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, 2001
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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 ___________________
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 incorporation or organization) (I.R.S. Employer 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 1, 2001 was 5,835,625.
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, 2000
and March 31, 2001 (unaudited) 1
Condensed Statements of Operations (unaudited) -
for the three months ended March 31, 2000 and 2001 2
Condensed Statements of Cash Flows (unaudited) -
for the three months ended March 31, 2000 and 2001 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 8
SIGNATURES 9
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
I.D. SYSTEMS, INC.
CONDENSED BALANCE SHEETS
DECEMBER 31, 2000 MARCH 31, 2001
(UNAUDITED)
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ASSETS
Cash and cash equivalents $ 3,085,000 $ 4,069,000
Investments 5,588,000 3,207,000
Accounts receivable (net of allowance of $48,000) 297,000 557,000
Unbilled receivables 349,000 220,000
Inventory 748,000 826,000
Income taxes receivable 111,000 111,000
Prepaid expenses and other assets 125,000 103,000
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Total current assets 10,303,000 9,093,000
Fixed assets, net 632,000 595,000
Other assets 146,000 132,000
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$ 11,081,000 $ 9,820,000
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LIABILITIES
Accounts payable $ 699,000 $ 273,000
Capital lease obligations 14,000 13,000
Income taxes payable 8,000
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Total current liabilities 721,000 286,000
Capital lease obligations 18,000 16,000
Deferred rent 19,000 25,000
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758,000 327,000
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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, $0.01 par value; issued and
outstanding 5,720,000 shares and 5,835,000 shares, respectively 57,000 58,000
Additional paid in capital 15,558,000 15,670,000
Accumulated deficit (5,292,000) (6,122,000)
Treasury stock; 40,178 shares at cost (113,000)
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10,323,000 9,493,000
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$ 11,081,000 $ 9,820,000
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SEE ACCOMPANYING NOTES.
1
I.D. SYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
2000 2001
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Revenues $ 306,000 $ 287,000
Cost of Revenues 149,000 146,000
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Gross Profit 157,000 141,000
Selling, general and administrative expenses 584,000 771,000
Research and development expenses 296,000 316,000
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Loss from operations (723,000) (946,000)
Interest income 181,000 117,000
Interest expense (1,000) (1,000)
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NET LOSS $ (543,000) $ (830,000)
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NET LOSS PER SHARE - BASIC AND DILUTED $ (0.09) $ (0.14)
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WEIGHTED AVERAGE COMMON SHARES OUTSTANDING-
BASIC AND DILUTED LOSS PER SHARE 5,720,000 5,821,000
==================== ==================
SEE ACCOMPANYING NOTES
2
I.D. SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
2000 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (543,000) $ (830,000)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 23,000 41,000
Deferred taxes 6,000
Deferred rent expense 6,000
Changes in:
Accounts receivable 700,000 (260,000)
Unbilled receivables 83,000 129,000
Inventory (166,000) (78,000)
Prepaid expenses and other assets 86,000 36,000
Income taxes payable (6,000) (8,000)
Accounts payable (275,000) (426,000)
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Net cash used in operating activities (92,000) (1,390,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (247,000) (4,000)
Investments maturities 5,563,000 2,381,000
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Net cash provided by investing activities 5,316,000 2,377,000
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CASH FLOWS FROM FINANCING ACTIVITIES
Payment of lease obligations (4,000) (3,000)
Proceeds from exercise of stock options 4,000
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Net cash used in financing activities (3,000)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 5,224,000 984,000
Cash and cash equivalents - beginning of period 7,021,000 3,085,000
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CASH AND CASH EQUIVALENTS - END OF PERIOD $12,245,000 $4,069,000
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SUPPLEMENTAL DISCLOSURES OF NON-CASH FINANCING ACTIVITIES
Treasury shares received as payment for exercise of stock
options $ 113,000
SEE ACCOMPANYING NOTES.
3
I.D. SYSTEMS, INC.
Notes to Condensed Financial Statements
March 31, 2001
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, 2001,
the results of its operations for the three-month periods ended March 31, 2000
and 2001 and cash flows for the three-month periods ended March 31, 2000 and
2001. The results of operations for the three-month period ended March 31, 2001
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,
2000 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, 2000 and
2001 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.
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.
The Company was incorporated in August 1993 and began to derive revenues from
its initial line of products in March 1995. Revenues are generated from design
and engineering fees as well as sales of its system. The Company's revenues to
date have been derived from designing, developing and customizing the Company's
system to each individual customer. The Company intends to generate additional
revenues by selling software and hardware upgrades as well as on-going
maintenance and support contracts to its existing customers.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue:
5
THREE MONTHS ENDED
MARCH 31,
2000 2001
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Revenues 100.0% 100.0%
Cost of Revenues 48.7 50.9
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Gross Profit 51.3 49.1
Selling, general and administrative expenses 190.8 268.6
Research and development expenses 96.7 110.1
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Loss from operations (236.2) (329.6)
Net interest (expense) income 58.8 40.4
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NET LOSS (177.4)% (289.2)%
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6
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000
REVENUES. Revenues were $287,000 in the three months ended March 31, 2001 as
compared to $306,000 in the three months ended March 31, 2000. Revenues in the
quarter ended March 31, 2001 were derived from the delivery and implementation
of the Company's fleet tracking and management system pursuant to a number of
pilot programs.
COST OF REVENUES. Cost of revenues were $146,000 in the three months ended March
31, 2001 as compared to $149,000 in the three months ended March 31, 2000. As a
percentage of revenues, cost of revenues were 50.9% in the three months ended
March 31, 2001 as compared to 48.7% in the three months ended March 31, 2000.
Gross profit was $141,000 in the three months ended March 31, 2001 compared to
$157,000 in the three months ended March 31, 2000. As a percentage of revenues,
gross profit decreased to 49.1% in the three months ended March 31, 2001 from
51.3% in the three months ended March 31, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $771,000 in the three months ended March 31, 2001
as compared to $584,000 in the three months ended March 31, 2000. This increase
was attributable to increased payroll expenses and additional costs related to
the Company's new facility. As a percentage of revenues, selling, general and
administrative expenses increased to 268.6% in the three months ended March 31,
2001 from 190.8% in the three months ended March 31, 2000.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$316,000 in the three months ended March 31, 2001 as compared to $296,000 in the
three months ended March 31, 2000. As a percentage of revenues, research and
development expenses were 110.1% in the three months ended March 31, 2001 as
compared to 96.7% in the three months ended March 31, 2000. Research and
development efforts were directed towards the reduction of the cost and size of
the Company's system and further development of the Company's "universal" system
which allows for widespread use of the Company's hardware and software.
INTEREST INCOME AND EXPENSE. Interest income was $117,000 in the three months
ended March 31, 2001 as compared to $181,000 in the three months ended March 31,
2000. This decrease was attributable to larger average cash, cash equivalents
and short-term investment balances in the three months ended March 31, 2000 as
compared to the three months ended March 31, 2001.
Interest expense was $1,000 in the three months ended March 31, 2001 and 2000.
NET LOSS. Net loss was $830,000 in the three months ended March 31, 2001 as
compared to net loss of $543,000 in the three-month period ended March 31, 2000.
This was due primarily to the reasons described above.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2001, the Company had $7,276,000 of cash, cash equivalents and
short-term investments and $8,807,000 of working capital as compared to
$8,673,000 and $9,582,000, respectively, at December 31, 2000.
Net cash used in operating activities was $1,390,000 for the three months ended
March 31, 2001 as compared to net cash used in operating activities of $92,000
for the three months ended March 31, 2000. Net cash used in operating activities
in the three months ended March 31, 2001 was primarily due to the net
7
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. Net cash used in operating activities in the three
months ended March 31, 2000 was primarily due to the net loss of $543,000, an
increase in inventory of $166,000 and a decrease in accounts payable of
$275,000, offset by a decrease in accounts and unbilled receivables of $783,000
and a decrease of prepaid expenses and other assets of $86,000.
Net cash provided by investing activities for the three months ended March 31,
2001 was $2,377,000 as compared to cash provided by investing activities of
$5,316,000 for the three months ended March 31, 2000. The cash provided by
investing activities in the three months ended March 31, 2001 was from
maturities of short-term investments of $2,381,000. The cash provided by
investing activities for the three months ended March 31, 2000 was from
maturities of short-term investments of $5,563,000 offset by use of cash of
$247,000 for the purchase of fixed assets.
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, 2001.
8
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 , 2001 By: /s/ Jeffrey M. Jagid
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Jeffrey M. Jagid
Chief Executive Officer
(Principal Executive Officer)
Dated: May , 2001 By: /s/ Ned Mavrommatis
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Ned Mavrommatis
Chief Financial Officer
(Principal Accounting Officer)
9
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 14, 2001 By: /s/ Jeffrey M. Jagid
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Jeffrey M. Jagid
Chief Executive Officer
(Principal Executive Officer)
Dated: May 14, 2001 By: /s/ Ned Mavrommatis
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Ned Mavrommatis
Chief Financial Officer
(Principal Accounting Officer)
9