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: June 30, 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 July 19, 2001 was 5,844,625.
INDEX
I.D. SYSTEMS, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS. Page
----
Condensed Balance Sheets as of December 31, 2000
and June 30, 2001 (unaudited) 1
Condensed Statements of Operations (unaudited)
for the three months and six months ended June 30, 2000 and 2001 2
Condensed Statements of Cash Flows (unaudited)
for the six months ended June 30, 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 JUNE 30, 2001
(UNAUDITED)
-------------------------- -----------------------
ASSETS
Cash and cash equivalents $ 3,085,000 $ 2,965,000
Investments 5,588,000 3,700,000
Accounts receivable (net of allowance of $48,000) 297,000 269,000
Unbilled receivables 349,000 96,000
Inventory 748,000 871,000
Income taxes receivable 111,000 111,000
Prepaid expenses and other assets 125,000 109,000
-------------------------- -----------------------
Total current assets 10,303,000 8,121,000
Fixed assets, net 632,000 559,000
Other assets 146,000 117,000
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$ 11,081,000 $ 8,797,000
========================== =======================
LIABILITIES
Accounts payable $ 699,000 $ 145,000
Capital lease obligations 14,000 14,000
Income taxes payable 8,000
-------------------------- -----------------------
Total current liabilities 721,000 159,000
Capital lease obligations 18,000 11,000
Deferred rent 19,000 31,000
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758,000 201,000
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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, $0.01 par value; issued and
outstanding 5,720,000 shares and 5,842,000 shares, respectively 57,000 58,000
Additional paid in capital 15,558,000 15,692,000
Accumulated deficit (5,292,000) (7,041,000)
Treasury stock; 40,178 shares at cost (113,000)
-------------------------- -----------------------
10,323,000 8,596,000
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$ 11,081,000 $ 8,797,000
========================== =======================
1
I.D. SYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 2001 2000 2001
----------------- ------------------ ------------------- -----------------
Revenues $ 313,000 $ 137,000 $ 619,000 $ 424,000
Cost of Revenues 165,000 99,000 314,000 245,000
----------------- ------------------ ------------------- -----------------
Gross Profit 148,000 38,000 305,000 179,000
Selling, general and administrative expenses 988,000 765,000 1,572,000 1,536,000
Research and development expenses 306,000 271,000 602,000 587,000
----------------- ------------------ ------------------- -----------------
Loss from operations (1,146,000) (998,000) (1,869,000) (1,944,000)
Interest income 191,000 80,000 372,000 197,000
Interest expense (2,000) (1,000) (3,000) (2,000)
----------------- ------------------ ------------------- -----------------
NET LOSS $ (957,000) $ (919,000) $ (1,500,000) $ (1,749,000)
================= ================== =================== =================
NET LOSS PER SHARE - BASIC AND DILUTED $ (0.17) $ (0.16) $ (0.26) $ (0.30)
================= ================== =================== =================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
BASIC AND DILUTED LOSS PER SHARE 5,720,000 5,838,000 5,720,000 5,829,000
================= ================== =================== =================
SEE ACCOMPANYING NOTES
2
I.D. SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
2000 2001
------------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,500,000) $ (1,749,000)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 49,000 80,000
Deferred taxes 12,000
Deferred rent expense (35,000) 12,000
Changes in:
Accounts receivable 682,000 28,000
Unbilled receivables 194,000 253,000
Inventory (291,000) (123,000)
Prepaid expenses and other assets 110,000 45,000
Income taxes payable (6,000) (8,000)
Accounts payable (232,000) (554,000)
------------------- ------------------
Net cash used in operating activities (1,017,000) (2,016,000)
------------------- ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (351,000) (7,000)
Purchases of investments (3,049,000) (6,245,000)
Maturities and sales of investments 6,005,000 8,158,000
Amortization of debt discount (20,000) (25,000)
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Net cash provided by investing activities 2,585,000 1,881,000
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of lease obligations (7,000) (7,000)
Proceeds from exercise of stock options 4,000 22,000
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Net cash (used in) provided by financing activities (3,000) 15,000
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,565,000 (120,000)
Cash and cash equivalents - beginning of period 7,021,000 3,085,000
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CASH AND CASH EQUIVALENTS - END OF PERIOD $8,586,000 $2,965,000
=================== ==================
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
June 30, 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 June 30, 2001,
the results of its operations for the six-month and three-month periods ended
June 30, 2000 and 2001 and cash flows for the six-month periods ended June 30,
2000 and 2001. The results of operations for the six- month and three-month
periods ended June 30, 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 of 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 and six-month periods
ended June 30, 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 Company's financial condition and
results of operations of I.D. Systems should be read in conjunction with I.D.
Systems' condensed 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:
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 2001 2000 2001
--------------- -------------- ----------- ------------
Revenues 100.0 % 100.0 % 100.0 % 100.0 %
Cost of Revenues 52.7 72.3 50.7 57.8
--------------- -------------- ----------- ------------
Gross Profit 47.3 27.7 49.3 42.2
Selling, general and administrative expenses 315.6 558.4 253.9 362.3
Research and development expenses 97.8 197.8 97.3 138.4
--------------- -------------- ----------- ------------
Loss from operations (366.1) (728.5) (301.9) (458.5)
Net interest income 60.4 57.7 59.6 46.0
--------------- -------------- ----------- ------------
NET LOSS (305.7) % (670.8) % (242.3) % (412.5) %
--------------- -------------- ----------- ------------
5
THREE MONTHS ENDED JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000
REVENUES. Revenues were $137,000 in the three months ended June 30, 2001 as
compared to $313,000 in the three months ended June 30, 2000. Revenues in the
quarter ended June 30, 2001 were derived from the delivery and implementation of
the Company's fleet tracking and management system pursuant to on-going pilot
programs.
COST OF REVENUES. Cost of revenues were $99,000 in the three months ended June
30, 2001 as compared to $165,000 in the three months ended June 30, 2000. As a
percentage of revenues, cost of revenues were 72.3% in the three months ended
June 30, 2001 as compared to 52.7% in the three months ended June 30, 2000. This
percentage increase was primarily attributable to production salaries
representing a higher percentage of lower revenues. Gross profit was $38,000 in
the three months ended June 30, 2001 compared to $148,000 in the three months
ended June 30, 2000. As a percentage of revenues, gross profit decreased to
27.7% in the three months ended June 30, 2001 from 47.3% in the three months
ended June 30, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $765,000 in the three months ended June 30, 2001 as
compared to $988,000 in the three months ended June 30, 2000. This decrease was
attributable to a decrease in payroll resulting from cost cutting efforts
instituted during the first quarter of 2001. As a percentage of revenues,
selling, general and administrative expenses increased to 558.4% in the three
months ended June 30, 2001 from 315.6% in the three months ended June 30, 2000.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$271,000 in the three months ended June 30, 2001 as compared to $306,000 in the
three months ended June 30, 2000. This decrease was attributable to cost cutting
efforts instituted during the first quarter of 2001. As a percentage of
revenues, research and development expenses increased to 197.8% in the three
months ended June 30, 2001 from 97.8% in the three months ended June 30, 2000.
NET INTEREST INCOME AND EXPENSE. Interest income was $80,000 in the three months
ended June 30, 2001 as compared to $191,000 in the three months ended June 30,
2000. This decrease was attributable to larger average cash, cash equivalents
and short-term investment balances in the three months ended June 30, 2000 as
compared to the three months ended June 30, 2001.
Interest expense was $1,000 in the three months ended June 30, 2001 as compared
to $2,000 in the three months ended June 30, 2000.
NET LOSS. Net loss was $919,000 in the three months ended June 30, 2001 as
compared to net loss of $957,000 in the three-month period ended June 30, 2000.
This was due primarily to the reasons described above.
SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
REVENUES. Revenues were $424,000 in the six months ended June 30, 2001 as
compared to $619,000 in the six months ended June 30, 2000. Revenues in the six
month period ended June 30, 2001 were derived from the delivery and
implementation of the Company's fleet tracking and management system pursuant to
on-going pilot programs.
COST OF REVENUES. Cost of revenues were $245,000 in the six months ended June
30, 2001 as compared to $314,000 in the six months ended June 30, 2000. As a
percentage of revenues, cost of revenues were 57.8% in the six months ended June
30, 2001 as compared to 50.7% in the six months ended June 30, 2000. This
percentage increase was primarily attributable to production salaries
6
representing a higher percentage of lower revenues. Gross profit was $179,000 in
the six months ended June 30, 2001 compared to $305,000 in the six months ended
June 30, 2000. As a percentage of revenues, gross profit decreased to 42.2% in
the six months ended June 30, 2001 from 49.3% in the six months ended June 30,
2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $1,536,000 in the six months ended June 30, 2001 as
compared to $1,572,000 in the six months ended June 30, 2000. This decrease was
attributable to a decrease in payroll resulting from cost cutting efforts
instituted during the first quarter of 2001. As a percentage of revenues,
selling, general and administrative expenses increased to 362.3% in the six
months ended June 30, 2001 from 253.9% in the six months ended June 30, 2000.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$587,000 in the six months ended June 30, 2001 as compared to $602,000 in the
six months ended June 30, 2000. This decrease was attributable to cost cutting
efforts instituted during the first quarter of 2001. As a percentage of
revenues, research and development expenses increased to 138.4% in the six
months ended June 30, 2001 from 97.3% in the six months ended June 30, 2000.
NET INTEREST INCOME AND EXPENSE. Interest income was $197,000 in the six months
ended June 30, 2001 as compared to $372,000 in the six months ended June 30,
2000. This decrease was attributable to larger average cash, cash equivalents
and short-term investment balances in the six months ended June 30, 2000 as
compared to the six months ended June 30, 2001.
Interest expense was $2,000 in the six months ended June 30, 2001 as compared to
$3,000 in the six months ended June 30, 2000.
NET LOSS. Net loss was $1,749,000 in the six months ended June 30, 2001 as
compared to net loss of $1,500,000 in the six-month period ended June 30, 2000.
This was due primarily to the reasons described above.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2001, the Company had $6,665,000 of cash, cash equivalents and
short-term investments and $7,962,000 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 $2,016,000 for the six months ended
June 30, 2001 as compared to net cash used in operating activities of $1,017,000
for the six months ended June 30, 2000. Net cash used in operating activities in
the six months ended June 30, 2001 was primarily due to the net loss of
$1,749,000, an increase in inventory of $123,000 and a decrease in accounts
payable of $554,000, partially offset by a decrease in accounts and unbilled
receivables of $281,000. Net cash used in operating activities for the six
months ended June 30, 2000 was primarily due to the net loss of $1,500,000, an
increase in inventory of $291,000 and a decrease in accounts payable of
$232,000, partially offset by a decrease in accounts and unbilled receivables of
$876,000 and a decrease in prepaid expenses and other assets of $110,000.
Net cash provided by investing activities for the six months ended June 30, 2001
was $1,881,000 as compared to cash provided by investing activities of
$2,585,000 for the six months ended June 30, 2000. The cash provided by
investing activities in the six months ended June 30, 2001 was primarily from
maturities of short-term investments of $8,158,000, partially offset by the
purchase of investments of $6,245,000 and the purchase of fixed assets of
$7,000. The cash provided by investing activities in the six months ended June
30, 2000 was primarily from maturities of short-term investments of $6,005,000,
partially offset by the purchase of investments of $3,049,000 and the purchase
of fixed assets of $351,000.
7
Net cash provided by financing activities for the six months ended June 30, 2001
was $15,000 as compared to cash used in financing activities of $3,000 for the
three months ended June 30, 2000. The net cash provided by financing activities
of $15,000 for the six months ended June 30, 2001, resulted from $22,000 of
proceeds received from exercise of employee stock options, offset by $7,000 paid
for capital lease obligations. The cash used in financing activities for the six
months ended June 30, 2000 was from payment of lease obligations of $7,000
offset by proceeds from exercise of employee stock options of $4,000.
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:
The Company filed a current report on Form 8-K on April 19, 2001 under
Item 5 regarding the inadvertent filing of a preliminary draft of the Company's
annual report on Form 10-KSB for the fiscal year ended December 31, 2000 by the
Company's filing agent. No financial statements were filed with such report.
8
SIGNATURES
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: August 10, 2001 By: /s/ Jeffrey M. Jagid
-----------------------------
Jeffrey M. Jagid
Chief Executive Officer
(Principal Executive Officer)
Dated: August 10, 2001 By: /s/ Ned Mavrommatis
-----------------------------
Ned Mavrommatis
Chief Financial Officer
(Principal Accounting Officer)
9