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)
|
Large
accelerated filer ¨
|
Accelerated
filer x
|
Non-accelerated
filer¨
[Do not check if smaller reporting company] Smaller reporting company
¨
|
Page
|
|
PART I - FINANCIAL INFORMATION | |
Item 1. Condensed Financial Statements | |
Condensed
Balance Sheets as of December 31, 2007 and September 30, 2008
(unaudited)
|
1
|
|
|
Condensed
Statements of Operations (unaudited) - for the three months and nine
months ended September 30, 2007 and 2008
|
2
|
|
|
Condensed
Statement of Changes in Stockholders’ Equity (unaudited) - for the nine
months ended September 30, 2008
|
3
|
|
|
Condensed
Statements of Cash Flows (unaudited) - for the nine months ended
September
30, 2007 and 2008
|
4
|
|
|
Notes
to unaudited Condensed Financial Statements
|
5
|
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
13
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
21
|
Item
4. Controls and Procedures
|
22
|
Part
II - Other Information
|
|
Item
1a. Risk Factors
|
23
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
23
|
Item
6. Exhibits
|
24
|
Signatures
|
25
|
September 30, 2008
|
|||||||
December 31, 2007 *
|
(Unaudited)
|
||||||
ASSETS
|
|||||||
Cash
and cash equivalents
|
$
|
5,103,000
|
$
|
6,723,000
|
|||
Marketable
securities – short term
|
21,385,000
|
8,929,000
|
|||||
Accounts
receivable, net
|
2,875,000
|
9,705,000
|
|||||
Unbilled
receivables
|
580,000
|
898,000
|
|||||
Inventory
|
4,420,000
|
2,454,000
|
|||||
Interest
receivable
|
142,000
|
259,000
|
|||||
Prepaid
expenses and other current assets
|
291,000
|
397,000
|
|||||
Total
current assets
|
34,796,000
|
29,365,000
|
|||||
Marketable
securities – long term
|
38,515,000
|
38,116,000
|
|||||
Goodwill
|
—
|
200,000
|
|||||
Other
intangible assets
|
—
|
178,000
|
|||||
Fixed
assets, net
|
1,398,000
|
1,122,000
|
|||||
Other
assets
|
87,000
|
107,000
|
|||||
$
|
74,796,000
|
$
|
69,088,000
|
||||
LIABILITIES
|
|||||||
Accounts
payable and accrued expenses
|
$
|
2,594,000
|
$
|
2,254,000
|
|||
Current
portion of long term debt
|
19,000
|
—
|
|||||
Deferred
revenue
|
291,000
|
775,000
|
|||||
Total
current liabilities
|
2,904,000
|
3,029,000
|
|||||
Deferred
revenue
|
167,000
|
228,000
|
|||||
Deferred
rent
|
55,000
|
39,000
|
|||||
Total
liabilities
|
3,126,000
|
3,296,000
|
|||||
STOCKHOLDERS'
EQUITY
|
|||||||
Preferred
stock; authorized 5,000,000 shares, $.01 par value; none
issued
|
—
|
—
|
|||||
Common
stock; authorized 50,000,000 shares, $.01 par value; 11,561,000 and
12,082,000 shares issued at December 31, 2007 and September 30, 2008,
respectively, shares outstanding, 11,015,000 and 10,938,000 at December
31, 2007 and September 30, 2008, respectively.
|
115,000
|
120,000
|
|||||
Additional
paid-in capital
|
97,076,000
|
100,755,000
|
|||||
Accumulated
deficit
|
(19,492,000
|
)
|
(22,435,000
|
)
|
|||
Accumulated
other comprehensive income (loss)
|
11,000
|
(2,090,000
|
)
|
||||
77,710,000
|
76,350,000
|
||||||
Treasury
stock; 546,000 shares and 1,144,000 shares at cost at December 31,
2007
and September 30, 2008, respectively
|
(6,040,000
|
)
|
(10,558,000
|
)
|
|||
Total
stockholders’ equity
|
71,670,000
|
65,792,000
|
|||||
Total
liabilities and stockholders’ equity
|
$
|
74,796,000
|
$
|
69,088,000
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
||||||||||||
2007
|
2008
|
2007
|
2008
|
||||||||||
Revenue:
|
|||||||||||||
Products
|
$
|
5,466,000
|
$
|
7,360,000
|
$
|
8,481,000
|
$
|
14,084,000
|
|||||
Services
|
1,052,000
|
1,977,000
|
4,881,000
|
5,041,000
|
|||||||||
6,518,000
|
9,337,000
|
13,362,000
|
19,125,000
|
||||||||||
Cost
of Revenue:
|
|||||||||||||
Cost
of products
|
2,725,000
|
3,622,000
|
4,282,000
|
6,836,000
|
|||||||||
Cost
of services
|
546,000
|
948,000
|
2,564,000
|
2,545,000
|
|||||||||
3,271,000
|
4,570,000
|
6,846,000
|
9,381,000
|
||||||||||
Gross
Profit
|
3,247,000
|
4,767,000
|
6,516,000
|
9,744,000
|
|||||||||
Selling,
general and administrative expenses
|
4,004,000
|
3,910,000
|
11,708,000
|
12,449,000
|
|||||||||
Research
and development expenses
|
828,000
|
672,000
|
2,128,000
|
2,091,000
|
|||||||||
(Loss)
income from operations
|
(1,585,000
|
)
|
185,000
|
(7,320,000
|
)
|
(4,796,000
|
)
|
||||||
Interest
income
|
784,000
|
434,000
|
2,344,000
|
1,853,000
|
|||||||||
Interest
expense
|
(2,000
|
)
|
—
|
(9,000
|
)
|
—
|
|||||||
Other
income
|
13,000
|
—
|
89,000
|
—
|
|||||||||
Net
(loss) income
|
$
|
(790,000
|
)
|
$
|
619,000
|
$
|
(4,896,000
|
)
|
$
|
(2,943,000
|
)
|
||
Net
(loss) income per share – basic
|
$
|
(0.07
|
)
|
$
|
0.06
|
$
|
(0.43
|
)
|
$
|
(0.27
|
)
|
||
Net
(loss) income per share – diluted
|
$
|
(0.07
|
)
|
$
|
0.06
|
$
|
(0.43
|
)
|
$
|
(0.27
|
)
|
||
Weighted
average common shares outstanding – basic
|
11,150,000
|
10,915,000
|
11,265,000
|
10,885,000
|
|||||||||
Weighted
average common shares outstanding – diluted
|
11,150,000
|
11,175,000
|
11,265,000
|
10,885,000
|
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, 2007
|
11,561,000
|
$
|
115,000
|
$
|
97,076,000
|
$
|
(19,492,000
|
)
|
$
|
11,000
|
$
|
(6,040,000
|
)
|
$
|
71,670,000
|
|||||||
Net
loss
|
(2,943,000
|
)
|
(2,943,000
|
)
|
||||||||||||||||||
Comprehensive
loss - unrealized loss on investments
|
|
(2,101,000
|
)
|
(2,101,000
|
)
|
|||||||||||||||||
Total
comprehensive loss
|
(2,943,000
|
)
|
(2,101,000
|
)
|
(5,044,000
|
)
|
||||||||||||||||
Shares
issued pursuant to exercise of stock options
|
505,000
|
5,000
|
1,372,000
|
1,377,000
|
||||||||||||||||||
Shares
repurchased
|
(4,094,000
|
)
|
(4,094,000
|
)
|
||||||||||||||||||
Shares
withheld pursuant to stock issuances
|
(424,000
|
)
|
(424,000
|
)
|
||||||||||||||||||
Issuance
of restricted stock
|
16,000
|
|||||||||||||||||||||
Stock
based compensation – restricted stock
|
451,000
|
451,000
|
||||||||||||||||||||
Stock
based compensation – performance shares
|
219,000
|
219,000
|
||||||||||||||||||||
Stock
based compensation - options
|
|
|
1,637,000
|
|
|
|
1,637,000
|
|||||||||||||||
Balance
at September 30, 2008
|
12,082,000
|
$
|
120,000
|
$
|
100,755,000
|
$
|
(22,435,000
|
)
|
$
|
(2,090,000
|
)
|
$
|
(10,558,000
|
)
|
$
|
65,792,000
|
Nine months ended
September 30,
|
|||||||
2007
|
2008
|
||||||
Cash flows from operating activities:
|
|||||||
Net
loss
|
$
|
(4,896,000
|
)
|
$
|
(2,943,000
|
)
|
|
Adjustments
to reconcile net income (loss) to cash used in operating
activities:
|
|||||||
Inventory
reserve
|
175,000
|
126,000
|
|||||
Accrued
interest income
|
120,000
|
(117,000
|
)
|
||||
Stock-based
compensation expense
|
2,435,000
|
2,307,000
|
|||||
Depreciation
and amortization expense
|
401,000
|
340,000
|
|||||
Deferred
rent expense
|
(16,000
|
)
|
(16,000
|
)
|
|||
Deferred
revenue
|
138,000
|
545,000
|
|||||
Deferred
contract costs
|
25,000
|
—
|
|||||
Changes
in:
|
|||||||
Accounts
receivable
|
(1,552,000
|
)
|
(6,830,000
|
)
|
|||
Unbilled
receivables
|
911,000
|
(318,000
|
)
|
||||
Inventory
|
2,131,000
|
2,031,000
|
|||||
Prepaid
expenses and other assets
|
(91,000
|
)
|
(126,000
|
)
|
|||
Accounts
payable and accrued expenses
|
(1,757,000
|
)
|
(764,000
|
)
|
|||
Net
cash used in operating activities
|
(1,976,000
|
)
|
(5,765,000
|
)
|
|||
Cash
flows from investing activities:
|
|||||||
Purchase
of fixed assets
|
(368,000
|
)
|
(60,000
|
)
|
|||
Business
acquisition
|
—
|
(573,000
|
)
|
||||
Purchase
of investments
|
(10,940,000
|
)
|
(21,163,000
|
)
|
|||
Maturities
of investments
|
12,145,000
|
31,917,000
|
|||||
Net
cash provided by investing activities
|
837,000
|
10,121,000
|
|||||
Cash
flows from financing activities:
|
|||||||
Repayment
of term loan
|
(165,000
|
)
|
(19,000
|
)
|
|||
Proceeds
from exercise of stock options
|
301,000
|
1,377,000
|
|||||
Purchase
of treasury shares
|
(4,968,000
|
)
|
(4,094,000
|
)
|
|||
Collection
of officer loan
|
8,000
|
—
|
|||||
Net
cash used in financing activities
|
(4,824,000
|
)
|
(2,736,000
|
)
|
|||
Net
(decrease) increase in cash and cash equivalents
|
(5,963,000
|
)
|
1,620,000
|
||||
Cash
and cash equivalents - beginning of period
|
9,644,000
|
5,103,000
|
|||||
Cash
and cash equivalents - end of period
|
$
|
3,681,000
|
$
|
6,723,000
|
|||
Supplemental
disclosure of cash flow information:
|
|||||||
Cash
paid for:
|
|||||||
Interest
|
$
|
9,000
|
$
|
—
|
|||
Non-cash
financing activity:
|
|||||||
Shares
withheld pursuant to stock issuances
|
$
|
344,000
|
$
|
424,000
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
||||||||||||
2007
|
2008
|
2007
|
2008
|
||||||||||
Basic (loss)
income per share
|
|||||||||||||
Net
(loss) income
|
$
|
(
790,000
|
)
|
$
|
619,000
|
$
|
(4,896,000
|
)
|
$
|
(2,943,000
|
)
|
||
Weighted
average shares outstanding
|
11,150,000
|
10,915,000
|
11,265,000
|
10,885,000
|
|||||||||
Basic
(loss) income per share
|
$
|
(0.07
|
)
|
$
|
0.06
|
$
|
(0.43
|
)
|
$
|
(0.27
|
)
|
||
Diluted
(loss) income per share
|
|||||||||||||
Net
(loss) income
|
$
|
(
790,000
|
)
|
$
|
619,000
|
$
|
(4,896,000
|
)
|
$
|
(2,943,000
|
)
|
||
Weighted
average shares outstanding
|
11,150,000
|
10,915,000
|
11,265,000
|
10,885,000
|
|||||||||
Dilutive
effect of stock options
|
—
|
260,000
|
—
|
—
|
|||||||||
Weighted
average shares outstanding - diluted
|
11,150,000
|
11,175,000
|
11,265,000
|
10,885,000
|
|||||||||
Diluted
(loss) income per share
|
$
|
(0.07
|
)
|
$
|
0.06
|
$
|
(0.43
|
)
|
$
|
(0.27
|
)
|
Weighted
|
|||||||||||||
Weighted
|
Average
|
||||||||||||
Average
|
Remaining
|
Aggregate
|
|||||||||||
Exercise
|
Contractual
|
Intrinsic
|
|||||||||||
Options
|
Price
|
Term
|
Value
|
||||||||||
Outstanding
at beginning of year
|
2,761,000
|
$
|
9.57
|
||||||||||
Granted
|
299,000
|
8.19
|
|||||||||||
Exercised
|
(505,000
|
)
|
2.73
|
||||||||||
Forfeited
|
(241,000
|
)
|
14.05
|
||||||||||
|
|||||||||||||
Outstanding
at end of period
|
2,314,000
|
$
|
10.42
|
6
years
|
$
|
2,858,000
|
|||||||
|
|||||||||||||
Exercisable
at end of period
|
1,467,000
|
$
|
9.30
|
5
years
|
$
|
2,421,000
|
2007
|
2008
|
||||||
Volatility
|
50
|
%
|
72
|
%
|
|||
Expected
life of options
|
5
years
|
5
years
|
|||||
Risk
free interest rate
|
5
|
%
|
3
|
%
|
|||
Dividend
yield
|
0
|
%
|
0
|
%
|
§ |
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
|
|||||||||||
($ in millions)
|
2008
|
Level 1
|
Level 2
|
Level 3
|
|||||||||
Assets:
|
|||||||||||||
Marketable
securities – short term
|
$
|
8.9
|
$
|
8.9
|
$
|
—
|
$
|
—
|
|||||
Marketable
securities – long term
|
38.1
|
19.7
|
—
|
18.4
|
|||||||||
|
$
|
47.0
|
$
|
28.6
|
$
|
—
|
$
|
18.4
|
Three months ended
September 30,
|
Nine months ended
September 30,
|
||||||||||||
2007
|
2008
|
2007
|
2008
|
||||||||||
Revenue:
|
|||||||||||||
Products
|
83.9
|
%
|
78.8
|
%
|
63.5
|
%
|
73.6
|
%
|
|||||
Services
|
16.1
|
21.2
|
36.5
|
26.4
|
|||||||||
100.0
|
100.0
|
100.0
|
100.0
|
||||||||||
Cost
of Revenues:
|
|||||||||||||
Cost
of products
|
41.8
|
38.8
|
32.0
|
35.7
|
|||||||||
Cost
of services
|
8.4
|
10.2
|
19.2
|
13.3
|
|||||||||
Gross
Profit
|
50.2
|
51.1
|
48.8
|
50.9
|
|||||||||
Selling,
general and administrative expenses
|
61.4
|
41.9
|
87.6
|
65.1
|
|||||||||
Research
and development expenses
|
12.7
|
7.2
|
15.9
|
10.9
|
|||||||||
(Loss)
income from operations
|
(24.3
|
)
|
2.0
|
(54.7
|
)
|
(25.1
|
)
|
||||||
Interest
income, net
|
12.0
|
4.6
|
17.5
|
9.7
|
|||||||||
Other
income
|
0.2
|
—
|
0.6
|
—
|
|||||||||
Net
(loss) income
|
(12.1
|
)%
|
6.6
|
%
|
(36.6
|
)%
|
(15.4
|
)%
|
Period
|
Total number of
shares (or unit)
purchased
|
Average price
paid per share (or
unit)
|
Total number of
shares (or units)
purchased as part of
publicly announced
plans or programs
|
Maximum number (or
approximate dollar
value) of shares (or
units) that may yet be
purchased under the
plans or programs
|
|||||||||
7/1/08 through 7/30/08
|
93,455
|
$
|
6.79
|
93,455
|
$
|
622,862
|
|||||||
8/1/08
through 8/31/08
|
16,623
|
$
|
6.69
|
16,623
|
$
|
511,618
|
|||||||
9/1/08
through 9/30/08
|
21,380
|
$
|
8.77
|
21,380
|
$
|
324,073
|
|||||||
Total
|
131,458
|
$
|
7.10
|
131,458
|
$
|
324,073
|
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 10, 2008
|
By:
|
/s/
Jeffrey M. Jagid
|
Jeffrey
M. Jagid
|
||
Chief
Executive Officer
|
||
(Principal
Executive Officer)
|
||
Dated:
November 10, 2008
|
By:
|
/s/
Ned Mavrommatis
|
Ned
Mavrommatis
|
||
Chief
Financial Officer
|
||
(Principal
Financial Officer)
|