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 March 31, 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
Incorporation or Organization) Identification Number)
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 May 13, 1996, the following securities of the Registrant were outstanding:
4,326,883 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
March 31, 1996 and September 30, 1995 3
Statement of Operations for the Three and Six
Months Ended March 31, 1996 and 1995 5
Statement of Cash Flows for the Three and Six
Months Ended March 31, 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 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
PART I. Item 1. Financial Information
XATA Corporation
BALANCE SHEETS
March 31, 1996 and September 30, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, September 30,
ASSETS: 1996 1995
------------------- -----------------
Current Assets:
Cash and cash equivalents $ 3,411,967 $ 519,715
Available-For-Sale Securities 2,485,394 0
Accounts receivable 2,390,303 1,681,218
Inventories 346,110 507,498
Prepaid expenses 71,651 59,711
------------------- -----------------
Total current assets 8,705,425 2,768,142
Other Assets
Capitalized software development costs, less accumulated amortization
of $650,350 at March 31, 1996, and $509,173 at September 30, 1995. 356,523 233,021
Other 5,107 5,185
------------------- -----------------
361,630 238,206
Equipment and leasehold improvements, at cost
Engineering and manufacturing equipment 232,007 216,374
Office furniture and equipment 624,482 470,529
Leasehold improvements 43,060 43,060
------------------- -----------------
899,549 729,963
Less accumulated depreciation and amortization (402,318) (333,293)
------------------- -----------------
Net equipment and leasehold improvements 497,231 396,670
------------------- -----------------
Total assets $ 9,564,286 $ 3,403,018
=================== =================
XATA Corporation
BALANCE SHEETS
March 31, 1996 and September 30, 1995
March 31, September 30,
LIABILITIES AND STOCKHOLDERS' EQUITY: 1996 1995
-------------------------------------
Current Liabilities:
Accounts payable $714,073 $231,733
Accrued expenses 400,705 476,779
Deferred revenue 540,173 379,998
------------------- -----------------
Total current liabilities 1,654,951 1,088,510
Long-term debt 136,729 130,603
Stockholders' Equity (Note 2):
Commonstock, par value $.01 per share, authorized 8,333,333
shares; issued 4,326,883 at March 31, 1996 and 3,517,452
at September 30, 1995 43,269 35,175
Additional paid-in capital 8,573,866 3,644,110
Accumulated deficit (844,529) (1,495,380)
------------------- -----------------
Total stockholders' equity 7,772,606 2,183,905
------------------- -----------------
Total liabilities and stockholders' equity $ 9,564,286 $ 3,403,018
=================== =================
</TABLE>
XATA Corporation
STATEMENT OF OPERATIONS
For the Three and Six Months ended March 31, 1996 and 1995
<TABLE>
<CAPTION>
Three Month Periods Six Month Periods
Ended March 31, Ended March 31,
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 2,428,942 $ 1,682,630 $ 4,718,685 $ 3,084,732
Cost of sales 1,311,033 941,260 2,624,581 1,805,030
----------- ----------- ----------- -----------
Gross profit 1,117,909 741,370 2,094,104 1,279,702
Operating expenses 805,491 550,760 1,518,028 969,737
----------- ----------- ----------- -----------
Operating income 312,418 190,610 576,076 309,965
Non-operating (expense) income:
Interest (expense) (3,063) (4,129) (6,125) (15,979)
Interest income 70,770 7,752 80,900 16,621
----------- ----------- ----------- -----------
67,707 3,623 74,775 642
----------- ----------- ----------- -----------
Net income (loss) before income taxes 380,125 194,233 650,851 310,607
----------- ----------- ----------- -----------
Income tax provision -- -- -- --
----------- ----------- ----------- -----------
Net income $ 380,125 $ 194,233 $ 650,851 $ 310,607
=========== =========== =========== ===========
Net income (loss) per share (Note 2) $ 0.09 $ 0.06 $ 0.16 $ 0.09
=========== =========== =========== ===========
Weighted average common and common
equivalent shares outstanding (Note 2) 4,306,114 3,489,633 4,029,611 3,471,991
=========== =========== =========== ===========
</TABLE>
XATA Corporation
STATEMENT OF CASH FLOWS
For the Three Months Ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
Six Month Periods
Ended March 31,
1996 1995
----------- -----------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 650,851 $ 310,607
Adjustments to reconcile net income (loss) to net cash
(used in) operating activities:
Depreciation and amortization 210,280 136,719
Amortization of discount on note payable 6,126 0
Change in assets and liabilities:
(Increase) decrease in accounts receivable (709,085) (77,370)
(Increase) decrease in inventories 161,388 (866,558)
(Increase) decrease in prepaid expenses (11,940) (28,934)
Increase (decrease) in accounts payable 482,340 273,533
Increase (decrease) in accrued expenses and deferred revenue 84,101 191,340
----------- -----------
Net cash provided by (used in) operating activities 874,061 (60,663)
----------- -----------
Cash Flows from Investing Activities
Purchase of Available-For-Sale Securities (2,485,394) 0
Purchase of equipment (169,586) (158,748)
Additions to software development costs (264,679) (146,245)
----------- -----------
Net cash provided by (used in) investing activities (2,919,659) (304,993)
----------- -----------
Cash Flows from Financing Activities
Net increase (decrease) in line of credit 0 125,000
Proceeds from long-term debt 0 41,505
Proceeds from options and warrants exercised 0 11,595
Proceeds from public stock offering 4,937,850 0
----------- -----------
Net cash provided by (used in) financing activities 4,937,850 178,100
----------- -----------
Increase (decrease) in cash and cash equivalents 2,892,252 (187,556)
Cash and Cash Equivalents
Beginning 519,715 783,708
----------- -----------
Ending $ 3,411,967 $ 596,152
=========== ===========
</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 March 31, 1996 and the results of operations and cash flows for
the three and six month periods ended March 31, 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 March 31, 1996 increased
44.4% to $2,428,942 as compared to sales of $1,682,630 for the comparable three
month period ended March 31, 1995. Net sales for the six months ended March 31,
1996 increased 53.0% to $4,718,685 from the comparable six months ended March
31, 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 $1,117,909 (46.0 % of net sales)
for the three months ended March 31, 1996, compared to a gross profit of
$741,370 (44.1% of net sales) for the comparable 1995 period. The six month
totals were $2,094,104 (44.4% of net sales) and $1,279,702 (41.5% 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
$805,491 (33.2% of net sales) for the three month period ended March 31, 1996
compared to $550,760 (32.7% of net sales) for the comparable prior year period.
The six month totals were $1,518,028 (32.2% of net sales) and $969,737 (31.4% of
sales) respectively.
Operating expenses other than research and development were $693,527 (28.6% of
net sales) for the three month period ended March 31, 1996 compared to $420,028
(25.0% of net sales) for the comparable prior year period. The six month totals
were $1,249,293 (26.5% of net sales) and $766,220 (24.8% of sales) respectively.
The increase of $273,499 for the three month period ended March 31, 1996
compared to the comparable prior year period ($483,073 for the six months) was
due to certain incentive-based compensation, to planned increases in sales and
marketing 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 for the rest of the fiscal year.
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 its expenditures for research and development
including its 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
March 31, 1996 were $111,964 compared to $130,732 during the comparable 1995
period. The six month totals were $268,735 and $203,517 respectively. The
increase over the prior year period occurred primarily as the result of planned
increases in personnel and expenses related to new product capabilities.
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, before amortization, were $152,925 for
the three month period ended March 31, 1996, compared to $72,388 for the
comparable three month period of 1995. The six month totals were $264,679 and
$146,245 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 to continue to increase during fiscal 1996
and fiscal 1997.
INTEREST INCOME AND EXPENSES. Net interest income for the three month period
ended March 31, 1996 was $67,707 compared to net interest income of $3,623 in
the comparable prior year period. The six month totals were $74,775 and $642
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 March 31, 1996, was
$380,125 compared to net income of $194,232 for the comparable 1995 period. The
six month totals were $650,851 and $310,606 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 March 31, 1996, the Company's working capital was $7,050,474 compared to
$1,679,632 at September 30, 1995. The improvement of $5,370,842 is a result of
cash flow generated from profitable operations achieved during the six 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 $3,411,967 are held primarily in a fund composed of short-term
commercial paper until such time as required by operations. Available-For-Sale
Securities of $2,485,394 are composed 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 approximate fair market value at March 31, 1996.
Cash flows provided by operating activities during the six months ended March
31, 1996 totaled $894,061, resulting primarily from net income ($650,851) plus
depreciation and amortization ($210,280), and increases in accounts payable
($482,340) offset by the increase in accounts receivable ($709,085).
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
($169,586) and software development ($264,679) totaling $434,265 during the six
months ended March 31, 1996, compared to capital expenditures ($158,748) and
software development ($146,245) totaling $304,993 for the comparable period in
1995. Capital expenditures were primarily for internal PC equipment and office
equipment 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.
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 May 10, 1996. From
time to time during fiscal 1996 the Company may use advances of the line to
offset minimum interest requirements. At March 31, 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 $136,729 at March 31, 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 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 STATEMENT. 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
The annual meeting of shareholders of the Company was held on
February 22, 1996. As of the record date, January 15, 1996,
there were 4,221,883 shares of Common Stock issued and
outstanding. There were present and voting at the meeting, in
person or by proxy, 3,904,890 shares of Common Stock
(approximately 92.4% of the total issued and outstanding).
Matters voted upon and results thereof are as follows:
1. Election of Directors:
FOR AGAINST
Dennis R. Johnson 3,898,294 6,596
William P. Flies 3,898,293 6,597
Edward T. Michalek 3,900,519 4,371
Roger Kleppe 3,900,519 4,371
Stephen Lawrence 3,898,293 6,597
2. Amendment to 1991 Long-Term Incentive Stock Option Plan to
increase the number of shares of Common Stock reserved for
issuance under the Plan from 433,333 to 650,000:
FOR 2,357,507 AGAINST 167,918 ABSTAIN 19,560
------------- -------------- --------
3. Amendment to 1991 Long-Term Incentive Stock Option Plan to
provide for non-discretionary automatic option grants to
non-employee members of the Board of Directors:
FOR 3,616,315 AGAINST 256,823 ABSTAIN 23,845
------------- -------------- --------
4. Amendment to 1991 Long-Term Incentive Stock Option Plan to
permit "cashless" notice of exercise of options:
FOR 3,634,025 AGAINST 221,424 ABSTAIN 41,534
------------- -------------- --------
5. Ratification of appointment of McGladrey & Pullen as the
independent auditors of the Company for the year ending
September 30, 1996:
FOR 3,884,963 AGAINST 7,170 ABSTAIN 12,757
-------------- -------------- ---------
Item 5. Other Information - None
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: May 13, 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
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 3,411,967
<SECURITIES> 2,485,394
<RECEIVABLES> 2,390,303
<ALLOWANCES> 0
<INVENTORY> 346,110
<CURRENT-ASSETS> 8,705,425
<PP&E> 899,549
<DEPRECIATION> 402,318
<TOTAL-ASSETS> 9,564,286
<CURRENT-LIABILITIES> 1,654,951
<BONDS> 136,729
0
0
<COMMON> 43,269
<OTHER-SE> 7,729,337
<TOTAL-LIABILITY-AND-EQUITY> 9,564,286
<SALES> 4,718,685
<TOTAL-REVENUES> 4,718,685
<CGS> 2,624,581
<TOTAL-COSTS> 1,518,028
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,125
<INCOME-PRETAX> 650,851
<INCOME-TAX> 0
<INCOME-CONTINUING> 650,851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 650,851
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
