U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2002
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 1-15087
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I.D. SYSTEMS, INC.
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(Exact name of small business issuer as specified in its charter)
Delaware 22-3270799
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(State or other jurisdiction or (I.R.S. Employer
incorporation or organization) Identification No)
One University Plaza, Hackensack, New Jersey 07601
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(Address of principal executive offices) (Zip Code)
(201) 670-9000
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(Issuer's telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period) that the issuer was required to file such reports, and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDING DURING THE
PRECEDING FIVE YEARS
Check whether the issuer filed all documents and reports required to be
filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
Yes No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the Registrant's Common Stock, $0.01 par
value, as of the close of business on May 10, 2002 was 6,798,722.
INDEX
I.D. Systems, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements. Page
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Condensed Balance Sheets as of December 31, 2001
and March 31, 2002 (unaudited) 1
Condensed Statements of Operations (unaudited) -
for the three months ended March 31, 2001 and 2002 2
Condensed Statements of Cash Flows (unaudited) -
for the three months ended March 31, 2001 and 2002 3
Notes to Condensed Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 7
Signatures 8
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
I.D. Systems, Inc.
Condensed Balance Sheets
December 31, March 31, 2002
2001 (Unaudited)
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Assets
Cash and cash equivalents $ 2,426,000 $ 6,874,000
Investments 3,039,000 3,621,000
Accounts receivable 234,000 786,000
Inventory 844,000 1,158,000
Prepaid expenses and other current assets 111,000 103,000
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Total current assets 6,654,000 12,542,000
Fixed assets, net 540,000 570,000
Other assets 117,000 117,000
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$ 7,311,000 $ 13,229,000
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Liabilities
Accounts payable and accrued expenses $ 574,000 $ 848,000
Capital lease obligations 10,000 7,000
Other current liabilities 100,000 100,000
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Total current liabilities 684,000 955,000
Deferred rent 42,000 48,000
Other liabilities 100,000 100,000
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826,000 1,103,000
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Stockholders' equity
Preferred Stock; authorized 5,000,000 shares,
$0.01 par value; none issued
Common Stock, authorized 15,000,000 shares, $0.01
par value; issued and outstanding 5,866,000
shares and 6,792,000 shares, respectively 59,000 68,000
Additional paid in capital 15,739,000 22,028,000
Treasury stock; 40,178 shares at cost (113,000) (113,000)
Accumulated deficit (9,200,000) (9,857,000)
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6,485,000 12,126,000
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$ 7,311,000 $ 13,229,000
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1
I.D. Systems, Inc.
Condensed Statements of Operations
(Unaudited)
Three months ended
March 31,
2001 2002
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Revenues $ 287,000 $ 831,000
Cost of Revenues 146,000 375,000
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Gross Profit 141,000 456,000
Selling, general and administrative expenses 771,000 883,000
Research and development expenses 316,000 280,000
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Loss from operations (946,000) (707,000)
Interest income 117,000 51,000
Interest expense (1,000) (1,000)
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Net loss $ (830,000) $ (657,000)
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Net loss per share - basic and diluted $ (0.14) $ (0.10)
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Weighted average common shares outstanding-
basic and diluted loss per share 5,821,000 6,444,000
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See accompanying notes
2
I.D. Systems, Inc.
Condensed Statements of Cash Flows
(Unaudited)
Three months ended
March 31,
2001 2002
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Cash flows from operating activities:
Net loss $ (830,000) $ (657,000)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 41,000 44,000
Deferred rent expense 6,000 6,000
Changes in:
Accounts receivable (260,000) (552,000)
Unbilled receivables 129,000
Inventory (78,000) (314,000)
Prepaid expenses and other assets 36,000 8,000
Income taxes payable (8,000)
Accounts payable (426,000) 274,000
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Net cash used in operating activities (1,390,000) (1,191,000)
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Cash flows from investing activities:
Purchase of fixed assets (4,000) (74,000)
Purchases of investments (3,156,000) (3,081,000)
Accrued interest receivable (44,000)
Maturities of investments 5,552,000 2,549,000
Amortization of (discount) premium on investments (15,000) (6,000)
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Net cash provided by (used in) investing
activities 2,377,000 (656,000)
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Cash flows from financing activities:
Payment of lease obligations (3,000) (3,000)
Proceeds from exercise of stock options 153,000
Net proceeds from private placement 6,145,000
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Net cash (used in) provided by financing
activities (3,000) 6,295,000
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Net increase in cash and cash equivalents 984,000 4,448,000
Cash and cash equivalents - beginning of period 3,085,000 2,426,000
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Cash and cash equivalents - end of period $ 4,069,000 $ 6,874,000
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Supplemental disclosures of non-cash financing activities
Treasury shares received as payment for exercise of stock
options $ 113,000
3
I.D. Systems, Inc.
Notes to Condensed Financial Statements
March 31, 2002
NOTE A - Basis of Reporting
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-QSB. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, such statements include all adjustments (consisting only of normal
recurring items) which are considered necessary for a fair presentation of the
financial position of I.D. Systems, Inc. (the "Company") as of March 31, 2002,
the results of its operations for the three-month periods ended March 31, 2001
and 2002 and cash flows for the three-month periods ended March 31, 2001 and
2002. The results of operations for the three-month period ended March 31, 2002
are not necessarily indicative of the operating results for the full year. It is
suggested that these financial statements be read in conjunction with the
financial statements and related disclosures for the year ended December 31,
2001 included in the Company's Annual Report.
NOTE B - Net Income (Loss) Per Share of Common Stock
Basic income (loss) per share is based on the weighted average number of common
shares outstanding during each period. Diluted income (loss) per share reflects
the potential dilution assuming common shares were issued upon the exercise of
outstanding options and warrants and the proceeds thereof were used to purchase
outstanding common shares. For the three-month periods ended March 31, 2001 and
2002, the basic and diluted weighted average shares outstanding are the same
since the effect from the potential exercise of outstanding stock options would
have been anti-dilutive.
NOTE C - Private Placement
In January 2002, the Company sold 821,250 shares of common stock and received
net proceeds of $6,145,000.
Warrants to purchase 107,125 shares of common stock were issued to the placement
agent and a finder. The warrants are exercisable for a period of five years,
commencing in January 2002, at a price of $9.58 per share.
4
Item 2. Management's Discussion And Analysis
The following discussion and analysis of the financial condition and results of
operations of I.D. Systems should be read in conjunction with I.D. Systems'
financial statements and notes thereto appearing elsewhere herein.
This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements that involve a number of risks
and uncertainties. The following are among the factors that could cause actual
results to differ materially from the forward-looking statements: business
conditions and growth in the wireless tracking industries, general economic
conditions, lower than expected customer orders or variations in customer order
patterns, competitive factors including increased competition, changes in
product and service mix, and resource constraints encountered in developing new
products. The forward-looking statements contained in this MD&A regarding
industry trends, product development and liquidity and future business
activities should be considered in light of these factors.
Results of Operations
The following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue:
Three months ended
March 31,
2001 2002
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Revenues 100.0% 100.0%
Cost of Revenues 50.9 45.1
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Gross Profit 49.1 54.9
Selling, general and administrative expenses 268.6 106.3
Research and development expenses 110.1 33.7
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Loss from operations (329.6) (85.1)
Interest income 40.8 6.0
Interest expense (0.4) (0.1)
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Net loss (289.2)% (79.2)%
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5
Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001
REVENUES. Revenues were $831,000 in the three months ended March 31, 2002 as
compared to $287,000 in the three months ended March 31, 2001. The increase in
revenues in the quarter ended March 31, 2002 is due to customers beginning to
transition from successful pilot programs of the Company's fleet tracking and
management system to larger production-scale orders.
COST OF REVENUES. Cost of revenues were $375,000 in the three months ended March
31, 2002 as compared to $146,000 in the three months ended March 31, 2001. As a
percentage of revenues, cost of revenues were 45.1% in the three months ended
March 31, 2002 as compared to 50.9% in the three months ended March 31, 2001.
The decrease in cost of revenues is due to product cost reductions realized from
outsourcing and engineering efforts. Gross profit was $456,000 in the three
months ended March 31, 2002 compared to $141,000 in the three months ended March
31, 2001. As a percentage of revenues, gross profit increased to 54.9% in the
three months ended March 31, 2002 from 49.1% in the three months ended March 31,
2001.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $883,000 in the three months ended March 31, 2002
as compared to $771,000 in the three months ended March 31, 2001. This increase
was attributable to increased payroll expenses associated with sales and
marketing. As a percentage of revenues, selling, general and administrative
expenses decreased to 106.3% in the three months ended March 31, 2002 from
268.6% in the three months ended March 31, 2001.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$280,000 in the three months ended March 31, 2002 as compared to $316,000 in the
three months ended March 31, 2001. This decrease was attributable to completing
and commercializing the new "universal system" of hardware and software for
tracking and managing fleets of industrial vehicles during the first quarter of
2001. As a percentage of revenues, research and development expenses decreased
to 33.7% in the three months ended March 31, 2002 as compared to 110.1% in the
three months ended March 31, 2001.
INTEREST INCOME AND EXPENSE.
Interest income was $51,000 in the three months ended March 31, 2002 as compared
to $117,000 in the three months ended March 31, 2001. This decrease was
attributable to the reduction of interest rates. The Company invests in
commercial paper and corporate bonds, which are classified as held to maturity.
Interest expense was $1,000 in the three months ended March 31, 2001 and 2002.
NET LOSS. Net loss was $657,000 in the three months ended March 31, 2002 as
compared to a net loss of $830,000 in the three-month period ended March 31,
2001. This was due primarily to the reasons described above.
Liquidity and Capital Resources
As of March 31, 2002, the Company had $10,495,000 of cash, cash equivalents and
short-term investments and $11,587,000 of working capital as compared to
$5,465,000 and $5,970,000, respectively, at December 31, 2001.
Net cash used in operating activities in the three months ended March 31, 2002
was $1,191,000 as compared to net cash used in operating activities of
$1,390,000 for the three months ended March 31, 2001. Net cash used in operating
activities in the three months ended March 31, 2002 was due to a net loss of
$657,000, an increase in accounts receivable of $552,000 and an increase in
inventory of $314,000, offset by a decrease in accounts payable and accrued
expenses of $274,000. Net cash used in operating activities in the three months
ended March 31, 2001 was primarily due to a net loss of $830,000, an increase in
accounts receivable of $260,000, and a decrease in accounts payable of $426,000,
partially offset by a decrease in unbilled receivables of $129,000.
6
Net cash used in investing activities for the three months ended March 31, 2002
was $656,000 as compared to net cash provided by investing activities for the
three months ended March 31, 2001 of $2,377,000. The cash used in investing
activities in the three months ended March 31, 2002 was for the purchases of
investments of $3,081,000 and the purchases of fixed assets of $74,000, offset
by maturities of investments of $2,549,000. The cash provided by investing
activities in the three months ended March 31, 2001 was from maturities of
short-term investments of $5,552,000, primarily offset by purchases of
investments of $3,156,000.
Net cash provided by financing activities for the three months ended March 31,
2002 was $6,295,000 as compared to net cash used in financing activities of
$3,000 in the three months ended March 31, 2001. The net cash provided by
financing activities in the three months ended March 31, 2002 was from the
proceeds of $6,145,000 received in connection with the sale of 821,250 shares of
common stock and $153,000 received from proceeds from exercise of stock options,
offset by $3,000 for payment of lease obligations. The net cash used in
financing activities of $3,000 for the three months ended March 31, 2001 was for
payment of lease obligations.
The Company believes its operations have not been and, in the foreseeable
future, will not be materially adversely affected by inflation or changing
prices.
Recently Issued Financial Standards
The Company believes that recently issued financial standards will not have a
significant impact on our results of operations, financial position or cash
flows.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
None
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended March
31, 2002.
7
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
I.D. Systems, Inc.
Dated: May 10, 2002 By: /s/ Jeffrey M. Jagid
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Jeffrey M. Jagid
Chief Executive Officer
(Principal Executive Officer)
Dated: May 10, 2002 By: /s/ Ned Mavrommatis
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Ned Mavrommatis
Chief Financial Officer
(Principal Accounting Officer)
8