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 December 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
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(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-1641815
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(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
500 East Travelers Trail, Burnsville, Minnesota 55337
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (612) 894-3680
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Not Applicable
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(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 February 12, 1997, the following securities of the Registrant were
outstanding: 4,384,039 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
December 31, 1996 and September 30, 1996 3
Statement of Operations for the Three
Months Ended December 31, 1996 and 1995 5
Statement of Cash Flows for the Three
Months Ended December 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 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
PART I. Item 1. Financial Information
<TABLE>
<CAPTION>
XATA Corporation
BALANCE SHEETS
December 31, 1996 and September 30, 1996
December 31, September 30,
ASSETS: 1996 1996
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<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 363,240 $ 740,085
Available-for-sale securities 2,176,810 3,026,520
Accounts receivable 4,093,218 3,363,763
Inventories 306,424 373,891
Prepaid expenses 95,748 76,300
Deferred Taxes 265,000 265,000
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Total current assets 7,300,440 7,845,559
Equipment and leasehold improvements, at cost:
Engineering and manufacturing equipment 495,250 469,725
Office furniture and equipment 948,723 868,298
Leasehold improvements 85,484 72,747
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1,529,457 1,410,770
Less accumulated depreciation and amortization (597,111) (513,089)
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Net equipment and leasehold improvements 932,346 897,681
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Other Assets:
Capitalized software development costs, less accumulated amortization
of $977,105 at December 31, 1996, and $850,888 at September 30, 1996 694,425 555,678
Purchased software, less accumulated amortization
of $100,000 at December 31, 1996, and $25,000 at September 30, 1996 1,300,000 1,175,000
Goodwill, less accumulated amortization
of $68,529 at December 31, 1996, and $15,942 at September 30, 1996 1,470,574 1,323,161
Other 56,614 55,029
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Total other assets 3,521,613 3,108,868
Total assets $ 11,754,399 $ 11,852,108
============ ============
</TABLE>
<TABLE>
<CAPTION>
XATA Corporation
BALANCE SHEETS
December 31, 1996 and September 30, 1996
December 31, September 30,
LIABILITIES AND STOCKHOLDERS' EQUITY: 1996 1996
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<S> <C> <C>
Current Liabilities:
Accounts payable $ 472,601 $ 996,033
Accrued expenses 554,036 690,154
Deferred revenue 727,881 591,044
Income Taxes Payable 19,912 25,012
----------- -----------
Total current liabilities 1,774,430 2,302,243
Long-term Liabilities:
Long-term debt 146,205 142,855
Deferred tax liabilities 195,000 195,000
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Total long-term liabilities 341,205 337,855
Stockholders' Equity:
Commonstock, par value $.01 per share, authorized 8,333,333 shares;
issued 4,384,039 at December 31, 1996 and 4,342,481 at
September 30, 1996 43,840 43,425
Additional paid-in capital 9,101,541 8,701,956
Common stock to be issued 407,812 407,812
Retained earnings 85,571 58,817
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Total stockholders' equity 9,638,764 9,212,010
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Total liabilities and stockholders' equity $11,754,399 $11,852,108
=========== ===========
</TABLE>
XATA Corporation
STATEMENT OF OPERATIONS
For the Three Months ended December 31, 1996 and 1995
Three Month Periods
Ended December 31,
1996 1995
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Net sales $ 2,480,075 $ 2,289,743
Cost of sales 1,256,066 1,313,548
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Gross profit 1,224,009 976,195
Operating expenses 1,218,971 712,537
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Operating income 5,038 263,658
Non-operating (expense) income:
Interest (expense) (3,401) (3,063)
Interest income 43,016 10,131
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39,615 7,068
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Net income before income taxes 44,653 270,726
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Income tax provision 17,900 0
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Net income $ 26,753 $ 270,726
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Net income per share $ 0.01 $ 0.06
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Weighted average common and common
equivalent shares outstanding 4,583,564 4,546,724
=========== ===========
<TABLE>
<CAPTION>
XATA Corporation
STATEMENT OF CASH FLOWS
For the Three Months Ended December 31, 1996 and 1995
Three Month Periods
Ended December 31,
1996 1995
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<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 26,753 $ 270,726
Adjustments to reconcile net income (loss) to net cash
(used in) operating activities:
Depreciation and amortization 337,865 96,071
Deferred taxes 0 0
(Increase) decrease in accrued income in available-for-sale securities (1,578) 0
Amortization of discount on note payable 3,350 3,063
Change in assets and liabilities:
(Increase) decrease in accounts receivable (729,455) (667,330)
(Increase) decrease in inventories 67,467 61,622
(Increase) decrease in prepaid expenses (19,448) 14,810
Increase (decrease) in accounts payable (523,432) 577,971
Increase (decrease) in accrued expenses and taxes payable (141,218) (99,571)
Increase (decrease) in deferred revenue 136,837 125,781
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Net cash provided by (used in) operating activities (842,859) 383,143
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Cash Flows from Investing Activities
Purchase of available-for-sale securities (1,039,319) 0
Proceeds from sale and maturity of available-for-sale securities 1,890,608 0
Purchase of equipment (118,687) (77,801)
Additions to software development costs (266,588) (111,754)
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Net cash provided by (used in) investing activities 466,014 (189,555)
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Cash Flows from Financing Activities
Proceeds from options and warrants exercised 0 0
Proceeds from public stock offering 0 4,269,000
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Net cash provided by (used in) financing activities 0 4,269,000
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Increase (decrease) in cash and cash equivalents (376,845) 4,462,588
Cash and Cash Equivalents
Beginning 740,085 519,715
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Ending $ 363,240 $ 4,982,303
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</TABLE>
NOTES TO FINANCIAL STATEMENTS
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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 December 31, 1996 and the results of operations and cash flows for
the three month periods ended December 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, 1997. 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, 1996.
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, 1996.
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 December 31, 1996 increased
8.3% to $2,480,075 as compared to sales of $2,289,743 for the comparable three
month period ended December 31, 1995. The increase in first quarter revenues can
be attributed to sales from the recently acquired Payne & Associates and to
growth in the company's private fleet business. Sales to private fleet customers
were more than double the fiscal 1996 first quarter level. This growth partially
offset a temporary slowdown in deliveries to a large customer that is currently
involved in a major restructuring program intended to direct additional funds
into its leading lines of business, one of which includes the division that
purchases XATA onboard computers. Deliveries to this customer accounted for more
than 45 percent of fiscal 1996 revenue, but only 15 percent of fiscal 1997 first
quarter revenue. Although deliveries to this customer will remain below prior
year levels, XATA expects that total fiscal 1997 revenue and net income will
exceed fiscal 1996 levels, but that the increase will be less than previously
expected.
GROSS PROFIT. The Company had a gross profit of $1,224,009 (49.4% on net sales)
for the three months ended December 31, 1996, compared to a gross profit of
$976,195 (42.6% on net sales) for the comparable 1995 period. The improvement in
gross profit resulted primarily from changes in the product sales mix, with
sales in the current quarter containing a larger portion of high margin sales,
including sales of XATA proprietary software. The Company has also realized
significant results from its program to reduce material costs of its onboard
computers. 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 have a number of beneficial
results, including lower average component costs, better quality, and shorter
lead time for shipment of customer orders. These efficiencies were offset
somewhat by significantly increased software development amortization expenses,
and the amortization of software acquired with the purchase of Payne &
Associates.
OPERATING EXPENSES. Operating expenses include research and development, selling
expenses and general and administrative expenses. Total operating expenses were
$1,218,971 for the three month period ended December 31, 1996 (49.2% of net
sales) compared to $712,537 for the comparable prior year period (31.1% of net
sales).
Operating expenses other than research and development were $1,059,993 for the
three month period ended December 31, 1996 (42.7% of net sales) compared to
$555,766 for the comparable prior year period (24.3% of net sales). The increase
of $504,227 for the three month period ended December 31, 1996 compared to the
comparable prior year period was primarily due to planned increases in sales,
marketing and MIS personnel, to increases in other marketing expenses associated
with a higher level of sales, and to costs associated with the operation of
Payne & Associates.
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 1997 and fiscal 1998.
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 December 31, 1996 were $158,978 compared to $156,771 during the
comparable 1995 period. 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 $266,588 for the
three month period ended December 31, 1996, compared to $111,754 for the
comparable three month period of 1995. 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 1997 and fiscal 1998.
INTEREST INCOME AND EXPENSES. Net interest income for the three month period
ended December 31, 1996 was $39,615 compared to $7,068 in the comparable prior
year period. The improvement resulted from the investment of the approximately
$4,900,000 of funds received in December, 1995 and January, 1996, from the
Company's stock offering.
INCOME TAXES. Income tax expense for the three month period ended December 31,
1996, was $17,900 (40% effective tax rate). No income tax expense was recorded
for the comparable 1995 period due to the utilization of available net operating
loss carryforwards.
NET INCOME. Net income for the three month period ended
December 31, 1996, was $26,753 compared to net income of $270,726 for the
comparable 1995 period. The $243,973 decrease from the prior year three month
period is primarily the result of additional operating costs of Payne &
Associates, the amortization of costs associated with the purchase of Payne &
Associates, and planned increases in sales and marketing expenses, as well as
the other factors discussed in this section.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company's working capital was $5,526,010 compared to
$5,543,316 at September 30, 1996. Currently, cash and cash equivalents of
$363,240 are held primarily in a fund composed of short-term commercial paper
until such time as required by operations. Available-for-sale securities of
$2,176,810 are composed of U.S. Treasury notes, and corporate debt securities
with maturities ranging from February 1997 to July 1998. The cost of the
available-for-sale securities approximated fair market value at December 31,
1996.
Cash flows used in operating activities during the three months ended December
31, 1996 totaled $842,859, resulting primarily from the increase in accounts
receivable ($729,455) and the decrease in accounts payable ($523,432) offset by
depreciation and amortization ($337,865). The increase in accounts receivable is
primarily due to the addition of the accounts receivable of Payne & Associates.
Cash flows provided by investing activities consisting of net proceeds from the
sale of available-for-sale securities ($851,289) offset by capital expenditures
($118,687) and software development ($266,588) for a total of $466,014 provided
during the three months ended December 31, 1996, compared to capital
expenditures ($77,801) and software development ($111,754) totaling $189,555
cash used in investing activities for the comparable period in 1995. There were
no funds invested in available-for-sale securities during the comparable period
in 1995. Capital expenditures were primarily for internal PC equipment and
office equipment to support increases in personnel and engineering equipment
used in developing new products. Although the Company has no firm commitments
for capital expenditures, it anticipates capital expenditures of at least
$300,000 during the balance of fiscal 1997.
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 February 12, 1996.
From time to time during fiscal 1997 the Company may use advances of the line to
offset minimum interest requirements. At December 31, 1996 there were no
balances due. The Company anticipates renewing this line of credit in March
1997.
There were no cash flows from financing activities during the three months ended
December 31, 1996. During the comparable period in 1995, cash flows provided by
financing activities included proceeds of an underwritten public offering of
700,000 shares of Common Stock at $7.00 per share received on December 26, 1995,
which, net of underwriting discount and expenses of the offering, was
approximately $4,269,000. After the close of the fiscal quarter ended December
31, 1995, the underwriters exercised in full an over-allotment option to
purchase 105,000 shares at $7.00 per share, for additional net proceeds of
$668,850.
During fiscal year 1997, 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, however, may vary depending on a number of factors, including level
of competition, general economic conditions and other factors beyond the
Company's control.
FORWARD-LOOKING STATEMENTS
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION
27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT
OF 1934. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES, AND OTHER FACTORS DESCRIBED IN THIS REPORT, INCLUDING BUT NOT
LIMITED TO COMPETITION; TIMING OF RECEIPT AND SHIPMENT OF CUSTOMER ORDERS; THE
RESULTS OF MARKETING EFFORTS; THE EXPENSE AND TIME REQUIRED TO COMPLETE RESEARCH
AND DEVELOPMENT EFFORTS; AND THE INTEGRATION OF ACQUIRED BUSINESSES.
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 - None
Item 6. Exhibits and Reports on Form 8-K
* Form 8-K/A dated November 8, 1996 amending prior
filing concerning acquisition of assets of Payne &
Associates
* 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: February 14, 1997 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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> DEC-31-1996
<CASH> 363,240
<SECURITIES> 2,176,810
<RECEIVABLES> 4,106,218
<ALLOWANCES> 13,000
<INVENTORY> 306,424
<CURRENT-ASSETS> 7,300,440
<PP&E> 1,529,457
<DEPRECIATION> 597,111
<TOTAL-ASSETS> 11,754,399
<CURRENT-LIABILITIES> 1,774,430
<BONDS> 146,205
0
0
<COMMON> 43,840
<OTHER-SE> 9,594,924
<TOTAL-LIABILITY-AND-EQUITY> 11,754,399
<SALES> 2,480,075
<TOTAL-REVENUES> 2,480,075
<CGS> 1,256,066
<TOTAL-COSTS> 1,218,971
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,401
<INCOME-PRETAX> 44,653
<INCOME-TAX> 17,900
<INCOME-CONTINUING> 26,753
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,753
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
