<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission File Number: 001-14217
INDUSTRIAL DATA SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA
(State of incorporation or organization)
88-0322261
(I.R.S. Employer Identification Number)
600 CENTURY PLAZA DRIVE, BUILDING 140, HOUSTON, TEXAS 77073-6013
(Address of Principal Executive Offices) (Zip Code)
(281) 821-3200
(Registrant's telephone number, including area code)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 of 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Shares outstanding of the issuer's Common Stock as of September 30, 1999 was
13,073,718.
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QUARTERLY REPORT ON FORM 10-QSB
FOR THE PERIOD ENDED SEPTEMBER 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
<S> <C>
PART 1 FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets at September 30, 1999 and
December 31, 1998............................................... 1
Condensed Consolidated Statements of Operations for the Three
Months and Nine Months ended September 30, 1999 and
September 30, 1998.............................................. 2
Condensed Consolidated Statements of Cash Flows for the Nine
Months ended September 30, 1999 and September 30, 1998.......... 3
Notes to Condensed Consolidated Financial Statements............ 4
ITEM 2. Management's Discussion and Analysis............................ 6
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings............................................... 13
Item 2. Changes in Securities........................................... 14
ITEM 3. Defaults Upon Senior Securities................................. 14
ITEM 4. Submission of Matters to a Vote of Security Holders............. 14
ITEM 5. Other Information............................................... 14
ITEM 6. Exhibits and Reports on Form 8-K................................ 14
Signature....................................................... 15
</TABLE>
i
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements
INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 361,509 $1,225,821
Marketable securities, at market value - trading 813,799 676,647
Accounts receivable - trade, less allowance for doubtful accounts of
approximately $40,000 for 1998 and $20,000 for 1999, respectively 2,087,226 2,913,128
Inventory 1,028,115 917,097
Notes receivable from stockholder 150,000 162,000
Deferred income taxes -- 8,000
Prepaid and other 431,377 228,115
----------- -----------
Total current assets 4,872,026 6,130,808
----------- -----------
PROPERTY AND EQUIPMENT, Net 1,096,317 1,050,568
OTHER ASSETS -- 1,500
GOODWILL, Net 154,499 745,760
----------- -----------
Total assets $6,122,842 $7,928,636
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable to bank $ 334,707 $ 620,383
Current portion - Note payable to bank, term 8,050 52,530
Accounts payable 952,851 1,557,985
Income taxes payable -- 157,000
----------- -----------
Accrued expenses and other current liabilities 178,264 695,619
Total current liabilities 1,473,872 3,083,517
Note payable to bank, term 401,727 422,483
Deferred liabilities 171,247 --
DEFERRED INCOME TAX 34,010 14,000
----------- -----------
Total liabilities 2,080,856 3,520,000
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 75,000,000 shares authorized; 13,073,718
shares issued 13,074 13,074
Additional paid-in capital 2,766,163 2,766,163
Retained earnings 1,345,117 1,644,722
----------- -----------
4,124,354 4,423,959
Treasury stock (82,368) (15,323)
----------- -----------
Total stockholders' equity 4,041,986 4,408,636
----------- -----------
Total liabilities and stockholders' equity $6,122,842 $7,928,636
=========== ===========
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
1
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INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
1999 1998 1999 1998
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Engineering $ 1,631,762 $ 1,132,930 $ 4,312,430 $ 3,193,830
Air Handling 709,561 697,288 2,421,778 2,752,726
Power Systems 422,183 1,432,343 1,526,121 2,196,451
Products 120,873 364,471 478,895 1,324,175
Fabricating 77,308 -- 395,925 --
----------- ----------- ----------- -----------
2,961,687 3,627,032 9,135,149 9,467,181
COST OF REVENUES:
Engineering 1,153,413 761,966 2,909,719 2,232,575
Air Handling 629,637 598,973 1,950,438 2,086,360
Power Systems 344,884 919,377 1,127,407 1,427,379
Products 128,590 377,571 407,833 1,123,016
Fabricating (16,542) -- 331,586 --
----------- ----------- ----------- -----------
2,239,982 2,657,887 6,726,983 6,869,330
----------- ----------- ----------- -----------
GROSS PROFIT 721,705 969,144 2,408,166 2,597,851
Selling, general and administrative 579,440 616,830 1,809,117 1,531,930
Depreciation 37,188 20,566 97,148 75,447
----------- ----------- ----------- -----------
OPERATING INCOME 105,077 331,748 501,901 990,474
OTHER INCOME (EXPENSE)
Realized gains on marketable securities 30,318 120,986 99,118 164,137
Other income 85 547 803 584
Unrealized gain (loss) on marketable
Securities (83,949) (86,098) (35,391) (106,839)
Interest (expense), net (953) (17,311) (15,048) (54,926)
Impairment of goodwill -- -- (765,261) --
----------- ----------- ----------- -----------
Other income (expense), net (54,499) 19,124 (715,779) 2,956
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE TAXES 50,577 350,872 (213,878) 993,430
TAX PROVISION (72,812) 144,467 85,727 382,452
----------- ----------- ----------- -----------
NET INCOME (LOSS) 123,389 206,405 (299,605) 610,978
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS (LOSS)
PER COMMON SHARE $0.009 $0.016 $(0.023) $0.047
=========== =========== =========== ===========
BASIC AND DILUTED WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 13,073,718 13,023,718 13,073,718 13,023,718
=========== =========== =========== ===========
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
2
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INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------------------------
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ (299,605) $ 610,978
Non-cash write-off of goodwill 765,261 --
Changes in working capital (749,866) 236,595
---------- ---------
Net cash provided (used) by operating activities (284,210) 847,573
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment acquired (45,749) (72,703)
Purchase of investments (137,152) (270,587)
Other assets acquired -- --
---------- ---------
Net cash used by investing activities (182,901) (343,290)
CASH FLOWS FROM FINANCING ACTIVITIES:
Long term mortgage on land and buildings (44,480) (30,013)
Repayment on notes payable, net (285,676) (3,922)
Purchase of treasury stock (67,045) --
Borrowings from bank -- (75,000)
---------- ---------
Net cash provided (used) by financing activities (397,201) (108,935)
---------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (864,312) 395,348
CASH AND CASH EQUIVALENTS, at beginning of period 1,225,821 457,701
---------- ---------
CASH AND CASH EQUIVALENTS, at end of period $ 361,509 $ 853,049
========== =========
Supplemental Cash Flow Information:
Interest paid $ 38,499 $ 60,602
Income taxes paid 210,000 55,000
*Non-cash Transactions:
Issuance of common stock in conjunction with purchase of
Constant Power Manufacturing, Inc. -- $ 663,269
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
3
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INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The condensed consolidated financial statements of Industrial Data Systems
Corporation (the "Company") included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in consolidated financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company believes that the disclosures are adequate to make the information
presented not misleading. The condensed consolidated financial statements
should be read in conjunction with the consolidated financial statements and
the notes thereto included in the Company's latest Annual Report to
Shareholders and the Annual Report on Form 10KSB/A for the year ended
December 31, 1998. In the opinion of the Company, all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly
the financial position as of September 30, 1999; the results of operations
for the three months and nine months ended September 30, 1999 and 1998; and
cash flows for the nine months ended September 30, 1999 and 1998 have been
included. The foregoing interim results are not necessarily indicative of
the results of the operations for the full fiscal year ending December 31,
1999.
2. NOTE RECEIVABLE FROM STOCKHOLDER:
At September 30, 1999, the Company had notes receivable due from a
stockholder in the amount of $150,000. The notes are unsecured, due on
demand and bear interest at a rate of 9% per annum. Interest on the notes is
due annually.
3. ACQUISITIONS:
In March 1998, the Company acquired Constant Power Manufacturing
Incorporated, (CPM) in a stock purchase. The Company issued 300,000 shares
of the Company's Common Stock for 100% of CPM's shares. Goodwill in the
amount of $121,649 was generated from this acquisition.
In November 1998, the Company acquired MLC Enterprises, Inc. (MLC), a Texas
corporation formed in August 1995, doing business as Marine and Industrial
Fire & Safety (MIFS) and Marine and Industrial Supply Company (MISC). The
Company issued 50,000 shares of the Company's Common Stock for 100% of MLC's
shares. Cash consideration of $100,000 was paid to the previous principal as
part of an employment contract. Goodwill in the amount of $784,961 was
generated as a result of the acquisition. Subsequent to the acquisition,
MLC's name was changed to IDS Fabricated Systems, Inc. (IDS FAB). This
transaction was rescinded effective October 28, 1999 as the result of a
settlement agreement entered into by the Company and a former principal of
MLC. See PART II, Item 1. Legal Proceedings, found elsewhere in this report
on Form 10-QSB.
The shares of Common Stock issued by the Company have been reflected as
issued and outstanding. The operating results of CPM and IDS FAB have been
included in the Company's consolidated financial statements since the
respective acquisition dates.
4
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The following table reflects proforma information as if these transactions
had occurred at January 1, 1998 (in 000's, except per share data).
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, 1998 Ended September 30, 1998
------------------------ ------------------------
<S> <C> <C>
Total Revenue $4,300 $10,300
Net Income 206 610
Income per Share .02 .05
</TABLE>
4. IMPAIRMENT OF GOODWILL:
During the quarter ended June 30, 1999, the Company took a $765,261 non-cash
write-off, which is the goodwill associated with the acquisition of MLC.
This write-off is non-deductible for tax purposes and the tax provision has
been calculated on the operating profit prior to accounting for this amount.
As a result of the settlement agreement reached in October 1999, the Company
expects to record a one-time gain in the fourth quarter related to the
previous goodwill write-off. See PART II, Item 1. Legal Proceedings.
5. COMMITMENTS AND CONTINGENCIES:
LEGAL PROCEEDINGS
On April 7, 1999, the former principal of MLC filed a lawsuit against the
Company alleging breach of an employment contract in addition to other
related claims. In October 1999, the Company reached a settlement agreement
in this lawsuit. See "Management's Discussion and Analysis Section" of this
report and PART II, Item 1. Legal Proceedings.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion is qualified in its entirety by, and should be read
in conjunction with, the Company's Condensed Consolidated Financial Statements
including the notes thereto, included elsewhere herein.
OVERVIEW
The Engineering segment of the Company generates the majority of the revenues
for the Company. These revenues are generated by providing engineering
consulting services to the pipeline divisions of major integrated oil and gas
companies. In October 1998, the engineering consulting segment, which had
previously operated as Industrial Data Systems, Inc. dba IDS Engineering, was
incorporated as a Texas corporation under the name of IDS Engineering, Inc.
(IED). Early in 1999, IED opened a business development office in Tulsa,
Oklahoma to pursue turnkey engineering, procurement and construction (EPC)
projects. As the result of business development efforts, during the quarter
ended September 30, 1999, the Company secured EPC contracts totaling over $1.0
million. The Company believes this avenue of business development will expand
its market exposure and may generate greater revenue potential than the
specialized areas it has been primarily involved in previously.
The Company generates other revenues through segments involved in the made-
to-order manufacture of industrial equipment. Its Products segment provides
industrial grade portable and rack mounted computers for commercial use. Due to
a decline in sales revenue in this segment, the Company is actively considering
other electronically based product lines and is also investigating opportunities
in computer systems service and consulting. The Company believes it can
redirect its efforts to maintain this segment as a revenue and profit-producing
segment.
In 1997, the Company acquired Thermal Corporation (Thermal), which fabricates
air handling equipment for commercial heating ventilation and cooling systems.
Thermal has placed an order for new plate-fin machinery, which is expected to
improve its production efficiency and reduce material costs. This equipment is
expected to be installed in the upcoming months and the Company believes it will
increase profit margins and will expand the Company's scope of business by
creating a product line of plate-fin coil units.
The Company acquired Constant Power Manufacturing, Inc., the Power Systems
segment, in March 1998. This segment manufactures industrial grade
uninterruptible electrical power systems and battery chargers. With the
development of a new battery charger systems to add to its product line, the
Company believes the revenue and profit margin of this segment will improve in
the upcoming quarters. The Company plans to introduce newly developed and
redesigned battery charger systems at a February 2000 trade show.
MLC Enterprises, Inc. (MLC), now known as IDS Fabricated Systems, Inc. (IDS
FAB), the Fabricating segment, was acquired in November 1998. Due to previously
disclosed litigation between the Company and a former principal of MLC,
operations at this segment were suspended in April 1999, as previously reported.
During the quarter ended June 30, 1999, the Company took a one-time non-cash
write-off of goodwill related to the acquisition of MLC. In October 1999, the
Company reached a settlement agreement rescinding this acquisition. As a result
of this settlement agreement the Company expects to record a one-time gain
during the
6
<PAGE>
quarter ending December 31, 1999. See additional details in PART II, Item 1.
Legal Proceedings of this report on Form 10-QSB.
YEAR 2000 (Y2K) ISSUES AND CONSEQUENCES
The Company's program to address its Year 2000 issues has progressed as
planned. Testing of the Company's internal hardware systems has been completed
and all systems have been brought into Y2K compliance. Upgrading of non-
compliant software systems is underway and implementation is expected to be
completed prior to year-end. Costs expended to address Year 2000 issues has
been approximately $100,000. The cost to address these issues is being funded
from internally generated cash flow and are expensed as incurred.
The Company's program to deal with Year 2000 issues includes evaluation of
the effects of third-party non-compliance and the effect that non-compliance
would have on the Company's ability to do business. The Company has banking
relations with major financial institutions, which have indicated that they are
Y2K compliant. The Company does not believe that the inability of external
agents to complete their Year 2000 remediation process in a timely manner will
have a material effect on the financial position or results of operation of the
Company. No material adverse effects have been identified, but the Company
intends to continue its evaluation process throughout the 1999 year. However,
the effect of non-compliance by external agents is not readily determinable.
There can be no guarantee that the Company's current efforts or its
contingency plan will successfully address all the contingencies that may arise.
The Company has defined critical activities which would be maintained manually
in case of third party utility failures, such as electrical and telephone
systems. Under a "most likely worst-case Year 2000 scenario," if any of the
Company's significant vendors or customers experienced a material business
interruption, or if the Company lost a significant vendor or customer due to
Year 2000 non-compliance issues or if the Company is unsuccessful in addressing
all of its Year 2000 issues, there could be material adverse effects on the
Company's financial position, results of operations or liquidity. Disruptions
in the economy generally resulting from Year 2000 issues could adversely effect
the Company's ability to do business. The amount of potential liability or lost
revenue cannot be reasonably estimated at this time.
FORWARD-LOOKING STATEMENTS
Certain information contained in this Quarterly Report on Form 10-QSB
(including statements contained in Part 1, Item 2. "Management's Discussion and
Analysis" and in Part II, Item 1. "Legal Proceedings"), as well as other written
and oral statements made or incorporated by reference from time to time by the
Company and its representatives in other reports, filings with the Securities
and Exchange Commission, press releases, conferences, or otherwise, may be
deemed to be forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934. This information includes, without limitation,
statements concerning the Company's future financial position, and results of
operations; planned capital expenditures; business strategy and other plans for
future operations; the future mix of revenues and business; commitments and
contingent liabilities; Year 2000 issues; and future demand and industry
conditions. Although the Company believes that the expectations reflected in
such forward-looking statements are reasonable, it can give no assurance that
such expectations will prove to have been correct. When used in this report,
the words "anticipate," "believe," "estimate,"
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"expect," "may," and similar expressions, as they relate to the Company and its
management, identify forward-looking statements. The actual results of future
events described in such forward-looking statements could differ materially from
the results described in the forward-looking statements due to the risks and
uncertainties set forth within this Quarterly Report on Form 10-QSB generally.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain financial
data derived from the Company's consolidated statements of operations and
indicates percentage of total revenue for each item.
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30
1999 1998 1999 1998
--------------------------------------------- --------------------------------------------
Amount % Amount % Amount % Amount %
---------- ----- ---------- ----- ---------- ----- ---------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Engineering $1,631,762 55.1 $1,132,930 31.2 $4,312,430 47.2 $3,193,830 33.7
Air Handling 709,561 24.0 697,288 19.2 2,421,778 26.5 2,752,726 29.1
Power Systems 422,183 14.3 1,432,343 39.6 1,526,121 16.7 2,196,451 23.2
Products 120,873 4.1 364,471 10.0 478,895 5.2 1,324,175 14.0
Fabricating 77,308 2.5 -- 0.0 395,925 4.4 -- 0.0
---------- ------ ---------- ------ ---------- ----- ---------- ------
Total Revenue 2,961,687 100.00 3,627,032 100.00 9,135,149 100.0 9,467,182 100.00
Gross Profit:
Engineering 478,349 29.3 370,964 32.7 1,402,711 32.5 961,255 30.1
Air Handling 79,924 11.3 98,315 14.1 471,340 19.5 666,366 24.2
Power Systems 77,299 18.3 512,966 35.8 398,714 26.1 769,072 35.0
Products (7,717) (6.4) (13,100) (3.6) 71,061 14.8 201,159 15.2
Fabricating 93,850 121.4 -- 0.0 64,340 16.3 - 0.0
---------- ------ ---------- ------ ---------- ----- ---------- ------
Total gross profit 721,705 24.4 969,144 26.7 2,408,166 26.4 2,597,851 27.4
Selling, general and
administrative expenses 579,440 19.6 616,830 17.0 1,809,117 19.8 1,531,930 16.2
Depreciation 37,188 1.3 20,566 0.6 97,148 1.1 75,447 0.8
---------- ------ ---------- ------ ---------- ----- ---------- ------
Operating income 105,077 3.5 331,748 9.1 501,901 5.5 990,474 10.5
---------- ------ ---------- ------ ---------- ----- ---------- ------
Other income (expense) (54,499) (1.8) 19,124 0.5 (715,779) (7.8) 2,956 0.0
Income (loss) before
provision for income taxes 50,577 1.7 350,872 9.7 (213,878) (2.3) 993,430 10.5
---------- ------ ---------- ------ ---------- ----- ---------- ------
Provision for income taxes (72,812) (2.5) 144,467 4.0 85,727 .9 382,452 4.0
---------- ------ ---------- ------ ---------- ----- ---------- ------
Net Income (Loss) $ 123,389 4.2 $ 206,405 5.7 $ (299,605) (3.3) $ 610,978 6.5
========== ====== ========== ====== ========== ===== ========== ======
</TABLE>
8
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THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
TOTAL REVENUE. Total revenue decreased by $665,345 or 18.3% from $3,627,032
for the three months ended September 30, 1998, compared to $2,961,687 in 1999.
Revenue from Engineering, which comprised 55.1% of total revenue for the three
months ended September 30, 1999, increased by $498,832 or 44.0% over the same
period in 1998. This increase is due to the wider scope of projects the
Engineering segment is now undertaking and to the award of several substantial
turnkey engineering, procurement and construction (EPC) projects.
Revenue from the Air Handling segment, which comprised 24.0% of total
revenue for the three months ended September 30, 1999, increased by $12,273 or
1.8% from 1998 period. A sales order backlog of approximately $700,000 was on
the books as of September 30, 1999.
Revenue from the Power Systems segment which accounted for 14.3% of total
revenue for the three months ended September 30, 1999, was $422,183, a decrease
of $1,010,160 or 70.5% from the 1998 period. This decrease is attributable to
lower sales during the third quarter of 1999, because of reduced
demand in the energy market. The sales order backlog for the Power Systems
segment at the end of the third quarter is approximately $2.0 million.
The Products segment revenue, which made up 4.1% of total revenues for the
three months ended September 30, 1999, decreased by $243,598 or 66.8% from the
1998 period. This decrease is attributable to strong market competition in
computer hardware products.
Revenue contribution from the Fabricating segment for the three months
ended September 30, 1999 was $77,308 or 2.5% of the total revenue generated
during that period.
GROSS PROFIT. Gross profit decreased by $247,439 or 25.5% from $969,144
for the three months ended September 30, 1998 to $721,705 for the same period in
1999. The gross margin as a percentage of total revenues decreased from 26.7%
for the three months ended September 30, 1998 to 24.4% for the same period in
1999. The decrease in gross margin was attributable to lower gross profit
margins in the Air Handling and the Power Systems segments. Each of these
segments experienced weak market conditions during the three months ended
September 30, 1999. The gross margin for the Engineering segment decreased
slightly from 32.7% for the period ended September 30, 1998 to 29.3% for the
same period in 1999. The gross margin for the Air Handling segment decreased
from 14.1% for the period ended September 30, 1998 to 11.3% for the same period
in 1999. The gross margin for the Power Systems segment decreased from 35.8%
for the period ended September 30, 1998 to 18.3% for the same period in 1999.
This decrease was due to a slow down in demand from the oil and gas and energy
markets. A positive gross margin for the Fabricating segment of $93,850 was
recorded for the three months ended September 30, 1999, due to the reduction in
accounts payables as a result of payment settlements and to the recapture of
previous reserves and accruals.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased by $37,390 or 6.1% from $616,830 for the three
months ended September 30, 1998 compared to $579,440 for the same period in
1999. As a percentage of total revenue, selling, general and administrative
expenses increased from 17.0% for the three months ended September 30, 1998 to
19.6% for the same period in 1999. This increase was attributable to
9
<PAGE>
legal costs associated with the MLC litigation and to additional expenses
related to establishing the Tulsa engineering operation office.
OPERATING INCOME. Operating income decreased by $226,671 or 68.3% from
$331,748 for the three months ended September 30, 1998, compared to $105,077 for
the same period in 1999. Operating income decreased as a percentage of total
revenue from 9.1% for the three months ended June 30, 1998 to 3.5% for the same
period in 1999. The decrease in operating income was a result of the decrease
in revenues and lower gross margins, primarily as a result in the market decline
in the oil and gas and energy sectors.
OTHER INCOME (EXPENSE). Other expense increased by $73,623 from $19,124
for the three months ended September 30, 1998 to ($54,499) for the same period
in 1999. This increase was due to higher interest costs for the 1999 period and
to a reduction in other income generated by marketable securities in the 1999
period.
NET INCOME (LOSS). Net income after taxes decreased by $83,016 from
$206,405 for the three months ended September 30, 1998 to $123,389 for the same
period in 1999. Net income after taxes decreased as a percentage of total
revenue from 5.7% for the three months ended September 30, 1998 to 4.2% for the
same period in 1999. This decrease was attributable to the lower revenues,
reduced gross margins generated in several of the segments and an increase in
other expense. The net income for the quarter was positively effected by
adjustments to tax accruals which were determined to be over accrued.
NINE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
Financial data reflected for the nine months ended September 30, 1998 includes
only six months (April - September) for Constant Power Manufacturing, Inc.
(Power Systems) operations.
TOTAL REVENUE. Total revenue decreased by $332,033 or 3.5% from $9,467,182 for
the nine months ended September 30, 1998, compared to $9,135,149 in 1999.
Revenue from the Engineering segment, which comprised 33.7% of total revenue for
the nine months ended September 30, 1998 increased by $1,118,600 or 35.0% from
$3,193,830 in 1998 to $4,312,430 for the same period in 1999. The increase was
due to the expanded scope of projects completed by the Engineering segment and
to being awarded several substantial EPC contracts.
Revenue from the Air Handling segment, which comprised 29.1% of the total
revenue for the nine months ended September 30, 1998, decreased by $330,948 or
12.0% from $2,752,726 in 1998 to $2,421,778 for the same period in 1999. This
decrease is primarily attributable to tighter market conditions during the nine-
month period in 1999 and higher than average revenues in the 1998 period.
Revenue generated from the Power Systems segment during the six-month period
subsequent to its acquisition in April 1998, ended September 30, 1998 was
$2,196,451. For the nine months ended September 30, 1999, the revenue generated
was $1,526,121. This decrease in revenue was due to the market conditions in
the oil and gas and energy markets, the major source of sales for this segment.
Sales and marketing efforts are being structured to diversify and expand the
market served by this segment.
10
<PAGE>
Revenue generated by the Products segment for the nine months ended September
30, 1999 decreased by $845,280 or 63.8% from the same period in 1998. The
highly competitive status of the computer hardware market has continued to
contribute to lower sales in the Products segment.
Revenue generated from the Fabricating segment for the nine months ended
September 30, 1999 was $395,925 and contributed 4.4% of the total revenue for
the period. No revenue was contributed from this segment for the 1998 period
because the acquisition took place subsequent to September 30, 1998.
GROSS PROFIT. Gross profit decreased by $189,685 or 7.3% from $2,597,851
for the nine months ended September 30, 1998 to $2,408,166 for the same period
in 1999. The gross margin for the Engineering segment increased from 30.1% for
the period ended September 30, 1998 to 32.5% for the same period in 1999. This
increase is the result of the expanded scope of projects being done by the
Engineering segment in the 1999 period and to several major EPC contracts
performed in the 1999 period. The Air Handling segment's gross margin decreased
from 24.2% for the nine month period ended September 30, 1998 to 19.5% for the
nine months ended September 30, 1999. This was attributable to the decrease in
revenue from the 1998 period to the 1999 period. The Power Systems segment's
gross margin dropped from 35.0% for the six-month period ended September 30,
1998 to 26.1% for the nine months ended September 30, 1999. This decrease was
attributable to the drop in sales revenue and to a more competitive market
environment. The gross margin for the Products segment decreased from 15.2% for
the nine months ended September 30, 1998 to 14.8% for 1999. The gross margin
generated by the Fabricating segment for the nine months ended September 30,
1999 was 16.3%. There was no gross margin contribution for the Fabricating
segment for the 1998 period because it was acquired subsequent to September 30,
1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $277,187 or 18.1% from $1,531,930 for the
nine months ended September 30, 1998 compared to $1,809,117 for the same period
in 1999. As a percentage of total revenue, selling, general and administrative
expenses increased from 16.2% for the nine months ended September 30, 1998 to
19.8% for the same period in 1999. The increase was attributable to additional
expenses related to the acquisitions of CPM and IDS FAB and to legal costs.
(See PART II, Item 1. Legal Proceedings found elsewhere in this report on Form
10-QSB.)
OPERATING INCOME. Operating income decreased by $488,573 or 49.3% from
$990,474 for the nine months ended September 30, 1998, compared to $501,901 for
the same period in 1999. Operating income decreased as a percentage of total
revenue from 10.5% for the nine months ended September 30, 1998 to 5.5% for the
same period in 1999. The decrease in operating income was a result of reduced
revenues, lower gross profits and increased selling, general and administrative
expenses.
OTHER INCOME (EXPENSE). Other expense increased by $718,735 from $2,956 for
the nine months ended September 30, 1998 to ($715,779) for the same period in
1999. This was primarily the result of the second quarter write-off of goodwill
related to the MLC acquisition.
NET INCOME (LOSS). Net income before taxes decreased by $1,207,308 or 121.5%
from $993,430 for the nine months ended September 30, 1998 to ($213,878) for the
same period in 1999. This decrease is due to lower revenues, reduced gross
margins and increased selling, general and administrative expenses and to the
write-off of goodwill in the second quarter of 1999. Net income after taxes
decreased by $910,583 or 149.0% from $610,978 for the nine months ended
September 30, 1998 to ($299,605) for the same period in 1999. Net income after
taxes decreased as a percentage of total revenue from 6.5% for the nine months
ended September 30, 1998 to (3.3%) for
11
<PAGE>
the same period in 1999. This decrease is due to lower revenues, reduced gross
margins, increased selling, general and administrative expenses and to the
second quarter 1999 non-cash write-off of goodwill.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has satisfied its cash requirements principally
through borrowings under its line of credit and through operations. As of
September 30, 1999, the Company's cash position, including marketable
securities, was sufficient to meet its working capital requirements for at least
the next twelve months. The Company has no current plans to raise additional
funds in the next twelve months. The Company had, as of September 30, 1999,
$845,000 in additional advances available under its line of credit with a bank.
The Company's line of credit, which provides for maximum borrowings of
$1,150,000 and bears interest at prime plus 1% per annum, is for a term of one
year and matures on June 30, 2000. The line of credit is secured by accounts
receivable, inventory and the personal guarantees of certain stockholders and
officers of the Company. In June 1998, the Company consolidated its line of
credit into one line for all subsidiaries. The Company's working capital was
$3,047,291 and $3,398,154 at December 31, 1998 and September 30, 1999,
respectively.
Operating activities provided net cash totaling $847,573 for the nine
months ended September 30, 1998 and used $284,210 for the nine months ended
September 30, 1999. Goodwill relating to the acquisition of MLC was written
down during the second quarter 1999. The amount of this non-cash charge was
$765,261, which represents all the remaining goodwill associated with the
acquisition of this subsidiary. A settlement agreement was finalized subsequent
to September 30, 1999 relating to the MLC acquisition. As a result of this
settlement, the Company expects a positive non-cash effect on its fourth quarter
financials.
Trade accounts receivable decreased $825,902 since December 31, 1998, due
to collection of outstanding amounts. Inventory increased by $111,018 for the
same period.
Investing activities used cash totaling $343,290 for the nine months ended
September 30, 1998 and used cash totaling $182,901 for the same period in 1999.
The cash used during the period ended September 30, 1998 was primarily related
to the purchase of CPM and in the 1999 period it was used for the purchase of
marketable securities.
As of September 30, 1999, the Company had a portfolio of marketable
securities which had a fair market value of $813,799 and consisted of common
stocks, bonds and mutual funds. The common stocks and bonds that the Company
holds consists of securities which are traded on three national exchanges - the
New York Stock Exchange, the American Stock Exchange and the NASDAQ National
Market System. These securities are frequently traded by the Company. The
mutual funds that the Company has available for sale are open-end stock funds
managed by Smith Barney & Co. These mutual fund investments are generally held
for longer than a one-year period. These securities are traded by the Company
as part of its plan to provide additional cash for working capital requirements.
The marketable securities to be held to maturity are stated at amortized
cost. Marketable securities classified as available-for-sale are stated at
market value, with unrealized gains and losses reported as a separate component
of stockholder's equity, net of deferred income taxes. If a decline in market
value is determined to be other than temporary, any such loss is charged to
12
<PAGE>
earnings. Marketable securities accounted for as trading securities are stated
at market value, with unrealized gains and losses charged to income. William A.
Coskey, the Company's President and Chief Executive Officer, is responsible for
managing the Company's portfolio of marketable securities. The funds used in
this portfolio were from generally available cash reserves.
The Company has implemented a policy that restricts it from purchasing any
securities on margin, and also limits the investment of any one security or
mutual fund to represent no more than 10% of the Company's investment portfolio.
The Company believes that the risks associated with its investment portfolio are
slightly higher than the risk of loss in a Standard & Poor's 500 Index Fund.
This higher risk is due to the less diverse distribution of the Company's
portfolio as compared to the broadly based Standard & Poor's 500 Stock Index.
Financing activities used cash totaling $397,201 for the nine months ended
September 30, 1999, which was used for repayment on the line of credit,
repayment on the term note for Thermal's facilities and for the purchase of
Treasury Stock. The Company has additional financing amounts of $845,000
available on its line of credit at September 30, 1999. The line of credit has
been used principally to finance accounts receivable and inventory purchases.
Financing for the purchase of new plate-fin production machinery for the Air
Handling segment is being provided by a 5 year lease-purchase agreement which
provides funds for the installation of this which is expected to be completed
within the next 12 months.
The Company's Board of Directors authorized a stock repurchase plan on June
29, 1999 authorizing the repurchase of up to 400,000 shares of the Company's
common stock over a 24 month period. Pursuant to the Stock Repurchase Program.
the Company purchased 40,000 shares of its Common Stock during the quarter ended
September 30, 1999. The funds to purchase these shares came from surplus cash
or operating funds. The total cumulative cost related to the purchase of these
40,000 shares was $67,045, an average price of $1.47 per share. Under the
repurchase plan, an additional 360,000 shares remain authorized for repurchase.
ASSET MANAGEMENT
The Company's cash flow from operations has been affected primarily by the
timing of its collection of trade accounts receivable. The Company typically
sells its products and services on short-term credit terms and seeks to minimize
its credit risk by performing credit checks and conducting its own collection
efforts. The Company had net trade accounts receivable of $2,454,210 and
$2,087,226 at September 30, 1998 and 1999, respectively. The number of days'
sales outstanding in trade accounts receivable at September 30, 1998 and 1999
was 70 days and 66 days, respectively. Bad debt expenses have been
insignificant for each of these periods.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On October 28, 1999, a final Settlement Agreement, incorporated by
reference as Exhibit 10.31 on this Form 10-QSB for the quarter ended September
30, 1999, was reached regarding the previously announced litigation between the
Company and a former principal of MLC Enterprises, Inc. The suit had been filed
in the 61st Judicial District Court of Harris County,
13
<PAGE>
Texas, on April 7, 1999 by Michael L. Moore. As a result of the Settlement
Agreement, all claims of the parties, including counter-claims and third-party
claims made by the Company, have been dismissed.
Terms of the settlement include rescission of the previously executed Stock
Acquisition Agreement of MLC Enterprises, Inc. and rescission of the Company's
Employment Agreement with Michael L. Moore. The settlement also calls for the
return of all stock issued and exchanged pursuant to the Stock Acquisition
Agreement. As a result, MLC Enterprises, Inc. (which had been renamed IDS
Fabricated Systems, Inc.) is no longer a subsidiary of the Company. Michael L.
Moore has individually assumed all assets, inventory and liabilities of MLC
pursuant to the terms of the Settlement Agreement.
As a result of the settlement and due to the magnitude of previous write-
offs associated with the MLC acquisition, the Company expects to record a one-
time gain during the fourth quarter ending December 31, 1999. See additional
details in the MD&A section of this Report on Form 10-QSB.
The Company is not a party to any other material pending legal proceedings
to which either it or its subsidiary is a party or of which any of its property
is subject.
ITEM 2. CHANGES IN SECURITIES
Not Applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
ITEM 5. OTHER INFORMATION
In August 1999, the Company engaged Mr. J. C. Sorensen as the Company's
exclusive financial advisor and strategic planner to evaluate the Company's
existing business operations and future business plans.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 10.31 Settlement Agreement between the Company and
Michael L. Moore
Exhibit 27 Financial Data Schedule
b. Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 30, 1999.
14
<PAGE>
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.
INDUSTRIAL DATA SYSTEMS CORPORATION
Dated: November 15, 1999 By: /s/ Hulda L. Coskey
---------------------------------------
Hulda L. Coskey, Chief Financial Officer,
Secretary and Treasurer
15
<PAGE>
EXHIBIT 10.31
NO. 99-17962
MICHAEL L. MOORE, (S) IN THE DISTRICT COURT OF
Plaintiff (S)
(S)
v. (S)
(S)
IDS FABRICATED SYSTEMS, INC., (S)
WILLIAM A. COSKEY, AND (S)
INDUSTRIAL DATA SYSTEMS CORP. (S)
Defendants. (S) HARRIS COUNTY, TEXAS
(S)
IDS FABRICATED SYSTEMS, INC. AND (S)
INDUSTRIAL DATA SYSTEMS CORP. (S)
Defendants/Counter-Plaintiffs, (S)
v. (S)
(S)
MICHAEL L. MOORE (S)
FULL AND FINAL MUTUAL RELEASE
AND SETTLEMENT AGREEMENT
KNOW ALL MEN BY THESE PRESENTS:
THAT I, MICHAEL L. MOORE, Individually, and as Authorized Representative of
FLAMEOUT DESIGN AND FABRICATION, INC.; and DEBORAH A. MOORE, in consideration of
IDS FABRICATED SYSTEMS, INC. k/n/a M L MOORE ENTERPRISES, INC., WILLIAM A.
COSKEY AND INDUSTRIAL DATA SYSTEMS CORP. dismissing its respective claims and
causes of action against us, and for good and other valuable consideration,
which is more fully set forth below, the receipt of which is hereby acknowledged
and confessed, do hereby for our self, our heirs, personal representatives and
assigns, RELEASE and FOREVER DISCHARGE Defendants, IDS Fabricated Systems, Inc.
k/n/a M L Moore Enterprises, Inc., William A. Coskey, Industrial Data Systems
Corp., any predecessor and successor companies, associations, professional
corporations, subsidiaries, affiliates and parent companies, officers and
directors, current and former employees, insurers, and counsel of record,
including but not
1
<PAGE>
limited to, Myall S. Hawkins, Roland Cook, Kathy Lindauer, and Jenkens &
Gilchrist, P.C., and John Williams, and any other person, firm or corporation
from any and all claims, demands, damages, costs, expenses, loss of services,
breach of contract, defamation, fraud, conversion, extortion, blackmail, breach
of trust, intentional infliction of emotional distress, intentional interference
with contractual relations, personal injuries, loss of earnings and earning
capacity, mental anguish, property damage, mismanagement in the either the
control or operation of any company, actions and causes of action, arising from
any act or occurrence up to the present time, and on account of all such
elements of damage of any kind sustained or that we may hereafter sustain or
claim to have sustained in consequence of any and all allegations stated in our
claims made the basis of Cause Number 99-17962, styled Michael L. Moore, et al
v. IDS Fabricated Systems, Inc., et al in the 61st District Court, Harris
County, Texas, or which could have been asserted therein.
THAT, IDS FABRICATED SYSTEMS, INC. k/n/a M L MOORE ENTERPRISES, INC.,
WILLIAM A. COSKEY AND INDUSTRIAL DATA SYSTEMS CORP., in consideration of MICHAEL
L. MOORE, Individually, and as Authorized Representative of FLAMEOUT DESIGN AND
FABRICATION, INC.; and DEBORAH A. MOORE, dismissing their respective claims and
causes of action against us, which is more fully set forth below, and for other
good and other valuable consideration, the receipt of which is hereby
acknowledged and confessed, do hereby RELEASE and FOREVER DISCHARGE, Michael L.
Moore, Individually and as authorized representative of Flameout Design &
Fabrication, Inc., and Deborah A. Moore, any current and former employees of
Flameout, any predecessor and successor companies, associations, professional
corporations, subsidiaries, affiliates and parent companies, officers and
directors, current and former employees, insurers, and counsel of record,
including but not limited to, Douglas A. Samuelson, and Samuelson & Associates
and Lloyd R. Cunningham, Marti Batson, and Cunningham & Associates, P.C., and
any other person, firm or corporation
2
<PAGE>
from any and all claims, demands, damages, costs, expenses, loss of services,
breach of contract, defamation, fraud, conversion, embezzlement, conspiracy,
intentional misrepresentation and fraud, breach of fiduciary duty, unjust
enrichment, loss of earnings and earning capacity, mental anguish, property
damage, mismanagement in the either the control or operation of any company,
actions and causes of action, arising from any act or occurrence up to the
present time, and on account of all such elements of damage of any kind
sustained by IDS Fabricated Systems, Inc. k/n/a M L Moore Enterprises, Inc.,
William A. Coskey, Industrial Data Systems Corp. in consequence of any and all
allegations stated in our claims made the basis of Cause Number 99-17962, styled
Michael L. Moore, et al v. IDS Fabricated Systems, Inc., et al in the 61st
District Court, Harris County, Texas, or which could have been asserted therein.
As further consideration for the mutual covenants, releases and settlement
incorporated herein, it is UNDERSTOOD and AGREED by the parties hereto that the
"STOCK ACQUISITION AGREEMENT" by and among Michael L. Moore as "Stockholder" of
MLC ENTERPRISES, INC. and INDUSTRIAL DATA SYSTEMS CORP. as the Acquiring
Corporation, executed by the parties on or about November 1, 1998, is rescinded
and will not be enforced, and that any and all stock issued and exchanged
pursuant to the Stock Acquisition Agreement shall be returned and exchanged
between Industrial Data Systems Corp. and Michael L. Moore. Michael L. Moore
and wife further understand and agree that any ownership interest they would
claim in Industrial Data Systems, Corp. or its subsidiaries, is waived, canceled
and held for naught. William A. Coskey, as the authorized representative of
Industrial Data Systems Corp. ("Industrial") understands and agrees that any
ownership interest that Industrial would claim in MLC Enterprises, Inc.
k/n/a M L Moore Enterprises, Inc., is waived, canceled and held for naught.
Michael L. Moore and wife further understand and agree that any right, title or
interest they or either of them might have or claim in Industrial Data Systems,
Corp. or its subsidiaries, past or future profits, bonuses, distributions,
accounts receivable, promissory notes
3
<PAGE>
or other assets owned by Industrial Data Systems, Corp. or its subsidiaries,
save and except IDS Fabricated Systems, Inc. k/n/a M L Moore Enterprises, Inc.,
as set forth below, is forever released, remised, quitclaimed, surrendered and
waived. Finally, Michael L. Moore, Deborah A. Moore and William A. Coskey agree
to assign, surrender and exchange any Industrial Data Systems, Corp. stock and
MLC Enterprises, Inc. k/n/a M L Moore Enterprises, Inc. stock, respectively, and
execute any other documentation that is reasonably necessary to assign,
surrender and exchange the before mentioned stock back to its original owner.
As further consideration for the mutual covenants, releases and settlement
incorporated herein, it is UNDERSTOOD and AGREED by the parties hereto, that the
"EMPLOYMENT AGREEMENT" executed between MLC Enterprises, Inc. n/k/a M L Moore
Enterprises, Inc. and Michael L. Moore, on or about November 1, 1998, and any
amendments thereto, is rescinded and its enforcement waived.
As further consideration for the mutual release and settlement, it is
UNDERSTOOD and AGREED by the parties released herein that any assignment by
Flameout Design & Fabrications, Inc. of its "PRODUCT DESIGNS AND RELATED
TECHNOLOGY", which was made ancillary to the Employment Agreement and executed
by and between MLC Enterprises, Inc. n/k/a M L Moore Enterprises, Inc. and
Michael L. Moore as President of Fameout Design & Fabrications, Inc. on or about
December 28, 1998, is rescinded and will not be enforced.
As further consideration for the mutual covenants, releases and settlement
incorporated herein, it is UNDERSTOOD and AGREED that:
1. Contemporaneously with rescinding the Stock Acquisition Agreement, and
the exchange of MLC and Industrial stock, respectively, Michael L.
Moore shall assume and take in to his possession all assets, inventory
and liabilities of MLC Enterprises, Inc. k/n/a M L Moore Enterprises,
Inc. which existed on October 12, 1999, save and except, the payment
of $4,917.95 made on October 13, 1999 in
4
<PAGE>
satisfaction and compromise of EPSCO'S outstanding account balance of
$9,836.90.
2. Any and all intercompany loans to or from Industrial Data Systems
Corp. and its subsidiaries to MLC Enterprises, Inc. k/n/a M L Moore
Enterprises, Inc. shall be canceled and not enforced.
3. The Toshiba copier previously used at the Metronome facility and its
lease, shall be assumed by IDS Engineering, Inc.
4. The drawing plotter previously used at the Metronome facility shall be
returned and Michael L. Moore shall be responsible for its lease.
5. The Toyota forklift shall remain at the Metronome facility and Michael
L. Moore shall be responsible for its lease.
6. The following computers shall be returned to Michael L. Moore at the
Metronome facility: IBM Aptiva, Gateway and Compaq. In addition, the
zip drive and any attached printer shall also be returned to Michael
L. Moore at the Metronome facility.
7. The Scotchman press previously used at the Metronome facility along
with its tools, punches and dies shall remain the property of and in
the possession of IDS Engineering, Inc..
8. Any and all assignments or transfers of property of IDS Fabricated
Systems, Inc. k/n/a M L Moore Enterprises, Inc. to Industrial Data
Systems Corp. and/or any of its subsidiaries shall be canceled.
9. All outstanding liabilities of IDS Fabricated Systems, Inc.
k/n/a M L Moore Enterprises, Inc. as of October 12, 1999, have been
disclosed and are attached as Exhibit "A".
5
<PAGE>
10. All account balances of MIS, MIFS, MLC and/or IDS k/n/a MLM as of
October 26, 1999 have been disclosed and are attached as Exhibit "B".
11. Any and all MIS, MIFS, MLC and/or Flameout data or drawings that are
still in the possession of Industrial Data Systems Corp. and/or its
subsidiaries shall be surrendered to Michael L. Moore.
12. Any and all original accounting and/or corporate records of MIS, MIFS,
MLC and/or IDS k/n/a MLM shall be returned to Michael L. Moore at the
Metronome facility.
13. The MIFS ASME stamp, certificate and materials shall be returned to
Michael L. Moore at the Metronome facility.
14. The personal note owed by Michael L. Moore on the Bravada vehicle
shall be canceled.
The undersigned, further declare that we are more than eighteen (18) years
of age, and that no representations about the nature and extent of said damages,
claims and causes of action made by any attorney or agent of any party hereby
released, nor any representations regarding the nature and extent of legal
liability or financial responsibility of any of the parties hereby released,
have induced any party to make this settlement.
Each party released herein shall bear its own attorney's fees and expenses
arising from the prosecution or defense of any claim or cause of action released
herein. Finally, all taxable costs of court will be charged to the party
incurring same.
All parties expressly warrant and represent that they have not assigned,
pledged or otherwise in any manner whatsoever sold, assigned, transferred or
impaired, either by instrument in writing or otherwise, any right, title,
interest or claim which they may have by reason of the facts giving rise to the
claims and causes of action described above or any matters arising out of or
related thereto. Michael L. Moore and wife expressly warrant and represent that
they have not
6
<PAGE>
assigned, pledged or otherwise in any manner whatsoever sold, assigned,
transferred or impaired, either by instrument in writing or otherwise, the
50,000 shares of Industrial Data Systems Corp. stock. William A. Coskey,
Individually, and as authorized representative of Industrial Data Systems Corp.
and IDS Fabricated Systems, Inc. k/n/a M L Moore Enterprises, Inc., expressly
warrants and represents that he has not assigned, pledged or otherwise in any
manner whatsoever sold, assigned, transferred, either by instrument in writing
or otherwise the 1,000 shares of MLC Enterprises, Inc. k/n/a M L Moore
Enterprises, Inc. stock.
The parties to this mutual release and settlement agreement further
UNDERSTAND and AGREE that this settlement agreement and release shall be
interpreted and construed under the laws of the State of Texas, which laws shall
prevail in the event of any conflict of law. Further, the parties herein
irrevocably agree and consent that in any action or proceeding to enforce this
agreement, each will submit to the exclusive jurisdiction and venue of any state
or federal court located in Harris County, Texas.
The parties herein released further agree to execute whatever documents are
reasonably necessary to carry out the purpose and effect of the mutual release
and settlement agreement.
7
<PAGE>
DATED this 28th day of October, 1999.
PLAINTIFF, COUNTER DEFENDANTS
AND THIRD PARTY DEFENDANTS:
/s/ Michael Moore_________________________
MICHAEL. MOORE, IND. AND AS
AUTHORIZED REPRESENTATIVE OF
FLAMEOUT DESIGN & FABRICATION,
INC.
/s/ Deborah A. Moore______________________
DEBORAH A. MOORE
DEFENDANTS, COUNTER PLAINTIFFS
AND THIRD PARTY PLAINTIFFS:
IDS FABRICATED SYSTEMS, INC. K/N/A
M L MOORE ENTERPRISES, INC.,
INDUSTRIAL DATA SYSTEMS CORP.
AND WILLIAM A. COSKEY
By: /s/ William A. Coskey_________________
WILLIAM A. COSKEY, IND. AND AS
AUTHORIZED REPRESENTATIVE
OF IDS FABRICATED SYSTEMS,
INC. K/N/A M L MOORE
ENTERPRISES, INC. AND
INDUSTRIAL DATA SYSTEMS
CORP.
STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
SWORN and SUBSCRIBED before me on this 28th day of October, 1999 by
Michael L. Moore.
/s/ Ken Hedrick__________________________
Notary Public, State of Texas
My Commission Expires: 12/19/2001
8
<PAGE>
STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
SWORN and SUBSCRIBED to before me on this 28th day of October, 1999 by
Deborah A. Moore.
/s/ Ken Hedrick___________________________
Notary Public, State of Texas
My Commission Expires: 12/19/2001
STATE OF TEXAS (S)
(S)
COUNTY OF HARRIS (S)
SWORN and SUBSCRIBED to before me on this 28th day of October, 1999 by
William A. Coskey.
/s/ Ken Hedrick___________________________
Notary Public, State of Texas
My Commission Expires: 12/19/2001
9
<PAGE>
EXHIBIT A
INTENTIONALLY OMITTED
10
<PAGE>
EXHIBIT B
INTENTIONALLY OMITTED
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The financial data schedule contains summary financial information extracted
from the Company's Quarterly Report on Form 10-QSB for the nine months ended
September 30, 1999 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> SEP-30-1999
<CASH> 361,509
<SECURITIES> 813,799
<RECEIVABLES> 2,107,219
<ALLOWANCES> (19,993)
<INVENTORY> 1,028,115
<CURRENT-ASSETS> 4,872,026
<PP&E> 1,493,046
<DEPRECIATION> (396,729)
<TOTAL-ASSETS> 6,122,842
<CURRENT-LIABILITIES> 1,473,872
<BONDS> 401,727
0
0
<COMMON> 13,074
<OTHER-SE> 4,028,912
<TOTAL-LIABILITY-AND-EQUITY> 6,122,842
<SALES> 4,822,719
<TOTAL-REVENUES> 9,135,149
<CGS> 3,817,264
<TOTAL-COSTS> 1,906,265
<OTHER-EXPENSES> (765,261)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,499
<INCOME-PRETAX> (213,878)
<INCOME-TAX> 85,727
<INCOME-CONTINUING> (299,605)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (299,605)
<EPS-BASIC> 0
<EPS-DILUTED> (0.023)
</TABLE>
