SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X} Quarterly report pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended June 30, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission File Number: 0-27166
XATA Corporation
(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-1641815
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
500 East Travelers Trail, Burnsville, Minnesota 55337
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (612) 894-3680
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __X__ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of August 7, 1996, the following securities of the Registrant were
outstanding: 4,327,439 shares of Common Stock, $.01 par value per share.
XATA Corporation
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements:
Balance Sheets as of
June 30, 1996 and September 30, 1995 3
Statement of Operations for the Three and Nine
Months Ended June 30, 1996 and 1995 5
Statement of Cash Flows for the Three and Nine
Months Ended June 30, 1996 and 1995 6
Notes to Financial Statements 7
Item 2. Management's Discussion and Analysis or Plan of Operation 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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<CAPTION>
PART I. Item 1. Financial Information
XATA Corporation
BALANCE SHEETS
June 30, 1996 and September 30, 1995
June 30, September 30,
ASSETS: 1996 1995
----------- -------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 1,216,484 $ 519,715
Available-for-sale securities 5,007,651 0
Accounts receivable 2,320,775 1,681,218
Inventories 334,679 507,498
Prepaid expenses 69,411 59,711
----------- -----------
Total current assets 8,949,000 2,768,142
Other Assets
Capitalized software development costs, less accumulated amortization
of $741,885 at June 30, 1996, and $509,173 at September 30, 1995 461,405 233,021
Other 5,068 5,185
----------- -----------
466,473 238,206
Equipment and leasehold improvements, at cost
Engineering and manufacturing equipment 260,677 216,374
Office furniture and equipment 686,389 470,529
Leasehold improvements 72,747 43,060
----------- -----------
1,019,813 729,963
Less accumulated depreciation and amortization (450,578) (333,293)
----------- -----------
Net equipment and leasehold improvements 569,235 396,670
----------- -----------
Total assets $ 9,984,708 $ 3,403,018
=========== ===========
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<TABLE>
<CAPTION>
XATA Corporation
BALANCE SHEETS
June 30, 1996 and September 30, 1995
June 30, September 30,
LIABILITIES AND STOCKHOLDERS' EQUITY : 1996 1995
----------- ------------
Current Liabilities:
<S> <C> <C>
Accounts payable $ 704,700 $ 231,733
Accrued expenses 414,548 476,779
Deferred revenue 617,951 379,998
----------- -----------
Total current liabilities 1,737,199 1,088,510
Long-term debt 139,792 130,603
Stockholders' Equity (Note 2):
Common stock, par value $.01 per share, authorized 8,333,333 shares;
issued 4,327,439 at June 30, 1996 and 3,517,452 at
September 30, 1995 43,274 35,175
Additional paid-in capital 8,576,463 3,644,110
Accumulated deficit (512,020) (1,495,380)
----------- -----------
Total stockholders' equity 8,107,717 2,183,905
----------- -----------
Total liabilities and stockholders' equity $ 9,984,708 $ 3,403,018
=========== ===========
</TABLE>
<TABLE>
<CAPTION>
XATA Corporation
STATEMENT OF OPERATIONS
For the Three and Nine Months ended June 30, 1996 and 1995
Three Month Periods Nine Month Periods
Ended June 30, Ended June 30,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 2,436,236 $ 1,962,967 $ 7,154,922 $ 5,047,699
Cost of sales 1,275,841 1,078,385 3,900,423 2,883,415
----------- ----------- ----------- -----------
Gross profit 1,160,395 884,582 3,254,499 2,164,284
Operating expenses 895,681 647,311 2,413,709 1,617,048
----------- ----------- ----------- -----------
Operating income 264,714 237,271 840,790 547,236
Non-operating (expense) income:
Interest (expense) (3,063) (7,985) (9,189) (23,964)
Interest income 70,858 2,785 151,759 19,406
----------- ----------- ----------- -----------
67,795 (5,200) 142,570 (4,558)
----------- ----------- ----------- -----------
Net income (loss) before income taxes 332,509 232,071 983,360 542,678
----------- ----------- ----------- -----------
Income tax provision -- (2,000) -- (2,000)
----------- ----------- ----------- -----------
Net income $ 332,509 $ 230,071 $ 983,360 $ 540,678
=========== =========== =========== ===========
Net income (loss) per share (Note 2) $ 0.07 $ 0.07 $ 0.24 $ 0.16
=========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding (Note 2) 4,488,843 3,492,408 4,182,688 3,478,822
=========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
XATA Corporation
STATEMENT OF CASH FLOWS
For the Nine Months Ended June 30, 1995 and 1994
Nine Month Periods
Ended June 30,
1996 1995
------------ ----------
Cash Flows from Operating Activities
<S> <C> <C>
Net income $ 983,360 $ 540,678
Adjustments to reconcile net income (loss) to net cash
(used in) operating activities:
Depreciation and amortization 350,114 241,055
(Increase) decrease in accrued income in available-for-sale securities (68,389) 0
(Gain) or loss on sale of available-for-sale securities 725 0
Amortization of discount on note payable 9,189 0
Change in assets and liabilities:
(Increase) decrease in accounts receivable (639,557) (730,671)
(Increase) decrease in inventories 172,819 (733,563)
(Increase) decrease in prepaid expenses (9,700) (15,843)
Increase (decrease) in accounts payable 472,967 95,706
Increase (decrease) in accrued expenses and deferred revenue 175,722 278,779
------------ ----------
Net cash provided by (used in) operating activities 1,447,250 (323,859)
------------ ----------
Cash Flows from Investing Activities
Purchase of available-for-sale securities (10,310,956) 0
Proceeds from sale and maturity of available-for-sale securities 5,370,969 0
Purchase of equipment (289,850) (209,919)
Additions to software development costs (461,096) (240,132)
------------ ----------
Net cash provided by (used in) investing activities (5,690,933) (450,051)
------------ ----------
Cash Flows from Financing Activities
Net increase (decrease) in line of credit 0 318,106
Proceeds from long-term debt 0 266,505
Repayment of long-term debt 0 (150,000)
Proceeds from options and warrants exercised 2,602 68,061
Proceeds from public stock offering 4,937,850 0
------------ ----------
Net cash provided by (used in) financing activities 4,940,452 502,672
------------ ----------
Increase (decrease) in cash and cash equivalents 696,769 (271,238)
Cash and Cash Equivalents
Beginning 519,715 783,708
------------ ----------
Ending $ 1,216,484 $ 512,470
============ ==========
</TABLE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1. MANAGEMENT STATEMENT
In the opinion of management of the Company, the accompanying unaudited
financial statements contain all adjustments (consisting of only normal,
recurring accruals) necessary to present fairly the financial position of the
Company as of June 30, 1996 and the results of operations for the three and nine
month periods ended June 30, 1996 and 1995, and cash flows for the nine month
periods ended June 30, 1996 and 1995. The results of operations for any interim
period are not necessarily indicative of the results for the fiscal year ending
September 30, 1996. These interim financial statements should be read in
conjunction with the Company's annual financial statements and related notes
thereto included in the Company's Form 10-KSB and Annual Report to shareholders
for the fiscal year ended September 30, 1995.
NOTE 2. SHAREHOLDERS' EQUITY
On September 8, 1995, the Company effected a one for three reverse stock split.
This resulted in a net transfer of $49,573 from common stock to additional
paid-in capital. The effect of this reverse stock split has been retroactively
reflected in these financial statements for all periods presented.
PART I ITEM 2. Management's discussion and analysis or plan of operation. The
following discussion and analysis provides information which management believes
is relevant to an assessment and understanding of the Company's results of
operation and financial condition. This discussion should be read in conjunction
with the financial statements in Item 1 and the Company's report on Form 10-KSB
for the period ended September 30, 1995.
RESULTS OF OPERATIONS
NET SALES. XATA Corporation develops, markets, and services fully integrated,
mobile information systems for the fleet trucking segment of the transportation
industry in the United States. XATA systems utilize proprietary software,
onboard touch-screen computers, and related hardware components and accessories
to capture, analyze and communicate operating information that assists fleet
management in improving productivity and profitability. XATA's solutions provide
significant fleet savings and benefits through: increased fuel economy; improved
routing and scheduling; reduced driver, clerical and compliance paperwork;
reduced maintenance costs; improved driver performance and safety; and better
customer service.
The Company's net sales for the three months ended June 30, 1996 increased 24.1%
to $2,436,236 as compared to sales of $1,962,967 for the comparable three month
period ended June 30, 1995. Net sales for the nine months ended June 30, 1996
increased 41.8% to $7,154,922 from $5,047,699 in the comparable nine months
ended June 30, 1995. The sales increase is primarily attributable to delivery of
additional product to existing customers and to new customers generated from
increased awareness of XATA's product capability in the trucking industry. The
Company anticipates continuing year-to-year revenue growth during the remainder
of the current fiscal year and into fiscal year 1997.
GROSS PROFIT. The Company had a gross profit of $1,160,395 (47.6 % of net sales)
for the three months ended June 30, 1996, compared to a gross profit of $884,582
(45.1% of net sales) for the comparable 1995 period. The nine month totals were
$3,254,499 (45.5% of net sales) and $2,164,284 (42.9% of net sales)
respectively. The improvement in gross profit is a function of increased sales,
which resulted in allocation of fixed direct costs over a larger number of
products, and in lower material costs from greater volume purchases of
components. Beginning in fiscal 1994 and continuing to the present, the Company
has increasingly used outside vendors to manufacture and assemble component
parts. The Company anticipates that this change will continue to have a number
of beneficial results, including lower average component costs, better quality,
and shorter lead time for shipment of customer orders. These beneficial results
may be offset in part by increased fixed costs associated with a higher level of
customer support and by significantly increased software development
amortization expenses. The Company's gross profit is also dependent on product
sales mix and discount on volume shipments to certain customers.
OPERATING EXPENSES. Operating expenses include research and development, selling
expenses and general and administrative expenses. Total operating expenses were
$895,681 (36.8% of net sales) for the three month period ended June 30, 1996
compared to $647,311 (33.0% of net sales) for the comparable prior year period.
The nine month totals were $2,413,708 (33.7% of net sales) and $1,617,048 (32.0%
of sales) respectively.
Operating expenses other than research and development were $797,703 (32.7% of
net sales) for the three month period ended June 30, 1996 compared to $512,061
(26.1% of net sales) for the comparable prior year period. The nine month totals
were $2,046,966 (28.6% of net sales) and $1,278,281 (25.3% of sales)
respectively.
The increase of $285,642 for the three month period ended June 30, 1996 compared
to the comparable prior year period ($768,715 for the nine months) was due to
planned increases in sales, marketing and MIS personnel, and to increases in
other marketing expenses associated with a higher level of sales.
The Company will continue to develop required infrastructure to facilitate
planned increases in revenue and, accordingly, expects that operating expenses
will continue to increase during fiscal 1996 and fiscal 1997.
The Company's market position is based on its strong research capability and its
technology leadership, as evidenced by its growing customer base. The Company
has significantly increased expenditures for its combined research and
development and capitalized software development costs. Expenditures for
research and development are included in operating expenses and are charged to
operations as incurred. Research and development expenses during the three
months ended June 30, 1996 were $97,978 compared to $135,250 during the
comparable 1995 period. The nine month totals were $366,712 and $338,767
respectively. Software development costs are capitalized after the establishment
of technological feasibility of new products or enhancements. Capitalized
software development costs are amortized to cost of sales over a two-year
period. Capitalized software development costs were $196,417 for the three month
period ended June 30, 1996, compared to $93,887 for the comparable three month
period of 1995. The nine month totals were $461,096 and $240,132 respectively.
The increase is due to development of enhancements and new software versions to
respond to industry requirements and specific customer needs. The Company
anticipates that expenditures for research and development and capitalized
software development will continue to increase during fiscal 1996 and fiscal
1997.
INTEREST INCOME AND EXPENSES. Net interest income for the three month period
ended June 30, 1996 was $67,795 compared to net interest expense of $5,200 in
the comparable prior year period. The nine month totals were net interest income
of $142,570 and net interest expense of $4,558 respectively. The improvement
resulted from a reduction in bank line of credit as well as the investment of
excess cash generated from the Company's operations and from the approximately
$4,900,000 of funds received in December, 1995 and January, 1996, from the
Company's stock offering.
NET INCOME. Net income for the three month period ended June 30, 1996, was
$332,509 compared to net income of $230,071 for the comparable 1995 period. The
nine month totals were $983,360 and $540,678 respectively. The improvement over
the prior year is primarily the result of increased revenue, as well as the
other factors discussed in this section.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1996, the Company's working capital was $7,211,801 compared to
$1,679,632 at September 30, 1995. The improvement of $5,532,169 is a result of
cash flow generated from profitable operations achieved during the nine month
period, and net cash of $4,937,850 received in December, 1995, and January,
1996, from an underwritten public offering . Currently, cash and cash
equivalents of $1,216,484 are held primarily in a fund composed of short-term
commercial paper until such time as required by operations. Available-for-sale
securities of $5,007,651 are composed of U.S. Treasury notes, and corporate debt
securities with maturities ranging from July 1996 to July 1998. The cost of the
available-for-sale securities approximated fair market value at June 30, 1996.
Cash flows provided by operating activities during the nine months ended June
30, 1996 totaled $1,447,250, resulting primarily from net income ($983,360) plus
depreciation and amortization ($350,114), and increases in accounts payable
($472,967) offset by the increase in accounts receivable ($639,557).
Cash flows used in investing activities consisted primarily of the purchase of
available-for-sale securities with proceeds of the underwritten public offering.
Other cash flows used in investing activities consisted of capital expenditures
($289,850) and software development ($461,096) together totaling $750,946 during
the nine months ended June 30, 1996, compared to capital expenditures ($209,919)
and software development ($240,132) together totaling $450,051 for the
comparable period in 1995. Capital expenditures are primarily for internal PC
equipment, office equipment and furniture to support increases in personnel.
Although the Company has no firm commitments for capital expenditures, it
anticipates total capital expenditures of at least $350,000 for fiscal year
1996, exclusive of potential acquisitions (see Part II, Item 5).
The Company has a $150,000 term debt facility to be used for fixed asset
additions, and a $1,000,000 line of credit with Norwest Bank Minnesota, N.A.,
both expiring in March 1997. Advances under the line of credit accrue interest
at prime plus 1.5%, with an effective rate of 9.75% as of August 8, 1996. From
time to time during fiscal 1996 the Company may use advances of the line to
offset minimum interest requirements. At June 30, 1996 there were no balances
due. The Company also has a $200,000, non-interest bearing note payable to a
customer, due on demand after December, 1999. This note has been discounted at
9% and has a balance of $139,792 at June 30, 1996 and $130,603 at September 30,
1995.
Cash flows provided by financing activities include proceeds of an underwritten
public offering of 700,000 shares of Common Stock at $7.00 per share received on
December 26, 1995, and proceeds from the exercise of an over-allotment option to
purchase an additional 105,000 shares at $7.00 per share received January 18,
1996. Total proceeds from the offering, net of underwriting discount and
expenses of the offering, were $4,937,850.
During fiscal year 1996, cash will be required to meet increased working capital
needs, including inventory and accounts receivable financing, increased
expenditures for marketing, sales, and customer support, continuing research and
development expenses and capital expenditures. The Company believes its cash on
hand, its line of credit, and its current vendor terms will be adequate to fund
the delivery of its anticipated revenue growth, to fund any potential
acquisitions and to maintain its liquidity for a period of approximately 18 to
24 months. The Company's future cash flows from operations may vary, however,
depending on a number of factors, including level of competition, general
economic conditions and other factors beyond the Company's control.
FORWARD-LOOKING STATEMENTS. Except for historical information contained herein,
the matters set forth in this management discussion are forward-looking
statements based on current expectations. Actual results may differ materially.
These forward-looking statements involve a number of risks and uncertainties
including, but not limited to, the extent of new orders received and shipped,
timing of customer installation schedules, effectiveness of new marketing and
sales programs, and the Company's ability to anticipate changes in technology
and industry standards and to develop and introduce new features and
enhancements to its system on a timely basis.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes In Securities - None
Item 3. Defaults upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - The Company has reached an agreement under
which it will acquire the assets of Payne & Associates from
United Communications Group in a cash purchase. Upon closing
of the agreement and purchase of the assets, a Form 8-K will
be filed.
Item 6. Exhibits and Reports on Form 8-K - Exhibit 27 - Financial Data
Schedule
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act, the Registrant
has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
Dated: August 12, 1996 XATA Corporation
(Registrant)
by: /s/ Robert M. Featherstone
Robert M. Featherstone
Chief Financial Officer
(Signing as Principal Financial and
Accounting Officer and as Authorized)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000854398
<NAME> XATA CORPORATION
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,216,484
<SECURITIES> 5,007,651
<RECEIVABLES> 2,320,775
<ALLOWANCES> 0
<INVENTORY> 334,679
<CURRENT-ASSETS> 8,949,000
<PP&E> 1,019,813
<DEPRECIATION> 450,578
<TOTAL-ASSETS> 9,984,708
<CURRENT-LIABILITIES> 1,737,199
<BONDS> 139,792
0
0
<COMMON> 43,274
<OTHER-SE> 8,064,443
<TOTAL-LIABILITY-AND-EQUITY> 9,984,708
<SALES> 7,154,922
<TOTAL-REVENUES> 7,154,922
<CGS> 3,900,423
<TOTAL-COSTS> 2,413,709
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,189
<INCOME-PRETAX> 983,360
<INCOME-TAX> 0
<INCOME-CONTINUING> 983,360
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