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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 001-14217
INDUSTRIAL DATA SYSTEMS CORPORATION
(Exact name of registrant as specified in its charter)
NEVADA
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(State of corporation or organization)
88-0322261
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(I.R.S. Employer Identification Number)
600 CENTURY PLAZA DRIVE, BUILDING 140, HOUSTON, TEXAS 77073-6013
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(Address of Principal Executive Offices) (Zip Code)
(281) 821-3200
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(Registrant's telephone number, including area code)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common equity as of the close of business June 30, 2000.
Common Stock, $.001 Par Value, 12,964,918
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QUARTERLY REPORT ON FORM 10-QSB
FOR THE PERIOD ENDED JUNE 30, 2000
TABLE OF CONTENTS
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Page
Number
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PART 1 FINANCIAL INFORMATION
ITEM 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 2000 and
June 30, 1999.................................................................. 1
Condensed Consolidated Statements of Operations for the
Three Months and Six Months ended June 30, 2000 and June 30, 1999.............. 2
Condensed Consolidated Statements of Cash Flows for the Six
Months ended June 30, 2000 and June 30, 1999.................................... 3
Notes to Condensed Consolidated Financial Statements............................ 4
ITEM 2 Management's Discussion and Analysis............................................ 5
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings............................................................... 11
Item 2. Changes in Securities........................................................... 11
ITEM 3. Defaults Upon Senior Securities................................................. 11
ITEM 4. Submission of Matters to a Vote of Security Holders............................. 11
ITEM 5. Other Information............................................................... 11
ITEM 6. Exhibits and Reports on Form 8-K................................................ 12
Signature....................................................................... 13
</TABLE>
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INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, 2000 December 31, 1999
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(unaudited)
ASSETS
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 147,468 $ 663,972
Marketable securities, at market value - Available-for-sale 630,300 300,000
Accounts receivable - trade, less allowance for doubtful accounts of
approximately $19,000 in 2000 and $6,500 in 1999 2,431,932 2,540,835
Inventory 787,928 771,808
Notes receivable from stockholder 150,000 150,000
Federal income tax receivable 66,527 53,000
Prepaid and other 473,416 329,441
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Total current assets 4,687,571 4,809,056
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PROPERTY AND EQUIPMENT 1,475,935 1,070,218
GOODWILL 26,550 34,650
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Total assets $6,190,056 $5,913,924
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Notes payable to bank $ 406,743 $ 342,010
Current portion - note payable to bank and capital lease 17,794 39,259
Accounts payable 771,757 779,017
Deferred Income taxes 45,000 45,000
Accrued expenses and other current liabilities 388,103 297,454
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Total current liabilities 1,629,397 1,502,740
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NOTE PAYABLE TO BANK, TERM 375,709 384,658
CAPITAL LEASE PAYABLE 151,471 --
DEFERRED INCOME TAX 52,000 52,000
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Total liabilities 2,208,577 1,939,398
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value; 75,000,000 shares authorized; 12,964,918
shares issued in 2000, 12,964,918 shares issued in 1999 12,965 12,965
Additional paid-in capital 2,640,154 2,640,154
Retained earnings 1,328,360 1,321,407
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Total stockholders' equity 3,981,479 3,974,526
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Total liabilities and stockholders' equity $6,190,056 $5,913,924
========== ==========
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
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INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 3,331,742 $ 3,218,750 $ 6,723,953 $ 5,854,845
OPERATING EXPENSES:
Cost of goods sold 2,630,377 2,329,553 5,029,627 4,138,874
Selling, general and administrative 922,838 549,043 1,681,041 1,131,923
----------- ----------- ----------- -----------
3,553,215 2,878,596 6,710,668 5,270,797
----------- ----------- ----------- -----------
OPERATING PROFIT (LOSS) (221,473) 340,154 13,285 584,048
OTHER INCOME (EXPENSE):
Other income 17,723 63,904 32,012 86,252
Net unrealized gains (losses) on marketable
securities -- 52,753 -- 48,558
Interest income (expense), net (21,342) (16,784) (38,344) (30,830)
----------- ----------- ----------- -----------
(3,619) 99,873 (6,332) 103,980
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS
BEFORE PROVISION FOR INCOME TAXES (225,092) 440,027 6,953 668,028
PROVISION FOR INCOME TAXES (71,254) 100,383 -- 158,539
----------- ----------- ----------- -----------
INCOME (LOSS) FROM CONTINUING OPERATIONS (153,838) 339,644 6,953 529,489
LOSS FROM DISCONTINUED OPERATIONS -- (886,221) -- (952,484)
----------- ----------- ----------- -----------
NET INCOME (LOSS) $ (153,838) $ (546,577) $ 6,953 $ (422,995)
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS (LOSS) PER
COMMON SHARE $ (0.012) $ (0.042) $ 0.001 $ (0.032)
=========== =========== =========== ===========
BASIC AND DILUTED WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING
12,964,918 13,073,718 12,964,918 13,073,718
=========== =========== =========== ===========
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
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INDUSTRIAL DATA SYSTEMS CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
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Six Months Ended
June 30,
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2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 6,953 $ (422,995)
Non-Cash change in working capital 41,126 825,222
Changes in working capital (258,120) (107,369)
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Net cash provided (used) by operating activities (210,041) 294,857
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment acquired (405,717) (54,364)
Purchase of investments -- 9,450
Addition of capital lease 151,471 --
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Net cash used in investing activities (254,246) (44,914)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Long term mortgage on land and buildings (8,949) (20,756)
Repayment on notes payable, net (43,268) (282,129)
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Net cash used in financing activities (52,217) (302,885)
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NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (516,504) (52,942)
CASH AND CASH EQUIVALENTS, at beginning of period 663,972 1,225,821
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CASH AND CASH EQUIVALENTS, at end of period $ 147,468 $1,172,879
========= ==========
Supplemental Cash Flow Information:
Interest Paid $ 38,344 $ 26,611
========= ==========
Income taxes paid $ -- $ 70,000
========= ==========
</TABLE>
See accompanying notes to these condensed consolidated financial statements.
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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 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 financial statements and the notes thereto included
in the Company's latest Annual Report to Shareholders and the Annual Report
on Form 10-KSB for the year ended December 31, 1999. In the opinion of the
Company, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position as of June 30, 2000; the
results of operations for the three months and six months ended June 30, 2000
and 1999; and cash flows for the six months ended June 30, 2000 and 1999 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,
2000.
2. NOTE RECEIVABLE FROM STOCKHOLDER:
At June 30, 2000, 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 note is due annually.
3. ACQUISITIONS:
In November 1998, the Company acquired MLC Enterprises, Inc. a Texas
corporation formed in August 1995, doing business as Marine and Industrial
Fire & Safety (MIFS) and Marine and Industrial Supply Company (MISC).
Subsequent to the acquisition, MLC's name was changed to IDS Fabricated
Systems, Inc. (IDS FAB). Operations at IDS FAB were suspended during the six
months ending June 30, 1999 and the acquisition was rescinded in October
1999. The results of operations are reported under the "Discontinued
Operations" category on the Condensed Consolidated Statements of Operations
for the three months and six months ended June 30, 1999.
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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 is the major producer of
revenues for the Company. Providing engineering consulting services to the
pipeline and process industries for the design, development and project
management of turnkey engineering projects generates these revenues. Early in
1999, IED opened a business development office in Tulsa, Oklahoma to pursue
turnkey engineering, procurement and construction (EPC) projects. As of June 30,
2000, the Tulsa operation had grown to approximately 40 employees and the
Company believes the contribution of the Tulsa operation will result in expanded
market exposure, greater revenue and profit margin potential from the EPC
market. However there can be no assurance that this will be the case.
The Company generates other revenues through segments involved in the
made-to-order manufacture of industrial equipment. Thermal Corporation
(Thermal), the Air Handling segment, fabricates air-handling equipment for
commercial heating ventilation and air conditioning systems. Thermal was
acquired in February 1997.
The Company acquired Constant Power Manufacturing, Inc., (CPM), the
Power Systems segment, in March 1998. This segment manufactures industrial
grade battery backup systems and battery chargers. Research and development
efforts and funds have been expended to develop a new battery charger system to
add to its product line, the Company believes the revenue and profit margin of
this segment will improve in future periods.
The Products segment designs and assembles industrial grade computers
for specialty applications. Due to the increased competition in the hardware
market and ever-decreasing profit margins, management is evaluating its options
concerning the future operations of this segment.
YEAR 2000
The year 2000 issue relates to computer systems that use the last two
digits rather than four to define a year and whether such systems would properly
and accurately process information when the year changed to 2000. During fiscal
1999, the Company completed its company-wide program to prepare the Company's
computer systems for year 2000 compliance.
At the date of this report, the Company had not experienced any
material problems related to the year 2000. The Company has not become aware of
any significant year 2000 issues affecting the Company's major customers or
suppliers. The Company does not anticipate any material complaints regarding any
year 2000 issues related to its products.
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;
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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,"
"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.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain financial
data derived from the Company's condensed consolidated statements of operations
and indicates percentage of total revenue for each item.
<TABLE>
<CAPTION>
Three Months Ended June 30 Six Months Ended June 30
2000 1999 2000 1999
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Amount % Amount % Amount % Amount %
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Engineering $2,057,850 61.8 $1,426,819 44.3 $3,649,511 54.3 $2,680,668 45.8
Air Handling 761,039 22.8 934,442 29.0 1,589,657 22.6 1,712,217 29.2
Power Systems 397,890 11.9 669,647 20.8 1,257,431 17.9 1,103,938 18.9
Products 114,963 3.5 187,842 6.1 227,354 3.2 358,022 6.1
---------- ----- ---------- ----- ---------- ----- ---------- -----
3,331,742 100.0 3,218,750 100.0 6,723,953 100.0 5,854,845 100.0
Total revenue ========== ===== ========== ===== ========== ===== ========== =====
Gross Profit:
Engineering 490,867 23.9 448,652 31.4 1,030,589 28.2 924,362 34.5
Air Handling 65,175 8.6 223,138 23.9 267,098 16.8 391,416 22.9
Power Systems 137,475 34.6 175,401 26.2 367,719 29.2 321,415 29.1
Products 7,848 6.8 42,006 22.4 28,920 12.7 78,780 22.0
---------- ----- ---------- ----- ---------- ----- ---------- -----
Total gross profit 701,365 21.1 889,197 27.6 1,694,326 25.2 1,715,973 29.3
========== ===== ========== ===== ========== ===== ========== =====
Selling, general and
administrative expenses 922,838 27.7 549,043 17.1 1,681,041 25.0 1,131,925 19.3
---------- ---------- ---------- ----------
Operating income (221,473) (6.6) 340,154 10.6 13,285 0.2 584,048 10.0
Other income (expense) (3,619) (0.1) 99,873 3.1 (6,332) (0.1) 103,980 1.8
---------- ----- ---------- ----- ---------- ----- ---------- -----
Income from continuing
operations before
provision for income
taxes (225,092) (6.8) 440,027 13.7 6,953 0.1 688,028 11.8
---------- ----- ---------- ----- ---------- ----- ---------- -----
Provision for income (71,254) (2.1) 100,383 3.1 -- 0.0 158,539 2.7
taxes ---------- ----- ---------- ----- ---------- ----- ---------- -----
Income from continuing
Operations (153,838) (4.6) 339,644 10.6 6,953 0.1 529,489 9.0
---------- ----- ---------- ----- ---------- ----- ---------- -----
Loss from discontinued
Operations -- 0.0 (886,221) (27.5) -- 0.0 (952,484) (16.3)
---------- ----- ---------- ----- ---------- ----- ---------- -----
Net Income $ (153,838) (4.6) $ (546,577) (17.0) $ 6,953 0.1 $ (422,995) (7.2)
========== ===== ========== ===== ========== ===== ========== =====
</TABLE>
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THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000
TOTAL REVENUE. Total revenue increased by $112,992 or 3.5% from $3,218,750
for the three months ended June 30, 1999, compared to $3,331,742 in 2000.
Revenue from Engineering, which comprised 61.8% of total revenue for the three
months ended June 30, 2000, increased by $631,031 or 44.2% over the same period
in 1999. This increase is due to the wider scope of projects the Engineering
segment is now undertaking and the expansion into the turnkey engineering,
procurement and construction (EPC) projects and to the revenue generated by two
large Caspian Sea pipeline contracts secured by the segment. Revenues generated
for the three months ended June 30, 2000, by the Air Handling segment, the Power
Systems segment and the Products segment all declined from the 1999 period.
Decreases ranged from (40.6%) in the Power Systems segment to (18.6%) in the Air
Handling segment. The decreases reported in the Air Handling and Power Systems
segments were attributable to delays in the production process, which caused
completion and shipping delays. Management has addressed the problem issues and
measures have been implemented to correct the problems. Reassignment and
reorganization of production personnel has been implemented, as well as, more
stringent management guidelines to control labor, material costs and maintain
required shipping deadlines.
GROSS PROFIT. Gross profit decreased by $187,832 or 21.1% from $889,197
for the three months ended June 30, 1999 to $701,365 for the same period in
1999. The gross margin as a percentage of total revenues decreased from 27.6%
for the period ended June 30, 1999 to 21.1% for the same period in 2000. The
decrease in the overall gross margin was attributable to declines in the gross
profit margins contributed by the Air Handling, Power Systems and Products
segments. Each of these segments experienced lower sales revenues in the 2000
period. Decreases in Gross Profit generated ranged from a decline of 21.6% in
the Power Systems segment to a decline of 81.3% in the Products segment, with
the Air Handling segment experiencing a decline of 70.8% from the three month
period in 2000. These declines were a result of the lower sales in these
segments accompanied by higher production costs. Management has implemented
procedures to more effectively monitor and control the costs related to the
production process. These procedures are expected to produce greater gross
profit margins in future periods as a result of controlling labor and material
costs.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $373,796 or 68.1% from $549,042 for the
three months ended June 30, 1999 compared to $922,838 for the same period in
1999. As a percentage of total revenue, selling, general and administrative
expenses increased from 17.1% for the three months ended June 30, 1999 to 27.7%
for the same period in 2000. This increase is caused by additional expenses
related to the establishment and maintenance of the Tulsa operation, to
additional non-billable expenses in the Engineering segment and to an overall
increase in corporate related expenses due the growing number of employees.
OPERATING INCOME. Operating income decreased by $561,628 from $340,155 for
the three months ended June 30, 1999, compared to ($221,473) for the same period
in 2000. Operating income decreased as a percentage of total revenue from 10.6%
for the three months ended June 30, 1999 to (6.6)% for the same period in 2000.
The decrease in operating income was a result of the decrease in gross profit
and the increase in selling, general and administrative expenses.
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OTHER INCOME (EXPENSE). Other expense decreased by $103,492 from $99,873
for the three months ended June 30, 1999 to ($3,619) for the same period in
2000. This decrease is due primarily to the elimination of other income
generated by the trading of marketable securities. This activity was suspended
effective December 31, 1999; therefore, there is no income from this activity to
offset items, such as interest expense.
INCOME (LOSS) FROM CONTINUING OPERATIONS. Income from continuing
operations decreased by $493,482 from $339,644 for the three months ended June
30, 1999 to ($153,838) for the same period in 2000. Net income from continuing
operations decreased as a percentage of total revenue from 10.6% for the three
months ended June 30, 1999 to (4.6%) for the same period in 2000. This decrease
was attributable to the lower overall gross margin generated and to increases in
selling, general and administrative expenses.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 2000
TOTAL REVENUE. Total revenue increased by $869,108 or 14.8% from $5,854,845
for the six months ended June 30, 1999, compared to $6,723,953 in 2000. Revenue
from the Engineering segment, which comprised 54.3% of total revenue for the six
months ended June 30, 2000 increased by $968,843 or 36.1% from $2,680,668 in
1999 to $3,649,511 for the same period in 2000. The increase was due to the
expanded scope of projects completed by the Engineering segment and to the
additional revenue generated by the Tulsa operation and to the two Caspian Sea
pipeline contracts secured by the segment.
Revenue from the Air Handling segment, which comprised 23.6% of the total
revenue for the six months ended June 30, 2000, decreased by $122,560 or 7.2%
from $1,712,217 in 1999 to $1,589,657 for the same period in 2000. This decrease
is primarily attributable to the production related problems discussed in the
preceding section under "Total Revenue" and "Gross Profit" categories.
Revenue from the Power Systems segment, which comprised 18.7% for the six
months ended June 30, 2000, increased by $153,493 or 13.9% from $1,103,938 in
1999 to $1,257,431 for the same period in 2000. Management believes the sales
revenues generated in the six month period ended June 30, 1999 were below normal
levels and that the increase from the 1999 to the 2000 period would not be
evident if the 1999 sales would have been at normal historical levels.
GROSS PROFIT. Gross profit decreased by $21,647 or 1.3% from $1,715,973 for
the six months ended June 30, 1999 to $1,694,326 for the same period in 2000.
The gross margin contributed by the Engineering segment increased by $106,227
from $924,362 for the six months ended June 30, 1999 to $1,030,589 for the
period ended June 30, 2000. This increase is the result of the expanded scope
of projects being done by the Engineering segment in the 2000 period and the
increase in sales revenue. The Air Handling segment's gross margin decreased
from 22.9% for the six-month period ended June 30, 1999 to 16.8% for the six
months ended June 30, 2000. The Power Systems segment's gross margin percentage
of sales revenue remained basically the same for both the six-month period ended
June 30, 1999 and 2000, although the 2000 sales revenue increased by $153,493.
Management believes the lack of gross profit is the result of production issues,
which were discussed in the preceding section under the "Total Revenue" and
"Gross Profit" categories.
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SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $549,115 or 48.5% from $1,131,925 for the
six months ended June 30, 1999 compared to $1,681,041 for the same period in
2000. As a percentage of total revenue, selling, general and administrative
expenses increased from 19.3% for the six months ended June 30, 1999 to 25.0%
for the same period in 2000. The increase was attributable to additional
selling, general and administrative expenses related to establishing and
maintaining the Tulsa operation, to additional non-billable costs absorbed by
the Engineering segment and to overall increased general and administrative
costs related to the growing number of employees added in the 2000 period.
OPERATING INCOME. Operating income decreased by $570,763 from $584,048 for
the six months ended June 30, 1999, compared to $13,285 for the same period in
2000. Operating income decreased as a percentage of total revenue from 10.0%
for the six months ended June 30, 1999 to 0.2% for the same period in 2000. The
decrease in operating income was a result of decreased revenues, reduced gross
profits and increased selling, general and administrative expenses.
OTHER INCOME (EXPENSE). Other expense decreased by $110,312 from $103,980
for the six months ended June 30, 1999 to ($6,332) for the same period in 2000.
This decrease is due primarily to the elimination of other income generated by
the trading of marketable securities. This activity was suspended effective
December 31,1999, therefore, there is no income from this activity to offset
items, such as interest expense.
INCOME (LOSS) FROM CONTINUING OPERATIONS. Income from continuing operations
decreased by $522,536 from $529,489 for the six months ended June 30, 1999 to
$6,953 for the same period in 2000. This decrease was due to the decline in
gross margins, to the increase in selling, general and administrative expenses
and to the decrease in other income.
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 June
30, 2000, 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. As of April 24, 2000 the Company established a new Line of
Credit with Frost National Bank in the principal amount of $1,250,00. The
previous Line of Credit that the Company had established with another bank was
paid off at that time.
The Company had, as of June 30, 2000, $885,000 in additional advances
available under its Line of Credit with the new bank. The Company's Line of
Credit, which provides for maximum borrowings of $1,250,000 and bears interest
at prime plus 0.500% per annum, is for a term of one year and matures on April
24, 2001. The Line of Credit is secured by accounts receivable, inventory and
the personal guarantees of certain stockholders and officers of the Company.
The Company's working capital was $3,058,174 and $3,306,316 at June 30,
2000 and December 31, 1999, respectively.
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CASH FLOW
Operating activities provided net cash totaling $294,857 for the six months
ended June 30, 1999 and used net cash of $210,041 for the six months ended June
30, 2000.
Trade accounts receivable decreased $108,903 since December 31, 1999, due
to collection of outstanding amounts. Inventory increased by $16,120 for the
same period.
Investing activities used cash totaling $44,914 for the six months ended
June 30, 1999 and used cash totaling $254,246 for the same period in 2000. The
cash used during the 2000 period was for the purchase of fixed assets and for
the purchase of marketable securities.
As of June 30, 2000, the Company had a portfolio of bonds, which had a fair
market value of $630,300.
Financing activities used cash totaling $52,217 for the six months ended
June 30, 2000, which was repayments on the Line of Credit, repayments on the
term note for Thermal's facilities and repayments on the capital lease. The
Company has additional financing amounts of $885,000 available on its line of
credit at June 30, 2000. The line of credit has been used principally to
finance accounts receivable and inventory purchases.
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 $2,431,932 and
$2,013,367 at June 30, 2000 and 1999, respectively. The number of days' sales
outstanding in trade accounts receivable was 34 days and 59 days, respectively.
Bad debt expenses have been insignificant for each of these periods.
10
<PAGE>
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not Applicable.
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
The Annual Meeting of the Shareholders of the Company was held on June 6,
2000 at 2:00 p.m. at the corporate offices of the Company in Houston, Texas. A
total of 12,548,174 share of common stock, which is 96.78% of the shares
outstanding on April 17, 2000 were represented at the meeting, either in person
or by proxy. Two proposals were approved by the shareholders with the vote
tabulations noted as follows:
1. The following directors were elected to serve until the next Annual Meeting
of Shareholders and until their successors have been elected and qualified.
<TABLE>
<CAPTION>
DIRECTORS: FOR AGAINST WITHHELD
---------- ------- ---------
AUTHORITY
---------
<S> <C> <C> <C>
William A. Coskey, P.E. 12,523,894 0 24,280
Hulda L. Coskey 12,522,244 0 25,930
David W. Gent, P.E. 12,523,444 0 24,730
Gordon R. Wingate 12,521,944 0 26,230
Ken J. Hedrick 12,521,944 0 26,230
</TABLE>
2. Ratification of the appointment of Hein + Associates LLP as the Company's
independent auditors.
These were all the matters submitted to the Shareholders at the Annual Meeting
of the Shareholders.
ITEM 5. OTHER INFORMATION
Not Applicable.
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<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit 10.36 Promissory Note payable to The Frost National
Bank, dated April 24, 2000
Exhibit 10.37 Loan Agreement with The Frost National Bank,
dated April 24, 2000
Exhibit 10.38 Commercial Security Agreement with The Frost
National Bank, dated April 24, 2000
Exhibit 10.39 Commercial Guaranty for the benefit of The
Frost National Bank, dated April 24, 2000
Exhibit 27 Financial Data Schedule
b. Form 8-K
No reports on Form 8-K were filed during the quarter ended
June 30, 2000.
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<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: August 14, 2000 By: /s/ Hulda L. Coskey
--------------------------------
Hulda L. Coskey, Chief Financial Officer,
Secretary and Treasurer
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