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: September 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
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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 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)
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(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 November 1, 2001 was 5,853,625.
A
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 September 30, 2001 (unaudited) 1
Condensed Statements of Operations (unaudited)
for the three months and nine months ended
September 30, 2000 and 2001 2
Condensed Statements of Cash Flows (unaudited)
for the nine months ended September 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
B
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
I.D. SYSTEMS, INC.
CONDENSED BALANCE SHEETS
DECEMBER 31, 2000 SEPTEMBER 30,2001
(UNAUDITED)
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ASSETS
Cash and cash equivalents $ 3,085,000 $ 470,000
Investments 5,588,000 5,665,000
Accounts receivable (net of allowance of $48,000) 297,000 292,000
Unbilled receivables 349,000
Inventory 748,000 925,000
Income taxes receivable 111,000
Prepaid expenses and other assets 125,000 119,000
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Total current assets 10,303,000 7,471,000
Fixed assets, net 632,000 519,000
Other assets 146,000 117,000
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$ 11,081,000 $ 8,107,000
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LIABILITIES
Accounts payable $ 699,000 $ 333,000
Capital lease obligations 14,000 12,000
Income taxes payable 8,000
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Total current liabilities 721,000 345,000
Capital lease obligations 18,000 9,000
Deferred rent 19,000 37,000
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758,000 391,000
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CONTINGENCY
STOCKHOLDERS' EQUITY
Preferred Stock; authorized 5,000,000 shares,
$0.01 par value; none issued
Common Stock, authorized 15,000,000 shares,
$0.01 par value; issued and outstanding
5,720,000 shares and 5,845,000 shares, respectively 57,000 58,000
Additional paid in capital 15,558,000 15,701,000
Accumulated deficit (5,292,000) (7,930,000)
Treasury stock; 40,178 shares at cost (113,000)
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10,323,000 7,716,000
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$ 11,081,000 $ 8,107,000
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SEE ACCOMPANYING NOTES.
1
I.D. SYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 2001 2000 2001
----------------- ------------------ ------------------- -----------------
Revenues $ 231,000 $ 188,000 $ 850,000 $ 612,000
Cost of Revenues 107,000 100,000 421,000 345,000
----------------- ------------------ ------------------- -----------------
Gross Profit 124,000 88,000 429,000 267,000
Selling, general and administrative expenses 1,118,000 860,000 2,690,000 2,396,000
Research and development expenses 489,000 185,000 1,091,000 772,000
----------------- ------------------ ------------------- -----------------
Loss from operations (1,483,000) (957,000) (3,352,000) (2,901,000)
Interest income 185,000 69,000 557,000 266,000
Interest expense (1,000) (1,000) (4,000) (3,000)
----------------- ------------------ ------------------- -----------------
NET LOSS $ (1,299,000) $ (889,000) $ (2,799,000) $ (2,638,000)
================= ================== =================== =================
NET LOSS PER SHARE - BASIC AND DILUTED $ (0.23) $ (0.15) $ (0.49) $ (0.45)
================= ================== =================== =================
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC AND DILUTED LOSS PER
SHARE 5,720,000 5,845,000 5,720,000 5,834,000
================= ================== =================== =================
SEE ACCOMPANYING NOTES
2
I.D. SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
2000 2001
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (2,799,000) $ (2,638,000)
Adjustments to reconcile net loss
to cash used in operating activities:
Depreciation and amortization 83,000 120,000
Deferred taxes 18,000
Deferred rent expense (29,000) 18,000
Changes in:
Accounts receivable 579,000 5,000
Unbilled receivables 199,000 349,000
Inventory (826,000) (177,000)
Prepaid expenses and other assets 166,000 35,000
Income taxes receivable 111,000
Income taxes payable (51,000) (8,000)
Accounts payable 99,000 (366,000)
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Net cash used in operating activities (2,561,000) (2,551,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (404,000) (7,000)
Purchase of investments (6,195,000) (8,747,000)
Maturities and sales of investments 7,097,000 8,729,000
Amortization of debt discount (78,000) (59,000)
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Net cash provided by (used in) investing activities 420,000 (84,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of lease obligations (10,000) (11,000)
Proceeds from exercise of stock options 4,000 31,000
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Net cash (used in) provided by financing activities (6,000) 20,000
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NET DECREASE IN CASH AND CASH EQUIVALENTS (2,147,000) (2,615,000)
Cash and cash equivalents - beginning of period 7,021,000 3,085,000
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CASH AND CASH EQUIVALENTS - END OF PERIOD $4,874,000 $470,000
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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
September 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 September 30,
2001, the results of its operations for the three-month and nine-month periods
ended September 30, 2000 and 2001 and cash flows for the nine-month periods
ended September 30, 2000 and 2001. The results of operations for the three-
month and nine - month periods ended September 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 nine-month
periods ended September 30, 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.
NOTE C - CONTINGENCY
In October 2001, the Company received notification of a claim brought against it
in the amount of $569,000. The Company, while evaluating the claim from a
business viewpoint and with consultation from counsel regarding the legal
merits, believes that the outcome will not have a material adverse effect on its
financial position and results of operations. No provision has been made
regarding the ultimate outcome of this matter.
4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis of the Company's financial condition and
results of operations should be read in conjunction with the 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 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.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue:
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 2001 2000 2001
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Revenues 100.0 % 100.0 % 100.0 % 100.0 %
Cost of Revenues 46.3 53.2 49.5 56.4
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Gross Profit 53.7 46.8 50.5 43.6
Selling, general and administrative expenses 483.9 457.4 316.5 391.5
Research and development expenses 211.7 98.4 128.3 126.1
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Loss from operations (641.9) (509.0) (394.3) (474.0)
Net interest income 79.6 36.2 65.1 43.0
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NET LOSS (562.3)% (472.8)% (329.2)% (431.0)%
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5
THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 2000
REVENUES. Revenues were $188,000 in the three months ended September 30, 2001 as
compared to $231,000 in the three months ended September 30, 2000. Revenues in
the quarter ended September 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 $100,000 in the three months ended
September 30, 2001 as compared to $107,000 in the three months ended September
30, 2000. As a percentage of revenues, cost of revenues were 53.2% in the three
months ended September 30, 2001 as compared to 46.3% in the three months ended
September 30, 2000. Gross profit was $88,000 in the three months ended September
30, 2001 compared to $124,000 in the three months ended September 30, 2000. As a
percentage of revenues, gross profit decreased to 46.8% in the three months
ended September 30, 2001 from 53.7% in the three months ended September 30,
2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $860,000 in the three months ended September 30,
2001 as compared to $1,118,000 in the three months ended September 30, 2000.
This decrease was attributable to a decrease in payroll expenses resulting from
cost cutting efforts instituted during the first quarter of 2001. As a
percentage of revenues, selling, general and administrative expenses decreased
to 457.4% in the three months ended September 30, 2001 from 483.9% in the three
months ended September 30, 2000.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$185,000 in the three months ended September 30, 2001 as compared to $489,000 in
the three months ended September 30, 2000. This decrease was attributable to the
completion of commercializing the new "universal system" of hardware and
software for tracking and managing fleet of industrial vehicles during the first
quarter of 2001. As a percentage of revenues, research and development expenses
decreased to 98.4% in the three months ended September 30, 2001 from 211.7% in
the three months ended September 30, 2000.
NET INTEREST INCOME AND EXPENSE. Interest income was $69,000 in the three months
ended September 30, 2001 as compared to $185,000 in the three months ended
September 30, 2000. This decrease was attributable to lower average cash, cash
equivalents and short-term investment balances in the three months ended
September 30, 2001 as compared to the three months ended September 30, 2000.
Interest expense was $1,000 in the three months ended September 30, 2001 and
2000.
NET LOSS. Net loss was $889,000 in the three months ended September 30, 2001 as
compared to net loss of $1,299,000 in the three-month period ended September 30,
2000. This was due primarily to the reasons described above.
NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2000
REVENUES. Revenues were $612,000 in the nine months ended September 30, 2001 as
compared to $850,000 in the nine months ended September 30, 2000. Revenues in
the nine-month period ended September 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 $345,000 in the nine months ended
September 30, 2001 as compared to $421,000 in the nine months ended September
30, 2000. As a percentage of revenues, cost of
6
revenues were 56.4% in the nine months ended September 30, 2001 as compared to
49.5% in the nine months ended September 30, 2000. Gross profit was $267,000 in
the nine months ended September 30, 2001 compared to $429,000 in the nine months
ended September 30, 2000. As a percentage of revenues, gross profit decreased to
43.6% in the nine months ended September 30, 2001 from 50.5% in the nine months
ended September 30, 2000.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $2,396,000 in the nine months ended September 30,
2001 as compared to $2,690,000 in the nine months ended September 30, 2000. This
decrease was attributable to a decrease in payroll expenses resulting from cost
cutting efforts instituted during the first quarter of 2001. As a percentage of
revenues, selling, general and administrative expenses increased to 391.5% in
the nine months ended September 30, 2001 from 316.5% in the nine months ended
September 30, 2000.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$772,000 in the nine months ended September 30, 2001 as compared to $1,091,000
in the nine months ended September 30, 2000. This decrease was attributable to
the completion of commercializing the new "universal system" of hardware and
software for tracking and managing a fleet of industrial vehicles during the
first quarter of 2001. As a percentage of revenues, research and development
expenses decreased to 126.1% in the nine months ended September 30, 2001 from
128.3% in the nine months ended September 30, 2000.
NET INTEREST INCOME AND EXPENSES). Interest income was $266,000 in the nine
months ended September 30, 2001 as compared to $557,000 in the nine months ended
September 30, 2000. This decrease was attributable to lower average cash, cash
equivalents and short-term investment balances in the nine months ended
September 30, 2001 as compared to the nine months ended September 30, 2000.
Interest expense was $3,000 in the nine months ended September 30, 2001 as
compared to $4,000 in the nine months ended September 30, 2000.
NET LOSS. Net loss was $2,638,000 in the nine months ended September 30, 2001 as
compared to net loss of $2,799,000 in the nine-month period ended September 30,
2000. This was due primarily to the reasons described above.
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2001, the Company had $6,135,000 of cash, cash equivalents
and short-term investments and $7,126,000 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 $2,551,000 for the nine months ended
September 30, 2001 as compared to net cash used in operating activities of
$2,561,000 for the nine months ended September 30, 2000. Net cash used in
operating activities in the nine months ended September 30, 2001 was primarily
due to the net loss of $2,638,000 a decrease in accounts payable of $366,000 and
an increase in inventory of $177,000, partially offset by a decrease in unbilled
receivables of $349,000 and the collection of income taxes receivable of
$111,000. Net cash used in operating activities for the nine months ended
September 30, 2000 was primarily due to the net loss of $2,799,000 and an
increase in inventory of $826,000, partially offset by a decrease in accounts
receivable of $579,000, a decrease in unbilled receivables of $199,000 and a
decrease of prepaid expenses and other assets of $166,000.
Net cash used in investing activities for the nine months ended September 30,
2001 was $84,000 as compared to cash provided by investing activities of
$420,000 for the nine months ended September 30,
7
2000. The cash used in investing activities in the nine months ended September
30, 2001 was primarily from the purchase of investments of $8,747,000
substantially offset by maturities of short-term investments of $8,729,000. The
cash provided by investing activities in the nine months ended September 30,
2000 was primarily from maturities of short-term investments of $7,097,000,
substantially offset by the purchase of investments of $6,195,000 and the
purchase of fixed assets of $404,000.
Net cash provided by financing activities for the nine months ended September
30, 2001 was $20,000 as compared to cash used in financing activities of $6,000
for the nine months ended September 30, 2000. The net cash provided by financing
activities of $20,000 for the nine months ended September 30, 2001, resulted
from $31,000 of proceeds received from exercise of employee stock options,
offset by $11,000 paid for capital lease obligations. The cash used in financing
activities for the nine months ended September 30, 2000 was from payment of
lease obligations of $10,000 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:
There were no reports on Form 8-K filed during the quarter ended September
30, 2001.
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: November 14, 2001 By: /s/ Jeffrey M. Jagid
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Jeffrey M. Jagid
Chief Executive Officer
(Principal Executive Officer)
Dated: November 14, 2001 By: /s/ Ned Mavrommatis
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Ned Mavrommatis
Chief Financial Officer
(Principal Accounting Officer)
9