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, 1999 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
----------------------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C>
XATA Corporation
- ---------------------------------------------------------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-1641815
- --------------------------------------------------------------------------- -------------------------------------------------
(State or Other Jurisdiction of Incorporation or Organization) (I.R.S. Employer Identification Number)
151 E. Cliff Road, Suite 10, Burnsville, Minnesota 55337
- ---------------------------------------------------------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (612) 894-3680
-----------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last report)
</TABLE>
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 1, 2000, the following securities of the Registrant were
outstanding: 4,472,296 shares of Common Stock, $.01 par value per share.
<PAGE>
XATA Corporation
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
--------
<S> <C> <C>
Item 1. Financial Statements:
Balance Sheets as of
December 31, 1999 and September 30, 1999 3
Statements of Operations for the Three
Months Ended December 31, 1999 and 1998 5
Statements of Cash Flows for the Three
Months Ended December 31, 1999 and 1998 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 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE>
PART I. Item 1. Financial Information
XATA Corporation
BALANCE SHEETS
December 31, 1999 and September 30, 1999
December 31, September 30,
1999 1999
------------ -------------
ASSETS: (unaudited) (audited)
Current Assets:
Cash and cash equivalents $ 377,954 $ 122,898
Accounts receivable, net 2,799,307 1,740,089
Inventories 809,150 637,713
Prepaid expenses 117,639 123,640
---------- ----------
Total current assets 4,104,050 2,624,340
Equipment and leasehold improvements, net 463,454 539,934
Other Assets:
Capitalized software development costs, net 5,296,807 4,464,815
Purchased software, net 0 66,656
Goodwill, net 0 116,665
Other 28,316 35,979
---------- ----------
5,325,123 4,684,115
Total assets $9,892,627 $7,848,389
========== ==========
3
<PAGE>
XATA Corporation
BALANCE SHEETS
December 31, 1999 and September 30, 1999
<TABLE>
<CAPTION>
December 31, September 30,
LIABILITIES AND SHAREHOLDERS' EQUITY : 1999 1999
------------ -------------
(unaudited) (audited)
<S> <C> <C>
Current Liabilities:
Bank line of credit $ 1,019,733 $ 237,395
Current maturies of long-term debt 411,855 486,140
Accounts payable 2,027,378 1,170,715
Accrued expenses 790,072 728,113
Deferred revenue 1,415,485 1,118,599
----------- -----------
Total current liabilities 5,664,523 3,740,962
Shareholders' Equity:
Preferred Stock, 8% convertible, stated value $15.00 per share;
333,333 shares authorized; 46,667 shares issued and outstanding 700,005 700,005
Common stock, par value $.01 per share, 8,333,333 shares authorized;
4,435,633 shares issued and outstanding 44,356 44,356
Additional paid-in capital 9,502,255 9,502,255
Accumulated deficit (6,018,512) (6,139,189)
----------- -----------
Total shareholders' equity 4,228,104 4,107,427
----------- -----------
Total liabilities and shareholders' equity $ 9,892,627 $ 7,848,389
=========== ===========
</TABLE>
4
<PAGE>
XATA Corporation
STATEMENTS OF OPERATIONS
For the Three Months ended December 31, 1999 and 1998
Three Month Periods
Ended December 31,
1999 1998
----------- -----------
(unaudited) (unaudited)
Net sales $ 2,928,646 $ 2,352,334
Cost of goods sold 1,614,851 1,309,559
----------- -----------
Gross profit 1,313,795 1,042,775
Operating expenses 1,043,433 1,081,066
----------- -----------
Operating profit(loss) 270,362 (38,291)
Non-operating income (expense):
Interest expense (26,431) (41,800)
Interest income 546 2,495
Other expense (109,687) 0
----------- -----------
(135,572) (39,305)
----------- -----------
Earnings (loss) before income taxes 134,790 (77,596)
Income taxes 0 0
----------- -----------
Net earnings (loss) $ 134,790 $ (77,596)
=========== ===========
Net earnings (loss) per share
Basic $ 0.03 $ (0.02)
=========== ===========
Diluted $ 0.03 $ (0.02)
=========== ===========
Weighted average common and common
equivalent shares outstanding
Basic 4,435,633 4,418,133
=========== ===========
Diluted 4,979,553 4,418,133
=========== ===========
5
<PAGE>
XATA Corporation
STATEMENTS OF CASH FLOWS
For the Three Months Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
Three Month Periods
Ended December 31,
1999 1998
----------- -----------
(unaudited) (unaudited)
<S> <C> <C>
Cash provided by Operating Activities
--------- ---------
Net cash provided by operating activities 243,259 351,467
--------- ---------
Cash used in Investing Activities
Principal payments received on notes receivable 4,499 62,408
Purchase of equipment 0 (20,179)
Additions to capitalized software development costs (700,755) (697,923)
--------- ---------
Net cash (used in) investing activities (696,256) (655,694)
--------- ---------
Cash provided by Financing Activities
Net borrowings on revolving line of credit 782,338 397,392
Payments of long-term debt (74,285) (93,165)
--------- ---------
Net cash provided by financing activities 708,053 304,227
--------- ---------
Increase in cash and cash equivalents 255,056 0
Cash and Cash Equivalents
Beginning period 122,898 0
--------- ---------
Ending period $ 377,954 $ 0
========= =========
</TABLE>
6
<PAGE>
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 December 31, 1999 and the results of operations and cash flows for
the three month periods ended December 31, 1999 and 1998. The results of
operations for any interim period are not necessarily indicative of the results
for the fiscal year ending September 30, 2000. 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, 1999.
NOTE 2. BASIC AND DILUTED PER SHARE
Basic net earnings (loss) per common share is computed by dividing net earnings
(loss) available to common shareholders by the weighted-average number of common
shares outstanding for the period. Diluted earnings (loss) per common share
reflect the dilutive effect of stock options, warrants and assumes the
conversion of preferred stock and related earnings adjustments.
NOTE 3. CORPORATE LIQUIDITY
Management's plans in regards to meeting the Company's working capital needs in
fiscal 2000 include cash from operations, utilization of its bank line of credit
and current vendor terms. This should provide adequate cash to fund operations
for the foreseeable future if investments in product development and other
operating costs are strictly controlled. Any significant new product development
in the near term will require external funding. The Company may not be able to
secure external funding when needed or at all, and such funding, if available,
may not be on terms favorable or acceptable to the Company.
It is possible that the Company's cash needs may vary significantly from its
projections, due to failure to generate anticipated cash flow, growth at a rate
faster than anticipated or other reasons. No assurance can be given that the
Company's predictions regarding its cash needs will prove accurate and there can
be no assurance that current financial arrangements will be sufficient or that
additional financing, if needed, can be obtained on terms acceptable to the
Company.
NOTE 4. OTHER
On December 30, 1999 the Company sold its RouteView product line for $225,000.
Of the sale price, $50,000 is included in deferred revenue and will be
recognized ratably over 36 months. The Company recorded a loss on the sale of
the product line of approximately $90,000 in the quarter ended December 31,
1999. The proceeds from the sale were received in January 2000.
7
<PAGE>
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
operations 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 year ended September 30, 1999.
RESULTS OF OPERATIONS
NET SALES. The Company's net sales for the three months ended December 31, 1999
were $2,928,646, an increase of 24% compared to sales of $2,352,334 for the
three month period ended December 31, 1998. The increase was due primarily to
higher sales of onboard computers partially offset by lower stand-alone software
sales, due to the sale of the XATA Enterprise Technologies product line in
February 1999. The Company anticipates that total Company revenue for fiscal
2000 will exceed fiscal 1999 levels.
GROSS PROFIT. The Company had a gross profit of $1,313,795 (45% of net sales)
for the three months ended December 31, 1999, compared to a gross profit of
$1,042,775 (44% of net sales) for the same period a year ago.
OPERATING EXPENSES. Operating expenses include research and development, selling
expenses and general and administrative expenses. Total operating expenses were
$1,043,433 for the three month period ended December 31, 1999 (36% of net sales)
compared to $1,081,066 (46% of net sales) for the comparable prior year period.
Operating expenses other than research and development were $988,600 (34% of net
sales) for the three month period ended December 31, 1999 compared to $973,828
(41% of net sales) for the comparable prior year period. Lower employee,
advertising, travel and public company related expenses were offset by higher
outside services, primarily contractors, and depreciation and amortization
expense. The Company expects operating expenses for fiscal 2000 to be higher
than during fiscal 1999.
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 over the past three years.
Expenditures for research and development are included in operating expenses and
are charged to operations as incurred. These research and development expenses
during the three months ended December 31, 1999 were $180,617 compared to
$117,238 during the comparable period a year ago. The increase over the prior
year period occurred primarily as the result of higher contractor rates.
Software development costs are capitalized after the establishment of
technological feasibility of new products. Capitalized software development
costs are amortized to cost of sales over the expected useful life of the
product, beginning when the first commercial sales are made. The recoverability
of capitalized costs is evaluated each quarter. Software development costs of
$1,002,755, which includes a non cash expense of $302,000, were capitalized for
the three month period ended December 31, 1999, compared to $697,923 for the
comparable three month period in fiscal 1998. The Company anticipates that
expenditures for research and development and capitalized software development
for fiscal 2000 will be approximately the same as fiscal 1999.
INTEREST AND OTHER INCOME AND EXPENSE. Net interest expense for the three month
period ended December 31, 1999 was $25,885 compared to $39,305 in the comparable
prior year period. The decrease was due to a lower average balance on the bank
line of credit.
8
<PAGE>
Other expense includes $20,000 in fees to John G. Kinnard & Company for its
efforts in assisting the Company in assessing various alternatives. In addition,
on December 30, 1999 the Company sold its RouteView product line for $225,000,
resulting in a loss of approximately $90,000.
INCOME TAXES. No income tax expense or benefit was recorded for the three month
periods ended December 31, 1999 and 1998 due to the Company's net operating loss
carry forward. No tax benefit was recorded from the net operating loss carry
forward during the period ended December 31, 1999.
NET EARNINGS. Net earnings for the three month period ended December 31, 1999
was $134,790 compared to a net loss of $77,596 for the period ended December 31,
1998. The increase in net earnings was primarily the result of higher revenues
partially offset by expenses associated with the sale of the RouteView product
line and expenses related to the engagement of John G. Kinnard & Company.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had a working capital deficit of $1,560,473
compared to a deficit of $1,116,622 at September 30, 1999.
Cash flows provided by operating activities during the three months ended
December 31, 1999 totaled $243,259 compared to cash provided by operating
activities of $351,467 for the same period a year ago. Cash provided by
operations for the three months ended December 31, 1999 was primarily the result
of a net earnings of approximately $135,000, an increase in accounts payable of
approximately $850,000 and an increase in deferred revenue of approximately
$297,000, non-cash expense of depreciation and amortization of approximately
$267,000, off set by an increase in accounts receivable of approximately
$1,059,000 and an increase in inventory of approximately $177,000.
Cash flows used in investing activities was $696,256 for the period ending
December 31, 1999 compared to cash used in investing activities of $655,694
during the same period last year. The increase in cash used in investing
activities was due primarily to increases in software development costs.
Cash flows provided by financing activities was $708,053 during the three months
ended December 31, 1999 compared to $304,227 during the same period a year ago.
The increase was due to additional use of the Company's bank line of credit,
partially offset by repayments of the Company's long term debt.
During fiscal 2000, cash will be required to meet working capital needs,
including inventory and accounts receivable financing, sales and marketing
expenditures, customer support, continuing research and development expenses and
capital expenditures. The Company believes its 1) cash from operations, 2) bank
line of credit and 3) current vendor terms will provide adequate cash to fund
operations for the foreseeable future. The Company's future cash flows from
operations may, however, vary depending on a number of factors including the
level of competition, general economic conditions as well as other factors
beyond the Company's control. Moreover, any significant new product development
in the near term will require external funding. No assurance can be given that
the Company's projections regarding its cash needs will prove accurate, that the
Company will not require additional funding or, that the Company will be able to
secure any required additional funding when needed or at all, or that such
funding, if obtained, will be on terms favorable or acceptable to the Company.
9
<PAGE>
The Company completed its year 2000 equipment and software readiness, where
two-year digits are used to define the applicable year, prior to December 31,
1999, at a direct cost of less than $100,000. To date the Company has
experienced no significant year 2000 issues with either its internal systems or
those related to entities with which it does business. The Company will continue
to monitor its systems and products on an on-going basis. At this time, the
Company anticipates no significant year 2000 actions.
10
<PAGE>
FORWARD-LOOKING STATEMENTS
THIS DOCUMENT INCLUDES 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 RECEIPT AND
SHIPPING OF NEW ORDERS FOR THE COMPANY'S CURRENT PRODUCTS, THE TIMELY
INTRODUCTION AND MARKET ACCEPTANCE OF NEW PRODUCTS, RESEARCH AND DEVELOPMENT
FUNDING AT THE LEVELS REQUIRED AND THE ABILITY TO SECURE AND MAINTAIN STRATEGIC
PARTNER RELATIONSHIPS.
11
<PAGE>
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
Exhibits
Exhibit
No. Description of Exhibit
-----------------------------------------------------
11 Earnings Per Share
27 Financial Data Schedule
Form 8-K None
12
<PAGE>
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 11, 1999 XATA Corporation
----------------- (Registrant)
by: /s/ Gary C. Thomas
-------------------------
Gary C. Thomas
Chief Financial Officer
(Signing as Principal Financial
and Accounting Officer and as
Authorized)
13
EXHIBIT 11
XATA Corporation
Earnings per Share
Period Ended December 31, 1999
<TABLE>
<CAPTION>
BASIC COMPUTATION
- -----------------
<S> <C> <C>
Net earnings (loss) $134,790
Less: Preferred Stock dividend 14,113
--------
Earnings available to common shareholders $120,677
--------
Weighted average shares outstanding 4,435,633
--------
BASIC EARNINGS PER SHARE $0.03
========
DILUTED COMPUTATION
- -------------------
Net earnings available to common shareholders $120,677
Plus: Preferred Stock dividend (assumed conversion) 14,113
Earnings available to common shareholders
--------
plus assumed conversions $134,790
--------
Weighted average shares outstanding 4,435,633
Common stock equivalents * 543,920
---------
Weighted average shares outstanding
plus equivalents 4,979,553
--------
DILUTED EARNINGS PER SHARE $0.03
========
</TABLE>
* includes 466,670 shares underlying the Company's Series A Convertible
Preferred Stock
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000854398
<NAME> XATA CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 377,954
<SECURITIES> 0
<RECEIVABLES> 3,049,302
<ALLOWANCES> 249,995
<INVENTORY> 809,150
<CURRENT-ASSETS> 4,104,050
<PP&E> 2,021,035
<DEPRECIATION> 1,557,581
<TOTAL-ASSETS> 9,892,627
<CURRENT-LIABILITIES> 5,664,523
<BONDS> 0
0
700,005
<COMMON> 44,356
<OTHER-SE> 3,483,743
<TOTAL-LIABILITY-AND-EQUITY> 9,892,627
<SALES> 2,928,646
<TOTAL-REVENUES> 2,928,646
<CGS> 1,614,851
<TOTAL-COSTS> 1,043,433
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,885
<INCOME-PRETAX> 134,790
<INCOME-TAX> 0
<INCOME-CONTINUING> 134,790
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 134,790
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
