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, 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 November 14, 2000 was 5,720,625.
A
<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 September 30, 2000 (unaudited) 1
Condensed Statements of Operations (unaudited)
for the three months and nine months ended
September 30, 1999 and 2000 2
Condensed Statements of Cash Flows (unaudited)
for the nine months ended September 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 10
Signatures 11
B
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
I.D. Systems, Inc.
Condensed Balance Sheets
<TABLE>
<CAPTION>
December 31, 1999 September 30,2000
(Unaudited)
----------------- -----------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 7,021,000 $ 4,874,000
Investments 6,005,000 5,181,000
Accounts receivable 880,000 301,000
Unbilled receivables 962,000 763,000
Inventory 123,000 949,000
Deferred taxes 49,000 31,000
Prepaid expenses and other assets 152,000 133,000
------------ ------------
Total current assets 15,192,000 12,232,000
Fixed assets, net 307,000 628,000
Other assets 324,000 177,000
------------ ------------
$ 15,823,000 $ 13,037,000
============ ============
Liabilities
Accounts payable and accrued expenses $ 545,000 $ 644,000
Capital lease obligations 14,000 13,000
Income taxes payable 51,000
------------ ------------
Total current liabilities 610,000 657,000
Capital lease obligations 32,000 23,000
Deferred rent 42,000 13,000
------------ ------------
684,000 693,000
------------ ------------
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) (3,271,000)
------------ ------------
15,139,000 12,344,000
------------ ------------
$ 15,823,000 $ 13,037,000
============ ============
</TABLE>
See accompanying notes.
1
<PAGE>
I.D. Systems, Inc.
Condensed Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $ 1,704,000 $ 231,000 $ 4,213,000 $ 850,000
Cost of Revenues 914,000 107,000 2,517,000 421,000
----------- ----------- ----------- -----------
Gross Profit 790,000 124,000 1,696,000 429,000
Selling, general and administrative expenses 656,000 1,118,000 1,467,000 2,690,000
Research and development expenses 93,000 489,000 149,000 1,091,000
----------- ----------- ----------- -----------
Income (loss) from operations 41,000 (1,483,000) 80,000 (3,352,000)
Interest income 148,000 185,000 176,000 557,000
Interest expense (18,000) (1,000) (53,000) (4,000)
----------- ----------- ----------- -----------
Income (loss) before taxes 171,000 (1,299,000) 203,000 (2,799,000)
Income tax provision 71,000 -- 86,000 --
----------- ----------- ----------- -----------
Net income (loss) $ 100,000 $(1,299,000) $ 117,000 $(2,799,000)
=========== =========== =========== ===========
Net income (loss) per share - basic $ 0.02 $ (0.23) $ 0.03 $ (0.49)
=========== =========== =========== ===========
Net income (loss) per share - diluted $ 0.02 $ (0.23) $ 0.02 $ (0.49)
=========== =========== =========== ===========
Weighted average common shares
outstanding - basic income per share
5,600,000 5,720,000 4,150,000 5,720,000
Effect of potential common shares from
exercise of options
1,049,000 -- 1,030,000 --
----------- ----------- ----------- -----------
Weighted average common shares
outstanding - diluted income per share 6,649,000 5,720,000 5,180,000 5,720,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes
2
<PAGE>
I.D. Systems, Inc.
Condensed Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1999 2000
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 117,000 $ (2,799,000)
Adjustments to reconcile net income (loss)
to cash provided by (used in) operating activities:
Depreciation and amortization 36,000 83,000
Amortization of debt discount 44,000
Deferred taxes 18,000
Deferred rent expense 3,000 (29,000)
Deferred revenue (545,000)
Changes in:
Accounts receivable (360,000) 579,000
Unbilled receivables 199,000
Inventory (826,000)
Prepaid expenses and other assets (186,000) 166,000
Income taxes payable (51,000)
Accounts payable and accrued expenses 466,000 99,000
------------ ------------
Net cash used in operating activities (425,000) (2,561,000)
------------ ------------
Cash flows from investing activities:
Purchase of fixed assets (98,000) (404,000)
Investments maturities 824,000
------------ ------------
Net cash (used in) provided by investing (98,000) 420,000
activities
------------ ------------
Cash flows from financing activities:
Payment of lease obligations (8,000) (10,000)
Proceeds from exercise of stock options 4,000
Receipt of amount due from stockholders 23,000
Payment of notes payable - stockholders (200,000)
Proceeds from initial public offering - net 13,921,000
------------ ------------
Net cash provided by (used in) financing activities 13,736,000 (6,000)
------------ ------------
Net increase (decrease) in cash and cash equivalents 13,213,000 (2,147,000)
Cash and cash equivalents - beginning of period 1,130,000 7,021,000
------------ ------------
Cash and cash equivalents - end of period $ 14,343,000 $ 4,874,000
============ ============
</TABLE>
See accompanying notes
3
<PAGE>
I.D. Systems, Inc.
Notes to Condensed Financial Statements
September 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 September 30,
2000, the results of its operations for the nine-month and three-month periods
ended September 30, 1999 and 2000 and cash flows for the nine-month periods
ended September 30, 1999 and 2000. The results of operations for the three -
month and nine - month periods ended September 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 nine-month periods ended
September 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 85% and 30% of the Company's revenues
during the nine-month periods ended September 30, 1999 and 2000, respectively.
NOTE D - Initial Public Offering
During July and August of 1999 the Company issued and sold 2,300,000 shares of
its common stock at $7.00 per share in an initial public offering. The offering
provided net proceeds to the Company of approximately $13,921,000.
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 and
consulting 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., John Deere Welland Works, 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 Nine months ended
September 30, September 30,
1999 2000 1999 2000
------ ------ ------ ------
<S> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0%
Cost of Revenues 53.6 46.3 59.7 49.5
------ ------ ------ ------
Gross Profit 46.4 53.7 40.3 50.5
Selling, general and administrative expenses 38.5 483.9 34.8 316.5
Research and development expenses 5.5 211.7 3.5 128.3
------ ------ ------ ------
Income (loss) from operations 2.4 (641.9) 2.0 (394.3)
Net interest income 7.6 79.6 2.9 65.1
------ ------ ------ ------
Income (loss) before income tax provision 10.0 (562.3) 4.9 (329.2)
Income tax expense 4.2 -- 2.1 --
------ ------ ------ ------
Net income (loss) 5.8% (562.3)% 2.8% (329.2)%
------ ------ ------ ------
</TABLE>
5
<PAGE>
Three Months Ended September 30, 2000 Compared to Three Months Ended September
30, 1999
REVENUES. Revenues were $231,000 in the three months ended September 30, 2000 as
compared to $1,704,000 in the three months ended September 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 monitoring contract"). The USPS mail monitoring contract provided for
the delivery of a wireless monitoring and tracking system for mail throughout
approximately 300 postal facilities. Additionally, during the quarter the
Company devoted its resources to developing and commercializing a new
"universal" system of hardware and software, which the Company believes will
enhance many aspects of system procurement, the sales cycle, and the
implementation process. The Company's initial systems required customization for
each separate program, including individualized software configurations,
distinct asset connectivity solutions, and non-modular functionality. The new
universal system provides interoperable software modules, repeatable,
non-intrusive asset interconnectivity, and plug-and play peripheral hardware for
modular functionality. While the emphasis placed on developing the universal
system had a restrictive effect on new revenues during the quarter, this focus
should reap rewards for the Company as leading customers move from pilot phase
toward replication mode.
COST OF REVENUES. Cost of revenues were $107,000 in the three months ended
September 30, 2000 as compared to $914,000 in the three months ended September
30, 1999. As a percentage of revenues, cost of revenues were 46.3% in the three
months ended September 30, 2000 as compared to 53.6% in the three months ended
September 30, 1999. This percentage decrease was primarily attributable to an
increase in the portion of revenues derived from software development, which
generally have higher margins than revenues related to hardware deliveries.
Gross profit was $124,000 in the three months ended September 30, 2000 compared
to $790,000 in the three months ended September 30, 1999. As a percentage of
revenues, gross profit increased to 53.7% in the three months ended September
30, 2000 from 46.4% in the three months ended September 30, 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $1,118,000 in the three months ended September 30,
2000 as compared to $656,000 in the three months ended September 30, 1999. This
increase was attributable to an increase in payroll expenses resulting from an
increase in personnel, as well as the increase in occupancy costs due to the
Company's relocation to its new headquarters. As a percentage of revenues,
selling, general and administrative expenses increased to 483.9% in the three
months ended September 30, 2000 from 38.5% in the three months ended September
30, 1999.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses not funded
by the Company's customers were $489,000 in the three months ended September 30,
2000 as compared to $93,000 in the three months ended September 30, 1999. This
increase was attributable to increased research and development costs related to
developing and commercializing a new "universal" system of hardware and
software. As a percentage of revenues, research and development expenses
increased to 211.7% in the three months ended September 30, 2000 from 5.5% in
the three months ended September 30, 1999.
NET INTEREST (EXPENSE) INCOME. Interest income was $185,000 in the three months
ended September 30, 2000 as compared to $148,000 in the three months ended
September 30, 1999.
Interest expense was $1,000 in the three months ended September 30, 2000 as
compared to $18,000 in the three months ended September 30, 1999. This decrease
is attributable to the repayment of stockholder loans during 1999.
6
<PAGE>
NET INCOME (LOSS). Net loss was $1,299,000 in the three months ended September
30, 2000 as compared to net income of $100,000 in the three-month period ended
September 30, 1999. This was due primarily to the reasons described above.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999
REVENUES. Revenues were $850,000 in the nine months ended September 30, 2000 as
compared to $4,213,000 in the nine months ended September 30, 1999. This
decrease was attributable to the completion of the USPS mail monitoring
contract. During the nine months ended September 30, 2000 approximately
$806,000, or 95%, of the Company's revenues were derived from sources other than
the USPS mail monitoring contract as compared to approximately $719,000, or 17%,
in the nine months ended September 30, 1999. During the three months ended
September 30, 2000 the Company devoted its resources to developing and
commercializing a new "universal" system of hardware and software, which the
Company believes will enhance many aspects of system procurement, the sales
cycle, and the implementation process. The Company's initial systems required
customization for each separate program, including individualized software
configurations, distinct asset connectivity solutions, and non-modular
functionality. The new universal system provides interoperable software modules,
repeatable, non-intrusive asset interconnectivity, and plug-and play peripheral
hardware for modular functionality. While the emphasis placed on developing the
universal system had a restrictive effect on new revenues during the quarter,
this focus should reap rewards for the Company as leading customers move from
pilot phase toward replication mode.
COST OF REVENUES. Cost of revenues were $421,000 in the nine months ended
September 30, 2000 as compared to $2,517,000 in the nine months ended September
30, 1999. As a percentage of revenues, cost of revenues were 49.5% in the nine
months ended September 30, 2000 as compared to 59.7% in the nine months ended
September 30, 1999. This percentage decrease was primarily attributable to an
increase in the portion of revenues derived from sources other than the USPS
mail monitoring contract. Under the USPS mail monitoring contract, revenues
attributable to materials had lower margins than revenues related to labor.
Gross profit was $429,000 in the nine months ended September 30, 2000 compared
to $1,696,000 in the nine months ended September 30, 1999. As a percentage of
revenues, gross profit increased to 50.3% in the nine months ended September 30,
2000 from 40.5% in the nine months ended September 30, 1999.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses were $2,690,000 in the nine months ended September 30,
2000 as compared to $1,467,000 in the nine months ended September 30, 1999. This
increase was attributable to an increase in payroll expenses resulting from an
increase in personnel, as well as an increase in occupancy costs due to the
Company's relocation to its new headquarters. As a percentage of revenues,
selling, general and administrative expenses increased to 316.5% in the nine
months ended September 30, 2000 from 34.8% in the nine months ended September
30, 1999.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses not funded
by the Company's customers were $1,091,000 in the nine months ended September
30, 2000 as compared to $149,000 in the nine months ended September 30, 1999.
This increase was attributable to increased research and development costs
related to developing new applications for the Company's products including a
new "universal" system of hardware and software. As a percentage of revenues,
research and development expenses increased to 128.3% in the nine months ended
September 30, 2000 from 3.6% in the nine months ended September 30, 1999.
7
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NET INTEREST (EXPENSE) INCOME. Interest income was $557,000 in the nine months
ended September 30, 2000 as compared to $176,000 in the nine months ended
September 30, 1999. This increase was attributable to larger average cash, cash
equivalents and short-term investment balances in the nine months ended
September 30, 2000 as compared to the nine months ended September 30, 1999 as
the Company received the proceeds from its initial public offering in July and
August of 1999.
Interest expense was $4,000 in the nine months ended September 30, 2000 as
compared to $53,000 in the nine months ended September 30, 1999. This decrease
is attributable to the repayment of stockholder loans during 1999.
NET INCOME (LOSS). Net loss was $2,799,000 in the nine months ended September
30, 2000 as compared to net income of $117,000 in the nine-month period ended
September 30, 1999. This was due primarily to the reasons described above.
Liquidity and Capital Resources
As of September 30, 2000, the Company had $10,055,000 of cash, cash equivalents
and short-term investments and $11,575,000 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 $2,561,000 for the nine months ended
September 30, 2000 as compared to net cash used in operating activities of
$425,000 for the nine months ended September 30, 1999. Net cash used in
operating activities in 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,
offset by a decrease in accounts and unbilled receivables of $778,000 and a
decrease of prepaid expenses and other assets of $166,000. Net cash used in
operating activities for the nine months ended September 30, 1999 was from a
decrease in deferred revenue of $545,000, an increase in accounts receivable of
$360,000 and an increase in prepaid expenses and other assets of $186,000,
offset by an increase in accounts payable and accrued expenses of $466,000 and
net income of $117,000.
Net cash provided by investing activities for the nine months ended September
30, 2000 was $420,000 as compared to cash used in investing activities of
$98,000 for the nine months ended September 30, 1999. The cash provided by
investing activities resulted from maturities of short-term investments of
$824,000 offset by use of cash of $404,000 for the purchase of fixed assets. The
use of cash of $98,000 for the nine months ended September 30, 1999 reflected
capital expenditures for fixed assets.
The net cash provided by financing activities of $13,736,000 for the nine months
ended September 30, 1999, resulted primarily from $13,921,000 of proceeds from
the Company's initial public offering in July and August of 1999 offset by a
$200,000 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
8
<PAGE>
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.
9
<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.
10
<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: November 14, 2000 By: /s/ Jeffrey M. Jagid
-------------------------------------
Jeffrey M. Jagid
Chief Executive Officer
(Principal Executive Officer)
Dated: November 14, 2000 By: /s/ Ned Mavrommatis
-------------------------------------
Ned Mavrommatis
Chief Financial Officer
(Principal Accounting Officer)
11
