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, 2000
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
I.D. SYSTEMS, INC.
(Exact name of small business issuer as specified in its charter)
Delaware 22-3270799
(State or other jurisdiction or (I.R.S. Employer
incorporation or organization) Identification No)
One University Plaza, Hackensack, New Jersey 07601
(Address of principal executive offices) (Zip Code)
(201) 670-9000
(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 _____
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 _____
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 August 10, 2000 was 5,720,625.
<PAGE>
INDEX
I.D. Systems, Inc.
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements. Page
----
Condensed Balance Sheets as of December 31, 1999
and June 30, 2000 (unaudited) 1
Condensed Statements of Operations (unaudited)
for the three months and six months ended June 30, 1999 and 2000 2
Condensed Statements of Cash Flows (unaudited)
for the six months ended June 30, 1999 and 2000 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 9
Signatures 10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
I.D. Systems, Inc.
Condensed Balance Sheets
<TABLE>
<CAPTION>
December 31, 1999 June 30, 2000
(Unaudited)
------------ ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 7,021,000 $ 8,586,000
Investments 6,005,000 3,069,000
Accounts receivable 880,000 198,000
Unbilled receivables 962,000 768,000
Inventory 123,000 414,000
Deferred taxes 49,000 37,000
Prepaid expenses and other assets 152,000 163,000
------------ ------------
Total current assets 15,192,000 13,235,000
Fixed assets, net 307,000 609,000
Other assets 324,000 203,000
------------ ------------
$ 15,823,000 $ 14,047,000
============ ============
Liabilities
Accounts payable and accrued expenses $ 545,000 $ 313,000
Capital lease obligations 14,000 13,000
Income taxes payable 51,000 45,000
------------ ------------
Total current liabilities 610,000 371,000
Capital lease obligations 32,000 26,000
Deferred rent 42,000 7,000
------------ ------------
684,000 404,000
------------ ------------
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
5,717,000 shares and 5,720,000 shares, respectively 57,000 57,000
Additional paid in capital 15,554,000 15,558,000
Accumulated deficit (472,000) (1,972,000)
------------ ------------
15,139,000 13,643,000
------------ ------------
$ 15,823,000 $ 14,047,000
============ ============
</TABLE>
See accompanying notes.
1
<PAGE>
I.D. Systems, Inc.
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 1,494,000 $ 313,000 $ 2,509,000 $ 619,000
Cost of Revenues 997,000 165,000 1,603,000 314,000
----------- ----------- ----------- -----------
Gross Profit 497,000 148,000 906,000 305,000
Selling, general and administrative expenses 419,000 988,000 811,000 1,572,000
Research and development expenses 56,000 306,000 56,000 602,000
----------- ----------- ----------- -----------
Income (loss) from operations 22,000 (1,146,000) 39,000 (1,869,000)
Interest income 13,000 191,000 28,000 372,000
Interest expense (7,000) (2,000) (35,000) (3,000)
----------- ----------- ----------- -----------
Income (loss) before taxes 28,000 (957,000) 32,000 (1,500,000)
Income tax provision 13,000 -- 15,000 --
----------- ----------- ----------- -----------
Net income (loss) $ 15,000 $ (957,000) $ 17,000 $(1,500,000)
=========== =========== =========== ===========
Net income (loss) per share - basic and
diluted $ 0.00 $ (0.17) $ 0.00 $ (0.26)
=========== =========== =========== ===========
Weighted average common shares
outstanding-basic income per share 3,414,000 5,720,000 3,414,000 5,720,000
Effect of potential common shares from
exercise of options 1,045,000 -- 1,017,000 --
----------- ----------- ----------- -----------
Weighted average common shares
outstanding - diluted income per share 4,459,000 5,720,000 4,431,000 5,720,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes
2
<PAGE>
I.D. Systems, Inc.
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
1999 2000
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 17,000 $(1,500,000)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating activities:
Depreciation and amortization 34,000 49,000
Amortization of debt discount 30,000
Deferred taxes 12,000
Deferred rent expense 2,000 (35,000)
Deferred revenue 80,000
Changes in:
Accounts receivable (47,000) 682,000
Unbilled receivables 194,000
Deferred contract costs (184,000)
Inventory (291,000)
Prepaid expenses and other assets (10,000) 110,000
Income taxes payable (6,000)
Accounts payable and accrued expenses 383,000 (232,000)
----------- -----------
Net cash provided by (used in) operating activities 305,000 (1,017,000)
----------- -----------
Cash flows from investing activities:
Purchase of fixed assets (76,000) (351,000)
Investments maturities 2,936,000
----------- -----------
Net cash (used in) provided by investing activities (76,000) 2,585,000
----------- -----------
Cash flows from financing activities:
Payment of lease obligations (6,000) (7,000)
Proceeds from exercise of stock options 4,000
Receipt of amount due from stockholders 23,000
Payment of notes payable - stockholders (106,000)
Payment of deferred registration costs (242,000)
----------- -----------
Net cash used in by financing activities (331,000) (3,000)
----------- -----------
Net (decrease) increase in cash and cash equivalents (102,000) 1,565,000
Cash and cash equivalents - beginning of period 1,130,000 7,021,000
----------- -----------
Cash and cash equivalents - end of period $ 1,028,000 $ 8,586,000
=========== ===========
</TABLE>
See accompanying notes
3
<PAGE>
I.D. Systems, Inc.
Notes to Condensed Financial Statements
June 30, 2000
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, 2000,
the results of its operations for the six-month and three-month periods ended
June 30, 1999 and 2000 and cash flows for the six-month periods ended June 30,
1999 and 2000. The results of operations for the six- month and three-month
periods ended June 30, 2000 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, 1999 included in the Company's Annual Report.
NOTE B - Net Income Per Share of Common Stock
Basic income per share is based on the weighted average number of common shares
of outstanding during each period. Diluted income 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 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 - Concentration of Customers
One customer accounted for approximately 93% and 41% of the Company's revenues
during the six-month periods ended June 30, 1999 and 2000, respectively.
4
<PAGE>
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 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. The Company's revenues
relate to the time expended and expertise involved in customizing its system to
the needs of each individual customer and related material costs. In the future,
the Company intends to generate additional revenues by selling software and
hardware upgrades as well as by providing on-going maintenance and support
contracts to its existing customers.
The Company's principal customers include DaimlerChrysler Corporation, Dana
Commercial Credit Corporation, a wholly-owned subsidiary of Dana Corporation,
Federal Express Corporation, Ford Motor Company, General Motors Corporation,
Hallmark Cards, Inc., Union Pacific Railroad, a subsidiary of Union Pacific
Corporation, and the United States Postal Service.
Results of Operations
The following table sets forth, for the periods indicated, certain operating
information expressed as a percentage of revenue:
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1999 2000 1999 2000
------- -------- ------- --------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of Revenues 66.7 52.7 63.9 50.7
------- -------- ------- --------
Gross Profit 33.3 47.3 36.1 49.3
Selling, general and administrative expenses 28.1 315.6 32.3 253.9
Research and development expenses 3.7 97.8 2.2 97.3
------- -------- ------- --------
Income (loss) from operations 1.5 (366.1) 1.6 (301.9)
Net interest income 0.3 60.4 (0.3) 59.6
------- -------- ------- --------
Income (loss) before income tax provision 1.8 (305.7) 1.3 (242.3)
Income tax expense 0.8 -- 0.6 --
------- -------- ------- --------
Net income (loss) 1.0% (305.7)% 0.7% (242.3)%
------- -------- ------- --------
</TABLE>
5
<PAGE>
Three Months Ended June 30, 2000 Compared to Three Months Ended June 30, 1999
REVENUES. Revenues were $313,000 in the three months ended June 30, 2000 as
compared to $1,494,000 in the three months ended June 30, 1999. This decrease
was attributable to the completion, during January 2000, of the approximately
$7.6 million contract with the United States Postal Service (the "USPS mail
tracking contract"). The USPS mail tracking contract provided for the delivery
of a wireless monitoring and tracking system for mail throughout approximately
300 postal facilities. During the three months ended June 30, 2000, $313,000, or
100%, of the Company's revenues were derived from sources other than the USPS
mail tracking contract as compared to approximately $247,000, or 17%, in the
three months ended June 30, 1999.
COST OF REVENUES. Cost of revenues were $165,000 in the three months ended June
30, 2000 as compared to $997,000 in the three months ended June 30, 1999. As a
percentage of revenues, cost of revenues were 52.7% in the three months ended
June 30, 2000 as compared to 66.7% in the three months ended June 30, 1999. This
percentage decrease was primarily attributable to an increase in the portion of
revenues derived from sources other than the USPS mail tracking contract. Under
the USPS mail tracking contract, revenues attributable to materials had lower
margins than revenues related to labor. During the three months ended June 30,
1999, approximately 80% of the revenues derived from the USPS mail tracking
contract were for materials. Gross profit was $148,000 in the three months ended
June 30, 2000 compared to $497,000 in the three months ended June 30, 1999. As a
percentage of revenues, gross profit increased to 47.3% in the three months
ended June 30, 2000 from 33.3% in the three months ended June 30, 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $988,000 in the three months ended June 30, 2000 as
compared to $419,000 in the three months ended June 30, 1999. This increase was
attributable to an increase in payroll resulting from an increase in personnel
hired to accommodate the Company's growth, as well as the increase in occupancy
costs due to the Company's relocation to its new headquarters and research and
development laboratories. As a percentage of revenues, selling, general and
administrative expenses increased to 315.6% in the three months ended June 30,
2000 from 28.1% in the three months ended June 30, 1999.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses not funded
by the Company's customers were $306,000 in the three months ended June 30, 2000
as compared to $56,000 in the three months ended June 30, 1999. This increase
was attributable to increased research and development costs related to
developing new applications for the Company's products. As a percentage of
revenues, research and development expenses increased to 97.8% in the three
months ended June 30, 2000 from 3.7% in the three months ended June 30, 1999.
NET INTEREST (EXPENSE) INCOME. Interest income was $191,000 in the three months
ended June 30, 2000 as compared to $13,000 in the three months ended June 30,
1999. This increase 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, 1999 as the Company received the
proceeds from its initial public offering in August of 1999.
Interest expense was $2,000 in the three months ended June 30, 2000 as compared
to $7,000 in the three months ended June 30, 1999. This decrease is attributable
to the repayment of stockholder loans during 1999.
6
<PAGE>
NET INCOME (LOSS). Net loss was $957,000 in the three months ended June 30, 2000
as compared to net income of $15,000 in the three-month period ended June 30,
1999. This was due primarily to the reasons described above.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
REVENUES. Revenues were $619,000 in the six months ended June 30, 2000 as
compared to $2,509,000 in the six months ended June 30, 1999. This decrease was
attributable to the completion of the USPS mail tracking contract. During the
six months ended June 30, 2000 approximately $575,000, or 93%, of the Company's
revenues were derived from sources other than the USPS mail tracking contract as
compared to approximately $247,000, or 10%, in the six months ended June 30,
1999.
COST OF REVENUES. Cost of revenues were $314,000 in the six months ended June
30, 2000 as compared to $1,603,000 in the six months ended June 30, 1999. As a
percentage of revenues, cost of revenues were 50.7% in the six months ended June
30, 2000 as compared to 63.9% in the six months ended June 30, 1999. This
percentage decrease was primarily attributable to an increase in the portion of
revenues derived from sources other than the USPS mail tracking contract. Under
the USPS mail tracking contract, revenues attributable to materials had lower
margins than revenues related to labor. During the six months ended June 30,
1999, approximately 70% of the revenues derived from the USPS mail tracking
contract were for materials. Gross profit was $305,000 in the six months ended
June 30, 2000 compared to $906,000 in the six months ended June 30, 1999. As a
percentage of revenues, gross profit increased to 49.3% in the six months ended
June 30, 2000 from 36.1% in the six months ended June 30, 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $1,572,000 in the six months ended June 30, 2000 as
compared to $811,000 in the six months ended June 30, 1999. This increase was
attributable to an increase in payroll resulting from an increase in personnel
hired to accommodate the Company's growth, as well as an increase in occupancy
costs due to the Company's relocation to its new headquarters and research and
development laboratories. As a percentage of revenues, selling, general and
administrative expenses increased to 253.9% in the six months ended June 30,
2000 from 32.3% in the six months ended June 30, 1999.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses not funded
by the Company's customers were $602,000 in the six months ended June 30, 2000
as compared to $56,000 in the six months ended June 30, 1999. This increase was
attributable to increased research and development costs related to developing
new applications for the Company's products. As a percentage of revenues,
research and development expenses increased to 97.3% in the six months ended
June 30, 2000 from 2.2% in the six months ended June 30, 1999.
NET INTEREST (EXPENSE) INCOME. Interest income was $372,000 in the six months
ended June 30, 2000 as compared to $28,000 in the six months ended June 30,
1999. This increase 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, 1999 as the Company received the
proceeds from its initial public offering in August of 1999.
Interest expense was $3,000 in the six months ended June 30, 2000 as compared to
$35,000 in the six months ended June 30, 1999. This decrease is attributable to
the repayment of stockholder loans during 1999.
7
<PAGE>
NET INCOME (LOSS). Net loss was $1,500,000 in the six months ended June 30, 2000
as compared to net income of $17,000 in the six-month period ended June 30,
1999. This was due primarily to the reasons described above.
Liquidity and Capital Resources
As of June 30, 2000, the Company had $11,655,000 of cash, cash equivalents and
short-term investments and $12,864,000 of working capital as compared to
$13,026,000 and $14,582,000, respectively, at December 31, 1999.
Net cash used in operating activities was $1,017,000 for the six months ended
June 30, 2000 as compared to net cash provided by operating activities of
$305,000 for the six months ended June 30, 1999. Net cash used in operating
activities in 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 and accrued expenses of $232,000, offset by a decrease in
accounts and unbilled receivables of $876,000 and a decrease of prepaid expenses
and other assets of $110,000. Net cash provided by operating activities for the
six months ended June 30, 1999 was from an increase in accounts payable and
accrued expenses of $383,000, an increase in deferred revenue of $80,000,
partially offset by an increase in deferred contract costs of $184,000 and an
increase in accounts receivable of $47,000.
Net cash provided by investing activities for the six months ended June 30, 2000
was $2,585,000 as compared to cash used in investing activities of $76,000 for
the six months ended June 30, 1999. The cash provided by investing activities
was from maturities of short-term investments of $2,585,000 offset by use of
cash of $351,000 for the purchase of fixed assets. The use of cash of $76,000
for the six months ended June 30, 1999 reflected capital expenditures for fixed
assets.
The net cash used in financing activities of $331,000 for the six months ended
June 30, 1999, resulted primarily from a payment of $242,000 for deferred
registration costs and a $106,000 repayment of notes payable to stockholders.
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.
Impact of Year 2000
In late 1999, the Company completed its remediation and testing of systems in
order to become Year 2000 ready. As a result of its planning and implementation
efforts, the Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes those
systems successfully responded to the Year 2000 date change. The Company is not
aware of any material problems resulting from Year 2000 issues, either with its
products, its internal systems, or the products and services of third parties.
The Company expensed immaterial amounts during 1999 in connection with
remediating its systems. During 2000, the Company expects to remediate certain
non-critical systems at an immaterial cost that will be funded through operating
cash flows. The Company will continue to monitor its mission critical computer
applications and those of its suppliers and vendors throughout the year 2000 to
ensure that any latent Year 2000 matters that may arise are addressed promptly.
8
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27. Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended June
30, 2000.
9
<PAGE>
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, 2000 By:
-----------------------------------
Jeffrey M. Jagid
Chief Executive Officer
(Principal Executive Officer)
Dated: August 10, 2000 By:
-----------------------------------
Ned Mavrommatis
Chief Financial Officer
(Principal Accounting Officer)
10
