Automakers began offering telematics as an option on vehicles in the mid-1990s. Today, virtually every major automaker in the world is analyzing, designing or managing a telematics program for at least some of its models. Of these automakers, most utilize an outsourced solution for their telematics programs. A typical telematics program includes a telematics service provider, such as ATX, and the following five distinct program elements: in-vehicle hardware, wireless communications, location technology, content and driver information. According to Telematics Research Group (TRG), an industry research firm, approximately 34.6 million new light vehicles were sold each year, on average, in North America and Western Europe during the three-year period ended December 31, 2003. TRG also reports that both the number of telematics-enabled light vehicles introduced into North America and Western Europe, as well as the number of telematics-serviced light vehicles on the road in these markets grew during this same period.

The overall telematics industry, which includes in-vehicle hardware, communication services, content and certain geographic markets is also growing. Today, total telematics industry revenue in North America and Western Europe is estimated to be approximately $5.9 billion and is expected to grow to $14.5 billion by 2007, reflecting annualized growth of 25.2%. The North American market alone is forecasted to grow from $4.8 billion in 2003 to $9.6 billion in 2007. Telematics service providers in North America and Western Europe as a stand-alone group earned approximately $784.0 million in monitoring service revenues during 2003, which figure is projected to grow to approximately $2.2 billion by 2007, reflecting annualized growth of 29.4%.

Consumer services represent those services provided to the driver of the vehicle and relate directly to the traditional driving experience. The Company offers the following consumer services: emergency and breakdown services - location-based emergency and breakdown response service that operates at the touch of a button; automatic collision notification - location-based emergency response service that operates automatically upon deployment of vehicle airbags, seat belt tensioners or collision detection sensors; remote door unlock - driver-initiated service that assists a consumer with remotely unlocking a car door or trunk; stolen vehicle recovery - real-time, location-enhanced, driver-initiated search for a consumer’s stolen vehicle; vehicle security system activation notification - real-time notification of a vehicle security system activation; voice navigation - real-time, location-enhanced, consumer-initiated navigation assistance provided by an operator; destination/points of interest download - upon request, a consumer may have a specific address or point of interest downloaded to the navigation unit within the vehicle; real-time traffic information - on demand traffic information is delivered to the vehicle in a number of ways; concierge - on demand connection to concierge services; vehicle information - on demand connection to customer service personnel to address any questions or issues a consumer may have with his/her vehicle; customer care - on demand connection to customer service representatives allowing customer profile updates, changes to emergency contact information, billing support and answers to questions regarding the service suite; and costumer website - consumer-based website that provides details on services available, answers to frequently asked questions, access to billing information and resolution of customer service issues through email messaging.

OEM services represent those services that are provided to the OEM and/or its dealers. The Company offers the following OEM services: dealer connect - automatic connection of a vehicle owner to his/her preferred or nearest dealer; diagnostic data services - real-time, vehicle-specific distribution of detailed error codes to potentially assist the OEM with vehicle design improvement, quicker trend and recall analysis, inventory adjustments, supply chain management, and customer satisfaction through immediate diagnosis of roadside repair issues, and facilitate the dealers’ capture of increased repair and replacement revenue, more efficient service scheduling, parts inventory management and improved customer satisfaction; owner’s manual - on demand owner’s manual information that functions using hands-free, interactive voice response technology; distribution of vehicle performance data, generally aggregated by model, to the OEM in order to potentially reveal performance trends and needed product enhancements; performance data - utilizing interactive voice technology, consumers can provide immediate feedback on vehicle performance, dealer experience, or respond to customer satisfaction surveys; OEM website - development and maintenance of a telematics website which provides pertinent information about the OEM’s telematics program; in-vehicle marketing - provides the ability to send text messages with response choices to an individual customer allowing the OEM to market services and communicate directly with the driver; off-board navigation - this service enhances the OEM’s ability to deliver route assistance/navigation to the vehicle by utilizing an off-board server (instead of the on-board computing power of the navigation system) to calculate routes and provide up-to-date information on various destinations.

Direct costs increased 39.0% to $5.7 million for the three months ended March 31, 2004 from $4.1 million for the same period of 2003.

Sales and marketing expenses increased 33.3% to $1.6 million for the three months ended March 31, 2004 from $1.2 million for the same period of 2003.

For the three months ended March 31, 2004, product development expenses increased 50.0% to $1.8 million from $1.2 million for the same period of 2003.

Depreciation and amortization expense increased 18.8% to $1.9 million for the three months ended March 31, 2004 from $1.6 million for the same period of 2003.