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, 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 Identification No)
incorporation or organization)
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 May 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 March 31, 2000 (unaudited) 1
Condensed Statements of Operations (unaudited)
for the three months ended March 31, 1999 and 2000 2
Condensed Statements of Cash Flows (unaudited)
for the three months ended March 31, 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 9
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
I.D. Systems, Inc.
Condensed Balance Sheets
<TABLE>
<CAPTION>
December 31, 2000 March 31, 2000
(Unaudited)
----------------- ---------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 7,021,000 $ 12,245,000
Investments 6,005,000 442,000
Accounts receivable 880,000 180,000
Unbilled receivables 962,000 879,000
Inventory 123,000 289,000
Deferred taxes 49,000 43,000
Prepaid expenses and other assets 152,000 172,000
------------ ------------
Total current assets 15,192,000 14,250,000
Fixed assets, net 307,000 531,000
Other assets 324,000 218,000
------------ ------------
$ 15,823,000 $ 14,999,000
============ ============
Liabilities
Accounts payable and accrued expenses $ 545,000 $ 270,000
Capital lease obligations 14,000 13,000
Income taxes payable 51,000 45,000
------------ ------------
Total current liabilities 610,000 328,000
Capital lease obligations 32,000 29,000
Deferred rent 42,000 42,000
------------ ------------
684,000 399,000
------------ ------------
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) (1,015,000)
------------ ------------
15,139,000 14,600,000
------------ ------------
$ 15,823,000 $ 14,999,000
============ ============
</TABLE>
See accompanying notes.
1
<PAGE>
I.D. Systems, Inc.
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 2000
-------------------- ------------------
<S> <C> <C>
Revenues $ 1,015,000 $ 306,000
Cost of Revenues 606,000 149,000
-------------------- ------------------
Gross Profit 409,000 157,000
Selling, general and administrative expenses 392,000 584,000
Research and development expenses -- 296,000
-------------------- ------------------
Income (loss) from operations 17,000 (723,000)
Interest income 15,000 181,000
Interest expense (28,000) (1,000)
-------------------- ------------------
Income (loss) before taxes 4,000 (543,000)
Income tax provision 2,000 --
-------------------- ------------------
Net income (loss) $ 2,000 $ (543,000)
==================== ==================
Net income (loss) per share - basic and diluted $ 0.00 $ (0.09)
==================== ==================
Weighted average common shares outstanding-
basic income per share 3,414,000 5,720,000
Effect of potential common shares from exercise
of options 979,000 --
-------------------- ------------------
Weighted average common shares outstanding-
diluted income per share 4,393,000 5,720,000
==================== ==================
</TABLE>
See accompanying notes
2
<PAGE>
I.D. Systems, Inc.
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 2000
------------------- ------------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 2,000 $ (543,000)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating activities:
Depreciation and amortization 17,000 23,000
Amortization of debt discount 25,000
Deferred taxes 6,000
Deferred rent expense 1,000
Deferred revenue 494,000
Changes in:
Accounts receivable 94,000 700,000
Unbilled receivables 83,000
Inventory (166,000)
Prepaid expenses and other assets (103,000) 86,000
Income taxes payable (6,000)
Accounts payable and accrued expenses (48,000) (275,000)
------------------- ------------------
Net cash provided by (used in) operating 482,000 (92,000)
activities
------------------- ------------------
Cash flows from investing activities:
Purchase of fixed assets (49,000) (247,000)
Investments maturities 5,563,000
------------------- ------------------
Net cash (used in) provided by investing activities (49,000) 5,316,000
------------------- ------------------
Cash flows from financing activities:
Payment of lease obligations (3,000) (4,000)
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 (45,000)
------------------- ------------------
Net cash (used in) provided by financing activities (131,000) --
------------------- ------------------
Net increase in cash and cash equivalents 302,000 5,224,000
Cash and cash equivalents - beginning of period 1,130,000 7,021,000
------------------- ------------------
Cash and cash equivalents - end of period $1,432,000 $12,245,000
=================== ==================
</TABLE>
See accompanying notes.
3
<PAGE>
I.D. Systems, Inc.
Notes to Condensed Financial Statements
March 31, 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 March 31, 2000,
the results of its operations for the three-months periods ended March 31, 1999
and 2000 and cash flows for the three-months periods ended March 31, 1999 and
2000. The results of operations for the three-month period ended March 31, 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 period ended March 31, 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 100% and 53% of the Company's revenues
during the three-month periods ended March 31, 1999 and 2000, respectively.
4
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
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
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 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., QVC 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:
5
<PAGE>
<TABLE>
<CAPTION>
Three months ended
March 31,
1999 2000
-------------------- --------------
<S> <C> <C>
Revenues 100.0% 100.0%
Cost of Revenues 59.7 48.7
-------------------- --------------
Gross Profit 40.3 51.3
Selling, general and administrative expenses 38.6 190.8
Research and development expenses -- 96.7
-------------------- --------------
Income (loss) from operations 1.7 (236.2)
Net interest (expense) income (1.3) 58.8
-------------------- --------------
Income (loss) before income tax provision 0.4 (177.4)
Income tax expense 0.2 --
-------------------- --------------
Net income (loss) 0.2% (177.4)%
==================== ==============
</TABLE>
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
REVENUES. Revenues were $306,000 in the three months ended March 31, 2000 as
compared to $1,015,000 in the three months ended March 31, 1999. This decrease
was attributable to the completion, during January 2000, of the $7.6 million
contract with the United States Postal Service (the "USPS mail tracking
contract"). The USPS mail tracking contract provided for the wireless monitoring
and tracking of mail in approximately 300 postal facilities. The United States
Postal Service accounted for approximately 53% of the Company's revenues during
the three months ended March 31, 2000. The USPS mail tracking contract accounted
for approximately 14% of the Company's revenue, and new business for the sale to
postal facilities of integrated tracking and monitoring systems for forklift
trucks and other similar vehicles accounted for 39% of the Company's revenue
during the three months ended March 31, 2000. During the three months ended
March 31, 1999 the USPS mail tracking contract accounted for 100% of the
Company's revenue.
COST OF REVENUES. Cost of revenues were $149,000 in the three months ended March
31, 2000 as compared to $606,000 in the three months ended March 31, 1999. As a
percentage of revenues, cost of revenues were 48.7% in the three months ended
March 31, 2000 as compared to 59.7% in the three months ended March 31, 1999.
This 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 have lower
margins than revenues related to labor. During the three months ended March 31,
1999, approximately 60% of the revenues derived from the USPS mail tracking
contract were for materials. Gross profit was $157,000 in the three months ended
March 31, 2000 compared to $409,000 in the three months ended March 31, 1999. As
a percentage of revenues, gross profit increased to 51.3% in the three months
ended March 31, 2000 from 40.3% in the three months ended March 31, 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $584,000 in the three months ended March 31, 2000
as compared to $392,000 in the three months ended March 31, 1999. This increase
was attributable to an increase in payroll expense resulting from an
6
<PAGE>
increase in personnel hired to accommodate the Company's growth and an increase
in occupancy costs due to the Company's relocation to its new headquarters and
research and development laboratories during March 2000. As a percentage of
revenues, selling, general and administrative expenses increased to 190.8% in
the three months ended March 31, 2000 from 38.6% in the three months ended March
31, 1999.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses were
$296,000 in the three months ended March 31, 2000 as compared to $0 in the three
months ended March 31, 1999. This increase was attributable to research and
development costs related to developing new applications for the Company's
products and expanding functionality of existing systems. As a percentage of
revenues, research and development expenses increased to 96.7% in the three
months ended March 31, 2000 from 0% in the three months ended March 31, 1999.
NET INTEREST (EXPENSE) INCOME. Interest income was $181,000 in the three months
ended March 31, 2000 as compared to $15,000 in the three months ended March 31,
1999. This increase 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, 1999 as the Company received the
proceeds from its initial public offering in July and August of 1999.
Interest expense was $1,000 in the three months ended March 31, 2000 as compared
to $28,000 in the three months ended March 31, 1999. This decrease is
attributable to the repayment of stockholder loans during 1999.
NET INCOME (LOSS). Net loss was $543,000 in the three months ended March 31,
2000 as compared to net income of $2,000 in the three-month period ended March
31, 1999. This was due primarily to the reasons described above.
Liquidity and Capital Resources
As of March 31, 2000, the Company had $12,687,000 of cash, cash equivalents and
short-term investments and $13,922,000 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 $92,000 for the three months ended
March 31, 2000 as compared to net cash provided by operating activities of
$482,000 for the three months ended March 31, 1999. 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 and accrued expenses 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 operating activities for the
three months ended March 31, 1999 was from an increase in deferred revenue of
$494,000 and a decrease in accounts receivable of $94,000, partially offset by
an increase in prepaid expenses and other assets of $103,000, and a decrease in
accounts payable and accrued expenses of $48,000.
Net cash provided by investing activities for the three months ended March 31,
2000 was $5,316,000 as compared to cash used in investing activities of $49,000
for the three months ended March 31, 1999. The cash provided by investing
activities 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 use of cash of
$49,000 for the three months ended March 31, 1999 reflected capital expenditures
for fixed assets.
The net cash used in financing activities of $131,000 for the three months ended
March 31, 1999, resulted primarily from a $106,000 repayment of notes payable to
stockholders.
7
<PAGE>
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 March
31, 2000.
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 15, 2000 By: /s/ Kenneth S. Ehrman
---------------------
Kenneth S. Ehrman
President
(Principal Executive Officer)
Dated: May 15, 2000 By: /s/ Ned Mavrommatis
-------------------
Ned Mavrommatis
Chief Financial Officer
(Principal Accounting Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS UNAUDITED SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONDENSED FINANCIAL STATEMENTS AS OF MARCH 31, 1999 AND FOR THE THREE MONTHS
THEN ENDED. THIS INFORMATION IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
CONDENSED FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000049615
<NAME> I.D. SYSTEMS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 12,245,000
<SECURITIES> 442,000
<RECEIVABLES> 1,059,000
<ALLOWANCES> 0
<INVENTORY> 289,000
<CURRENT-ASSETS> 14,250,000
<PP&E> 701,000
<DEPRECIATION> 170,000
<TOTAL-ASSETS> 14,999,000
<CURRENT-LIABILITIES> 328,000
<BONDS> 0
0
0
<COMMON> 57,000
<OTHER-SE> 14,543,000
<TOTAL-LIABILITY-AND-EQUITY> 14,999,000
<SALES> 306,000
<TOTAL-REVENUES> 306,000
<CGS> 149,000
<TOTAL-COSTS> 1,029,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,000
<INCOME-PRETAX> (543,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (543,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (543,000)
<EPS-BASIC> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
