuit against us. See "Risk Factors--Our success
and ability to compete depends upon our ability to secure and protect patents,
trademarks and other proprietary rights."
Employees
As of March 31, 2000, we had 228 employees, 225 of whom were located in the
U.S. and three of whom were located in Chennai, India. We believe relationships
with our employees are good.
Legal Proceedings
We have received a letter from the holder of two patents claiming that we
infringe its patents. We are in the process of reviewing the patents; however,
the ultimate outcome of this matter cannot be determined at this time. We are
presently a defendant in a lawsuit arising out of the recruitment of employees.
We are in the process of reviewing the claims alleged in this lawsuit and while
the ultimate outcome cannot be predicted with certainty, we believe this
lawsuit is immaterial and without merit. We also may be a potential defendant
in lawsuits and claims arising in the ordinary course of business in the
future.
Facilities
Our principal executive offices are located in Fremont, California. We lease
approximately 54,000 square feet under a lease that expires in February, 2005.
In addition, we lease 24,000 square feet in Fremont, California for our
engineering and information technology organization under a lease that expires
in December, 2000. We also lease space in Chennai, India for a portion of our
software engineering organization. We believe that our current facilities are
adequate to meet our needs through the end of 2000, at which time we may need
to lease additional space.
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MANAGEMENT
Executive Officers, Management and Directors
Our executive officers, directors and additional corporate management
members and their ages as of March 31, 2000 are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
---- --- ----------
<S> <C> <C>
Executive Officers and Directors
Krish Panu.............. 42 Chairman of the Board, Chief Executive Officer and President
Rodric Fan.............. 56 Director and Chief Technology Officer
Thomas Hoster........... 49 Chief Financial Officer and Vice President, Finance and Administration
David Manovich.......... 48 Vice President, Sales
Thomas Allen............ 46 Vice President, Information Technology and Management Systems
Kris Chellam............ 49 Director
Stuart Phillips......... 42 Director
Andrew Sheehan.......... 42 Director
T. Peter Thomas......... 53 Director
Additional Corporate Management
Julia Langley........... 42 Vice President, Corporate Development and Alliances
John Lankes............. 51 Vice President, Marketing
Valerie Menager......... 47 Vice President, Human Resources
Amin Mufti.............. 45 Vice President, Business Development
Shirish Puranik......... 38 Vice President, Software Development
Michael Walker.......... 45 Vice President, Platform Engineering
</TABLE>
Krish Panu has served as our Chief Executive Officer, President and as a
director of @Road since February 1999 and Chairman of the Board since December
1999. Prior to joining @Road, he served as Vice President and General Manager
of the Logic Products division of Atmel Corporation, a manufacturer of advanced
semiconductors. He held various senior management positions at Atmel
Corporation from August 1991 to November 1998. From September 1989 to August
1991, he held the position of Vice President of Sales and Marketing at Catalyst
Semiconductor, a manufacturer of non-volatile memory products. Mr. Panu also
serves on the boards of directors of two privately held companies. Mr. Panu
holds a B.S. in Electrical Engineering, an M.S. in Computer Engineering and an
M.B.A. from Wayne State University.
Rodric Fan founded @Road and has been one of our directors since August
1996. Since September 1998, Mr. Fan has served as our Chief Technology
Officer, and from August 1996 to September 1998, he served as our Chief
Executive Officer and President. From May 1993 to August 1996 Mr. Fan was the
Technical Director for GPS-related projects and Global Star Satellites, and
from May 1989 to May 1993 he was the Manager of the Satellite Orbit Control
Division, at Space Systems Loral, a producer of commercial communications and
weather satellites. Mr. Fan holds a B.E.S. in Electrical Engineering from
Brigham Young University and an M.S. in Electrical Engineering specializing in
the areas of data communications from Northwestern Polytec University.
Thomas Hoster has served as our Vice President, Finance and Administration
and Chief Financial Officer since November 1999. Prior to joining @Road, Mr.
Hoster was Senior Vice President and Chief Financial Officer of GetSmart, an
on-line provider of consumer financial services, from May 1998 to March 1999.
Prior to GetSmart, Mr. Hoster was Chief Financial Officer of ClickAction, a
provider of e-mail marketing services, formerly known as MySoftware Company,
from June 1996 to May 1998. Prior to that, Mr. Hoster held several finance and
administration positions at Octel Communications, a voice messaging company,
from December 1989 to June 1996. Mr. Hoster has a B.S.E. in Electrical
Engineering from Princeton University and an M.B.A. from Stanford University.
37
<PAGE>
David Manovich has served as our Vice President, Sales since August 1999.
Prior to joining @Road, Mr. Manovich served as Partner at Union Atlantic, an
investment banking consulting firm, from January 1998 to August 1999. From
October 1985 to January 1996 and from March 1997 to January 1998, Mr. Manovich
worked at Apple Computer, a personal computer technology company, serving as
Executive Vice President of Worldwide Sales and Service, Senior Vice President
of International Sales, Vice President of Retail/Consumer Sales, Director of
Business Markets and Country Manager--UK and Ireland, and Director of U.S.
Channel Sales. From March 1996 to March 1997, Mr. Manovich worked at Fujitsu PC
Corporation, a personal computer manufacturing company, serving as Vice
President of Sales. Mr. Manovich holds a B.S. in Business Administration and an
M.B.A. in Finance from the University of Montana.
Thomas Allen has served as our Vice President, Information Technology and
Management Systems since August 1999. From June 1999 to August 1999, Mr. Allen
served as Director of Operations of IPass, an Internet services company. From
January 1996 to June 1999, Mr. Allen served as Vice President of Network
Engineering at Visa International, a payment card company. From March 1983 to
August 1995, Mr. Allen served as General Manager at Southern California Edison,
an electric utility company. Mr. Allen holds a B.S. in Industrial Engineering
from State University of New York at Buffalo, an M.B.A. from San Jose State
University and a Certificate in Executive Management from the Peter F. Drucker
Management Center at the Claremont Graduate University.
Kris Chellam has served as a director of @Road since December 1999. Since
July 1998, Mr. Chellam has served as Senior Vice President, Finance and Chief
Financial Officer of Xilinx, a provider of programmable logic solutions. Prior
to joining Xilinx, he served at Atmel Corporation, a manufacturer of advanced
semiconductors, as Senior Vice President and General Manager of a product group
from March to July 1998 and as Vice President, Finance and Administration, and
Chief Financial Officer from September 1991 through March 1998. Mr. Chellam
became a member of the Institute of Chartered Accountants in England and Wales
in April 1975.
Stuart Phillips has served as a director of @Road since September 1998.
Since June 1997, Mr. Phillips has been a General Partner at U.S. Venture
Partners, a venture capital firm. From October 1993 to June 1997, Mr. Phillips
served as Vice President of Central Engineering at Cisco Systems, an
internetworking company. Mr. Phillips also serves on the boards of directors of
CacheFlow, a manufacturer of Internet caching appliances, and several privately
held companies. He holds a B.S. in Electronics from the University of Wales at
Cardiff.
Andrew Sheehan has served as a director since March 2000. Since April 1998,
Mr. Sheehan has been employed by and is a managing member of the general
partner of ABS Capital Partners III, a private equity fund. From 1985 to 1998,
Mr. Sheehan held various positions at BT Alex. Brown, an investment company,
most recently as Managing Director. Mr. Sheehan is also a director of Rainmaker
Systems, a provider of electronic customer relationship management services,
and several privately held companies. Mr. Sheehan received his B.A. from
Dartmouth College and his M.B.A. from the Wharton School of Business.
T. Peter Thomas has served as a director of @Road since September 1998.
Since November 1985, Mr. Thomas has been a Managing Director of Institutional
Venture Partners, a venture capital firm. Mr. Thomas also serves as a director
of Telcom Semiconductor and Atmel Corporation. Mr. Thomas holds a B.S. in
Electrical Engineering from Utah State University and an M.S. in Computer
Science from the University of Santa Clara.
Julia Langley has served as our Vice President of Corporate Development and
Alliances since January 2000. From March 1999 to January 2000, Ms. Langely
served as Senior Vice President, Corporate Business Development for Vadem, a
mobile technology company. From April 1995 to March 1999, Ms. Langely served
with Philips Electronics as Executive Vice President, Philips Consumer
Electronics Services, as Executive Vice President, Philips Consumer
Communications, Paging Line of Business, and as Senior Vice President,
Strategic Marketing and Business Development, Phillips Digital Video Group. Ms.
Langley holds a B.A. from Emory University, an M.B.A. from the Wharton School
of Business and a J.D. from the University of Georgia School of Law.
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<PAGE>
John Lankes has served as our Vice President, Marketing since May 1999.
Prior to joining @Road, Mr. Lankes served as Vice President of Wireless Data
Services for Southern New England Tele-communications Corporation from June
1995 to May 1999. From May 1991 to March 1993, Mr. Lankes was Vice President of
Marketing for AirTouch Teletrac, a wireless communications company. From
November 1982 to November 1986, Mr. Lankes was Vice President of Sales and
Marketing for the Great Lakes Region of Epson America, a technology company.
Mr. Lankes has a B.A. from the University of Detroit.
Valerie Menager has served as our Vice President, Human Resources since
March 2000. Prior to joining @Road, Ms. Menager served as Senior Employment
Counsel for Nortel Networks, a telecommunications manufacturer, from February
1999 to March 2000. From October 1997 to February 1999, Ms. Menager provided
consulting services to Atmel Corporation, a semiconductor company, Nortel
Networks and Bay Networks, an Internet equipment manufacturer. Prior to that
Ms. Menager served at Atmel Corporation as Vice President and Legal Counsel
from May 1997 to September 1997, Director of Human Resources and Legal Counsel
from September 1991 to May 1997 and Legal Counsel from July 1989 to September
1991. Ms. Menager has a B.A. from the University of California at Santa Cruz,
an M.A. from the University of California at Los Angeles and a J.D. from Loyola
University of Los Angeles.
Amin Mufti has served as our Vice President, Business Development since
January 1997. From March 1994 to July 1996, Mr. Mufti was General Manager at
International Microcomputer Software. Mr. Mufti has a B.S. in Mechanical
Engineering and an M.S. in Aeronautical Engineering from Stanford University.
Shirish Puranik has served as our Vice President, Software Development since
July 1999. From August 1992 to July 1999, Mr. Puranik worked in the Database
Group of Oracle Corporation, most recently as Director of Product Development.
From February 1988 to August 1992, Mr. Puranik was an engineer in the
distributed database group at Digital Equipment Corporation. Mr. Puranik has a
B.S. in Electrical Engineering from the Indian Institute of Technology, Bombay,
an M.S. in Electrical Engineering from the University of Florida and an M.S. in
Engineering Management from Stanford University.
Michael Walker has served as our Vice President, Platform Engineering since
July 1999. From April 1997 to July 1999, Mr. Walker served as Vice President
Engineering at Silicon Wireless, a manufacturer of wireless communications
infrastructure. From August 1993 to April 1997, Mr. Walker served as Vice
President of Engineering and Vice President of Operations at Sierra Wireless, a
manufacturer of wireless data modems. Mr. Walker holds a B.A.Sc. in Electric
Engineering from Queen's University in Canada and an M.S. in Electrical
Engineering from Simon Fraser University.
Board Composition
We currently have authorized six directors. Each director is elected for a
period of one year at our annual meeting of stockholders and serves until the
next annual meeting or until their successor is duly elected and qualified. The
executive officers serve at the discretion of the board of directors. There are
no family relationships among any of our directors or executive officers.
Subsequent to the offering and our reincorporation in Delaware, our certificate
of incorporation will be amended to provide for the classification of the board
into three classes serving staggered terms. The class I directors, Krish Panu
and T. Peter Thomas, will serve an initial term until the 2001 annual meeting
of stockholders, the class II directors, Rodric Fan and Andrew Sheehan, will
serve an initial term until the 2002 annual meeting of stockholders, and the
class III directors, Kris Chellam and Stuart Phillips, will serve an initial
term until the 2003 annual meeting of stockholders. Each class will be elected
for three-year terms following its respective initial term.
Board Compensation
Except for reimbursement for reasonable travel expenses relating to
attendance at board meetings and the grant of stock options, directors are not
compensated for their services as directors. Our directors are eligible to
participate in our 1996 stock option plan and, beginning in 2000, in our 2000
stock option plan. Messrs. Thomas,
39
<PAGE>
Phillips, Chellam and Sheehan, our nonemployee directors, received options to
purchase 37,500, 37,500, 82,500 and 25,000 shares of common stock respectively
under our 1996 stock option plan in 1999 and 2000. Beginning in 2000, the
directors who are our employees may be eligible to participate in our 2000
employee stock purchase plan and the directors who are not employees of @Road
will be eligible to participate in our 2000 directors' stock option plan.
Board Committees
The board currently has an audit committee and a compensation committee. The
audit committee reviews our annual audit and meets with our independent
auditors to review our internal controls and financial management practices.
The board's audit committee currently consists of Kris Chellam, T. Peter Thomas
and Andrew Sheehan. The compensation committee recommends compensation for
certain of our personnel to the board and administers our stock plans. The
compensation committee currently consists of T. Peter Thomas, Andrew Sheehan
and Stuart Phillips.
Compensation Committee Interlocks and Insider Participation
The members of the compensation committee of our board of directors are
currently T. Peter Thomas, Stuart Phillips and Andrew Sheehan. None of T. Peter
Thomas, Stuart Phillips or Andrew Sheehan has at any time been an officer or
employee of @Road or any subsidiary of @Road.
Executive Compensation
The following table provides summary information regarding the compensation
received for services rendered to @Road during the fiscal year ended December
31, 1999 by the Chief Executive Officer and the only other executive officer
whose aggregate compensation during our last fiscal year exceeded $100,000.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------------------------- ------------
Securities
Name and Principal Other Annual Underlying All Other
Position Salary ($) Bonus ($) Compensation ($) Options (#) Compensation($)
------------------ ---------- --------- ---------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Krish Panu, Chairman of
the Board, Chief
Executive Officer and
President.............. $168,462 $ -- $-- 3,375,000(1) $--
Rodric Fan, Director and
Chief Technology
Officer................ $138,910 45,000 -- 150,000(2) --
</TABLE>
--------
(1)Represents options to purchase 3,000,000 shares and 375,000 shares granted
as restricted stock award.
(2)Represents 150,000 shares granted as restricted stock award.
40
<PAGE>
The following table provides summary information regarding stock options
granted to the chief executive officer and the other executive officer named in
the table above during the fiscal year ended December 31, 1999. Options were
granted pursuant to our 1996 stock option plan and are immediately exercisable
at the time of grant. No stock appreciation rights were granted to these
officers during the year.
The percentages shown below are based on a total of 7,047,575 shares subject
to options granted to all of our employees and consultants during the year
ended December 31, 1999. The exercise price per share of the options shown
below was equal to the fair market value of the common stock on the date of
grant as determined by our board of directors. The 5% and 10% assumed annual
rates of compounded stock price appreciation are mandated by the rules of the
SEC. There is no assurance that the actual stock price appreciation over the
ten-year option term will be at the assumed 5% and 10% levels or at any other
defined level. Unless the market price of the common stock appreciates over the
option term, no value will be realized from the option grants made to the chief
executive officer and the other named executive officer.
<TABLE>
<CAPTION>
Potential
Realizable Value
At Assumed Annual
Rates of Stock
Price
Appreciation For
Individual Grants Option Term
--------------------------------------------- -----------------
Percent Of
Number Of Total
Securities Options
Underlying Granted To Exercise
Options Employees In Price Expiration
Name Granted (#) Fiscal Year ($/Share) Date 5% 10%
---- ---------- ------------ -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Krish Panu, Chairman of
the Board, Chief
Executive Officer &
President.............. 2,625,000 37.2% 0.067 2/22/2009 $110,760 $280,776
375,000 5.3 0.667 8/30/2009 157,520 399,313
Option Grants in Last Fiscal Year
Rodric Fan, Director and
Chief Technology
Officer................ -- -- -- -- -- --
</TABLE>
Option Exercises and Holdings
The following table provides summary information concerning the shares of
common stock represented by outstanding stock options held by each of the named
officers as of December 31, 1999.
The value realized and the value of unexercised options represents the
difference between the fair market value of the shares as of December 31, 1999,
using an assumed initial public offering price of $ per share as the fair
market value, and the exercise price of the option.
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Shares Options at the-Money Options at
Acquired December 31, 1999 ,
on Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Krish Panu, Chairman of
the Board, Chief
Executive Officer and
President.............. 2,250,000 750,000 -- $
Rodric Fan, Director and
Chief Technical
Officer................ -- -- -- -- -- --
</TABLE>
41
<PAGE>
Change-of-Control Agreements
We have entered into an agreement with Krish Panu that provides that
following a change of control transaction, subject to limitations, the vesting
of any stock option or restricted stock held by Mr. Panu shall be automatically
fifty percent vested. Additionally, if Mr. Panu's employment is terminated
involuntarily other than for cause within twelve months following a change of
control transaction, then subject to limitations, the vesting of any stock
option or restricted stock held by Mr. Panu shall be automatically fully
vested. We have entered into agreements with our remaining executive officers
and corporate management which provide that in the event of an involuntary
termination within:
. one year following a change of control transaction and the employee was
employed by us for less than one year prior to the change of control
transaction, the vesting of any stock option or restricted stock held by
the employee shall automatically be accelerated as though the employee
maintained his employment with us for twelve months following the
involuntary termination or
. one year following a change of control transaction and the employee was
employed by us for at least one year prior to the change of control
transaction, the vesting of any stock option or restricted stock held by
the employee shall automatically be accelerated as though the employee
maintained his employment with us for 24 months following the involuntary
termination.
Stock Plans
2000 Stock Option Plan. Our 2000 stock option plan was adopted by the board
of directors in March 2000 and will be submitted for approval by our
stockholders prior to completion of this offering. A total of 2,000,000 shares
of common stock have been reserved and are available for grant under the 2000
stock option plan as of the date of this offering. In addition, the 2000 stock
option plan provides that up to 9,825,000 shares of common stock that are
either reserved and available for issuance under our 1996 stock option plan, or
that will return to the 1996 stock option plan upon either the cancellation of
options issued under that plan or the repurchase of outstanding shares common
stock issued under the 1996 stock option plan in connection with the
termination of the holder's employment or consulting relationship with us,
shall become available for issuance under the 2000 stock option plan. The 2000
stock option plan also provides for an automatic annual increase on the first
day of each of our fiscal years beginning in 2001 and ending in 2010 equal to
the lesser of 2,500,000 shares, 4% of our outstanding common stock on the last
day of the immediately preceding fiscal year, or a lesser number of shares as
determined by the board of directors. The maximum total number of shares of
common stock that may be sold under the Plan during its term is 36,825,000.
The purposes of the 2000 stock option plan are to attract and retain the
best available personnel, to provide additional incentives to our employees and
consultants and to promote the success of our business. The 2000 stock option
plan provides for the granting to employees, including officers and directors,
of incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986, and for the granting to employees and consultants,
including non-employee directors, of non-statutory stock options. If an option
holder would have the right in any calendar year to exercise for the first time
one or more incentive stock options for shares having a total fair market value
in excess of $100,000, any excess options shall be treated as non-statutory
stock options. Unless terminated earlier, the 2000 stock option plan will
terminate in March, 2010.
The 2000 stock option plan may be administered by the board or a committee
of the board. The administrator determines the terms of options granted under
the 2000 stock option plan, including the number of shares subject to an option
and its exercise price, term and exercisability. However, no individual
employee may receive option grants under the 2000 stock option plan during any
one fiscal year that would allow him or her to purchase more than 2,500,000
shares.
The exercise price of all incentive stock options granted under the 2000
stock option plan must be at least equal to the fair market value of our common
stock on the date of grant. After the effective date of this
42
<PAGE>
offering, the exercise price of non-statutory stock options granted under the
2000 stock option plan will be the price determined by the administrator.
Payment of the option exercise price may be made in cash or other consideration
as determined by the administrator.
The administrator determines the term of options, which may not exceed 10
years, or 5 years in the case of an incentive stock option granted to a 10%
stockholder. Generally, an option may not be transferred by the option holder
other than by will or the laws of descent or distribution. However, after the
effective date of this offering, the administrator may grant non-statutory
stock options with limited transferability rights. We expect that options
granted under the 2000 stock option plan generally will vest at the rate of 1/4
of the total number of shares subject to the options twelve months after the
date of grant, and 1/48 of the total number of shares subject to the options
each month thereafter.
If we merge with or consolidate into another corporation, or sell
substantially all of our assets, we would expect that the successor corporation
will assume outstanding options or substitute equivalent awards. If the
successor corporation refuses to assume or substitute the options, each
outstanding stock option will terminate on the effective date of the
transaction. Outstanding options will adjust in the event of a stock split,
stock dividend or other similar change in our capital structure.
The administrator has the authority to amend or terminate the 2000 stock
option plan. However, the administrator may not take any action that impairs
the rights of any holder of an outstanding option without the holder's consent.
In addition, we must obtain stockholder approval of amendments to the plan as
required by applicable law.
1996 Stock Option Plan. Our 1996 stock option plan was adopted by the board
of directors in October 1996 and was approved by the stockholders in October
1996. The plan was amended at various times after October 1996, including an
amendment to provide that following adoption of the 2000 stock option plan, up
to 9,825,000 shares of stock which are either reserved and available for
issuance under the plan, or which would otherwise return to the plan upon
either the cancellation of outstanding options or the repurchase of shares in
connection with the termination of the holder's employment or consulting
relationship with us, will become available for issuance under our 2000 stock
option plan.
As of March 31, 2000, a total of 11,326,125 shares of common stock had been
reserved for issuance under the 1996 option plan. As of March 31, 2000, options
to purchase 6,495,482 shares of common stock had been exercised, options to
purchase 3,611,641 shares of common stock were outstanding and 1,178,301 shares
remained available for future option grants. However, no future grants will be
made under the 1996 stock option plan after the effective date of this
offering.
The terms of the 1996 stock option plan are substantially similar to those
of the 2000 stock option plan except for the following:
. Unless the board terminates it earlier, the 1996 stock option plan will
terminate in September 2006.
. The 1996 stock option plan does not impose an annual limit on the size of
awards that may be granted to any one individual under the plan.
. Generally, the exercise price of non-statutory stock options must be
equal to at least 85% of the fair market value of our common stock on the
date of grant.
. The 1996 stock option plan provides for the indemnification of the
administrator for claims arising out of the administration of the plan
unless it is determined that the administrator is liable for gross
negligence, bad faith, or intentional misconduct.
2000 Employee Stock Purchase Plan. Our 2000 employee stock purchase plan was
adopted by the board of directors in March 2000 and will be submitted for
approval by our stockholders prior to completion of this offering. The 2000
employee stock purchase plan becomes effective upon the effective date of this
offering. A total of 450,000 shares of common stock has been reserved for
issuance under the 2000 employee stock
43
<PAGE>
purchase plan, plus an automatic annual increase on the first day of each of
our fiscal years beginning in 2001 and ending in 2010 equal to the lesser of
900,000 shares, 2% of our outstanding common stock on the last day of the
immediately preceding fiscal year, or a lesser number of shares as determined
by the board of directors. Unless terminated earlier by the board of directors,
the 2000 employee stock purchase plan will terminate 10 years following the
date of this offering.
The 2000 employee stock purchase plan is intended to qualify under Section
423 of the Internal Revenue Code. The plan will be implemented by a series of
overlapping offering periods of approximately 24 months duration, with new
offering periods (other than the first offering period) commencing on August 1
and February 1 of each year. Each offering period will generally consist of 4
consecutive purchase periods of 6 months duration, at the end of which an
automatic purchase will be made for participants. The initial offering period
is expected to commence on the effective date of this offering.
The 2000 employee stock purchase plan will be administered by the board of
directors or by a committee appointed by the board. Our employees (including
officers and employee directors), or employees of any majority-owned subsidiary
designated by the board, are eligible to participate if they are regular
employees who work at least 20 hours per week and more than 5 months per year.
The 2000 employee stock purchase plan permits eligible employees to purchase
common stock through payroll deductions, which may not exceed 20% of an
employee's total compensation. Stock is purchased at a price equal to the lower
of 85% of the fair market value of the common stock at the beginning of the
offering period or at the end of the purchase period. In addition, no employee
may purchase more than 2,700 shares of common stock under the plan in any one
purchase period. Employees may end their participation in the plan at any time
during an offering period, and participation ends automatically on termination
of employment.
If we merge or consolidate with or into another corporation or sell all or
substantially all of our assets, we expect that each right to purchase stock
under the 2000 employee stock purchase plan will be assumed or an equivalent
right substituted by the successor corporation. If our acquiror does not agree
to assume or substitute outstanding rights, the offering period then in
progress will be shortened so that employees' rights to purchase stock under
the plan are exercised prior to the transaction. Outstanding options will
adjust in the event of a stock split, stock dividend or other similar change in
our capital structure.
Our board of directors has the power to amend or terminate the 2000 employee
stock purchase plan and to change or terminate offering periods as long as such
action does not adversely affect any outstanding rights to purchase stock
thereunder. However, the board may amend or terminate the 2000 employee stock
purchase plan or an offering period even if it would adversely affect
outstanding options in order to avoid our incurring adverse accounting charges.
2000 Directors' Stock Option Plan. The 2000 directors' stock option plan was
adopted by the board of directors in March 2000 and will be submitted for
approval by our stockholders prior to completion of this offering. It will
become effective upon the effective date of this offering. A total of 1,200,000
shares of common stock has been reserved for issuance under the 2000 directors'
plan. The 2000 directors' plan provides for the grant of non-statutory stock
options to our non-employee directors. The 2000 directors' plan is designed to
work automatically without administration. If administration is necessary, it
will be performed by the board of directors, with any interested director
abstaining from the decision-making process. Unless terminated earlier, the
2000 directors' plan will terminate 10 years from the effective date of this
offering.
Under the directors' plan, each individual who first becomes a non-employee
director after the effective date of the directors' plan will receive an
automatic initial grant of an option to purchase 40,000 shares of common stock
upon appointment or election to the board. These automatic grants to purchase
40,000 shares will vest and become exercisable as to 1/4 of the total number of
shares subject to the option on the 12 month anniversary of the date of grant
and as to 1/48 of the total number of shares subject to the option each month
44
<PAGE>
following the date of grant. The directors' plan also provides for automatic
annual grants of options to purchase 10,000 shares of common stock on the date
of each annual meeting of our stockholders to each non-employee director who
has served on the board for at least six months prior to the meeting. The
automatic grants to purchase 10,000 shares will vest and become exercisable in
installments of 1/12 of the total number of shares subject to the option each
month following the date of grant. All options granted under the 2000
directors' plan will have a term of 10 years and an exercise price equal to the
fair market value of our common stock on the date of grant.
If we merge with or consolidate into another corporation, or sell all or
substantially all of our assets, each option outstanding under the directors'
plan will become immediately fully vested and exercisable immediately before
the transaction. Outstanding options will adjust in the event of a stock split,
stock dividend or other similar change in our capital structure. The board may
amend or terminate the directors' plan, but any such amendment that would
impair the rights of any holder of an outstanding option will not affect those
outstanding options without the holder's consent. In addition, we must obtain
stockholder approval of amendments to the plan as required by applicable law.
Limitation of Liability and Indemnification Matters
As permitted by the Delaware General Corporation Law, we have included in
our amended and restated certificate of incorporation a provision to eliminate
the personal liability of our officers and directors for monetary damages for
breach or alleged breach of their fiduciary duties as officers or directors,
respectively, subject to certain exceptions. In addition, our bylaws provide
that we are required to indemnify our officers and directors under certain
circumstances, including those circumstances in which indemnification would
otherwise be discretionary, and we are required to advance expenses to our
officers and directors as incurred in connection with proceedings against them
for which they may be indemnified. We have entered into indemnification
agreements with our officers and directors containing provisions that are in
some respects broader than the specific indemnification provisions contained in
the Delaware law. The indemnification agreements require us, among other
things, to indemnify such officers and directors against certain liabilities
that may arise by reason of their status or service as officers and directors,
other than liabilities arising from willful misconduct of a culpable nature, to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified, and to obtain directors' and officers'
insurance if available on reasonable terms.
We currently intend to purchase a policy for directors' and officers'
insurance. At present, we are not aware of any pending or threatened litigation
or proceeding involving any of our directors, officers, employees or agents in
which indemnification would be required or permitted. We are not aware of any
threatened litigation or proceeding that might result in a claim for such
indemnification. We believe that our charter provisions and indemnification
agreements are necessary to attract and retain qualified persons as directors
and officers.
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<PAGE>
RELATED PARTY TRANSACTIONS
Since January 1, 1997, we have not been a party to any transaction or series
of similar transactions in which the amount involved exceeds $60,000 and in
which any director, executive officer, or holder of more than 5% of our common
stock had or will have a direct or indirect material interest other than:
. normal compensation arrangements which are described under "Management--
Executive Compensation" above; and
. the transactions described below.
Private Placement Transactions
Since January 1, 1997, we have issued shares of preferred stock for the
purchase of preferred stock in private placement transactions involving related
parties, as follows:
. An aggregate of 12,413,793 shares of series B preferred stock at $0.483
per share in September 1998 to twelve investors;
. An aggregate of 6,956,400 shares of series C preferred stock at $3.33 per
share in June 1999 to thirty-three investors; and
. An aggregate of 3,590,763 shares of series D preferred stock at $8.67 per
share in December 1999 and January 2000 to twenty-nine investors.
. An aggregate of 2,000,000 shares of Series E preferred stock at $10.00
per share in June 2000 to six investors.
The table below summarizes the shares of preferred stock purchased by our
executive officers, directors and 5% stockholders and persons and entities
associated with them in the above private placement transactions. Shares held
by affiliated persons and entities have been aggregated.
<TABLE>
<CAPTION>
Investors Preferred Stock
--------- -------------------------------------
Series
Series B Series C D Series E
--------- --------- ------- ---------
<S> <C> <C> <C> <C>
ABS Capital Partners III, L.P and Andrew
Sheehan................................ 0 1,650,000 230,769 1,000,000
Admirals, L.P........................... 0 1,500,000 576,922 500,000
Institutional Venture Partners and its
affiliates, including T. Peter Thomas.. 5,586,205 1,440,000 692,307
U.S. Venture Partners and its
affiliates, including Stuart Phillips.. 5,586,206 1,440,000 692,307
Kris Chellam............................ 0 75,000 15,000
</TABLE>
Transactions with Management
In connection with the exercise of options to purchase common stock granted
pursuant to our 1996 stock option plan, we have provided loans to the following
executive officers pursuant to notes secured by stock pledge agreements, which
are summarized below:
<TABLE>
<CAPTION>
Note
Name Due Date Interest Rate Issue Date Amount
---- -------- ------------- ---------- ------
<S> <C> <C> <C> <C>
Krish Panu 12/16/2004 6.11% 12/16/1999 $275,000
Krish Panu 2/23/2005 6.46 2/23/2000 500,000
Rodric Fan 12/17/2003 6.11 12/16/1999 200,000
Thomas Hoster 11/30/2004 6.11 12/1/1999 450,000
David Manovich 12/16/2004 6.11 12/16/1999 250,000
Thomas Allen 12/15/2004 6.11 12/15/1999 100,000
John Lankes 12/16/2004 6.11 12/16/1999 78,500
Julia Langley 2/22/2005 6.12 2/22/2000 250,000
Shirish Puranik 12/15/2004 6.11 12/15/1999 260,000
Michael Walker 12/1/2004 6.11 12/1/1999 100,000
</TABLE>
46
<PAGE>
In March 2000, the board of directors approved the acceleration of the
vesting of a stock option held by Krish Panu to purchase 375,000 shares of
common stock.
In April 2000, the board of directors ratified a loan to John Lankes in the
amount of $80,000 under a note secured by a stock pledge agreement for
financing relocation expenses for his employment with @Road.
We have entered into employment and change-of-control agreements with some
of our officers and directors. See "Management--Employment and Change-of-
Control Agreements."
We have entered into indemnification agreements with our officers and
directors containing provisions which may require us, among other things, to
indemnify our officers and directors against certain liabilities that may arise
by reason of their status or service as officers or directors, other than
liabilities arising from willful misconduct of a culpable nature, and to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified.
Transactions with Shareholders
Orient Semiconductor Electronics, which holds more than 5% of our common
stock, manufactured Internet Location Managers for us pursuant to purchase
orders in the aggregate amounts of approximately $21,000 in 1998 and $512,000
in 1999. At March 31, 2000, approximately $551,000 owed to Orient Semiconductor
Electronics was included in our accounts payable.
Registration Rights Agreements
Some of our shareholders are entitled to have their shares registered by us
for resale. See "Description of Capital Stock--Registration Rights."
47
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of our common stock as of March 31, 2000 and as adjusted to reflect
the sale of the common stock offered by us pursuant to this prospectus and
conversion of all outstanding shares of preferred stock into shares of common
stock by
. each of our directors, our chief executive officer and our one other
executive officer whose aggregate compensation during our last fiscal
year exceeded $100,000,
. all directors and executive officers as a group, and
. each person who is known by us to own beneficially more than 5% of our
common stock.
Percentage of beneficial ownership is based on 36,032,116 shares of common
stock outstanding as of March 31, 2000, together with options that are
exercisable within sixty days of March 31, 2000 for each person.
Except as otherwise noted, the address of each person listed in the table is
c/o @Road, Inc., 47200 Bayside Parkway, Fremont, CA 94538, and the persons
listed in the table have sole voting and investment power with respect to all
shares of common stock shown as beneficially owned by them, subject to
community property laws where applicable. Beneficial ownership is determined in
accordance with the rules of the SEC and includes voting and investment power
with respect to the shares.
<TABLE>
<CAPTION>
Percent
Beneficially Owned
----------------------
Number of Shares Before After
Name of Beneficial Owner Beneficially Owned Offering Offering
------------------------ ------------------ --------- ---------
<S> <C> <C> <C>
Krish Panu...................... 3,375,000 9.4%
Institutional Venture
Partners(1).................... 7,718,512 21.4
U.S. Venture Partners(2)........ 7,718,513 21.4
Orient Semiconductor Electronics
Ltd.(3)........................ 2,557,062 7.1
Admirals, L.P.(4)............... 2,076,922 5.8
ABS Capital Partners III,
L.P(5)......................... 1,880,769 5.2
Rodric Fan (6).................. 2,400,000 6.7
Kris Chellam(7)................. 172,500 *
Stuart Phillips(8).............. 37,500 *
Andrew Sheehan(9)............... 25,000 *
T. Peter Thomas(10)............. 37,500 *
All directors and executive
officers as a group (9
persons)(11)................... 24,505,294 67.2
</TABLE>
--------
* Less than one percent of the outstanding shares of common stock.
(1) Represents 7,539,412 shares held by Institutional Venture Partners, VIII,
L.P., 55,861 shares held by Institutional Venture Partners Founders Fund I,
L.P., 98,101 shares held by Institutional Venture Management Fund, VIII,
L.L.C., and 25,138 shares held by Institutional Venture Management Fund
VIII-A, L.L.C. T. Peter Thomas, a director of @Road, is a managing director
of the general partner or managing member of each of these entities, shares
voting and dispositive power with respect to the shares held by each such
entity, and disclaims beneficial ownership of such shares in which he has
no pecuniary interest. Address is 3000 Sand Hill Road, Bldg. 2, Suite 290,
Menlo Park, California 94025.
(2) Represents 6,323,586 shares held by U.S. Venture Partners V, L.P., 692,307
shares held by U.S. Venture Partners VII, L.P., 154,576 shares held by U.S.
Venture Partners V Entrepreneur Partners, L.P., 351,310 shares held by U.S.
Venture Partners V International, L.P., and 196,734 shares held by 2180
Associates Fund V, L.P. Stuart Phillips, a director of @Road, is a general
partner of the general partner of each of these partnerships, shares voting
and dispositive power with respect to the shares held by each such
48
<PAGE>
entity, and disclaims beneficial ownership of such shares in which he has
no pecuniary interest. Address is 2180 Sand Hill Road, Suite 300, Menlo
Park, California 94025.
(3) Represents 2,480,295 shares held by Orient Semiconductor Electronics Ltd.
and 76,767 shares held by Eugene C.V. Duh. Mr. Duh is a director and 10%
shareholder of Orient Semiconductor Electronics, Limited. Mr. Duh
disclaims beneficial ownership of such shares except to the extent of his
pecuniary interest. Mr. Duh has shared voting power and shared investment
power of such shares. Address is c/o Edmond Tseng, 2700 Augstine Dr.,
#140, Santa Clara, California 95054.
(4) Address is Galleon Management, 135 E. 57th Street, 26th Floor, New York,
New York 10022.
(5) Andrew Sheehan, a director of @Road, is a managing member of ABS Capital
Partners III, LLC, the general partner of ABS Capital Partners III, L.P.,
which owns such shares. Mr. Sheehan disclaims beneficial ownership of
these shares except to the extent of his pecuniary interest. Mr. Sheehan
has shared voting power and shared investment power of these shares.
Address is 1 South Street, 25th Floor, Baltimore, Maryland, 21202.
(6) Represents 1,080,000 shares held by Rodric C. Fan, 450,000 shares held by
Judy Fan; 675,000 shares held by R. C. Fan Management Company, L.P.;
60,000 shares held by Eric Fan; 60,000 shares held by Carey B. Fan;
60,000 shares held by David W. Fan; and 15,000 shares held by Rodric C.
Fan and Judy Fan, custodians for Dorian Falcone.
(7) Includes 45,000 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000.
(8) Represents 37,500 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000. Excludes 7,718,514 shares held by U.S.
Venture Partners V, L.P. and its affiliates. See note (2). Address is
2180 Sand Hill Road, Suite 300, Menlo Park, California 94025.
(9) Represents 25,000 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000. Excludes 1,880,769 shares held by ABS
Capital Partners III, L.P. See note (5). Address is 1 South Street, 25th
Floor, Baltimore, Maryland, 21202.
(10) Represents 37,500 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000. Excludes 7,718,514 shares held by
Institutional Venture Partners, VIII, L.P. and its affiliates. See note
(1). Address is 3000 Sand Hill Road, Bldg. 2, Suite 290, Menlo Park,
California 94025.
(11) Includes 437,500 shares issuable upon exercise of options exercisable
within 60 days of March 31, 2000 and 17,317,794 shares held by affiliates
of our directors and officers.
49
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Upon the completion of this offering, after giving effect to the conversion
of all outstanding shares of preferred stock into common stock and the filing
of our amended and restated certificate of incorporation, our authorized
capital stock will consist of 250,000,000 shares of common stock, $0.0001 par
value, and 10,000,000 shares of undesignated preferred stock, $0.0001 par
value.
Common Stock
As of March 31, 2000, there were 36,072,829 shares of common stock
outstanding, held of record by 101 stockholders, after giving effect to the
conversion of all outstanding shares of our preferred stock into common stock.
There will be shares of common stock outstanding, assuming no exercise of
the underwriter's over-allotment option or exercise of outstanding options
under the stock plans after March 15, 2000, after giving effect to the sale of
the shares of common stock to the public offered hereby.
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders. Subject to
preferential rights with respect to any outstanding preferred stock, holders of
common stock are entitled to receive ratably such dividends as may be declared
by the board of directors out of funds legally available therefor. In the event
of liquidation, dissolution or winding up of @Road, the holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities and satisfaction of preferential rights of any outstanding
preferred stock. The common stock has no preemptive or conversion rights or
other subscription rights. The outstanding shares of common stock are, and the
shares of common stock to be issued upon completion of this offering will be,
fully paid and non-assessable.
Preferred Stock
Upon the closing of the offering, all outstanding shares of preferred stock
at March 31, 2000 will be converted into 26,710,956 shares of common stock and
automatically retired. Thereafter, the board of directors is authorized to
issue preferred stock in one or more series and to fix the rights, preferences,
privileges and restrictions thereof, including dividend rights, dividend rates,
conversion rights, voting rights, terms of redemption, redemption prices,
liquidation preferences and the number of shares constituting any series or the
designation of such series, without further vote or action by the stockholders.
The issuance of preferred stock may have the effect of delaying, deferring
or preventing a change in control of @Road without further action by the
stockholders. The issuance of preferred stock with voting and conversion rights
may adversely affect the voting power of the holders of common stock, including
voting rights, of the holders of common stock. In certain circumstances, such
issuance could have the effect of decreasing the market price of the common
stock. As of the closing of the offering, no shares of preferred stock will be
outstanding and we currently have no plans to issue any shares of preferred
stock.
Registration Rights
As of March 31, 2000, the holders of 26,907,677 shares of common stock or
their transferees are entitled to certain rights with respect to the
registration of such shares under the Securities Act. These rights are provided
under the terms of an agreement between us and the holders of these registrable
securities. Subject to certain limitations in the agreement, the holders of at
least a majority of the registrable securities, excluding registrable common
stock held by Rodric Fan, may require, on two occasions beginning six months
after the date of this prospectus, that we use our best efforts to register the
registrable securities for public resale. If we register any of our common
stock either for our own account or for the account of other security holders,
the holders of registrable securities are entitled to include their shares of
common stock in such registration, subject to the ability of the underwriters
to limit the number of shares included in the offering. The holders of
registrable securities may also require us, not more than twice in any twelve-
month period, to register all or a
50
<PAGE>
portion of their registrable securities on Form S-3 when use of such form
becomes available to us, provided, among other limitations, that the proposed
aggregate selling price, net of any underwriters' discounts or commissions, is
at least $1,000,000. We must bear all registration expenses, and the holders
of the securities being registered must bear all selling expenses relating to
the registrable securities.
Effect of Certain Certificate of Incorporation and Bylaw Provisions
In March 2000, our board of directors approved certain amendments to our
certificate of incorporation and bylaws to provide, among other things, that
our directors will be elected without the application of cumulative voting.
Such provision will be submitted to our stockholders for approval in July 2000
and shall become effective at the first meeting of stockholders following the
annual meeting of stockholders when we shall have had at least 800
stockholders. Such amendments also provide that, after the closing of the
offering contemplated hereby, any action required or permitted to be taken by
our stockholders may be taken only at a duly called annual or special meeting
of the stockholders. The bylaws also establish procedures, including advance
notice procedures with regard to the nomination, other than by or at the
direction of the board of directors, of candidates for election as directors.
The foregoing provisions could have the effect of making it more difficult
for a third party to effect a change in the control of the board of directors.
In addition, these provisions could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, a majority of our outstanding voting stock.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is American Stock
Transfer and Trust Company.
51
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market could
adversely affect prevailing market prices. Furthermore, since only a limited
number of shares will be available for sale shortly after this offering because
of certain contractual and legal restrictions on resale (as described below),
sales of substantial amounts of our common stock in the public market after the
restrictions lapse could adversely affect the prevailing market price and our
ability to raise equity capital in the future.
Upon completion of the offering, we will have outstanding shares of
common stock assuming no exercise of the underwriters' option to purchase
additional shares in the offering, no sale of additional shares of common stock
or securities convertible into common stock, and no exercise of outstanding
options to purchase our common stock after March 31, 2000. Of these shares, the
shares sold in the offering, plus any shares issued upon exercise of the
underwriters' over-allotment option, will be freely tradable without
restriction under the Securities Act, unless purchased by our affiliates, as
defined in Rule 144 under the Securities Act.
The remaining 36,072,815 shares of common stock outstanding are restricted
securities within the meaning of Rule 144 under the Securities Act. These
restricted shares may be sold in the public market only if registered or if
they qualify for an exemption from registration under Rules 144, 144(k) or 701
promulgated under the Securities Act, which are summarized below. Sales of the
restricted shares in the public market, or the availability of such shares for
sale, could adversely affect the market price of the common stock.
All of our directors and officers and current stockholders holding at least
one percent of our outstanding stock have entered into lock-up agreements
generally providing that they will not offer, sell, contract to sell or grant
any option to purchase or otherwise dispose of the shares of our common stock
or any securities exercisable for or convertible into our common stock owned by
them for a period of 180 days after the effective date of this offering without
the prior written consent of @Road or a designated representative of the
underwriters. As a result of these contractual restrictions, notwithstanding
possible earlier eligibility for sale under the provisions of Rules 144, 144(k)
and 701, shares subject to lock-up agreements will not be saleable until such
agreements expire or are waived by the designated underwriters' representative.
Upon expiration of the 180-day lock-up period, 33,350,081 shares will be
eligible for immediate sale (of which 28,046,328 shares will be subject to
certain volume, manner of sale and other limitations under Rule 144 or 701).
The remaining 2,722,734 restricted shares will be eligible for sale under Rule
144 on the:
. satisfaction of the one-year holding period required by Rule 144; or
. expiration of the repurchase options held by us over the four years
following the original purchase date of the shares.
In general, under Rule 144 as currently in effect, beginning after the
expiration of the lock-up agreements, a person, or persons whose shares are
aggregated, who has beneficially owned restricted shares for at least one year
would be entitled to sell within any three-month period a number of shares that
does not exceed the greater of: (1) one percent of the number of shares of
common stock then outstanding; or (2) the average weekly trading volume of the
common stock during the four calendar weeks preceding the sale. Sales under
Rule 144 are also subject to certain manner of sale provisions and notice
requirements and to the availability of current public information about us.
Under Rule 144(k), a person who is not deemed to have been an affiliate of ours
at any time during the three months preceding a sale and has beneficially owned
the shares proposed to be sold for at least two years, is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Rule 701 provides that, beginning 90 days after the date of this prospectus,
persons other than affiliates may sell our common stock acquired from us in
connection with written compensatory benefit plans, including our stock option
plans, subject only to the manner of sale provisions of Rule 144 and lock-up
agreements.
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<PAGE>
Beginning 90 days after this prospectus (but subject to the applicable lock-up
period), affiliates may sell these shares subject to all provisions of Rule 144
except the one-year minimum holding period.
In addition, we intend to file a registration statement on Form S-8 under
the Securities Act as promptly as possible after the effective date of this
offering to register shares to be issued pursuant to our employee benefit
plans. See "Management--Stock Plans." This Form S-8 registration statement is
expected to become effective immediately upon filing, and shares covered by
that registration statement will then be eligible for sale in the public
markets, subject to:
. the Rule 144 limitations applicable to affiliates;
. the expiration of the lock-period; and
. vesting restrictions imposed by us.
As of March 31, 2000 there were outstanding options to purchase 3,611,641
shares of common stock, of which options to purchase 1,400,480 shares of our
common stock were exercisable. See "Risk Factors--Future sales of common stock
by our existing stockholders could cause our share price to fall." and
"Management--Stock Plans."
After the closing of this offering, assuming no sale of additional shares of
our common stock or securities convertible into common stock after March 31,
2000, the holders of approximately 28,375,945 shares of our common stock will
be entitled to have their shares registered by us for resale. For a discussion
of these rights, see "Description of Capital Stock--Registration Rights."
53
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, we have agreed to sell to the underwriters named
below, for whom Credit Suisse First Boston Corporation, Chase Securities Inc.
and U.S. Bancorp Piper Jaffray Inc. are acting as representatives, the
following respective numbers of shares of common stock:
<TABLE>
<CAPTION>
Number
of
Underwriter Shares
----------- ------
<S> <C>
Credit Suisse First Boston Corporation................................
Chase Securities Inc. ................................................
U.S. Bancorp Piper Jaffray Inc. ......................................
----
Total...............................................................
====
</TABLE>
The underwriting agreement provides that the underwriters are obligated to
purchase all the shares of common stock in the offering if any are purchased,
other than those shares covered by the over-allotment option described below.
The underwriting agreement also provides that if an underwriter defaults, the
purchase commitments of non-defaulting underwriters may be increased or the
offering of common stock may be terminated.
We have granted to the underwriters a 30-day option to purchase on a pro
rata basis up to additional shares at the initial public offering price
less the underwriting discounts and commissions. The option may be exercised
only to cover any over-allotments of common stock.
The underwriters propose to offer the shares of common stock initially at
the public offering price on the cover page of this prospectus and to selling
group members at that price less a concession of $ per share. The
underwriters and the selling group members may allow a discount of $ per
share on sales to other broker/dealers. After the initial public offering, the
public offering price and concession and discount to broker/dealers may be
changed by the representatives.
The following table summarizes the compensation and estimated expenses we
will pay.
<TABLE>
<CAPTION>
Per Share Total
----------------------------- -----------------------------
Without With Without With
Over-allotment Over-allotment Over-allotment Over-allotment
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Underwriting Discounts
and Commissions paid by
us . . . . . . . . . .
....................... $ $ $ $
Expenses payable by us.. $ $ $ $
</TABLE>
The underwriters have informed us that they do not expect discretionary
sales to exceed 5% of the shares of common stock being offered.
We have agreed that we will not offer, sell, contract to sell, pledge or
otherwise dispose of, directly or indirectly, or file with the Securities and
Exchange Commission a registration statement under the Securities Act relating
to, any shares of our common stock or securities convertible into or
exchangeable or exercisable for any shares of our common stock, or publicly
disclose the intention to make any such offer, sale, pledge, disposition or
filing, without the prior written consent of Credit Suisse First Boston
Corporation for a period of 180 days after the date of this prospectus, except
issuances pursuant to the exercise of employee stock options outstanding on the
date hereof or pursuant to our dividend reinvestment plan.
Our officers and directors and all of our stockholders have agreed that they
will not offer, sell, contract to sell, pledge or otherwise dispose of,
directly or indirectly, any shares of our common stock or securities
convertible into or exchangeable or exercisable for any shares of our common
stock, enter into a transaction which would have the same effect, or enter into
any swap, hedge or other arrangement that transfers, in whole or in part, any
of the economic consequences of ownership of our common stock, whether any such
transaction
54
<PAGE>
is to be settled by delivery of our common stock or such other securities, in
cash or otherwise, or publicly disclose the intention to make any such offer,
sale, pledge or disposition, without the prior written consent of Credit Suisse
First Boston Corporation for a period of 180 days after the date of this
prospectus.
The underwriters have reserved for sale at the initial public offering price
up to shares of the common stock for employees, directors and certain
other persons associated with us who have expressed an interest in purchasing
common stock in the offering. The number of shares available for sale to the
general public in the offering will be reduced to the extent such persons
purchase such reserved shares. Any reserved shares not so purchased will be
offered by the underwriters to the general public on the same terms as the
other shares.
We have agreed to indemnify the underwriters against liabilities under the
Securities Act, or contribute to payments that the underwriters may be required
to make in that respect.
We have applied to list the shares of common stock on The Nasdaq Stock
Market's National Market under the symbol ARDI.
Prior to this offering, there has been no public market for the common
stock. The initial public offering price will be determined by negotiation
between us and the representatives. The principal factors to be considered in
determining the public offering price include the following:
. the information set forth in this prospectus and otherwise available to
the representatives;
. market conditions for initial public offerings;
. the history and the prospects for the industry in which we will compete;
. the ability of our management;
. our prospects for future earnings;
. the present state of our development and our current financial condition;
. the general condition of the securities markets at the time of this
offering; and
. the recent market prices of, and the demand for, publicly traded common
stock of generally comparable companies.
The representatives may engage in over-allotment, stabilizing transactions,
syndicate covering transactions and penalty bids in accordance with Regulation
M under the Securities Exchange Act of 1934.
. Over-allotment involves syndicate sales in excess of the offering size,
which creates a syndicate short position.
. Stabilizing transactions permit bids to purchase the underlying security
so long as the stabilizing bids do not exceed a specified maximum.
. Syndicate covering transactions involve purchases of the common stock in
the open market after the distribution has been completed in order to
cover syndicate short positions.
. Penalty bids permit the representatives to reclaim a selling concession
from a syndicate member when the common stock originally sold by the
syndicate member is purchased in a stabilizing or syndicate covering
transaction to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty
bids may cause the price of the common stock to be higher than it would
otherwise be in the absence of these transactions. These transactions may be
effected on The Nasdaq National Market or otherwise and, if commenced, may be
discontinued at any time.
A prospectus in electronic format may be made available on the websites
maintained by one or more of the underwriters participating in this offering.
The representatives may agree to allocate a number of shares to underwriters
for sale to their online brokerage account holders. Internet distributions will
be allocated by the representatives of the underwriters on the same basis as
other allocations.
55
<PAGE>
NOTICE TO CANADIAN RESIDENTS
Resale Restrictions
The distribution of the common stock in Canada is being made only on a
private placement basis exempt from the requirement that we prepare and file a
prospectus with the securities regulatory authorities in each province where
trades of common stock are effected. Accordingly, any resale of the common
stock in Canada must be made in accordance with applicable securities laws
which will vary depending on the relevant jurisdiction, and which may require
resales to be made in accordance with available statutory exemptions or
pursuant to a discretionary exemption granted by the applicable Canadian
securities regulatory authority. Purchasers are advised to seek legal advice
prior to any resale of the common stock.
Representations of Purchasers
Each purchaser of common stock in Canada who receives a purchase
confirmation will be deemed to represent to us and the dealer from whom such
purchase confirmation is received that (i) such purchaser is entitled under
applicable provincial securities laws to purchase such common stock without the
benefit of a prospectus qualified under such securities laws, (ii) where
required by law, that such purchaser is purchasing as principal and not as
agent, and (iii) such purchaser has reviewed the text above under "Resale
Restrictions."
Rights of Action (Ontario Purchasers)
The securities being offered are those of a foreign issuer and Ontario
purchasers will not receive the contractual right of action prescribed by
Ontario securities law. As a result, Ontario purchasers must rely on other
remedies that may be available, including common law rights of action for
damages or rescission or rights of action under the civil liability provisions
of the U.S. federal securities laws.
Enforcement of Legal Rights
All of the issuer's directors and officers as well as the experts named
herein may be located outside of Canada and, as a result, it may not be
possible for Canadian purchasers to effect service of process within Canada
upon the issuer or such persons. All or a substantial portion of the assets of
the issuer and such persons may be located outside of Canada and, as a result,
it may not be possible to satisfy a judgment against the issuer or such persons
in Canada or to enforce a judgment obtained in Canadian courts against such
issuer or persons outside of Canada.
Notice to British Columbia Residents
A purchaser of common stock to whom the Securities Act (British Columbia)
applies is advised that such purchaser is required to file with the British
Columbia Securities Commission a report within ten days of the sale of any
common stock acquired by such purchaser pursuant to this offering. Such report
must be in the form attached to British Columbia Securities Commission Blanket
Order BOR #95/17, a copy of which may be obtained from us. Only one such report
must be filed in respect of common stock acquired on the same date and under
the same prospectus exemption.
Taxation and Eligibility for Investment
Canadian purchasers of common stock should consult their own legal and tax
advisors with respect to the tax consequences of an investment in the common
stock in their particular circumstances and with respect to the eligibility of
the common stock for investment by the purchaser under relevant Canadian
legislation.
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<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Venture Law Group, A Professional Corporation, Menlo Park, California. Tae
Hea Nahm, a director of Venture Law Group, is our Secretary. The underwriters
have been represented by Wilson Sonsini Goodrich & Rosati, Palo Alto,
California. As of the date of this prospectus, certain attorneys of Venture Law
Group and an investment partnership affiliated with Venture Law Group own an
aggregate of 65,673 shares of our common stock and an option to purchase 22,500
shares of our common stock.
EXPERTS
The consolidated financial statements as of December 31, 1998 and 1999 and
for each of the three years ended December 31, 1999 included in this prospectus
and the related consolidated financial statement schedule included elsewhere in
the registration statement have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their reports appearing herein and elsewhere
in the registration statement, and have been so included in reliance upon the
reports of such firm given upon their authority as experts in accounting and
auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement, including any amendments to the registration statement, on Form S-1
under the Securities Act with respect to the common stock offered by this
prospectus. This prospectus, which constitutes a part of the registration
statement, does not contain all of the information set forth in the
registration statement. For further information with respect to @Road and the
common stock offered by this prospectus, reference is made to the registration
statement and its exhibits, and the financial statements and notes filed as a
part of the registration statement. With respect to each such document filed
with the Commission as an exhibit to the registration statement, reference is
made to the exhibit for a more complete description of the matter involved. The
registration statement, including its exhibits and the financial statements and
notes filed as a part of the registration statement, as well as such reports
and other information filed with the Commission, may be inspected without
charge at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission located at Seven World Trade Center, 13th Floor, New York, NY 10048,
and the Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of all or any part of the registration statement may be obtained
from the Commission upon payment of certain fees prescribed by the Commission.
These reports and other information may also be inspected without charge at a
web site maintained by the Commission at http://www.sec.gov.
57
<PAGE>
@ROAD, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report............................................. F-2
Consolidated Balance Sheets as of December 31, 1998, 1999 and March 31,
2000 (unaudited)........................................................ F-3
Consolidated Statements of Operations for the Years Ended December 31,
1997, 1998, 1999 and three months ended March 31, 1999 and 2000
(unaudited)............................................................. F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Loss
for the Years Ended December 31, 1997, 1998, 1999 and three months ended
March 31, 2000 (unaudited).............................................. F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1997, 1998, 1999 and three months ended March 31, 1999 and 2000
(unaudited)............................................................. F-6
Notes to Consolidated Financial Statements for the Years Ended December
31, 1997, 1998, 1999 and three months ended March 31, 1999 and 2000
(unaudited)............................................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
@Road, Inc.:
We have audited the accompanying consolidated balance sheets of @Road, Inc.
and subsidiary (the "Company") as of December 31, 1998 and 1999, and the
related consolidated statements of operations, stockholders' equity and
comprehensive loss, and cash flows for each of the three years in the period
ended December 31, 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of @Road, Inc. and subsidiary at
December 31, 1998 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
March 23, 2000
F-2
<PAGE>
@ROAD, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and par value amounts)
<TABLE>
<CAPTION>
December 31, Pro Forma
----------------- March 31, March 31,
1998 1999 2000 2000
------- -------- --------- ---------
(Note 1)
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 5,356 $ 22,714 $ 34,493 $ 54,493
Short-term investments................ -- 13,939 3,781 3,781
Restricted short-term investments..... -- 2,000 2,000 2,000
Accounts receivable (net of allowances
of $0, $131 and $323)................ 62 807 2,304 2,304
Inventories........................... 238 1,880 2,870 2,870
Deferred product costs................ 67 1,282 2,847 2,847
Prepaid expenses and other............ 94 204 540 540
------- -------- -------- --------
Total current assets................ 5,817 42,826 48,835 68,835
Property and equipment, net............. 174 1,566 4,559 4,559
Deferred product costs.................. -- 594 1,015 1,015
Other assets............................ 15 188 653 653
------- -------- -------- --------
Total assets........................ $ 6,006 $ 45,174 $ 55,062 $ 75,062
======= ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable...................... $ 51 $ 2,020 $ 4,275 $ 4,275
Accrued liabilities................... 100 1,345 2,389 2,389
Deferred revenue...................... 67 703 1,595 1,595
------- -------- -------- --------
Total current liabilities........... 218 4,068 8,259 8,259
Deferred revenue........................ -- 464 863 863
Other long-term liabilities............. -- 34 128 128
------- -------- -------- --------
Total liabilities................... 218 4,566 9,250 9,250
Commitments and contingencies (Note 9)
Stockholders' equity:
Convertible preferred stock, $0.0001
par value, 26,927,886 shares
authorized; shares issued and
outstanding: 16,163,793 in 1998,
25,430,187 in 1999, and 26,710,956 in
2000, pro forma--none outstanding.... 8,469 51,606 62,675 --
Common stock, par value $0.0001,
48,072,114 shares authorized; shares
issued and outstanding: 2,311,125 in
1998, 7,550,001 in 1999, and
9,361,873 in 2000, pro forma--
38,072,829 shares outstanding........ 7 18,590 30,191 112,866
Deferred stock compensation........... -- (11,632) (18,330) (18,330)
Notes receivable from stockholders.... -- (1,758) (3,060) (3,060)
Accumulated other comprehensive loss.. -- (21) (21) (21)
Accumulated deficit................... (2,688) (16,177) (25,643) (25,643)
------- -------- -------- --------
Total stockholders' equity.......... 5,788 40,608 45,812 65,812
------- -------- -------- --------
Total liabilities and
stockholders' equity............. $ 6,006 $ 45,174 $ 55,062 $ 75,062
======= ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
@ROAD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three
Months Ended
Years Ended December 31, March 31,
-------------------------- ----------------
1997 1998 1999 1999 2000
------- ------- -------- ------ --------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
Service........................ $ -- $ 4 $ 612 $ 7 $ 937
Product........................ -- 64 294 24 253
------- ------- -------- ------ --------
Total revenues............... -- 68 906 31 1,190
------- ------- -------- ------ --------
Costs and expenses:
Cost of service revenue........ -- 27 681 9 639
Cost of product revenue........ -- 87 1,777 30 1,273
Sales and marketing............ 107 266 3,530 176 2,744
Research and development....... 745 731 2,109 203 1,611
General and administrative..... 250 457 2,129 309 1,595
Stock compensation (*)......... -- -- 4,973 63 3,415
------- ------- -------- ------ --------
Total costs and expenses..... 1,102 1,568 15,199 790 11,277
------- ------- -------- ------ --------
Loss from operations............. (1,102) (1,500) (14,293) (759) (10,087)
Interest income, net............. 98 90 804 56 621
------- ------- -------- ------ --------
Net loss......................... $(1,004) $(1,410) $(13,489) $ (703) $ (9,466)
======= ======= ======== ====== ========
Basic and diluted net loss per
share........................... $ (0.45) $ (0.62) $ (4.88) $(0.30) $ (2.64)
======= ======= ======== ====== ========
Shares used in calculating basic
and diluted net loss per share.. 2,250 2,287 2,763 2,311 3,590
======= ======= ======== ====== ========
Pro forma basic and diluted net
loss per share (unaudited) (Note
1).............................. $ (0.59) $ (0.31)
======== ========
Shares used in calculating pro
forma basic and diluted net loss
per share (unaudited) (Note 1).. 22,882 30,088
======== ========
(*)Stock compensation:
Cost of service revenue........ $ -- $ -- $ 17 $ -- $ 41
Cost of product revenue........ -- -- 52 -- 123
Sales and marketing............ -- -- 501 4 471
Research and development....... -- -- 445 1 793
General and administrative..... -- -- 3,958 58 1,987
------- ------- -------- ------ --------
Total........................ $ -- $ -- $ 4,973 $ 63 $ 3,415
======= ======= ======== ====== ========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
@ROAD, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE LOSS
YEARS ENDED DECEMBER 31, 1997, 1998, 1999 AND THREE MONTHS ENDED MARCH 31, 2000
(In thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Notes Accumulated
Convertible Receivable Other Total
Preferred Stock Common Stock Deferred from Compre- Accumu- Compre-
------------------ ----------------- Stock Stock- hensive lated Stockholders' hensive
Shares Amount Shares Amount Compensation holders Loss Deficit Equity Loss
---------- ------- --------- ------- ------------ ---------- ----------- -------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCES,
January 1,
1997........... 3,750,000 $ 2,489 2,250,000 $ 3 $ -- $ -- $ -- $ (274) $ 2,218
Net loss........ (1,004) (1,004) $ (1,004)
---------- ------- --------- ------- -------- ------- ----- -------- -------- ========
BALANCES,
December 31,
1997........... 3,750,000 2,489 2,250,000 3 -- -- -- (1,278) 1,214
Net loss........ (1,410) (1,410) $ (1,410)
========
Issuance of
Series B
convertible
preferred stock
at $0.48 per
share, net of
issuance costs
of $20......... 12,413,793 5,980 5,980
Exercise of
stock options.. 61,125 4 4
---------- ------- --------- ------- -------- ------- ----- -------- --------
BALANCES,
December 31,
1998........... 16,163,793 8,469 2,311,125 7 -- -- -- (2,688) 5,788
Net loss........ (13,489) (13,489) $(13,489)
Change in net
unrealized loss
from short-term
investments.... (21) (21) (21)
--------
Comprehensive
loss........... $(13,510)
========
Issuance of
Series C
convertible
preferred stock
at $3.33 per
share, net of
issuance costs
of $21......... 6,956,400 23,167 23,167
Issuance of
Series D
convertible
preferred stock
at $8.67 per
share, net of
issuance costs
of $50......... 2,309,994 19,970 19,970
Common stock
issued for
consulting
services....... 50,689 43 43
Exercise of
stock options
and stock
purchase
rights......... 5,188,187 1,935 (1,758) 177
Deferred stock
compensation... 16,605 (16,605) --
Amortization of
deferred stock
compensation... 4,973 4,973
---------- ------- --------- ------- -------- ------- ----- -------- --------
BALANCES,
December 31,
1999........... 25,430,187 51,606 7,550,001 18,590 (11,632) (1,758) (21) (16,177) 40,608
Net loss*....... (9,466) (9,466) $ (9,466)
========
Issuance of
Series D
convertible
preferred stock
at $8.67 per
share, net of
issuance costs
of $35*........ 1,280,769 11,069 11,069
Exercise of
stock options
and stock
purchase
rights*........ 1,811,872 1,488 (1,302) 186
Deferred stock
compensation*.. 10,124 (10,124) --
Reversal of
deferred stock
compensation
due to employee
terminations*.. (11) 11 --
Amortization of
deferred stock
compensation*.. 3,415 3,415
---------- ------- --------- ------- -------- ------- ----- -------- --------
BALANCES, March
31, 2000*...... 26,710,956 $62,675 9,361,873 $30,191 $(18,330) $(3,060) $ (21) $(25,643) $ 45,812
========== ======= ========= ======= ======== ======= ===== ======== ========
</TABLE>
-------
* unaudited
See notes to consolidated financial statements.
F-5
<PAGE>
@ROAD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
Three Months
Ended March
Years Ended December 31, 31,
-------------------------- ---------------
1997 1998 1999 1999 2000
------- ------- -------- ------ -------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss........................ $(1,004) $(1,410) $(13,489) $ (703) $(9,466)
Adjustments to reconcile net
loss to net cash used in
operating activities:
Depreciation and
amortization................. 18 47 188 21 148
Loss on sale of property and
equipment.................... -- -- 6 -- --
Amortization of deferred stock
compensation................. -- -- 4,973 63 3,415
Common stock issued for
consulting services.......... -- -- 43 -- --
Change in assets and
liabilities:
Accounts receivable......... -- (62) (745) 62 (1,497)
Inventories................. (71) (166) (1,642) (186) (990)
Deferred product costs...... -- (67) (1,809) (28) (1,986)
Prepaid expenses and other.. 1 (84) (110) 48 (336)
Accounts payable............ 10 25 1,969 28 2,255
Accrued and other
liabilities................ 28 33 1,279 57 1,138
Deferred revenue............ -- 67 1,100 2 1,291
------- ------- -------- ------ -------
Net cash used in operating
activities............... (1,018) (1,617) (8,237) (636) (6,028)
------- ------- -------- ------ -------
Cash flows from investing
activities:
Purchase of property and
equipment...................... (62) (101) (1,621) (64) (3,141)
Proceeds from sale of property
and equipment.................. -- -- 35 -- --
Purchases of short-term
investments.................... (500) -- (17,971) -- --
Proceeds from maturities of
short-term investments......... 1,000 500 4,011 -- 10,158
Purchase of restricted short-
term investments............... -- -- (2,000) -- --
Other assets.................... -- -- (173) 15 (465)
------- ------- -------- ------ -------
Net cash provided by (used
in) investing
activities............... 438 399 (17,719) (49) 6,552
------- ------- -------- ------ -------
Cash flows from financing
activities:
Proceeds from sale of preferred
stock.......................... -- 5,980 43,137 -- 11,069
Proceeds from sale of common
stock.......................... -- 4 177 -- 186
------- ------- -------- ------ -------
Net cash provided by
financing activities..... -- 5,984 43,314 -- 11,255
------- ------- -------- ------ -------
Net increase (decrease) in cash
and cash equivalents............. (580) 4,766 17,358 (685) 11,779
Cash and cash equivalents:
Beginning of period............. 1,170 590 5,356 5,356 22,714
------- ------- -------- ------ -------
End of period................... $ 590 $ 5,356 $ 22,714 $4,671 $34,493
======= ======= ======== ====== =======
Supplemental disclosure of cash
flow information--Cash paid for
interest......................... $ -- $ -- $ 25 $ -- $ --
======= ======= ======== ====== =======
Noncash financing activities--
Issuance of common stock for
notes receivable............... $ -- $ -- $ 1,758 $ -- $ 1,302
======= ======= ======== ====== =======
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
1. Summary of Significant Accounting Policies
Organization--@Road, Inc. (the Company), was incorporated in July 1994 in
California and commenced operations on July 1, 1996. During 1999, the Company
completed the development of its service delivery platform and began
substantial sales and marketing efforts. The Company is a leading provider of
Internet based productivity enhancement services for companies with a mobile
workforce through the use of the proprietary global positioning system (GPS)
and wireless technologies.
Principles of Consolidation--The consolidated financial statements include
the company and its wholly-owned subsidiary. Intercompany accounts and
transactions are eliminated in consolidation.
Estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Cash Equivalents--The Company considers all highly liquid debt instruments
purchased with an original maturity of 90 days or less to be cash equivalents.
Short-Term Investments--Short-term investments represent highly liquid debt
instruments purchased with a maturity date at purchase of greater than 90 days
and are stated at fair value. The differences between amortized cost (cost
adjusted for amortization of premiums and accretion of discounts which are
recognized as adjustments to interest income) and fair value representing
unrealized holding gains or losses are recorded as accumulated other
comprehensive loss within stockholders' equity. While the Company's intent is
to hold debt securities to maturity, they are classified as available-for-sale
because the sale of such securities may be required prior to maturity. Any
gains and losses on the sale of debt securities are determined on a specific
identification basis.
Restricted short-term investments consist of a certificate of deposit with
an original maturity of greater than 90 days which is held as collateral under
the Company's line of credit agreement (see Note 6). The certificate of deposit
is classified as an available-for-sale as the sale of such security may be
required prior to maturity. At December 31, 1999 and March 31, 2000, the fair
value of the restricted short-term investment approximated cost.
Concentration of Credit Risk--Financial instruments which potentially
subject the Company to concentrations of credit risk consist primarily of cash
equivalents, short-term investments and accounts receivable. The Company's cash
equivalents and short-term investments consist of checking and savings
accounts, money market accounts and highly liquid debt instruments with three
financial institutions. The Company sells its products primarily to companies
in the United States. The Company does not require collateral or other security
to support accounts receivable. To reduce credit risk, management performs
ongoing evaluations of its customers' financial condition.
Inventories--Inventories consist of raw materials, work in process and
finished goods, and are stated at the lower of cost (average cost) or market.
Property and Equipment--Property and equipment are stated at cost and
depreciated using the straight-line method over estimated useful lives of
approximately three to five years. Leasehold improvements are amortized over
the shorter of the lease term or their useful lives.
F-7
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
Long-Lived Assets--The Company evaluates long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. An impairment loss would be recognized when
the sum of the undiscounted future net cash flows expected to result from the
use of the asset and its eventual disposition is less than its carrying amount.
Income Taxes--The Company accounts for income taxes under an asset and
liability approach. Deferred income taxes reflect the impact of temporary
differences between assets and liabilities recognized for financial reporting
purposes and such amounts recognized for income tax reporting purposes, net
operating loss carryforwards and other tax credits measured by applying
currently enacted tax laws. Valuation allowances are provided when necessary to
reduce deferred tax assets to an amount that is more likely than not to be
realized.
Revenue Recognition--Revenue is recognized when earned in accordance with
applicable accounting standards, including American Institute of Certified
Public Accountants (AICPA) Statement of Position No. 97-2, Software Revenue
Recognition, as amended. The Company earns revenues under service contracts,
which generally provide service over periods from two to three years, and from
related products sold to customers (for which title passes on shipment). The
Company's service is only available through use of the Company's product; such
product has no alternative use. Accordingly, service revenue is recognized
ratably over the minimum service contract period, which commences upon product
installation. In addition, the Company defers product revenue at installation
and recognizes it ratably over the minimum service contract period. Product
costs (not in excess of the related deferred product revenues) are also
deferred and amortized over such period. Allowances for sales returns are
recorded at the time product revenue is recognized. Deferred revenue also
includes customer payments received prior to installation.
Advertising Costs--All advertising costs are expensed as incurred.
Advertising costs, which are included in sales and marketing expenses, were
$4,000, $3,000 and $179,000 for 1997, 1998 and 1999, respectively.
Research and development expenses are charged to operations as incurred.
Such expenses include product development costs and costs related to the
Company's internally developed software systems, which have not met the
capitalization criteria of Statement of Position 98-1, Accounting for the Costs
of Computer Software Developed or Obtained for Internal Use (SOP 98-1). During
1999, the Company capitalized approximately $242,000 of costs related to
internally developed software systems in accordance with SOP 98-1.
Foreign Currency Transactions--The functional currency of the Company's
foreign subsidiary is the U.S. dollar. Accordingly, all monetary assets and
liabilities are translated at the current exchange rate at the end of the year,
nonmonetary assets and liabilities are translated at historical rates and
revenues and expenses are translated at average exchange rates in effect during
the period. Transaction gains and losses have not been significant to date.
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.
The Company accounts for equity instruments issued to nonemployees 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,
F-8
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
which requires that the fair value of such instruments be recognized as an
expense over the period in which the related services are received.
Net Loss per Common Share--Basic net loss per common share excludes dilution
and is computed by dividing net loss by the weighted average number of common
shares outstanding for the period (excluding shares subject to repurchase).
Diluted net loss per common share was the same as basic net loss per common
share for all periods presented since the effect of any potentially dilutive
securities is excluded as they are anti-dilutive because of the Company's net
losses.
Unaudited Pro Forma Net Loss per Common Share--Pro forma basic and diluted
net loss per common share is computed by dividing net loss by the weighted
average number of common shares outstanding for the period (excluding shares
subject to repurchase) plus the weighted average number of common shares
resulting from the assumed conversion upon the closing of the planned initial
public offering of outstanding shares of convertible preferred stock.
Unaudited Pro Forma Information--The unaudited pro forma balance sheet
information assumes that as of March 31, 2000, the Company had issued 2,000,000
shares of Series E convertible preferred stock (see Note 13) and each share of
preferred stock had converted into one share of common stock upon closing of an
initial public offering.
Unaudited Interim Financial Information--The unaudited interim financial
information as of March 31, 2000 and for the three months ended March 31, 1999
and 2000 has been prepared on the same basis as the audited consolidated
financial statements. In the opinion of management, such unaudited information
includes all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of this interim information when read in
conjunction with the consolidated financial statements and notes thereto.
Operating results for the three months ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000.
Certain Significant Risks and Uncertainties--The Company participates in a
dynamic high-technology industry and believes that changes in any of the
following areas could have a material adverse effect on the Company's future
financial position, results of operations or cash flows: advances and trends in
new technologies and industry standards; competitive pressures in the form of
new products and services or price reductions on current products and services;
changes in the overall demand for products and services offered by the Company;
market acceptance of the Company's products and services; development of sales
channels; changes in third-party manufacturers; changes in key suppliers;
changes in certain strategic relationships or customer relationships;
litigation or claims against the Company based on intellectual property,
patent, product, regulatory or other factors; risks associated with necessary
components and the Company's ability to attract and retain employees necessary
to support its growth.
Comprehensive Loss--Statement of Financial Accounting Standards (SFAS) No.
130, Reporting Comprehensive Income requires that an enterprise report, by
major components and as a single total, the change in its net assets during the
period from nonowner sources. For the years ended December 31, 1997 and 1998,
comprehensive loss was equal to net loss. At December 31, 1999 and March 31,
2000, accumulated other comprehensive loss is comprised of unrealized losses on
short-term investments of $21,000.
Segment Reporting--Effective January 1, 1999, the Company adopted SFAS No.
131, Disclosures About Segments of an Enterprise and Related Information. In
1999 and the three months ended March 31, 2000, the Company operated in a
single reportable segment and will evaluate additional segment disclosure
requirements
F-9
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
as it expands its operations. The Company had no significant revenues from
customers outside of the United States in 1999 and the three months ended March
31, 2000 and had no significant long-lived assets deployed outside the United
States as of December 31, 1999 and March 31, 2000.
Recently Issued Accounting Standard--In June 1998, the Financial Accounting
Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities. This statement requires companies to record derivatives on
the balance sheet as assets or liabilities, measured at fair value. Gains or
losses resulting from changes in the values of those derivatives would be
accounted for depending on the use of the derivative and whether it qualifies
for hedge accounting. SFAS No. 133 will be effective for the Company's fiscal
year ending December 31, 2001. Management believes that this statement will not
have a significant impact on the Company's financial position, results of
operations or cash flows.
Reclassifications--Certain reclassifications have been made to the 1997 and
1998 financial statement presentation to conform to the 1999 presentation.
These reclassifications had no effect on net loss or stockholders' equity.
2. Short-Term Investments
Short term investments include the following available-for-sale securities
at December 31, 1999 (in thousands):
<TABLE>
<CAPTION>
Unrealized Unrealized
Amortized Market Holding Holding
Cost Value Gains Losses
--------- ------- ---------- ----------
<S> <C> <C> <C> <C>
Commercial paper....................... $10,214 $10,215 $ 1 $ --
Corporate debt securities.............. 2,746 2,731 -- (15)
U.S. Government debt securities........ 1,000 993 -- (7)
------- ------- ---- -----
Total................................ $13,960 $13,939 $ 1 $ (22)
======= ======= ==== =====
Short term investments include the following available-for-sale securities
at March 31, 2000 (in thousands):
<CAPTION>
Unrealized
Amortized Market Holding
Cost Value Losses
--------- ------- ----------
<S> <C> <C> <C> <C>
Corporate debt securities.............. $ 2,802 $ 2,787 $(15)
U.S. Government debt securities........ 1,000 994 (6)
------- ------- ----
Total................................ $ 3,802 $ 3,781 $(21)
======= ======= ====
</TABLE>
3. Inventories
Inventories consist of (in thousands):
<TABLE>
<CAPTION>
December
31,
----------- March 31,
1998 1999 2000
---- ------ ---------
<S> <C> <C> <C>
Raw materials........................................ $204 $1,095 $2,043
Work in progress..................................... 21 338 391
Finished goods....................................... 13 447 436
---- ------ ------
Total.............................................. $238 $1,880 $2,870
==== ====== ======
</TABLE>
F-10
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
4. Property and Equipment
Property and equipment consist of (in thousands):
<TABLE>
<CAPTION>
December
31,
------------ March 31,
1998 1999 2000
---- ------ ---------
<S> <C> <C> <C>
Computers and software............................. $133 $1,603 $4,460
Manufacturing and office equipment................. 109 131 154
Furniture and fixtures............................. -- 67 232
Leasehold improvements............................. -- 19 115
---- ------ ------
Total............................................ 242 1,820 4,961
Accumulated depreciation and amortization.......... (68) (254) (402)
---- ------ ------
Property and equipment, net...................... $174 $1,566 $4,559
==== ====== ======
</TABLE>
5. Accrued Liabilities
Accrued liabilities consist of (in thousands):
<TABLE>
<CAPTION>
December
31,
----------- March 31,
1998 1999 2000
---- ------ ---------
<S> <C> <C> <C>
Accrued compensation and related benefits............ $ 46 $ 924 $1,637
Other................................................ 54 421 752
---- ------ ------
Total.............................................. $100 $1,345 $2,389
==== ====== ======
</TABLE>
6. Line of Credit
During 1999, the Company entered into a $2,000,000 revolving line of credit
agreement that expires in March 2001. The line of credit provides for issuance
of letters of credit of up to $2,000,000. Borrowings bear interest at the
restricted certificate of deposit rate plus 2% (6.4% at December 31, 1999) and
are collateralized by a restricted certificate of deposit (see Note 1). There
were no borrowings and letters of credit outstanding under this revolving line
of credit at December 31, 1999.
7. Stockholders' Equity
Preferred stock as of December 31, 1999 consists of (in thousands, except
share amounts):
<TABLE>
<CAPTION>
Outstanding
-------------------
Amount
(Net of Aggregate
Shares Issuance Liquidation
Designated Shares Costs) Preference
---------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Series A........................ 3,750,000 3,750,000 $ 2,489 $ 2,500
Series B........................ 12,413,793 12,413,793 5,980 6,000
Series C........................ 6,956,400 6,956,400 23,167 23,188
Series D........................ 3,807,693 2,309,994 19,970 20,020
---------- ---------- ------- -------
26,927,886 25,430,187 $51,606 $51,708
========== ========== ======= =======
</TABLE>
F-11
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
Convertible Preferred Stock
The significant terms of the convertible preferred stock are as follows:
. Each share is convertible into one share of common stock (subject to
adjustments for events of dilution). Shares will automatically be
converted upon a public offering of common stock yielding proceeds in
excess of $15,000,000 or upon the approval (by vote or written consent)
of at least 75% of the then outstanding Series A, Series B, Series C and
Series D, voting together as a class.
. Each share has the same voting rights as the number of shares of common
stock into which it is convertible.
. If and when declared by the Board of Directors, the holders of Series A,
Series B, Series C and Series D convertible preferred stock are entitled
to receive noncumulative dividends at the rate of $0.06, $0.043, $0.30
and $0.78 per share per annum on each outstanding share of Series A,
Series B, Series C and Series D convertible preferred stock,
respectively.
. In the event of liquidation, dissolution or winding up of the Company,
the preferred stockholders of Series A, Series B, Series C and Series D
shall receive an amount equal to $0.67, $0.48, $3.33 and $8.67 per share,
respectively, plus an amount equal to all declared but unpaid dividends
on each share. Any remaining assets will be distributed among the holders
of Series A, Series B, Series C and Series D preferred stock and common
stock, pro rata, based on the number of shares of common stock held by
each stockholder on an as-converted basis. In total, the holders of
Series A, Series B, Series C and Series D preferred stock shall not be
entitled to receive more than $2.00, $1.45, $10.00 and $26.00 per share,
respectively.
Common Stock
At December 31, 1999, the Company has reserved shares of common stock for
issuance as follows:
<TABLE>
<S> <C>
Conversion of preferred stock................................... 25,430,187
Issuance under stock option plan................................ 6,226,813
Issuance under stock purchase right............................. 375,000
----------
32,032,000
==========
</TABLE>
Stock Option Plan
Under the Company's 1996 Stock Option Plan (the Plan), the Board of
Directors is authorized to grant to employees, officers, directors and
consultants up to 11,326,125 shares of common stock. These options generally
expire ten years from the date of grant and generally vest in installments over
a four-year period.
Stock Purchase Rights
During 1999, the Company granted to employees purchase rights for 525,000
shares of common stock at $1.33 per share. Of the shares issuable under the
purchase rights, 150,000 of the shares are subject to repurchase by the Company
at the original issuance price; the repurchase right lapses over a thirty-three
month period.
F-12
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
A summary of option and stock purchase right activity is as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Shares Price
---------- --------
<S> <C> <C>
Outstanding, January 1, 1997 (none exercisable).......... 1,665,000 $0.07
Granted (weighted average fair value of $0.01 per
share).................................................. 97,500 0.07
Canceled................................................. (7,500) 0.07
----------
Outstanding, December 31, 1997 (583,188 exercisable at a
weighted average exercise price of $0.07)............... 1,755,000 0.07
Granted (weighted average fair value of $0.01 per
share).................................................. 627,000 0.07
Exercised................................................ (61,125) 0.07
Canceled................................................. (189,375) 0.07
----------
Outstanding, December 31, 1998 (1,062,483 exercisable at
a weighted average exercise price of $0.07)............. 2,131,500 0.07
Granted (weighted average fair value of $2.34 per
share).................................................. 7,572,575 0.55
Exercised................................................ (5,188,187) 0.37
Canceled................................................. (459,000) 0.09
----------
Outstanding, December 31, 1999........................... 4,056,888 0.57
Granted*................................................. 1,374,125 2.24
Exercised*............................................... (1,811,872) 0.82
Canceled* ............................................... (7,500) 0.93
----------
Outstanding, March 31, 2000*............................. 3,611,641 $1.08
==========
</TABLE>
--------
* Unaudited
At December 31, 1999, 2,544,925 shares were available for future grant under
the Option Plan.
Additional information regarding options and stock purchase rights
outstanding as of December 31, 1999 is as follows:
<TABLE>
<CAPTION>
Outstanding Vested
------------------------------------- ----------------
Weighted Average Weighted Weighted
Remaining Average Average
Exercise Number Contractual Life Exercise Number Exercise
Price Outstanding (Years) Price Vested Price
------------ ----------- ---------------- -------- ------- --------
<S> <C> <C> <C> <C> <C>
$0.07 2,032,063 8.33 $0.07 395,672 $0.07
0.67 786,950 9.69 0.67 49,700 0.67
1.33 1,237,875 9.87 1.33 388,500 1.33
--------- -------
$0.07--$1.33 4,056,888 9.06 $0.57 833,872 $0.69
========= =======
</TABLE>
Stock Compensation
During 1999, the Company issued 7,045,125 common stock options and stock
purchase rights to employees at a weighted average price of $0.59 per share,
which were at prices less than the fair value of its
F-13
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
common stock. The weighted average fair value of the common stock was $2.95 per
share. Accordingly, the Company recorded approximately $15,842,000 as the value
of such options in 1999. Stock compensation of $4,436,000 was amortized to
expense in fiscal 1999, and at December 31, 1999, the Company had $11,406,000
in deferred stock compensation related to employee options.
During the three months ended March 31, 2000, the Company issued options to
purchase 1,264,875 shares of common stock to employees at a weighted average
exercise price of $2.28 per share, which were at prices less than the fair
value of its common stock. The weighted average fair value of the common stock
was $9.27 per share. Accordingly, the Company recorded approximately $8,830,000
as the value of such options in the three months ended March 31, 2000. Stock
compensation of $2,760,000 was amortized to expense in the three months ended
March 31, 2000, and at March 31, 2000, the Company had $17,476,000 in deferred
compensation related to employee options.
During 1999 and the three months ended March 31, 2000, the Company issued
nonstatutory common stock options to consultants to purchase 147,200 and
109,250 shares of common stock, respectively, of which options to purchase
144,200 shares and 212,750 shares of common stock were outstanding at December
31, 1999 and March 31, 2000, respectively. Accordingly, the Company recorded
$763,000 and $1,294,000 as the fair value of such options in 1999 and the three
months ended March 31, 2000, respectively. Stock compensation of $537,000 and
$655,000 was recognized as a result of issuing these options in 1999 and the
three months ended March 31, 2000, respectively. The fair value of the unvested
portion of these options is being amortized over the vesting period. The fair
value attributable to the unvested portion of these options is subject to
adjustment based upon the future value of the Company's common stock. The fair
values of these options were determined at the date of vesting using the
methods specified by SFAS 123 with the following weighted average assumptions
during 1999 and 2000: expected life, ten years; risk free interest rate, 6%;
volatility, 95%; and no dividends during the expected term. Forfeitures are
recognized as they occur.
Additional Stock Plan Information
As discussed in Note 1, the Company accounts for its stock-based awards
using the intrinsic value method in accordance with 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.
SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123), requires
the disclosure of pro forma net income or loss had the Company adopted the fair
value method. Under SFAS 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 tradeable, 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 were made using the minimum value
method with the following weighted average assumptions: expected life, five
years in 1997, 1998 and 1999; risk-free interest rate, 6% in 1997, 5% in 1998
and 6% in 1999; and no dividends during the expected term. The Company's
calculations are based on a single option valuation approach, and forfeitures
are recognized as they occur.
F-14
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
If the computed minimum values of the Company's stock-based awards to
employees had been amortized to expense over the vesting period of the awards
as specified under SFAS No. 123, loss attributable to common shareholders and
basic and diluted loss per share on a pro forma basis (as compared to such
items as reported) would have been (in thousands except per share amounts):
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Net loss:
As reported................................. $(1,004) $(1,410) $(13,489)
Pro forma................................... $(1,012) $(1,417) $(13,746)
Basic and diluted net loss per share:
As reported................................. $ (0.45) $ (0.62) $ (4.88)
Pro forma................................... $ (0.45) $ (0.62) $ (4.98)
</TABLE>
Receivable from Sales of Stock
At December 31, 1999 and March 31, 2000, notes receivable from stockholders
representing notes receivable from certain officers and other employees of the
Company, were comprised of (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
Stock Purchased
------------------- Interest
Issue Date Amount Number Per Share Rate
---------- ------ --------- --------- --------
<S> <C> <C> <C> <C>
December 1999.......................... $814 610,500 $1.33 6.11%
December 1999.......................... $905 1,357,500 $0.67 6.11%
December 1999.......................... $ 39 577,500 $0.07 6.11%
January 2000........................... $344 258,000 $1.33 6.12%
January 2000........................... $ 28 42,000 $0.67 6.12%
February 2000.......................... $250 187,500 $1.33 6.12%
February 2000.......................... $500 375,000 $1.33 6.46%
March 2000............................. $180 45,000 $4.00 6.46%
</TABLE>
These full recourse notes are secured by common stock and generally are due
five years from the issue dates. The stock sold in connection with these notes
and other stock sales for cash are subject to repurchase by the Company at the
original issuance price; this right generally lapses over a four-year period
subject to continued employment. At December 31, 1999 and March 31, 2000,
approximately 4,046,000 and 5,703,000 shares, respectively, of common stock
were subject to this purchase right.
F-15
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
8. Net Loss per Share
The following is a reconciliation of the numerators and denominators used in
computing basic and diluted net loss per share (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Three Months Ended
Years Ended December 31, March 31,
-------------------------- -------------------
1997 1998 1999 1999 2000
------- ------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Net loss (numerator), basic
and diluted................. $(1,004) $(1,410) $(13,489) $(703) $(9,466)
======= ======= ======== ======== =========
Shares (denominator):
Weighted average common
shares outstanding........ 2,250 2,287 3,974 2,311 8,670
Weighted average common
shares outstanding subject
to repurchase............. -- -- (1,211) -- (5,080)
------- ------- -------- -------- ---------
Shares used in computation,
basic and diluted......... 2,250 2,287 2,763 2,311 3,590
======= ======= ======== ======== =========
Net loss per share, basic and
diluted..................... $ (0.45) $ (0.62) $ (4.88) $ (0.30) $ (2.64)
======= ======= ======== ======== =========
Shares used in computation,
basic and diluted........... 2,763 3,590
Weighted average preferred
stock outstanding........... 20,119 26,498
-------- ---------
Shares used in computing pro
forma per share amounts on a
converted basis............. 22,882 30,088
======== =========
Pro forma net loss per share
on a converted basis, basic
and diluted................. $ (0.59) $ (0.31)
======== =========
</TABLE>
For the above mentioned periods, the Company had securities outstanding
which could potentially dilute basic earnings per share in the future, but were
excluded from the computation of diluted net loss per share in the periods
presented, as their effect would have been antidilutive. Such outstanding
securities consist of the following:
<TABLE>
<CAPTION>
Three Months Ended
Years Ended December 31, March 31,
------------------------------- ---------------------
1997 1998 1999 1999 2000
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Convertible preferred
stock................... 3,750,000 16,163,793 25,430,187 16,163,793 26,710,956
Shares of common stock
subject to repurchase... -- -- 4,046,000 -- 5,703,000
Outstanding options and
stock purchase rights... 1,755,000 2,131,500 4,056,888 4,932,000 3,611,641
Weighted average exercise
price of options and
stock purchase rights... $ 0.07 $ 0.07 $ 0.57 $ 0.07 $ 1.08
========= ========== ========== ========== ==========
</TABLE>
F-16
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
9. Commitments and Contingencies
Lease Commitments
The Company leases its principal facilities under a noncancelable operating
lease expiring in December 2000 (see Note 12). Future minimum rental payments
under operating leases, net of sublease income, are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ending
December 31,
------------
<S> <C>
2000............................................................ $280,000
2001............................................................ 45,000
2002............................................................ 42,000
--------
$367,000
========
</TABLE>
Rent expense was approximately $50,000, $51,000 and $225,000 (net of
sublease income of $0, $0, and $50,000) for 1997, 1998 and 1999, respectively.
Purchase Commitments
At December 31, 1999, the Company has noncancelable inventory purchase
commitments totaling approximately $720,000.
Contingencies
The Company has received a letter from the holder of two patents claiming
that the Company infringes the patents. The Company is in the process of
reviewing the patents; however, the ultimate outcome of this matter cannot be
determined at this time.
In addition, the Company is a defendant in a lawsuit and may be a defendant
in lawsuits and claims arising in the ordinary course of business in the
future. While the outcomes of such claims, lawsuits or other proceedings cannot
be predicted with certainty, management expects that such liability, to the
extent not provided by insurance or otherwise, will not have a material adverse
effect on the financial condition, results of operation or cash flows of the
Company.
F-17
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
10. Income Taxes
No income taxes were provided for any years presented due to the Company's
net losses.
The Company's effective tax rate differs from the expected benefit at the
federal statutory tax rate for the years ended December 31 as follows:
<TABLE>
<CAPTION>
1997 1998 1999
----- ----- -----
<S> <C> <C> <C>
Federal statutory rate.... (35.0)% (35.0)% (35.0)%
State taxes, net of
federal benefit.......... (8.4) (8.1) (3.9)
Non-deductible stock
compensation charges..... -- -- 11.5
Research and development
credits.................. (3.7) (3.7) (0.7)
Other..................... (3.9) (4.2) (1.7)
Valuation allowance....... 51.0 51.0 29.8
----- ----- -----
Effective tax rate...... -- % -- % -- %
===== ===== =====
</TABLE>
Net deferred tax assets at December 31 consist of (in thousands):
<TABLE>
<CAPTION>
1998 1999
------- -------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards..................... $ 1,167 $ 4,419
Credit carryforwards................................. 142 292
Accruals and reserves recognized in different
periods............................................. -- 614
------- -------
Total gross deferred tax assets before valuation
allowance......................................... 1,309 5,325
Valuation reserve...................................... (1,309) (5,325)
------- -------
Net deferred tax asset................................. $ -- $ --
======= =======
</TABLE>
At December 31, 1999, the Company has federal and state net operating loss
carryforwards of approximately $10,276,000 and $10,277,000, respectively,
expiring through 2019 and 2003, respectively.
At December 31, 1999, the Company also has research and development and
manufacturing investment credits of approximately $182,000 and $110,000
available to offset future federal and state income taxes, respectively. The
federal tax credit carryforward expires through 2019. The state tax credit
carryforward has no expiration.
Current federal and California tax law includes provisions limiting the
annual use of net operating loss and credit carryforwards in the event of
certain defined changes in stock ownership. The Company's capitalization
described herein may have resulted in such a change. Accordingly, the annual
use of the Company's net operating loss and credit carryforwards would be
limited according to these provisions. Management has not yet determined the
extent of such limitation. Such limitation may result in the loss of
carryforward benefits due to their expiration.
F-18
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
11. Related Party Transactions
In 1999 and 1998, the Company purchased approximately $512,000 and $21,000,
respectively, of inventory from a preferred stockholder. At December 31, 1999,
approximately $256,000 owed to the preferred stockholder was included in
accounts payable. At December 31, 1998, no amounts were payable to the
preferred stockholder.
12. Employee Benefit Plan
The Company sponsors a 401(k) Saving and Retirement Plan (the Plan) for all
employees who meet certain eligibility requirements. Participants may
contribute, on a pre-tax basis, between 1% and 15% of their annual
compensation, but not to exceed a maximum contribution amount pursuant to
Section 401(k) of the Internal Revenue Code. The Company is not required to
contribute, nor has it contributed, to the Plan for any of the years presented.
13. Subsequent Events
In January 2000, the Company sold 1,280,769 shares of Series D convertible
preferred stock to investors at $8.67 per share for proceeds of approximately
$11,100,000.
In January 2000, the Company entered into an additional non-cancelable
facilities operating lease expiring in 2005 requiring lease payments of
approximately $212,000 in 2000, $663,000 in 2001, $719,000 in 2002, $751,000 in
2003, $784,000 in 2004, and $66,000 in 2005.
In February 2000, the stockholders approved an increase in the number of
authorized shares to 75,000,000 and a three-for-two stock split of its common
and preferred stock outstanding. All share and per share information in the
accompanying consolidated financial statements have been adjusted to
retroactively give effect to the stock split for all periods presented.
In March 2000, the Company agreed, subject to certain conditions, to
purchase substantially all assets and certain related liabilities of
Differential Corrections, Inc. for cash of $4,010,000 and 78,923 shares of the
Company's Series D convertible preferred stock. The Company completed this
purchase in April 2000.
In March 2000, the Board of Directors approved, subject to stockholder
approval, the following:
. Reincorporation of the Company in the state of Delaware with the
Company's name changed to At Road, Inc.
. An increase of authorized shares of common stock to 250,000,000 shares
and creation of newly undesignated preferred stock totaling 10,000,000
shares, contingent upon the approval of the reincorporation of the
Company in Delaware and the closing of the Company's initial public
offering.
. Adoption of the Company's 2000 Stock Option Plan (the 2000 Option Plan).
A total of up to 2,000,000 shares are be reserved for issuance under the
2000 Plan. In addition, up to 9,825,000 shares, if available for grant
under the 1996 option plan will be granted under the 2000 plan. The
number of shares reserved under the plan will automatically be increased
on the first day of each of the fiscal years
F-19
<PAGE>
@ROAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
YEARS ENDED DECEMBER 31, 1997, 1998 AND 1999 AND THREE MONTHS
ENDED MARCH 31, 1999 AND 2000
(Information as of March 31, 2000 and for the three months
ended March 31, 1999 and 2000 is unaudited)
beginning 2001 and ending 2010 in an amount equal to the lesser of
2,500,000 shares or four percent of the shares outstanding on the last day
of the preceding year.
. Adoption of the Company's 2000 Employee Stock Purchase Plan (the ESPP).
The ESPP will become effective upon the closing of the Company's initial
public offering. A total of 450,000 shares of common stock will be
reserved for issuance under the ESPP. The number of shares reserved for
issuance under the ESPP will automatically increase on the first day of
each year beginning in 2001 and ending 2010 by an amount equal to the
lesser of 900,000 shares or two percent of the total shares outstanding
on the last day of the preceding year. Under the ESPP, shares of common
stock will be sold to employees at a price not less than 85% of the lower
of fair market value at the beginning of the two-year offering period or
the end of the six month purchase periods.
. Adoption of the Company's 2000 Directors' Stock Option Plan (the
Directors' Plan). The Directors' Plan will become effective upon the
closing of the Company's initial public offering. A total of up to
1,200,000 shares of common stock will be reserved for issuance for the
initial grant of nonstatutory stock options to each nonemployee director
to purchase 40,000 shares of common stock at the fair market value at the
grant date, as well as additional option grants for 10,000 shares to be
issued each subsequent year.
On March 23, 2000, the Company agreed, subject to certain conditions, to
purchase certain assets of Hynet Technologies for 50,000 shares of the
Company's common stock. The Company completed this asset purchase in May 2000.
In June 2000, the Company increased its authorized shares of common and
preferred stock to 49,000,000 and 30,789,879, respectively. The authorized
preferred stock includes 3,000,000 and 1,000,000 shares designated as Series E
and Series E-1 (collectively Series E), respectively. The significant terms of
Series E preferred stock are similar to the terms of the outstanding preferred
stock (See Note 7) except that holders of Series E-1 preferred stock cannot
vote for the election of the Company's board of directors.
In June 2000, the Company sold 2,000,000 shares of Series E convertible
preferred stock to investors at $10.00 per share for proceeds of approximately
$20,000,000.
* * * * *
F-20
<PAGE>
[@ROAD LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts are estimates except the SEC
registration fee and the NASD filing fee and the Nasdaq National Market listing
fee.
<TABLE>
<CAPTION>
Amount to
be Paid
----------
<S> <C>
SEC registration fee........................................... $23,377.20
NASD filing fee................................................ *
Nasdaq National Market listing fee............................. *
Printing and engraving expenses................................ *
Legal fees and expenses........................................ *
Accounting fees and expenses................................... *
Blue Sky qualification fees and expenses....................... *
Transfer Agent and Registrar fees.............................. *
Miscellaneous fees and expenses................................ *
Total........................................................ $ *
</TABLE>
--------
*to be filed by amendment
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's board of directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities, including reimbursement for expenses
incurred, arising under the Securities Act of 1933, as amended . Article six of
our certificate of incorporation, exhibit 3.2 hereto, and article six of our
bylaws, exhibit 3.3, provide for indemnification of our directors, officers,
employees and other agents to the maximum extent permitted by Delaware law. In
addition, we have entered into indemnification agreements, exhibit 10.1, with
our officers and directors. The indemnification agreements may require us to
obtain directors' and officers' insurance if available on reasonable terms. We
currently intend to purchase a policy for directors' and officers' insurance.
The underwriting agreement, exhibit 1.1, also provides for cross-
indemnification among At Road and the underwriters with respect to certain
matters, including matters arising under the Securities Act.
Item 15. Recent Sales of Unregistered Securities
Since August 1996 we have sold and issued the following securities:
1. On July 15, 1996, we issued 3,750,000 shares of our series A
preferred stock at $0.667 per share to ten investors for an aggregate cash
consideration of $2,500,000.
2. On September 15, 1998 we issued 11,224,137 shares of our series B
preferred stock to ten investors, and on September 25 1998, we issued an
additional 1,189,656 shares of our series B preferred stock to two
investors, both at $0.483 per share for an aggregate cash consideration of
$6,000,000.
3. On June 3, 1999, we issued 3,270,000 shares of our series C preferred
stock to five investors, and on June 18, 1999, we issued an additional
3,686,400 shares of our series C preferred stock to 28 investors, both at
$3.33 per share for an aggregate cash consideration of $23,188,000.
4. On December 17, 1999, we issued 2,309,994 shares of our series D
preferred stock to 26 investors, on January 6, 2000, we issued 692,307
shares of our series D preferred stock to one investor, and on January 28,
2000 we issued an additional 588,462 shares of our series D preferred stock
to two
II-1
<PAGE>
investors, all issuances at $8.67 per share for an aggregate cash
consideration of $31,119,946. On April 7, 2000, we issued 76,923 shares of
our series D preferred stock to one investor as a portion of the
consideration for our acquisition of Differential Corrections. On April 7,
2000, we issued 2,000 shares of our series D preferred stock to one
investor as consideration for their consent to the assignment to us of
technology that we acquired in our acquisition of Differential Corrections.
5. From August 1996 to December 31, 1999, we granted 9,437,075 options
to purchase our common stock with a weighted average price of $0.39 to a
number of our employees, directors and consultants.
6. In December 1999, we granted an option to purchase 150,000 shares of
our common stock to our Chief Technology Officer and a right to purchase
375,000 shares of our common stock to our Chief Executive Officer each for
$1.33 per share, for aggregate consideration of $700,000.
7. In February 2000, we issued 375,000 shares of our common stock to our
Chief Executive Officer at $1.33 per share for a total of $500,000.
8. On June 27, 2000, we issued 2,000,000 shares of our Series E
preferred stock (comprised of 1,000,000 shares of Series E preferred stock
and 1,000,000 shares of Series E-1 preferred stock) to six investors at $10
per share for an aggregate consideration of $20,000,000.
The issuances of the above securities were deemed to be exempt from
registration under the Securities Act in reliance on Section 4(2) of such
Securities Act as transactions by an issuer not involving any public offering.
Certain issuances described in items 5 and 6 were deemed exempt from
registration under the Securities Act in reliance upon Rule 701 promulgated
under the Securities Act.
The recipients of securities in each such transaction represented their
intentions to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
were affixed to the share certificates issued in such transactions. All
recipients had adequate access, through their relationships with At Road, to
information about us.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S> <C>
1.1 Form of Underwriting Agreement dated , 2000.
3.1 Amended and Restated Articles of Incorporation of the Registrant.
3.2 Amended and Restated Certificate of Incorporation of the
Registrant, as proposed for reincorporation in Delaware.
3.3 Amended and Restated Bylaws of the Registrant.
3.4 Amended and Restated Bylaws of the Registrant, as proposed for
reincorporation in Delaware.
4.1 Specimen Stock Certificate.
5.1 Opinion of Venture Law Group regarding the legality of the common
stock being registered.
10.1* CDPD Value Added Reseller Agreement between the Registrant and
AT&T Wireless Data, Inc. dated September 30, 1997.
10.2* Form of Wireless Network Services Agreement and Form of Purchase
Agreement for Goods.
10.3* Product License and Collaboration Agreement between the
Registrant and Intel Corporation dated January 28, 2000.
10.4* Product Purchase Agreement between the Registrant and Novatel
Wireless Technologies, Inc. dated January 1, 2000.
10.5* Product Purchase Agreement between the Registrant and Novatel
Wireless Technologies, Inc. dated April 1, 2000.
10.6* Design and Purchase Contract between the Registrant and Philsar
Electronics, Inc. dated April 11, 1997.
10.7* Joint Marketing Agreement between the Registrant and Cellco
Partnership dated June 25, 1999 and Amendment No. 1 dated October
12, 1999.
10.8 Sublease Agreement between the Registrant and Sterling Software
(Western), Inc. dated August 24, 1999.
10.9 Industrial Space Lease between Renco Equities IV as landlord and
SEEQ Technology Inc. as tenant, First Addendum to Lease, each
dated January 13, 1995, and First Amendment to Lease dated April
18, 1995.
10.10 Sublease Agreement between the Registrant and LSI Logic
Corporation dated January 25, 2000 and Consent to Sublease
between LSI Logic Corporation and Renco Equities IV dated
February 8, 2000.
Agreement between the Registrant and Elnet Technologies Ltd.
10.11 dated November 16, 1999.
10.12 1996 Stock Option Plan.
10.13 2000 Stock Option Plan.
10.14 2000 Employee Stock Purchase Plan.
10.15 2000 Directors' Stock Option Plan.
10.16 Form of Indemnification Agreement.
10.17 Asset Purchase Agreement between the Registrant and Differential
Corrections, Inc. dated March 8, 2000.
10.18 Asset Purchase Agreement between the Registrant and Hynet
Technologies dated March 23, 2000.
10.19 Amended and Restated Rights Agreement between the Registrant and
certain investors dated June 27, 2000.
10.20* CDPD Data National Service Agreement between the Registrant and
GTE Wireless Incorporated dated May 5, 2000.
10.21 Joint Marketing Agreement between the Registrant and GTE Wireless
Service Corporation dated May 5, 2000.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.22 Loan and Security Agreement between the Registrant and Silicon Valley
Bank dated June 30, 1999, Loan Modification Agreement dated July 23,
1999, Loan Modification Agreement dated December 29, 1999 and Loan
Modification Agreement dated March 31, 2000.
21.1 List of Subsidiaries.
23.1 Independent Auditors' Consent.
23.2 Consent of Venture Law Group (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
--------
* Confidential treatment requested as to certain portions of this Exhibit.
(b) Financial Statement Schedules
Schedule II--Valuation and Qualifying Accounts
Schedules not listed above have been omitted because the information
required to be set forth therein is not applicable or is shown in the financial
statements or notes thereto.
Item 17. Undertakings
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act, and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement on Form S-1 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the city of Fremont,
State of California on July 13, 2000.
AT ROAD, INC.
/s/ Krish Panu
By: _________________________________
Krish Panu
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints, jointly and severally, Krish Panu,
Thomas C. Hoster and Rodric C. Fan and each of them, as his attorney-in-fact,
with full power of substitution, for him in any and all capacities, to sign any
and all amendments to this registration statement, including post-effective
amendments, and any and all registration statements filed pursuant to Rule 462
under the Securities Act of 1933, as amended, in connection with or related to
the offering contemplated by this registration statement and its amendments, if
any, and to file the same, with exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, hereby
ratifying and confirming our signatures as they may be signed by our said
attorney to any and all amendments to said registration statement.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form S-1 has been signed by the following persons in
the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Krish Panu Chairman of the Board of July 13, 2000
______________________________________ Directors, President and
Krish Panu Chief Executive Officer
/s/ Thomas Hoster Vice President, Finance July 13, 2000
______________________________________ and Administration and
Thomas Hoster Chief Financial Officer
/s/ Rodric C. Fan Director and Chief July 13, 2000
______________________________________ Technology Officer
Rodric C. Fan
/s/ Kris Chellam Director July 13, 2000
______________________________________
Kris Chellam
/s/ Stuart Phillips Director July 13, 2000
______________________________________
Stuart Phillips
/s/ Andrew Sheehan Director July 13, 2000
______________________________________
Andrew Sheehan
/s/ T. Peter Thomas Director July 13, 2000
______________________________________
T. Peter Thomas
</TABLE>
II-5
<PAGE>
INDEPENDENT AUDITORS' REPORT ON SCHEDULE
To the Board of Directors and Stockholders of @Road, Inc.:
Our audits of the consolidated financial statements of @Road, Inc. and
subsidiary (the Company) for the years ended December 31, 1997, 1998, and 1999
also included the financial statement schedule of the Company, listed in Item
16(b) of this Registration Statement on Form S-1. The consolidated financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
San Jose, California
March 23, 2000
S-1
<PAGE>
SCHEDULE II
@ROAD, INC.
VALUATION AND QUALIFYING ACCOUNTS
For the Years Ended December 31, 1997, 1998, and 1999
(in thousands)
<TABLE>
<CAPTION>
Additions
Balance at and Write-offs
Beginning of Charges to and Balance at
Description Year Expenses Deductions End of Year
----------- ------------ ---------- ---------- -----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1997
Accounts receivable allowance... $ -- $ -- $ -- $ --
===== ===== ===== =====
Year Ended December 31, 1998
Accounts receivable allowance... $ -- $ -- $ -- $ --
===== ===== ===== =====
Year Ended December 31, 1999
Accounts receivable allowance... $ -- $ 131 $ -- $ 131
===== ===== ===== =====
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1.1 Form of Underwriting Agreement dated , 2000.
3.1 Amended and Restated Articles of Incorporation of the Registrant.
3.2 Amended and Restated Certificate of Incorporation of the Registrant, as
proposed for reincorporation in Delaware.
3.3 Amended and Restated Bylaws of the Registrant.
3.4 Amended and Restated Bylaws of the Registrant, as proposed for
reincorporation in Delaware.
4.1 Specimen Stock Certificate.
5.1 Opinion of Venture Law Group regarding the legality of the common stock
being registered.
10.1* CDPD Value Added Reseller Agreement between the Registrant and AT&T
Wireless Data, Inc. dated September 30, 1997.
10.2* Form of Wireless Network Services Agreement and Form of Purchase
Agreement for Goods.
10.3* Product License and Collaboration Agreement between the Registrant and
Intel Corporation dated January 28, 2000.
10.4* Product Purchase Agreement between the Registrant and Novatel Wireless
Technologies, Inc. dated January 1, 2000.
10.5* Product Purchase Agreement between the Registrant and Novatel Wireless
Technologies, Inc. dated April 1, 2000.
10.6* Design and Purchase Contract between the Registrant and Philsar
Electronics, Inc. dated April 11, 1997.
10.7* Joint Marketing Agreement between the Registrant and Cellco Partnership
dated June 25, 1999 and Amendment No. 1 dated October 12, 1999.
10.8 Sublease Agreement between the Registrant and Sterling Software
(Western), Inc. dated August 24, 1999.
10.9 Industrial Space Lease between Renco Equities IV as landlord and SEEQ
Technology Inc. as tenant, First Addendum to Lease, each dated January
13, 1995, and First Amendment to Lease dated April 18, 1995.
10.10 Sublease Agreement between the Registrant and LSI Logic Corporation
dated January 25, 2000 and Consent to Sublease between LSI Logic
Corporation and Renco Equities IV dated February 8, 2000.
Agreement between the Registrant and Elnet Technologies Ltd. dated
10.11 November 16, 1999.
10.12 1996 Stock Option Plan.
10.13 2000 Stock Option Plan.
10.14 2000 Employee Stock Purchase Plan.
10.15 2000 Directors' Stock Option Plan.
10.16 Form of Indemnification Agreement.
10.17 Asset Purchase Agreement between the Registrant and Differential
Corrections, Inc. dated March 8, 2000.
10.18 Asset Purchase Agreement between the Registrant and Hynet Technologies
dated March 23, 2000.
10.19 Amended and Restated Rights Agreement between the Registrant and
certain investors dated June 27, 2000.
10.20* CDPD Data National Service Agreement between the Registrant and GTE
Wireless Incorporated dated May 5, 2000.
10.21 Joint Marketing Agreement between the Registrant and GTE Wireless
Service Corporation dated May 5, 2000.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
10.22 Loan and Security Agreement between the Registrant and Silicon Valley
Bank dated June 30, 1999, Loan Modification Agreement dated July 23,
1999, Loan Modification Agreement dated December 29, 1999 and Loan
Modification Agreement dated March 31, 2000.
21.1 List of Subsidiaries.
23.1 Independent Auditors' Consent.
23.2 Consent of Venture Law Group (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule
</TABLE>
--------
* Confidential treatment requested as to certain portions of this Exhibit.
