##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-K
 FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES AND EXCHANGE ACT OF 1934
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended August 31, 2005 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 0-26140
 Remote Dynamics, Inc.
  Delaware
    
    51-0352879(State or Other Jurisdiction of Incorporation or Organization)
    
    (I.R.S. Employer Identification Number)
 1155 Kas Drive, Suite 100 Richardson, Texas 75081
  (972) 301-2000
 None
  Common Stock, $.01 par value
   Yes þ No o .
 þ
 Yes o No þ
 Yes o No þ
 Yes o No þ
 Yes o No þ
  Yes þ No o
   
 *
    
    Excludes the Common Stock held by executive officers, directors and by stockholders whose
ownership exceeds 5% of the Common Stock outstanding at February 28, 2005.Exclusion of such
shares should not be construed to indicate that any such person possesses the power, direct or
indirect, to direct or cause the direction of the management or policies of the Registrant or that
such person is controlled by or under common control with the Registrant.




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##### 



PagePART IITEM 1.
    
    BUSINESS
    
    
    1ITEM 2.
    
    PROPERTIES
    
    
    38ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    38ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    41PART IIITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
    
    
    43ITEM 6.
    
    SELECTED FINANCIAL DATA
    
    
    44ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    47ITEM 7A.
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    79ITEM 8.
    
    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
    
    
    79ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    79ITEM 9A.
    
    CONTROLS AND PROCEDURES
    
    
    79ITEM 9B
    
    OTHER INFORMATION
    
    
    80PART IIIITEM 10.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    81ITEM 11.
    
    EXECUTIVE COMPENSATION
    
    
    86ITEM 12.
    
    SECURITY OWNERSHIP
OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
    
    
    91ITEM 13.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    92ITEM 14
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    95PART IVITEM 15.
    
    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
    
    
    96Subsidiaries of the RegistrantConsent of Independent Registered Public Accounting FirmConsent of Independent Registered Public Accounting FirmCertification Pursuant to Section 302Certification Pursuant to Section 302Certification Pursuant to Section 906Certification Pursuant to Section 906
  i




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PART I
 
 ITEM 1. BUSINESS
 GENERAL
 Stockholders should also carefully consider the information presented under Risk Factors
below.
 EXECUTIVE SUMMARY
      1




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HISTORICAL BACKGROUND
     2




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Ô
      
    
    Minorplanet UK irrevocably waived certain approval rights, including the right to
appoint members to the Companys board of directors, as were provided for in that certain
Stock Purchase and Exchange Agreement dated February 14, 2001 and the Companys bylaws;
    
    Minorplanet UK waived $1.8 million of accrued executive consulting fees that it had
previously billed to the Company.
    
    The exclusive License and Distribution Agreement, which grants to the Companys United
Kingdom-based subsidiary a 99-year, royalty-free, exclusive right and license to market,
sell and commercially exploit the VMI technology in the United States, Canada and Mexico,
was amended to grant Minorplanet UK, or its designee, the right to market and sell the VMI
technology, on a non-exclusive basis, in the Northeast
 3




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region of the United States. The Company retained the right to market and sell the VMI
technology under the Minorplanet name and logo in this Northeast region.
    
    Minorplanet UK obtained anti-dilution rights from the Company, under which it had the
right to subscribe for and to purchase at the same price per share as the offering or
private sale, that number of shares necessary to maintain the lesser of (i) the percentage
holdings of the Companys stock on the date of subscription or (ii) 19.9 percent of the
Companys issued and outstanding common stock.
   Voluntary Bankruptcy Filing and Reorganization
     
    
    For purposes of the Debtors plan of reorganization, the Debtors and Committee agreed
that the value of the Debtors shall be equal to $25.3 million, such that holders of allowed
unsecured claims under the plan of reorganization shall receive 75%, and prior equity
holders shall receive 25%, of the 7,000,000 shares of new common stock issued upon
confirmation of the plan of reorganization.
    
    The Debtors and the Committee reached agreement on the composition of the Board of
Directors of the Company upon emergence from bankruptcy;
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
    
    The Debtors and the Committee reached agreement on the general terms and conditions of
new employment agreements for senior management of the Company.
    
    The Debtors and the Committee reached agreement on the general terms and conditions
under which restricted shares would be issued to senior management of the Company.
    
    The Debtors, HFS Minorplanet Funding LLC (HFS) and the Committee agreed to amend the
April 15, 2004 letter agreement so that the price per share at which HFS may convert the
unpaid principal and accrued interest due under the $1.575 million promissory note (later
amended and increased to $2.0 million) into common stock of the Company, shall be set at
$3.62 per share of common stock, provided that such amount shall be reduced (i) by twenty
percent (20%) if such unpaid principal and accrued interest is converted within one (1)
year after the date the promissory note was issued or (ii) by fifteen percent (15%) if such
unpaid principal and accrued interest is converted more than one (1) year after the date
the promissory note was issued.
    
    
    Holders of allowed administrative and priority claims will be paid in cash in the
ordinary course as they come due or on such other terms as the parties may agree. Holders
of allowed priority tax claims will receive periodic payments as provided under section
1129(a)(9)(C) of the Bankruptcy Code, unless the parties agree to other terms for the
payment of such claims.
    
    Holders of allowed secured claims shall receive, at the election of the Debtors, either
(i) payment in cash in an amount equivalent to the full amount of such holders allowed
secured claim; (ii) deferred cash payments over a period of five (5) years after the
initial distribution date totaling the amount of such holders allowed secured claim, with
interest; (iii) the return of the collateral securing such allowed secured claim in full
satisfaction of such claim, or (iv) such other treatment as may be agreed to in writing by
such holder and the Debtors.
    
    Holders of allowed general unsecured claims received their pro rata share of
seventy-five percent (75%) of seven million (7,000,000) shares of the new common stock of
the Company on or as soon as practicable after the Effective Date.
    
    Each holder of an allowed convenience claim received cash in an amount equal to fifty
percent (50%) of their allowed claims, up to an aggregate maximum of one hundred fifty
thousand dollars ($150,000) for all such claims paid as soon as practicable after the
Effective Date.
    
    All existing equity interests in the Debtors were extinguished as of the Effective Date.
Each holder of an equity interest in the Company that was attributable to existing common
stock received a pro rata share of twenty-five percent (25%) of seven million (7,000,000) shares of the new common stock that was not
 5




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issued to holders of allowed general unsecured claims. The holders of equity interests in
the Company, Limited and Caren, other than common stock, did not receive or retain any
property under the Plan.
    
    The new common stock and the restricted shares were issued and distributed in accordance
with the terms of the Plan without further act or action under applicable law, regulation,
order or rule and are exempt from registration under applicable securities law pursuant to
section 1145(a) of the Bankruptcy Code.
    
    The Debtors initially distributed 7,000,000 shares of new common stock to satisfy
holders of allowed general unsecured claims and holders of equity interests in the Company
that were attributable to existing common stock. The initial distribution of 7,000,000
shares of new common stock resulted in the satisfaction of approximately $17.6 million of
allowed general unsecured claims. Subsequently, certain rejection claims and other disputed
claims were settled and allowed by the bankruptcy court resulting in the issuance of an
additional 393,568 shares of common stock during the 2005 fiscal year.
 Caren and Limited, as a matter of law, were merged with and into the Company, ceasing to exist
as separate entities as of the Effective Date. In addition,
 
    
    The Companys certificate of incorporation was amended and restated to change the
Companys corporate name to Remote Dynamics, Inc. on the Effective Date;
    
    the size of the board was increased to seven (7) directors with four (4) new directors
being appointed by the Official Unsecured Creditors Committee on behalf of the unsecured
creditors and three (3) directors to be appointed by the Debtors;
    
    a new restricted stock plan for key executive officers was approved;
    
    the Company entered into two (2) year term employment agreements with the following key
executive officers which included restricted stock grants to each officer:
 
    
    Dennis R. Casey  President and Chief Executive Officer
    
    J. Raymond Bilbao  Senior Vice President, General Counsel & Secretary
    
    W. Michael Smith  Executive Vice President, Chief Operating Officer, Chief
Financial Officer & Treasurer
   Exit Financing
 6
    Table of Contents        Securities Purchase Agreement  Sale of Series A Convertible Redeemable Preferred Stock
  7
    Table of Contents     Ranking.
 Dividends
 Conversion Rights
  Redemption Rights of the Company
 Voting Rights and Limitations. 8
    Table of Contents    Warrants Issued to Holder of Series A Preferred Stock
   9




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Anti-Dilution Rights.
 Registration Rights Agreement
  Redemption Rights of Series A Preferred Stock
 
    
    the Common Stock is suspended from trading or is not listed for trading on at least one
of, the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or
the Nasdaq SmallCap Market for an aggregate of 10 or more trading days in any twelve-month
period;
    
    the initial registration statement required to be filed by the Company pursuant to the
Registration Rights Agreement has not been declared effective by January 29, 2005 or such
registration statement, after being declared effective, cannot be utilized by the holders
of Series A Preferred Stock for the resale of all of their registrable securities for an
aggregate of more than 15 days in the aggregate;
    
    the Company fails to remove any restrictive legend on any certificate or any shares of
Common Stock issued to the holders of Series A Preferred Stock upon conversion of the
Series A Preferred Stock as and when required and such failure continues uncured for five
business days;
    
    the Company provides written notice (or otherwise indicates) to any holder of Series A
Preferred Stock, or states by way of public announcement distributed via a press release,
at any time, of its intention not to issue, or otherwise refuses to
issue, shares of Common
Stock to any holder of Series A Preferred Stock upon conversion in accordance with the
terms of the Certificate of Designation for the Series A Preferred Stock;
    
    the Company or any subsidiary of the Company shall make an assignment for the benefit of
creditors, or apply for or consent to the appointment of a receiver or trustee for the
Company or for a substantial part of the Companys property or business;
    
    bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings
for the relief of Company shall be instituted by or against the Company or any subsidiary
which shall not be dismissed within 60 days of their initiation;
    
    the Company shall:
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
    
    sell, convey or dispose of all or substantially all of its assets;
    
    merge or consolidate with or into, or engage in any other business combination with,
any other person or entity, in any case which results in either (i) the holders of the
voting securities of the Company immediately prior to such transaction holding or having
the right to direct the voting of fifty percent (50%) or less of the total outstanding
voting securities of the Company or such other surviving or acquiring person or entity
immediately following such transaction or (ii) the members of the Board of Directors or
other governing body of the Company comprising fifty percent (50%) or less of the members
of the board of directors or other governing body of the Corporation or such other
surviving or acquiring person or entity immediately following such transaction;
    
    either (i) fail to pay, when due, or within any applicable grace period, any payment
with respect to any indebtedness of the Company in excess of $250,000 due to any third
party, other than payments contested by the Company in good faith, or (ii) suffer to exist
any other default under any agreement binding the Company which default or event of
default would or is likely to have a material adverse effect on the business, operations,
properties, prospects or financial condition of the Company;
    
    have fifty percent (50%) or more of the voting power of its capital stock owned
beneficially by one person, entity or group;
    
    experience any other Change of Control not otherwise addressed above; or
    
    the Company otherwise shall breach any material term under the private placement
transaction documents, and if such breach is curable, shall fail to cure such breach
within 10 business days after the Company has been notified thereof in writing by the
holder.
 Actions Requiring Approval of Holder of a Majority of the Companys Series A Preferred Stock.
           11




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senior securities pari passu
      Bridge Loan
  12




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Securities Purchase Agreement  Sale of Series B Convertible Redeemable Preferred Stock
    Ranking .
 Dividends
 Conversion .
 Redemption by Holder
 13




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
    
    the Companys common stock is suspended from trading or is not listed for trading on at least
one of, the New York Stock Exchange, the American Stock Exchange, The Nasdaq National Market
or The Nasdaq SmallCap Market for an aggregate of 10 or more trading days in any twelve-month
period;
    
    the initial registration statement required to be filed by the Company pursuant to the
registration rights agreement has not been declared effective by December 31, 2005, or such
registration statement, after being declared effective, cannot be utilized by the holders of
Series B convertible preferred stock for the resale of all of their registrable securities for
an aggregate of more than 15 days;
    
    the Company fails to remove any restrictive legend on any certificate or any shares of common
stock issued to the holders of Series B convertible preferred stock upon conversion of the
Series B convertible preferred stock as and when required and such failure continues uncured
for five business days;
    
    the Company provides written notice (or otherwise indicate) to any holder of Series B
convertible preferred stock, or state by way of public announcement distributed via a press
release, at any time, of the Companys intention not to issue, or otherwise refuse to issue,
shares of common stock to any holder of Series B convertible preferred stock upon conversion
in accordance with the terms of the certificate of designation for the Companys Series B
convertible preferred stock;
    
    the Company or any of its subsidiaries make an assignment for the benefit of creditors, or
applies for or consents to the appointment of a receiver or trustee for the Company or for a
substantial part of its property or business;
    
    bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the
relief of debtors shall be instituted by or against the Company or any of its subsidiaries
which shall not be dismissed within 60 days of their initiation; or
    
    the Company:
 
    
    sells, conveys or disposes of all or substantially all of its assets;
    
    merges or consolidates with or into, or engages in any other business
combination with any other person or entity, in any case which results in either
(i) the holders of the Companys voting securities immediately prior to such
transaction holding or having the right to direct the voting of fifty percent (50%)
or less of the Companys total outstanding voting securities or such other surviving or
acquiring person or entity immediately following such transaction or (ii) the
members of the Companys board of directors comprising fifty percent (50%) or less
of the members of its board of directors or such other surviving or acquiring
person or entity immediately following such transaction;
    
    either (i) fail to pay, when due, or within any applicable grace period, any
payment with respect to any indebtedness in excess of $250,000 due to any third
party, other than payments contested by the Company in good faith, or (ii) suffer
to exist any other default under any agreement binding the Company which default or
event of default would or is likely to have a material adverse effect on the
Companys business, operations, properties, prospects or financial condition;
    
    have fifty percent (50%) or more of the voting power of the Companys capital
stock owned beneficially by one person, entity or group;
    
    experience any other change of control not otherwise addressed above; or
    
    the Company otherwise breaches any material term under the private placement
transaction documents, and if such breach is curable, shall fail to cure such
breach within 10 business days after the Company has been notified thereof in
writing by the holder.
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Redemption by the Company
 Restricted Actions
 1)
    
    alter or change the rights, preferences or privileges of the Series B
convertible preferred stock, or increase the authorized number of shares of Series B
convertible preferred stock;2)
    
    amend the Companys certificate of incorporation or bylaws;3)
    
    issue any shares of Series B convertible preferred stock other than pursuant to
the securities purchase agreement with the selling stockholder;4)
    
    redeem, repurchase or otherwise acquire, or declare or pay any cash dividend or
distribution on, any junior securities;5)
    
    increase the par value of the Companys common stock;6)
    
    sell all or substantially all of the Companys assets or stock, or consolidate
or merge with another entity;7)
    
    enter into or permit to occur any change of control transaction;8)
    
    sell, transfer or encumber technology, other than licenses granted in the
ordinary course of business;9)
    
    liquidate, dissolve, recapitalize or reorganize;10)
    
    authorize, reserve, or issue common stock with respect to any plan or agreement
that provides for the issuance of equity securities to the Companys employees,
officers, directors or consultants in excess of 250,000 shares of common stock;11)
    
    change the Companys principal business;12)
    
    issue shares of the Companys common stock, other than as contemplated by the
certificate of designation or by the warrants issued to the selling stockholder;13)
    
    increase the number of members of the Companys board of directors to more than
7 members, or, if no Series B convertible preferred stock director has been elected,
increase the number of members of the Companys board of directors to more than 6
members;
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14)
    
    alter or change the rights, preferences or privileges of any of the Companys
capital stock so as to affect adversely the Series B convertible preferred stock;15)
    
    create or issue any senior securities or pari passu securities to the Series B
convertible preferred stock;16)
    
    except for the issuance of debt securities to, or incurrence of indebtedness
from, a recognized financial institution in an aggregate amount not exceeding
$5,000,000 and which, in the case of debt securities, are not convertible securities,
issue any debt securities or incur any indebtedness that would have any preferences
over the Series B convertible preferred stock upon the Companys liquidation, or
redeem, repurchase, prepay or otherwise acquire any of our outstanding debt securities
or indebtedness, except as expressly required by the terms of such securities or
indebtedness;17)
    
    make any dilutive issuance;18)
    
    enter into any agreement, commitment, understanding or other arrangement to
take any of the foregoing actions; or19)
    
    cause or authorize any of the Companys subsidiaries to engage in any of the
foregoing actions.
 Voting Rights
 Warrants Issued to Selling Stockholder
    16




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Registration Rights Agreement




PRODUCTS AND SERVICES


Ô






NSC Systems


Truck Fleet Mobile Communications 17




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SBC Service Vehicles






18




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pari passu
  Mobile Asset Tracking  TrackWareÒ & 20/20VÔ
 Ò
  19




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REDIview Product Line
   Vehicle Management Information (VMI)
     20




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
    
    On June 30, 2004, the VMI license agreement converted to a nonexclusive license until
December 31, 2004 when it would terminate.
    
    From the period beginning June 30, 2004 through December 31, 2004, the territory in
which the Company may market, sell and use the VMI system shall be reduced to the following
metropolitan areas: Los Angeles, California; Atlanta, Georgia; Dallas, Texas; and Houston,
Texas.
    
    On July 31, 2004, the Company shall no longer use the name, Minorplanet, nor any
derivative thereof, and shall remove and refrain from using any references to said name.
    
    The Company provided Minorplanet Limited, at no cost, 100 AEM 3000 VMI units to USA
specifications with accompanying special tariff SIMs for T-Mobile.
    
    Subsequent to December 31, 2004, the Company has the right to use the VMI software
internally for the sole purpose of satisfying its warranty, service and support obligations
to its existing VMI customer base.
    
    Minorplanet Limited was allowed a general unsecured claim in the amount of $1,000,000 in
Limiteds bankruptcy case no. 04-31202-SAF-11. On the Effective Date, Minorplanet Limited
released and waived its administrative claim and, as of such date, waived any future R&D
fees due under Section 16.4 of the VMI license agreement.
    
    The Company provided to Minorplanet Limited and Minorplanet UK a general release of any
and all claims which could have been asserted against Minorplanet Limited or Minorplanet UK
by the Company.
  COMPETITION
 REDIview and VMI
  
    
    @Road @Road currently sells an Internet-based solution using the CDPD or GPRS networks of Nextel, Cingular Wireless,
Verizon, and other carriers. @Roads mobile resource management system enables vehicle location, wireless voice and
text communications, and remote transaction processing with signature capture using a PDA.
    
    Teletrac Teletrac currently sells an Internet-based solution and offers service on GPRS, CDPD, and Cellemetry
wireless networks as well as Teletracs own proprietary TDOA network.
    
    Trimble- In addition to providing advanced GPS components, Trimble augments GPS with other positioning technologies
as well as wireless communications and software to create complete customer solutions. Trimble focuses on emerging
applications including surveying, automobile navigation, machine guidance, asset tracking, wireless platforms, and
telecommunications infrastructures.
    
    Other Regional Competitors- There are numerous smaller regional companies vying for a local presence.
 NSC Systems
 Truck mobile communications
 21




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
    
    Qualcomm- Qualcomm pioneered the commercialization of the
code-division multiple access (CDMA) technology used in wireless
communications equipment and satellite ground stations mainly in
North America. Qualcomms OmniTRACS satellite vehicle tracking
system is used by the trucking industry to manage vehicle fleets.
Qualcomm, Inc. ranks first in the truck mobile communications
market with greater than 50% of the market share.
    
    Geologic Solutions- Geologic Solutions provides wireless and
mobile data services in the transportation, fleet management, and
mobile government markets.
 EMPLOYEES
  INFRASTRUCTURE AND OPERATIONS
 Networks .
 VMI and REDIview Products
 Network Services Center .
  Call Routing .
 22




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Navigation Technology .
 STRATEGIC SERVICE ALLIANCES OF THE COMPANY
 T-Mobile
 Cingular Wireless LLC .
  Key Manufacturers .
 PATENTS AND PROPRIETARY TECHNOLOGY
 23
    Table of Contents    RESEARCH AND DEVELOPMENT
  REGULATION
     24




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RECAPITALIZATION TRANSACTION
     
    
    any capital expenditure by the Company that was not contemplated in any current annual
budget which exceeds $200,000;
    
    the hiring and firing of any Company officer or senior executive reporting to the chief
executive officer who has an annual salary of $130,000 or more, or entering into employment
agreements with these individuals or amendments to existing agreements;
    
    the direct or indirect redemption, purchase or making of any payments with respect to
stock appreciation rights and similar types of stock plans;
    
    the sale, lease or transfer of any assets of the Company representing 5% or more of the
Companys consolidated assets, or the merger, consolidation, recapitalization,
reclassification or other changes to the
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capital stock of the Company; except as required under law, the taking or instituting of
bankruptcy or similar proceedings;
    
    the issuance, purchase, acquisition or redemption of any capital stock or any notes or
debt convertible into equity;
    
    the acquisition of another entity;
    
    the entering into any agreement or contract which commits the Company to pay more than
$1,000,000 or with a term in excess of 12 months and requiring payments in the aggregate
which exceed $200,000;
    
    the amendment of the Companys Certificate of Incorporation or Bylaws that would
adversely affect holders of the Companys common stock or Minorplanet UKs rights under the
Purchase Agreement;
    
    the exiting of, or entering into a different line of business;
    
    the incurrence of any indebtedness or liability or the making of any loan except in the
ordinary course of business;
    
    the placing of any lien on the Companys assets or properties; or
    
    the adoption or implementation of any anti-takeover provision that would adversely
affect Minorplanet UK.
 END OF MINORPLANET UK MAJORITY OWNERSHIP AND VMI LICENSE RIGHT SETTLEMENT
    
    
    Minorplanet UK irrevocably waived the approval rights granted to the Minorplanet UK
Directors set forth above, including the right to appoint members to the Companys Board
of Directors, as were provided for in that certain Stock Purchase and Exchange Agreement
dated February 14, 2001 and the Companys bylaws;
    
    Minorplanet UK waived $1.8 million of accrued executive consulting fees that it had
previously billed to the Company.
    
    The exclusive License and Distribution Agreement, which grants to the Companys United
Kingdom-based subsidiary a 99-year, royalty-free, exclusive right and license to market,
sell and commercially exploit the VMI technology in the United States, Canada and Mexico,
was amended to grant Minorplanet UK, or its designee, the right to market and sell the VMI
technology, on a non-exclusive basis, in the Northeast region of the United States. The
Company retained the right to market and sell the VMI technology under the Minorplanet
name and logo in this Northeast region.
 26




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
    
    Minorplanet UK obtained anti-dilution rights from the Company, under which it had the
right to subscribe for and to purchase at the same price per share as the offering or
private sale, that number of shares necessary to maintain the lesser of (i) the percentage
holdings of the Companys stock on the date of subscription or (ii) 19.9 percent of the
Companys issued and outstanding common stock.
     
    
    On June 30, 2004, the VMI license agreement converted to a nonexclusive license until December 31, 2004, at which time
it terminates;
    
    From the period beginning June 30, 2004 through December 31, 2004, the territory in which the Company may market, sell
and use the VMI system was reduced to the following metropolitan areas: Los Angeles, California; Atlanta, Georgia;
Dallas, Texas and Houston, Texas;
    
    As of July 31, 2004, the Company was no longer permitted to use the name, Minorplanet;
    
    The Company was required to provide Minorplanet Limited, at no cost, 100 VMI units with T-Mobile special tariff SIM
cards;
    
    Subsequent to December 31, 2004, the Company has the right to use the VMI software internally only for the sole purpose
of satisfying its warranty, service and support obligations to its existing VMI customer base; and
    
    Minorplanet Limited was allowed a general unsecured claim of $1,000,000, and it released and waived its administrative
claim and waived any future research and development fees due under the VMI license agreement.
   RISK FACTORS
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Forward-Looking Statements
  The Company has operated at a significant loss in recent periods and such losses will continue.
  The
Company must obtain additional financing within the month of
December 2005 in order to sustain its
business operations through August 31, 2006.
   
    
    Ability to raise a minimum of $4 million in additional
capital resources to fund ongoing operations through August 31,
2006.
    
    Ability to increase sales of the REDIview product line to lessen the amount of capital
resources necessary to fund our operations until such time that revenues from the REDIview
product line are sufficient to fund ongoing operations.
    
    Ability to complete development of additional features and functionality to the REDIview
product line.
    
    Significant market acceptance of the Companys product offerings from new customers,
including the Companys REDIview product line, in the United States.
    
    Maintaining and expanding our direct sales channel and expanding into new markets not
currently served by the Company.
    
    Hiring qualified salespersons. New salespersons will require training and time to
become productive. In addition, there is significant competition for qualified
salespersons, and training these persons requires a delay in time before they are
productive.
    
    Maintaining and expanding indirect distribution channels for the Companys REDIview
product line.
    
    Securing and maintaining adequate third party leasing sources for customers who purchase
the Companys products.
   28




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##### Table of Contents



pari passu
  If SBC deactivates the Companys mobile units sooner than management currently anticipates
and/or the Company fails to achieves its current sales and gross margin projections, the amount of
capital required by the Company to sustain its operation will significantly increase.
   pari passu
  29




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##### Table of Contents



The Companys goodwill and other intangible assets have been impaired.
   Following the expiration of the Companys current contract with SBC, its revenues will be primarily
dependent on sales of its REDIview product line, and the Companys failure to achieve its sales
projections from its REDIview product line will have a material adverse effect on the Companys
business, financial condition and results of operations.
  30




---



##### Table of Contents



Potential future offerings could dilute the interest of the Companys common stockholders .
  The certificate of designation for the Companys Series B convertible preferred stock contains
restrictions on the Companys ability to take certain actions without the approval of the Series B
convertible preferred stockholders, including entering into mergers or issuing additional debt or
equity, and also contains certain mandatory redemption events which could force the Company to
redeem shares when it does not have the funds to do so.
  
    
    amending our certificate of incorporation or bylaws;
    
    redeeming securities;
    
    entering into an asset sale, merger or similar transaction;
    
    creating or issuing senior or pari passu securities; or
    
    issuing equity or debt securities.
   The Company faces significant competition in the automatic vehicle location marketplace.
  The Company may be unable to adapt to shifts in technology in the wireless communications industry.
 31




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##### Table of Contents



If wireless carriers on which the Company depends for services decide to abandon or do not continue
to expand their wireless networks, the Company may lose subscribers and its revenues could
decrease.
  The Company does not expect to pay dividends on its common stock in the foreseeable future.
  The Company depends on Creation Technologies to manufacture its products.
  The Company relies primarily on Cingular Wireless for the provision of GSM/GPRS data services to
its REDIview customers and the Companys inability to renew its agreements with Cingular Wireless
may require it to retrofit the Companys installed base of REDIview units.
  32
    Table of Contents  The Company relies primarily on T-Mobile for the provision of GSM data services to its VMI
customers and the Companys inability to renew its agreements with T-Mobile may increase the
Companys costs of providing GSM data services to its VMI customers, result in a decrease in GSM
coverage for its VMI customers or may require the Company to retrofit its installed base of VMI
units with mobile units which utilize GSM/GPRS.
    The Company depends on Global Positioning System technology owned and controlled by others. If the
Company does not have continued access to GPS technology or satellites, its REDIview product line
will cease to function.
   Any natural disaster, terrorist attack or other occurrence that renders the Companys network
service center inoperable could significantly hinder the delivery of the Companys services to its
customers because the Company lacks an effective remote back-up communications system.
  33
    Table of Contents  The Company depends on its key personnel, and the loss of one or more of these individuals could
have a material adverse effect on the Companys business, financial condition and results of
operations.
  
    
    Dennis R. Casey, President and Chief Executive Officer;
    
    W. Michael Smith, Executive Vice President, Chief Operating Officer, Chief Financial
Officer and Treasurer;
    
    J. Raymond Bilbao, Senior Vice President, General Counsel and Secretary; and
    
    David Bagley, Senior Vice President, Networks and Engineering.
  
    
    The employment agreements with Messrs. Casey, Smith and Bilbao expire on July 2, 2006; and
    
    The employment agreement with Mr. Bagley expires on September 17, 2006.
   Increases in the wholesale rates for digital wireless service could reduce or eliminate the
Companys services margin.
  Product liability claims could have a material adverse effect on the Companys business by creating
additional costs related to the payment or settlement of these claims.
  34
    Table of Contents  Changes in industry-specific government regulations could require the Company to materially
increase its expenses to pay compliance fees.
  The Company may not be able to adequately protect its patents and other proprietary technology, and
its intellectual property rights may be challenged by others.
   The Companys current business plan contemplates significant expansion, which it may be unable to
manage.
  The Companys adoption of fresh start accounting makes comparisons of its financial position and
results of operations with those of prior fiscal periods more difficult.
  35
    Table of Contents    The Companys certificate of incorporation and bylaws and state law contain provisions that could
discourage a takeover.
  
    
    authorizing the board to issue blank check preferred stock on terms it deems advisable;
    
    prohibiting cumulative voting in the election of directors; and
    
    limiting the persons who may call special meetings of stockholders;
  A large number of shares of the Companys common stock is eligible for future sale, and the sale of
these shares may cause the price of the Companys common stock to drop.
   The price of the Companys common stock is volatile.
  The Company has received notices from Nasdaq that its common stock fails to meet the minimum bid
price requirement of $1.00 for continued listing on the Nasdaq SmallCap Market.
 36




---



##### Table of Contents



37
    Table of Contents      
    
    sales commissions payable to both the broker-dealer and the registered representative; and
    
    current quotations for the securities.
  AVAILABLE INFORMATION
  
 ITEM 2. PROPERTIES
 Real Property and Leases
  
 ITEM 3. LEGAL PROCEEDINGS
 Legal Proceedings
 Voluntary Bankruptcy Filing and Reorganization
  38




---



##### Table of Contents




    
    For purposes of the Debtors plan of reorganization, the Debtors and Committee agreed
that the value of the Debtors shall be equal to $25.3 million, such that holders of allowed
unsecured claims under the plan of reorganization shall receive 75%, and prior equity
holders shall receive 25%, of the 7,000,000 shares of new common stock issued upon
confirmation of the plan of reorganization.
    
    The Debtors and the Committee reached agreement on the composition of the Board of
Directors of the Company upon emergence from bankruptcy;
    
    The Debtors and the Committee reached agreement on the general terms and conditions of
new employment agreements for senior management of the Company.
    
    The Debtors and the Committee reached agreement on the general terms and conditions
under which restricted shares would be issued to senior management of the Company.
    
    The Debtors, HFS Minorplanet Funding LLC (HFS) and the Committee agreed to amend the
April 15, 2004 letter agreement so that the price per share at which HFS may convert the
unpaid principal and accrued interest due under the $1.575 million promissory note (later
amended and increased to $2.0 million) into common stock of the Company, shall be set at
$3.62 per share of common stock, provided that such amount shall be reduced (i) by twenty
percent (20%) if such unpaid principal and accrued interest is converted within one (1)
year after the date the promissory note was issued or (ii) by fifteen percent (15%) if such
unpaid principal and accrued interest is converted more than one (1) year after the date
the promissory note was issued.
 39
    Table of Contents  
    
    Holders of allowed administrative and priority claims will be paid in cash in the
ordinary course as they come due or on such other terms as the parties may agree. Holders
of allowed priority tax claims will receive periodic payments as provided under section
1129(a)(9)(C) of the Bankruptcy Code, unless the parties agree to other terms for the
payment of such claims.
    
    Holders of allowed secured claims shall receive, at the election of the Debtors, either
(i) payment in cash in an amount equivalent to the full amount of such holders allowed
secured claim; (ii) deferred cash payments over a period of five (5) years after the
initial distribution date totaling the amount of such holders allowed secured claim, with
interest; (iii) the return of the collateral securing such allowed secured claim in full
satisfaction of such claim, or (iv) such other treatment as may be agreed to in writing by
such holder and the Debtors.
    
    Holders of allowed general unsecured claims received their pro rata share of
seventy-five percent (75%) of seven million (7,000,000) shares of the new common stock of
the Company on or as soon as practicable after the Effective Date.
    
    Each holder of an allowed convenience claim received cash in an amount equal to fifty
percent (50%) of their allowed claims, up to an aggregate maximum of one hundred fifty
thousand dollars ($150,000) for all such claims paid as soon as practicable after the
Effective Date.
    
    All existing equity interests in the Debtors were extinguished as of the Effective Date.
Each holder of an equity interest in the Company that was attributable to existing common
stock received a pro rata share of twenty-five percent (25%) of seven million (7,000,000) shares of the new common stock that was not issued to holders of allowed general unsecured
claims. The holders of equity interests in the Company, Limited and Caren, other than
common stock, did not receive or retain any property under the Plan.
    
    The new common stock and the restricted shares were issued and distributed in accordance
with the terms of the Plan without further act or action under applicable law, regulation,
order or rule and are exempt from registration under applicable securities law pursuant to
section 1145(a) of the Bankruptcy Code.
    
    The Debtors initially distributed 7,000,000 shares of new common stock to satisfy
holders of allowed general unsecured claims and holders of equity interests in the Company
that were attributable to existing common stock. The initial distribution of 7,000,000
shares of new common stock resulted in the satisfaction of approximately $17.6 million of
allowed general unsecured claims. Subsequently, certain rejection claims and other disputed
claims were settled and allowed by the bankruptcy court resulting in the issuance of an
additional 393,568 shares of common stock during the 2005 fiscal year.
  
    
    The Companys certificate of incorporation was amended and restated to change the
Companys corporate name to Remote Dynamics, Inc. on the Effective Date;
 40
    Table of Contents  
    
    the size of the board was increased to seven (7) directors with four (4) new directors
being appointed by the Official Unsecured Creditors Committee on behalf of the unsecured
creditors and three (3) directors to be appointed by the Debtors;
    
    a new restricted stock plan for key executive officers was approved;
    
    the Company entered into two (2) year term employment agreements with the following key
executive officers which included restricted stock grants to each officer:
 
    
    Dennis R. Casey  President and Chief Executive Officer
    
    J. Raymond Bilbao  Senior Vice President, General Counsel & Secretary
    
    W. Michael Smith  Executive Vice President, Chief Operating Officer, Chief
Financial Officer & Treasurer
    
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  Proposal 1:
 Shares Voting
    
    
    SharesDirector
    
    In Favor
    
    
    WithheldGerry C. Quinn
    
    
    6,258,644
    
    
    
    54,989Dennis R. Casey
    
    
    6,233,379
    
    
    
    80,254Stephen CuUnjieng
    
    
    6,260,088
    
    
    
    53,545Matthew Petzold
    
    
    6,194,386
    
    
    
    119,247Greg Pritchard
    
    
    6,260,062
    
    
    
    53,571Thomas Honeycutt
    
    
    6,260,088
    
    
    
    53,545
 41
    Table of Contents  Proposal 2:
 Votes in favor:
    
    
    6,271,950Votes against:
    
    
    31,997Abstentions:
    
    
    9,686
 Proposal 3:
 Votes in favor:
    
    
    1,852,286Votes against:
    
    
    1,791,984Abstentions:
    
    
    4,352
 Proposal 4:
 Votes in favor:
    
    
    3,603,770Votes against:
    
    
    38,484Abstentions:
    
    
    6,368
 42
    Table of Contents  PART II
 
 ITEM 5.
    
    MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES
OF EQUITY SECURITIES
  BID PRICESHIGH
    
    LOWPredecessor Company2003First Quarter
    
    
    $  1.04
    
    
    
    $0.53Second Quarter
    
    
    $  0.99
    
    
    
    $0.58Third Quarter
    
    
    $  0.71
    
    
    
    $0.44Fourth Quarter
    
    
    $  0.70
    
    
    
    $0.482004First Quarter
    
    
    $  0.76
    
    
    
    $0.37Second Quarter
    
    
    $  8.35
    
    
    
    $0.33Third Quarter
    
    
    $  1.15
    
    
    
    $0.45Fourth Quarter (through June 30th)
    
    
    $  0.60
    
    
    
    $0.41Reorganized CompanyFourth Quarter (beginning July 1st)
    
    
    $18.52
    
    
    
    $0.722005First Quarter
    
    
    $  1.31
    
    
    
    $0.72Second Quarter
    
    
    $  1.30
    
    
    
    $0.50Third Quarter
    
    
    $  2.30
    
    
    
    $0.42Fourth Quarter
    
    
    $  1.68
    
    
    
    $0.50
  .
 43
    Table of Contents  Equity Compensation Plan Information
 (a)
    
    (b)
    
    (c)Number of securitiesremaining available forNumber of securities to be
    
    Weighted average
    
    future issuance under equityissued upon exercise of
    
    exercise price of
    
    compensation plansoutstanding options,
    
    outstanding options,
    
    (excluding securitiesPlan Category
    
    warrants and rights
    
    warrants, and rights
    
    reflected in column (a))Equity compensation
plans approved by
security holders
    
    
    525,000
    
    
    $
    
    
    
    
    175,000Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    525,000
    
    
    
    
    
    
    
    175,000
   
 ITEM 6. SELECTED FINANCIAL DATA
 Selected Financial Data
   44
    Table of Contents  Predecessor
    
    
    
    
    
    
    PredecessorReorganized Company
    
    
    Company
    
    
    
    
    
    
    CompanyTwo months
    
    
    Ten months
    
    
    Combined yearYear ended
    
    
    ended
    
    
    ended
    
    
    ended
    
    
    Year endedAugust 31,
    
    
    August 31,
    
    
    June 30,
    
    
    August 31,
    
    
    August 31,2005
    
    
    2004
    
    
    2004
    
    
    2004
    
    
    2003(in thousands, except share information)Statement of Operations DataRevenues:Product
    
    $
    920
    
    
    $
    209
    
    
    $
    1,066
    
    
    $
    1,275
    
    
    $
    2,319Ratable product
    
    
    2,538
    
    
    
    574
    
    
    
    4,489
    
    
    
    5,063
    
    
    
    9,837Service
    
    
    12,914
    
    
    
    2,439
    
    
    
    14,430
    
    
    
    16,869
    
    
    
    32,755Total revenues
    
    
    16,372
    
    
    
    3,222
    
    
    
    19,985
    
    
    
    23,207
    
    
    
    44,911Cost of revenues:Product
    
    
    868
    
    
    
    49
    
    
    
    911
    
    
    
    960
    
    
    
    1,953Ratable product
    
    
    1,362
    
    
    
    240
    
    
    
    2,094
    
    
    
    2,334
    
    
    
    6,871Service
    
    
    5,968
    
    
    
    1,217
    
    
    
    7,470
    
    
    
    8,687
    
    
    
    17,508Total cost of revenues
    
    
    8,198
    
    
    
    1,506
    
    
    
    10,475
    
    
    
    11,981
    
    
    
    26,332Gross profit
    
    
    8,174
    
    
    
    1,716
    
    
    
    9,510
    
    
    
    11,226
    
    
    
    18,579Expenses:General and administrative
    
    
    4,863
    
    
    
    914
    
    
    
    5,767
    
    
    
    6,681
    
    
    
    9,456Customer service
    
    
    1,521
    
    
    
    337
    
    
    
    1,939
    
    
    
    2,276
    
    
    
    3,988Sales and marketing
    
    
    3,186
    
    
    
    294
    
    
    
    2,079
    
    
    
    2,373
    
    
    
    11,632Engineering
    
    
    1,319
    
    
    
    183
    
    
    
    1,593
    
    
    
    1,776
    
    
    
    1,800Depreciation and amortization
    
    
    2,700
    
    
    
    393
    
    
    
    3,451
    
    
    
    3,844
    
    
    
    5,626Impairment loss on license right
    
    
    201
    
    
    
    
    
    
    
    28,759
    
    
    
    28,759
    
    
    
    Goodwill impairment
    
    
    9,604
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    23,394
    
    
    
    2,121
    
    
    
    43,588
    
    
    
    45,709
    
    
    
    32,502Operating loss
    
    
    (15,220
    )
    
    
    (405
    )
    
    
    (34,078
    )
    
    
    (34,483
    )
    
    
    (13,923
    )Interest income
    
    
    253
    
    
    
    51
    
    
    
    351
    
    
    
    402
    
    
    
    447Interest expense
    
    
    (390
    )
    
    
    (37
    )
    
    
    (905
    )
    
    
    (942
    )
    
    
    (2,118
    )Other (expense) income
    
    
    (284
    )
    
    
    (11
    )
    
    
    257
    
    
    
    246
    
    
    
    (426
    )Loss before reorganization
items and income taxes
    
    
    (15,641
    )
    
    
    (402
    )
    
    
    (34,375
    )
    
    
    (34,777
    )
    
    
    (16,020
    )Reorganization items:Restructuring expenses and losses
    
    
    (22
    )
    
    
    (139
    )
    
    
    (3,384
    )
    
    
    (3,523
    )
    
    
    Gain on discharge of liabilities subject to
compromise
    
    
    
    
    
    
    
    
    
    
    190
    
    
    
    190
    
    
    
    Fresh start accounting adjustments
    
    
    
    
    
    
    
    
    
    
    20,331
    
    
    
    20,331
    
    
    
    Net loss before income taxes
    
    
    (15,663
    )
    
    
    (541
    )
    
    
    (17,238
    )
    
    
    (17,779
    )
    
    
    (16,020
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (15,663
    )
    
    
    (541
    )
    
    
    (17,238
    )
    
    
    (17,779
    )
    
    
    (16,020
    )Preferred stock dividend
    
    
    (368
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss attributable to
common stockholders
    
    $
    (16,031
    )
    
    $
    (541
    )
    
    $
    (17,238
    )
    
    $
    (17,779
    )
    
    $
    (16,020
    )Net loss income per share  basic and diluted
    
    $
    (2.47
    )
    
    $
    (0.08
    )
    
    $
    (1.78
    )
    
    
    n/a
    
    
    $
    (1.66
    )Weighted average number of shares outstanding
Basic and diluted
    
    
    6,498
    
    
    
    6,505
    
    
    
    9,671
    
    
    
    n/a
    
    
    
    9,670
 45
    Table of Contents  Predecessor CompanyEight months endedYear ended August 31,
    
    August 31,
    
    Year ended December 31,2003
    
    2002
    
    2002
    
    2001
    
    2001
    
    2000(In thousands, except
share information)Statement of Operations DataRevenues:Product
    
    $
    2,319
    
    
    $
    11,936
    
    
    $
    5,074
    
    
    $
    12,796
    
    
    $
    19,658
    
    
    $
    41,971Ratable product
    
    
    9,837
    
    
    
    9,618
    
    
    
    6,780
    
    
    
    7,026
    
    
    
    9,864
    
    
    
    12,093Service
    
    
    32,755
    
    
    
    45,216
    
    
    
    30,102
    
    
    
    32,844
    
    
    
    47,958
    
    
    
    48,066Total revenues
    
    
    44,911
    
    
    
    66,770
    
    
    
    41,956
    
    
    
    52,666
    
    
    
    77,480
    
    
    
    102,130Cost of revenues:Product
    
    
    1,953
    
    
    
    9,426
    
    
    
    3,996
    
    
    
    9,810
    
    
    
    15,239
    
    
    
    30,031Ratable product
    
    
    6,871
    
    
    
    7,634
    
    
    
    5,213
    
    
    
    5,814
    
    
    
    8,236
    
    
    
    10,006Service
    
    
    17,508
    
    
    
    24,515
    
    
    
    16,155
    
    
    
    18,204
    
    
    
    26,563
    
    
    
    30,636Inventory write-down to net realizable value
    
    
    
    
    
    
    4,693
    
    
    
    
    
    
    
    
    
    
    
    4,693
    
    
    
    Provision for settlement of litigation
    
    
    
    
    
    
    100
    
    
    
    100
    
    
    
    2,100
    
    
    
    2,100
    
    
    
    Total cost of revenues
    
    
    26,332
    
    
    
    46,368
    
    
    
    25,464
    
    
    
    35,928
    
    
    
    56,831
    
    
    
    70,673Gross profit
    
    
    18,579
    
    
    
    20,402
    
    
    
    16,492
    
    
    
    16,738
    
    
    
    20,649
    
    
    
    31,457Expenses:General and administrative
    
    
    9,456
    
    
    
    11,856
    
    
    
    7,943
    
    
    
    8,349
    
    
    
    12,482
    
    
    
    12,478Customer service
    
    
    3,988
    
    
    
    5,396
    
    
    
    3,411
    
    
    
    5,051
    
    
    
    7,036
    
    
    
    7,146Sales and marketing
    
    
    11,632
    
    
    
    10,386
    
    
    
    8,600
    
    
    
    2,784
    
    
    
    4,570
    
    
    
    4,980Engineering
    
    
    1,800
    
    
    
    2,433
    
    
    
    1,374
    
    
    
    4,107
    
    
    
    5,166
    
    
    
    4,345Network services center
    
    
    
    
    
    
    1,045
    
    
    
    461
    
    
    
    1,168
    
    
    
    1,753
    
    
    
    1,512Depreciation and amortization
    
    
    5,626
    
    
    
    7,087
    
    
    
    4,322
    
    
    
    4,673
    
    
    
    7,438
    
    
    
    5,90732,502
    
    
    
    38,203
    
    
    
    26,111
    
    
    
    26,132
    
    
    
    38,445
    
    
    
    36,368Operating loss
    
    
    (13,923
    )
    
    
    (17,801
    )
    
    
    (9,619
    )
    
    
    (9,394
    )
    
    
    (17,796
    )
    
    
    (4,911
    )Interest income
    
    
    447
    
    
    
    539
    
    
    
    457
    
    
    
    420
    
    
    
    501
    
    
    
    1,371Interest expense
    
    
    (2,118
    )
    
    
    (2,124
    )
    
    
    (1,411
    )
    
    
    (6,642
    )
    
    
    (7,355
    )
    
    
    (13,368
    )Other (expense) income
    
    
    (426
    )
    
    
    (183
    )
    
    
    (183
    )
    
    
    
    
    
    
    
    
    
    
    1,569Gain on recapitalization and extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    59,461
    
    
    
    59,461
    
    
    
    (Loss) income before income taxes and
cumulative effect of accounting
change
    
    
    (16,020
    )
    
    
    (19,569
    )
    
    
    (10,756
    )
    
    
    43,845
    
    
    
    34,811
    
    
    
    (15,339
    )Income tax benefit
    
    
    
    
    
    
    978
    
    
    
    978
    
    
    
    
    
    
    
    
    
    
    
    (Loss) income before cumulative effect
of accounting change
    
    
    (16,020
    )
    
    
    (18,591
    )
    
    
    (9,778
    )
    
    
    43,845
    
    
    
    34,811
    
    
    
    (15,339
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,206
    )Net (loss) income
    
    $
    (16,020
    )
    
    $
    (18,591
    )
    
    $
    (9,778
    )
    
    $
    43,845
    
    
    $
    34,811
    
    
    $
    (20,545
    )Basic and diluted (loss) income per share:(Loss) income before cumulative effect
of accounting change
    
    $
    (1.66
    )
    
    $
    (1.93
    )
    
    $
    (1.01
    )
    
    $
    12.42
    
    
    $
    6.23
    
    
    $
    (15.16
    )Cumulative effect of accounting change
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5.15
    )Net (loss) income per share
    
    $
    (1.66
    )
    
    $
    (1.93
    )
    
    $
    (1.01
    )
    
    $
    12.42
    
    
    $
    6.23
    
    
    $
    (20.31
    )Weighted average number of shares outstanding
Basic and diluted
    
    
    9,670
    
    
    
    9,634
    
    
    
    9,647
    
    
    
    3,530
    
    
    
    5,586
    
    
    
    1,012
 46
    Table of Contents  August 31,
    
    August 31,
    
    August 31,
    
    August 31,
    
    December 31,2005
    
    2004
    
    2003
    
    2002
    
    2001
    
    2000Balance Sheet DataCash and short-term investments
    
    $
    503
    
    
    $
    1,312
    
    
    $
    5,105
    
    
    $
    18,090
    
    
    $
    14,889
    
    
    $
    20,641Restricted cash
    
    
    
    
    
    
    439
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Working capital
    
    
    (1,857
    )
    
    
    (2,784
    )
    
    
    753
    
    
    
    8,337
    
    
    
    12,486
    
    
    
    20,825Property and equipment, net
    
    
    3,743
    
    
    
    4,283
    
    
    
    3,865
    
    
    
    6,425
    
    
    
    8,583
    
    
    
    12,851Total assets
    
    
    21,706
    
    
    
    35,756
    
    
    
    56,100
    
    
    
    81,403
    
    
    
    87,597
    
    
    
    81,044Notes payable
    
    
    4,173
    
    
    
    2,741
    
    
    
    14,316
    
    
    
    14,254
    
    
    
    14,109
    
    
    
    92,484Stockholders equity (deficit)
    
    
    5,901
    
    
    
    19,499
    
    
    
    19,490
    
    
    
    35,418
    
    
    
    44,179
    
    
    
    (58,341
    )
 
 ITEM 7.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 Executive Summary
     47
    Table of Contents  General Overview
   48
    Table of Contents  Ô
  Ô
    49
    Table of Contents  
    
    Minorplanet UK irrevocably waived the approval rights, including the right to appoint
members to the Companys Board of Directors, as were provided for in that certain Stock
Purchase and Exchange Agreement dated February 14, 2001 and the Companys bylaws;
    
    Minorplanet UK waived $1.8 million of accrued executive consulting fees that it had
previously billed to the Company.
    
    The exclusive License and Distribution Agreement, which granted to the Companys United
Kingdom-based subsidiary a 99-year, royalty-free, exclusive right and license to market,
sell and commercially exploit the VMI technology in the United States, Canada and Mexico,
was amended to grant Minorplanet UK, or its designee, the right to market and sell the VMI
technology, on a non-exclusive basis, in the Northeast region of the United States. The
Company retained the right to market and sell the VMI technology under the Minorplanet
name and logo in this Northeast region.
    
    Minorplanet UK obtained anti-dilution rights from the Company, under which it had the
right to subscribe for and to purchase at the same price per share as the offering or
private sale, that number of shares necessary to maintain the lesser of (i) the percentage
holdings of the Companys stock on the date of subscription or (ii) 19.9 percent of the
Companys issued and outstanding common stock.
   Voluntary Bankruptcy Filing and Reorganization
   50
    Table of Contents  
    
    For purposes of the Debtors plan of reorganization, the Debtors and Committee agreed
that the value of the Debtors shall be equal to $25.3 million, such that holders of allowed
unsecured claims under the plan of reorganization shall receive 75%, and prior equity
holders shall receive 25%, of the 7,000,000 shares of new common stock issued upon
confirmation of the plan of reorganization.
    
    The Debtors and the Committee reached agreement on the composition of the Board of
Directors of the Company upon emergence from bankruptcy;
    
    The Debtors and the Committee reached agreement on the general terms and conditions of
new employment agreements for senior management of the Company.
    
    The Debtors and the Committee reached agreement on the general terms and conditions
under which restricted shares would be issued to senior management of the Company.
    
    The Debtors, HFS Minorplanet Funding LLC (HFS) and the Committee agreed to amend the
April 15, 2004 letter agreement so that the price per share at which HFS may convert the
unpaid principal and accrued interest due under the $1.575 million promissory note (later
amended and increased to $2.0 million) into common stock of the Company, shall be set at
$3.62 per share of common stock, provided that such amount shall be reduced (i) by twenty
percent (20%) if such unpaid principal and accrued interest is converted within one (1)
year after the date the promissory note was issued or (ii) by fifteen percent (15%) if such
unpaid principal and accrued interest is converted more than one (1) year after the date
the promissory note was issued.
    
    
    Holders of allowed administrative and priority claims will be paid in cash in the
ordinary course as they come due or on such other terms as the parties may agree. Holders
of allowed priority tax claims will receive periodic payments as provided under section
1129(a)(9)(C) of the Bankruptcy Code, unless the parties agree to other terms for the
payment of such claims.
 51
    Table of Contents  
    
    Holders of allowed secured claims shall receive, at the election of the Debtors, either
(i) payment in cash in an amount equivalent to the full amount of such holders allowed
secured claim; (ii) deferred cash payments over a period of five (5) years after the
initial distribution date totaling the amount of such holders allowed secured claim, with
interest; (iii) the return of the collateral securing such allowed secured
claim in full satisfaction of such claim, or (iv) such other treatment as may be agreed to
in writing by such holder and the Debtors.
    
    Holders of allowed general unsecured claims received their pro rata share of
seventy-five percent (75%) of seven million (7,000,000) shares of the new common stock of
the Company on or as soon as practicable after the Effective Date.
    
    Each holder of an allowed convenience claim received cash in an amount equal to fifty
percent (50%) of their allowed claims, up to an aggregate maximum of one hundred fifty
thousand dollars ($150,000) for all such claims paid as soon as practicable after the
Effective Date.
    
    All existing equity interests in the Debtors were extinguished as of the Effective Date.
Each holder of an equity interest in the Company that was attributable to existing common
stock received a pro rata share of twenty-five percent (25%) of seven million (7,000,000) shares of the new common stock that was not issued to holders of allowed general unsecured
claims. The holders of equity interests in the Company, Limited and Caren, other than
common stock, did not receive or retain any property under the Plan.
    
    The new common stock and the restricted shares were issued and distributed in accordance
with the terms of the Plan without further act or action under applicable law, regulation,
order or rule and are exempt from registration under applicable securities law pursuant to
section 1145(a) of the Bankruptcy Code.
    
    The Debtors initially distributed 7,000,000 shares of new common stock to satisfy
holders of allowed general unsecured claims and holders of equity interests in the Company
that were attributable to existing common stock. The initial distribution of 7,000,000
shares of new common stock resulted in the satisfaction of approximately $17.6 million of
allowed general unsecured claims. Subsequently, certain rejection claims and other disputed
claims were settled and allowed by the bankruptcy court resulting in the issuance of an
additional 393,568 shares of common stock during the 2005 fiscal year.
  
    
    the Companys certificate of incorporation was amended and restated to change the
Companys corporate name to Remote Dynamics, Inc. on the Effective Date;
    
    the size of the board was increased to seven (7) directors with four (4) new directors
being appointed by the Official Unsecured Creditors Committee on behalf of the unsecured
creditors and three (3) directors to be appointed by the Debtors;
    
    a new restricted stock plan for key executive officers was approved;
    
    the Company entered into two (2) year term employment agreements with the following key
executive officers which included restricted stock grants to each officer:
 o
    
    Dennis R. Casey  President and Chief Executive Officero
    
    J. Raymond Bilbao  Senior Vice President, General Counsel & Secretaryo
    
    W. Michael Smith  Executive Vice President, Chief Operating Officer, Chief
Financial Officer & Treasurer
  52
    Table of Contents  Securities Purchase Agreement  Sale of Series A Convertible Redeemable Preferred Stock
    Ranking.
 Dividends
 Conversion Rights
 53
    Table of Contents  Redemption Rights of the Company
 Voting Rights and Limitations.
 Warrants Issued to Holder of Series A Preferred Stock
  54
    Table of Contents  Anti-Dilution Rights.
 Registration Rights Agreement
  Redemption Rights of Series A Preferred Stock
 55
    Table of Contents  
    
    the Common Stock is suspended from trading or is not listed for trading on at least one
of, the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or
the Nasdaq SmallCap Market for an aggregate of 10 or more trading days in any twelve-month
period;
    
    the initial registration statement required to be filed by the Company pursuant to the
Registration Rights Agreement has not been declared effective by January 29, 2005 or such
registration statement, after being declared effective, cannot be utilized by the holders
of Series A Preferred Stock for the resale of all of their registrable securities for an
aggregate of more than 15 days in the aggregate;
    
    the Company fails to remove any restrictive legend on any certificate or any shares of
Common Stock issued to the holders of Series A Preferred Stock upon conversion of the
Series A Preferred Stock as and when required and such failure continues uncured for five
business days;
    
    the Company provides written notice (or otherwise indicates) to any holder of Series A
Preferred Stock, or states by way of public announcement distributed via a press release,
at any time, of its intention not to issue, or otherwise refuses to issue, shares of Common
Stock to any holder of Series A Preferred Stock upon conversion in accordance with the
terms of the Certificate of Designation for the Series A Preferred Stock;
    
    the Company or any subsidiary of the Company shall make an assignment for the benefit of
creditors, or apply for or consent to the appointment of a receiver or trustee for the
Company or for a substantial part of the Companys property or business;
    
    bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings
for the relief of Company shall be instituted by or against the Company or any subsidiary
which shall not be dismissed within 60 days of their initiation;
    
    the Company shall:
    
    sell, convey or dispose of all or substantially all of its assets;
    
    merge or consolidate with or into, or engage in any other business combination with,
any other person or entity, in any case which results in either (i) the holders of the
voting securities of the Company immediately prior to such transaction holding or having
the right to direct the voting of fifty percent (50%) or less of the total outstanding
voting securities of the Company or such other surviving or acquiring person or entity
immediately following such transaction or (ii) the members of the Board of Directors or
other governing body of the Company comprising fifty percent (50%) or less of the members
of the board of directors or other governing body of the Corporation or such other
surviving or acquiring person or entity immediately following such transaction;
    
    either (i) fail to pay, when due, or within any applicable grace period, any payment
with respect to any indebtedness of the Company in excess of $250,000 due to any third
party, other than payments contested by the Company in good faith, or (ii) suffer to exist
any other default under any agreement binding the Company which default or event of
default would or is likely to have a material adverse effect on the business, operations,
properties, prospects or financial condition of the Company;
    
    have fifty percent (50%) or more of the voting power of its capital stock owned
beneficially by one person, entity or group;
    
    experience any other Change of Control not otherwise addressed above; or
    
    the Company otherwise shall breach any material term under the private placement
transaction documents,
 56
    Table of Contents  and if such breach is curable, shall fail to cure such breach
within 10 business days after the Company has been notified thereof in writing by the
holder.
 Actions Requiring Approval of Holder of a Majority of the Companys Series A Preferred Stock.
               senior securities pari passu
   57
    Table of Contents  Accounting for Sale of Series A Convertible Redeemable Preferred Stock
    Structured Warrant Exercise
  Bridge Loan
  Securities Purchase Agreement  Sale of Series B Convertible Redeemable Preferred Stock
 58
    Table of Contents  Ranking .
 Dividends
 Conversion .
 Redemption by Holder
 59
    Table of Contents  
    
    the Companys common stock is suspended from trading or is not listed for trading on at least
one of, the New York Stock Exchange, the American Stock Exchange, The Nasdaq National Market
or The Nasdaq SmallCap Market for an aggregate of 10 or more trading days in any twelve-month
period;
    
    the initial registration statement required to be filed by the Company pursuant to the
registration rights agreement has not been declared effective by December 31, 2005, or such
registration statement, after being declared effective, cannot be utilized by the holders of
Series B convertible preferred stock for the resale of all of their registrable securities for
an aggregate of more than 15 days in the aggregate;
    
    the Company fails to remove any restrictive legend on any certificate or any shares of common
stock issued to the holders of Series B convertible preferred stock upon conversion of the
Series B convertible preferred stock as and when required and such failure continues uncured
for five business days;
    
    the Company provides written notice (or otherwise indicate) to any holder of Series B
convertible preferred stock, or state by way of public announcement distributed via a press
release, at any time, of the Companys intention not to issue, or otherwise refuse to issue,
            shares of common stock to any holder of Series B convertible preferred stock upon conversion
in accordance with the terms of the certificate of designation for the Companys Series B
convertible preferred stock;
    
    the Company or any of its subsidiaries make an assignment for the benefit of creditors, or
applies for or consents to the appointment of a receiver or trustee for the Company or for a
substantial part of its property or business;
    
    bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the
relief of debtors shall be instituted by or against the Company or any of its subsidiaries
which shall not be dismissed within 60 days of their initiation; or
    
    the Company:
 
    
    sells, conveys or disposes of all or substantially all of its assets;
    
    merges or consolidates with or into, or engages in any other business
combination with, any other person or entity, in any case which results in either
(i) the holders of the Companys voting securities immediately prior to such
transaction holding or having the right to direct the voting of fifty percent (50%)
or less of our total outstanding voting securities of or such other surviving or
acquiring person or entity immediately following such transaction or (ii) the
members of the Companys board of directors comprising fifty percent (50%) or less
of the members of its board of directors or such other surviving or acquiring
person or entity immediately following such transaction;
    
    either (i) fail to pay, when due, or within any applicable grace period, any
payment with respect to any indebtedness in excess of $250,000 due to any third
party, other than payments contested by the Company in good faith, or (ii) suffer
to exist any other default under any agreement binding the Company which default or
event of default would or is likely to have a material adverse effect on the
Companys business, operations, properties, prospects or financial condition;
    
    have fifty percent (50%) or more of the voting power of the Companys capital
stock owned beneficially by one person, entity or group;
    
    experience any other change of control not otherwise addressed above; or
 60
    Table of Contents  
    
    the Company otherwise breaches any material term under the private placement
transaction documents, and if such breach is curable, shall fails to cure such
breach within 10 business days after the Company has been notified thereof in
writing by the holder.
  Redemption by the Company
 Restricted Actions
 1)
    
    alter or change the rights, preferences or privileges of the Series B
convertible preferred stock, or increase the authorized number of shares of Series
B convertible preferred stock;2)
    
    amend the Companys certificate of incorporation or bylaws;3)
    
    issue any shares of Series B convertible preferred stock other than
pursuant to the securities purchase agreement with the selling stockholder;4)
    
    redeem, repurchase or otherwise acquire, or declare or pay any cash
dividend or distribution on, any junior securities;5)
    
    increase the par value of the Companys common stock;6)
    
    sell all or substantially all of the Companys assets or stock, or
consolidate or merge with another entity;7)
    
    enter into or permit to occur any change of control transaction;8)
    
    sell, transfer or encumber technology, other than licenses granted in
the ordinary course of business;9)
    
    liquidate, dissolve, recapitalize or reorganize;10)
    
    authorize, reserve, or issue common stock with respect to any plan or
agreement that provides for the issuance of equity securities to the Companys
employees, officers, directors or consultants in excess of 250,000 shares of common
stock;11)
    
    change the Companys principal business;
 61
    Table of Contents  12)
    
    issue shares of the Companys common stock, other than as contemplated
by the certificate of designation or by the warrants issued to the selling
stockholder;13)
    
    increase the number of members of the Companys board of directors to
more than 7 members, or, if no Series B convertible preferred stock director has
been elected, increase the number of members of the Companys board of directors to
more than 6 members;14)
    
    alter or change the rights, preferences or privileges of any of the
Companys capital stock so as to affect adversely the Series B convertible
preferred stock;15)
    
    create or issue any senior securities or pari passu securities to the
Series B convertible preferred stock;16)
    
    except for the issuance of debt securities to, or incurrence of
indebtedness from, a recognized financial institution in an aggregate amount not
exceeding $5,000,000 and which, in the case of debt securities, are not convertible
securities, issue any debt securities or incur any indebtedness that would have any
preferences over the Series B convertible preferred stock upon the Companys
liquidation, or redeem, repurchase, prepay or otherwise acquire any of our
outstanding debt securities or indebtedness, except as expressly required by the
terms of such securities or indebtedness;17)
    
    make any dilutive issuance;18)
    
    enter into any agreement, commitment, understanding or other
arrangement to take any of the foregoing actions; or19)
    
    cause or authorize any of the Companys subsidiaries to engage in any
of the foregoing actions.
 Voting Rights
 Warrants Issued to Selling Stockholder
   62
    Table of Contents  Registration Rights Agreement
  Accounting for Sale of Series B Convertible Redeemable Preferred Stock and Exchange of Note Payable
for Warrants
    Next Generation Product
   63
    Table of Contents  TM
   
    
    On June 30, 2004, the VMI license agreement converted to a nonexclusive license until
December 31, 2004 when it shall terminate.
    
    From the period beginning June 30, 2004 through December 31, 2004, the territory in
which the Company could market, sell and use the VMI system shall be reduced to the
following metropolitan areas: Los Angeles, California; Atlanta, Georgia; Dallas, Texas;
and Houston, Texas.
    
    On July 31, 2004, the Company shall no longer use the name, Minorplanet, nor any
derivative thereof, and shall remove and refrain from using any references to said name.
    
    The Company provided Minorplanet Limited, at no cost, 100 AEM 3000 VMI units to USA
specifications with accompanying special tariff SIMs for T-Mobile.
    
    Subsequent to December 31, 2004, the Company has the right to use the VMI software
internally for the sole purpose of satisfying its warranty, service and support obligations
to its existing VMI customer base.
    
    Minorplanet Limited was allowed a general unsecured claim in the amount of $1,000,000 in
Limiteds bankruptcy case no. 04-31202-SAF-11. On the Effective Date, Minorplanet Limited
released and waived its administrative claim and, as of such date, waived any future R&D
fees due under Section 16.4 of the VMI license agreement.
    
    The Company provided to Minorplanet Limited and Minorplanet UK a general release of any
and all claims which could have been asserted against Minorplanet Limited or Minorplanet UK
by the Company.
  64
    Table of Contents  Research and Development
  Critical Accounting Policies and Estimates
 Estimates Inherent in the Preparation of Financial Statements
   Fresh Start Accounting
  65
    Table of Contents  Revenue Recognition
    Allowance for Doubtful Accounts
  Inventory Valuation
  66
    Table of Contents  Valuation of Long-Lived Assets
   
    
    significant negative industry trends,
    
    significant changes in technology,
    
    significant underutilization of the asset, and
    
    significant changes in how the asset is used or is planned to be used.
 Intangible Assets
    67
    Table of Contents  Results of Operations
  Twelve Months Ended August 31, 2005, Compared to Twelve Months Ended August 31, 2004
      68
    Table of Contents  Twelve Months Ended August 31, 2004, Compared to Twelve Months Ended August 31, 2003
   69
    Table of Contents  70
    Table of Contents  nd
  Twelve Months Ended August 31, 2003, Compared to Twelve Months Ended August 31, 2002
     71
    Table of Contents  Liquidity and Capital Resources
   72
    Table of Contents  73
    Table of Contents  Reorganized
    
    
    Reorganized
    
    
    PredecessorCompany
    
    
    Company
    
    
    CompanyYear
    
    
    Two months
    
    
    Ten months
    
    
    Combined yearended
    
    
    ended
    
    
    ended
    
    
    endedAugust 31,
    
    
    August 31,
    
    
    June 30,
    
    
    August 31,2005
    
    
    2004
    
    
    2004
    
    
    2004(in thousands)Net cash used in operating activities
    
    $
    (5,022
    )
    
    $
    (1,023
    )
    
    $
    (1,789
    )
    
    $
    (2,812
    )Net cash provided by (used in) investing activities
    
    
    (962
    )
    
    
    (303
    )
    
    
    (548
    )
    
    
    (851
    )Cash flows from financing activities:Proceeds from issuance of Series A preferred
stock net of offering costs
    
    
    4,651Proceeds from issuance of note payable
    
    
    1,750
    
    
    
    2,000
    
    
    
    
    
    
    
    2,000Debt issuance costs
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    (80
    )Dividends paid on preferred stock
    
    
    (368
    )Common stock repurchased
    
    
    
    
    
    
    (1,860
    )
    
    
    
    
    
    
    (1,860
    )Other
    
    
    (858
    )
    
    
    (48
    )
    
    
    (142
    )
    
    
    (190
    )Net cash provided by (used in) financing activities
    
    
    5,175
    
    
    
    12
    
    
    
    (142
    )
    
    
    (130
    )Total change in cash
    
    
    (809
    )
    
    
    (1,314
    )
    
    
    (2,479
    )
    
    
    (3,793
    )Cash and cash equivalents, end of period
    
    $
    503
    
    
    $
    1,312
    
    
    $
    2,626
    
    
    $
    1,312
    
    
    Ability to raise a minimum of $4 million in additional
capital resources to fund ongoing operations through August 31, 2006.
    
    Ability to increase sales of the REDIview product line to lessen the amount of capital
resources necessary to fund our operations until such time that revenues from the REDIview
product line are sufficient to fund ongoing operations.
    
    Ability to complete development of additional features and functionality to the REDIview
product line.
    
    Significant market acceptance of the Companys product offerings from new customers,
including the Companys REDIview product line, in the United States.
    
    Maintaining and expanding our direct sales channel and expanding into new markets not
currently served by the Company.
    
    Hiring qualified salespersons. New salespersons will require training and time to
become productive. In addition, there is significant competition for qualified
salespersons, and training these persons requires a delay in time before they are
productive.
 74
    Table of Contents  
    
    Maintaining and expanding indirect distribution channels for the Companys REDIview
product line.
    
    Securing and maintaining adequate third party leasing sources for customers who purchase
the Companys products.
    pari passu
   Nasdaq Delisting Notification
  75
    Table of Contents  76
    Table of Contents  
    
    sales commissions payable to both the broker-dealer and the registered representative; and
    
    current quotations for the securities.
  Contractual Obligations
  Payments due by periodLess than 1
    
    
    
    
    
    
    
    
    
    More than 5Contractual Obligations
    
    Total
    
    Year
    
    1-3 Years



3-5 Years

    
    YearsNote Payable  SDS (a)
Principal Payments
    
    $
    1,750
    
    
    $
    1,750Interest Payments
    
    $
    36
    
    
    $
    36Long-Term Debt (b)
Principal Payments
    
    $
    2,000
    
    
    $
    
    
    
    $
    2,000
    
    
    $
    
    
    
    $
    Interest Payments
    
    
    460
    
    
    
    240
    
    
    
    220
    
    
    
    
    
    
    
    Capital Lease Obligations
    
    
    910
    
    
    
    479
    
    
    
    431
    
    
    
    
    
    
    
    Operating Leases
    
    
    1,802
    
    
    
    324
    
    
    
    628
    
    
    
    600
    
    
    
    250Other Notes Payable
    
    
    136
    
    
    
    136Purchase Obligations (c )
    
    
    1,865
    
    
    
    1,865
    
    
    
    
    
    
    
    
    
    
    
    Other Long-Term Liabilities (d)
    
    
    526
    
    
    
    246
    
    
    
    176
    
    
    
    96
    
    
    
    8Total
    
    $
    9,485
    
    
    $
    5,076
    
    
    $
    3,455
    
    
    $
    696
    
    
    $
    258
 77
    Table of Contents  (a)
    
    Convertible promissory note payable to SDS Capital Group SPC, Ltd. with the principal balance
being due in September of 2005. Interest is payable upon maturity based on an annual rate of
8%. The note is secured by a first lien on all of the assets of the Company pursuant to that
certain Security Agreement by and between SDS Capital Group SPC, Ltd. and the Company dated
May 31, 2005. The note subsequently exchanged into a
common stock purchase warrant with a 5-year term to purchase 1,666,667 shares of common stock at
an exercise price of $0.01 per share and a common stock purchase warrant with a 5-year term to
purchase 700,000 shares of common stock at an exercise price of $1.75 per share on September 2,
2005 (see Securities Purchase Agreement  Sale of Series B Preferred Stock under Item 3 of
this Form 10-K for additional information regarding exchange of the note payable for warrants).(b)
    
    Convertible promissory note payable to HFS Minorplanet Funding LLC with the principal balance
being due in July of 2007. Interest is payable monthly based on an annual rate of 12%.(c)
    
    Primarily includes obligations to purchase REDIview inventory.(d)
    
    Primarily includes obligations under priority tax claims allowed under the bankruptcy
proceedings and product warranty commitments.
 Impact of Recently Issued Accounting Standards
    78
    Table of Contents  ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  
 ITEM 9.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
 Change from Arthur Andersen to Deloitte & Touche LLP
  Change from Deloitte & Touche LLP to BDO Seidman LLP
  
 ITEM 9A. CONTROLS AND PROCEDURES
    79
    Table of Contents  ITEM 9B. OTHER INFORMATION
  80
    Table of Contents  PART III
 
 ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 Organization of the Board of Directors and Meetings
   Audit Committee
  Audit Committee Financial Expert
 Code of Ethics for Chief Executive Officer and Senior Financial Officers
 Nomination and Corporate Governance Committee
 Remote Dynamics Directors and Executive Officers
 DENNIS R. CASEY  Director since July 13, 2004, President, Chief Executive Officer and
Director (Principal Executive Officer) since January 30, 2004.
 81
    Table of Contents  STEPHEN CUUNJIENG  Director since July 13, 2004.
  THOMAS HONEYCUTT  Director since July 29, 2004.
  MATTHEW PETZOLD  Director since August 6, 2004.
  82
    Table of Contents  GREGG PRITCHARD  Director since July 2, 2004.
  GERRY C. QUINN  Director since June 22, 1995.
  Executive Officers
  DAVID H. BAGLEY  Senior Vice President of Networks & Engineering.
  83
    Table of Contents  J. RAYMOND BILBAO  Senior Vice President, General Counsel and Secretary.
  DENNIS R. CASEY  President, Chief Executive Officer and Director (Principal Executive
Officer).
  W. MICHAEL SMITH  Executive Vice President, Chief Operating Officer, Chief Financial Officer
and Treasurer (Principal Accounting Officer and Principal Financial Officer).
  84
    Table of Contents  Indemnification of Directors and Officers
   
    
    in good faith in a manner the indemnified person reasonably believed to be in or not
opposed to the best interests of the Company; or
    
    with respect to criminal proceedings, not unlawful.
  Section 16(a) Beneficial Ownership Reporting Compliance
   85
    Table of Contents  ITEM 11. EXECUTIVE COMPENSATION
 Compensation of Directors
  Compensation of Certain Executive Officers
 Summary Compensation Table
  Long TermAnnual
    
    CompensationCompensation
    
    AwardsSecuritiesOther Annual
    
    UnderlyingName and
    
    
    
    
    
    Salary
    
    Bonus
    
    Compensation
    
    Options/Principal Position
    
    Year
    
    (Dollars)
    
    (Dollars)
    
    (Dollars)
    
    SARs (shares)Dennis R. Casey (1)
    
    
    2005
    
    
    $
    225,000
    
    
    
    
    
    
    
    
    
    
    
    President and Chief Executive Officer
    
    
    2004
    
    
    
    121,311
    
    
    $
    25,000
    
    
    $
    73,500
    (2)
    
    
    for Remote Dynamics (Principal
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Executive Officer)W. Michael Smith
    
    
    2005
    
    
    $
    200,000
    
    
    
    
    
    
    
    
    
    
    
    Executive Vice President, Chief
    
    
    2004
    
    
    
    182,107
    
    
    
    
    
    
    $
    49,000
    (3)
    
    
    Financial Officer, Chief Operating
    
    
    2003
    
    
    
    178,600
    
    
    
    
    
    
    
    
    
    
    
    Officer and Treasurer for Remote
Dynamics (Principal Accounting and
Financial Officer)J. Raymond Bilbao
    
    
    2005
    
    
    $
    200,000
    
    
    
    
    
    
    $
    49,000
    (4)
    
    
    Senior Vice President, General
    
    
    2004
    
    
    
    182,019
    
    
    
    
    
    
    
    
    
    
    
    Counsel and Secretary for Remote
    
    
    2003
    
    
    
    178,500
    
    
    
    
    
    
    
    
    
    
    
    DynamicsJoseph Pollard
    
    
    2005
    
    
    $
    200,000
    
    
    
    
    
    
    
    
    
    
    
    Senior Vice President Sales and
    
    
    2004
    
    
    
    19,354
    
    
    
    
    
    
    $
    164,000
    (5)
    
    
    Marketing for Remote Dynamics
    
    
    2003
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    David Bagley
    
    
    2005
    
    
    $
    141,700
    
    
    
    
    
    
    $
    67,500
    (6)
    
    
    Senior Vice President, Networks &
    
    
    2004
    
    
    
    128,800
    
    
    
    
    
    
    
    
    
    
    
    Engineering for Remote Dynamics
    
    
    2003
    
    
    
    128,800
    
    
    
    
    
    
    
    
    
    
    
    
 
 (1)
    
    Mr. Casey became President and Chief Executive Officer of Remote Dynamics effective January
30, 2004.(2)
    
    As of August 31, 2005, Mr. Casey held 150,000 shares of restricted stock with a value of
$150,000. The restricted stock vests pursuant to the achievement of certain performance
objectives. As of August 31, 2005, none of the 150,000 restricted shares were vested. Pursuant
to the 2004 Restated Management Incentive Plan, if cash dividends are paid by the Company on
shares of common stock, the Company shall credit to a bookkeeping account in the name of the
Mr. Casey the amount of cash dividends payable on his shares of restricted stock. Mr. 86
    Table of Contents  Caseys
dividend account associated with his or her shares of restricted stock shall become vested and
payable in cash on the date his shares of restricted stock vest. See the 2004 Restated
Management Incentive Plan for additional details regarding the vesting requirements.(3)
    
    As of August 31, 2005, Mr. Smith held 100,000 shares of restricted stock with a value of
$100,000. The restricted stock vests pursuant to the achievement of certain performance
objectives. As of August 31, 2005, none of the 100,000 restricted shares were vested. Pursuant
to the 2004 Restated Management Incentive Plan, if cash dividends are paid by the Company on
shares of common stock, the Company shall credit to a bookkeeping account in the name of the
Mr. Smith the amount of cash dividends payable on his shares of restricted stock. Mr. Smiths
dividend account associated with his or her shares of restricted stock shall become vested and
payable in cash on the date his shares of restricted stock vest. See the 2004 Restated
Management Incentive Plan for additional details regarding the vesting requirements.(4)
    
    As of August 31, 2005, Mr. Bilbao held 100,000 shares of restricted stock with a value of
$100,000. The restricted stock vests pursuant to the achievement of certain performance
objectives. As of August 31, 2005, none of the 100,000 restricted shares were vested. Pursuant
to the 2004 Restated Management Incentive Plan, if cash dividends are paid by the Company on
shares of common stock, the Company shall credit to a bookkeeping account in the name of the
Mr. Bilbao the amount of cash dividends payable on his shares of restricted stock. Mr.
Bilbaos dividend account associated with his or her shares of restricted stock shall become
vested and payable in cash on the date his shares of restricted stock vest. See the 2004
Restated Management Incentive Plan for additional details regarding the vesting requirements.(5)
    
    As of August 31, 2005, Mr. Pollard held 100,000 shares of restricted stock with a value of
$100,000. The restricted stock vests pursuant to the achievement of certain performance
objectives. As of August 31, 2005, none of the 100,000 restricted shares were vested. Pursuant
to the 2004 Restated Management Incentive Plan, if cash dividends are paid by the Company on
shares of common stock, the Company shall credit to a bookkeeping account in the name of the
Mr. Pollard the amount of cash dividends payable on his shares of restricted stock. Mr.
Pollards dividend account associated with his shares of restricted stock shall become vested
and payable in cash on the date his shares of restricted stock vest. See the 2004 Restated
Management Incentive Plan for additional details regarding the vesting requirements. Mr. Pollard resigned as of December 6, 2005.(6)
    
    As of August 31, 2005, Mr. Bagley held 75,000 shares of restricted stock with a value of
$75,000. The restricted stock vests pursuant to the achievement of certain performance
objectives. As of August 31, 2005, none of the 75,000 restricted shares were vested. Pursuant
to the 2004 Restated Management Incentive Plan, if cash dividends are paid by the Company on
shares of common stock, the Company shall credit to a bookkeeping account in the name of the
Mr. Bagley the amount of cash dividends payable on his shares of restricted stock. Mr.
Bagleys dividend account associated with his shares of restricted stock shall become vested
and payable in cash on the date his shares of restricted stock vest. See the 2004 Restated
Management Incentive Plan for additional details regarding the vesting requirements. 2004 Restated Management Incentive Plan
  
    
    One third of the restricted shares granted will vest upon the execution by the
Company of an agreement with the member companies of SBC Communications, Inc. for the
retrofit of SBCs fleet of service vehicles at the substantially similar volumes and
profit margins as set forth in the May 20, 2004 Report to the Official Unsecured Creditors Committee;
    
    One third of the restricted shares granted will vest upon the completion by the
Company of three consecutive fiscal quarters in which the Company achieves positive
earnings before interest, depreciation, taxes and amortization on or before January 2,
2007; and
    
    One third of the restricted shares granted vest upon the completion by the Company
of four
 87
    Table of Contents  consecutive fiscal quarters in which the Company achieves net income on or
before July 2, 2007.
  Savings Plan
 Employment Agreements
  
    
    David Bagley;
    
    Dennis R. Casey;
    
    J. Raymond Bilbao; and
    
    W. Michael Smith.
   
    
    the salary earned by the executive officer before the effective date of termination
hereof (including salary payable during any applicable notice period), prorated on the
basis of the number of full days of service rendered by the executive officer during
the salary payment period to the effective date of termination;
    
    any accrued, but unpaid, vacation benefits;
    
    the percentage of bonus compensation earned by the executive officer prior to the
effective date of the termination based upon targets achieved prior to the effective
date of termination; and
    
    any previously authorized but unreimbursed business expenses.
  
    
    a cash payment equal to twelve months of base salary for the executive officer;
    
    continued medical insurance benefits at the Companys expense for a period of twelve months;
 88
    Table of Contents  
    
    acceleration of vesting of restricted stock grants.
 
    
    Specifically, in the event that (i) the Company terminates the employment
relationship with the executive officer for a reason other than cause or due to the
executive officers death (other than by suicide) or permanent disability; or (ii)
the executive officer terminates his employment relationship with the Company for
Good Reason following a Change in Control, then in addition to any other
compensation and benefits due to the executive officer under the employment
agreement, all restricted shares previously vested at the time of termination shall
be retained by the executive officer, and fifty percent of the restricted shares
not yet vested at the time of termination shall vest as of the date of termination;
provided that, if it is no longer possible to earn such unvested restricted shares,
then the executive officer shall not be entitled to receive fifty percent of the
restricted shares that are no longer possible to become vested.
   
    
    the reduction of the employees job title, position or responsibilities without the
executive officers prior written consent;
    
    the change of the location where the executive officer is based to a location which
is more than fifty (50) miles from his present location without the executive officers
prior written consent; or
    
    the reduction of the executive officers annual salary and bonus by more than 10%
from the sum of the higher rate of the executive officers actual annual salary and
bonus in effect within two years immediately preceding the Change of Control.
  
    
    the subsequent acquisition by any person or group of 35% or more of the Companys
securities;
    
    during any two year period, the members of the board of directors of the Company at
the beginning of the period cease to constitute a majority of the board of directors of
the Company unless the election or nomination of new directors by the stockholders was
approved by 2/3 of directors still in office who were either directors at the beginning
of the period or whose election or nomination for election was previously so approved;
    
    a merger of the Company; other than a merger in which the stockholders of the
Company maintain more than 80% of the voting control in the surviving entity or a
merger effected as part of a recapitalization of the Company in which no person
acquires more than 35% of the voting securities then outstanding; and/or
    
    the approval by the stockholders of the complete liquidation of the Company or the
sale of substantially all of the assets of the Company.
  Dennis R. Casey
 89
    Table of Contents  W. Michael Smith
 J. Raymond Bilbao .
 David Bagley .
 90
    Table of Contents  COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
   Equity Compensation Plan and Other
  (a)
    
    (b)
    
    (c)Number of securitiesremaining available forNumber of securities to be
    
    Weighted average
    
    future issuance under equityissued upon exercise of
    
    exercise price of
    
    compensation plansoutstanding options,
    
    outstanding options,
    
    (excluding securitiesPlan Category
    
    warrants and rights
    
    warrants, and rights
    
    reflected in column (a))Equity compensation
plans approved by
security holders
    
    
    525,000
    
    
    $
    
    
    
    
    175,000Equity compensation
plans not approved
by security holders
    
    
    
    
    
    
    
    
    
    
    525,000
    
    
    
    
    
    
    
    175,000
  
 ITEM 12.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER
MATTERS
  
    
    each stockholder who is known by Remote Dynamics to own more than five percent (5%)
of our outstanding common stock;
    
    each director;
    
    each executive officer; and
    
    all directors and executive officers as a group.
  91
    Table of Contents  Number of Shares of
    
    Percent of ClassCommon Stock Beneficially
    
    BeneficiallyName of Holder
    
    Owned
    
    OwnedMackay Shields LLC
9 West 57th Street
New York, NY 10019
    
    
    663,374
    
    
    
    9.1
    %Gerry C. Quinn (Director)
    
    
    0
    
    
    
    0Dennis R. Casey (Officer & Director) (2)
    
    
    217,980
    
    
    
    3.0
    %Thomas Honeycutt (Director) (3)
    
    
    74,241
    
    
    
    1.0
    %Matthew Petzold (Director)
    
    
    0
    
    
    
    0Gregg Pritchard (Director)
    
    
    0
    
    
    
    0Stephen CuUnjieng (Director) (4)
    
    
    689,655
    
    
    
    8.6
    %David H. Bagley (Officer) (1)
    
    
    75,000
    
    
    
    1.0
    %J. Raymond Bilbao (Officer) (1)
    
    
    100,000
    
    
    
    1.4
    %W. Michael Smith (Officer) (1)
    
    
    100,000
    
    
    
    1.4
    %Neil Read (1)
    
    
    20,000
    
    
    
    *Scott Broudy (1)
    
    
    20,000
    
    
    
    *All directors and officers as a group
(11 persons) (5)
    
    
    1,279,635
    
    
    
    16.1
    %
 
 *
    
    Less than 1%(1)
    
    These shares of common stock have been issued and registered in the name of this
individual but the transfer of such shares of common stock is prohibited until certain
performance objectives are achieved by the individual.(2)
    
    This individual owns 67,980 shares and the remaining 150,000 shares of common stock have been
issued and registered in the name of this individual but the transfer of such shares of common
stock is prohibited until certain performance objectives are achieved by the individual.(3)
    
    This individual owns 57,000 shares and is deemed to jointly beneficially own with Mr.
CuUnjieng an additional 17,241 shares issuable upon conversion of a convertible promissory
note issued by Remote Dynamics.(4)
    
    This individual does not actually own any shares but is deemed to beneficially own an
additional 689,655 shares issuable upon conversion of a convertible promissory note issued by
Remote Dynamics.(5)
    
    All directors and officers (11 persons) collectively own 589,980 shares of common stock and
are deemed to beneficially own an additional 689,655 shares. 
 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 VMI License Amendment & Repurchase Option
  92
    Table of Contents  
    
    Minorplanet UK irrevocably waived the approval rights, including the right to appoint
members to the Companys Board of Directors, as such rights were provided for in that
certain Stock Purchase and Exchange Agreement dated February 14, 2001 and the Companys
second amended and restated bylaws;
    
    Minorplanet UK waived $1.8 million of accrued executive consulting fees that it had
previously billed to the Company.
    
    The exclusive License and Distribution Agreement, which grants to the Companys United
Kingdom-based subsidiary a 99-year, royalty-free, exclusive right and license to market,
sell and commercially exploit the VMI technology in the United States, Canada and Mexico,
was amended to grant Minorplanet UK, or its designee, the right to market and sell the VMI
technology, on a non-exclusive basis, in the Northeast region of the United States. The
Company retained the right to market and sell the VMI technology under the Minorplanet name
and logo in this Northeast region.
    
    Minorplanet UK obtained anti-dilution rights from the Company, under which it had the
right to subscribe for and to purchase at the same price per share as the offering or
private sale, that number of shares necessary to maintain the lesser of (i) the percentage
holdings of the Companys stock on the date of subscription or (ii) 19.9 percent of the
Companys issued and outstanding common stock.
  VMI License Settlement
  
    
    On June 30, 2004, the VMI license agreement converted to a nonexclusive license
until December 31, 2004, at which time it terminates;
    
    From the period beginning June 30, 2004 through December 31, 2004, the territory in
which the Company may market, sell and use the VMI system was reduced to the following
metropolitan areas: Los Angeles, California; Atlanta, Georgia; Dallas, Texas and
Houston, Texas;
    
    As of July 31, 2004, the Company is no longer permitted to use the name,
Minorplanet;
 93
    Table of Contents  
    
    The Company was required to provide Minorplanet Limited, at no cost, 100 VMI units
with T-Mobile special tariff SIM cards;
    
    Subsequent to December 31, 2004, the Company has the right to use the VMI software
internally only for the sole purpose of satisfying its warranty, service and support
obligations to its existing VMI customer base; and
    
    Minorplanet Limited was allowed a general unsecured claim of $1,000,000, and it
released and waived its administrative claim and waived any future research and
development fees due under the VMI license agreement.
   Exit Financing
     94
    Table of Contents  ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
  Fiscal Year Ended August 31,2005
    
    2004Audit fees
    
    $
    113,171
    
    
    $
    163,474Audit-related fees (a)Tax fees (b)
    
    
    27,900
    
    
    
    10,000All other fees (c)
    
    
    16,500
    
    
    
    16,700
 
 (a)
    
    Audit-related fees primarily include research services to validate certain
accounting policies of the Company.(b)
    
    Tax fees include costs for the preparation of the Companys corporate income
tax return.(c)
    
    Other fees include billings for services provided for the audit of financial
statements filed in the United Kingdom by the Companys 100% owned subsidiary,
Minorplanet Systems USA Limited, which was merged into the Company and ceased to exist
as a separate entity as of the July 2, 2004 effective date of the Companys
Reorganization Plan.  95
    Table of Contents  PART IV
 
 ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
 Page Number(a)      Documents filed as part of the report:(1) Report of Independent Registered Public Accounting Firm
    
    
    F-1Report of Previous Independent Auditors
    
    
    F-2Consolidated Balance Sheets as of August 31, 2005 and August 31, 2004
    
    
    F-4Consolidated Statements of Operations for the Year Ended August 31, 2005,
Two Months Ended August 31, 2004, the Ten Months Ended June 30, 2004,
and the Year Ended August 31, 2003
    
    
    F-5Consolidated Statements of Cash Flows for the Year Ended August 31, 2005,
Two Months Ended August 31, 2004, the Ten Months Ended June 30, 2004,
and the Year Ended August 31, 2003
    
    
    F-6Consolidated Statements of Changes in Stockholders Equity (Deficit) for the
Year Ended August 31, 2005, the Two Months Ended August 31, 2004,
the Ten Months Ended June 30, 2004, and the Year Ended August 31, 2003
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8(2) Financial Statement SchedulesIndependent Auditors Report on Supplemental Financial Statement Schedule, Valuation
and Qualifying Accounts
    
    
    S-1Report of Previous Independent Auditors on Financial Statement Schedule
    
    
    S-2Schedule II-Valuation and Qualifying Accounts
    
    
    S-3
  96
    Table of Contents  EXHIBITNUMBER
    
    
    
    TITLE2.1
    
    -
    
    Stock Purchase and Exchange Agreement by and between the Company,
Minorplanet Systems PLC and Mackay Shields LLC, dated February 14,
2001 (14)2.2
    
    -
    
    Asset Purchase Agreement by and between the Company and Aether
Systems, Inc. dated March 15, 2002 (15)2.3
    
    -
    
    Findings and Fact, Conclusions of Law and Order Confirming Companys
Third Amended Joint Plan of Reorganization and Approving Settlement
of Companys Amended Motion for Valuation (22)2.4
    
    -
    
    Securities Purchase Agreement by and between the Company and SDS
Capital Group SPC, Ltd. dated October 1, 2004 (24)2.5
    
    -
    
    Registration Rights Agreement by and between the Company and SDS
Capital Group SPC, Ltd. dated October 1, 2004 (24)2.6
    
    -
    
    Stock Purchase Warrant issued to SDS Capital Group SPC, Ltd. on
October 1, 2004 for purchase of 1,000,000 shares of common stock
(24)2.7
    
    -
    
    Stock Purchase Warrant issued to SDS Capital Group SPC, Ltd. on
October 1, 2004 for purchase of 625,000 shares of common stock (24)2.8
    
    -
    
    Securities Purchase Agreement by and between the Company and SDS
Capital Group SPC, Ltd. dated May 31, 2005 (27)2.9
    
    -
    
    Registration Rights Agreement by and between the Company and SDS
Capital Group SPC, Ltd. dated September 2, 2005 (29)2.10
    
    -
    
    Stock Purchase Warrant issued to SDS Capital Group SPC, Ltd. on
September 2, 2005 for purchase of 2,000,000 shares of common stock
(29)2.11
    
    -
    
    Stock Purchase Warrant issued to SDS Capital Group SPC, Ltd. on
September 2, 2005 for purchase of 1,666,667 shares of common stock
(29)2.12
    
    -
    
    Stock Purchase Warrant issued to SDS Capital Group SPC, Ltd. on
September 2, 2005 for purchase of 700,000 shares of common stock
(29)3.1
    
    -
    
    Amended and Restated Certificate of Incorporation of the Company (23)3.2
    
    -
    
    Third Amended and Restated By-Laws of the Company (26)4.1
    
    -
    
    Specimen of certificate representing Common Stock, $.01 par value,
of the Company (1)4.2
    
    -
    
    Certificate of Designation, Preferences and Rights, Series A
Convertible Preferred Stock of Remote Dynamics, Inc. filed with
Secretary of State of Delaware on October 1, 2004 (24)4.3
    
    -
    
    Certificate of Designation, Preferences and Rights, Series B
Convertible Preferred Stock of Remote Dynamics, Inc. filed with
Secretary of State of Delaware on September 1, 2005 (29)10.1
    
    -
    
    Exclusive License and Distribution Agreement by and between
Minorplanet Limited, (an @Track subsidiary) and Mislex (302)
Limited, dated June 21, 2001 (13)10.2
    
    -
    
    Product Development Agreement, dated December 21, 1995, between
HighwayMaster Corporation and IEX Corporation (2)(3)10.3
    
    -
    
    Lease Agreement, dated March 20, 1998, between HighwayMaster
Corporation and Cardinal Collins Tech Center, Inc. (4)10.4
    
    -
    
    Agreement No. 980427 between Southwestern Bell Telephone Company,
Pacific Bell, Nevada Bell, Southern New England Telephone and
HighwayMaster Corporation executed on January 13, 1999 (6)(7)10.5
    
    -
    
    Administrative Carrier Agreement entered into between HighwayMaster
Corporation and Southwestern Bell Mobile Systems, Inc. on March 30,
1999 (6)(7)
 97
    Table of Contents  EXHIBITNUMBER
    
    
    
    TITLE10.6
    
    -
    
    Addendum to Agreement entered into between HighwayMaster Corporation
and International Telecommunications Data Systems, Inc. on February
4, 1999 (6)(7)10.7
    
    -
    
    Second Addendum to Agreement entered into between HighwayMaster
Corporation and International Telecommunications Data Systems, Inc.
on February 4, 1999 (6)(7)10.8
    
    -
    
    Fleet-on-Track Services Agreement entered into between GTE
Telecommunications Services Incorporated and HighwayMaster
Corporation on May 3, 1999 (8)(9)10.9
    
    -
    
    Limited Liability Company Agreement of HighwayMaster of Canada, LLC
executed March 3, 2000 (10)10.10
    
    -
    
    Monitoring Services Agreement dated May 25, 2000, by and between the
Company and Criticom International Corporation (11) (12)10.11
    
    -
    
    Agreement No. 980427-03, dated January 31, 2002 between SBC
Ameritech, SBC Pacific Bell, SBC Southern New England Telephone, SBC
Southwestern Bell Telephone, L.P. and the Company (16) (17)10.12
    
    -
    
    Addendum dated September 26, 2002 to Exclusive License and
Distribution Agreement (18)10.13
    
    -
    
    Irrevocable Waiver and Consent to Amendment to Bylaws of certain
rights executed by Minorplanet Systems PLC, dated October 6, 2003
(19)10.14
    
    -
    
    Variation Agreement to Exclusive License and Distribution Agreement
by and between Minorplanet Limited, as Licensor, and Minorplanet
Systems USA, Limited, as Licensee, dated October 6, 2003 (19)10.15
    
    
    
    Amendment No. 3 to Agreement No. 980427-03 by and between
Minorplanet Systems USA, Inc. and SBC Services, Inc. dated January
21, 2004 (21)10.16
    
    -
    
    Amendment No. 5 to Agreement No. 980427-03 by and between Remote
Dynamics, Inc. and SBC Services, Inc. dated October 8, 2004 (25)10.17
    
    -
    
    Third Amendment to Lease Agreement between the Company and Cardinal
Collins Tech Center, Inc. dated July 1, 2004 (26)10.18
    
    -
    
    Employment Agreement between the Company and Dennis R. Casey dated
July 2, 2004 (26)10.19
    
    -
    
    Employment Agreement between the Company and W. Michael Smith dated
July 2, 2004 (26)10.20
    
    -
    
    Employment Agreement between the Company and J. Raymond Bilbao dated
July 2, 2004 (26)10.21
    
    -
    
    Employment Agreement between the Company and Joseph W. Pollard dated
July 26, 2004 (26)10.22
    
    -
    
    Restricted Stock Agreement between the Company and Dennis R. Casey
dated July 2, 2004 (26)10.23
    
    -
    
    Restricted Stock Agreement between the Company and W. Michael Smith
dated July 2, 2004 (26)10.24
    
    -
    
    Restricted Stock Agreement between the Company and J. Raymond Bilbao
dated July 2, 2004 (26)10.25
    
    -
    
    Restricted Stock Agreement between the Company and Joseph W. Pollard
dated July 26, 2004 (26)10.26
    
    -
    
    Employment Agreement between the Company and David Bagley dated
September 17, 2004 (26)10.27
    
    -
    
    Restricted Stock Agreement between the Company and David Bagley
dated September 17, 2004 (26)10.28
    
    -
    
    2004 Restated Management Incentive Plan (26)10.29
    
    -
    
    Secured Promissory Note issued by the Company to SDS Capital Group
SPC, Ltd. dated May 31, 2005 (27)10.30
    
    -
    
    Security Agreement by and between the Company and SDS Capital Group
SPC, Ltd. dated May 31, 2005 (27)11.0
    
    -
    
    Statement Regarding Computation of Per Share Earnings (30)14.1
    
    -
    
    Code of Ethics for Senior Financial Officers approved by the Board
of Directors
 98
    Table of Contents  EXHIBITNUMBER
    
    
    
    TITLEof the Company on November 7, 2003 (20)16.1
    
    -
    
    Letter from Arthur Andersen to the SEC (Omitted pursuant to Item
304T of Regulation S-K)21.1
    
    -
    
    Subsidiaries of Registrant (30)23.1
    
    -
    
    Consent of Independent Registered
Public Accounting Firm (30)23.2
    
    -
    
    Consent of Independent Registered
Public Accounting Firm (Prior Auditor) (30)31.1
    
    -
    
    Certification Pursuant to Section 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002, by Dennis R. Casey, President and
Chief Executive Officer (Principal Executive Officer) (30)31.2
    
    -
    
    Certification Pursuant to Section 13a-15(e) and 15d-15(e) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302
of the Sarbanes-Oxley Act of 2002, by W. Michael Smith, Executive
Vice President, Chief Operating Officer, Chief Financial Officer and
Treasurer (Principal Financial and Accounting Officer) (30)32.1
    
    -
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by Dennis
R. Casey, President and Chief Executive Officer (Principal Executive
Officer) (30)32.2
    
    -
    
    Certification Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, by W.
Michael Smith, Executive Vice President, Chief Operating Officer,
Chief Financial Officer and Treasurer (Principal Financial and
Accounting Officer) (30)99.1
    
    -
    
    Amended and Restated Audit Committee Charter approved by Audit
Committee of the Board of Directors of the Company on November 18,
2003 (20)
 
 1.
    
    Filed in connection with the Companys Registration Statement
on Form S-1, as amended (No. 33-91486), effective June 22, 1995.2.
    
    Filed in connection with the Companys Annual Report on Form
10-K for the fiscal year ended December 31, 1995.3.
    
    Certain confidential portions deleted pursuant to Application
for Confidential Treatment filed in connection with the Companys Annual Report
on Form 10-K for the fiscal year ended December 31, 1995.4.
    
    Filed in connection with the Companys Form 10-Q Quarterly
Report for the quarterly period ended September 30, 1998.5.
    
    Filed in connection with the Companys Form 10-K fiscal year
ended December 31, 1998.6.
    
    Filed in connection with the Companys Form 10-Q Quarterly
Report for the quarterly period ended March 31, 1999.7.
    
    Certain confidential portions deleted pursuant to Order
Granting Application for Confidential Treatment issued June 22, 1999 in
connection with the Companys Form 10 Q Quarterly Report for the quarterly
period ended March 31, 1999.8.
    
    Filed in connection with the Companys Form 10-Q Quarterly
Report for the quarterly period ended June 30, 1999.9.
    
    Certain confidential portions deleted pursuant to letter
granting application for confidential treatment issued October 10, 1999 in
connection with the Companys Form 10-Q Quarterly Report for the quarterly
period ended June 30, 1999.10.
    
    Filed in connection with the Companys Form 10-Q Quarterly
Report for the quarterly period ended March 31, 2000.11.
    
    Certain confidential portions deleted pursuant to Order
Granting Application for Confidential Treatment issued December 5, 2000 in
connection with the Companys Form 10 Q Quarterly Report for the quarterly
period ended June 30, 2000.12.
    
    Filed in connection with the Companys Form 10-Q Quarterly
Report for the quarterly period ended June 30, 2000.13.
    
    Filed in connection with Companys Current Report on Form 8-K
filed with SEC on June 29, 2001.14.
    
    Filed as Appendix A to the Companys Definitive Proxy Statement
on Schedule 14A filed with the SEC on May 11, 2001. 99
    Table of Contents  15.
    
    Filed in connection with the Companys Current Report on Form
8-K filed with the SEC on March 27, 2002. Certain confidential portions deleted
pursuant to Order Granting Application for Confidential Treatment issued in
connection with the Companys Current Report on Form 8-K filed with the SEC on
March 27, 2002.16.
    
    Filed in connection with the Companys Form 10-Q Quarterly
Report for the quarterly period ended March 31, 2002.17.
    
    Certain confidential portions deleted pursuant to Order
Granting Application for Confidential Treatment issued in connection with the
Companys Quarterly Report on Form 10-Q for the quarterly period ended March
31, 2002.18.
    
    Filed in connection with the Companys Form 10-Q Quarterly
Report for the quarterly period ended November 30, 2002.19.
    
    Filed in connection with the Companys Current Report on Form
8-K filed with the SEC on August 27, 2003.20.
    
    Filed in connection with Companys Form 10-K Annual Report for
the year ended August 31, 2003.21.
    
    Filed in connection with the Companys Form 10-Q Quarterly
Report for the quarterly period ended February 29, 2004.22.
    
    Filed in connection with Companys Current Report on Form 8-K
with SEC on June 23, 2004.23.
    
    Filed in connection with the Companys Form 10-Q Quarterly
Report for the quarterly period ended May 31, 2004.24.
    
    Filed in connection with the Companys Current Report on Form
8-K with SEC on October 4, 2004.25.
    
    Filed in connection with the Companys Current Report on Form
8-K with SEC on October 13, 2004.26.
    
    Filed in connection with Companys Annual Report on Form 10-K
for the fiscal year ended August 31, 2004.27.
    
    Filed in connection with the Companys Current Report on Form
8-K with SEC on June 6, 2005.28.
    
    Filed in connection with the Companys Form 10-Q Quarterly
Report for the quarterly period ended May 31, 2005.29.
    
    Filed in connection with the Companys Current Report on Form
8-K with SEC on September 7, 2005.30.
    
    Filed herewith. 100
    Table of Contents  SIGNATURES
   REMOTE DYNAMICS, INC.By:
    /s/ Dennis R. CaseyDennis R. CaseyPresident and Chief Executive Officer
(Principal Executive Officer) 101
    Table of Contents  SIGNATURES
  Signature
    
    Title
    
    Date/s/ Dennis R. Casey

Dennis R. Casey
    
    Chief Executive Officer and Director (Principal
Executive Officer)
    
    December 14, 2005/s/W. Michael Smith

W. Michael Smith
    
    Executive Vice President, Chief
Operating Officer, Chief Financial
Officer, and Treasurer (Principal
Financial and Accounting Officer)
    
    December 14, 2005/s/Gregg Pritchard

Gregg Pritchard
    
    Director
    
    December 14, 2005/s/Gerry C. Quinn

Gerry C. Quinn
    
    Director
    
    December 14, 2005/s/Thomas Honeycutt

Thomas Honeycutt
    
    Director
    
    December 14, 2005/s/Stephen CuUnjieng

Stephen CuUnjieng
    
    Director
    
    December 14, 2005/s/Matthew Petzold

Matthew Petzold
    
    Director
    
    December 14, 2005
 102
    Table of Contents  Report of Independent Registered Public Accounting Firm
 
     /s/ BDO Seidman, LLP
  
 F-1
    Table of Contents  REPORT OF PREVIOUS INDEPENDENT AUDITORS
 
       F-2
    Table of Contents  F-3
    Table of Contents  Reorganized
    
    
    ReorganizedCompany
    
    
    CompanyAugust 31,
    
    
    August 31,2005
    
    
    2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    503
    
    
    $
    1,312Restricted cash
    
    
    
    
    
    
    439Accounts receivable, net of allowance for doubtful accounts
of $197 and $162, respectively
    
    
    2,695
    
    
    
    2,700Inventories
    
    
    791
    
    
    
    674Deferred product costs  current portion
    
    
    950
    
    
    
    980Lease receivables and other current assets, net
    
    
    632
    
    
    
    987Total current assets
    
    
    5,571
    
    
    
    7,092Property and equipment, net of accumulated depreciation
and amortization of $1,565 and $180 respectively
    
    
    3,743
    
    
    
    4,283Deferred product costs  non-current portion
    
    
    1,007
    
    
    
    1,085Goodwill
    
    
    10,120
    
    
    
    19,724License right, net
    
    
    580
    
    
    
    1,207Other intangibles, net
    
    
    271
    
    
    
    1,085Lease receivables and other assets, net
    
    
    414
    
    
    
    1,280Total assets
    
    $
    21,706
    
    
    $
    35,756LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,557
    
    
    $
    2,167Deferred product revenues  current portion
    
    
    2,038
    
    
    
    2,374Note payable  SDS
    
    
    1,750
    
    
    
    Accrued expenses and other current liabilities
    
    
    2,083
    
    
    
    5,335Total current liabilities
    
    
    7,428
    
    
    
    9,876Deferred product revenues  non-current portion
    
    
    2,112
    
    
    
    3,174Other notes payable
    
    
    423
    
    
    
    741Note payable  HFS
    
    
    2,000
    
    
    
    2,000Other non-current liabilities
    
    
    300
    
    
    
    466Total liabilities
    
    
    12,263
    
    
    
    16,257Commitments and contingencies (Note 16)Redeemable Preferred Stock  Series A, $0.01 par value, 2,000,000 shares
authorized, 5,000 shares issued and outstanding at August 31, 2005
    
    
    3,542
    
    
    
    Stockholders equity:Common stock, $0.01 par value, 50,000,0000 shares authorized, 8,255,785
shares issued and 7,325,937 outstanding at August 31, 2005;50,000,000 shares authorized, 7,450,000 shares issued and 6,520,052
shares outstanding at August 31, 2004
    
    
    83
    
    
    
    75Preferred Stock, $0.01 par value, 2,000,000 shares authorized at August 31, 2005 and
2004; no shares issued and outstanding at August 31, 2005 and 2004
    
    
    
    
    
    
    Treasury stock, 929,948 shares at August 31, 2005 and 2004 at cost
    
    
    (1,860
    )
    
    
    (1,860
    )Additional paid-in capital
    
    
    24,775
    
    
    
    22,297Deferred stock compensation
    
    
    (525
    )
    
    
    (472
    )Accumulated deficit
    
    
    (16,572
    )
    
    
    (541
    )Total stockholders equity
    
    
    5,901
    
    
    
    19,499Total liabilities and stockholders equity
    
    $
    21,706
    
    
    $
    35,756
  F-4
    Table of Contents  Reorganized Company
    
    
    Predecessor CompanyTwo months
    
    
    Ten monthsYear ended
    
    
    ended
    
    
    ended
    
    
    Year endedAugust 31,
    
    
    August 31,
    
    
    June 30,
    
    
    August 31,2005
    
    
    2004
    
    
    2004
    
    
    2003RevenuesProduct
    
    $
    920
    
    
    $
    209
    
    
    $
    1,066
    
    
    $
    2,319Ratable product
    
    
    2,538
    
    
    
    574
    
    
    
    4,489
    
    
    
    9,837Service
    
    
    12,914
    
    
    
    2,439
    
    
    
    14,430
    
    
    
    32,755Total revenues
    
    
    16,372
    
    
    
    3,222
    
    
    
    19,985
    
    
    
    44,911Cost of revenuesProduct
    
    
    868
    
    
    
    49
    
    
    
    911
    
    
    
    1,953Ratable product
    
    
    1,362
    
    
    
    240
    
    
    
    2,094
    
    
    
    6,871Service
    
    
    5,968
    
    
    
    1,217
    
    
    
    7,470
    
    
    
    17,508Total cost of revenues
    
    
    8,198
    
    
    
    1,506
    
    
    
    10,475
    
    
    
    26,332Gross profit
    
    
    8,174
    
    
    
    1,716
    
    
    
    9,510
    
    
    
    18,579Expenses:General and administrative
    
    
    4,863
    
    
    
    914
    
    
    
    5,767
    
    
    
    9,456Customer service
    
    
    1,521
    
    
    
    337
    
    
    
    1,939
    
    
    
    3,988Sales and marketing
    
    
    3,186
    
    
    
    294
    
    
    
    2,079
    
    
    
    11,632Engineering
    
    
    1,319
    
    
    
    183
    
    
    
    1,593
    
    
    
    1,800Depreciation and amortization
    
    
    2,700
    
    
    
    393
    
    
    
    3,451
    
    
    
    5,626Impairment loss on license right
    
    
    201
    
    
    
    
    
    
    
    28,759
    
    
    
    Goodwill impairment
    
    
    9,604
    
    
    
    
    
    
    
    
    
    
    
    23,394
    
    
    
    2,121
    
    
    
    43,588
    
    
    
    32,502Operating loss
    
    
    (15,220
    )
    
    
    (405
    )
    
    
    (34,078
    )
    
    
    (13,923
    )Interest income
    
    
    253
    
    
    
    51
    
    
    
    351
    
    
    
    447Interest expense
    
    
    (390
    )
    
    
    (37
    )
    
    
    (905
    )
    
    
    (2,118
    )Other (expense) income
    
    
    (284
    )
    
    
    (11
    )
    
    
    257
    
    
    
    (426
    )Loss before reorganization items and income taxes
    
    
    (15,641
    )
    
    
    (402
    )
    
    
    (34,375
    )
    
    
    (16,020
    )Reorganization items:Restructuring expenses and losses
    
    
    (22
    )
    
    
    (139
    )
    
    
    (3,384
    )
    
    
    Gain on discharge of liabilities subject to compromise
    
    
    
    
    
    
    
    
    
    
    190
    
    
    
    Fresh start accounting adjustments
    
    
    
    
    
    
    
    
    
    
    20,331
    
    
    
    Net loss before income taxes
    
    
    (15,663
    )
    
    
    (541
    )
    
    
    (17,238
    )
    
    
    (16,020
    )Income tax benefit
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    (15,663
    )
    
    
    (541
    )
    
    
    (17,238
    )
    
    
    (16,020
    )Preferred stock dividend
    
    
    (368
    )
    
    
    
    
    
    
    
    
    
    
    Net loss attributable to common
stockholders
    
    $
    (16,031
    )
    
    $
    (541
    )
    
    $
    (17,238
    )
    
    $
    (16,020
    )Net loss per share  basic and diluted
    
    $
    (2.47
    )
    
    $
    (0.08
    )
    
    $
    (1.78
    )
    
    $
    (1.66
    )Weighted average number of shares outstandingBasic and diluted
    
    
    6,498
    
    
    
    6,505
    
    
    
    9,671
    
    
    
    9,670
  F-5
    Table of Contents  Reorganized Company
    
    
    Predecessor CompanyYear ended
    
    
    Two months
    
    
    Ten months
    
    
    Year endedAugust 31,
    
    
    ended August 31,
    
    
    ended June 30,
    
    
    August 31,2005
    
    
    2004
    
    
    2004
    
    
    2003Cash flows from operating activities:Net loss
    
    $
    (15,663
    )
    
    $
    (541
    )
    
    $
    (17,238
    )
    
    $
    (16,020
    )Adjustments to reconcile net loss (income) to cash used in
operating activities:Depreciation and amortization
    
    
    1,460
    
    
    
    187
    
    
    
    1,432
    
    
    
    3,011Amortization of discount on notes payable
    
    
    
    
    
    
    
    
    
    
    30
    
    
    
    60Amortization of license right and other intangibles
    
    
    1,240
    
    
    
    206
    
    
    
    2,019
    
    
    
    2,615Impairment loss on license right
    
    
    201
    
    
    
    
    
    
    
    28,759
    
    
    
    Goodwill Impairment
    
    
    9,604Non-cash expense on repricing of warrants
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    Provision for bad debts
    
    
    188
    
    
    
    110
    
    
    
    923
    
    
    
    1,353Non-cash compensation and consulting
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    92Loss on assets retired or sold
    
    
    206
    
    
    
    14
    
    
    
    247
    
    
    
    302Gain on discharge of liabilities subject to compromise
    
    
    
    
    
    
    
    
    
    
    (190
    )
    
    
    Fresh start accounting adjustments
    
    
    
    
    
    
    
    
    
    
    (20,331
    )
    
    
    Changes in operating assets and liabilities:Decrease (increase) in restricted cash
    
    
    439
    
    
    
    
    
    
    
    (439
    )
    
    
    Decrease (increase) in accounts receivable
    
    
    (29
    )
    
    
    3
    
    
    
    1,619
    
    
    
    2,780Decrease (increase) in inventory
    
    
    (117
    )
    
    
    108
    
    
    
    1,408
    
    
    
    (609
    )Decrease in deferred product costs
    
    
    108
    
    
    
    198
    
    
    
    1,466
    
    
    
    3,616Decrease (increase) in lease receivables and other assets
    
    
    1,401
    
    
    
    (167
    )
    
    
    160
    
    
    
    (755
    )Increase (decrease) in accounts payable
    
    
    (610
    )
    
    
    (254
    )
    
    
    (1,493
    )
    
    
    (1,172
    )Decrease in deferred product revenues
    
    
    (1,398
    )
    
    
    (419
    )
    
    
    (2,709
    )
    
    
    (1,312
    )Increase (decrease) in deferred service revenues
    
    
    21
    
    
    
    (14
    )
    
    
    (224
    )
    
    
    (6,595
    )Increase (decrease) in accrued expenses and other liabilities
    
    
    914
    
    
    
    (454
    )
    
    
    2,770
    
    
    
    (428
    )Net cash used in operating activities before reorg items
    
    
    (1,950
    )
    
    
    (1,023
    )
    
    
    (1,789
    )
    
    
    (13,062
    )Decrease in restructuring accruals
    
    
    (3,072
    )
    
    
    
    
    
    
    
    
    
    
    Net cash used in operating activities
    
    
    (5,022
    )
    
    
    (1,023
    )
    
    
    (1,789
    )
    
    
    (13,062
    )Cash flows from investing activities:Additions to property and equipment
    
    
    (962
    )
    
    
    (303
    )
    
    
    (553
    )
    
    
    (575
    )Proceeds from sale of assets
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    Decrease (increase) in short-term investments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,677Purchase of license right
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash provided by (used in) investing activities
    
    
    (962
    )
    
    
    (303
    )
    
    
    (548
    )
    
    
    7,102Cash flows from financing activities:Proceeds from sale of service contract
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    758Proceeds from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    Proceeds from issuance of note payable
    
    
    1,750
    
    
    
    2,000
    
    
    
    
    
    
    
    Proceeds from issuance of Series A preferred stock net of
offering costs
    
    
    4,651
    
    
    
    
    
    
    
    
    
    
    
    Debt issuance costs
    
    
    
    
    
    
    (80
    )
    
    
    
    
    
    
    Dividends paid on preferred stock
    
    
    (368
    )
    
    
    
    
    
    
    
    
    
    
    Payments on capital leases and other notes payable
    
    
    (858
    )
    
    
    (48
    )
    
    
    (146
    )
    
    
    (106
    )Common stock repurchased
    
    
    
    
    
    
    (1,860
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    5,175
    
    
    
    12
    
    
    
    (142
    )
    
    
    652Decrease in cash and cash equivalents
    
    
    (809
    )
    
    
    (1,314
    )
    
    
    (2,479
    )
    
    
    (5,308
    )Cash and cash equivalents, beginning of period
    
    
    1,312
    
    
    
    2,626
    
    
    
    5,105
    
    
    
    10,413Cash and cash equivalents, end of period
    
    $
    503
    
    
    $
    1,312
    
    
    $
    2,626
    
    
    $
    5,105Supplemental cash flow information:Interest paid
    
    $
    288
    
    
    $
    23
    
    
    $
    1,000
    
    
    $
    1,990Income taxes paid
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Non-cash investing and financing activities:Discharge of debt and exchange of shares of common stock
under the plan of reorganization
    
    $
    1,311
    
    
    $
    
    
    
    $
    17,605
    
    
    $
    Conversion of related party liability to capital contribution
    
    $
    
    
    
    $
    
    
    
    $
    2,066
    
    
    $
    Purchases of assets through capital leases
    
    $
    571
    
    
    $
    1,125
    
    
    $
    63
    
    
    $
    178
  F-6
    Table of Contents  Common Stock
    
    
    AdditionalPreferred Stock
    
    
    Common Stock
    
    
    Class B
    
    
    Paid-in
    
    
    Deferred
    
    
    Treasury Stock
    
    
    AccumulatedShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Comp.
    
    
    Shares
    
    
    Amount
    
    
    Deficit
    
    
    TotalPredecessor Company:Stockholders equity at December 31, 2001
    
    
    1
    
    
    
    
    
    
    
    48,118,253
    
    
    
    481
    
    
    
    
    
    
    
    
    
    
    
    217,495
    
    
    
    
    
    
    
    75,799
    
    
    
    (562
    )
    
    
    (173,235
    )
    
    
    44,179Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    306,707
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    482
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    485Acceleration of vesting on stock options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    532
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    532Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,778
    )
    
    
    (9,778
    )Stockholders equity at August 31, 2002
    
    
    1
    
    
    
    
    
    
    
    48,424,960
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    218,509
    
    
    
    
    
    
    
    75,799
    
    
    
    (562
    )
    
    
    (183,013
    )
    
    
    35,418Issuance of stock warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (16,020
    )
    
    
    (16,020
    )Stockholders equity at August 31, 2003
    
    
    1
    
    
    
    
    
    
    
    48,424,960
    
    
    
    484
    
    
    
    
    
    
    
    
    
    
    
    218,601
    
    
    
    
    
    
    
    75,799
    
    
    
    (562
    )
    
    
    (199,033
    )
    
    
    19,490Related party capital contribution
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,066
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,066Reverse stock split
    
    
    
    
    
    
    
    
    
    
    (38,739,968
    )
    
    
    (387
    )
    
    
    
    
    
    
    
    
    
    
    387
    
    
    
    
    
    
    
    (60,639
    )
    
    
    
    
    
    
    
    
    
    
    Exercise of stock options
    
    
    
    
    
    
    
    
    
    
    2,588
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4Deferred stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2Common stock repurchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,875,703
    
    
    
    
    
    
    
    
    
    
    
    Net loss of predecessor company
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (17,238
    )
    
    
    (17,238
    )Elimination of predecessor equity
in connection with fresh start accounting
    
    
    (1
    )
    
    
    
    
    
    
    (9,687,580
    )
    
    
    (97
    )
    
    
    
    
    
    
    
    
    
    
    (221,060
    )
    
    
    
    
    
    
    (3,890,863
    )
    
    
    562
    
    
    
    216,271
    
    
    
    (4,324
    )Issuance of common stock under plan
of reorganization
    
    
    
    
    
    
    
    
    
    
    7,000,000
    
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    21,830
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,900Issuance of restricted stock
    
    
    
    
    
    
    
    
    
    
    350,000
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    1,172
    
    
    
    (1,176
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Reorganized Company:Stockholders equity at June 30, 2004
    
    
    
    
    
    
    
    
    
    
    7,350,000
    
    
    
    74
    
    
    
    
    
    
    
    
    
    
    
    23,002
    
    
    
    (1,176
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,900Issuance of restricted stock
    
    
    
    
    
    
    
    
    
    
    100,000
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    151
    
    
    
    (152
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Change in deferred stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (856
    )
    
    
    856
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock repurchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    929,948
    
    
    
    (1,860
    )
    
    
    
    
    
    
    (1,860
    )Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (541
    )
    
    
    (541
    )Stockholders equity at August 31, 2004
    
    
    
    
    
    
    
    
    
    
    7,450,000
    
    
    
    75
    
    
    
    
    
    
    
    
    
    
    
    22,297
    
    
    
    (472
    )
    
    
    929,948
    
    
    
    (1,860
    )
    
    
    (541
    )
    
    
    19,499Issuance of common stock under plan
of reorganization
    
    
    
    
    
    
    
    
    
    
    393,568
    
    
    
    4
    
    
    
    
    
    
    
    
    
    
    
    1,307
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,311Issuance of warrants in connection with
Series A preferred stock offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,037
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,037Issuance of Series A preferred stock dividends
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (368
    )
    
    
    (368
    )Repricing of warrants
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    85Exercise of warrants
    
    
    
    
    
    
    
    
    
    
    337,317
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of restricted stock
    
    
    
    
    
    
    
    
    
    
    75,000
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    67
    
    
    
    (68
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Change in deferred stock compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15,663
    )
    
    
    (15,663
    )Stockholders equity at August 31, 2005
    
    
    
    
    
    $
    
    
    
    
    8,255,885
    
    
    $
    83
    
    
    
    
    
    
    $
    
    
    
    $
    24,775
    
    
    $
    (525
    )
    
    
    929,948
    
    
    $
    (1,860
    )
    
    $
    (16,572
    )
    
    $
    5,901
  F-7
    Table of Contents  REMOTE DYNAMICS, INC. AND SUBSIDIARIES
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. BUSINESS OVERVIEW, REORGANIZATION AND GOING CONCERN
 Business Overview
       F - 8
    Table of Contents  Ô
 Ô
 Voluntary Bankruptcy Filing and Reorganization
   F - 9
    Table of Contents  
    
    For purposes of the Debtors plan of reorganization, the Debtors and Committee agreed
that the value of the Debtors shall be equal to $25.3 million, such that holders of allowed
unsecured claims under the plan of reorganization shall receive 75%, and prior equity
holders shall receive 25%, of the 7,000,000 shares of new common stock issued upon
confirmation of the plan of reorganization.
    
    The Debtors and the Committee reached agreement on the composition of the Board of
Directors of the Company upon emergence from bankruptcy;
    
    The Debtors and the Committee reached agreement on the general terms and conditions of
new employment agreements for senior management of the Company.
    
    The Debtors and the Committee reached agreement on the general terms and conditions
under which restricted shares would be issued to senior management of the Company.
    
    The Debtors, HFS Minorplanet Funding LLC (HFS) and the Committee agreed to amend the
April 15, 2004 letter agreement so that the price per share at which HFS may convert the
unpaid principal and accrued interest due under the $1.575 million promissory note (later
amended and increased to $2.0 million) into common stock of the Company, shall be set at
$3.62 per share of common stock, provided that such amount shall be reduced (i) by twenty
percent (20%) if such unpaid principal and accrued interest is converted within one (1)
year after the date the promissory note was issued or (ii) by fifteen percent (15%) if such
unpaid principal and accrued interest is converted more than one (1) year after the date
the promissory note was issued.
    
    
    Holders of allowed administrative and priority claims will be paid in cash in the ordinary course as they
 F - 10
    Table of Contents  come due or on such other terms as the parties may agree. Holders of allowed priority tax
claims will receive periodic payments as provided under section 1129(a)(9)(C) of the
Bankruptcy Code, unless the parties agree to other terms for the payment of such claims.
    
    Holders of allowed secured claims shall receive, at the election of the Debtors, either
(i) payment in cash in an amount equivalent to the full amount of such holders allowed
secured claim; (ii) deferred cash payments over a period of five (5) years after the
initial distribution date totaling the amount of such holders allowed secured claim, with
interest; (iii) the return of the collateral securing such allowed secured claim in full
satisfaction of such claim, or (iv) such other treatment as may be agreed to in writing by
such holder and the Debtors.
    
    Holders of allowed general unsecured claims received their pro rata share of
seventy-five percent (75%) of seven million (7,000,000) shares of the new common stock of
the Company on or as soon as practicable after the Effective Date.
    
    Each holder of an allowed convenience claim received cash in an amount equal to fifty
percent (50%) of their allowed claims, up to an aggregate maximum of one hundred fifty
thousand dollars ($150,000) for all such claims paid as soon as practicable after the
Effective Date.
    
    All existing equity interests in the Debtors were extinguished as of the Effective Date.
Each holder of an equity interest in the Company that was attributable to existing common
stock received a pro rata share of twenty-five percent (25%) of seven
million (7,000,000) shares of the new common stock that was not issued to holders of allowed general unsecured
claims. The holders of equity interests in the Company, Limited and Caren, other than
common stock, did not receive or retain any property under the Plan.
    
    The new common stock and the restricted shares were issued and distributed in accordance
with the terms of the Plan without further act or action under applicable law, regulation,
order or rule and are exempt from registration under applicable securities law pursuant to
section 1145(a) of the Bankruptcy Code.
    
    The Debtors initially distributed 7,000,000 shares of new common stock to satisfy
holders of allowed general unsecured claims and holders of equity interests in the Company
that were attributable to existing common stock. The initial distribution of 7,000,000
shares of new common stock resulted in the satisfaction of approximately $17.6 million of
allowed general unsecured claims. Subsequently, certain rejection claims and other disputed
claims were settled and allowed by the bankruptcy court resulting in the issuance of an
additional 393,568 shares of common stock during the 2005 fiscal year.
  
    
    the Companys certificate of incorporation was amended and restated to change the
Companys corporate name to Remote Dynamics, Inc. on the Effective Date;
    
    the size of the board was increased to seven (7) directors with four (4) new directors
being appointed by the Official Unsecured Creditors Committee on behalf of the unsecured
creditors and three (3) directors to be appointed by the Debtors;
    
    a new restricted stock plan for key executive officers was approved;
    
    the Company entered into two (2) year term employment agreements with the following key
executive officers which included restricted stock grants to each officer:
 °
    
    Dennis R. Casey  President and Chief Executive Officer°
    
    J. Raymond Bilbao  Senior Vice President, General Counsel & Secretary°
    
    W. Michael Smith  Executive Vice President, Chief Operating Officer, Chief
Financial Officer & Treasurer
 F - 11
    Table of Contents  Going Concern
      F - 12
    Table of Contents  
    
    Ability to raise a minimum of $4 million in additional
capital resources to fund ongoing operations through August 31, 2006.
    
    Ability to increase sales of the REDIview product line to lessen the amount of capital
resources necessary to fund our operations until such time that revenues from the REDIview
product line are sufficient to fund ongoing operations.
    
    Ability to complete development of additional features and functionality to the REDIview
product line.
    
    Significant market acceptance of the Companys product offerings from new customers,
including the Companys REDIview product line, in the United States.
    
    Maintaining and expanding our direct sales channel and expanding into new markets not
currently served by the Company.
    
    Hiring qualified salespersons. New salespersons will require training and time to
become productive. In addition, there is significant competition for qualified
salespersons, and training these persons requires a delay in time before they are
productive.
    
    Maintaining and expanding indirect distribution channels for the Companys REDIview
product line.
    
    Securing and maintaining adequate third party leasing sources for customers who purchase
the Companys products.
    F - 13
    Table of Contents  pari passu
   2. FRESH START ACCOUNTING AND RESTRUCTURING EXPENSES
 Fresh Start Accounting
  Postpetition liabilities and allowed claims
    
    $
    32,841Reorganization value (net of $2 million exit financing)
    
    
    (23,333
    )Excess of liabilities over reorganization value
    
    $
    9,508
   F - 14
    Table of Contents  F - 15
    Table of Contents  Predecessor
    
    
    Debt Discharge
    
    
    
    
    
    
    ReorganizedCompany
    
    
    and Exchange
    
    
    Fresh Start
    
    
    CompanyJune 30, 2004
    
    
    of Stock (a)
    
    
    Adjustments (b)
    
    
    June 30, 2004ASSETSCurrent assets:Cash and cash equivalents
    
    $
    2,626
    
    
    
    
    
    
    
    
    
    
    $
    2,626Restricted cash
    
    
    439
    
    
    
    
    
    
    
    
    
    
    
    439Accounts receivable, net
    
    
    2,762
    
    
    
    
    
    
    
    
    
    
    
    2,762Inventories
    
    
    783
    
    
    
    
    
    
    
    
    
    
    
    783Deferred product costs  current portion
    
    
    1,153
    
    
    
    
    
    
    
    (36
    )
    
    
    1,117Lease receivables and other current assets, net
    
    
    973
    
    
    
    (69
    )
    
    
    
    
    
    
    904Total current assets
    
    
    8,736
    
    
    
    (69
    )
    
    
    (36
    )
    
    
    8,631Property and equipment, net
    
    
    2,797
    
    
    
    
    
    
    
    259
    
    
    
    3,056Deferred product costs  non-current portion
    
    
    1,410
    
    
    
    
    
    
    
    (264
    )
    
    
    1,146Goodwill
    
    
    
    
    
    
    
    
    
    
    19,724
    
    
    
    19,724License right, net
    
    
    2,707
    
    
    
    
    
    
    
    (1,429
    )
    
    
    1,278Other intangible assets
    
    
    
    
    
    
    
    
    
    
    1,220
    
    
    
    1,220Lease receivables and other assets, net
    
    
    1,206
    
    
    
    (40
    )
    
    
    
    
    
    
    1,166Total assets
    
    $
    16,856
    
    
    $
    (109
    )
    
    $
    19,474
    
    
    $
    36,221LIABILITIES AND STOCKHOLDERS EQUITY (DEFICIT)Current liabilities not subject to compromise:Accounts payable
    
    $
    137
    
    
    $
    2,283
    
    
    
    
    
    
    $
    2,420Deferred product revenues  current portion
    
    
    2,757
    
    
    
    
    
    
    
    (107
    )
    
    
    2,650Accrued expenses and other current liabilities
    
    
    3,309
    
    
    
    2,061
    
    
    
    
    
    
    
    5,370Total current liabilities not subject to compromise
    
    
    6,203
    
    
    
    4,344
    
    
    
    (107
    )
    
    
    10,440Liabilities subject to compromise
    
    
    22,315
    
    
    
    (22,315
    )
    
    
    
    
    
    
    Long-term liabilities not subject to compromise:Deferred product revenues  non-current portion
    
    
    4,066
    
    
    
    
    
    
    
    (750
    )
    
    
    3,316Other non-current liabilities
    
    
    257
    
    
    
    309
    
    
    
    
    
    
    
    566Total long-term liabilities not subject to compromise
    
    
    4,323
    
    
    
    309
    
    
    
    (750
    )
    
    
    3,882Total liabilities
    
    
    32,841
    
    
    
    (17,663
    )
    
    
    (857
    )
    
    
    14,322Total stockholders equity (deficit)
    
    
    (15,985
    )
    
    
    17,554
    
    
    
    20,331
    
    
    
    21,900Total liabilities and stockholders equity
    
    $
    16,856
    
    
    $
    (109
    )
    
    $
    19,474
    
    
    $
    36,221
 (a)
    
    To record the discharge or reclassification of prepetition obligations related to
long-term debt, other liabilities, and equity and the issuance of 7,000,000 shares of new
common stock to creditors and old equity holders. Also includes the issuance of 350,000
shares of restricted stock to executives approved under the Plan, and the write off of the
remaining unamortized prepaid loan fees and debt discount related to the discharged long-term
debt. The cancellation of the Companys pre-reorganization equity includes the reversal of
the $20.3 million gain on the fresh start adjustment of assets and liabilities to fair value
as well as the reversal of the $0.2 million gain on discharge of liabilities subject to
compromise.(b)
    
    To record fresh start adjustments to reflect assets and liabilities at fair value.
Management used an expected present value technique, in which multiple cash flow scenarios
that reflect the range of possible outcomes and a risk-free rate are used, to estimate the
fair value of the VMI license right. Deferred product revenue and the related deferred
product costs were adjusted to fair value based on present value calculations utilizing
appropriate current interest rates. As discussed above, the results of an independent
financial advisory firms fair market valuation was utilized to value property and equipment.
Inventory and certain software were valued at estimated replacement cost. An independent
financial advisory firm was also utilized to value the Companys intangible assets.
 Restructuring Expenses and Losses
  F - 16
    Table of Contents  PredecessorReorganized Company
    
    
    CompanyFor the twelve
    
    
    For the two
    
    
    For the tenmonths ended
    
    
    months ended
    
    
    months endedAugust 31, 2005
    
    
    August 31, 2004
    
    
    June 30, 2004Professional fees
    
    $
    90
    
    
    $
    127
    
    
    $
    1,793Losses on rejection of executory contracts, unexpired
leases and other claims
    
    
    
    
    
    
    
    
    
    
    1,324Other restructuring expenses, losses and adjustments
    
    
    (68
    )
    
    
    12
    
    
    
    267Total restructuring expenses and losses
    
    $
    22
    
    
    $
    139
    
    
    $
    3,384
 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Basis of Presentation
    Estimates Inherent in the Preparation of Financial Statements
  Revenue Recognition
  F - 17
    Table of Contents  Shipping and Handling Fees and Costs
  Deferred Product Costs
  Financial Instruments
   F-18
    Table of Contents  Trade Receivables  Allowance for Doubtful Accounts
  August 31,
    
    
    August 31,2005
    
    
    2004Beginning balance
    
    $
    162
    
    
    $
    246Additions
    
    
    165
    
    
    
    387Deductions
    
    
    (129
    )
    
    
    (471
    )Ending balance
    
    $
    197
    
    
    $
    162
  Business and Credit Concentrations
   Inventories
  Property and Equipment
  Valuation of Long-Lived Assets
   
    
    significant negative industry trends,
    
    significant changes in technology,
    
    significant underutilization of the asset, and
    
    significant changes in how the asset is used or is planned to be used.
 Research and Development Costs
  F-19
    Table of Contents  Capitalized Software Costs
  VMI License Right
    (1)
    
    On June 30, 2004, the VMI license agreement converted to a nonexclusive license until
December 31, 2004 when it shall terminate.(2)
    
    From the period beginning June 30, 2004 through December 31, 2004, the territory in
which the Company may market, sell and use the VMI system shall be reduced to the following
metropolitan areas: Los Angeles, California; Atlanta, Georgia; Dallas, Texas; and Houston,
Texas.(3)
    
    On July 31, 2004, the Company shall no longer use the name, Minorplanet, nor any
derivative thereof, and shall remove and refrain from using any references to said name.(4)
    
    The Company provided Minorplanet Limited, at no cost, 100 AEM 3000 VMI units to USA
specifications with accompanying special tariff SIMs for T-Mobile.(5)
    
    Subsequent to December 31, 2004, the Company has the right to use the VMI software
internally for the sole purpose of satisfying its warranty, service and support obligations
to its existing VMI customer base.
 F-20
    Table of Contents  (6)
    
    Minorplanet Limited was allowed a general unsecured claim in the amount of $1,000,000
in Limiteds bankruptcy case no. 04-31202-SAF-11. On the Effective Date, Minorplanet
Limited released and waived its administrative claim and, as of such date, waived any
future R&D fees due under Section 16.4 of the VMI license agreement.(7)
    
    The Company provided to Minorplanet Limited and Minorplanet UK a general release of any
and all claims which could have been asserted against Minorplanet Limited or Minorplanet UK
by the Company.
    Goodwill and Other Intangibles
    F-21
    Table of Contents  Advertising Costs
  Income Taxes
  Stock Based Awards
   Reorganized Company
    
    
    Predecessor CompanyYear
    
    
    Two Months
    
    
    Ten Months
    
    
    YearEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedAugust 31,
    
    
    August 31,
    
    
    June 30,
    
    
    August 31,2005
    
    
    2004
    
    
    2004
    
    
    2003Net loss attributable to common stockholders, as reported
    
    
    (16,031
    )
    
    
    (541
    )
    
    
    (17,238
    )
    
    $
    (16,020
    )Add: Stock-based
employee
compensation
expense
included in reported net income
    
    
    
    
    
    
    
    
    
    
    2
    
    
    
    Deduct: Stock-based
employee
compensation
expense
determined under fair value based method for all awards
    
    
    
    
    
    
    
    
    
    
    (428
    )
    
    
    (692
    )Net (loss) income,
pro forma
    
    $
    (16,031
    )
    
    $
    (541
    )
    
    $
    (17,664
    )
    
    $
    (16,712
    )Net (loss) income
per share  basic
and diluted            As reported
    
    $
    (2.47
    )
    
    $
    (0.08
    )
    
    $
    (1.78
    )
    
    $
    (1.66
    )Pro-forma
    
    $
    (2.47
    )
    
    $
    (0.08
    )
    
    $
    (1.83
    )
    
    $
    (1.73
    )Weighted average
number of shares
outstanding:Basic and diluted
    
    
    6,498
    
    
    
    6,505
    
    
    
    9,671
    
    
    
    9,670
  F-22
    Table of Contents  PredecessorCompanyYear EndedAugust 31,2003Dividend
    
    
    Expected volatility
    
    
    96.60
    %Risk free rate of return
    
    
    3.02
    %Expected life in years
    
    
    4.5
 Restricted Stock
  Earnings Per Share & Reverse Stock Split
   F-23
    Table of Contents  Reorganized
    
    
    ReorganizedCompany
    
    
    Company
    
    
    Predecessor CompanyYear ended
    
    
    Two Months
    
    
    Ten Months
    
    
    Year endedAugust 31,
    
    
    Ended August 31,
    
    
    Ended June 30,
    
    
    August 31,2005
    
    
    2004
    
    
    2004
    
    
    2003Net loss applicable to
common stockholders:
    
    $
    (16,031
    )
    
    $
    (541
    )
    
    $
    (17,238
    )
    
    $
    (16,020
    )Weighted average number of shares
outstanding:Weighted average number of shares
outstanding,
net of treasury shares  Basic EPS
    
    
    6,498
    
    
    
    6,505
    
    
    
    9,671
    
    
    
    9,670Additional weighted average
shares for
assumed exercise of stock
options, net
of shares assumed to be
repurchased with
exercise proceeds
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Weighted average number of shares
outstanding,
net of treasury shares  Diluted
EPS
    
    
    6,498
    
    
    
    6,505
    
    
    
    9,671
    
    
    
    9,670Net loss per common
share applicable to
common stockholders:Basic and diluted EPS
    
    $
    (2.47
    )
    
    $
    (0.08
    )
    
    $
    (1.78
    )
    
    $
    (1.66
    )
  Reorganized
    
    ReorganizedCompany
    
    Company
    
    Predecessor CompanyYear ended
    
    Two Months
    
    Ten Months
    
    Year endedAugust 31,
    
    ended August 31,
    
    ended June 30,
    
    August 31,2005
    
    2004
    
    2004 (a)
    
    2003Restricted stock ( not vested)
    
    
    525,000
    
    
    
    450,000
    
    
    
    
    
    
    
    Convertible note payable
    
    
    689,655
    
    
    
    689,655
    
    
    
    
    
    
    
    Outstanding stock options
    
    
    
    
    
    
    
    
    
    
    323,345
    
    
    
    325,933Outstanding warrants to purchase common stock
    
    
    1,125,000
    
    
    
    
    
    
    
    33,150
    
    
    
    93,150Warrants issued subsequent to year-end
    
    
    2,366,667
 
 (a)
    
    All equity interests in the Predecessor Company (including but not limited to warrants,
stock options, and anti-dilutive rights), outstanding as of the July 2, 2004 effective date of
the plan of reorganization were extinguished. Reporting Comprehensive Income
  New Accounting Standards
  F-24
    Table of Contents  4. SALE OF ASSETS
   F-25
    Table of Contents  5. CHANGE IN FISCAL YEAR END
  6. CASH AND CASH EQUIVALENTS
  August 31,
    
    
    August 31,2005
    
    
    2004Cash
    
    $
    498
    
    
    $
    494Money market accounts
    
    
    5
    
    
    
    818Cash and cash equivalents
    
    $
    503
    
    
    $
    1,312
  7. INVENTORIES
  August 31,
    
    
    August 31,2005
    
    
    2004Complete systems
    
    $
    622
    
    
    $
    459Component parts
    
    
    169
    
    
    
    215$
    791
    
    
    $
    674
 F-26
    Table of Contents  8. PROPERTY AND EQUIPMENT
 August 31,
    
    
    August 31,2005
    
    
    2004Network service center
    
    $
    720
    
    
    $
    685Machinery and equipment
    
    
    163
    
    
    
    158Software
    
    
    1,770
    
    
    
    955Leasehold improvements
    
    
    692
    
    
    
    646Vehicles, computer equipment, and other equipment
    
    
    1,963
    
    
    
    2,0195,308
    
    
    
    4,463Less: accumulated depreciation and amortization
    
    
    (1,565
    )
    
    
    (180
    )$
    3,743
    
    
    $
    4,283
   9. GOODWILL AND OTHER INTANGIBLE ASSETS
  Reorganized CompanyBalance at
    
    
    
    
    
    
    
    
    
    Balance at
    
    AmortizationAugust 31,
    
    Accumulated
    
    
    
    
    
    August 31,
    
    Period2004
    
    Amortization
    
    Impairment
    
    2004
    
    (in months)Goodwill
    
    $
    19,724
    
    
    $
    
    
    
    $
    (9,604
    )
    
    $
    10,120
    
    
    
    n/aOther intangibles:Customer relationships
    
    
    1,220
    
    
    
    (949
    )
    
    
    
    
    
    
    271
    
    
    
    4VMI License Right
    
    
    1,207
    
    
    
    (426
    )
    
    
    (201
    )
    
    
    580
    
    
    
    22
  10. LEASE RECEIVABLES AND OTHER ASSETS
  F-27
    Table of Contents  August 31,
    
    
    August 31,2005
    
    
    2004Minimum lease payments receivable
    
    $
    730
    
    
    $
    2,359Less: Allowance for uncollectibles
    
    
    (98
    )
    
    
    (357
    )632
    
    
    
    2,002Less: Unearned interest income
    
    
    (128
    )
    
    
    (559
    )Net investment in sales-type leases
    
    $
    504
    
    
    $
    1,443
   Fiscal Year Ending August 31,2006
    
    $
    3512007
    
    
    2412008
    
    
    1202009
    
    
    18Total minimum lease payments receivable
    
    $
    730
  Fiscal Year Ending August 31,2005
    
    $
    1222006
    
    
    452007
    
    
    2Total minimum rental payments
    
    $
    169
   11. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
  F-28
    Table of Contents  August 31,
    
    
    August 31,2005
    
    
    2004Reorganization accruals
    
    $
    15
    
    
    $
    3,087Notes payable  current portion
    
    
    584
    
    
    
    554Property, franchise, and other taxes payable
    
    
    302
    
    
    
    326Accrued warranty costs
    
    
    160
    
    
    
    182Accrued telecom costs
    
    
    165
    
    
    
    228Accrued vacation
    
    
    198
    
    
    
    245Legal, accounting, interest and other accruals
    
    
    659
    
    
    
    713$
    2,083
    
    
    $
    5,335
  Compromise Settlement Agreement
  12. NOTE PAYABLES
 Senior Notes of the Predecessor Company
   HFS Note Payable
  F-29
    Table of Contents  SDS Note Payable
   Fiscal year ending August 31,2006
    
    $
    1,750,0002007
    
    
    2,000,0002008
    
    
    2009
    
    
    2010
    
    
    Total notes payable by maturity date
    
    $
    3,750,000
 F-30
    Table of Contents  Other notes payable
   Fiscal year ending August 31,2006
    
    
    $
    4842007
    
    
    
    1932008
    
    
    
    2472009
    
    
    
    2010
    
    
    
    Total minimum lease payments
    
    
    
    
    
    
    924Less: amount representing interest
    
    
    
    
    
    
    (50
    )Present value of net minimum lease payments
    
    
    
    
    
    $
    874
 13. INCOME TAXES
  Reorganized Company
    
    
    Predecessor CompanyYear Ended
    
    
    Two Months
    
    
    Ten Months
    
    
    Year endedEnded August 31,
    
    
    Ended August 31,
    
    
    Ended June 30,
    
    
    August 31,2005
    
    
    2004
    
    
    2004
    
    
    2003Current:Federal
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Deferred:Federal
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    State
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income Tax Expense (Benefit)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  F-31
    Table of Contents  August 31,
    
    
    August 31,
    
    
    August 31,2005
    
    
    2004
    
    
    2003Deferred tax assets:Deferred revenue
    
    
    803
    
    
    
    1,387
    
    
    
    2,247Allowance for doubtful accounts
    
    
    100
    
    
    
    176
    
    
    
    238Other accrued liabilities
    
    
    73
    
    
    
    97
    
    
    
    1,899Inventory reserves
    
    
    106
    
    
    
    228
    
    
    
    115Other reserves
    
    
    177
    
    
    
    190
    
    
    
    Other Intangible assets
    
    
    418
    
    
    
    199
    
    
    
    498License Intangible
    
    
    9,116
    
    
    
    10,264
    
    
    
    Net operating loss carryforwards
    
    
    66,669
    
    
    
    66,225
    
    
    
    60,174Gross deferred tax assets
    
    
    77,462
    
    
    
    78,766
    
    
    
    65,171Valuation allowance
    
    
    (76,977
    )
    
    
    (70,920
    )
    
    
    (64,100
    )Net deferred tax assets
    
    
    485
    
    
    
    7,846
    
    
    
    1,071Deferred tax liabilities:Depreciation
    
    
    (363
    )
    
    
    (448
    )
    
    
    (1,071
    )Fresh Start Identified Intangibles
    
    
    (122
    )
    
    
    (7,398
    )Gross deferred tax liabilities
    
    
    (485
    )
    
    
    (7,846
    )
    
    
    (1,071
    )Net deferred tax asset
    
    $
    
    
    
    $
    
    
    
    $
    
   Reorganized Company
    
    
    Predecessor CompanyYear Ended
    
    
    Two Months
    
    
    Ten Months
    
    
    Year endedEnded August 31,
    
    
    Ended August 31,
    
    
    Ended June 30,
    
    
    August 31,2005
    
    
    2004
    
    
    2004
    
    
    2003Income tax at federal statutory rate
    
    $
    (5,325
    )
    
    $
    (184
    )
    
    $
    (5,861
    )
    
    $
    (5,416
    )Valuation allowance
    
    
    6,109
    
    
    
    182
    
    
    
    6,638
    
    
    
    5,394Other
    
    
    (784
    )
    
    
    2
    
    
    
    (777
    )
    
    
    22Provision for income taxes
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  14. STOCKHOLDERS EQUITY INSTRUMENTS AND RELATED MATTERS
 Common and Preferred Stock
  F-32
    Table of Contents  Series A Convertible Preferred Stock
    Ranking.
 Dividends
 Conversion Rights
 F-33
    Table of Contents  Redemption Rights of the Company
 Voting Rights and Limitations.
 Warrants Issued to Holder of Series A Preferred Stock
  F-34
    Table of Contents  Anti-Dilution Rights.
 Registration Rights Agreement
  Redemption Rights of Series A Preferred Stock
 
    
    the Common Stock is suspended from trading or is not listed for trading on at least one
of, the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market or
the Nasdaq SmallCap Market for an aggregate of 10 or more trading days in any twelve-month
period;
    
    the initial registration statement required to be filed by the Company pursuant to the
Registration Rights
 F-35
    Table of Contents  
    
    the Company fails to remove any restrictive legend on any certificate or any shares of
Common Stock issued to the holders of Series A Preferred Stock upon conversion of the
Series A Preferred Stock as and when required and such failure continues uncured for five
business days;
    
    the Company provides written notice (or otherwise indicates) to any holder of Series A
Preferred Stock, or states by way of public announcement distributed via a press release,
at any time, of its intention not to issue, or otherwise refuses to issue, shares of Common
Stock to any holder of Series A Preferred Stock upon conversion in accordance with the
terms of the Certificate of Designation for the Series A Preferred Stock;
    
    the Company or any subsidiary of the Company shall make an assignment for the benefit of
creditors, or apply for or consent to the appointment of a receiver or trustee for the
Company or for a substantial part of the Companys property or business;
    
    bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings
for the relief of Company shall be instituted by or against the Company or any subsidiary
which shall not be dismissed within 60 days of their initiation;
    
    the Company shall:
 
    
    sell, convey or dispose of all or substantially all of its assets;
    
    merge or consolidate with or into, or engage in any other business combination with,
any other person or entity, in any case which results in either (i) the holders of the
voting securities of the Company immediately prior to such transaction holding or
having the right to direct the voting of fifty percent (50%) or less of the total
outstanding voting securities of the Company or such other surviving or acquiring
person or entity immediately following such transaction or (ii) the members of the
Board of Directors or other governing body of the Company comprising fifty percent
(50%) or less of the members of the board of directors or other governing body of the
Corporation or such other surviving or acquiring person or entity immediately following
such transaction;
    
    either (i) fail to pay, when due, or within any applicable grace period, any payment
with respect to any indebtedness of the Company in excess of $250,000 due to any third
party, other than payments contested by the Company in good faith, or (ii) suffer to
exist any other default under any agreement binding the Company which default or event
of default would or is likely to have a material adverse effect on the business,
operations, properties, prospects or financial condition of the Company;
    
    have fifty percent (50%) or more of the voting power of its capital stock owned
beneficially by one person, entity or group;
    
    experience any other Change of Control not otherwise addressed above; or
    
    the Company otherwise shall breach any material term under the private placement
transaction documents, and if such breach is curable, shall fail to cure such breach
within 10 business days after the Company has been notified thereof in writing by the
holder.
 Actions Requiring Approval of Holder of a Majority of the Companys Series A Preferred Stock.
 F-36
    Table of Contents  senior securities pari passu
   F-37
    Table of Contents  Accounting for Sale of Series A Convertible Redeemable Preferred Stock
    Bridge Loan
  Stock Repurchase
  Restricted Stock
  F-38
    Table of Contents  Number of securitiesremaining available forNumber of securities to be
    
    Weighted average
    
    future issuance under equityissued upon exercise of
    
    exercise price of
    
    compensation plansoutstanding options,
    
    outstanding options,
    
    (excluding securitieswarrants and rights
    
    warrants, and rights
    
    reflected in column (a))525,000
    
    $
    
    
    
    
    175,000
    
    
    
    
    
    
    525,000
    
    $
    
    
    
    
    175,000
 Predecessor Companys Equity Stock Plans
  Ten Months ended
    
    
    Year endedJune 30, 2004
    
    
    August 31, 2003Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageExercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Price
    
    
    Shares
    
    
    PriceOutstanding at beginning of period
    
    
    325,781
    
    
    $
    1.41
    
    
    
    515,533
    
    
    $
    1.59Granted
    
    
    
    
    
    
    
    
    
    
    80,000
    
    
    
    0.80Exercised
    
    
    (2,588
    )
    
    
    1.41
    
    
    
    
    
    
    
    Forfeited or expired
    
    
    (323,193
    )
    
    
    1.41
    
    
    
    (269,752
    )
    
    
    1.58Outstanding at end of period
    
    
    
    
    
    $
    
    
    
    
    325,781
    
    
    $
    1.41Options exercisable at end of period
    
    
    
    
    
    $
    
    
    
    
    32,567
    
    
    $
    1.61
  Retirement Plan
  F-39
    Table of Contents  15. OTHER COMMITMENTS AND CONTINGENCIES
 Operating Lease Commitments
  2006
    
    $
    3242007
    
    
    3162008
    
    
    3122009
    
    
    3002010 and thereafter
    
    
    550$
    1,802
  Product Warranty Guarantees
  Reorganized Company
    
    
    Predecessor CompanyTwelve
    
    
    Two
    
    
    Ten
    
    
    TwelveMonths Ended
    
    
    Months Ended
    
    
    Months Ended
    
    
    Months EndedAugust 31, 2005
    
    
    August 31, 2004
    
    
    June 30, 2004
    
    
    August 31, 2003Warranty product liability at beginning of period
    
    $
    375
    
    
    $
    434
    
    
    $
    514
    
    
    $
    491Accruals for product warranties issued
    
    
    28
    
    
    
    9
    
    
    
    118
    
    
    
    371Product replacements
    
    
    (348
    )
    
    
    (58
    )
    
    
    (186
    )
    
    
    (173
    )Adjustments to pre-existing warranty estimates
    
    
    155
    
    
    
    (10
    )
    
    
    (12
    )
    
    
    (175
    )Warranty product liability at end of period
    
    $
    210
    
    
    $
    375
    
    
    $
    434
    
    
    $
    514
  Other Purchase Commitments
  F-40
    Table of Contents  16. RELATED PARTY TRANSACTIONS
    Reorganized Company
    
    
    Predecessor CompanyYear
    
    
    Two Months
    
    
    Ten Months
    
    
    YearEnded
    
    
    Ended
    
    
    Ended
    
    
    EndedAugust 31,
    
    
    August 31,
    
    
    June 30,
    
    
    August 31,2005
    
    
    2004
    
    
    2004
    
    
    2003Research and development costs
    
    $
    
    
    
    $
    
    
    
    $
    833
    
    
    $
    1,000Contract service expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,719Inventory and other purchases
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146Product sales
    
    
    
    
    
    
    
    
    
    
    23
    
    
    
    
 Reorganized
    
    
    Reorganized
    
    
    PredecessorCompany
    
    
    Company
    
    
    CompanyAs of
    
    
    As of
    
    
    As ofAugust 31,
    
    
    August 31,
    
    
    August 31,2005
    
    
    2004
    
    
    2003Other current liabilities
    
    $
    
    
    
    $
    
    
    
    $
    553Other non-current liabilities
    
    
    
    
    
    
    
    
    
    
    1,760
    F-41
    Table of Contents  HFS Note Payable
  Stock Repurchase
  17. SEGMENT REPORTING
     F-42
    Table of Contents  Reorganized CompanyYear Ended August 31, 2005ReorganizationNSC Systems
    
    
    VMI
    
    
    Items
    
    
    ConsolidatedRevenues
    
    $
    12,593
    
    
    $
    3,779
    
    
    $
    
    
    
    $
    16,372Operating loss
    
    
    (13,928
    )
    
    
    (1,292
    )
    
    
    
    
    
    
    (15,220
    )Interest expense
    
    
    (390
    )
    
    
    
    
    
    
    
    
    
    
    (390
    )Interest income
    
    
    31
    
    
    
    222
    
    
    
    
    
    
    
    253Depreciation and amortization
    
    
    2,194
    
    
    
    506
    
    
    
    
    
    
    
    2,700Impairment loss on license right
    
    
    
    
    
    
    201
    
    
    
    
    
    
    
    201Goodwill impairment
    
    
    9,604
    
    
    
    
    
    
    
    
    
    
    
    9,604Net loss
    
    
    (14,435
    )
    
    
    (1,206
    )
    
    
    (22
    )
    
    
    (15,663
    )Total assets
    
    
    19,175
    
    
    
    2,531
    
    
    
    
    
    
    
    21,706Capital expenditures
    
    
    913
    
    
    
    49
    
    
    
    
    
    
    
    962
 Reorganized CompanyTwo Months Ended August 31, 2004ReorganizationNSC Systems
    
    
    VMI
    
    
    Items
    
    
    ConsolidatedRevenues
    
    $
    2,390
    
    
    $
    832
    
    
    $
    
    
    
    $
    3,222Operating income (loss)
    
    
    118
    
    
    
    (523
    )
    
    
    
    
    
    
    (405
    )Interest expense
    
    
    32
    
    
    
    5
    
    
    
    
    
    
    
    37Interest income
    
    
    2
    
    
    
    49
    
    
    
    
    
    
    
    51Depreciation and amortization
    
    
    301
    
    
    
    92
    
    
    
    
    
    
    
    393Net income (loss)
    
    
    88
    
    
    
    (490
    )
    
    
    (139
    )
    
    
    (541
    )Total assets
    
    
    29,812
    
    
    
    5,944
    
    
    
    
    
    
    
    35,756Capital expenditures
    
    
    251
    
    
    
    52
    
    
    
    
    
    
    
    303
 F-43
    Table of Contents  Predecessor CompanyTen Months Ended June 30, 2004ReorganizationNSC Systems
    
    
    VMI
    
    
    Items
    
    
    ConsolidatedRevenues
    
    $
    14,438
    
    
    $
    5,547
    
    
    $
    
    
    
    $
    19,985Operating income (loss)
    
    
    2,990
    
    
    
    (37,068
    )
    
    
    
    
    
    
    (34,078
    )Interest expense
    
    
    (905
    )
    
    
    
    
    
    
    
    
    
    
    (905
    )Interest income
    
    
    15
    
    
    
    336
    
    
    
    
    
    
    
    351Impairment loss on license right
    
    
    
    
    
    
    28,759
    
    
    
    
    
    
    
    28,759Depreciation and amortization
    
    
    1,282
    
    
    
    2,169
    
    
    
    
    
    
    
    3,451Net income (loss)
    
    
    2,491
    
    
    
    (36,866
    )
    
    
    17,137
    
    
    
    (17,238
    )Total assets
    
    
    30,495
    
    
    
    5,726
    
    
    
    
    
    
    
    36,221Capital expenditures
    
    
    311
    
    
    
    242
    
    
    
    
    
    
    
    553
 Predecessor CompanyTwelve Months Ended August 31, 2003NSC Systems
    
    
    VMI
    
    
    ConsolidatedRevenues
    
    $
    39,854
    
    
    $
    5,057
    
    
    $
    44,911Operating income (loss)
    
    
    11,029
    
    
    
    (24,952
    )
    
    
    (13,923
    )Interest expense
    
    
    2,118
    
    
    
    
    
    
    
    2,118Interest income
    
    
    117
    
    
    
    330
    
    
    
    447Depreciation and amortization
    
    
    2,803
    
    
    
    2,823
    
    
    
    5,626Income tax benefit
    
    
    
    
    
    
    
    
    
    
    Net income (loss)
    
    
    8,918
    
    
    
    (24,938
    )
    
    
    (16,020
    )Total assets
    
    
    12,998
    
    
    
    43,102
    
    
    
    56,100Capital expenditures
    
    
    344
    
    
    
    231
    
    
    
    575
  18. SUBSEQUENT EVENTS
 Securities Purchase Agreement  Sale of Series B Convertible Redeemable Preferred Stock
  F-44
    Table of Contents  Ranking .
 Dividends
 Conversion .
 Redemption by Holder
 
    
    the Companys common stock is suspended from trading or is not listed for trading on at least
one of, the New York Stock Exchange, the American Stock Exchange, The Nasdaq National Market
or The Nasdaq SmallCap Market for an aggregate of 10 or more trading days in any twelve-month
period;
    
    the initial registration statement required to be filed by the Company pursuant to the
registration rights agreement has not been declared effective by December 31, 2005, or such
registration statement, after being declared effective, cannot be utilized by the holders of
Series B convertible preferred stock for the resale of all of their registrable securities for
an aggregate of more than 15 days in the aggregate;
    
    the Company fails to remove any restrictive legend on any certificate or any shares of common
stock issued to the holders of Series B convertible preferred stock upon conversion of the
Series B convertible preferred stock as and when required and such failure continues uncured
for five business days;
 F-45
    Table of Contents  
    
    the Company provides written notice (or otherwise indicate) to any holder of Series B
convertible preferred stock, or state by way of public announcement distributed via a press
release, at any time, of the Companys intention not to issue, or otherwise refuse to issue, shares of common stock to any holder of Series B convertible preferred stock upon conversion
in accordance with the terms of the certificate of designation for the Companys Series B
convertible preferred stock;
    
    the Company or any of its subsidiaries make an assignment for the benefit of creditors, or
applies for or consents to the appointment of a receiver or trustee for the Company or for a
substantial part of its property or business;
    
    bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the
relief of debtors shall be instituted by or against the Company or any of its subsidiaries
which shall not be dismissed within 60 days of their initiation; or
    
    the Company:
 
    
    sells, conveys or disposes of all or substantially all of its assets;
    
    merges or consolidates with or into, or engages in any other business
combination with, any other person or entity, in any case which results in either
(i) the holders of the Companys voting securities immediately prior to such
transaction holding or having the right to direct the voting of fifty percent (50%)
or less of our total outstanding voting securities of or such other surviving or
acquiring person or entity immediately following such transaction or (ii) the
members of the Companys board of directors comprising fifty percent (50%) or less
of the members of its board of directors or such other surviving or acquiring
person or entity immediately following such transaction;
    
    either (i) fail to pay, when due, or within any applicable grace period, any
payment with respect to any indebtedness in excess of $250,000 due to any third
party, other than payments contested by the Company in good faith, or (ii) suffer
to exist any other default under any agreement binding the Company which default or
event of default would or is likely to have a material adverse effect on the
Companys business, operations, properties, prospects or financial condition;
    
    have fifty percent (50%) or more of the voting power of the Companys capital
stock owned beneficially by one person, entity or group;
    
    experience any other change of control not otherwise addressed above; or
    
    the Company otherwise breaches any material term under the private placement
transaction documents, and if such breach is curable, shall fails to cure such
breach within 10 business days after the Company has been notified thereof in
writing by the holder.
  Redemption by the Company
 F-46
    Table of Contents  Restricted Actions
 1)
    
    alter or change the rights, preferences or privileges of the Series B
convertible preferred stock, or increase the authorized number of shares of Series
B convertible preferred stock;2)
    
    amend the Companys certificate of incorporation or bylaws;3)
    
    issue any shares of Series B convertible preferred stock other than
pursuant to the securities purchase agreement with the selling stockholder;4)
    
    redeem, repurchase or otherwise acquire, or declare or pay any cash
dividend or distribution on, any junior securities;5)
    
    increase the par value of the Companys common stock;6)
    
    sell all or substantially all of the Companys assets or stock, or
consolidate or merge with another entity;7)
    
    enter into or permit to occur any change of control transaction;8)
    
    sell, transfer or encumber technology, other than licenses granted in
the ordinary course of business;9)
    
    liquidate, dissolve, recapitalize or reorganize;10)
    
    authorize, reserve, or issue common stock with respect to any plan or
agreement that provides for the issuance of equity securities to the Companys
employees, officers, directors or consultants in excess of 250,000 shares of common
stock;11)
    
    change the Companys principal business;12)
    
    issue shares of the Companys common stock, other than as contemplated
by the certificate of designation or by the warrants issued to the selling
stockholder;13)
    
    increase the number of members of the Companys board of directors to
more than 7 members, or, if no Series B convertible preferred stock director has
been elected, increase the number of members of the Companys board of directors to
more than 6 members;14)
    
    alter or change the rights, preferences or privileges of any of the
Companys capital stock so as to affect adversely the Series B convertible
preferred stock;15)
    
    create or issue any senior securities or pari passu securities to the
Series B convertible preferred stock;16)
    
    except for the issuance of debt securities to, or incurrence of
indebtedness from, a recognized financial institution in an aggregate amount not
exceeding $5,000,000 and which, in the case of debt securities, are not convertible
securities, issue any debt securities or incur any indebtedness that would have any
preferences over the Series B convertible preferred stock upon the Companys
liquidation, or redeem, repurchase, prepay or otherwise acquire any of our
outstanding debt securities or indebtedness, except as expressly required by the
terms of such securities or indebtedness;
 F-47
    Table of Contents  17)
    
    make any dilutive issuance;18)
    
    enter into any agreement, commitment, understanding or other
arrangement to take any of the foregoing actions; or19)
    
    cause or authorize any of the Companys subsidiaries to engage in any
of the foregoing actions.
 Voting Rights
 Warrants Issued to Selling Stockholder
     Registration Rights Agreement
 F-48
    Table of Contents  Accounting for Sale of Series B Convertible Redeemable Preferred Stock and Exchange of Note Payable
for Warrants
    Nasdaq Delisting Notification
     
    
    sales commissions payable to both the broker-dealer and the registered representative; and
    
    current quotations for the securities.
  F-49
    Table of Contents  19. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
  Reorganized companyFirst
    
    Second
    
    Third
    
    Fourth2005
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterTotal revenues
    
    $
    4,524
    
    
    $
    4,286
    
    
    $
    4,244
    
    
    $
    3,318Gross profit
    
    
    2,224
    
    
    
    2,307
    
    
    
    2,168
    
    
    
    1,475Operating
loss (excluding reorganization
items)
    
    
    (978
    )
    
    
    (1,091
    )
    
    
    (1,425
    )
    
    
    (11,726
    )Net loss
    
    
    (1,131
    )
    
    
    (1,180
    )
    
    
    (1,508
    )
    
    
    (11,844
    )Preferred Stock Dividend
    
    
    (67
    )
    
    
    (99
    )
    
    
    (101
    )
    
    
    (101
    )Net loss attributable to common shareholders
    
    
    (1,198
    )
    
    
    (1,279
    )
    
    
    (1,609
    )
    
    
    (11,945
    )Basic and diluted loss per share
    
    $
    (0.19
    )
    
    $
    (0.20
    )
    
    $
    (0.24
    )
    
    $
    (1.76
    )Weighted average shares outstanding:Basic and diluted
    
    
    6,241
    
    
    
    6,352
    
    
    
    6,596
    
    
    
    6,801
  ReorganizedPredecessor Company
    
    CompanyOne Month
    
    Two MonthFirst
    
    Second
    
    Third
    
    Period Ended
    
    Period Ended2004
    
    Quarter
    
    Quarter
    
    Quarter (a)
    
    June 30, 2004 (b)
    
    August 31, 2004Total revenues
    
    $
    6,817
    
    
    $
    5,967
    
    
    $
    5,274
    
    
    $
    1,927
    
    
    $
    3,222Gross profit
    
    
    2,858
    
    
    
    3,027
    
    
    
    2,842
    
    
    
    783
    
    
    
    1,716Operating
loss (excluding reorganization
items)
    
    
    (2,845
    )
    
    
    (1,079
    )
    
    
    (29,873
    )
    
    
    (281
    )
    
    
    (405
    )Net loss
    
    
    (3,280
    )
    
    
    (1,346
    )
    
    
    (31,630
    )
    
    
    19,018
    
    
    
    (541
    )Basic and diluted income (loss) per share
    
    $
    (0.34
    )
    
    $
    (0.14
    )
    
    $
    (3.27
    )
    
    $
    1.97
    
    
    $
    (0.08
    )Weighted average shares outstanding:Basic and diluted
    
    
    9,670
    
    
    
    9,671
    
    
    
    9,672
    
    
    
    9,672
    
    
    
    6,505
 
 (a)
    
    Net loss for the third quarter ending May 31, 2004 included a $28.8 million impairment loss
on the write down of the VMI license right.(b)
    
    Net income for the one-month period ended June 30, 2004 includes several items related to the
Companys emergence from bankruptcy including a $20.3 million fresh start accounting adjustment to
reflect assets and liabilities at fair value. Predecessor CompanyFirst
    
    Second
    
    Third
    
    Fourth2003
    
    Quarter
    
    Quarter
    
    Quarter
    
    QuarterTotal revenues
    
    $
    13,629
    
    
    $
    12,045
    
    
    $
    10,892
    
    
    $
    8,346Gross profit
    
    
    5,595
    
    
    
    5,200
    
    
    
    4,584
    
    
    
    3,201Operating loss
    
    
    (3,956
    )
    
    
    (3,880
    )
    
    
    (2,739
    )
    
    
    (3,349
    )Net loss
    
    
    (4,473
    )
    
    
    (4,404
    )
    
    
    (3,228
    )
    
    
    (3,915
    )Basic and diluted loss per share
    
    $
    (0.46
    )
    
    $
    (0.46
    )
    
    $
    (0.33
    )
    
    $
    (0.40
    )Weighted average shares
outstanding:Basic and diluted
    
    
    9,670
    
    
    
    9,670
    
    
    
    9,670
    
    
    
    9,670
 F-50
    Table of Contents  Report of Independent Registered Public Accounting Firm
 
   /s/ BDO Seidman, LLPBDO Seidman, LLP
 
 S-1
    Table of Contents  INDEPENDENT AUDITORS REPORT
 
   
 S-2
    Table of Contents  SCHEDULE II
 REMOTE DYNAMICS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
($ in thousands)
 AdditionsBalance at
    
    Charged toBeginning of
    
    Costs and
    
    
    
    
    
    Balance atDescription
    
    Period
    
    Expenses
    
    Deductions
    
    End of PeriodPredecessor CompanyYear ended August 31, 2003Allowance for doubtful accounts
Accounts receivable
    
    
    2,843
    
    
    
    234
    
    
    
    (2,831
    )
    
    
    246Allowance for doubtful accounts
Lease receivables
    
    
    189
    
    
    
    1,144
    
    
    
    (881
    )
    
    
    452Warranty reserve
    
    
    491
    
    
    
    196
    
    
    
    (173
    )
    
    
    514Provision for settlement of litigation
    
    
    1,681
    
    
    
    
    
    
    
    
    
    
    
    1,681Valuation allowance against
deferred tax asset
    
    
    58,706
    
    
    
    5,394
    
    
    
    
    
    
    
    64,100Ten months ended June 30, 2004Allowance for doubtful accounts
Accounts receivable
    
    
    246
    
    
    
    352
    
    
    
    (377
    )
    
    
    221Allowance for doubtful accounts
Lease receivables
    
    
    452
    
    
    
    594
    
    
    
    (671
    )
    
    
    375Warranty reserve
    
    
    514
    
    
    
    118
    
    
    
    (198
    )
    
    
    434Provision for settlement of litigation
    
    
    1,681
    
    
    
    
    
    
    
    (1,681
    )
    
    
    Valuation allowance against
deferred tax asset
    
    
    64,100
    
    
    
    6,638
    
    
    
    
    
    
    
    70,738Reorganized CompanyTwo months ended August 31, 2004Allowance for doubtful accounts
Accounts receivable
    
    
    221
    
    
    
    35
    
    
    
    (94
    )
    
    
    162Allowance for doubtful accounts
Lease receivables
    
    
    375
    
    
    
    50
    
    
    
    (68
    )
    
    
    357Warranty reserve
    
    
    434
    
    
    
    9
    
    
    
    (68
    )
    
    
    375Valuation allowance against
deferred tax asset
    
    
    70,738
    
    
    
    182
    
    
    
    
    
    
    
    70,920Year ended August 31, 2005Allowance for doubtful accounts
Accounts receivable
    
    
    162
    
    
    
    165
    
    
    
    (130
    )
    
    
    197Allowance for doubtful accounts
Lease receivables
    
    
    357
    
    
    
    22
    
    
    
    (281
    )
    
    
    98Warranty reserve
    
    
    375
    
    
    
    28
    
    
    
    (193
    )
    
    
    210Valuation allowance against
deferred tax asset
    
    
    70,920
    
    
    
    6,057
    
    
    
    
    
    
    
    76,977
 S-3