##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549


Form 10-K

|           |  |                                                                                             
|---------- |  | --------------------------------------------------------------------------------------------
|(Mark One) |  |                                                                                             
|þ          |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|          
|           |  | For the fiscal year ended December 31,
    2003                                             
|          
|or        
|          
|o          |  | 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 000-31511

At Road, Inc.

(Exact name of registrant as specified in its
charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 94-3209170                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)

47200 Bayside Parkway

Fremont, CA 94538


(Address of principal executive offices,
including zip code)


Registrants telephone number, including
area code: 510-668-1638

Securities registered pursuant to
Section 12(b) of the Act:

None


Securities registered pursuant to
Section 12(g) of the Act:

Common Stock


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 þ          No o

Indicate by check
mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this
Form 10-K or any amendment to this
Form 10-K.     þ

Indicate by check
mark whether the registrant is an accelerated filer (as defined
in the Exchange Act
Rule 12b-2).     Yes þ          No o

The aggregate
market value of the voting stock held by non-affiliates of the
registrant was approximately $297,962,137 as of June 30,
2003, based upon the closing sale price on the Nasdaq National
Market reported for such date. Shares of Common Stock held by
each officer and director and by each person who owns 5% or more
of the outstanding Common Stock have been excluded in that such
persons may be deemed to be affiliates. This determination of
affiliate status is not necessarily a conclusive determination
for other purposes.

There were
53,838,699 shares of the registrants Common Stock
issued and outstanding as of February 27, 2004.

DOCUMENTS INCORPORATED BY REFERENCE

Part III
incorporates information by reference from the definitive proxy
statement to be filed in connection with the registrants
2004 annual meeting of stockholders.



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TABLE OF CONTENTS

|              |  |                                                                                                                                            |  |  |    | 
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------ |  |  | -- | 
|PART I        |  |                                                                                                                                            |  |  |    | 
|Item 1.       |  | Business                                                                                                                                   |  |  | 2  | 
|Item 2.       |  | Properties                                                                                                                                 |  |  | 13 | 
|Item 3.       |  | Legal Proceedings                                                                                                                          |  |  | 13 | 
|Item 4.       |  | Submission of Matters to a
    Vote of Security Holders                                                                                    |  |  | 13 | 
|PART II      
|Item 5.       |  | Market for Registrants
    Common Equity and Related Stockholder Matters                                                                  |  |  | 13 | 
|Item 6.       |  | Selected Financial Data                                                                                                                    |  |  | 15 | 
|Item 7.       |  | Managements Discussion
    and Analysis of Financial Condition and Results of Operations                                                  |  |  | 16 | 
|Item 7A.      |  | Quantitative and Qualitative
    Disclosures About Market Risk                                                                             |  |  | 35 | 
|Item 8.       |  | Financial Statements and
    Supplementary Data                                                                                            |  |  | 35 | 
|Item 9.       |  | Changes in and Disagreements
    with Accountants on Accounting and Financial Disclosure                                                   |  |  | 35 | 
|Item 9A.      |  | Controls and Procedures                                                                                                                    |  |  | 35 | 
|PART IV      
|Item 15.      |  | Exhibits, Financial
    Statement Schedules and Reports on Form 8-K                                                                        |  |  | 36 | 
|              |  | Independent Auditors
    Report                                                                                                           |  |  | 39 | 
|              |  | Consolidated Balance
    Sheets  December 31, 2003 and 2002                                                                               |  |  | 40 | 
|              |  | Consolidated Statements of
    Operations  Years ended December 31, 2003, 2002
    and 2001                                               |  |  | 41 | 
|              |  | Consolidated Statements of
    Stockholders Equity and Comprehensive Income
    (Loss)  Years ended December 31, 2003, 2002 and
    2001 |  |  | 42 | 
|              |  | Consolidated Statements of
    Cash Flows  Years ended December 31, 2003, 2002
    and 2001                                               |  |  | 43 | 
|              |  | Notes to the Consolidated
    Financial Statements                                                                                         |  |  | 44 | 
|EXHIBIT 10.38
|EXHIBIT 10.39
|EXHIBIT 10.40
|EXHIBIT 10.41
|EXHIBIT 23.1 
|EXHIBIT 31.1 
|EXHIBIT 31.2 
|EXHIBIT 32.1 
|EXHIBIT 32.2 



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Except for the historical information contained
in this Report, the matters discussed in this Report are
forward-looking statements involving risks and uncertainties
that could cause actual results to differ materially from those
in such forward-looking statements. Potential risks and
uncertainties include, but are not limited to, fluctuations in
quarterly results, our limited operating history, the infancy of
the mobile resource management industry where there is no
established market for our products and services, our ability to
adapt to rapid technological change, our dependence on wireless
networks, network infrastructure and positioning systems owned
and controlled by others and general economic and political
conditions. Further information regarding these and other risks
is included in this Report and in our other filings with the
Securities and Exchange Commission (SEC).

Our primary Internet address is
www.road.com. We make our periodic SEC reports (Forms
10-Q and Forms 10-K) and current reports (Forms 8-K) available
free of charge through our website as soon as reasonably
practicable after they are filed electronically with the SEC. We
may from time to time provide important disclosures to investors
by posting them in the investor relations section of our
website, as allowed by the SEC rules.



PART I






|        |         
|------- | --------
|Item 1. | Business

Overview

We are a leading provider of mobile resource
management services, a rapidly growing category of business
productivity solutions that enable the effective management of
mobile resources. We market and sell our services to a broad
range of customers in the United States and Canada that vary in
size, geographic location and industry. In 2003, our largest
customers based on revenues were Verizon Communications, Waste
Management and Qwest Communications. We have grown our
subscriber base from approximately 35,000 subscribers as of
December 31, 2000 to approximately 125,000 subscribers as
of December 31, 2003.

The @Road Solution

Our mobile resource management (MRM)
services allow customers to improve productivity by enabling the
effective management of the activities of their mobile workers
and assets and their goods and services. In addition, our
services allow customers to increase the utility of their mobile
resources and decrease costs of operations by facilitating
business processes, such as event confirmation, signature
verification, forms processing, project management and
timekeeping while their workers are in the field. Our services
also provide location, reporting, dispatch, messaging, and other
management services and are designed to be easy to implement and
use. Our customers can manage their mobile workers in several
ways, including by logging onto our website, receiving their
data directly into their existing software applications, using
any wireline or wireless telephone to access our speech-to-text
voice portal or requesting information from our data centers
using application programming interfaces.

Our services are built on our LocationSmart
technology platform, an end-to-end solution that seamlessly
combines wireless communications, Global Positioning System
(GPS) technology, hosted software applications and
Internet technologies. The information technology infrastructure
and network application software used in our LocationSmart
technology platform reside at our co-located data centers in
Virginia and California. Because we host our services, our
customers do not need to make a substantial

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investment in acquiring and supporting capital
equipment, such as hardware, software and data networking
equipment, to use our services. The LocationSmart technology
platform is depicted in Figure 1.


@Road LocationSmart Technology
Platform

(TECHNOLOGY PLATFORM)

Figure 1


Our service delivery architecture is designed to
serve a growing number of subscribers with increasing data
transmission volumes without compromising performance, delivery
times or data accuracy. Because key technology components of our
solution can be expanded to accommodate additional users, as in
the case of wireless networks or the Internet, or are designed
to accommodate a practically unlimited number of users, as in
the case of GPS, we believe that we can support a significantly
expanding customer base. With the addition of our services that
run on a location- or wireless application protocol-enabled
mobile telephone, a customer can easily expand the deployment of
our services to existing or new handsets.

We believe that customers use return on
investment as a primary selection criterion when evaluating MRM
solutions. We believe that benefits of our services that drive a
rapid return on investment for our customers include the
following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Improved productivity of mobile
    resources.Customers use location,
    personalized mapping landmarks and path sequencing features to
    maximize the time spent completing work orders in the field and
    minimize non-productive time. Customers also monitor the
    progress of jobs in the field and re-allocate resources to
    better meet project deadlines. Customers measure improvements in
    their mobile workers productivity from using our services
    in many ways, including by an increase in the number of jobs a
    mobile worker can complete per day or by an increase in revenue
    earned by a mobile worker per day.
|
| |  | Decreased costs of operations of mobile
    resources.Customers use our two-way
    communications services for low-cost transmission of completed
    business forms, signature verification and messaging. Customers
    also use our services to automatically monitor and schedule
    maintenance activities for assets in the field. Customers
    measure decreases in their costs from using our services in many
    ways, including by a decrease in the cost of having a mobile
    worker in the field or by a decrease in the cost of insuring
    mobile workers and assets.                                                                
|
| |  | Improved efficiency of a customers
    overall operations.Customers use our
    services to capture timekeeping, workflow and inventory
    information in the field. This information can be delivered
    directly to our customers existing software applications
    or downloaded from our website and                                                                                                                                                                                                                                                                                                                                             

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | imported into a payroll or customer invoicing
    system. These services can minimize the need for back-office
    data entry services, minimize data entry errors and accelerate
    invoicing processes. Customers measure improvements in their
    efficiency from using our services in many ways, including by a
    decrease in costs of general and administrative expenses and by
    a reduction in days sales outstanding of accounts receivable.                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Improved responsiveness to our customers
    customers.Customers use location and
    workflow information to update our customers customers
    about pending work orders or deliveries. Our customers also use
    our location-on-demand feature to assign a pending work order to
    the closest or best-equipped mobile worker to provide the
    quickest response that meets the end-customers demands.
    Customers enhance their customer relationship management
    operations by accessing stored information about end-customers,
    including workflow data records, audit trails of mobile worker
    messages, and daily mobile worker activity data. Customers
    measure improvements in their responsiveness from using our
    services in many ways, including by a reduction in aged
    receivables and by an improvement in internal customer
    satisfaction indexes.

In addition, we offer multi-year subscription
contracts that allow our customers to pay us on a monthly basis
and minimize upfront cash commitments. We believe a monthly
payment subscription model further accelerates a customers
return on investment in our services.



| |         
| | --------
| | Strategy

We believe that leaders in the MRM market are
evaluated on a number of criteria, including size, technology
leadership, financial strength, strength of customer base,
strategic relationships with wireless carriers and management
experience. We believe that based on these criteria, we are a
leader in the MRM market. Our objective is to enhance our
leadership position in the MRM market. Key elements of our
strategy are:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Further penetrate vertical markets in which we
    have or are developing leading reference
    customers.We have developed a
    relationship with leading companies in some vertical markets,
    such as telecommunications, construction and facilities/waste
    management. We are leveraging our relationships with these
    customers and our knowledge of their MRM needs to attract other
    potential medium- to large-sized customers in these markets. In
    other vertical markets, we intend to replicate the model of
    deploying our services with a leading reference customer and
    leveraging this relationship and our MRM market expertise to
    attract other customers in those markets.                                                                                                                                                                                                                                                             
|
| |  | Create new value-added services for our
    customers.We will continue to add new
    features and functionality to our services and develop new
    platforms that take advantage of advances that are being made in
    wireless communications. We expect to continue to release new
    features that synthesize the information currently retrieved by
    our existing services and which arise from working closely with
    our customers. We expect some of these features to be
    incorporated into our services as free enhancements, while
    others will be offered for additional fees. We intend to
    continue to use our capabilities in the U.S. and our
    wholly-owned subsidiary in India to help develop and support new
    features and functionality for our services. In addition, we are
    continuing to develop an open platform architecture to allow our
    customers and partners to integrate third-party applications
    with our services.
|
| |  | Expand our services
    internationally.We intend to identify
    new geographic markets for which our services and our
    LocationSmart technology platform satisfy evolving customer
    demands. We believe that leveraging our technology leadership
    position, our broad experience with customers in the United
    States and Canada and the distribution resources of established
    vendors and wireless carriers will help us to establish customer
    awareness and acceptance of our services in international
    markets.                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Acquire complementary businesses and
    technologies.We intend to supplement
    our subscriber base, revenue and service offerings by
    selectively acquiring complementary businesses and technologies.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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| |  |                                                                                                                                     
| |  | ------------------------------------------------------------------------------------------------------------------------------------
| |  | We continually evaluate opportunities to
    accelerate our growth and broaden our market share in the United
    States and abroad.



| |                        
| | -----------------------
| | @Road Service Offerings

Our current family of MRM services includes
GeoManager, GeoManager Pocket Edition, @Road Pathway,
RoadREPORT, RoadFORCE and ConnectBusiness. Together, these
service offerings are designed to meet the needs of customers in
a variety of vertical markets, including telecommunications,
field service, construction, facilities/waste management,
freight and passenger transportation, courier/delivery,
distribution, security, cable/broadband and utilities.

Our services provide current and historical data
relating to a customers mobile resources in a variety of
formats, including activity reports, maps and completed business
forms. We provide these formats in a standard configuration, and
customers can configure certain elements and views themselves to
help achieve compliance with their internal business rules.
Customers can choose to have reports delivered on a
pre-scheduled basis, or they can submit queries to our databases
to create reports and views on demand. Customers can also
download reports to manipulate and store data as desired. Mobile
resource data is typically stored by us for 14 days, unless
the customer purchases our extended data storage service.

Our services are enabled by the deployment of a
device, which we call a platform, to each of the customers
mobile resources. We call each mobile resource with a platform a
subscriber. Our services operate with three
independent platforms. First, a mobile worker can use our
proprietary hardware device embedded with software that
integrates a GPS receiver with a wireless modem. Second, a
mobile worker can use our proprietary hardware device embedded
with software and an integrated GPS receiver and which is
tethered by cable to a wireless telephone. Each of these
proprietary hardware devices is called an Internet Location
Manager. The Internet Location Manager is installed in a mobile
workers vehicle. Installation in any type of vehicle
typically takes less than an hour, and is completed by our
subcontracted installation agents. Third, a mobile worker can
use a location- or wireless application protocol-enabled mobile
telephone installed with our software application.

These platforms send and receive a variety of
information from time to time and on demand. Such data include
location, velocity, time and operational diagnostics. These data
are transmitted to our data centers using wireless networks and
the Internet. If a wireless connection is not available, then
the platform will store up to five days of captured data and
seek to transmit the data when a wireless connection is
available.

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The following table describes our current family
of MRM services, selected features and enhancements of these
services and platforms that operate with those services:

|                           |  |                                                                                                                                                                                                                                                                                                                                                       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |             
|-------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------
|                          
|                          
|                           |  | @Road-Supported                                                                                                                                                                                                                                                                                                                                      
|Service                    |  | Description                                                                                                                                                                                                                                                                                                                                           |  | Selected Features and Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Platforms   
|                          
|                          
|GeoManager                 |  | Flagship service designed to provide detailed
    mobile resource management for customers in all of our markets.
    Provides services on a hosted basis using a web browser on
    demand, continuously streamed to customer applications or by
    providing connections to other applications with
    application programming interfaces (APIs). |  | 4  DirectData
    continuous streaming of subscriber data to customer
    applications4   Two-Way
    Communications text messaging and storage using multiple
    devices4   Exception
    Servicesalerts and reports identifying incidents where
    mobile workers meet or exceed customer-defined business rules4   MobileFormsconduct
    business transactions, signature capture and document workflow
    in the field using a ruggedized personal digital assistant4   Voice
    Solutionsspeech-to-text translation engine for oral and
    text messaging4   Mappingprovides
    automatic geocoding of location data and configurable map views |  | LOGOLOGOLOGO
|                          
|GeoManager, Pocket Edition |  | Provides much of the same functionality as the
    GeoManager service. Runs a java application on a
    location-enabled wireless telephone.                                                                                                                                                                                                          |  | 4  DirectData4   Field
    Landmarking subscribers can use wireless telephones to
    generate location-specific icons for use with mapping, reports
    and other features4   Mapping                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | LOGO        
|                          
|@Road Pathway              |  | Provides customers a cost- effective, entry-level
    MRM solution using a location- enabled wireless telephone.                                                                                                                                                                                                                                      |  | 4  Activity
    Reports detailed reporting of individual mobile workers
    and groups4   Ping locate
    workers in the field on demand using any web browser4   Mapping                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | LOGO        
|                          
|RoadREPORT                 |  | Provides detailed historical reporting of mobile
    resources and their activities. Cost-effective solution for
    companies in all of our markets that do not need current
    information from the field.                                                                                                                                         |  | 4  Multiple
    Report Retrieval Methods reports are accessible using a
    web browser or can be delivered by email or file transfer
    protocol4   Advanced Reports
    Scheduling customers can configure reporting formats and
    delivery times in advance                                                                                                                                                                                                                                                                                                                                                                                               |  | LOGO        
|                          

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|                |  |                                                                                                                                                                                                                                                                                                                                                     |  |                                                                                                                                                             |  |          
|--------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------
|               
|               
|                |  | @Road-Supported                                                                                                                                                                                                                                                                                                                                    
|Service         |  | Description                                                                                                                                                                                                                                                                                                                                         |  | Selected Features and Options                                                                                                                               |  | Platforms
|               
|               
|RoadFORCE       |  | Provides companies with mobile professionals
    detailed information about their teams activities.
    Available in two modules, one focused on managing a mobile staff
    and one focused on managing company assets.                                                                                                                           |  | 4  Productivity
    Reports4   Customer Call
    Reports4   Personal/ Business
    Mileage Management                                                       |  | LOGO     
|               
|ConnectBusiness |  | Provides project managers in construction and
    related industries an application for managing contractors,
    remote workers and multiple job sites. Data is available over
    the Internet using a web browser. Uses any wireless application
    protocol (WAP) enabled mobile telephone to send and receive data
    from our data centers. |  | 4  Project
    Management Module4   Timekeeping4   Two-Way
    Communications4   Easy Import into
    Accounting, Project Management and other Applications |  | LOGO     
|               

We believe the following features and benefits of
each of our services provide a variety of competitive advantages
over other solutions:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Cost-effective.Our
    services are cost-effective for our customers because we utilize
    existing infrastructure, such as the Internet and wireless
    networks, developed by other companies, and GPS technology
    developed by the U.S. government. Our customers are not
    required to make substantial capital investment because our
    services can be deployed on an existing location- or wireless
    application protocol-enabled mobile telephone, customer data and
    our software reside at our data centers, and our services can be
    accessed by using the Internet or any wireline or wireless
    telephone.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Ease of
    implementation.The implementation of
    our services is designed to be quick and easy for our customers.
    When deploying our services using a location- or wireless
    application protocol-enabled mobile telephone as the hardware
    platform, customers install a software program on the telephone.
    Once launched, this software program communicates with our data
    centers, and the customer deployment is complete. When deploying
    our services using an Internet Location Manager, an optional
    Internet Data Terminal device or a ruggedized personal digital
    assistant as the hardware platform, we install this hardware in
    the customers vehicles. As our customers grow, they can
    install software on additional mobile telephones or our hardware
    platform in additional vehicles to continue to expand their use
    of our services.                                                                                                                                                                                                                     
|
| |  | Ease of use.Our
    services are designed to be deployed as end-to-end solutions.
    That is, a customer does not incur incremental information
    technology costs associated with the deployment or use of our
    services. Our services are designed to be available over the
    Internet and by telephone 24 hours a day, seven days a
    week, with the exception of scheduled maintenance. Our user
    interfaces, including those used with the Internet, mobile
    telephones, Internet Data Terminals and our ruggedized personal
    digital assistant, are designed to be intuitive and easy to use,
    require minimal training and be modified by the customer to meet
    each customers particular requirements. Additionally, our
    DirectData service streams customer data directly to a
    customers existing software applications, and the business
    intelligence arising from use of our services with a
    customers existing operations models enables a customer to
    maximize the value of its existing investments in information
    technology and productivity solutions.
|
| |  | Ease of maintenance.We host and maintain all the services we provide. We also manage
    the wireless network and Internet connections between and among
    the platforms in the field, our data                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | centers and the Internet. Additionally, we
    implement service and software upgrades centrally at our data
    centers and remotely to the platforms in the field over the same
    wireless connection used to transmit mobile resource
    information. For these reasons, customers benefit from
    enhancements to our services while avoiding information
    technology and infrastructure maintenance expenses and the daily
    interruption of the operations of their mobile resources.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | Wireless data
    connectivity.Our services operate
    with a number of wireless networks offered by some of the
    largest wireless carriers in the United States and Canada
    including: General Packet Radio Services, Code Division Multiple
    Access 1XRTT, Integrated Digital Enhanced Network and Cellular
    Digital Packet Data. With our wireless carrier partners, we
    deliver services in more than 200 of the top metropolitan
    statistical areas in the United States and Canada. Subject to a
    customers preferences, we typically configure our services
    with the most cost-effective and efficient wireless network
    available in the customers geographic area of operations.
    In some cases, a single customer with geographically disperse
    operations may receive services that seamlessly use more than
    one wireless network. Wireless network configuration typically
    occurs in the background and does not require significant time
    or effort of the customer.
|
| |  | Store-and-forward
    functionality.Our services are
    designed to address common geographic limitations and network
    difficulties associated with wireless networks. When a
    subscriber travels outside a wireless networks coverage
    area, the Internet Location Manager or mobile telephone, as the
    case may be, continues to collect and stores up to five days of
    information. These data are transmitted to our data centers when
    the subscriber returns to the wireless coverage area. Our
    services are designed to be tolerant of wireless network
    difficulties and to have the ability to confirm receipt of data
    from the field and re-transmit data when errors are detected.                                                                                                                                                                                                                                                                                                     
|
| |  | Robust reporting and mapping
    capabilities.Our services offer
    customers comprehensive, detailed reporting of workforce
    activity, either individually or for all or a selected group of
    a customers mobile resources. Reports can be formatted by
    customers and downloaded for additional sorting and analysis. A
    customers preferences are stored at our data centers and
    can be modified by the customer at any time to meet its changing
    needs. The current and past locations of each subscriber can be
    displayed on a map, making monitoring simple. Map views can be
    personalized by customers to graphically display different
    information about their mobile resources, including locating
    positions on maps by address or customer-defined landmarks.                                                                                                                                                                                                                   
|
| |  | Location by Global Positioning
    System.Our services use the Global
    Positioning System to determine the location of a mobile
    resource. We believe GPS 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 minimizes our costs of service
    delivery.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Communications
    capabilities.Our customers may
    enhance their field operations by using our two-way
    communications services. These services operate using either a
    wireless telephone or the Internet Location Manager with our
    optional Internet Data Terminal. These services enable our
    customers to communicate regularly and quickly with mobile
    workers. While the services permit free-text messages, they also
    enable customers to pre-program a set of messages that can be
    transmitted with the push of a button to minimize distractions
    in the field. Messages are stored at our data centers, and are
    accessible by our customers using a web browser. Customers can
    use the message database for customer relationship management,
    proof of service, auditing and minimizing the occurrence of lost
    change orders, missed appointments or other communications.                                                                                              



| |          
| | ---------
| | Customers

We market and sell our services to a broad range
of customers in the United States and Canada that vary in size,
geographic location and industry. The number of mobile resources
enabled with our services has grown from 135 as of
December 31, 1998 to approximately 125,000 as of
December 31, 2003. We

8



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categorize a customer in a small-, medium- or
large-sized customer group by reference to the total number of
subscribers to our services for that customer. Small-sized
customers have less than 30 subscribers, medium-sized customers
have 31 to 750 subscribers and large-sized customers have more
than 750 subscribers. Currently we have customers in the
following industries:


|                                       |  |                   
|-------------------------------------- |  | ------------------
| Telecommunications                   |  |  Courier/Delivery
| Field Service                        |  |  Distribution    
| Construction                         |  |  Security        
| Facilities/ Waste Management         |  |  Cable/Broadband 
| Freight and Passenger Transportation |  |  Utilities       

In 2003, one customer, Verizon Communications,
represented 17% of total revenues. No other customers comprised
10% or more of total revenues. In 2002 and 2001, no single
customer or group of related customers comprised 10% or more of
total revenues.



| |                         
| | ------------------------
| | Research and Development

We concentrate our research and development
activities on services and platform engineering. Our
U.S. research and development activities are supplemented
by resources and personnel at our subsidiary in India. 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, in March 2003,
    we launched GeoManager Pocket Edition service, which is designed
    to deliver our standard mobile resource management application
    using a location-enabled mobile telephone in lieu of an Internet
    Location Manager. In July 2003, we launched Electronic Driver
    Logs service, which eliminates paperwork for mobile workforces
    and office staff by generating reports by subscriber showing
    hours worked, hours available and regulatory violations. Also in
    July 2003, we launched Automated State Mileage Reports service,
    which enables companies to automatically record how many miles
    each subscriber has traveled, information that can be used when
    preparing state-mandated quarterly fuel tax reports. In
    September 2003, we launched @Road Pathway service, which is
    designed to provide a cost-effective mobile resource management
    solution using a location-enabled Nextel Communications cellular
    telephone.
|
| |  | Platform.We intend
    to continue to develop and release platform upgrades to add new
    features as well as to enhance existing features. For example,
    in April 2003, we announced the availability of an Internet
    Location Manager with AT&Ts wireless General Packet
    Radio Service network. This new hardware platform enables
    customers to experience increased data transmission rates,
    enhanced security capabilities and wide geographic coverage. In
    June 2003, we announced the availability of an Internet Location
    Manager with Sprints Code Division Multiple Access 1XRTT
    wireless network. This new hardware platform enables customers
    to use our services on a third-generation wireless network that
    enables faster data transmission speeds than older wireless
    networks.                                                                                                                                                                                                                                                                                                  

We spent $5.4 million, $5.9 million and
$7.6 million on research and development activities in the
years 2003, 2002 and 2001, respectively. As of December 31,
2003, we had 56 employees in research and development.



| |           
| | ----------
| | Technology

Our technology efforts focus on creating new
services and enhancing the reliability, availability and
features of our services while maintaining a scalable and cost
effective architecture. Our proprietary technologies are
designed to work with technologies from other companies,
including our partners, competitors, and other third parties.
While we have integrated wireless communications into our
services in three ways, including a wireless modem embedded in
our Internet Location Manager, an Internet Location Manager
tethered to a Nextel Communications cellular telephone and
installation of our thin client

9



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##### Table of Contents



software application on a location-enabled mobile
telephone, our services are designed to operate with a variety
of wireless communications protocols and devices. Similarly,
although our services utilize our patented GPS chipset, our
services have been designed to work with other location
technologies. We expect to continue to develop additional
proprietary technology where feasible and to purchase or license
technology where cost-effective. Our technology efforts focus on
the following areas:




| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Wireless technology.Our services currently operate on several wireless networks
    offered by a number of wireless carriers, including the General
    Packet Radio Services, Code Division Multiple Access 1XRTT,
    Integrated Digital Enhanced Network and Cellular Digital Packet
    Data. One of our objectives is to continue to maintain our
    technological independence from any one wireless protocol or
    platform, enabling our customers to communicate with our data
    centers in the way or ways which best suit their needs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | Access and Internet
    technology.The delivery of our
    services is complex in part because it involves the continuous
    collection, storage and processing of data from over one hundred
    thousand subscribers in the field as well as processing requests
    from thousands of users accessing our data centers. To manage
    the throughput of customer information and to deliver our
    services to our customers, we use secure Internet connections
    between our data centers and customers accessing our services as
    well as the wireless networks transmitting customer information.
    In addition to providing access to our services using any
    Internet connected computer, we provide access via any wireline
    or wireless telephone with our speech-to-text interface
    technology. We also facilitate the integration of customer data
    collected by our services with a customers existing
    software applications through our DirectData streaming service
    and application programming interfaces. We plan to further
    enhance access to customer data and our services by developing
    additional access methods for customers to obtain their data.
|
| |  | Information
    technology.We have an information
    technology organization dedicated to maintaining and enhancing
    our data centers. By managing our services at our data centers,
    we relieve our customers of the development and operations
    burden of managing services resulting from the integration of
    wireless communications, location technologies, hosted software
    applications, transaction processing infrastructure and Internet
    technologies. Our data centers are composed of servers
    co-located in Redwood City, California and Ashburn, Virginia. We
    maintain variable-speed capacity connections between our data
    centers and the Internet and dedicated connections to the
    wireless networks we use. In addition, our data centers
    automatically replicate customer data on a minute-by-minute
    basis. In the event of a power failure, our systems would be
    powered by a backup power supply.                                                                                                                                                                                                                                            
|
| |  | 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 developed a patented GPS chipset and
    algorithm designed to be optimized for our services. As a
    result, our Internet Location Manager is designed to determine
    its location in less time than that which is required by other
    commercial receivers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           



| |                                    
| | -----------------------------------
| | 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:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Wireless carriers.We have established strategic relationships with ALLTEL,
    AT&T Wireless, Bell Mobility, Cingular Wireless, Nextel
    Communications, Nextel Partners, Sprint, TELUS Mobility and
    Verizon Wireless to provide wireless connectivity between our
    subscribers and the Internet. We contract directly with ALLTEL,
    AT&T Wireless, Sprint and TELUS Mobility for the provision
    of wireless communications, which are bundled with our services.
    With Bell Mobility, Cingular Wireless, Nextel Communications and
    Nextel Partners our customers have separate contracts for

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| |   |                                                                                                                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | wireless communications with their carrier. With
    Verizon Wireless, in some geographic areas we bundle our
    services with wireless communications, and in other areas our
    customers have separate contracts for wireless communications.
|
| |  | Manufacturers.Symbol Technologies manufactures the ruggedized personal digital
    assistant for use with our services. Orient Semiconductor
    Electronics manufactures and tests our Internet Location Manager.                                



| |                    
| | -------------------
| | Sales and Marketing

Our sales and marketing objective is to achieve
broad market penetration through vertical marketing and targeted
sales activities. We currently market and sell our solution
through a number of sales channels, including the following:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Strategic sales
    force.We have a team of sales
    employees focused on marketing and selling our services to
    large-sized customers. Large-sized customers are defined as
    customers with greater than 750 mobile resources. This sales
    force is geographically dispersed throughout the United States
    near target sales prospects. The sales process with large-sized
    customers often requires many months of activity, is competitive
    and typically requires a pilot test of our services.                                                                                            
|
| |  | Mid-market sales
    force.We have a team of sales
    employees focused on marketing and selling our services to
    small- and medium-sized customers. This sales force is
    geographically dispersed throughout the United States where
    major wireless networks are available. Additionally, our
    mid-market sales force works with our wireless carrier partners
    to increase our subscriber base.                                                                                                                                                                                                
|
| |  | Inside sales force.We have a team of sales employees focused on marketing and
    selling our services to small-sized customers. This sales force
    is located at our headquarters in Fremont, CA. Additionally, our
    inside sales force works with our direct sales force to increase
    our subscriber base.                                                                                                                                                                                                                                                                                              
|
| |  | Agent sales force.We have a team of employees who manage a network of independent
    sales agents focused on marketing and selling our services.
    These independent sales agents are geographically dispersed
    throughout the United States and Canada. Participants in the
    agent sales program are compensated for the sale of our services
    and for the length of time during which a customer is under
    contract with us. Independent sales agents facilitate sales of
    our services through their own efforts and work with wireless
    carrier partners to increase our subscriber base.
|
| |  | Wireless carrier
    partners.Our wireless carrier
    partners are ALLTEL, AT&T Wireless, Bell Mobility, Cingular
    Wireless, Nextel Communications, Nextel Partners, Sprint, TELUS
    Mobility and Verizon Wireless. Certain of these partners market
    or facilitate sales of our services through their own sales
    channels and work with our mid-market sales force to increase
    our subscriber base.                                                                                                                                                                                             

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 partners.

As of December 31, 2003, our sales and
marketing team consisted of 86 employees.



| |            
| | -----------
| | Competition

We face strong competition for our services. We
compete primarily on the basis of functionality, ease of use,
quality, price, service availability, geographic coverage of
services and corporate financial strength. As the demand by
businesses for mobile resource management services increases,
the quality, functionality and breadth of competing products and
services will likely improve and new competitors will likely
enter our market. In addition, the widespread adoption of
industry standards may make it easier for new market entrants or
existing competitors to improve their existing services, to
offer some or all of the services we offer or may offer in the
future, or to offer new services that we do not offer. We also
do not know to what extent network infrastructure developers and
wireless network operators will seek to provide integrated

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wireless communications, Global Positioning
System, software applications, transaction processing, and
Internet solutions, including access devices developed
internally or through captive suppliers.


The market for our services is competitive and is
expected to become even more competitive in the future. If we
are unable to compete successfully, it may harm our business or
increase our sales cycles, resulting in a loss of market share
and revenues. We face competition from a number of different
business productivity solutions, including:



| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Solutions developed internally by our prospective
    customers information technology staffs;                                                              
|
| |  | Discrete means of communication with mobile
    workers, such as pagers, two-way radios, handheld devices and
    wireless telephones;                       
|
| |  | Solutions targeted at specific vertical markets,
    such as services offered by Qualcomm that monitor assets in the
    long-haul transportation sector; and
|
| |  | Solutions offered by smaller market entrants.                                                                                                                

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.



| |                      
| | ---------------------
| | 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.
As of December 31, 2003, we possessed ten patents, which we
believe cover our GPS chipset technology and some of the methods
and structures for distributing information over a network as
well as applications of those methods, and had approximately 35
patent applications pending in jurisdictions around the world.
We have filed numerous additional patent applications to further
protect and extend our technology leadership position. Although
we have applied for patent protection primarily in the United
States, we have filed and intend to continue 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. In the event that a third
party breaches the confidentiality provisions or other
obligations in one or more of our agreements or misappropriates
or infringes on our intellectual property or the intellectual
property licensed to us by third parties, our business would be
seriously harmed. 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 United States. Therefore, the
measures we take to protect our proprietary rights may not be
adequate.

Third parties may claim that our current or
future products or services infringe their proprietary rights or
assert other claims against us. As the number of entrants into
our market increases, the possibility of an intellectual
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, if at all. Any
of these results would increase our expenses and could decrease
the functionality of our services, which would make our services
less attractive to our current or potential customers. We have
agreed in some of our agreements, and may agree in the future,
to indemnify other parties for any expenses or liabilities
resulting from claimed infringements of the proprietary rights
of third parties.

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| |          
| | ---------
| | Employees

As of December 31, 2003, we had 314
employees, 276 of whom were located in the U.S. and 38 of whom
were located in Chennai, India. We believe relationships with
our employees are good.






|        |           
|------- | ----------
|Item 2. | Properties

We have offices in Fremont, California and
Chennai, India.

|               |  |           |        |        |  |             |  |                                                                                                                                                                                                                                                                                     |  |  |            | 
|-------------- |  | --------- | ------ | ------ |  | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ---------- | 
|               |  |           |        | Square |  |             |  | Lease                                                                                                                                                                                                                                                                              
|Location       |  | Ownership |        | Feet   |  | Primary Use |  | Expiration                                                                                                                                                                                                                                                                         
|               |  |           |        |        |  |             |  |                                                                                                                                                                                                                                                                                    
|Fremont, CA    |  |           | Leased |        |  | 54,000      |  | Corporate headquarters, customer service,
    engineering                                                                                                                                                                                                                           |  |  | 1/31/2005  | 
|Fremont, CA    |  |           | Leased |        |  | 30,000      |  | Engineering, research and development, data
    center (6,000 square feet was subleased to a third party
    under an agreement that expires on March 14, 2004. Upon
    expiration of the initial term of the sublease, the sublease
    will continue on a month-to-month basis.) |  |  | 12/31/2005 | 
|Chennai, India |  |           | Leased |        |  | 4,100       |  | Research and development, customer service                                                                                                                                                                                                                                          |  |  | 11/16/2005 | 






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

From time to time, we are subject to claims in
legal proceedings arising in the normal course of our business.
We do not believe that we are party to any pending legal action
that could reasonably be expected to have a material adverse
effect on our business, financial condition or operating results.






|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders

None.




PART II






|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market for Registrants Common Equity
    and Related Stockholder Matters

Price Range of Common Stock

Our common stock has been listed for quotation on
the Nasdaq National Market under the symbol ARDI
since our initial public offering on September 28, 2000.
The following table shows the high and low sales prices of our
common stock as reported by the Nasdaq National Market for the
period indicated.

|                                                             |  |      |       |     |  |  |       | 
|------------------------------------------------------------ |  | ---- | ----- | --- |  |  | ----- | 
|                                                             |  | High |       | Low
|                                                             |  |      |       |    
|Quarter ended March 31, 2002                                 |  |      | 8.45  |     |  |  | 4.90  | 
|Quarter ended June 30, 2002                                  |  |      | 8.12  |     |  |  | 6.13  | 
|Quarter ended September 30, 2002                             |  |      | 6.25  |     |  |  | 3.20  | 
|Quarter ended December 31, 2002                              |  |      | 5.99  |     |  |  | 3.87  | 
|Quarter ended March 31, 2003                                 |  |      | 6.76  |     |  |  | 4.34  | 
|Quarter ended June 30, 2003                                  |  |      | 11.73 |     |  |  | 6.00  | 
|Quarter ended September 30, 2003                             |  |      | 15.10 |     |  |  | 10.93 | 
|Quarter ended December 31, 2003                              |  |      | 15.15 |     |  |  | 10.98 | 
|Quarter ended March 31, 2004 (through February
    27, 2004) |  |      | 16.82 |     |  |  | 11.92 | 

At December 31, 2003, there were
approximately 106 holders of record of our common stock. This
does not include the number of persons whose stock is held in
nominee or street name accounts through brokers.

13



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##### Table of Contents



The market price of our common stock has been and
may continue to be subject to wide fluctuations in response to a
number of events and factors, such as quarterly variations in
our operating results, announcements of technological
innovations or new products or services by us or our
competitors, changes in financial estimates and recommendations
by securities analysts, the operating and stock performance of
other companies that investors may deem comparable to us, and
news reports relating to trends in our markets. In addition, the
stock market in recent years has experienced extreme price and
volume fluctuations that have particularly affected the market
prices of many high technology companies that have often been
unrelated or disproportionate to the operating performance of
those companies. These fluctuations, as well as general
political, economic and market conditions, may adversely affect
the market price for our common stock.

Dividend Policy

We have never paid cash dividends on our common
stock. We currently intend to retain any future earnings to fund
the development and growth of our business. Therefore, we do not
currently anticipate paying any cash dividends in the
foreseeable future.

14



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##### Table of Contents








|        |                        
|------- | -----------------------
|Item 6. | Selected 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 other information contained in this Report.

|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |       |        | 
|----------------------------------------------------------- | ------------------------------------------------------------------------------- | ---------------------------------------- | ----- | ------ | ------ | ---- | ------- | ------ | ------ | ---- | ------- | ------ | ------ | - | ------- | ------ | ------ | - | ------- | ----- | ------ | 
|                                                            |                                                                                 |                                         
|                                                            |                                                                                 | Years Ended December 31,                
|                                                            |                                                                                 |                                         
|                                                            |                                                                                 | 2003                                     |       | 2002   |        | 2001 |         | 2000   |        | 1999
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |     
|                                                            |                                                                                 |                                         
|                                                            |                                                                                 | (In thousands, except per share amounts)
|Consolidated Statements of Operations
    Data:             |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|Revenues:                                                   |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|                                                            | Services                                                                        |                                          | $     | 49,561 |        |      | $       | 33,678 |        |      | $       | 20,188 |        |   | $       | 7,919  |        |   | $       | 612   |       
|                                                            | Product                                                                         |                                          |       | 13,802 |        |      |         | 10,742 |        |      |         | 7,262  |        |   |         | 2,704  |        |   |         | 294   |       
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|                                                            |                                                                                 | Total revenues                           |       |        | 63,363 |      |         |        | 44,420 |      |         |        | 27,450 |   |         |        | 10,623 |   |         |       | 906    | 
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|Costs and expenses:                                         |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|                                                            | Cost of service revenue (excluding intangibles
    amortization included below) |                                          |       | 15,711 |        |      |         | 13,544 |        |      |         | 12,690 |        |   |         | 6,414  |        |   |         | 681   |       
|                                                            | Cost of product revenue                                                         |                                          |       | 19,770 |        |      |         | 16,946 |        |      |         | 13,523 |        |   |         | 7,865  |        |   |         | 1,777 |       
|                                                            | Intangibles amortization                                                        |                                          |       | 455    |        |      |         | 1,670  |        |      |         | 1,656  |        |   |         | 1,239  |        |   |         |      |       
|                                                            | Sales and marketing                                                             |                                          |       | 11,408 |        |      |         | 10,746 |        |      |         | 17,267 |        |   |         | 15,512 |        |   |         | 3,530 |       
|                                                            | Research and development                                                        |                                          |       | 5,379  |        |      |         | 5,878  |        |      |         | 7,608  |        |   |         | 8,893  |        |   |         | 2,109 |       
|                                                            | General and administrative                                                      |                                          |       | 9,202  |        |      |         | 8,616  |        |      |         | 12,733 |        |   |         | 10,887 |        |   |         | 2,129 |       
|                                                            | Restructuring charges                                                           |                                          |       |       |        |      |         |       |        |      |         | 218    |        |   |         |       |        |   |         |      |       
|                                                            | Stock compensation                                                              |                                          |       | 467    |        |      |         | 1,065  |        |      |         | 3,041  |        |   |         | 11,664 |        |   |         | 4,973 |       
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|                                                            |                                                                                 | Total costs and expenses                 |       |        | 62,392 |      |         |        | 58,465 |      |         |        | 68,736 |   |         |        | 62,474 |   |         |       | 15,199 | 
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|Income (loss) from operations                               |                                                                                 |                                          | 971   |        |        |      | (14,045 | )      |        |      | (41,286 | )      |        |   | (51,851 | )      |        |   | (14,293 | )    
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|Other income (expense), net:                                |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|                                                            | Interest income                                                                 |                                          |       | 686    |        |      |         | 964    |        |      |         | 2,662  |        |   |         | 3,243  |        |   |         | 829   |       
|                                                            | Interest expense                                                                |                                          |       | (11    | )      |      |         | (15    | )      |      |         | (9     | )      |   |         |       |        |   |         | (25   | )     
|                                                            | Investment impairment charge                                                    |                                          |       |        |        |      |         | (1,035 | )      |      |         |       |        |   |         |       |        |   |         |      |       
|                                                            | Other income (expense), net                                                     |                                          |       | 16     |        |      |         | (106   | )      |      |         | (14    | )      |   |         | (215   | )      |   |         |      |       
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|                                                            |                                                                                 | Total other income (expense), net        |       |        | 691    |      |         |        | (192   | )    |         |        | 2,639  |   |         |        | 3,028  |   |         |       | 804    | 
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|Net income (loss)                                           |                                                                                 | $                                        | 1,662 |        |        | $    | (14,237 | )      |        | $    | (38,647 | )      |        | $ | (48,823 | )      |        | $ | (13,489 | )    
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|Net income (loss) per share:                                |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|                                                            | Basic                                                                           |                                          | $     | 0.03   |        |      | $       | (0.31  | )      |      | $       | (0.88  | )      |   | $       | (3.48  | )      |   | $       | (4.88 | )     
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|                                                            | Diluted                                                                         |                                          | $     | 0.03   |        |      | $       | (0.31  | )      |      | $       | (0.88  | )      |   | $       | (3.48  | )      |   | $       | (4.88 | )     
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|Shares used in calculating net income (loss) per
    share: |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|                                                            | Basic                                                                           |                                          |       | 49,978 |        |      |         | 46,134 |        |      |         | 43,892 |        |   |         | 14,026 |        |   |         | 2,763 |       
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      
|                                                            | Diluted                                                                         |                                          |       | 54,282 |        |      |         | 46,134 |        |      |         | 43,892 |        |   |         | 14,026 |        |   |         | 2,763 |       
|                                                            |                                                                                 |                                          |       |        |        |      |         |        |        |      |         |        |        |   |         |        |        |   |         |      

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|                              |       |                          |     |      |  |      |     |       |  |      |       |       |  |   |       |        |  |   |       |       | 
|----------------------------- | ----- | ------------------------ | --- | ---- |  | ---- | --- | ----- |  | ---- | ----- | ----- |  | - | ----- | ------ |  | - | ----- | ----- | 
|                              |       |                         
|                              |       | Years Ended December 31,
|                              |       |                         
|                              |       | 2003                     |     | 2002 |  | 2001 |     | 2000  |  | 1999
|                              |       |                          |     |      |  |      |     |       |  |     
|                              |       |                         
|                              |       | (In thousands)          
|Detail of stock compensation: |       |                          |     |      |  |      |     |       |  |      |       |       |  |   |       |        |  |   |       |      
|Cost of service revenue       |       | $                        | 10  |      |  | $    | 23  |       |  | $    | 82    |       |  | $ | 171   |        |  | $ | 17    |      
|Cost of product revenue       |       |                          | 25  |      |  |      | 96  |       |  |      | 194   |       |  |   | 479   |        |  |   | 52    |      
|Sales and marketing           |       |                          | 25  |      |  |      | 72  |       |  |      | (12   | )     |  |   | 1,691 |        |  |   | 501   |      
|Research and development      |       |                          | 93  |      |  |      | 322 |       |  |      | 214   |       |  |   | 2,686 |        |  |   | 445   |      
|General and administrative    |       |                          | 314 |      |  |      | 552 |       |  |      | 2,563 |       |  |   | 6,637 |        |  |   | 3,958 |      
|                              |       |                          |     |      |  |      |     |       |  |      |       |       |  |   |       |        |  |   |       |      
|                              | Total |                          | $   | 467  |  |      | $   | 1,065 |  |      | $     | 3,041 |  |   | $     | 11,664 |  |   | $     | 4,973 | 
|                              |       |                          |     |      |  |      |     |       |  |      |       |       |  |   |       |        |  |   |       |      

|                                 |  |                          |         |      |  |      |        |      |  |      |        |  |  |   |         |  |  |   |        | 
|-------------------------------- |  | ------------------------ | ------- | ---- |  | ---- | ------ | ---- |  | ---- | ------ |  |  | - | ------- |  |  | - | ------ | 
|                                 |  |                         
|                                 |  | Years Ended December 31,
|                                 |  |                         
|                                 |  | 2003                     |         | 2002 |  | 2001 |        | 2000 |  | 1999
|                                 |  |                          |         |      |  |      |        |      |  |     
|                                 |  |                         
|                                 |  | (In thousands)          
|Consolidated Balance Sheet Data: |  |                          |         |      |  |      |        |      |  |      |        |  |  |   |         |  |  |   |        | 
|Cash and cash equivalents        |  | $                        | 103,669 |      |  | $    | 35,659 |      |  | $    | 40,164 |  |  | $ | 69,280  |  |  | $ | 22,714 | 
|Working capital                  |  |                          | 108,120 |      |  |      | 45,771 |      |  |      | 51,300 |  |  |   | 82,172  |  |  |   | 38,758 | 
|Total assets                     |  |                          | 139,016 |      |  |      | 70,550 |      |  |      | 78,474 |  |  |   | 111,757 |  |  |   | 45,174 | 
|Total stockholders equity       |  |                          | 112,128 |      |  |      | 50,167 |      |  |      | 60,411 |  |  |   | 94,766  |  |  |   | 40,608 | 






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | 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 in this Report. This Report contains
forward-looking statements that involve risks and uncertainties.
Our actual results could differ materially from those in such
forward-looking statements as a result of many factors,
including those discussed in Risk Factors,
Business and elsewhere in this Report.

Overview

We are a leading provider of mobile resource
management (MRM) services, a rapidly growing category of
business productivity solutions that enable the effective
management of mobile resources. Our MRM services allow customers
to improve productivity by enabling the effective management of
their mobile workers and assets, and their goods and services.
In addition, our services are designed to allow customers to
increase the utility of their mobile resources and decrease
costs of operations by facilitating business processes, such as
event confirmation, signature verification, forms processing,
project management and timekeeping while their workers are in
the field. Our services also provide location, reporting,
dispatch, messaging, and other management services and are
designed to be easy to implement and use. Our customers can
manage their mobile workers in several ways, including by
logging onto our website, having their data emailed to them,
receiving their data directly into their existing software
applications, using any wireline or wireless telephone to access
our speech-to-text voice portal or requesting information from
our data centers using application programming interfaces.

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,now
called GeoManager, a service that leverages existing
infrastructure, including the Global Positioning System,
wireless networks and the Internet along with integrated
transaction processing and software applications, to enable
companies to efficiently manage their

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mobile resources. Subsequent to the introduction
of FleetASAP,we have introduced a number of additional
services, including GeoManager Pocket Edition, @Road Pathway,
RoadREPORT, RoadFORCE and ConnectBusiness, and have added
features to our services.


Our services provide current and historical data
relating to a customers mobile resources in a variety of
formats, including activity reports, maps and completed business
forms. We provide these formats in a standard configuration, and
customers can configure certain elements and views themselves to
help achieve compliance with their internal business rules.
Customers can choose to submit queries to our database to create
reports and views on demand or they can have reports delivered
on a pre-scheduled basis. Customers can also download reports to
manipulate and store data as desired. Mobile resource data is
typically stored by us for 14 days, unless the customer
purchases our extended data storage services.

Our services are enabled by the deployment of a
device, which we call a platform, to each of the customers
mobile resources. We call each mobile resource with a platform a
subscriber. Our services operate with three
independent platforms. First, a mobile worker can use our
proprietary hardware device embedded with software that
integrates a GPS receiver with a wireless modem. Second, a
mobile worker can use our proprietary hardware device embedded
with software and an integrated GPS receiver and which is
tethered by cable to a wireless telephone. Each of these
proprietary hardware devices is called an Internet Location
Manager. The Internet Location Manager is installed in a mobile
workers vehicle. Installation in any type of vehicle
typically takes less than an hour, and is completed by our
subcontracted installation agents. Third, a mobile worker can
use a location- or wireless application protocol-enabled mobile
telephone installed with our software application.

These platforms send and receive a variety of
information from time to time and on demand. Such data include
location, velocity, time and operational diagnostics. These data
are transmitted to our data centers using wireless networks and
the Internet. If a wireless connection is not available, then
the platform will store up to five days of captured data and
seek to transmit the data when a wireless connection is
available.

Since 1998, we have derived substantially all of
our revenues from the sale of our services and the associated
product hardware. Our service revenue is comprised of monthly
fees. Our customers can contract to receive our services for
terms of one, two or three years and can purchase enhanced
service features for additional fees. As more customers use our
services, the impact on our service revenue is compounded. Our
product revenue consists of sales of the Internet Location
Manager, Internet Data Terminal and ruggedized personal digital
assistant.

To date, we have not sold our services outside
the United States and Canada; however, we intend to expand our
service offerings to additional countries in the future. We do
not expect that revenues from international sales will be
material in 2004. In 2003, one customer, Verizon Communications,
represented 17% of total revenues. No other customers comprised
10% or more of total revenues in 2003. In 2002 and 2001, no
single customer or group of related customers comprised 10% or
more of total revenues.

Since inception we have invested substantially in
research and development, marketing, the building of our sales
channels and our overall infrastructure. We anticipate that such
investments may increase in the future. We incurred losses in
each quarter from inception through the quarter ending
June 30, 2003, and may incur net losses in the future. At
December 31, 2003, we had an accumulated deficit of
$116.2 million. Our limited operating history makes it
difficult to forecast future operating results. We may not
sustain or increase profitability on a quarterly or annual basis.

In the third quarter of 2002, AT&T Wireless
announced that it expects to cease operating its Cellular
Digital Packet Data network by June 30, 2004. On
March 11, 2004, we received a letter dated March 9,
2004 from AT&T Wireless that states that AT&T Wireless
will continue to operate its Cellular Digital Packet Data
network for certain valuable partners, including
@Road, until at least September 30, 2004. The letter
further states that this extension of Cellular Digital Packet
Data network availability extends across all AT&T Wireless
geographic locations. We are currently in discussions with
AT&T Wireless and other wireless carriers to minimize any
disruption of the provision of our services to

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subscribers. On or about the actual termination
date of AT&T Wireless Cellular Digital Packet Data
network and where possible, certain affected subscribers would
be transferred to alternate Cellular Digital Packet Data
networks without a change to the hardware platform then used by
those subscribers. However, we currently estimate that as of
September 30, 2004 we will have approximately 8,000
subscribers in their initial contract periods that are then
using AT&T Wireless Cellular Digital Packet Data
network and that would need to use an alternate wireless
protocol to continue to use our services. To use an alternate
wireless protocol, existing hardware platforms would have to be
replaced for these subscribers. We do not expect to realize a
loss on the sale of these replacement hardware platforms. While
there is no assurance, we do not expect that the termination of
AT&T Wireless Cellular Digital Packet Data network
will have a material adverse impact on our financial results.


In its Report on Form 10-K filed with the
SEC on March 27, 2003, Verizon Wireless disclosed that it
expects to cease operating its Cellular Digital Packet Data
network at the end of 2005. We estimate that as of
December 31, 2005 we will have approximately 5,000
subscribers in their initial contract periods that are then
using Verizon Wireless Cellular Digital Packet Data
network and that would need to use an alternate wireless
protocol to continue to use our services. To use an alternate
wireless protocol, existing hardware platforms would have to be
replaced for these subscribers. We do not expect to realize a
loss on the sale of these replacement hardware platforms. While
there is no assurance, we do not expect that the termination of
Verizon Wireless Cellular Digital Packet Data network will
have a material adverse impact on our financial results.

Critical Accounting Policies

Financial Reporting Release No. 60, which
was released by the SEC in January 2002, requires all companies
to include a discussion of critical accounting policies or
methods used in the preparation of financial statements.
Included in Note 1 of the Notes to the Consolidated
Financial Statements, included in this Report, is a summary of
the significant accounting policies and methods we use. The
following is a discussion of the more significant of these
policies and methods.



| |                    
| | -------------------
| | Revenue Recognition

In accordance with applicable accounting
standards, including SOP No. 97-2, Software Revenue
Recognition, as amended, we recognize revenue when earned.
Specifically, we recognize revenue when the price is fixed and
determinable, upon persuasive evidence of an agreement, when we
have fulfilled our obligations under any such agreement and upon
a determination that collection is probable.

Through December 31, 2003, our services have
been available only by using our platform or a location- or
wireless application protocol-enabled mobile telephone.
Accordingly, through December 31, 2003, service revenue,
which is comprised of monthly fees, was recognized ratably over
the minimum service contract period, which commenced
(a) upon installation where customers have installed our
platform in mobile worker vehicles or (b) upon the creation
of subscription licenses and a customer account on our website
where customers have elected to use our services with a
location-enabled mobile telephone.

Our product revenue primarily consists of sales
of the Internet Location Manager, Internet Data Terminal and
ruggedized personal digital assistant. We defer product revenue
at installation and recognize it ratably over the minimum
service contract period, which generally is two or three years.
Renewal rates for our services are not considered priced at a
bargain in comparison to the initial sales price of an
associated product (as described in Staff Accounting Bulletin
No. 104, Revenue Recognition). Changes to the
pricing of our products and services in the future could result
in the recognition of product revenue over periods that extend
beyond the minimum service contract period.

Historically, the selling prices of our products
have often been at or below our costs. Product costs not in
excess of related product revenue are deferred at the time of
shipment and amortized ratably over the minimum service contract
period. Where the selling prices of our products are below our
costs, we expense the difference at the time of shipment of the
related products.

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| |                                     
| | ------------------------------------
| | Allowances for Doubtful
    Accounts

Historically, we have had a significant number of
small- to medium-sized companies utilizing our services. These
customers are involved in diverse businesses. Our payment
arrangements with customers generally provide 30-day payment
terms. At the time that customers contract with us for our
services, we assess their creditworthiness.

During economic downturns, certain of our
customers have had difficulty with their cash flows. The nature
of our relationship with customers is inherently long-term and
we have extended and may extend payment terms on an exception
basis. We regularly review our customers ability to
satisfy their payment obligations and provide an allowance for
doubtful accounts for all specific receivables that we believe
are not collectible. When these conditions arise, we suspend
recognition of revenue until collection becomes probable or cash
is collected. Beyond these specific customer accounts, we record
an allowance based on the size and age of all receivable
balances against which we have not established a specific
allowance. These allowances are based on our experience in
collecting such accounts.

Although we believe that we can make reliable
estimates for doubtful accounts, the size and diversity of our
customer base, as well as overall economic conditions, may
affect our ability to accurately estimate revenue and bad debt
expense. Actual results may differ from those estimates.

Results of Operations for the Years Ending
December 31, 2003, 2002, and 2001

|                                                                    |                               |                          |        |        |  |      |        |        |  |   |        |        | 
|------------------------------------------------------------------- | ----------------------------- | ------------------------ | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                                                    |                               |                         
|                                                                    |                               | Years Ended December 31,
|                                                                    |                               |                         
|                                                                    |                               | 2003                     |        | 2002   |  | 2001
|                                                                    |                               |                          |        |        |  |     
|                                                                    |                               |                         
|                                                                    |                               | (In thousands)          
|Service revenue                                                     |                               | $                        | 49,561 |        |  | $    | 33,678 |        |  | $ | 20,188 |       
|Cost of service revenue (excluding amortization
    included below) |                               |                          | 15,711 |        |  |      | 13,544 |        |  |   | 12,690 |       
|Intangibles amortization                                            |                               |                          | 455    |        |  |      | 1,670  |        |  |   | 1,656  |       
|Stock compensation  cost of service
    revenue                    |                               |                          | 10     |        |  |      | 23     |        |  |   | 82     |       
|                                                                    |                               |                          |        |        |  |      |        |        |  |   |        |       
|                                                                    | Total cost of service revenue |                          |        | 16,176 |  |      |        | 15,237 |  |   |        | 14,428 | 
|                                                                    |                               |                          |        |        |  |      |        |        |  |   |        |       
|Service gross margin                                                |                               | $                        | 33,385 |        |  | $    | 18,441 |        |  | $ | 5,760  |       
|Service gross margin percentage                                     |                               |                          | 67     | %      |  |      | 55     | %      |  |   | 29     | %     



| |                
| | ---------------
| | Service Revenue

Service revenue increased to $49.6 million
in 2003 from $33.7 million and $20.2 million in 2002
and 2001, respectively, as a direct result of the growth in our
installed base of subscribers to our services. The number of
subscribers using our services totaled approximately 125,000,
90,000 and 66,000 at December 31, 2003, 2002 and 2001,
respectively. In addition to subscriber growth, our service
revenue is affected by a number of factors, including the rate
at which service features or add-ons are adopted and pricing
associated with the size and term of customer contracts. Given
the fixed nature of our arrangements with our customers and
ratable revenue recognition, the impact on revenues of changes
in current prices for products and services is tempered because
revenues from new pricing are layered on top of revenues from
existing subscribers. Price changes did not have a material
impact on service revenue between periods. Achieved average
monthly revenue per subscriber was approximately $38.19 for
2003, up from $36.02 in 2002. Of the increase, approximately
$0.76 was related to adoption of additional service capabilities
and features by subscribers. The remaining increase of
approximately $1.41 was the result of price changes associated
with the types of services and size and term of contracts for
new subscribers as those new revenues were layered on top of
revenues from existing subscribers. Achieved average monthly
revenue per subscriber was approximately $36.02 for 2002, up
from $32.60 for 2001. Of the increase, approximately $0.17 was
related to adoption of additional service capabilities and
features by subscribers. The remaining increase of approximately
$3.25 was the result of price changes associated with the types
of services and size and term of contracts for new subscribers
as those new revenues were layered on top of revenues from
existing subscribers.

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| |                                                                 
| | ----------------------------------------------------------------
| | Cost of Service Revenue (excluding
    intangibles amortization)

Cost of service revenue consists of expenses
related to the delivery and support of our services. Direct
expenses are comprised of costs associated with connecting our
services to wireless networks and the Internet and royalty and
subscription fees paid to others. Support and other delivery
costs include such expenses as employee salaries and related
expenses and depreciation of our data centers. Cost of service
revenue increased to $15.7 million in 2003 from
$13.5 million in 2002. The increase in cost of service
revenue resulted from an increase of $2.0 million in direct
service delivery expenses, consistent with growth in our
installed base of subscribers, and an increase in
employee-related costs of $744,000, associated with a higher
average headcount during the year. These costs were offset by a
reduction in depreciation expense of $637,000 as certain assets
became fully depreciated. Cost of service revenue increased to
$13.5 million in 2002 from $12.7 million in 2001. The
increase resulted from an increase in direct service delivery
expenses of $1.4 million, consistent with growth in our
installed base of subscribers, offset by reductions in
personnel, service infrastructure and travel costs of $275,000,
$121,000 and $118,000, respectively. Direct expenses generally
increase at a rate proportional to the growth in subscribers
using our services. Personnel costs and depreciation expense
generally increase at a rate slower than the growth rate of
subscribers to our services. As a result, we expect that the
growth in service revenue will be greater than the growth in
cost of service revenue as we continue to add subscribers.



| |                     
| | --------------------
| | Service Gross Margin

During the year ended December 31, 2003
service gross margins improved to 67% from 55% and 29% in 2002
and 2001, respectively, as a result of increased service revenue
associated with growth in our installed base of subscribers and
a smaller increase in the total cost of service revenue,
including intangibles amortization. The average number of
subscribers to our services increased 39% in 2003 over 2002 and
51% in 2002 over 2001. Cost of service revenue includes fixed
indirect expenses and, therefore, generally increases at rates
slower than the growth in our installed base of subscribers.

|                                                 |                               |                          |        |        |  |      |        |        |  |   |        |        | 
|------------------------------------------------ | ----------------------------- | ------------------------ | ------ | ------ |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                                 |                               |                         
|                                                 |                               | Years Ended December 31,
|                                                 |                               |                         
|                                                 |                               | 2003                     |        | 2002   |  | 2001
|                                                 |                               |                          |        |        |  |     
|                                                 |                               |                         
|                                                 |                               | (In thousands)          
|Product revenue                                  |                               | $                        | 13,802 |        |  | $    | 10,742 |        |  | $ | 7,262  |       
|                                                 |                               |                          |        |        |  |      |        |        |  |   |        |       
|Cost of product revenue                          |                               |                          | 19,770 |        |  |      | 16,946 |        |  |   | 13,523 |       
|Stock compensation  cost of product
    revenue |                               |                          | 25     |        |  |      | 96     |        |  |   | 194    |       
|                                                 |                               |                          |        |        |  |      |        |        |  |   |        |       
|                                                 | Total cost of product revenue |                          |        | 19,795 |  |      |        | 17,042 |  |   |        | 13,717 | 
|                                                 |                               |                          |        |        |  |      |        |        |  |   |        |       
|Product gross deficit                            |                               |                          | (5,993 | )      |  |      | (6,300 | )      |  |   | (6,455 | )     
|Product gross deficit percentage                 |                               |                          | (43    | )%     |  |      | (59    | )%     |  |   | (89    | )%    



| |                
| | ---------------
| | Product Revenue

Product revenue increased 28%, 48% and 169% over
each prior year in 2003, 2002 and 2001, respectively. This
growth is consistent with the growth in our installed base of
subscribers. As new subscribers are added to our installed base,
the amount of both deferred revenue and deferred costs
recognized ratably over the minimum service contract period
increases. Upon completion of the initial term of a
customers contract, recognition of both deferred product
revenue and product cost is complete. Customers may then renew
their agreements for future services without the purchase of new
hardware and, therefore, we anticipate that product revenue will
grow more slowly than service revenue.



| |                        
| | -----------------------
| | Cost of Product Revenue

Cost of product revenue consists of the cost of
the Internet Location Manager, Internet Data Terminal,
ruggedized personal digital assistant and related parts; costs
associated with the final assembly, test, provisioning, delivery
and installation of our products; and other costs such as
provisions for inventory and repair costs. Product costs not in
excess of related product revenue are deferred at the time of

20



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##### Table of Contents



shipment and amortized ratably over the minimum
service contract period. Where the selling prices of our
products are below our costs, we expense the difference at the
time of shipment of the related products. Generally, we expect
the selling prices of our products to be approximately equal to
or exceed the product costs in future periods. The impact of
selling products below our cost on future cash flow from
operations is expected to be minimal. As new subscribers are
added to our installed base, the amount of both deferred revenue
and deferred costs recognized ratably increases. Upon completion
of the initial term of a customers contract, recognition
of both deferred product revenue and product cost is complete.
Customers may then renew their agreements for future services
without the purchase of new hardware and, therefore, we
anticipate that product revenue and cost of product revenue will
grow more slowly than service revenue.


Cost of product revenue rose to
$19.8 million in 2003 from $16.9 million in 2002. The
increase in cost of product revenue resulted from an increase in
product repair and refurbishment costs of $731,000, an increase
in deferred product cost recognized during the period of
$728,000, increases in employee-related costs of $355,000, and
an increase in provisions for inventory valuation of $311,000.
Cost of product revenue rose to $16.9 million in 2002 from
$13.5 million in 2001. The increase in cost of product
revenue resulted from a $2.6 million increase in deferred
product cost recognized during the period, consistent with the
growth in subscribers using our services, and increased
employee-related expenses of $677,000.



| |                      
| | ---------------------
| | Product gross deficit

Product gross deficit improved to (43)% in 2003
from (59)% in 2002 and from (89)% in 2001. Increases in product
revenue from deferrals associated with the growth in our
installed base of subscribers were greater than the related
increases in product costs from deferrals. Other costs,
including repair expenses, provisions for inventory valuation
and the loss recognized on the excess of product cost over
product revenue also increased between 2003, 2002 and 2001.
While we expect the selling prices of our products to be
approximately equal to or to exceed product costs in future
periods, after considering other costs, such as those described
in Cost of product revenue above, we do not expect
to generate significant product gross margin during the next
twelve months.



| |                             
| | ----------------------------
| | Sales and Marketing Expenses

Sales and marketing expenses consist of employee
salaries, sales commissions, and marketing and promotional
expenses. Sales and marketing expenses increased to
$11.4 million in 2003 from 10.7 million in 2002. The
increase was the result of higher employee-related costs of
$1.1 million, associated with higher average headcount
during 2003, offset by decreases in depreciation of $221,000 as
certain assets became fully depreciated and decreases in travel
expenses of $204,000. Sales and marketing headcount decreased to
86 at December 31, 2003 from 88 at December 31, 2002.
We expect that sales and marketing expenses will increase as we
expand our sales and marketing efforts, including, but not
limited to, modest headcount growth and promotional expenses
related to new product and service offerings.

Sales and marketing expenses decreased to
$10.7 million in 2002 from $17.3 million in 2001. The
reduction in expenses was attributed to lower average headcount
and the associated decline in compensation expense of
$3.0 million and reductions in promotional expenses of
$2.8 million, consistent with our cost control initiatives
across the company. Sales and marketing headcount increased to
88 at December 31, 2002 from 85 at December 31, 2001.



| |                                      
| | -------------------------------------
| | 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
decreased to $5.4 million in 2003 from $5.9 million in
2002. The reduction in expense is attributed to decreases in
depreciation of $257,000 as certain assets became fully
depreciated during the year, decreases in indirect allocated
costs of $158,000 and decreases in employee-related costs of
$113,000, associated with a decrease in the average headcount.
Headcount decreased to 56 at December 31,

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2003 from 59 at December 31, 2002. We
anticipate that research and development expenses will increase
in future periods as we develop and introduce new products and
services, including modest increases in consultant and
employee-related expenses associated with those introductions.


Research and development expenses decreased to
$5.9 million in 2002 from $7.6 million in 2001, as a
result of reductions in employee-related expenses of
$1.3 million and consultant expenses of $404,000. Headcount
decreased to 59 at December 31, 2002 from 72 at
December 31, 2001. After development of our initial service
and product offerings was completed, certain personnel and
consultants related to those initial introductions were no
longer required. As a result, research and development expenses
declined in connection with those headcount reductions.

In accordance with American Institute of
Certified Public Accountants Statement of Position 98-1, or
SOP 98-1, Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use, we capitalize
qualifying computer software costs that are incurred during the
application development stage and amortize them over the
softwares estimated useful life. During 2003, 2002 and
2001, no research and development costs were capitalized in
accordance with SOP 98-1.



| |                                        
| | ---------------------------------------
| | General and Administrative
    Expenses

General and administrative expenses consist of
employee salaries and related expenses for executive and
administrative costs, accounting and professional fees,
recruiting costs and provisions for doubtful accounts. General
and administrative expenses increased to $9.2 million in
2003 from $8.6 million in 2002. The increase resulted from
higher employee-related expenses of $433,000 related to growth
in average headcount during the year, increases in corporate and
other tax expenses of $362,000, increases in professional fees
of $242,000 and a rise in general operating expenses such as
insurance and bank fees of $173,000. These increases were
consistent with our anticipated expenditures associated with our
growth and were offset in part by a decrease in the provision
for doubtful accounts of $588,000. We expect that general and
administrative expenses will increase in future periods,
including modest increases in employee-related expenses and
professional fees associated with our operation as a public
company.

General and administrative expenses decreased to
$8.6 million in 2002 from $12.7 million in 2001. The
decrease in 2002 was the result of reductions in provision for
doubtful accounts of $2.0 million, decreases in
employee-related expenses of $732,000 attributed to lower
average headcount in 2002, reduced consultant charges of
$431,000, and reduced legal fees of $346,000. These reductions,
with the exception of the provisions for doubtful accounts, were
consistent with our cost control initiatives across the company.

Provisions for doubtful accounts decreased to
$(127,000) in 2003 from $461,000 in 2002 and from
$2.4 million in 2001, due to improved collection activity
and receivables management. We expect that provisions for
doubtful accounts may increase because of the non-recurring
nature of favorable adjustments that occurred during 2002 and
2003; however, we do not expect that these provisions will
return to the levels reported in 2001.

General and administrative headcount totaled 53,
47 and 47 at December 31, 2003, 2002, and 2001,
respectively.



| |                      
| | ---------------------
| | Restructuring Charges

During 2001, in response to a general downturn in
the economy, we undertook a formal plan to lower our cost
structure. We completed a reorganization to more effectively
develop, market and sell mobile resource management products and
services. This effort resulted in the total number of employees
being reduced by approximately 11 percent. Restructuring
expenses, which consist of severance and related costs, were
$218,000 in 2001.

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| |                         
| | ------------------------
| | Intangibles Amortization

Intangibles amortization relates to the
intangible assets purchased from Differential Corrections, Inc.
in April 2000 and ConnectBusiness.com, Inc. in September 2002.
The costs are being amortized over an estimated useful life of
three and two years, respectively.



| |                           
| | --------------------------
| | Stock Compensation Expense

Deferred stock compensation related to the
granting of stock options to employees and consultants was
approximately $4,000 at December 31, 2003 and $491,000 as
of December 31, 2002. Stock compensation expense decreased
to $467,000 in 2003 from $1.1 million in 2002 and
$3.0 million in 2001, and primarily represents the
amortization of deferred stock compensation over the vesting
periods of related options granted in 2000 and 1999.



| |                             
| | ----------------------------
| | Investment Impairment Charge

At December 31, 2001, we held approximately
148,000 shares of preferred stock in Cellport Systems,
Inc., with a book value of $1,035,000 which represented
approximately seven percent ownership in Cellport Systems, Inc.
We accounted for this investment using the cost method. During
2002, we determined that the investment had experienced a
decline in value that was other than temporary. Accordingly, we
expensed $1,035,000 in 2002.



| |                                   
| | ----------------------------------
| | Interest Income (Expense),
    Net

Net interest income (expense) is composed
primarily of interest earned on cash, cash equivalents and
short-term investments, partially offset by interest expense
related to the financing of directors and officers insurance
costs. Net interest income (expense) decreased to
approximately $675,000 in 2003 from $949,000 and
$2.7 million in 2002 and 2001, respectively. The decreases
resulted from lower balances available for investment and lower
interest rates.



| |                   
| | ------------------
| | Other Expense, Net

In 2003, 2002 and 2001 other expense consisted
primarily of immaterial net foreign currency exchange losses
related to our subsidiary in India.



| |             
| | ------------
| | Income Taxes

Through 2002, we incurred net losses for federal
and state tax purposes and except for only minimum state income
and franchise taxes have not recognized any tax provision or
benefit. The 2003 net income was offset by the utilization
of prior years net operating losses; therefore no income
tax expense was provided.



| |                  
| | -----------------
| | Net Income (Loss)

Net income (loss) increased to $1.7 million
in 2003 from $(14.2) million in 2002. Total revenues
increased to $63.4 million in 2003 from $44.4 million
in 2002, while operating costs increased at a slower rate to
$62.4 million in 2003 from $58.5 million in 2002.
Specifically, cost of revenue, sales and marketing expenses, and
general and administrative expenses grew modestly, while
amortization of intangibles and research and development
expenses declined. Generally, we expect that our revenues will
grow at a faster rate than our operating expenses.

Net loss decreased to $14.2 million in 2002
from $38.6 million in 2001, the result of increases in
revenue accompanied by decreases in operating costs.
Specifically, cost of revenue grew more slowly than total
revenues while stock compensation, sales and marketing expenses,
research and development expenses and general and administrative
expenses all declined.

23



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| |                
| | ---------------
| | Changing Prices

We conduct operations primarily within the
U.S. where inflation during 2003, 2002 and 2001 has been
low and has not materially impacted our operating results.
Foreign currency exchange losses resulting from transactions
with our wholly-owned subsidiary in India, which began business
in 1999, were not material during 2003, 2002 and 2001 and were
expensed as incurred.

Quarterly Results of Operations

The following table presents certain unaudited
consolidated statement of operations data for our eight most
recent fiscal quarters. The information for each of these
quarters is unaudited and has been prepared on the same basis as
our audited consolidated financial statements appearing
elsewhere in this Report. In the opinion of our management, all
necessary adjustments, consisting only of normal recurring
adjustments, have been included to present fairly the unaudited
quarterly results when read in conjunction with our consolidated
financial statements and related notes included elsewhere or
incorporated by reference in this Report. We believe that
results of operations for interim periods should not be relied
upon as any indication of the results to be expected or achieved
in any future period or any fiscal year as a whole. Certain
quarterly amounts presented below for 2002 have been
reclassified to conform with the 2003 presentation.

|                                                |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |       |        | 
|----------------------------------------------- | ---------------------------- | --------------------------------- | ----- | ------------- | ------ | -------- | ----- | --------- | ------ | ------------ | ---- | ------------- | ------ | -------- | ------ | --------- | ------ | - | ------ | ----- | ------ | - | ------ | ----- | ------ | - | ------ | ------ | ------ | - | ------ | ----- | ------ | 
|                                                |                              |                                  
|                                                |                              | Quarters Ended                   
|                                                |                              |                                  
|                                                |                              | December 31,                      |       | September 30, |        | June 30, |       | March 31, |        | December 31, |      | September 30, |        | June 30, |        | March 31,
|                                                |                              | 2003                              |       | 2003          |        | 2003     |       | 2003      |        | 2002         |      | 2002          |        | 2002     |        | 2002     
|                                                |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |          
|                                                |                              |                                  
|                                                |                              | (In thousands)                   
|Consolidated Statements of Operations
    Data: |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |      
|Revenues:                                       |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |      
|                                                | Services                     |                                   | $     | 13,710        |        |          | $     | 13,113    |        |              | $    | 12,135        |        |          | $      | 10,603    |        |   | $      | 9,813 |        |   | $      | 8,657 |        |   | $      | 7,957  |        |   | $      | 7,251 |       
|                                                | Product                      |                                   |       | 3,527         |        |          |       | 3,503     |        |              |      | 3,634         |        |          |        | 3,138     |        |   |        | 3,133 |        |   |        | 2,659 |        |   |        | 2,501  |        |   |        | 2,449 |       
|                                                |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |      
|                                                |                              | Total revenues                    |       |               | 17,237 |          |       |           | 16,616 |              |      |               | 15,769 |          |        |           | 13,741 |   |        |       | 12,946 |   |        |       | 11,316 |   |        |        | 10,458 |   |        |       | 9,700  | 
|                                                |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |      
|Costs and expenses:                             |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |      
|                                                | Cost of service revenue      |                                   |       | 3,871         |        |          |       | 3,782     |        |              |      | 4,266         |        |          |        | 3,792     |        |   |        | 3,570 |        |   |        | 3,440 |        |   |        | 3,325  |        |   |        | 3,209 |       
|                                                | Cost of product revenue      |                                   |       | 4,692         |        |          |       | 5,249     |        |              |      | 5,192         |        |          |        | 4,637     |        |   |        | 4,931 |        |   |        | 4,265 |        |   |        | 3,796  |        |   |        | 3,954 |       
|                                                | Intangibles amortization     |                                   |       | 10            |        |          |       | 11        |        |              |      | 10            |        |          |        | 424       |        |   |        | 424   |        |   |        | 418   |        |   |        | 414    |        |   |        | 414   |       
|                                                | Sales and marketing          |                                   |       | 3,064         |        |          |       | 2,907     |        |              |      | 2,840         |        |          |        | 2,597     |        |   |        | 2,711 |        |   |        | 2,433 |        |   |        | 2,604  |        |   |        | 2,998 |       
|                                                | Research and development     |                                   |       | 1,360         |        |          |       | 1,386     |        |              |      | 1,297         |        |          |        | 1,336     |        |   |        | 1,340 |        |   |        | 1,476 |        |   |        | 1,476  |        |   |        | 1,586 |       
|                                                | General and administrative   |                                   |       | 2,355         |        |          |       | 2,189     |        |              |      | 2,440         |        |          |        | 2,218     |        |   |        | 1,911 |        |   |        | 1,873 |        |   |        | 1,899  |        |   |        | 2,933 |       
|                                                | Stock compensation           |                                   |       | 26            |        |          |       | 154       |        |              |      | 95            |        |          |        | 192       |        |   |        | 248   |        |   |        | 380   |        |   |        | 376    |        |   |        | 61    |       
|                                                |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |      
|                                                |                              | Total costs and expenses          |       |               | 15,378 |          |       |           | 15,678 |              |      |               | 16,140 |          |        |           | 15,196 |   |        |       | 15,135 |   |        |       | 14,285 |   |        |        | 13,890 |   |        |       | 15,155 | 
|                                                |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |      
|Income (loss) from operations                   |                              |                                   | 1,859 |               |        |          | 938   |           |        |              | (371 | )             |        |          | (1,455 | )         |        |   | (2,189 | )     |        |   | (2,969 | )     |        |   | (3,432 | )      |        |   | (5,455 | )    
|                                                |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |      
|Other income (expense), net:                    |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |      
|                                                | Interest income              |                                   |       | 239           |        |          |       | 151       |        |              |      | 142           |        |          |        | 152       |        |   |        | 297   |        |   |        | 203   |        |   |        | 219    |        |   |        | 245   |       
|                                                | Interest expense             |                                   |       | (1            | )      |          |       |          |        |              |      | (5            | )      |          |        | (4        | )      |   |        | (4    | )      |   |        | (1    | )      |   |        | (4     | )      |   |        | (6    | )     
|                                                | Investment impairment charge |                                   |       |              |        |          |       |          |        |              |      |              |        |          |        |          |        |   |        |      |        |   |        |      |        |   |        | (1,035 | )      |   |        |      |       
|                                                | Other income (expense), net  |                                   |       |              |        |          |       | 6         |        |              |      | 7             |        |          |        | 4         |        |   |        | (121  | )      |   |        | 4     |        |   |        | (5     | )      |   |        | 6     |       
|                                                |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |      
|                                                |                              | Total other income (expense), net |       |               | 238    |          |       |           | 157    |              |      |               | 144    |          |        |           | 152    |   |        |       | 172    |   |        |       | 206    |   |        |        | (815   | ) |        |       | 245    | 
|                                                |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |      
|Net income (loss)                               |                              | $                                 | 2,097 |               |        | $        | 1,095 |           |        | $            | (227 | )             |        | $        | (1,303 | )         |        | $ | (2,017 | )     |        | $ | (2,763 | )     |        | $ | (4,247 | )      |        | $ | (5,210 | )    
|                                                |                              |                                   |       |               |        |          |       |           |        |              |      |               |        |          |        |           |        |   |        |       |        |   |        |       |        |   |        |        |        |   |        |      

Liquidity and Capital Resources

As of December 31, 2003, we had
$103.7 million of cash and cash equivalents,
$2.0 million of short-term investments and working capital
of $108.1 million. We currently have a $100,000 revolving
line of

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credit facility against which there were no
borrowings as of December 31, 2003. The line of credit
expires December 31, 2004.


Net cash provided by (used in) operating
activities was $9.7 million, $(6.6) million and
$(34.6) million in 2003, 2002 and 2001, respectively. In
2003, this improvement in cash provided by operating activities
was primarily attributed to net income, net of non-cash expenses
and charges (depreciation and amortization, provision for
inventory valuation, amortization of deferred stock
compensation, loss on disposal of property and equipment and
provisions for doubtful accounts). Cash provided by operating
activities during 2003 also increased in comparison to the prior
year due to increases in deferred revenue, accounts payable,
accrued and other liabilities, and reductions in inventory,
offset by increases in deferred product costs. In 2002, cash
used for operating activities increased in comparison to the
prior year due to increases in accounts receivable and deferred
product costs, offset by an increase in deferred revenue. In
2001, cash used for operating activities was also attributable
to increases in accounts receivable, inventory, and deferred
product costs, offset in part by increases in deferred revenue.
Improvements in accounts receivable collections as compared to
increases in customer billings also contributed to increased
operating cash flows in both 2003 and 2002. As of
December 31, 2003, approximately $1.2 million of our
accounts receivable were over 90 days old. We believe we
have adequately provided allowances as of December 31, 2003
for any such amounts that may ultimately become uncollectible.

Net cash used in investing activities was
$1.5 million in 2003 and resulted from the purchase of
property and equipment and other assets of $1.8 million,
offset by the net cash proceeds from purchases and sales of
short-term investments of $241,000. Net cash used in investing
activities was $881,000 in 2002 and resulted from purchases of
$755,000 of property and equipment and other assets of $101,000.
Net cash provided by investing activities in 2001 was
$4.2 million, primarily resulting from maturities of
short-term investments of $5.2 million and offset in part
by purchases of approximately $763,000 of property and equipment.

Net cash provided by financing activities was
$59.8 million in 2003 and was attributed to proceeds from
the issuance of our stock and payments on stockholders notes
receivable. Net cash provided by financing activities was
$2.9 million and $1.3 million in 2002 and 2001,
respectively. Cash provided by financing activities in 2002 and
2001 was primarily attributable to proceeds from the issuance of
our stock.

Our capital expenditures in 2003 increased to
$1.5 million from $755,000 in 2002 and $763,000 in 2001.
Our capital expenditures have been consistent with our
anticipated needs in operations, infrastructure and personnel.
We have no material commitments for capital expenditures,
although we anticipate increases in capital expenditures and
lease commitments with our expected growth in operations and
infrastructure over the next twelve months. We also may
establish additional operations as we expand globally.

The following table represents our future
commitments under minimum annual lease payments and
non-cancellable purchase commitments as of December 31,
2003 (in thousands):

|                                               |  |       |       |           |  |           |       |           |  |           |     |  |  |   |   |  |  |   |   | 
|---------------------------------------------- |  | ----- | ----- | --------- |  | --------- | ----- | --------- |  | --------- | --- |  |  | - | - |  |  | - | - | 
|                                               |  |       |       | Less than |  |           |       |           |  | More than
|                                               |  | Total |       | 1 Year    |  | 1-3 Years |       | 3-5 Years |  | 5 Years  
|                                               |  |       |       |           |  |           |       |           |  |          
|Non-cancellable operating lease commitments    |  | $     | 2,262 |           |  | $         | 1,489 |           |  | $         | 773 |  |  | $ |  |  |  | $ |  | 
|Non-cancellable inventory purchase commitments |  |       | 2,968 |           |  |           | 2,968 |           |  |           |    |  |  |   |  |  |  |   |  | 
|                                               |  |       |       |           |  |           |       |           |  |           |     |  |  |   |   |  |  |   |   | 
|                                               |  | $     | 5,230 |           |  | $         | 4,457 |           |  | $         | 773 |  |  | $ |  |  |  | $ |  | 
|                                               |  |       |       |           |  |           |       |           |  |           |     |  |  |   |   |  |  |   |   | 

Other long-term liabilities in our consolidated
balance sheet as of December 31, 2003 include a deferred
rent liability of $33,000. The payments related to this amount
are included in non-cancellable operating lease commitments
above.

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##### Table of Contents



We believe that our current cash and cash
equivalents will be sufficient to meet our anticipated cash
needs for operating expenses, working capital and capital
expenditures for at least the next eighteen 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 our
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.

Impact of Recently Issued Accounting
Standards

The Financial Accounting Standards Board
(FASB) issued Interpretation 46 (FIN 46),
Consolidation of Variable Interest Entitiesin January
2003, and a revised interpretation of FIN 46
(FIN 46-R). FIN 46 requires certain
variable interest entities (VIEs) to be consolidated
by the primary beneficiary of the entity if the equity investors
in the entity do not have the characteristics of a controlling
financial interest or sufficient equity at risk for the entity
to finance its activities without additional subordinated
financial support from other parties. The provisions of
FIN 46 are effective immediately for all arrangements
entered into after January 31, 2003. We have not invested
in any entities that we believe are variable interest entities
for which we are the primary beneficiary. The adoption of FIN-46
had no impact, and we do not expect the adoption of
FIN 46-R to have an impact, on our financial position,
results of operations or cash flows.

In May 2003, the FASB issued
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity,which requires that certain financial instruments be
presented as liabilities that were previously presented as
equity or as temporary equity. Such instruments include
mandatory redeemable preferred and common stock, and certain
options and warrants. SFAS No. 150 is effective for
financial instruments entered into or modified after
May 31, 2003 and was effective at the beginning of the
first interim period beginning after June 15, 2003. In
November 2003, the FASB issued FASB Staff Position
(FSP) No. 150-3, Effective Date, Disclosures, and
Transition for Mandatorily Redeemable Financial Instruments of
Certain Nonpublic Entities and Certain Mandatorily Redeemable
Noncontrolling Interests under SFAS No. 150,which
defers the effective date for various provisions of
SFAS No. 150. We believe that we have properly
classified and measured in our balance sheets and disclosed in
our consolidated financial statements certain financial
instruments with characteristics of both liabilities and equity.

Risk Factors

In addition to the other information contained in
this Report, the following factors should be carefully
considered in evaluating our business and prospects. The risks
and uncertainties described below are intended to be ones that
are specific to us or our industry and that we deem material,
but they are not the only ones that we face.

If, pursuant to its announcement, AT&T
Wireless ceases to operate its Cellular Digital Packet Data
network in 2004, we may lose subscribers and our revenues could
decrease.

Beginning March 31, 2003, AT&T Wireless
discontinued new sales of Cellular Digital Packet Data service.
AT&T Wireless has also indicated that it expects to cease
operating its Cellular Digital Packet Data network by
September 30, 2004. If the termination of AT&T
Wireless Cellular Digital Packet Data network disrupts our
ability to deliver services to certain of our customers and we
are unable to transition those customers to other networks, our
revenues would decrease and customer satisfaction would suffer.

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If, pursuant to its announcement, Verizon
Wireless ceases to operate its Cellular Digital Packet Data
network by the end of 2005, we may lose subscribers and our
revenues could decrease.

Verizon Wireless has indicated that it expects to
cease operating its Cellular Digital Packet Data network by the
end of 2005. If the termination of Verizon Wireless
Cellular Digital Packet Data network disrupts our ability to
deliver services to certain of our customers and we are unable
to transition those customers to other networks, our revenues
would decrease and customer satisfaction would suffer.

If wireless carriers on which we depend for
services decide to abandon or do not continue to expand their
wireless networks, we may lose subscribers and our revenues
could decrease.

Currently our services function on General Packet
Radio Services networks, Code Division Multiple Access 1xRTT
networks, Integrated Digital Enhanced Networks and Cellular
Digital Packet Data networks. These protocols cover only
portions of the United States and Canada, and may not gain
widespread market acceptance. If wireless carriers abandon these
protocols in favor of other types of wireless technology, we may
not be able to provide services to our customers. In addition,
if wireless carriers do not expand their coverage areas, we will
be unable to meet the needs of customers who may wish to use
some of our services outside the current coverage area.

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:



| |   |                                                                                                                                                   
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in the market for mobile resource
    management services;                                                                                
|
| |  | delays in market acceptance or implementation by
    customers of our services;                                                                   
|
| |  | changes in length of sales cycles of or demand by
    our customers for existing and additional services;                                         
|
| |  | changes in the productivity of our distribution
    channels;                                                                                     
|
| |  | 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;                                                                                                        
|
| |  | general economic and political conditions;                                                                                                        
|
| |  | wireless networks, positioning systems and
    Internet infrastructure owned and controlled by others; and                                        
|
| |  | any need to migrate to new wireless networks,
    which could cause our products to be incompatible with new
    wireless networks or out of date.

Our expense levels are based, in part, on our
expectation of future revenues. Additionally, a substantial
portion of our expenses is relatively fixed. 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.

27



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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. 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 revenues may
decrease, we may not be able to recover our costs and our
competitive position may be harmed.

If our customers do not have access to
sufficient capacity on reliable wireless networks, we may be
unable to deliver our services, we may lose subscribers, 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, for example due to tunnels blocking the transmission
of data to and from wireless modems used with our services.
These effects could make our services less reliable and less
useful, and customer satisfaction could suffer.

If one or more of the agreements we have with
wireless carriers is terminated and as a result we are unable to
offer services to our customers within a carriers coverage
area, we may be unable to deliver our services, we may lose
subscribers, and our revenues could decrease.

Our existing agreements with wireless carriers
may in some cases be terminated immediately upon the occurrence
of certain conditions or with prior written notice. In
connection with ceasing operation of their Cellular Digital
Packet Data networks, AT&T Wireless and/or Verizon Wireless
may seek to terminate or not to renew their contracts for
Cellular Digital Packet Data service with us. If one or more of
our wireless carriers decides to terminate or not to 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 services
to our customers in that coverage area.

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,
which could reduce our revenues.

We are continually evaluating 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 objectives and other business concerns;                                    
|
| |  | failure to integrate efficiently businesses or
    technologies acquired in the future with our pre-existing
    business or technologies;
|
| |  | 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.

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We face competition from internal development
teams of potential customers and from existing and potential
competitors, which could limit our ability to acquire
subscribers and 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 evaluate our services and those of our competitors
primarily on the basis of the functionality, ease of use,
quality, price, geographic coverage of services and corporate
financial strength. As the demand by businesses for mobile
resource management services increases, the quality,
functionality and breadth of competing products and services
will likely improve and new competitors will likely enter our
market. In addition, the widespread adoption of industry
standards may make it easier for new market entrants or existing
competitors to improve their existing services, to offer some or
all of the services we offer or may offer in the future, or to
offer new services that we do not offer. We also do not know to
what extent network infrastructure developers and wireless
network operators will seek to provide integrated wireless
communications, Global Positioning System, software
applications, transaction processing and Internet solutions,
including access devices developed internally or through captive
suppliers. If we are unable to compete successfully, it may harm
our business, which in turn may limit our ability to acquire or
retain subscribers, resulting in a loss of market share and
revenues. We face competition from a number of different
business productivity solutions, including:



| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | solutions developed internally by our prospective
    customers information technology staffs;                                                              
|
| |  | discrete means of communication with mobile
    workers, such as pagers, two-way radios, handheld devices and
    wireless telephones;                       
|
| |  | solutions targeted at specific vertical markets,
    such as services offered by Qualcomm that monitor assets in the
    long-haul transportation sector; and
|
| |  | solutions offered by smaller market entrants.                                                                                                                

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.

We have a history of losses, have only
recently become profitable and may not sustain or increase
profitability in the future.

We have only recently become profitable and may
not sustain or increase profitability in the future. As of
December 31, 2003, we had an accumulated deficit of
$116.2 million. To sustain profitability we will need to
generate significant revenues to offset our cost of revenues and
our 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 increase in the
future. To facilitate the sale of our services, we have sold and
may sell our hardware below our costs. As a result, we have
experienced, and expect to continue to experience, negative
gross margins on the sale of our hardware. Changes such as
increases in our pricing for products and services or the
pricing of competing products and services may harm our ability
to increase sales of our products and services to new and
existing customers. If we are not able to expand our customer
base and increase our revenue from new and existing customers,
we may be unprofitable.

Due to our limited operating history, it is
difficult to predict future operating results or our stock
price.

An evaluation of our business is 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

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continue to achieve profitability or continue to
grow. We face a number of risks encountered by companies in the
mobile resource management market, including:




| |   |                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our need to respond to technological change and
    introduce reliable and robust products and services that meet
    the demanding needs of customers;
|
| |  | the uncertainty of market acceptance of our
    services;                                                                                              
|
| |  | our need to expand and manage the expansion of
    our marketing, sales and support organizations, as well as our
    distribution channels;           
|
| |  | our ability to anticipate and respond to market
    competition;                                                                                       
|
| |  | wireless networks, positioning systems and
    Internet infrastructure owned and controlled by others; and                                             
|
| |  | any need to migrate to new wireless networks,
    which could result in our products being incompatible with new
    wireless networks or out of date. 

We may not successfully address these risks, and
our business strategy may not be successful.

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 could
decrease, which would result in a decrease in our revenues. Our
development and expansion have 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.

We depend on a limited number of third parties
to manufacture and supply critical components for our products
and services.

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 or
manufacturers. If these parties do not perform their
obligations, or if they cease to manufacture and supply
components critical for our products and services, we may be
unable to find other suppliers or operate our business. We
cannot be sure that alternative sources for key components used
in our products, such as 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. Our sole suppliers and
manufacturers of key components include:



| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Orient Semiconductor Electronics, our sole
    manufacturer of Internet Location Managers;                                                                            
|
| |  | Motorola, our sole supplier of wireless modems
    operable on Integrated Digital Enhanced Networks and of
    microcontrollers for our Internet Location Manager; and
|
| |  | Taiwan Semiconductor Manufacturing Company, our
    sole manufacturer of our GPS digital receiver chips.                                                              

If our agreements with these or other suppliers
and manufacturers are terminated or expire, if we are unable to
obtain sufficient quantities of components critical for our
products and services, if the quality of these components is
inadequate, or if the terms for supply of these components
become commercially unreasonable, our search for additional or
alternate suppliers and manufacturers could result in
significant delays, added expense and our inability to maintain
or expand our subscriber base. Any of these events could require
us to take unforeseen actions or devote additional resources to
provide our products and services and could harm our ability to
compete effectively.

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A disruption of our services due to accidental
or intentional security breaches may harm our reputation, cause
a loss of revenues and increase our expenses.

Unauthorized access, computer viruses and other
accidental or intentional actions could disrupt our information
systems or communications networks. We expect to incur
significant costs to protect against the threat of security
breaches and to alleviate problems caused by any breaches.
Currently, the wireless transmission of our customers
proprietary information 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.

System or network failures could reduce our
sales, increase costs or result in liability claims.

Any disruption to our services, information
systems or communications networks or those of third parties
could result in the inability of our customers to receive our
services for an indeterminate period of time. Our operations
depend upon our ability to maintain and protect our computer
systems at our co-located data centers in Ashburn, Virginia and
Redwood City, California, which is on or near earthquake fault
zones. Our services may not function properly if our systems
fail, or if there is an interruption in the supply of power, or
if there is an earthquake, fire, flood or other natural
disaster, or an act of war or terrorism. Within each of our data
centers, we have fully redundant systems; however, in the event
of a system or network failure, the process of shifting access
to customer data from one data center to the other would be
performed manually, and could result in a further disruption to
our services. 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 depend on Global Positioning System
technology owned and controlled by others. If we do not have
continued access to GPS technology or satellites, we will be
unable to deliver our services and revenues will
decrease.

Our services rely on signals from Global
Positioning System satellites built and maintained by the
U.S. Department of Defense. GPS 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 to function and
customer satisfaction would suffer.

In addition, the U.S. government could
decide not to continue to operate and maintain GPS 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 and international political unrest,
U.S. government agencies may become increasingly involved
in the administration or the regulation of the use of GPS
signals in the future. If factors such as the foregoing affect
the Global Positioning System, for example by affecting the
availability, quality, accuracy or pricing of GPS technology,
our business will suffer.

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 MRM market. Products and services that
address this market 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 or dissatisfaction of customers. This would damage
our reputation and result in lost revenues, diverted development
resources, and increased service and warranty costs.

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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.

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 United States and in foreign
countries. In the event that a third party breaches the
confidentiality provisions or other obligations in one or more
of our agreements 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 agreements, 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 United States. Therefore, the measures we take to protect
our proprietary rights may not be adequate.

Claims that we infringe third-party
proprietary rights could result in significant expenses or
restrictions on our ability to provide our services.

Third parties may claim that our current or
future products or services infringe their proprietary rights or
assert other claims against us. As the number of entrants into
our market increases, the possibility of an intellectual
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, if at all. Any
of these results would increase our expenses and could decrease
the functionality of our services, which would make our services
less attractive to our current or potential customers. We have
agreed in some of our agreements, and may agree in the future,
to indemnify other parties for any expenses or liabilities
resulting from claimed infringements of the proprietary rights
of third parties.

From time to time, we are or may be subject to
litigation that could result in significant costs to
us.

From time to time, we are or may be subject to
litigation in the ordinary course of business relating to any
number or type of claims, including claims for damages related
to errors and malfunctions of our services or hardware platforms
or their deployment. A securities, product liability or other
claim could seriously harm our business because of the costs of
defending the lawsuit, diversion of employees time and
attention, and potential damage to our reputation. Some of our
agreements with our customers, suppliers and other third parties
contain provisions designed to limit exposure to potential
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. Although we carry
general liability and directors and officers insurance, our
insurance may not cover potential claims or may not be adequate
to cover all costs incurred in defense of potential claims or to
indemnify us for all liability that may be imposed.

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Our success depends on our ability to maintain
and expand our sales channels.

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, and we may not be able to attract and retain
sufficient new sales personnel to expand our operations. New
sales personnel require training and it takes time for them to
achieve full productivity, if at all. In addition, we believe
that our success is dependent on expansion of our indirect
distribution channels, including our relationships with wireless
carriers, independent sales agents and distribution partners. To
date, we have relationships with wireless carriers, independent
sales agents and a limited number of distribution partners.
These sales channel partners require training in selling our
products and services and it will take time for these partners
to achieve productivity, if at all. We may not be able to
establish relationships with additional distributors on a timely
basis, or at all. Our distributors, many of which are not
engaged with us on an exclusive basis, may not devote adequate
resources to promoting and selling our services.

We depend on recruiting and retaining
qualified personnel and our inability to do so may cause a loss
in sales, impair our ability to effectively manage our
operations or impair our ability to develop and support services
and products.

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 sales and other
personnel with expertise in wireless communications, Global
Positioning Systems, hosted software applications, transaction
processing and the Internet. Competitors and others have in the
past, and may attempt in the future, to recruit our employees
and encourage our former employees to solicit business from our
customers. 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.

Government regulations and standards could
subject us to increased regulation, increase our costs of
operations or reduce our opportunities to earn
revenue.

In addition to regulations applicable to
businesses in general, we may also be subject to direct
regulation by U.S. governmental agencies, including the
Federal Communications Commission and Department of Defense.
These regulations may impose licensing requirements, privacy
safeguards relating to certain subscriber information, or safety
standards, for example 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 GPS
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.

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 United States. 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

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these countries, our suppliers and manufacturers
may request a price increase at the end of the contract period.


Geopolitical, economic and military
conditions, including terrorist attacks and other acts of war,
may materially and adversely affect the markets on which our
common stock trades, the markets in which we operate, our
operations and our profitability.

Terrorist attacks and other acts of war, and any
response to them, may lead to armed hostilities and such
developments would likely cause instability in financial
markets. Armed hostilities and terrorism may directly impact our
facilities, personnel and operations that are located in the
United States and India, as well as those of our clients.
Furthermore, severe terrorist attacks or acts of war may result
in temporary halts of commercial activity in the affected
regions, and may result in reduced demand for our products.
These developments could have a material adverse effect on our
business and the trading price of our common stock.

Our stock price is volatile, which may cause
you to lose money and could lead to costly litigation against us
that could divert our resources.

Over the past several years, stock markets have
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 nature and growth rate of our business and
the mobile resource management market, the market price of our
common stock may rise and fall in response to:



| |   |                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------
| |  | quarterly variations in operating results;                                                                 
|
| |  | failure to achieve operating results anticipated
    by securities analysts and investors;                 
|
| |  | changes in estimates of our financial performance
    or changes in recommendations by securities analysts;
|
| |  | announcements of technological or competitive
    developments;                                            
|
| |  | the gain or loss of a significant customer or
    order;                                                   
|
| |  | disposition of shares of our common stock held by
    large investors; and                                 
|
| |  | acquisitions or strategic alliances by us or our
    competitors.                                          

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.

As of February 27, 2004, a limited number
of stockholders own approximately 49% of our stock and may act,
or prevent certain types of corporate actions, to the detriment
of other stockholders.

Our directors, officers and greater than 5%
stockholders own, as of February 27, 2004, approximately
49% of our outstanding common stock. 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. This
concentration could also have the effect of delaying or
preventing a change in control that could otherwise be
beneficial to our stockholders.

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Our certificate of incorporation and bylaws
and state law contain provisions that could discourage a
takeover.

We have adopted 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;                                                                
|
| |  | 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.






|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures
    About Market Risk

Foreign Currency Exchange

We transact business primarily in
U.S. dollars. We are subject, however, to adverse movements
in foreign currency exchange rates in those countries where we
conduct business. To date, the effect of fluctuations in foreign
currency exchange rates on expenses has not been material.
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. 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; Sierra Wireless, in Canada, provides the modem for some
versions of the Internet Location Manager; Taiwan Semiconductor
Manufacturing Company, in Taiwan, manufactures our Global
Positioning System digital receiver chips; and Micronet, in
Israel, supplies our Internet Data Terminal. Should there be a
sustained increase in average exchange rates for the local
currency in any of the foregoing 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 percent increase in average exchange rates could
increase our product costs by approximately 2 percent.

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 subsidiary in
India.






|        |                                                
|------- | -----------------------------------------------
|Item 8. | Financial Statements and Supplementary
    Data

See Part IV, Item 15 of this Report.






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

Not applicable.






|         |                        
|-------- | -----------------------
|Item 9A. | Controls and Procedures

Within 90 days prior to the date of this
Report, we carried out an evaluation, under the supervision and
with the participation of our management, including our
principal executive officer and principal financial officer, of
the effectiveness of our disclosure controls and procedures as
defined in Rules 13a-14(c) and 15d-14(c) of the Securities
Exchange Act of 1934 (the Exchange Act). Based upon
that evaluation, our principal executive officer and principal
financial officer have concluded that our disclosure controls
and procedures are effective. Our disclosure controls are
designed to provide a

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reasonable level of assurance of reaching our
desired disclosure control objectives and are effective in doing
so.


There were no significant changes in our internal
controls or in other factors that could significantly affect
these internal controls subsequent to the date of their
evaluation.




PART III

Information required by Part III is omitted
from this Report because we will file a definitive proxy
statement within 120 days after the end of our fiscal year
pursuant to Regulation 14A (the Proxy
Statement) for our 2004 annual meeting of stockholders and
the information included in the Proxy Statement is incorporated
herein by reference.




PART IV






|         |                                                                    
|-------- | -------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules and
    Reports on Form 8-K

(a) The following documents are filed as
part of this Report:



| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | 1. Index to Consolidated Financial Statements                                                                                             
|
| | The following Consolidated Financial Statements
    of At Road, Inc. and its subsidiary are filed as part of this
    Report on Form 10-K:

|                                                                                                                                       |  |      |    | 
|-------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -- | 
|                                                                                                                                       |  | Page
|                                                                                                                                       |  |     
|Independent Auditors Report                                                                                                           |  |      | 39 | 
|Consolidated Balance Sheets 
    December 31, 2003 and 2002                                                                           |  |      | 40 | 
|Consolidated Statements of Operations 
    Years ended December 31, 2003, 2002 and 2001                                               |  |      | 41 | 
|Consolidated Statements of Stockholders
    Equity and Comprehensive Income (Loss)  Years ended
    December 31, 2003, 2002 and 2001 |  |      | 42 | 
|Consolidated Statements of Cash Flows 
    Years ended December 31, 2003, 2002 and 2001                                               |  |      | 43 | 
|Notes to the Consolidated Financial Statements                                                                                         |  |      | 44 | 



| |                                                    
| | ---------------------------------------------------
| | 2. Consolidated Financial Statement Schedules      
|
| | Schedule II  Valuation and
    Qualifying Accounts

Schedules not listed above have been omitted
because the matter or conditions are not present or the
information required to be set forth therein is included in the
Consolidated Financial Statements hereto.



| |                                                                         
| | ------------------------------------------------------------------------
| | 3. Exhibits (numbered in accordance with
    Item 601 of Regulation S-K)

(b) Reports on Form 8-K

The Company filed the following reports on
Form 8-K during the three months ended December 31,
2003:



| |   |                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A current report on Form 8-K was filed on
    October 2, 2003 pursuant to Item 7 (Financial
    Statements, Pro FormaFinancial Information and Exhibits)
    and Item 9 (Regulation FD Disclosure). 
|
| |  | A current report on Form 8-K was filed on
    October 15, 2003 pursuant to Item 7 (Financial
    Statements, Pro FormaFinancial Information and Exhibits)
    and Item 9 (Regulation FD Disclosure).

36



---



##### Table of Contents





| |   |                                                                                                                                                                                                                           
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | A current report on Form 8-K was filed on
    October 23, 2003 pursuant to Item 7 (Financial
    Statements, Pro FormaFinancial Information and Exhibits)
    and Item 12 (Results of Operations and Financial Condition).
|
| |  | A current report on Form 8-K was filed on
    October 24, 2003 pursuant to Item 7 (Financial
    Statements, Pro FormaFinancial Information and Exhibits)
    and Item 9 (Regulation FD Disclosure).                      

(c) Exhibits

| |           |  |  |                                                                                                                                                                                                                                                                          
| | --------- |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.4****   |  |  | Amended and Restated Bylaws of the Registrant, as
    amended                                                                                                                                                                                                            
| | 3.5*      |  |  | Amended and Restated Certificate of Incorporation
    of the Registrant                                                                                                                                                                                                  
| | 4.1*      |  |  | Specimen Stock Certificate                                                                                                                                                                                                                                               
| | 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                                                                                                                                                                                 
| | 10.7*    |  |  | 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                                                                
| | 10.11*    |  |  | Agreement between the Registrant and Elnet
    Technologies Ltd. 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                                                                                                                                                                                                                                        
| | 10.19*    |  |  | 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                                                                                                                                                              
| | 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
| | 10.23*   |  |  | Strategic Agreement between the Registrant and
    Hitachi Software Engineering Co., Ltd. dated July 21, 2000                                                                                                                                                            
| | 10.24*    |  |  | Lease Agreement between the Registrant and
    ProLogis Limited Partnership-I dated August 3, 2000                                                                                                                                                                       
| | 10.25**   |  |  | First Amendment to Lease Agreement between the
    Registrant and ProLogis Limited Partnership-I dated
    March 8, 2001                                                                                                                                                 
| | 10.26**   |  |  | Loan Modification Agreement between the
    Registrant and Silicon Valley Bank dated March 21, 2001                                                                                                                                                                      
| | 10.27*** |  |  | Cellular Digital Packet Data Reseller Agreement
    between the Registrant and TELUS Mobility dated January 19,
    2001                                                                                                                                                 
| | 10.28*** |  |  | Co-Marketing Agreement between the Registrant and
    Nextel Partners Operating Corp. dated March 14, 2001                                                                                                                                                               

37



---



##### Table of Contents



| |            |  |  |                                                                                                                                                                                                                                             
| | ---------- |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.29***  |  |  | Co-Marketing Agreement between the Registrant and
    Nextel Financing Company dated December 15, 2000                                                                                                                                      
| | 10.30***  |  |  | Cellular Digital Packet Data Reseller Agreement
    between the Registrant and Ameritech Mobile Communications LLC
    dated January 10, 2002                                                                                               
| | 10.31***  |  |  | Service Agreement between the Registrant and
    ALLTEL Communications Inc. dated May 17, 2001                                                                                                                                              
| | 10.32***  |  |  | Integrator Agreement between the Registrant and
    Symbol Technologies, Inc. dated July 31, 2001, as amended
    by Amendment to Agreement with Integrator between the Registrant
    and Symbol Technologies, Inc. dated December 28, 2001
| | 10.33***   |  |  | Loan Modification Agreements between the
    Registrant and Silicon Valley Bank dated July 31, 2001,
    September 30, 2001 and November 5, 2001                                                                                            
| | 10.34***   |  |  | Co-Marketing Agreement between the Registrant and
    Southern Communications Services, Inc. dated March 4, 2002                                                                                                                            
| | 10.35****  |  |  | Agreement between the Registrant and Elnet
    Technologies Ltd. dated November 17, 2002                                                                                                                                                    
| | 10.36****  |  |  | Loan Modification Agreement between the
    Registrant and Silicon Valley Bank dated December 24, 2002                                                                                                                                      
| | 10.37**** |  |  | Reseller Agreement between the Registrant and
    AT&T Wireless dated February 24, 2003                                                                                                                                                     
| | 10.38      |  |  | Loan Modification Agreement between the
    Registrant and Silicon Valley Bank dated December 30, 2003                                                                                                                                      
| | 10.39      |  |  | First Amendment to Sublease between the
    Registrant and Athena Semiconductor, Inc. dated March 14,
    2003                                                                                                                              
| | 10.40      |  |  | Second Amendment to Lease Agreement between the
    Registrant and ProLogis Limited Partnership-I dated
    December 31, 2003                                                                                                               
| | 10.41      |  |  | Agreement between the Registrant and Elnet
    Technologies Ltd. dated December 10, 2003                                                                                                                                                    
| | 21.1*      |  |  | List of Subsidiaries                                                                                                                                                                                                                        
| | 23.1       |  |  | Independent Auditors Consent                                                                                                                                                                                                               
| | 24.1       |  |  | Power of Attorney (see page 60)                                                                                                                                                                                                             
| | 31.1       |  |  | Rule 13a-14(a)/15d-14(a) Certification of
    Chief Executive Officer                                                                                                                                                                       
| | 31.2       |  |  | Rule 13a-14(a)/15d-14(a) Certification of
    Chief Financial Officer                                                                                                                                                                       
| | 32.1       |  |  | Certification pursuant to 18 U.S.C.
    Section 1350 of Chief Executive Officer                                                                                                                                                             
| | 32.2       |  |  | Certification pursuant to 18 U.S.C.
    Section 1350 of Chief Financial Officer                                                                                                                                                             



---



| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| | * | Incorporated by reference to our registration
    statement on Form S-1 (File No. 333-41372) initially
    filed with the SEC on July 13, 2000.



| |    |                                                                                               
| | -- | ----------------------------------------------------------------------------------------------
| | ** | Incorporated by reference to our Report on
    Form 10-K filed with the SEC on March 30, 2001.



| |     |                                                                                               
| | --- | ----------------------------------------------------------------------------------------------
| | *** | Incorporated by reference to our Report on
    Form 10-K filed with the SEC on March 28, 2002.



|     |                                                                                                 
|---- | ------------------------------------------------------------------------------------------------
|**** | Incorporated by reference to our Report on
    Form 10-K/ A filed with the SEC on July 29, 2003.



| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Certain information in this Exhibit has been
    omitted and filed separately with the SEC. Confidential
    treatment has been requested or granted with respect to the
    omitted portions.

38



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##### Table of Contents






INDEPENDENT AUDITORS REPORT

To the Stockholders and Board of Directors of At
Road, Inc.:

We have audited the accompanying consolidated
balance sheets of At Road, Inc. and its subsidiary (the
Company) as of December 31, 2003 and 2002, and
the related consolidated statements of operations,
stockholders equity and comprehensive income (loss) and
cash flows for each of the three years in the period ended
December 31, 2003. Our audit also included the consolidated
financial statement schedule listed in Item 15.(a)2. These
financial statements and the financial statement schedule are
the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial
statements and the financial statement schedule based on our
audits.

We conducted our audits in accordance with
auditing standards generally accepted in the United States of
America. 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 At Road, Inc., and its subsidiary at
December 31, 2003 and 2002, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2003 in conformity with
accounting principles generally accepted in the United States of
America. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic 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 11, 2004


39



---



##### Table of Contents



AT ROAD, INC.



CONSOLIDATED BALANCE SHEETS


(In thousands, except share and par value
amounts)


|                                         |                                                                  |                                                                                                                                                  |          |         |         |  |          |        |         | 
|---------------------------------------- | ---------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------ | -------- | ------- | ------- |  | -------- | ------ | ------- | 
|                                         |                                                                  |                                                                                                                                                 
|                                         |                                                                  | December 31,                                                                                                                                    
|                                         |                                                                  |                                                                                                                                                 
|                                         |                                                                  | 2003                                                                                                                                             |          | 2002   
|                                         |                                                                  |                                                                                                                                                  |          |        
|ASSETS                                  
|Current assets:                          |                                                                  |                                                                                                                                                  |          |         |         |  |          |       
|                                         | Cash and cash equivalents                                        |                                                                                                                                                  | $        | 103,669 |         |  | $        | 35,659 |        
|                                         | Short-term investments                                           |                                                                                                                                                  |          | 2,000   |         |  |          |       |        
|                                         | Restricted short-term investments                                |                                                                                                                                                  |          |        |         |  |          | 2,241  |        
|                                         | Accounts receivable (net of allowances of $1,421
    and $1,900) |                                                                                                                                                  |          | 7,109   |         |  |          | 7,407  |        
|                                         | Inventories                                                      |                                                                                                                                                  |          | 2,425   |         |  |          | 5,399  |        
|                                         | Deferred product costs                                           |                                                                                                                                                  |          | 11,921  |         |  |          | 8,694  |        
|                                         | Prepaid expenses and other                                       |                                                                                                                                                  |          | 1,269   |         |  |          | 1,243  |        
|                                         |                                                                  |                                                                                                                                                  |          |         |         |  |          |       
|                                         |                                                                  | Total current assets                                                                                                                             |          |         | 128,393 |  |          |        | 60,643  | 
|Property and equipment, net              |                                                                  |                                                                                                                                                  | 2,298    |         |         |  | 2,500    |       
|Deferred product costs                   |                                                                  |                                                                                                                                                  | 7,270    |         |         |  | 6,166    |       
|Intangible assets, net                   |                                                                  |                                                                                                                                                  | 28       |         |         |  | 483      |       
|Other assets                             |                                                                  |                                                                                                                                                  | 1,027    |         |         |  | 758      |       
|                                         |                                                                  |                                                                                                                                                  |          |         |         |  |          |       
|                                         |                                                                  | Total assets                                                                                                                                     |          | $       | 139,016 |  |          | $      | 70,550  | 
|                                         |                                                                  |                                                                                                                                                  |          |         |         |  |          |       
|LIABILITIES AND STOCKHOLDERS
    EQUITY
|Current liabilities:                     |                                                                  |                                                                                                                                                  |          |         |         |  |          |       
|                                         | Accounts payable                                                 |                                                                                                                                                  | $        | 5,057   |         |  | $        | 3,408  |        
|                                         | Accrued liabilities                                              |                                                                                                                                                  |          | 5,465   |         |  |          | 3,870  |        
|                                         | Deferred revenue and customer deposits                           |                                                                                                                                                  |          | 9,751   |         |  |          | 7,594  |        
|                                         |                                                                  |                                                                                                                                                  |          |         |         |  |          |       
|                                         |                                                                  | Total current liabilities                                                                                                                        |          |         | 20,273  |  |          |        | 14,872  | 
|Deferred revenue                         |                                                                  |                                                                                                                                                  | 6,582    |         |         |  | 5,321    |       
|Other long-term liabilities              |                                                                  |                                                                                                                                                  | 33       |         |         |  | 190      |       
|                                         |                                                                  |                                                                                                                                                  |          |         |         |  |          |       
|                                         |                                                                  | Total liabilities                                                                                                                                |          |         | 26,888  |  |          |        | 20,383  | 
|                                        
|Commitments and contingencies (Note 9)   |                                                                  |                                                                                                                                                  |          |         |         |  |          |       
|Stockholders equity:                    |                                                                  |                                                                                                                                                  |          |         |         |  |          |       
|                                         |                                                                  | Preferred stock, $0.0001 par value,
    10,000,000 shares authorized, shares issued and
    outstanding: none in 2003 and 2002                   |          |         |        |  |          |        |        | 
|                                         |                                                                  | Common stock, $0.0001 par value,
    250,000,000 shares authorized, shares issued and
    outstanding: 53,700,445 in 2003 and 47,747,156 in 2002 |          |         | 228,441 |  |          |        | 170,610 | 
|Deferred stock compensation              |                                                                  |                                                                                                                                                  | (4       | )       |         |  | (491     | )     
|Notes receivable from stockholders       |                                                                  |                                                                                                                                                  | (87      | )       |         |  | (2,068   | )     
|Accumulated deficit                      |                                                                  |                                                                                                                                                  | (116,222 | )       |         |  | (117,884 | )     
|                                         |                                                                  |                                                                                                                                                  |          |         |         |  |          |       
|                                         |                                                                  | Total stockholders equity                                                                                                                       |          |         | 112,128 |  |          |        | 50,167  | 
|                                         |                                                                  |                                                                                                                                                  |          |         |         |  |          |       
|                                         |                                                                  | Total liabilities and stockholders equity                                                                                                       |          | $       | 139,016 |  |          | $      | 70,550  | 
|                                         |                                                                  |                                                                                                                                                  |          |         |         |  |          |       

See notes to consolidated financial statements.

40



---



##### Table of Contents



AT ROAD, INC.



CONSOLIDATED STATEMENTS OF
OPERATIONS


(In thousands, except per share
amounts)


|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |        |        | 
|----------------------------------------------------------- | ------------------------------------------------------------------------------- | --------------------------------- | ----- | ------ | ------ | ---- | ------- | ------ | ------ | - | ------- | ------ | ------ | 
|                                                            |                                                                                 |                                  
|                                                            |                                                                                 | Years Ended December 31,         
|                                                            |                                                                                 |                                  
|                                                            |                                                                                 | 2003                              |       | 2002   |        | 2001
|                                                            |                                                                                 |                                   |       |        |        |     
|Revenues:                                                   |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|                                                            | Service                                                                         |                                   | $     | 49,561 |        |      | $       | 33,678 |        |   | $       | 20,188 |       
|                                                            | Product                                                                         |                                   |       | 13,802 |        |      |         | 10,742 |        |   |         | 7,262  |       
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|                                                            |                                                                                 | Total revenues                    |       |        | 63,363 |      |         |        | 44,420 |   |         |        | 27,450 | 
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|Costs and expenses:                                         |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|                                                            | Cost of service revenue (excluding intangibles
    amortization included below) |                                   |       | 15,711 |        |      |         | 13,544 |        |   |         | 12,690 |       
|                                                            | Cost of product revenue                                                         |                                   |       | 19,770 |        |      |         | 16,946 |        |   |         | 13,523 |       
|                                                            | Intangibles amortization                                                        |                                   |       | 455    |        |      |         | 1,670  |        |   |         | 1,656  |       
|                                                            | Sales and marketing                                                             |                                   |       | 11,408 |        |      |         | 10,746 |        |   |         | 17,267 |       
|                                                            | Research and development                                                        |                                   |       | 5,379  |        |      |         | 5,878  |        |   |         | 7,608  |       
|                                                            | General and administrative                                                      |                                   |       | 9,202  |        |      |         | 8,616  |        |   |         | 12,733 |       
|                                                            | Restructuring charges                                                           |                                   |       |       |        |      |         |       |        |   |         | 218    |       
|                                                            | Stock compensation(*)                                                           |                                   |       | 467    |        |      |         | 1,065  |        |   |         | 3,041  |       
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|                                                            |                                                                                 | Total costs and expenses          |       |        | 62,392 |      |         |        | 58,465 |   |         |        | 68,736 | 
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|Income (loss) from operations                               |                                                                                 |                                   | 971   |        |        |      | (14,045 | )      |        |   | (41,286 | )     
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|Other income (expense), net:                                |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|                                                            | Interest income                                                                 |                                   |       | 686    |        |      |         | 964    |        |   |         | 2,662  |       
|                                                            | Interest expense                                                                |                                   |       | (11    | )      |      |         | (15    | )      |   |         | (9     | )     
|                                                            | Investment impairment charge                                                    |                                   |       |       |        |      |         | (1,035 | )      |   |         |       |       
|                                                            | Other income (expense), net                                                     |                                   |       | 16     |        |      |         | (106   | )      |   |         | (14    | )     
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|                                                            |                                                                                 | Total other income (expense), net |       |        | 691    |      |         |        | (192   | ) |         |        | 2,639  | 
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|Net income (loss)                                           |                                                                                 | $                                 | 1,662 |        |        | $    | (14,237 | )      |        | $ | (38,647 | )     
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|Net income (loss) loss per share:                           |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|                                                            | Basic                                                                           |                                   | $     | 0.03   |        |      | $       | (0.31  | )      |   | $       | (0.88  | )     
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|                                                            | Diluted                                                                         |                                   | $     | 0.03   |        |      | $       | (0.31  | )      |   | $       | (0.88  | )     
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|Shares used in calculating net income (loss) per
    share: |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|                                                            | Basic                                                                           |                                   |       | 49,978 |        |      |         | 46,134 |        |   |         | 43,892 |       
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|                                                            | Diluted                                                                         |                                   |       | 54,282 |        |      |         | 46,134 |        |   |         | 43,892 |       
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|(*) Stock compensation:                                     |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|                                                            | Cost of service revenue                                                         |                                   | $     | 10     |        |      | $       | 23     |        |   | $       | 82     |       
|                                                            | Cost of product revenue                                                         |                                   |       | 25     |        |      |         | 96     |        |   |         | 194    |       
|                                                            | Sales and marketing                                                             |                                   |       | 25     |        |      |         | 72     |        |   |         | (12    | )     
|                                                            | Research and development                                                        |                                   |       | 93     |        |      |         | 322    |        |   |         | 214    |       
|                                                            | General and administrative                                                      |                                   |       | 314    |        |      |         | 552    |        |   |         | 2,563  |       
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       
|                                                            |                                                                                 | Total                             |       | $      | 467    |      |         | $      | 1,065  |   |         | $      | 3,041  | 
|                                                            |                                                                                 |                                   |       |        |        |      |         |        |        |   |         |       

See notes to consolidated financial statements.

41



---



##### Table of Contents



AT ROAD, INC.



CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY AND COMPREHENSIVE INCOME (LOSS)


YEARS ENDED DECEMBER 31, 2003, 2002 AND
2001


(In thousands, except share and per share
amounts)


|                                                                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------------------- |  | ------------ | ---------- | -------- |  | ------------ | ------- | ------------- |  | ----------- | ------ | ------------- |  | ------------- | ------ | ------------- |  | - | --- | - |  | - | -------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                                 |  |              |            |          |  | Notes        |         | Accumulated   |  |             |        |               |  |              
|                                                                                 |  | Common Stock |            | Deferred |  | Receivable   |         | Other         |  |             |        |               |  | Total        
|                                                                                 |  |              |            | Stock    |  | from         |         | Comprehensive |  | Accumulated |        | Stockholders |  | Comprehensive
|                                                                                 |  | Shares       |            | Amount   |  | Compensation |         | Stockholders  |  | Loss        |        | Deficit       |  | Equity        |        | Income (loss)
|                                                                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |              
|BALANCES, January 1, 2001                                                        |  |              | 46,071,979 |          |  | $            | 171,208 |               |  | $           | (8,123 | )             |  | $             | (3,309 | )             |  | $ | (10 | ) |  | $ | (65,000  | ) |  | $ | 94,766  |   |  |   |         |  
|Net loss                                                                         |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   | (38,647  | ) |  |   | (38,647 | ) |  | $ | (38,647 | )
|Change in net unrealized income (loss) from
    short- term investments          |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   | 10  |   |  |   |          |   |  |   | 10      |   |  |   | 10      |  
|                                                                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |         |   |  |   |         |  
|Comprehensive loss                                                               |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |        |   |  | $ | (38,637 | )
|                                                                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |         |   |  |   |         |  
|Shares issued under employee stock purchase plan                                 |  |              | 367,579    |          |  |              | 672     |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   | 672     |   |  |   |         |  
|Exercise of stock options                                                        |  |              | 387,226    |          |  |              | 282     |               |  |             |        |               |  |               | (35    | )             |  |   |     |   |  |   |          |   |  |   | 247     |   |  |   |         |  
|Common stock issued for consulting services                                      |  |              | 2,250      |          |  |              | 4       |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   | 4       |   |  |   |         |  
|Collection of notes receivable from stockholders                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               | 318    |               |  |   |     |   |  |   |          |   |  |   | 318     |   |  |   |         |  
|Repurchase of common stock through cancellation
    of notes receivable          |  |              | (329,583   | )        |  |              | (278    | )             |  |             |        |               |  |               | 278    |               |  |   |     |   |  |   |          |   |  |   |        |   |  |   |         |  
|Deferred stock compensation                                                      |  |              |            |          |  |              | 85      |               |  |             | (85    | )             |  |               |        |               |  |   |     |   |  |   |          |   |  |   |        |   |  |   |         |  
|Reversal of deferred stock compensation due to
    employee terminations         |  |              |            |          |  |              | (2,825  | )             |  |             | 2,825  |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |        |   |  |   |         |  
|Amortization of deferred stock compensation                                      |  |              |            |          |  |              |         |               |  |             | 3,041  |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   | 3,041   |   |  |   |         |  
|                                                                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |         |   |  |   |         |  
|BALANCES, December 31, 2001                                                      |  |              | 46,499,451 |          |  | $            | 169,148 |               |  | $           | (2,342 | )             |  | $             | (2,748 | )             |  | $ |    |   |  | $ | (103,647 | ) |  | $ | 60,411  |   |  |   |         |  
|Net loss                                                                         |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   | (14,237  | ) |  |   | (14,237 | ) |  | $ | (14,237 | )
|                                                                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |         |   |  |   |         |  
|Shares issued under employee stock purchase plan                                 |  |              | 553,401    |          |  |              | 1,098   |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   | 1,098   |   |  |   |         |  
|Exercise of stock options                                                        |  |              | 788,054    |          |  |              | 1,276   |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   | 1,276   |   |  |   |         |  
|Collection of notes receivable from stockholders                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               | 554    |               |  |   |     |   |  |   |          |   |  |   | 554     |   |  |   |         |  
|Repurchase of common stock through cancellation
    of notes receivable          |  |              | (93,750    | )        |  |              | (126    | )             |  |             |        |               |  |               | 126    |               |  |   |     |   |  |   |          |   |  |   |        |   |  |   |         |  
|Deferred stock compensation                                                      |  |              |            |          |  |              | 15      |               |  |             | (15    | )             |  |               |        |               |  |   |     |   |  |   |          |   |  |   |        |   |  |   |         |  
|Reversal of deferred stock compensation due to
    employee terminations         |  |              |            |          |  |              | (801    | )             |  |             | 801    |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |        |   |  |   |         |  
|Amortization of deferred stock compensation                                      |  |              |            |          |  |              |         |               |  |             | 1,065  |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   | 1,065   |   |  |   |         |  
|                                                                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |         |   |  |   |         |  
|BALANCES, December 31, 2002                                                      |  |              | 47,747,156 |          |  | $            | 170,610 |               |  | $           | (491   | )             |  | $             | (2,068 | )             |  | $ |    |   |  | $ | (117,884 | ) |  | $ | 50,167  |   |  |   |         |  
|Net income                                                                       |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   | 1,662   |   |  | $ | 1,662   |  
|                                                                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |         |   |  |   |         |  
|Common stock issued through secondary public
    offering, net of issuance costs |  |              | 4,000,000  |          |  |              | 51,889  |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   | 51,889  |   |  |   |         |  
|Shares issued through employee stock purchase plan                               |  |              | 563,295    |          |  |              | 1,484   |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   | 1,484   |   |  |   |         |  
|Exercise of stock options                                                        |  |              | 1,389,994  |          |  |              | 4,478   |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   | 4,478   |   |  |   |         |  
|Collection of notes receivable from stockholders                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               | 1,981  |               |  |   |     |   |  |   |          |   |  |   | 1,981   |   |  |   |         |  
|Deferred stock compensation                                                      |  |              |            |          |  |              | 5       |               |  |             | (5     | )             |  |               |        |               |  |   |     |   |  |   |          |   |  |   |        |   |  |   |         |  
|Reversal of deferred stock compensation due to
    employee terminations         |  |              |            |          |  |              | (25     | )             |  |             | 25     |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |        |   |  |   |         |  
|Amortization of deferred stock compensation                                      |  |              |            |          |  |              |         |               |  |             | 467    |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   | 467     |   |  |   |         |  
|                                                                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |         |   |  |   |         |  
|Balances, December 31, 2003                                                      |  |              | 53,700,445 |          |  | $            | 228,441 |               |  | $           | (4     | )             |  | $             | (87    | )             |  | $ |    |   |  | $ | (116,222 | ) |  | $ | 112,128 |   |  |   |         |  
|                                                                                 |  |              |            |          |  |              |         |               |  |             |        |               |  |               |        |               |  |   |     |   |  |   |          |   |  |   |         |   |  |   |         |  

See notes to consolidated financial statements

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##### Table of Contents



AT ROAD, INC.



CONSOLIDATED STATEMENT OF CASH FLOWS


(In thousands)


|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |         |       |        |         |  
|-------------------------------------------------------- | ------------------------------------------------------------------------------------------------------ | ------------------------------------------- | ----------------------------- | ------------------------------------------------------- | ----- | ------ | ------ | ------- | ----- | ------ | ------- | ------- | ----- | ------ | ------- | -
|                                                         |                                                                                                        |                                            
|                                                         |                                                                                                        | Years Ended December 31,                   
|                                                         |                                                                                                        |                                            
|                                                         |                                                                                                        | 2003                                        |                               | 2002                                                    |       | 2001  
|                                                         |                                                                                                        |                                             |                               |                                                         |       |       
|Cash flows from operating activities:                    |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|                                                         | Net income (loss)                                                                                      |                                             | $                             | 1,662                                                   |       |        | $      | (14,237 | )     |        | $       | (38,647 | )    
|                                                         | Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities: |                                             |                               |                                                         |       |        |        |         |       |        |         |         |      
|                                                         |                                                                                                        | Depreciation and amortization               |                               |                                                         | 2,168 |        |        |         | 4,710 |        |         |         | 4,625 |       
|                                                         |                                                                                                        | Loss on disposal of property and equipment  |                               |                                                         | 7     |        |        |         | 115   |        |         |         | 2     |       
|                                                         |                                                                                                        | Investment impairment charge                |                               |                                                         |      |        |        |         | 1,035 |        |         |         |      |       
|                                                         |                                                                                                        | Amortization of deferred stock compensation |                               |                                                         | 467   |        |        |         | 1,065 |        |         |         | 3,041 |       
|                                                         |                                                                                                        | Provision for inventory valuation           |                               |                                                         | 1,375 |        |        |         | 1,063 |        |         |         | 735   |       
|                                                         |                                                                                                        | Provision for doubtful accounts             |                               |                                                         | (127  | )      |        |         | 461   |        |         |         | 2,442 |       
|                                                         |                                                                                                        | Common stock issued for consulting services |                               |                                                         |      |        |        |         |      |        |         |         | 4     |       
|                                                         |                                                                                                        | Change in assets and liabilities:           |                               |                                                         |       |        |        |         |       |        |         |         |       |       
|                                                         |                                                                                                        |                                             | Accounts receivable           |                                                         |       | 425    |        |         |       | (3,087 | )       |         |       | (2,656 | )      
|                                                         |                                                                                                        |                                             | Inventories                   |                                                         |       | 1,599  |        |         |       | 1,934  |         |         |       | (2,155 | )      
|                                                         |                                                                                                        |                                             | Deferred product costs        |                                                         |       | (4,331 | )      |         |       | (1,170 | )       |         |       | (3,386 | )      
|                                                         |                                                                                                        |                                             | Prepaid expenses and other    |                                                         |       | (26    | )      |         |       | (761   | )       |         |       | 330    |        
|                                                         |                                                                                                        |                                             | Accounts payable              |                                                         |       | 1,649  |        |         |       | 1,031  |         |         |       | (1,233 | )      
|                                                         |                                                                                                        |                                             | Accrued and other liabilities |                                                         |       | 1,438  |        |         |       | (365   | )       |         |       | (1,827 | )      
|                                                         |                                                                                                        |                                             | Deferred revenue              |                                                         |       | 3,418  |        |         |       | 1,654  |         |         |       | 4,132  |        
|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|                                                         |                                                                                                        |                                             |                               | Net cash provided by (used in) operating
    activities |       |        | 9,724  |         |       |        | (6,552  | )       |       |        | (34,593 | )
|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|Cash flows from investing activities:                    |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|                                                         | Purchase of property and equipment                                                                     |                                             |                               | (1,519                                                  | )     |        |        | (755    | )     |        |         | (763    | )    
|                                                         | Proceeds from sale of property and equipment                                                           |                                             |                               | 2                                                       |       |        |        |        |       |        |         |        |      
|                                                         | Purchases of short-term investments                                                                    |                                             |                               | (2,000                                                  | )     |        |        |        |       |        |         |        |      
|                                                         | Proceeds from maturities of short-term investments                                                     |                                             |                               | 2,241                                                   |       |        |        |        |       |        |         | 5,208   |      
|                                                         | Purchase of restricted short-term investments                                                          |                                             |                               |                                                        |       |        |        | (25     | )     |        |         | (81     | )    
|                                                         | Other assets                                                                                           |                                             |                               | (270                                                    | )     |        |        | (101    | )     |        |         | (124    | )    
|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|                                                         |                                                                                                        |                                             |                               | Net cash provided by (used in) investing
    activities |       |        | (1,546 | )       |       |        | (881    | )       |       |        | 4,240   |  
|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|Cash flows from financing activities:                    |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|                                                         | Proceeds from sale of common stock                                                                     |                                             |                               | 57,851                                                  |       |        |        | 2,374   |       |        |         | 919     |      
|                                                         | Proceeds from payments on note receivable issued
    to stockholders                                   |                                             |                               | 1,981                                                   |       |        |        | 554     |       |        |         | 318     |      
|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|Net cash provided by financing activities                |                                                                                                        |                                             | 59,832                        |                                                         |       |        | 2,928  |         |       |        | 1,237   |        
|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|Net increase (decrease) in cash and cash
    equivalents |                                                                                                        |                                             | 68,010                        |                                                         |       |        | (4,505 | )       |       |        | (29,116 | )      
|Cash and cash equivalents:                               |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|                                                         | Beginning of year                                                                                      |                                             |                               | 35,659                                                  |       |        |        | 40,164  |       |        |         | 69,280  |      
|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|                                                         | End of year                                                                                            |                                             | $                             | 103,669                                                 |       |        | $      | 35,659  |       |        | $       | 40,164  |      
|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|Supplemental disclosure of cash flow information:        |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|Non-cash investing and financing activities:             |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|                                                         | Issuance of common stock for notes receivable                                                          |                                             | $                             |                                                        |       |        | $      |        |       |        | $       | 35      |      
|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|                                                         | Deferred stock compensation                                                                            |                                             | $                             | 5                                                       |       |        | $      | 15      |       |        | $       | 85      |      
|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|                                                         | Reversal of deferred stock compensation                                                                |                                             | $                             | 25                                                      |       |        | $      | 801     |       |        | $       | 2,825   |      
|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        
|                                                         | Repurchase of common stock through cancellation
    of notes receivable                                |                                             | $                             |                                                        |       |        | $      | 126     |       |        | $       | 278     |      
|                                                         |                                                                                                        |                                             |                               |                                                         |       |        |        |         |       |        |         |        

See notes to consolidated financial statements.

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AT ROAD, INC.



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS


YEARS ENDED DECEMBER 31, 2003, 2002 AND
2001




|        |                                                                
|------- | ---------------------------------------------------------------
|Note 1. | Organization and Summary of Significant
    Accounting Policies



| |             
| | ------------
| | Organization

At Road, Inc. (the Company), was incorporated in
July 1994 in California and commenced operations on July 1,
1996. The Company is a leading provider of mobile resource
management services 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 upon consolidation.



| |          
| | ---------
| | Estimates

The preparation of financial statements in
conformity with accounting principles generally accepted in the
United States 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 a remaining maturity at purchase of
90 days or less to be cash equivalents.



| |                       
| | ----------------------
| | Short-Term Investments

Short-term investments represent highly liquid
debt instruments purchased with a remaining 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
separately 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. At December 31, 2003 short-term investments consist
of a certificate of deposit with a fair value which approximated
cost. The certificate of deposit has a maturity date of
June 12, 2004. There were no short-term investments at
December 31, 2002.

Restricted short-term investments consist of a
certificate of deposit with an original maturity of greater than
90 days, which was held as collateral under the
Companys line of credit agreement existing at that time
(see Note 6). The certificate of deposit was classified as
available-for-sale as the sale of such security may be required
prior to maturity. At December 31, 2002 the fair value of
the restricted short-term investment approximated cost. There
were no restricted short-term investments at December 31,
2003.



| |                             
| | ----------------------------
| | 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 products primarily to
companies in the United States. The Company does not require
collateral or other security to support

44



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

accounts receivable. To reduce credit risk,
management performs ongoing evaluations of its customers
financial condition.

At December 31, 2003, Verizon Communications
totaled 25% of outstanding accounts receivable. No other
customers comprised 10% or more of total outstanding accounts
receivable at December 31, 2003. At December 31, 2002,
no single customer or group of related customers comprised 10%
or more of total outstanding accounts receivable.



| |            
| | -----------
| | 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 estimated useful lives.



| |                            
| | ---------------------------
| | Intangible and Other Assets

Intangible assets, which represent purchased
technology, are stated at cost and amortized using the
straight-line method over an estimated useful lives of two to
three years.

At December 31, 2001, the Company held
approximately 148,000 shares of preferred stock in Cellport
Systems, Inc., with a book value of $1,035,000 and which
represented approximately seven percent ownership in Cellport
Systems, Inc. The Company accounts for this investment using the
cost method. During the quarter ended June 30, 2002, it was
determined that the investment had experienced a decline in
value that was other than temporary. Accordingly, $1,035,000 was
expensed in 2002 (see Note 4).



| |                  
| | -----------------
| | 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
carry forwards 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 delivery). Through December 31, 2003, its
services have been available only by using the Companys
platform or a location- or wireless application protocol-enabled
mobile telephone.

45



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Accordingly, service revenue, which is comprised
of monthly fees, is recognized ratably over the minimum service
contract period, which commences (a) upon installation
where customers have installed the platform in mobile worker
vehicles or (b) upon the creation of subscription licenses
and a customer account on the Companys website where
customers have elected to use services with a location-enabled
mobile telephone.

The Company does not sell location- or wireless
application protocol-enabled mobile telephones and, therefore,
recognizes no product or upfront revenues related to subscribers
utilizing such telephones. For products sold, 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 revenue) are also
deferred and amortized over such period. Customer payments
received prior to installation are recorded as customer deposits.



| |                  
| | -----------------
| | Advertising Costs

All advertising costs are expensed as incurred.
Advertising costs, which are included in sales and marketing
expenses, were approximately $301,000, $252,000 and $1,345,000
in 2003, 2002 and 2001, respectively. Advertising costs consist
primarily of ad campaigns, catalog brochures, direct mailings
and trade show expenses.



| |                                      
| | -------------------------------------
| | Research and Development
    Expenses

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
(SOP 98-1), Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. During
2003, 2002 and 2001 no research and development costs were
capitalized 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, non-monetary 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, and its related
interpretations. Accordingly, no compensation expense has been
recognized in the financial statements for employee stock
arrangements granted at fair market value.

The Company accounts for equity instruments
issued to non-employees in accordance with the provisions of
Statement of Financial Accounting Standards
(SFAS) No. 123, Accounting for Stock-Based
Compensation, which requires that the fair value of such
instruments be recognized as an expense over the period in which
the related services are received.

SFAS No. 123 requires the disclosure of pro
forma net income or loss had the Company adopted the fair value
method. Under SFAS No. 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 tradable, fully transferable
options without vesting restrictions, which significantly differ
from the Companys stock option awards. These models also
require subjective assumptions, including

46



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

expected time to exercise, which greatly affect
the calculated values. The Companys calculations are based
on a single option valuation approach, and forfeitures are
recognized as they occur. The Company used the following
weighted average assumptions:

|                              |                          |                          |   |       |   |      |   |       |   |  |   |       |  
|----------------------------- | ------------------------ | ------------------------ | - | ----- | - | ---- | - | ----- | - |  | - | ----- | -
|                              |                          |                         
|                              |                          | Years Ended December 31,
|                              |                          |                         
|                              |                          | 2003                     |   | 2002  |   | 2001
|                              |                          |                          |   |       |   |     
|Stock Option Plans:           |                          |                          |   |       |   |      |   |       |   |  |   |      
|                              | Risk free interest rate  |                          |   | 2.91  | % |      |   | 3.56  | % |  |   | 4.50  | %
|                              | Expected volatility      |                          |   | 114.0 | % |      |   | 124.0 | % |  |   | 143.0 | %
|                              | Expected life (in years) |                          |   | 5     |   |      |   | 5     |   |  |   | 5     |  
|                              | Expected dividend        |                          | $ | 0.00  |   |      | $ | 0.00  |   |  | $ | 0.00  |  
|                             
|Employee Stock Purchase Plan: |                          |                          |   |       |   |      |   |       |   |  |   |      
|                              | Risk free interest rate  |                          |   | 1.14  | % |      |   | 1.61  | % |  |   | 2.83  | %
|                              | Expected volatility      |                          |   | 92.0  | % |      |   | 124.0 | % |  |   | 143.0 | %
|                              | Expected life (in years) |                          |   | .5    |   |      |   | .5    |   |  |   | .5    |  
|                              | Expected dividend        |                          | $ | 0.00  |   |      | $ | 0.00  |   |  | $ | 0.00  |  

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
stockholders 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):

|                                                                                            |             |                          |        |       |   |      |         |       |   |   |         |       |  
|------------------------------------------------------------------------------------------- | ----------- | ------------------------ | ------ | ----- | - | ---- | ------- | ----- | - | - | ------- | ----- | -
|                                                                                            |             |                         
|                                                                                            |             | Years Ended December 31,
|                                                                                            |             |                         
|                                                                                            |             | 2003                     |        | 2002  |   | 2001
|                                                                                            |             |                          |        |       |   |     
|Net income (loss) as reported                                                               |             | $                        | 1,662  |       |   | $    | (14,237 | )     |   | $ | (38,647 | )    
|Less; stock-based employee compensation expense
    included in reported net income (loss)  |             |                          | 462    |       |   |      | 1,025   |       |   |   | 2,957   |      
|Add; stock-based employee compensation expense
    determined under fair value based method |             |                          | (9,422 | )     |   |      | (8,705  | )     |   |   | (7,364  | )    
|                                                                                            |             |                          |        |       |   |      |         |       |   |   |         |      
|Pro forma net loss                                                                          |             | $                        | (7,298 | )     |   | $    | (21,917 | )     |   | $ | (43,054 | )    
|                                                                                            |             |                          |        |       |   |      |         |       |   |   |         |      
|Basic net income (loss) per share:                                                          |             |                          |        |       |   |      |         |       |   |   |         |      
|                                                                                            | As reported |                          | $      | 0.03  |   |      | $       | (0.31 | ) |   | $       | (0.88 | )
|                                                                                            |             |                          |        |       |   |      |         |       |   |   |         |      
|                                                                                            | Pro forma   |                          | $      | (0.15 | ) |      | $       | (0.48 | ) |   | $       | (0.98 | )
|                                                                                            |             |                          |        |       |   |      |         |       |   |   |         |      
|Diluted net income (loss) per share:                                                        |             |                          |        |       |   |      |         |       |   |   |         |      
|                                                                                            | As reported |                          | $      | 0.03  |   |      | $       | (0.31 | ) |   | $       | (0.88 | )
|                                                                                            |             |                          |        |       |   |      |         |       |   |   |         |      
|                                                                                            | Pro forma   |                          | $      | (0.13 | ) |      | $       | (0.48 | ) |   | $       | (0.98 | )
|                                                                                            |             |                          |        |       |   |      |         |       |   |   |         |      



| |                                         
| | ----------------------------------------
| | Net Income and Loss per Common
    Share

Basic net income (loss) per common share excludes
the effect of dilutive securities and is computed by dividing
net income (loss) by the weighted average shares outstanding
(excluding shares subject to repurchase). Diluted net income per
share is computed by dividing net income by the weighted average
shares outstanding plus the weighted average number of common
shares resulting from the assumed conversion of outstanding
stock options and employee stock plan share shares. Diluted net
loss per common share for 2002 and 2001 was the same as basic
net loss per common share since the effect of any

47



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

potentially dilutive securities is excluded, as
they are anti-dilutive due to the Companys net losses,
respectively.



| |                                                
| | -----------------------------------------------
| | 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 its
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 availability
of wireless data networks; 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.

Motorola is the sole supplier of microcontrollers
used in the Companys products. The Company expects to rely
on Motorola as a source for this component for the next several
years. Taiwan Semiconductor Manufacturing Company (TSMC) is the
sole manufacturer of the Companys Global Positioning
System digital receiver chips used in some of the Companys
products. The Company expects to rely on TSMC as a source for
this component for at least the next twelve months.



| |                            
| | ---------------------------
| | Comprehensive Income (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 non-owner sources. At December 31, 2003 and 2002,
accumulated other comprehensive loss was zero.



| |                  
| | -----------------
| | Segment Reporting

In 2003, 2002 and 2001, the Company operated in a
single reportable segment and will evaluate additional segment
disclosure requirements as it expands its operations. The
Company had no significant revenues from customers outside of
the United States in 2003, 2002 and 2001, and had no significant
long-lived assets deployed outside the United States at
December 31, 2003 and 2002.



| |                
| | ---------------
| | Major Customers

In 2003, one customer, Verizon Communications,
represented 17% of total revenues. No other customers comprised
10% or more of total revenues in 2003. In 2002 and 2001, no
single customer or group of related customers comprised 10% or
more of total revenues.



| |                                                  
| | -------------------------------------------------
| | Derivative Instruments and Hedging
    Activities

In June 1998, the Financial Accounting Standards
Board (FASB) 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 became effective for the Company on
January 1, 2001. The adoption of this statement did not
have a significant impact on the Companys consolidated
financial position, results of operations or cash flows.

48



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                                         
| | ----------------------------------------
| | Recently Issued Accounting
    Standards

The Financial Accounting Standards Board (FASB)
issued Interpretation 46 (FIN 46), Consolidation of
Variable Interest Entitiesin January 2003, and a revised
interpretation of FIN 46 (FIN 46-R).
FIN 46 requires certain variable interest entities
(VIEs) to be consolidated by the primary beneficiary
of the entity if the equity investors in the entity do not have
the characteristics of a controlling financial interest or
sufficient equity at risk for the entity to finance its
activities without additional subordinated financial support
from other parties. The provisions of FIN 46 are effective
immediately for all arrangements entered into after
January 31, 2003. The Company has not invested in any
entities that the Company believes are variable interest
entities for which the Company is the primary beneficiary. The
adoption of FIN-46 had no impact, and the Company does not
expect the adoption of FIN 46-R to have an impact, on its
financial position, results of operations or cash flows.

In May 2003, the FASB issued
SFAS No. 150, Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and
Equity, which requires that certain financial instruments be
presented as liabilities that were previously presented as
equity or as temporary equity. Such instruments include
mandatory redeemable preferred and common stock, and certain
options and warrants. SFAS No. 150 is effective for
financial instruments entered into or modified after
May 31, 2003 and was effective at the beginning of the
first interim period beginning after June 15, 2003. In
November 2003, the FASB issued FASB Staff Position (FSP)
No. 150-3, Effective Date, Disclosures, and Transition
for Mandatorily Redeemable Financial Instruments of Certain
Nonpublic Entities and Certain Mandatorily Redeemable
Noncontrolling Interests under SFAS No. 150,which
defers the effective date for various provisions of
SFAS No. 150. The Company believes that it has
properly classified and measured in its balance sheets and
disclosed in our consolidated financial statements certain
financial instruments with characteristics of both liabilities
and equity.

Certain reclassifications have been made to the
2002 financial statement presentation to conform to the 2003
presentation. These reclassifications had no effect on net loss
or stockholders equity.



|        |            
|------- | -----------
|Note 2. | Inventories

Inventories consist of (in thousands):

|                |  |              |       |      |  |   |       | 
|--------------- |  | ------------ | ----- | ---- |  | - | ----- | 
|                |  |             
|                |  | December 31,
|                |  |             
|                |  | 2003         |       | 2002
|                |  |              |       |     
|Raw materials   |  | $            | 1,294 |      |  | $ | 3,183 | 
|Work in process |  |              | 177   |      |  |   | 389   | 
|Finished goods  |  |              | 954   |      |  |   | 1,827 | 
|                |  |              |       |      |  |   |       | 
|                |  | $            | 2,425 |      |  | $ | 5,399 | 
|                |  |              |       |      |  |   |       | 

49



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|        |                       
|------- | ----------------------
|Note 3. | Property and Equipment

Property and equipment consist of (in thousands):

|                                          |       |              |        |        |  |   |        |        | 
|----------------------------------------- | ----- | ------------ | ------ | ------ |  | - | ------ | ------ | 
|                                          |       |             
|                                          |       | December 31,
|                                          |       |             
|                                          |       | 2003         |        | 2002  
|                                          |       |              |        |       
|Computers and software                    |       | $            | 11,120 |        |  | $ | 9,662  |       
|Manufacturing and office equipment        |       |              | 296    |        |  |   | 289    |       
|Furniture and fixtures                    |       |              | 422    |        |  |   | 419    |       
|Leasehold improvements                    |       |              | 105    |        |  |   | 105    |       
|                                          |       |              |        |        |  |   |        |       
|                                          | Total |              |        | 11,943 |  |   |        | 10,475 | 
|Accumulated depreciation and amortization |       |              | (9,645 | )      |  |   | (7,975 | )     
|                                          |       |              |        |        |  |   |        |       
|Property and equipment, net               |       | $            | 2,298  |        |  | $ | 2,500  |       
|                                          |       |              |        |        |  |   |        |       



|        |                  
|------- | -----------------
|Note 4. | Intangible Assets

During 2002, the Company acquired an additional
$83,000 of purchase technology. This intangible asset is being
amortized on a straight-line basis over an estimated useful life
of two years.

The Company reassessed the useful lives and
classification of our identifiable intangible assets and
determined that they continued to be appropriate. Information
regarding the Companys intangible assets having a finite
life is as follows (in thousands):

|                     |  |                         |       |                         |  |         |        |          |  |              |    |         |  |   |       |  |  |   |        |   |  |   |     | 
|-------------------- |  | ----------------------- | ----- | ----------------------- |  | ------- | ------ | -------- |  | ------------ | -- | ------- |  | - | ----- |  |  | - | ------ | - |  | - | --- | 
|                     |  |                         |       |                        
|                     |  | As of December 31, 2003 |       | As of December 31, 2002
|                     |  |                         |       |                        
|                     |  | Carrying                |       | Accumulated             |  | Net     |        | Carrying |  | Accumulated  |    | Net    
|                     |  | Amount                  |       | Amortization            |  | Balance |        | Amount   |  | Amortization |    | Balance
|                     |  |                         |       |                         |  |         |        |          |  |              |    |        
|Purchased technology |  | $                       | 5,052 |                         |  | $       | (5,024 | )        |  | $            | 28 |         |  | $ | 5,052 |  |  | $ | (4,569 | ) |  | $ | 483 | 

Amortization expense for intangible assets was
$455,000, $1,670,000 and $1,656,000 for 2003, 2002 and 2001,
respectively. The estimated amortization for fiscal years
subsequent to December 31, 2003 is as follows (in
thousands):

|                        |  |              |    | 
|----------------------- |  | ------------ | -- | 
|                        |  | Amortization
|Year Ended December 31, |  | Expense     
|                        |  |             
|2004                    |  | $            | 28 | 



|        |                    
|------- | -------------------
|Note 5. | Accrued Liabilities

Accrued liabilities consist of (in thousands):

|                                          |       |              |       |       |  |   |       |       | 
|----------------------------------------- | ----- | ------------ | ----- | ----- |  | - | ----- | ----- | 
|                                          |       |             
|                                          |       | December 31,
|                                          |       |             
|                                          |       | 2003         |       | 2002 
|                                          |       |              |       |      
|Accrued compensation and related benefits |       | $            | 2,437 |       |  | $ | 1,655 |      
|Accrued installation charges              |       |              | 505   |       |  |   | 530   |      
|Other accrued expenses                    |       |              | 2,523 |       |  |   | 1,685 |      
|                                          |       |              |       |       |  |   |       |      
|                                          | Total |              | $     | 5,465 |  |   | $     | 3,870 | 
|                                          |       |              |       |       |  |   |       |      



|        |               
|------- | --------------
|Note 6. | Line of Credit

At December 31, 2003, the Company had a
non-collateralized line of credit agreement for $100,000 that
expires on December 31, 2004. There were no borrowings
against the line of credit at December 31, 2003. Borrowings
bear interest at the certificate of deposit rate plus
2 percent.

50



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|        |                     
|------- | --------------------
|Note 7. | Stockholders Equity



| |                
| | ---------------
| | Preferred Stock

The Company has authorized an undesignated class
of preferred stock of 10,000,000 shares. The preferred stock may
be issued from time to time in one or more series. The Board of
Directors is authorized to determine or alter the rights,
preferences, privileges and restrictions of such preferred
stock. No shares were outstanding at December 31, 2003 or
2002.



| |                                       
| | --------------------------------------
| | Secondary Public Offering of
    Stock

On August 25, 2003, the Company completed
the sale of 4,000,000 shares of common stock in an
underwritten secondary public offering at a price of $14.00.
Offering proceeds to the Company, net of the underwriting
discount and aggregate expenses of approximately $4,111,000,
were approximately $51,889,000. In conjunction with the
secondary public offering, stockholders sold an additional
2,500,000 shares of the Companys common stock. The
Company did not receive any proceeds from the sale of common
stock held by the stockholders.



| |                             
| | ----------------------------
| | Employee Stock Purchase Plan

In 2000, the Company adopted the 2000 Employee
Stock Purchased Plan (the ESPP) under which a total of
450,000 shares of common stock were reserved for issuance.
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 percent 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. In 2003,
563,295 shares were issued at a weighted average price of
$2.634 per share under this plan. In 2002,
553,401 shares were issued at a weighted average price of
$1.983 per share under this plan. At December 31,
2003, 765,725 shares of common stock were reserved for
issuance under the plan.



| |                   
| | ------------------
| | Stock Option Plans

In 2000, the Company adopted the 2000 Stock
Option Plan (the 2000 Option Plan). A total of up to
7,612,364 shares are reserved for issuance under the 2000
Option Plan at December 31, 2003. In addition, up to
9,825,000 shares, if available for grant under the 1996
Stock Option Plan will be granted under the 2000 Option Plan.
The number of shares reserved under the 2000 Option Plan will
automatically be increased on the first day of each of the
fiscal years 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. These
options generally expire ten years from date of grant and
generally vest in installments over a four-year period.

In 2000, the Company adopted the 2000
Directors Stock Option Plan (the Directors Plan). A
total of up to 1,200,000 shares of common stock are
reserved for issuance under the Directors Plan at the fair
market value at the grant date. 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. These initial grants generally vest in
installments over a four-year period. 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 the Companys 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 generally vest in installments over a
one-year period. Options granted under the Directors Plan
have a term of 10 years from the date of grant.

51



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

Under the Companys 1996 Stock Option 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 in 10 years
from the date of the grant and generally vest in installments
over a four-year period.

A summary of option activity is as follows:

|                                                                                                        |  |           |            |                |  |   |      | 
|------------------------------------------------------------------------------------------------------- |  | --------- | ---------- | -------------- |  | - | ---- | 
|                                                                                                        |  |           |            | Weighted      
|                                                                                                        |  | Number of |            | Average       
|                                                                                                        |  | Shares    |            | Exercise Price
|                                                                                                        |  |           |            |               
|Outstanding, January 1, 2001 (576,993
    exercisable at a weighted average exercise price of $0.87)    |  |           | 5,338,385  |                |  | $ | 4.25 | 
|Granted (weighted average fair value of
    $2.29 per share)                                            |  |           | 3,678,605  |                |  |   | 2.53 | 
|Exercised                                                                                               |  |           | (387,226   | )              |  |   | 0.73 | 
|Canceled                                                                                                |  |           | (1,765,643 | )              |  |   | 5.36 | 
|                                                                                                        |  |           |            |                |  |   |      | 
|Outstanding, December 31, 2001(1,562,775
    exercisable at a weighted average exercise price of $3.41) |  |           | 6,864,121  |                |  |   | 3.24 | 
|Granted (weighted average fair value of
    $4.59 per share)                                            |  |           | 2,542,250  |                |  |   | 5.41 | 
|Exercised                                                                                               |  |           | (788,054   | )              |  |   | 1.64 | 
|Canceled                                                                                                |  |           | (749,404   | )              |  |   | 3.94 | 
|                                                                                                        |  |           |            |                |  |   |      | 
|Outstanding, December 31, 2002                                                                          |  |           | 7,868,913  |                |  |   | 4.04 | 
|Granted (weighted average fair value of
    $7.31 per share)                                            |  |           | 1,889,050  |                |  |   | 8.93 | 
|Exercised                                                                                               |  |           | (1,389,994 | )              |  |   | 3.22 | 
|Canceled                                                                                                |  |           | (952,601   | )              |  |   | 5.19 | 
|                                                                                                        |  |           |            |                |  |   |      | 
|Outstanding, December 31, 2003                                                                          |  |           | 7,415,368  |                |  |   | 5.29 | 
|                                                                                                        |  |           |            |                |  |   |      | 

At December 31, 2003, an aggregate of
3,281,004 shares were available for future grant under the
2000 Option Plan and the Directors Plan.

Additional information regarding options
outstanding as of December 31, 2003 is as follows:

|               |               |  |  |                     |  |                     |           |          |  |             |      |          |  |   |       |  |  |  |           |  |  |   |      | 
|-------------- | ------------- |  |  | ------------------- |  | ------------------- | --------- | -------- |  | ----------- | ---- | -------- |  | - | ----- |  |  |  | --------- |  |  | - | ---- | 
|               |               |  |  |                     |  |                    
|               |               |  |  | Options Outstanding |  | Options Exercisable
|               |               |  |  |                     |  |                    
|               |               |  |  |                     |  | Weighted            |           |          |  |            
|               |               |  |  |                     |  | Average             |           | Weighted |  |             |      | Weighted
|               |               |  |  |                     |  | Remaining           |           | Average  |  |             |      | Average 
|               |               |  |  |                     |  | Contractual         |           | Exercise |  | Number      |      | Exercise
|Exercise Price |               |  |  | Number              |  | Life (Years)        |           | Price    |  | Exercisable |      | Price   
|               |               |  |  |                     |  |                     |           |          |  |             |      |         
|$              | 0.07 - 0.67   |  |  |                     |  |                     | 352,242   |          |  |             | 5.59 |          |  | $ | 0.57  |  |  |  | 352,242   |  |  | $ | 0.57 | 
|               | 1.33 - 1.97   |  |  |                     |  |                     | 1,068,468 |          |  |             | 6.84 |          |  |   | 1.54  |  |  |  | 892,264   |  |  |   | 1.52 | 
|               | 2.00 - 2.13   |  |  |                     |  |                     | 1,148,855 |          |  |             | 7.67 |          |  |   | 2.01  |  |  |  | 653,420   |  |  |   | 2.01 | 
|               | 3.69 - 3.85   |  |  |                     |  |                     | 460,000   |          |  |             | 7.48 |          |  |   | 3.73  |  |  |  | 282,708   |  |  |   | 3.71 | 
|               | 4.00 - 4.85   |  |  |                     |  |                     | 454,140   |          |  |             | 8.21 |          |  |   | 4.44  |  |  |  | 166,421   |  |  |   | 4.19 | 
|               | 5.04 - 5.69   |  |  |                     |  |                     | 1,325,57  |          |  |             | 8.74 |          |  |   | 5.20  |  |  |  | 86,629    |  |  |   | 5.36 | 
|               | 6.05 - 7.90   |  |  |                     |  |                     | 845,218   |          |  |             | 8.94 |          |  |   | 6.68  |  |  |  | 99,555    |  |  |   | 7.07 | 
|               | 8.40 - 10.93  |  |  |                     |  |                     | 1,279,722 |          |  |             | 7.79 |          |  |   | 9.77  |  |  |  | 719,667   |  |  |   | 9.42 | 
|               | 11.98 - 14.58 |  |  |                     |  |                     | 481,150   |          |  |             | 9.55 |          |  |   | 13.08 |  |  |  |          |  |  |   |     | 
|               |               |  |  |                     |  |                     |           |          |  |             |      |          |  |   |       |  |  |  |           |  |  |   |      | 
|$              | 0.07 - 14.58  |  |  |                     |  |                     | 7,415,368 |          |  |             | 7.95 |          |  | $ | 5.29  |  |  |  | 3,252,906 |  |  | $ | 3.86 | 
|               |               |  |  |                     |  |                     |           |          |  |             |      |          |  |   |       |  |  |  |           |  |  |   |      | 

52



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



| |                   
| | ------------------
| | Stock Compensation

In 2000 and 1999, the Company issued options and
purchase rights to employees having a fair value greater than
the related exercise price. These options and purchase rights
totaled 1,264,875 and 7,045,125 shares of common stock at a
weighted average exercise price of $2.28 and $0.59,
respectively. The weighted average fair value of the common
stock at the time the options were issued was $9.27 and
$2.95 per share in 2000 and 1999, respectively.
Accordingly, the Company recorded approximately $8,830,000 and
$15,842,000 as the value of such options in 2000 and 1999,
respectively. Stock compensation of $462,000, $1,025,000 and
$2,957,000 was amortized to expense in 2003, 2002 and 2001,
respectively. At December 31, 2003 and 2002, the Company
had $4,000 and $491,000 in deferred compensation related to
employee options, respectively.

In 2002, 2001, 2000 and 1999, the Company issued
non-statutory common stock options to consultants to purchase
2,750, 12,500, 204,550 and 147,200 shares of common stock,
of which options to purchase 63,250, 80,125, and
149,250 shares of common stock were outstanding at
December 31, 2003, 2002, and 2001, respectively.
Accordingly, the Company recorded $5,000, $15,000 and $85,000 as
the fair value of such options in 2003, 2002 and 2001,
respectively. Stock compensation expense of $5,000, $40,000, and
$84,000 was recognized as a result of issuing these options in
2003, 2002 and 2001, respectively. The fair value attributed 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: expected life, five
years in 2003, 2002 and 2001; risk-free interest rate,
2.9 percent in 2003, 3.6 percent in 2002 and 4.5
percent in 2001; volatility of 114 percent in 2003,
124 percent in 2002 and 143 percent in 2001; and no
dividends during the expected term. Forfeitures are recognized
as they occur.



| |             
| | ------------
| | Common Stock

At December 31, 2003, the Company has
reserved shares of common stock for issuance as follows:

|                                  |  |  |            | 
|--------------------------------- |  |  | ---------- | 
|Issuance under stock option plans |  |  | 10,696,372 | 
|Issuance under ESPP               |  |  | 765,725    | 
|                                  |  |  |            | 
|                                  |  |  | 11,462,097 | 
|                                  |  |  |            | 



| |                                   
| | ----------------------------------
| | Receivable from Sales of
    Stock

At December 31, 2003, notes receivable from
stockholders representing notes receivable from certain
employees of the Company were composed of (dollars in thousands,
except per share amounts):

|             |       |                 |    |        |  |           |        |               |  |  |      |  |  |  |       |  | 
|------------ | ----- | --------------- | -- | ------ |  | --------- | ------ | ------------- |  |  | ---- |  |  |  | ----- |  | 
|             |       |                
|             |       | Stock Purchased
|             |       |                
|Issue Date   |       | Amount          |    | Number |  | Per Share |        | Interest Rate
|             |       |                 |    |        |  |           |        |              
|January 2000 |       | $               | 50 |        |  |           | 37,500 |               |  |  | 1.33 |  |  |  | 6.12% | 
|March 2000   |       |                 | 37 |        |  |           | 9,375  |               |  |  | 4.00 |  |  |  | 6.46% | 
|             |       |                 |    |        |  |           |        |               |  |  |      |  |  |  |       | 
|             | Total |                 | $  | 87     |  |           |        | 46,875        |  |  |      |  |  |  |       |  | 
|             |       |                 |    |        |  |           |        |               |  |  |      |  |  |  |       | 

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 certain of 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, 2003, 44,072 shares of common stock were
subject to this repurchase right.

53



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|        |                            
|------- | ---------------------------
|Note 8. | Net Income (Loss) Per Share

The following is a reconciliation of the
numerators and denominators used in computing basic and diluted
net income (loss) per share (in thousands, except per share
amounts):

|                              |                                                  |                                                                      |       |        |        |      |         |        |        |   |         |        |        |  
|----------------------------- | ------------------------------------------------ | -------------------------------------------------------------------- | ----- | ------ | ------ | ---- | ------- | ------ | ------ | - | ------- | ------ | ------ | -
|                              |                                                  |                                                                     
|                              |                                                  | Years Ended December 31,                                            
|                              |                                                  |                                                                     
|                              |                                                  | 2003                                                                 |       | 2002   |        | 2001
|                              |                                                  |                                                                      |       |        |        |     
|Net income (loss) (numerator) |                                                  | $                                                                    | 1,662 |        |        | $    | (14,237 | )      |        | $ | (38,647 | )     
|Shares (denominator):         |                                                  |                                                                      |       |        |        |      |         |        |        |   |         |       
|                              | Basic Weighted average common shares outstanding |                                                                      |       | 50,140 |        |      |         | 47,047 |        |   |         | 46,219 |       
|                              |                                                  | Weighted average common shares outstanding
    subject to repurchase |       |        | (162   | )    |         |        | (913   | ) |         |        | (2,327 | )
|                              |                                                  |                                                                      |       |        |        |      |         |        |        |   |         |       
|                              |                                                  | Shares used in computation                                           |       |        | 49,978 |      |         |        | 46,134 |   |         |        | 43,892 |  
|                              | Diluted                                          |                                                                      |       |        |        |      |         |        |        |   |         |        |       
|                              |                                                  | Dilution impact from option equivalent shares                        |       |        | 3,932  |      |         |        |        |   |         |        |        |  
|                              |                                                  | Dilution impact from employee stock purchase plan                    |       |        | 210    |      |         |        |        |   |         |        |        |  
|                              |                                                  | Add back weighted average common shares subject
    to repurchase    |       |        | 162    |      |         |        |       |   |         |        |       |  
|                              |                                                  |                                                                      |       |        |        |      |         |        |        |   |         |       
|                              |                                                  | Shares used in computation                                           |       |        | 54,282 |      |         |        | 46,134 |   |         |        | 43,892 |  
|                              |                                                  |                                                                      |       |        |        |      |         |        |        |   |         |       
|Net income (loss) per share   |                                                  |                                                                      |       |        |        |      |         |        |        |   |         |       
|                              | Basic                                            |                                                                      | $     | 0.03   |        |      | $       | (0.31  | )      |   | $       | (0.88  | )     
|                              |                                                  |                                                                      |       |        |        |      |         |        |        |   |         |       
|                              | Diluted                                          |                                                                      | $     | 0.03   |        |      | $       | (0.31  | )      |   | $       | (0.88  | )     
|                              |                                                  |                                                                      |       |        |        |      |         |        |        |   |         |       

For the above-mentioned periods, the Company had
securities outstanding which could potentially dilute basic
earnings per share in the future, but which 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:

|                                                                         |  |                          |           |      |  |      |           |  |  |   |           | 
|------------------------------------------------------------------------ |  | ------------------------ | --------- | ---- |  | ---- | --------- |  |  | - | --------- | 
|                                                                         |  |                         
|                                                                         |  | Years Ended December 31,
|                                                                         |  |                         
|                                                                         |  | 2003                     |           | 2002 |  | 2001
|                                                                         |  |                          |           |      |  |     
|Shares of common stock subject to repurchase                             |  |                          | 44,072    |      |  |      | 384,540   |  |  |   | 1,562,891 | 
|Outstanding options                                                      |  |                          | 7,415,368 |      |  |      | 7,868,913 |  |  |   | 6,864,121 | 
|Weighted average exercise price of options and
    stock purchase rights |  | $                        | 5.29      |      |  | $    | 4.04      |  |  | $ | 3.24      | 
|                                                                         |  |                          |           |      |  |      |           |  |  |   |           | 

54



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|        |                              
|------- | -----------------------------
|Note 9. | Commitments and Contingencies



| |                  
| | -----------------
| | Lease Commitments

The Company leases its principal facilities under
noncancelable operating leases expiring through December 2005.
Future minimum rental payments under operating leases are as
follows (in thousands):

|                             |  |           |       | 
|---------------------------- |  | --------- | ----- | 
|                             |  | Operating
|                             |  | Leases   
|                             |  |          
|Year Ending December 31,     |  |           |       | 
|2004                         |  | $         | 1,489 | 
|2005                         |  |           | 773   | 
|                             |  |           |       | 
|Total minimum lease payments |  | $         | 2,262 | 
|                             |  |           |       | 

Rent expense was approximately $1,415,000,
$1,312,000 and $1,563,000 (net of sublease income of
approximately $48,600, $72,000 and $79,000) for 2003, 2002 and
2001, respectively. The lease provides for escalating rental
payments over the lease period. Rent expense is recognized on a
straight-line basis over the term of the lease. Deferred rent
represents the difference between rental payments and rent
expense recognized. Current deferred rent is included in accrued
liabilities, with the long-term portion being included in other
long-term liabilities.



| |                     
| | --------------------
| | Purchase Commitments

At December 31, 2003, the Company had
noncancelable inventory purchase commitments totaling
approximately $2,968,000.



| |              
| | -------------
| | Contingencies

In the third quarter of 2002, AT&T Wireless
announced that it expects to cease operating its Cellular
Digital Packet Data network by June 30, 2004. On
March 11, 2004, the Company received a letter dated
March 9, 2004 from AT&T Wireless that states that
AT&T Wireless will continue to operate its Cellular Digital
Packet Data network for certain valuable partners,
including @Road, until at least September 30, 2004. The
letter further states that this extension of Cellular Digital
Packet Data network availability extends across all AT&T
Wireless geographic locations. The Company is currently in
discussions with AT&T Wireless and other wireless carriers
to minimize any disruption of the provision of its services to
subscribers. On or about the actual termination date of AT&T
Wireless Cellular Digital Packet Data network and where
possible, certain affected subscribers would be transferred to
alternate Cellular Digital Packet Data networks without a change
to the hardware platform then used by those subscribers.
However, the Company currently estimates that as of
September 30, 2004 the Company will have approximately
8,000 subscribers in their initial contract periods that are
then using AT&T Wireless Cellular Digital Packet Data
network and that would need to use an alternate wireless
protocol to continue to use the Companys services. To use
an alternate wireless protocol, existing hardware platforms
would have to be replaced for these subscribers. The Company
does not expect to realize a loss on the sale of these
replacement hardware platforms. While there is no assurance, the
Company does not expect that the termination of AT&T
Wireless Cellular Digital Packet Data network will have a
material adverse impact on its financial results.

In its Report on Form 10-K filed with the
Securities and Exchange Commission on March 27, 2003,
Verizon Wireless disclosed that it expects to cease operating
its Cellular Digital Packet Data network at the end of 2005. The
Company estimates that as of December 31, 2005 it will have
approximately 5,000 subscribers in their initial contract
periods that are then using Verizon Wireless Cellular
Digital Packet Data network and that would need to use an
alternate wireless protocol to continue to use its services. To

55



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

use an alternate wireless protocol, existing
hardware platforms would have to be replaced for these
subscribers. The Company does not expect to realize a loss on
the sale of these replacement hardware platforms. While there is
no assurance, the Company does not expect that the termination
of Verizon Wireless Cellular Digital Packet Data network
will have a material adverse impact on our financial results.

The Company is party to legal proceedings in the
ordinary course of business. Based on evaluation of these other
matters, the Company believes that these matters will not have a
material effect on its results of operations or financial
position.



| |                    
| | -------------------
| | Other Contingencies

The Company from time to time enters into certain
types of agreements that contingently require it to indemnify
parties against third party claims. These agreements primarily
relate to: (i) certain agreements with the Companys
officers, directors and employees and third parties, under which
the Company may be required to indemnify such persons for
liabilities arising out of their duties to the Company and
(ii) certain agreements under which the Company indemnifies
customers and partners for claims such as those arising from
intellectual property infringement, personal injury, or
non-performance under the agreement. Such indemnification
provisions are accounted for in accordance with SFAS No. 5.
To date, the Company has not incurred any costs related to any
claims under such indemnification provisions.

The terms of such obligations vary. Generally, a
maximum obligation is not explicitly stated. Because the
obligated amounts of these types of agreements often are not
explicitly stated, the overall maximum amount of the obligations
cannot be reasonably estimated. Historically, the Company has
not been obligated to make significant payments for these
obligations, and no liabilities have been recorded for these
obligations on the Companys balance sheet as of
December 31, 2003.

In general, the Company provides its customers a
one year limited warranty in connection with the sale of its
products that the hardware furnished under the agreement will be
free from defects in materials and workmanship and will
substantially conform to the specifications for such hardware.
The Companys policy is to expense such costs as incurred.
To date, the Company has incurred minimal costs related to this
limited warranty obligation.



|         |                            
|-------- | ---------------------------
|Note 10. | Restructuring of Operations

During 2001, the Company adopted a formal plan to
reduce operating costs in response to a general downturn in the
economy. In connection with these actions, a pre-tax
restructuring charge of approximately $218,000 (net of reversals
in 2001 of $30,000) was recorded in 2001. The principal actions
of the plan involved reducing the number of employees by
approximately 11 percent. All areas of the Company were
affected by the reduction of 29 employees. The restructuring
expense was composed of severance and related costs. The total
restructuring expense paid in 2001 was $218,000.



|         |             
|-------- | ------------
|Note 11. | Income Taxes

Only minimum state income and franchise taxes
were provided for any of the years presented due to the
Companys net losses.

56



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)

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:

|                                          |  |      |        |      |  |      |       |    |  |  |       |   
|----------------------------------------- |  | ---- | ------ | ---- |  | ---- | ----- | -- |  |  | ----- | --
|                                          |  | 2003 |        | 2002 |  | 2001
|                                          |  |      |        |      |  |     
|Federal statutory rate                    |  |      | 35.0   | %    |  |      | (35.0 | )% |  |  | (35.0 | )%
|State taxes, net of federal benefit       |  |      | 21.30  |      |  |      | (6.14 | )  |  |  | (4.84 | ) 
|Non-deductible stock compensation charges |  |      | (50.11 | )    |  |      | 2.61  |    |  |  | 2.78  |   
|Research and development credits          |  |      | (16.24 | )    |  |      | (2.72 | )  |  |  | (0.56 | ) 
|Other                                     |  |      | 2.07   |      |  |      | (1.04 | )  |  |  | (2.22 | ) 
|Valuation allowance                       |  |      | 7.98   |      |  |      | 42.29 |    |  |  | 39.84 |   
|                                          |  |      |        |      |  |      |       |    |  |  |       |   
|Effective tax rate                        |  |      |       | %    |  |      |      | %  |  |  |      | % 

Net deferred tax assets at December 31
consist of (in thousands):

|                                                               |  |      |         |      |  |   |         |  
|-------------------------------------------------------------- |  | ---- | ------- | ---- |  | - | ------- | -
|                                                               |  | 2003 |         | 2002
|                                                               |  |      |         |     
|Net operating loss carry forwards                              |  | $    | 36,141  |      |  | $ | 34,815  |  
|Credit carry forwards                                          |  |      | 3,719   |      |  |   | 3,016   |  
|Accruals and reserves recognized in different
    periods      |  |      | 3,780   |      |  |   | 4,115   |  
|                                                               |  |      |         |      |  |   |         |  
|Total gross deferred tax assets before valuation
    allowance |  |      | 43,640  |      |  |   | 41,946  |  
|Valuation reserve                                              |  |      | (43,640 | )    |  |   | (41,946 | )
|                                                               |  |      |         |      |  |   |         |  
|Net deferred tax asset                                         |  | $    |        |      |  | $ |        |  
|                                                               |  |      |         |      |  |   |         |  

At December 31, 2003, the Company had
federal and state net operating loss (NOL) carry forwards
of approximately $95,700,000 and $50,897,000, respectively. The
federal NOL carry forwards expire through 2023, while the state
NOL carry forwards expire through 2013.

At December 31, 2003 approximately
$3,089,000 of valuation allowance for deferred tax assets
relating to net operating loss carry forwards is attributed to
employee stock option deductions, the benefit from which will be
allocated to equity rather than current earnings when realized.

At December 31, 2003, the Company also has
federal and state research credits of approximately $2,078,000
and $1,529,000, respectively. The federal tax credit carry
forward expires through 2023. The state tax credit carry forward
has no expiration.

Current federal and California tax law includes
provisions limiting the annual use of net operating loss and
credit carry forwards 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
carry forwards 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 carry forward benefits
due to their expiration.



|         |                           
|-------- | --------------------------
|Note 12. | Related Party Transactions

The Company purchased approximately $2,285,000 in
2003 and $1,892,000 in 2002, of inventory from a stockholder.
During 2003, the stockholder sold all the shares of the
Companys common stock it previously owned. At
December 31, 2002, approximately $198,000 owed to the
stockholder was included in accounts payable.

57



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##### Table of Contents



AT ROAD, INC.


NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS  (Continued)



|         |                      
|-------- | ---------------------
|Note 13. | 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 percent and 15 percent 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.



|         |                                                                                 
|-------- | --------------------------------------------------------------------------------
|Note 14. | Quarterly Financial Data (unaudited) (in
    thousands except per share amounts)

|                                                            |         |              |        |               |  |          |        |           |  |              |        |               |   |          |        |           |   |   |        |        |   |   |        |        |   |   |        |        |   |   |        |        |  
|----------------------------------------------------------- | ------- | ------------ | ------ | ------------- |  | -------- | ------ | --------- |  | ------------ | ------ | ------------- | - | -------- | ------ | --------- | - | - | ------ | ------ | - | - | ------ | ------ | - | - | ------ | ------ | - | - | ------ | ------ | -
|                                                            |         | December 31, |        | September 30, |  | June 30, |        | March 31, |  | December 31, |        | September 30, |   | June 30, |        | March 31,
|                                                            |         | 2003         |        | 2003          |  | 2003     |        | 2003      |  | 2002         |        | 2002          |   | 2002     |        | 2002     
|                                                            |         |              |        |               |  |          |        |           |  |              |        |               |   |          |        |          
|Consolidated Statements of Operations
    Data:             |         |              |        |               |  |          |        |           |  |              |        |               |   |          |        |           |   |   |        |        |   |   |        |        |   |   |        |        |   |   |        |       
|Total revenues                                              |         | $            | 17,237 |               |  | $        | 16,616 |           |  | $            | 15,769 |               |   | $        | 13,741 |           |   | $ | 12,946 |        |   | $ | 11,316 |        |   | $ | 10,458 |        |   | $ | 9,700  |       
|Income (loss) from operations                               |         |              | 1,859  |               |  |          | 938    |           |  |              | (371   | )             |   |          | (1,455 | )         |   |   | (2,189 | )      |   |   | (2,969 | )      |   |   | (3,432 | )      |   |   | (5,455 | )     
|Net income (loss)                                           |         | $            | 2,097  |               |  | $        | 1,095  |           |  | $            | (227   | )             |   | $        | (1,303 | )         |   | $ | (2,017 | )      |   | $ | (2,763 | )      |   | $ | (4,247 | )      |   | $ | (5,210 | )     
|                                                            |         |              |        |               |  |          |        |           |  |              |        |               |   |          |        |           |   |   |        |        |   |   |        |        |   |   |        |        |   |   |        |       
|Net income (loss) per share:                                |         |              |        |               |  |          |        |           |  |              |        |               |   |          |        |           |   |   |        |        |   |   |        |        |   |   |        |        |   |   |        |       
|                                                            | Basic   |              | $      | 0.04          |  |          | $      | 0.02      |  |              | $      | (0.00         | ) |          | $      | (0.03     | ) |   | $      | (0.04  | ) |   | $      | (0.06  | ) |   | $      | (0.09  | ) |   | $      | (0.12  | )
|                                                            |         |              |        |               |  |          |        |           |  |              |        |               |   |          |        |           |   |   |        |        |   |   |        |        |   |   |        |        |   |   |        |       
|                                                            | Diluted |              | $      | 0.04          |  |          | $      | 0.02      |  |              | $      | (0.00         | ) |          | $      | (0.03     | ) |   | $      | (0.04  | ) |   | $      | (0.06  | ) |   | $      | (0.09  | ) |   | $      | (0.12  | )
|                                                            |         |              |        |               |  |          |        |           |  |              |        |               |   |          |        |           |   |   |        |        |   |   |        |        |   |   |        |        |   |   |        |       
|Shares used in calculating net income (loss) per
    share: |         |              |        |               |  |          |        |           |  |              |        |               |   |          |        |           |   |   |        |        |   |   |        |        |   |   |        |        |   |   |        |       
|                                                            | Basic   |              |        | 53,450        |  |          |        | 50,689    |  |              |        | 48,196        |   |          |        | 47,577    |   |   |        | 46,990 |   |   |        | 46,355 |   |   |        | 45,904 |   |   |        | 45,287 |  
|                                                            |         |              |        |               |  |          |        |           |  |              |        |               |   |          |        |           |   |   |        |        |   |   |        |        |   |   |        |        |   |   |        |       
|                                                            | Diluted |              |        | 58,209        |  |          |        | 50,689    |  |              |        | 48,196        |   |          |        | 47,577    |   |   |        | 46,990 |   |   |        | 46,355 |   |   |        | 45,904 |   |   |        | 45,287 |  
|                                                            |         |              |        |               |  |          |        |           |  |              |        |               |   |          |        |           |   |   |        |        |   |   |        |        |   |   |        |        |   |   |        |       

58



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##### Table of Contents



SCHEDULE II

AT ROAD, INC.



VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED DECEMBER 31, 2003,
2002 AND 2001


(In thousands)


|                              |  |            |       |            |  |            |       |            |  |   |       |  |  |   |       | 
|----------------------------- |  | ---------- | ----- | ---------- |  | ---------- | ----- | ---------- |  | - | ----- |  |  | - | ----- | 
|                              |  |            |       | Additions  |  |            |       |           
|                              |  | Balance at |       | and        |  | Write-off  |       | Balance at
|                              |  | Beginning  |       | Charges to |  | and        |       | End of    
|                              |  | of Year    |       | Expenses   |  | Deductions |       | Year      
|                              |  |            |       |            |  |            |       |           
|Year Ended December 31, 2003  |  |            |       |            |  |            |       |            |  |   |       |  |  |   |       | 
|Accounts receivable allowance |  | $          | 1,900 |            |  | $          | (127  | )          |  | $ | 352   |  |  | $ | 1,421 | 
|                              |  |            |       |            |  |            |       |            |  |   |       |  |  |   |       | 
|Year Ended December 31, 2002  |  |            |       |            |  |            |       |            |  |   |       |  |  |   |       | 
|Accounts receivable allowance |  | $          | 3,633 |            |  | $          | 461   |            |  | $ | 2,194 |  |  | $ | 1,900 | 
|                              |  |            |       |            |  |            |       |            |  |   |       |  |  |   |       | 
|Year Ended December 31, 2001  |  |            |       |            |  |            |       |            |  |   |       |  |  |   |       | 
|Accounts receivable allowance |  | $          | 2,247 |            |  | $          | 2,442 |            |  | $ | 1,056 |  |  | $ | 3,633 | 
|                              |  |            |       |            |  |            |       |            |  |   |       |  |  |   |       | 

59



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##### Table of Contents



SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this Report to be signed on its behalf by the
undersigned, thereunto duly authorized.



| |              
| | -------------
| | AT ROAD, INC.



| |     |               
| | --- | --------------
| | By: | /s/ KRISH PANU

| |                                          
| | -----------------------------------------
| |                                          
| | Krish Panu                               
| | President and Chief Executive
    Officer

Date: March 12, 2004

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each
person whose signature appears below constitutes and appoints
Krish Panu and Thomas C. Hoster, jointly and severally, his
attorneys-in-fact, each with the power of substitution, for him
in any and all capacities, to sign any amendments to this Report
on Form 10-K, and to file the same, with exhibits thereto
and other documents in connection therewith with the Securities
and Exchange Commission, hereby ratifying and confirming all
that each of said attorneys-in-fact, or his substitute or
substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities
Exchange Act of 1934, the following persons on behalf of the
Registrant and in the capacities and on the dates indicated have
signed this Report below.

|                                       |  |                                                                                                                                        |  |                |  | 
|-------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------- |  | -------------- |  | 
|                                       |  |                                                                                                                                        |  |               
|Signature                              |  | Title                                                                                                                                  |  | Date          
|                                       |  |                                                                                                                                        |  |               
|                                      
|/s/ KRISH PANUKrish Panu               |  | Chairman of the Board of Directors, President and
    Chief Executive Officer
    (Principal Executive Officer)                        |  | March 12, 2004
|                                      
|/s/ THOMAS C. HOSTERThomas C. Hoster   |  | Senior Vice President,
    Finance and Administration and
    Chief Financial Officer
    (Principal Financial and Accounting Officer) |  | March 12, 2004
|                                      
|/s/ KRIS CHELLAMKris Chellam           |  | Director                                                                                                                               |  | March 12, 2004
|                                      
|/s/ CHARLES E. LEVINECharles E. Levine |  | Director                                                                                                                               |  | March 12, 2004
|                                      
|/s/ STUART PHILLIPSStuart Phillips     |  | Director                                                                                                                               |  | March 12, 2004
|                                      
|/s/ T. PETER THOMAST. Peter Thomas     |  | Director                                                                                                                               |  | March 12, 2004

60



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##### Table of Contents



EXHIBIT INDEX

| |       |      |  |                                                                                                                                                                                                                                                                           
| | ----- | ---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3.4*  | ***  |  | Amended and Restated Bylaws of the Registrant, as
    amended.                                                                                                                                                                                                            
| | 3.5*  |      |  | Amended and Restated Certificate of Incorporation
    of the Registrant.                                                                                                                                                                                                  
| | 4.1*  |      |  | Specimen Stock Certificate.                                                                                                                                                                                                                                               
| | 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.                                                                                                                                                                                 
| | 10.7* |     |  | 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.                                                                
| | 10.11 | *    |  | Agreement between the Registrant and Elnet
    Technologies Ltd. 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.                                                                                                                                                                                                                                        
| | 10.19 | *    |  | 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.                                                                                                                                                              
| | 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.
| | 10.23 | *   |  | Strategic Agreement between the Registrant and
    Hitachi Software Engineering Co., Ltd. dated July 21, 2000.                                                                                                                                                            
| | 10.24 | *    |  | Lease Agreement between the Registrant and
    ProLogis Limited Partnership-I dated August 3, 2000.                                                                                                                                                                       
| | 10.25 | **   |  | First Amendment to Lease Agreement between the
    Registrant and ProLogis Limited Partnership-I dated
    March 8, 2001.                                                                                                                                                 
| | 10.26 | **   |  | Loan Modification Agreement between the
    Registrant and Silicon Valley Bank dated March 21, 2001.                                                                                                                                                                      
| | 10.27 | *** |  | Cellular Digital Packet Data Reseller Agreement
    between the Registrant and TELUS Mobility dated January 19,
    2001.                                                                                                                                                 
| | 10.28 | *** |  | Co-Marketing Agreement between the Registrant and
    Nextel Partners Operating Corp. dated March 14, 2001.                                                                                                                                                               
| | 10.29 | *** |  | Co-Marketing Agreement between the Registrant and
    Nextel Financing Company dated December 15, 2000.                                                                                                                                                                   
| | 10.30 | *** |  | Cellular Digital Packet Data Reseller Agreement
    between the Registrant and Ameritech Mobile Communications LLC
    dated January 10, 2002.                                                                                                                            
| | 10.31 | *** |  | Service Agreement between the Registrant and
    ALLTEL Communications Inc. dated May 17, 2001.                                                                                                                                                                           



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##### Table of Contents



| |       |       |  |                                                                                                                                                                                                                                              
| | ----- | ----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 10.32 | ***  |  | Integrator Agreement between the Registrant and
    Symbol Technologies, Inc. dated July 31, 2001, as amended
    by Amendment to Agreement with Integrator between the Registrant
    and Symbol Technologies, Inc. dated December 28, 2001.
| | 10.33 | ***   |  | Loan Modification Agreements between the
    Registrant and Silicon Valley Bank dated July 31, 2001,
    September 30, 2001 and November 5, 2001.                                                                                            
| | 10.34 | ***   |  | Co-Marketing Agreement between the Registrant and
    Southern Communications Services, Inc. dated March 4, 2002.                                                                                                                            
| | 10.35 | ****  |  | Agreement between the Registrant and Elnet
    Technologies Ltd. dated November 17, 2002.                                                                                                                                                    
| | 10.36 | ****  |  | Loan Modification Agreement between the
    Registrant and Silicon Valley Bank dated December 24, 2002.                                                                                                                                      
| | 10.37 | **** |  | Reseller Agreement between the Registrant and
    AT&T Wireless dated February 24, 2003.
    December 30, 2003.                                                                                                                              
| | 10.38 |       |  | Loan Modification Agreement between the
    Registrant and Silicon Valley Bank dated December 30, 2003.                                                                                                                                      
| | 10.39 |       |  | First Amendment to Sublease between the
    Registrant and Athena Semiconductor, Inc., dated March 14,
    2003.                                                                                                                             
| | 10.40 |       |  | Second Amendment to Lease Agreement between the
    Registrant and ProLogis Limited Partnership-I dated
    December 31, 2003.                                                                                                               
| | 10.41 |       |  | Agreement between the Registrant and Elnet
    Technologies Ltd., dated December 10, 2003.                                                                                                                                                   
| | 21.1* |       |  | List of Subsidiaries.                                                                                                                                                                                                                        
| | 23.1  |       |  | Independent Auditors Consent.                                                                                                                                                                                                               
| | 24.1  |       |  | Power of Attorney (see page 60).                                                                                                                                                                                                             
| | 31.1  |       |  | Rule 13a-14(a)/15d-14(a) Certification of
    Chief Executive Officer.                                                                                                                                                                       
| | 31.2  |       |  | Rule 13a-14(a)/15d-14(a) Certification of
    Chief Financial Officer.                                                                                                                                                                       
| | 32.1  |       |  | Certification pursuant to 18 U.S.C.
    Section 1350 of Chief Executive Officer.                                                                                                                                                             
| | 32.2  |       |  | Certification pursuant to 18 U.S.C.
    Section 1350 of Chief Financial Officer.                                                                                                                                                             



---



| |   |                                                                                                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------
| | * | Incorporated by reference to our registration
    statement on Form S-1 (File No. 333-41372) initially
    filed with the SEC on July 13, 2000.



| |    |                                                                                               
| | -- | ----------------------------------------------------------------------------------------------
| | ** | Incorporated by reference to our Report on
    Form 10-K filed with the SEC on March 30, 2001.



| |     |                                                                                               
| | --- | ----------------------------------------------------------------------------------------------
| | *** | Incorporated by reference to our Report on
    Form 10-K filed with the SEC on March 28, 2002.



| |      |                                                                                                
| | ---- | -----------------------------------------------------------------------------------------------
| | **** | Incorporated by reference to our Report on
    Form 10-K/A filed with the SEC on July 29, 2003.



| |   |                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Certain information in this Exhibit has been
    omitted and filed separately with the SEC. Confidential
    treatment has been requested or granted with respect to the
    omitted portions.