x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
22-3270799
|
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
|
One
University Plaza, Hackensack, New
Jersey
|
07601
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Page
|
|
PART
I - FINANCIAL INFORMATION
|
|
Item
1. Condensed Consolidated Financial Statements
|
|
Condensed
Consolidated Balance Sheets as of December 31, 2008 and
September 30, 2009 (unaudited)
|
1
|
Condensed
Consolidated Statements of Operations (unaudited) - for
the three months and nine months ended September 30, 2008 and
2009
|
2
|
Condensed
Consolidated Statement of Changes in Stockholders’ Equity (unaudited) -
for
the nine months ended September 30, 2009
|
3
|
Condensed
Consolidated Statements of Cash Flows (unaudited) - for
the nine months ended September 30, 2008 and 2009
|
4
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
5
|
Item
2. Management’s Discussion and Analysis of Consolidated Financial
Condition and Consolidated Results of Operations
|
17
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
25
|
Item
4. Controls and Procedures
|
26
|
PART
II - OTHER INFORMATION
|
|
Item
1a. Risk Factors
|
27
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
27
|
Item
6. Exhibits
|
27
|
Signatures
|
28
|
December 31, 2008*
|
September 30,
2009
(Unaudited)
|
|||||||
ASSETS
|
||||||||
Cash
and cash equivalents
|
$
|
12,558,000
|
$
|
14,496,000
|
||||
Restricted
cash
|
230,000
|
-
|
||||||
Investments
– short term
|
8,550,000
|
39,861,000
|
||||||
Accounts
receivable, net
|
8,245,000
|
1,938,000
|
||||||
Unbilled
receivables
|
168,000
|
248,000
|
||||||
Inventory,
net
|
3,273,000
|
5,596,000
|
||||||
Interest
receivable
|
217,000
|
245,000
|
||||||
Prepaid
expenses and other current assets
|
261,000
|
611,000
|
||||||
Total
current assets
|
33,502,000
|
62,995,000
|
||||||
Investments
– long term
|
34,911,000
|
9,945,000
|
||||||
Fixed
assets at cost
|
2,873,000
|
2,900,000
|
||||||
Less:
accumulated depreciation
|
(1,823,000)
|
(1,900,000)
|
||||||
Net
fixed assets
|
1,050,000
|
1,000,000
|
||||||
Goodwill
|
200,000
|
200,000
|
||||||
Other
intangible assets
|
178,000
|
178,000
|
||||||
Other
assets
|
107,000
|
-
|
||||||
$
|
69,948,000
|
$
|
74,318,000
|
|||||
LIABILITIES
|
||||||||
Accounts
payable and accrued expenses
|
$
|
2,175,000
|
$
|
599,000
|
||||
Line
of credit
|
-
|
12,643,000
|
||||||
Deferred
revenue
|
424,000
|
364,000
|
||||||
Total
current liabilities
|
2,599,000
|
13,606,000
|
||||||
Deferred
revenue
|
231,000
|
517,000
|
||||||
Deferred
rent
|
33,000
|
17,000
|
||||||
Total
liabilities
|
2,863,000
|
14,140,000
|
||||||
STOCKHOLDERS'
EQUITY
|
||||||||
Preferred
stock; authorized 5,000,000 shares, $.01 par value; none
issued
|
—
|
—
|
||||||
Common
stock; authorized 50,000,000 shares, $.01 par value; 12,082,000 and
12,284,000 shares issued at December 31, 2008 and September 30, 2009,
respectively; shares outstanding, 10,893,000 and 11,075,000 at December
31, 2008 and September 30, 2009, respectively.
|
120,000
|
120,000
|
||||||
Additional
paid-in capital
|
101,437,000
|
103,056,000
|
||||||
Accumulated
deficit
|
(23,667,000)
|
(32,100,000)
|
||||||
Accumulated
other comprehensive income
|
46,000
|
18,000
|
||||||
77,936,000
|
71,094,000
|
|||||||
Treasury
stock; 1,189,000 shares and 1,209,000 shares at cost at December 31, 2008
and September 30, 2009 respectively.
|
(10,851,000)
|
(10,916,000)
|
||||||
Total
stockholders’ equity
|
67,085,000
|
60,178,000
|
||||||
Total
liabilities and stockholders’ equity
|
$
|
69,948,000
|
$
|
74,318,000
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2008
|
2009
|
2008
|
2009
|
|||||||||||||
Revenue:
|
||||||||||||||||
Products
|
$ | 7,360,000 | $ | 1,218,000 | $ | 14,084,000 | $ | 4,367,000 | ||||||||
Services
|
1,977,000 | 623,000 | 5,041,000 | 3,093,000 | ||||||||||||
9,337,000 | 1,841,000 | 19,125,000 | 7,460,000 | |||||||||||||
Cost
of revenue:
|
||||||||||||||||
Cost
of products
|
3,622,000 | 603,000 | 6,836,000 | 2,291,000 | ||||||||||||
Cost
of services
|
948,000 | 339,000 | 2,545,000 | 1,209,000 | ||||||||||||
4,570,000 | 942,000 | 9,381,000 | 3,500,000 | |||||||||||||
Gross
Profit
|
4,767,000 | 899,000 | 9,744,000 | 3,960,000 | ||||||||||||
Selling,
general and administrative expenses
|
3,910,000 | 3,644,000 | 12,449,000 | 11,619,000 | ||||||||||||
Research
and development expenses
|
672,000 | 642,000 | 2,091,000 | 2,022,000 | ||||||||||||
Income
(loss) from operations
|
185,000 | (3,387,000 | ) | (4,796,000 | ) | (9,681,000 | ) | |||||||||
Interest
income
|
434,000 | 284,000 | 1,853,000 | 913,000 | ||||||||||||
Interest
expense
|
— | (44,000 | ) | — | (87,000 | ) | ||||||||||
Other
income, net
|
— | 110,000 | — | 422,000 | ||||||||||||
Net
income (loss)
|
$ | 619,000 | $ | (3,037,000 | ) | $ | (2,943,000 | ) | $ | (8,433,000 | ) | |||||
Net
income (loss) per share – basic and diluted
|
$ | 0.06 | $ | (0.27 | ) | $ | (0.27 | ) | $ | (0.77 | ) | |||||
Weighted
average common shares outstanding – basic
|
10,915,000 | 11,075,000 | 10,885,000 | 10,963,000 | ||||||||||||
Weighted
average common shares outstanding – diluted
|
11,175,000 | 11,075,000 | 10,885,000 | 10,963,000 |
Accumulated
|
||||||||||||||||||||||||||||
Common Stock
|
Additional
|
Other
|
||||||||||||||||||||||||||
Number of
|
Paid-in
|
Accumulated
|
Comprehensive
|
Treasury
|
Stockholders'
|
|||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Income (loss)
|
Stock
|
Equity
|
||||||||||||||||||||||
Balance
at December 31, 2008
|
12,082,000
|
$
|
120,000
|
$
|
101,437,000
|
$
|
(23,667,000
|
)
|
$
|
46,000
|
$
|
(10,851,000
|
)
|
$
|
67,085,000
|
|||||||||||||
|
||||||||||||||||||||||||||||
Net
loss
|
(8,433,000
|
)
|
(8,433,000
|
)
|
||||||||||||||||||||||||
Comprehensive
loss - unrealized loss on investments
|
(28,000
|
)
|
(28,000
|
)
|
||||||||||||||||||||||||
Total
comprehensive loss
|
(8,461,000
|
)
|
||||||||||||||||||||||||||
Shares
issued pursuant to exercise of stock options
|
1,000
|
2,000
|
2,000
|
|||||||||||||||||||||||||
Shares
withheld pursuant to issuance of
restricted and performance stock
|
(65,000
|
)
|
(65,000
|
)
|
||||||||||||||||||||||||
Issuance
of restricted and performance stock
|
201,000
|
|||||||||||||||||||||||||||
Stock
based compensation –restricted stock
|
149,000
|
149,000
|
||||||||||||||||||||||||||
Stock
based compensation - options
|
1,468,000
|
1,468,000
|
||||||||||||||||||||||||||
Balance
at September 30, 2009 (Unaudited)
|
12,284,000
|
$
|
120,000
|
$
|
103,056,000
|
$
|
(32,100,000)
|
$
|
18,000
|
$
|
(10,916,000)
|
$
|
60,178,000
|
Nine months ended
September 30,
|
||||||||
2008
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$
|
(2,943,000
|
)
|
$
|
(8,433,000
|
)
|
||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||
Inventory
reserve
|
126,000
|
|||||||
Bad
debt expense
|
(132,000)
|
|||||||
Accrued
interest income
|
(117,000)
|
(28,000)
|
||||||
Stock-based
compensation expense
|
2,307,000
|
1,617,000
|
||||||
Depreciation
and amortization
|
340,000
|
404,000
|
||||||
Change
in fair value of investments
|
—
|
(422,000)
|
||||||
Deferred
rent expense
|
(16,000
|
)
|
(16,000
|
)
|
||||
Deferred
revenue
|
545,000
|
226,000
|
||||||
Changes
in:
|
||||||||
Restricted
cash
|
—
|
230,000
|
||||||
Accounts
receivable
|
(6,830,000
|
)
|
6,439,000
|
|||||
Unbilled
receivables
|
(318,000
|
)
|
(80,000)
|
|||||
Inventory
|
2,031,000
|
(2,323,000
|
)
|
|||||
Prepaid
expenses and other assets
|
(126,000)
|
(243,000)
|
||||||
Accounts
payable and accrued expenses
|
(764,000
|
)
|
(1,641,000)
|
)
|
||||
Net
cash used in operating activities
|
(5,765,000
|
)
|
(4,402,000
|
)
|
||||
Cash
flows from investing activities:
|
||||||||
Purchase
of fixed assets
|
(60,000
|
)
|
(354,000
|
)
|
||||
Business
acquisition
|
(573,000)
|
|||||||
Purchase
of investments
|
(21,163,000
|
)
|
(46,134,000
|
)
|
||||
Maturities
of investments
|
31,917,000
|
40,183,000
|
||||||
Net
cash provided by (used in) investing activities
|
10,121,000
|
(6,305,000
|
)
|
|||||
Cash
flows from financing activities:
|
||||||||
Repayment
of term loan
|
(19,000
|
)
|
||||||
Proceeds
from exercise of stock options
|
1,377,000
|
2,000
|
||||||
Purchase
of treasury shares
|
(4,094,000
|
)
|
||||||
Borrowing
on line of credit
|
—
|
12,900,000
|
||||||
Principal
payments on line of credit
|
—
|
(257,000
|
)
|
|||||
Net
cash (used in) provided by financing activities
|
(2,736,000
|
)
|
12,645,000
|
|||||
Net
increase in cash and cash equivalents
|
1,620,000
|
1,938,000
|
||||||
Cash
and cash equivalents - beginning of period
|
5,103,000
|
12,558,000
|
||||||
Cash
and cash equivalents - end of period
|
$
|
6,723,000
|
14,496,000
|
|||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid for:
|
||||||||
Interest
|
$
|
—
|
$
|
87,000
|
||||
Noncash
activities:
|
||||||||
Unrealized
loss on investments
|
$
|
(424,000
|
)
|
$
|
(28,000)
|
|||
Shares
withheld pursuant to stock issuance
|
$
|
—
|
$
|
65,000
|
Three months ended September 30, 2009
|
Fair Value at June
30, 2009
|
Net
Purchases
(Sales)
|
Unrealized
Gain
(Loss)
|
Fair Value at
September 30, 2009
|
||||||||||||
Auction
Rate Securities
|
$ | 18,681,000 | $ | (50,000 | ) | $ | 9,000 | $ | 18,640,000 | |||||||
Auction
Rate Securities – Rights
|
1,718,000 | - | 101,000 | 1,819,000 | ||||||||||||
Net
unrealized gain recorded for the
|
||||||||||||||||
three
months ended September 30, 2009
|
$ | 20,399,000 | $ | (50,000 | ) | $ | 110,000 | $ | 20,459,000 |
Nine months ended September 30, 2009
|
Fair Value at
December 31, 2008
|
Net
Purchases
(Sales)
|
Unrealized
Gain
(Loss)
|
Fair Value at
September 30, 2009
|
||||||||||||
Auction
Rate Securities
|
$ | 18,117,000 | $ | (50,000 | ) | $ | 573,000 | $ | 18,640,000 | |||||||
Auction
Rate Securities – Rights
|
1,970,000 | - | (151,000 | ) | 1,819,000 | |||||||||||
Net
unrealized gain recorded for the
|
||||||||||||||||
three
months ended September 30, 2009
|
$ | 20,087,000 | $ | (50,000 | ) | $ | 422,000 | $ | 20,459,000 |
September 30, 2009
|
Cost
|
Unrealized
Gain
|
Unrealized
Loss
|
Fair
Value
|
||||||||||||
Investments -
short term
|
||||||||||||||||
Trading
securities
|
||||||||||||||||
Auction
Rate
|
$ | 20,375,000 | $ | (1,735,000 | ) | $ | 18,640,000 | |||||||||
Auction
Rate Securities- Right
|
$ | 1,819,000 | 1,819,000 | |||||||||||||
Total
trading securities
|
20,375,000 | 1,819,000 | (1,735,000 | ) | 20,459,000 | |||||||||||
Available
for sale
|
||||||||||||||||
Government
Agency
|
17,966,000 | 54,000 | (5,000 | ) | 18,015,000 | |||||||||||
Total
available for sale
|
17,966,000 | 54,000 | (5,000 | ) | 18,015,000 | |||||||||||
Held
to maturity securities
|
||||||||||||||||
Government
Agency
|
1,133,000 | - | - | 1,133,000 | ||||||||||||
Corporate
Bonds and Commercial Paper
|
254,000 | 254,000 | ||||||||||||||
Total
held to maturity
|
1,387,000 | - | - | 1,387,000 | ||||||||||||
Total investments
- short term
|
39,728,000 | 1,873,000 | (1,740,000 | ) | 39,861,000 | |||||||||||
Marketable
securities - long term
|
||||||||||||||||
Available
for sale
|
||||||||||||||||
US
Treasury Notes
|
703,000 | 8,000 | - | 711,000 | ||||||||||||
Total
available for sale
|
703,000 | 8,000 | - | 711,000 | ||||||||||||
Held
to maturity securities
|
||||||||||||||||
US
Treasury Notes
|
1,556,000 | - | - | 1,556,000 | ||||||||||||
Government
Agency
|
3,212,000 | 3,212,000 | ||||||||||||||
Corporate
Bonds and Commercial Paper
|
4,466,000 | - | - | 4,466,000 | ||||||||||||
Total
held to maturity securities
|
9,234,000 | - | - | 9,234,000 | ||||||||||||
Total investments
- long term
|
9,937,000 | 8,000 | - | 9,945,000 | ||||||||||||
Total
investments
|
$ | 49,665,000 | $ | 1,881,000 | $ | (1,740,000 | ) | $ | 49,806,000 |
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
2008
|
2009
|
2008
|
2009
|
|||||||||||||
Basic and diluted loss per
share
|
||||||||||||||||
Net
income (loss)
|
$ | 619,000 | $ | (3,037,000 | ) | $ | (2,943,000 | ) | $ | (8,433,000 | ) | |||||
Weighted
average shares outstanding- basic
|
10,915,000 | 11,075,000 | 10,885,000 | 10,963,000 | ||||||||||||
Basic
net income (loss) per share
|
$ | 0.06 | $ | (0.27 | ) | $ | (0.27 | ) | $ | (0.77 | ) | |||||
Weighted
average shares outstanding- diluted
|
11,175,000 | 11,075,000 | 10,885,000 | 10,963,000 | ||||||||||||
Diluted
net income (loss) per share
|
$ | 0.06 | $ | (0.27 | ) | $ | (0.27 | ) | $ | (0.77 | ) |
Weighted
|
|||||||||||||
Weighted
|
Average
|
||||||||||||
Average
|
Remaining
|
Aggregate
|
|||||||||||
Exercise
|
Contractual
|
Intrinsic
|
|||||||||||
Options
|
Price
|
Term
|
Value
|
||||||||||
Outstanding
at beginning of year
|
2,601,000
|
$
|
9.81
|
||||||||||
Granted
|
317,000
|
3.58
|
|||||||||||
Exercised
|
(1,000)
|
2.31
|
|||||||||||
Forfeited
|
(268,000
|
)
|
11.44
|
||||||||||
Outstanding
at end of period
|
2,649,000
|
$
|
8.91
|
6 years
|
$
|
186,000
|
|||||||
Exercisable
at end of period
|
1,623,000
|
$
|
9.53
|
4 years
|
$
|
64,000
|
September 30
|
||||||||
2008
|
2009
|
|||||||
Expected
volatility
|
72%
- 76
|
%
|
54%
- 76
|
%
|
||||
Expected
life of options
|
5
years
|
5
years
|
||||||
Risk
free interest rate
|
3
|
%
|
2
|
%
|
||||
Dividend
yield
|
0
|
%
|
0
|
%
|
Weighted
|
||||||||
Average
|
||||||||
Non-vested
Shares
|
Grant Date
Fair Value
|
|||||||
Non-vested
at January 1, 2009
|
31,000 | $ | 9.49 | |||||
Granted
|
161,000 | 3.54 | ||||||
Vested
|
(20,000 | ) | 10.55 | |||||
Forfeited
|
- | |||||||
Non-vested
at September 30, 2009
|
172,000 | $ | 3.78 |
|
§
|
Level
1: Unadjusted quoted prices in active markets for identical assets or
liabilities.
|
|
§
|
Level
2: Inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly. These include quoted prices for
similar assets or liabilities in active markets and quoted prices for
identical or similar assets or liabilities in markets that are not
active.
|
|
§
|
Level
3: Unobservable inputs that reflect the reporting entity’s own
assumptions.
|
Balance at
September
30,
|
Basis of Fair Value Measurements
|
|||||||||||||||
2009
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Cash
Equivalents
|
$
|
2,760,000
|
$
|
2,760,000
|
||||||||||||
Marketable
securities – short term
|
39,861,000
|
19,402,000
|
$
|
—
|
$
|
20,459,000
|
||||||||||
Marketable
securities – long term
|
9,945,000
|
9,945,000
|
—
|
—
|
||||||||||||
$
|
52,566,000
|
$
|
32,107,000
|
$
|
—
|
$
|
20,459,000
|
Fair
value, January 1, 2009
|
$
|
20,087,000
|
||
Net
purchases (maturities)
|
(50,000)
|
|||
Unrealized
gain included in condensed consolidated statement of
operations
|
422,000
|
|||
Fair
value, September 30, 2009
|
$
|
20,459,000
|
·
|
increase
sales of products and services to our existing
customers;
|
·
|
convert
our initial programs into larger or enterprise-wide purchases by our
customers;
|
·
|
increase
market acceptance and penetration of our products;
and
|
·
|
develop
and commercialize new products and
technologies.
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2008
|
2009
|
2008
|
2009
|
|||||||||||||
Revenue:
|
|
|
|
|
||||||||||||
Products
|
78.8 | % | 66.2 | % | 73.6 | % | 58.5 | % | ||||||||
Services
|
21.2 | 33.8 | 26.4 | 41.5 | ||||||||||||
100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||
Cost
of revenue:
|
||||||||||||||||
Cost
of products
|
38.8 | 32.8 | 35.7 | 30.7 | ||||||||||||
Cost
of services
|
10.2 | 18.4 | 13.3 | 16.2 | ||||||||||||
49.0
|
51.2 | 49 | 46.9 | |||||||||||||
Gross
profit
|
51.1 | 48.8 | 50.9 | 53.1 | ||||||||||||
Selling,
general and administrative expenses
|
41.9 | 197.9 | 65.1 | 155.8 | ||||||||||||
Research
and development expenses
|
7.2 | 34.9 | 10.9 | 27.1 | ||||||||||||
Income
(loss) from operations
|
2.0 | (184.0 | ) | (25.1 | ) | (129.8 | ) | |||||||||
Interest
income, net
|
4.6 | 15.4 | 9.7 | 12.2 | ||||||||||||
Interest
expense
|
— | (2.4 | ) | (1.2 | ) | |||||||||||
Other
income
|
— | 6.0 | — | 5.7 | ||||||||||||
Net
Income (loss)
|
6.6 | % | (165.0 | )% | (15.4 | )% | (113.0 | )% |
|
·
|
a
decrease in accounts receivable of $6.3 million resulting from increased
cash collections and the overall decrease in
revenue;
|
|
·
|
a
increase in inventory of $2.3 million;
and
|
|
·
|
a
decrease in accounts payable and accrued expenses of $1.6 million
primarily due to the timing of the payments to our
vendors.
|
a.
|
Disclosure
controls and procedures.
|
b.
|
Changes
in internal controls over financial
reporting.
|
10.1
|
Severance
Agreement, dated September 11, 2009, by and between the Company and
Jeffrey Jagid.
|
10.2
|
Severance
Agreement, dated September 11, 2009, by and between the Company and Ned
Mavrommatis.
|
10.3
|
Severance
Agreement, dated September 11, 2009, by and between the Company and
Kenneth Ehrman.
|
10.4
|
Severance
Agreement, dated September 11, 2009, by and between the Company and
Michael Ehrman.
|
10.5
|
I.D.
Systems, Inc. 2009 Non-Employee Director Equity Compensation
Plan.
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002.
|
I.D.
Systems, Inc.
|
|||
Dated:
November 6, 2009
|
By:
|
/s/ Jeffrey
M. Jagid
|
|
Jeffrey
M. Jagid
|
|||
Chief
Executive Officer
(Principal
Executive Officer)
|
Dated:
November 6, 2009
|
By:
|
/s/ Ned
Mavrommatis
|
|
Ned
Mavrommatis
|
|||
Chief
Financial Officer
(Principal
Financial Officer)
|
Exhibit
Number
|
Description
|
10.1
|
Severance
Agreement, dated September 11, 2009, by and between I.D. Systems, Inc. and
Jeffrey Jagid.
|
10.2
|
Severance
Agreement, dated September 11, 2009, by and between I.D. Systems, Inc. and
Ned Mavrommatis.
|
10.3
|
Severance
Agreement, dated September 11, 2009, by and between I.D. Systems, Inc. and
Kenneth Ehrman.
|
10.4
|
Severance
Agreement, dated September 11, 2009, by and between I.D. Systems, Inc. and
Michael Ehrman.
|
10.5
|
I.D.
Systems, Inc. 2009 Non-Employee Director Equity Compensation
Plan.
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002.
|