10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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þ |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the quarterly period ended: June 30, 2010 |
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or |
o |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 |
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For the transition period from __________ to __________ |
Commission File Number: 001-15087
I.D. SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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22-3270799 |
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(State or other jurisdiction of incorporation or
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(I.R.S. Employer Identification No.) |
organization) |
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One University Plaza, Hackensack, |
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New Jersey
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07601 |
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(Address of principal executive offices)
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(Zip Code) |
(201) 996-9000
(Registrants telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (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
þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to
submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer, and smaller reporting
company in Rule 12b-2 of the Exchange Act.
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Large accelerated filer o
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Accelerated filer o
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Non-accelerated filer þ
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Smaller reporting company o |
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(Do not check if a smaller reporting company) |
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Indicate by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act of 1934). Yes o No þ
The number of shares of the registrants common stock, $0.01 par value per share,
outstanding as of the close of business on August 13, 2010 was 11,253,253.
INDEX
I.D. Systems, Inc. and Subsidiaries
PART I FINANCIAL INFORMATION
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Item 1. |
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Financial Statements |
I.D. Systems, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
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December 31, |
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June 30, |
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2009* |
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2010 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
19,481,000 |
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$ |
6,768,000 |
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Investments short term |
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33,909,000 |
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17,103,000 |
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Accounts receivable, net of allowance for doubtful accounts of $106,000 and
$149,000 in 2009 and 2010, respectively |
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3,252,000 |
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5,843,000 |
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Note and lease receivable current |
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153,000 |
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Inventory, net |
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4,487,000 |
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8,591,000 |
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Interest receivable |
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97,000 |
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74,000 |
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Deferred costs current |
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566,000 |
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Prepaid expenses and other current assets |
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686,000 |
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1,940,000 |
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Total current assets |
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61,912,000 |
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41,038,000 |
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Investments long term |
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6,752,000 |
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4,379,000 |
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Note and lease receivable less current portion |
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1,088,000 |
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Deferred costs less current portion |
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1,233,000 |
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Fixed assets, net |
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917,000 |
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3,984,000 |
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Other assets |
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271,000 |
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Goodwill |
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619,000 |
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1,573,000 |
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Intangible assets, net |
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375,000 |
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5,620,000 |
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$ |
70,575,000 |
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$ |
59,186,000 |
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LIABILITIES |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
2,094,000 |
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$ |
6,084,000 |
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Line of credit |
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11,638,000 |
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1,161,000 |
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Deferred revenue current |
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501,000 |
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1,131,000 |
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Total current liabilities |
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14,233,000 |
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8,376,000 |
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Deferred revenue less current portion |
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461,000 |
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2,133,000 |
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14,694,000 |
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10,509,000 |
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Commitments and Contingencies (Note 26) |
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STOCKHOLDERS EQUITY |
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Preferred stock; authorized 5,000,000 shares, $0.01 par value; none issued |
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Common stock; authorized 50,000,000 shares, $0.01 par value; 12,284,000 and
12,466,000 shares issued at December 31, 2009 and June 30, 2010, respectively;
shares outstanding, 11,075,000 and 11,253,000 at December 31, 2009 and June 30,
2010, respectively |
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120,000 |
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121,000 |
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Additional paid-in capital |
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103,596,000 |
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104,491,000 |
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Accumulated deficit |
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(36,859,000 |
) |
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(44,948,000 |
) |
Accumulated other comprehensive loss |
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(60,000 |
) |
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(61,000 |
) |
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66,797,000 |
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59,603,000 |
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Treasury stock; 1,209,000 and 1,213,000 shares at cost in 2009 and 2010 |
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(10,916,000 |
) |
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(10,926,000 |
) |
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Total stockholders equity |
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55,881,000 |
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48,677,000 |
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Total liabilities and stockholders equity |
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$ |
70,575,000 |
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$ |
59,186,000 |
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* |
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Derived from audited balance sheet as of December 31, 2009. |
See accompanying notes to condensed consolidated financial statements.
1
I.D. Systems, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
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Three months ended |
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Six months ended |
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June 30, |
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June 30, |
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2009 |
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2010 |
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2009 |
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2010 |
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Revenue: |
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Products |
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$ |
1,771,000 |
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$ |
1,829,000 |
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$ |
3,149,000 |
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$ |
3,852,000 |
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Services |
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913,000 |
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4,184,000 |
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2,469,000 |
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8,285,000 |
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2,684,000 |
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6,013,000 |
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5,618,000 |
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12,137,000 |
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Cost of revenue: |
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Cost of products |
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890,000 |
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865,000 |
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1,688,000 |
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1,840,000 |
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Cost of services |
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323,000 |
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1,532,000 |
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870,000 |
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3,296,000 |
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1,213,000 |
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2,397,000 |
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2,558,000 |
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5,136,000 |
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Gross profit |
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1,471,000 |
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3,616,000 |
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3,060,000 |
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7,001,000 |
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Selling, general and administrative expenses |
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3,764,000 |
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6,689,000 |
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7,975,000 |
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13,163,000 |
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Research and development expenses |
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691,000 |
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1,119,000 |
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1,380,000 |
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2,273,000 |
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Loss from operations |
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(2,984,000 |
) |
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(4,192,000 |
) |
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(6,295,000 |
) |
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(8,435,000 |
) |
Interest income |
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283,000 |
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187,000 |
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630,000 |
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|
396,000 |
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Interest expense |
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(43,000 |
) |
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(25,000 |
) |
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(43,000 |
) |
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(55,000 |
) |
Other income, net |
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420,000 |
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4,000 |
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312,000 |
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5,000 |
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Net loss |
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$ |
(2,324,000 |
) |
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$ |
(4,026,000 |
) |
|
$ |
(5,396,000 |
) |
|
$ |
(8,089,000 |
) |
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Net loss per share basic and diluted |
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$ |
(0.21 |
) |
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$ |
(0.36 |
) |
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$ |
(0.49 |
) |
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$ |
(0.72 |
) |
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Weighted average common shares outstanding
basic and diluted |
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10,916,000 |
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11,253,000 |
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10,906,000 |
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11,219,000 |
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See accompanying notes to condensed consolidated financial statements.
2
I.D. Systems, Inc. and Subsidiaries
Condensed Consolidated Statement of Changes in Stockholders Equity
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Accumulated |
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Common Stock |
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Additional |
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Other |
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Number of |
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Paid-in |
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Accumulated |
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Comprehensive |
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Treasury |
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Stockholders |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Stock |
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Equity |
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Balance at December 31, 2009 |
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12,284,000 |
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|
$ |
120,000 |
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|
$ |
103,596,000 |
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$ |
(36,859,000 |
) |
|
$ |
(60,000 |
) |
|
$ |
(10,916,000 |
) |
|
$ |
55,881,000 |
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Net loss |
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(8,089,000 |
) |
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(8,089,000 |
) |
Comprehensive loss
unrealized gain
on investments |
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88,000 |
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88,000 |
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Foreign currency
translation
adjustment |
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(89,000 |
) |
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(89,000 |
) |
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Total
comprehensive loss |
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(8,090,000 |
) |
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Shares issued
pursuant to
exercise of stock
options |
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|
1,000 |
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|
1,000 |
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|
2,000 |
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|
3,000 |
|
Issuance of
restricted stock |
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|
181,000 |
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Shares withheld
pursuant to stock
issuances |
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(10,000 |
) |
|
|
(10,000 |
) |
Stock based
compensation
restricted stock |
|
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|
|
|
|
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|
173,000 |
|
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|
173,000 |
|
Stock based
compensation
options |
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|
|
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|
720,000 |
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|
720,000 |
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|
Balance at June 30,
2010 (Unaudited) |
|
|
12,466,000 |
|
|
$ |
121,000 |
|
|
$ |
104,491,000 |
|
|
$ |
(44,948,000 |
) |
|
$ |
(61,000 |
) |
|
$ |
(10,926,000 |
) |
|
$ |
48,677,000 |
|
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|
See accompanying notes to condensed consolidated financial statements.
3
I.D. Systems, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
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|
Six months ended |
|
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|
June 30, |
|
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|
2009 |
|
|
2010 |
|
Cash flows from operating activities: |
|
|
|
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|
Net loss |
|
$ |
(5,396,000 |
) |
|
$ |
(8,089,000 |
) |
Adjustments to reconcile net loss to cash used in operating activities: |
|
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|
|
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|
Bad debt expense |
|
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|
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|
|
53,000 |
|
Accrued interest income |
|
|
46,000 |
|
|
|
23,000 |
|
Stock-based compensation expense |
|
|
1,058,000 |
|
|
|
893,000 |
|
Depreciation and amortization |
|
|
277,000 |
|
|
|
970,000 |
|
Change in fair value of investments |
|
|
(312,000 |
) |
|
|
|
|
Deferred rent expense |
|
|
(11,000 |
) |
|
|
|
|
Deferred revenue |
|
|
(14,000 |
) |
|
|
919,000 |
|
Changes in: |
|
|
|
|
|
|
|
|
Restricted cash |
|
|
230,000 |
|
|
|
|
|
Accounts receivable |
|
|
5,565,000 |
|
|
|
571,000 |
|
Unbilled receivables |
|
|
44,000 |
|
|
|
|
|
Note and lease receivable |
|
|
|
|
|
|
149,000 |
|
Inventory |
|
|
(2,236,000 |
) |
|
|
1,131,000 |
|
Prepaid expenses and other assets |
|
|
6,000 |
|
|
|
(625,000 |
) |
Deferred costs |
|
|
|
|
|
|
(1,104,000 |
) |
Accounts payable and accrued expenses |
|
|
(1,017,000 |
) |
|
|
(401,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(1,760,000 |
) |
|
|
(5,510,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
|
Expenditures for fixed assets including website development costs |
|
|
(278,000 |
) |
|
|
(961,000 |
) |
Business acquisition |
|
|
|
|
|
|
(15,000,000 |
) |
Purchase of investments |
|
|
(34,607,000 |
) |
|
|
(2,751,000 |
) |
Proceeds from sales and maturities of investments |
|
|
29,855,000 |
|
|
|
22,017,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by investing activities |
|
|
(5,030,000 |
) |
|
|
3,305,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
|
Proceeds from exercise of stock options |
|
|
|
|
|
|
3,000 |
|
Borrowing on line of credit |
|
|
12,900,000 |
|
|
|
|
|
Principal payments on line of credit |
|
|
(234,000 |
) |
|
|
(10,477,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities |
|
|
12,666,000 |
|
|
|
(10,474,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of foreign exchange rate changes on cash and cash equivalents |
|
|
2,000 |
|
|
|
(34,000 |
) |
Net increase (decrease) in cash and cash equivalents |
|
|
5,878,000 |
|
|
|
(12,713,000 |
) |
Cash and cash equivalents beginning of period |
|
|
12,558,000 |
|
|
|
19,481,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents end of period |
|
$ |
18,436,000 |
|
|
|
6,768,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information: |
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
Taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest |
|
$ |
43,000 |
|
|
$ |
55,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncash activities: |
|
|
|
|
|
|
|
|
Unrealized (loss) gain on investments |
|
$ |
(6,000 |
) |
|
$ |
88,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares withheld pursuant to stock issuance |
|
$ |
65,000 |
|
|
$ |
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition: |
|
|
|
|
|
|
|
|
Fair value of assets acquired |
|
|
|
|
|
$ |
19,695,000 |
|
Liabilities assumed |
|
|
|
|
|
|
(4,695,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash paid in 2010 |
|
|
|
|
|
$ |
15,000,000 |
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
4
I.D. Systems, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
June 30, 2010
NOTE 1 The Company
I.D. Systems, Inc. and its subsidiaries (the Company, we, our or us) develop,
market and sell wireless solutions for managing and securing high-value enterprise
assets. These assets include industrial vehicles, including forklifts, airport ground
support equipment, rental vehicles and transportation assets, such as dry van trailers,
refrigerated trailers, railcars and containers. The Companys patented wireless asset
management system addresses the needs of organizations to control, track, monitor and
analyze their assets. The Companys solutions enable customers to achieve tangible
economic benefits by making timely, informed decisions that increase the security,
productivity and efficiency of their operations. The Company outsources its hardware
manufacturing operations to contract manufacturers.
On January 7, 2010, the Company entered into a Membership Interest Purchase Agreement
(the Purchase Agreement) with General Electric Capital Corporation (GECC) and GE
Asset Intelligence, LLC (GEAI), pursuant to which the Company acquired GEAIs
telematics business (the GEAI Business) through the purchase of 100% of the membership
interests of Asset Intelligence, LLC (AI), a newly formed, wholly owned subsidiary of
GEAI into which substantially all of the assets, including intellectual property, and
liabilities of the GEAI Business had been transferred immediately prior to the closing.
Effective with the closing of the transaction, AI became a wholly owned subsidiary of the
Company. See Note 12 to the Unaudited Condensed Consolidated Financial Statements.
Prior to the AI acquisition, the Company operated in a single reportable segment, which
consisted of the historical operations of I.D. Systems (IDS). Subsequent thereto, the
Company has determined that it has two reportable segments organized by product line: IDS
and AI. The IDS operating segment includes the Companys core wireless asset management
systems operations: I.D. Systems, Inc., I.D. Systems, GmbH, and Didbox Ltd. This core
business develops, markets and sells wireless solutions for managing and securing
high-value enterprise assets such as industrial trucks. The AI operating segment, which
consists of Asset Intelligence, LLC, provides data-driven telematics solutions for
tracking and managing supply chain assets such as trailers and containers.
I.D. Systems, Inc. was incorporated in Delaware in 1993 and commenced operations in
January 1994.
NOTE 2 Organization and Consolidation Policy
The unaudited interim condensed consolidated financial statements include the accounts of
I.D. Systems, Inc. and its wholly owned subsidiaries Asset Intelligence, LLC (AI), I.D.
Systems, GmbH (GmbH) and Didbox, Ltd. (Didbox) (collectively referred to as the
Company). All material intercompany balances and transactions have been eliminated in
consolidation. The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally accepted in the
United States of America (U.S. GAAP) for interim financial information and with the
instructions to Form 10-Q. Accordingly, they do not include all of the information and
footnotes required by U.S. GAAP for complete financial statements. In the opinion of
management, such statements include all adjustments (consisting only of normal recurring
items) which are considered necessary for a fair presentation of the consolidated
financial position of the Company as of June 30, 2010, the consolidated results of its
operations for the three- and six- month periods ended June 30, 2009 and 2010,
respectively, the consolidated change in stockholders equity for the six months ended
June 30, 2010 and consolidated cash flows for the six months ended June 30, 2010. The
results of operations for the six-month period ended June 30, 2010 are not necessarily
indicative of the operating results for the full year. We suggest that these financial
statements be read in conjunction with the audited consolidated financial statements and
related disclosures for the year ended December 31, 2009 included in the Companys Annual
Report on Form 10-K for the year then ended.
NOTE 3 Cash and Cash Equivalents
The Company considers all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents unless they are legally or
contractually restricted. The Companys cash and cash equivalent balances exceed FDIC
limits.
NOTE 4 Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during the
reporting period. The Company continually evaluates estimates used in the preparation of
the financial statements for reasonableness. The most significant estimates relate to
stock-based compensation arrangements, the fair value of auction-rate securities and
auction-rate securities rights (see Note 6 Fair Value Measurements), acquisition
accounting, realization of deferred tax assets, the impairment of tangible and intangible
assets, inventory reserves, bad debt reserves and warranty and deferred revenue and
costs. Actual results could differ from those estimates.
5
NOTE 5 Investments
The Companys investments include debt securities, U.S. Treasury Notes, government and
state agency bonds, corporate bonds and auction-rate securities, which are classified as
either available for sale, held to maturity or trading, depending on managements
investment intentions relating to these securities. Available for sale securities are
marked-to-market based on quoted market values of the securities, with the unrealized
gain and (losses) reported as comprehensive income or (loss). For the three- and six-
month periods ended June 30, 2010, the Company reported unrealized gain of $22,000 and
88,000, respectively, and for the three and six month periods ended June 30, 2009, the
Company reported unrealized gain (loss) of $39,000 and ($6,000), respectively, on
available for sale securities in comprehensive loss. Investments categorized as held to
maturity are carried at amortized cost because the Company has both the intent and the
ability to hold these investments until they mature. The Company has classified as
short-term those securities that mature within one year, and all other securities are
classified as long-term.
The Companys investments include auction-rate securities (ARS) and an auction-rate
securities right (ARSR), each as described below.
The Company has classified its ARS investments and ARSR as trading securities. Trading
securities are carried at fair value, with unrealized holding gains and losses included
in other income (expense) on the Companys consolidated statements of operations.
At December 31, 2009 and June 30, 2010, the Company held approximately $19.4 million and
$9.0 million fair value in ARS and ARSR, respectively. These ARS represent interests in
collateralized pools of student loan receivables issued by agencies established by
counties, cities, states and other municipal entities within the United States. Liquidity
for these ARS is typically provided by an auction process that resets the applicable
interest rate at pre-determined intervals. Starting in February 2008 and continuing
through 2010, these securities failed to sell at auction. These failed auctions represent
liquidity risk exposure and are not defaults or credit events. As a holder of the
securities, the Company continues to receive interest on the ARS.
6
The Company purchased all of the ARS it holds from UBS AG (UBS). In October 2008,
the Company received a non-transferable offer (the Offer) from UBS for a put right (the
ARSR) permitting the Company to sell to UBS at par value all ARS previously purchased
from UBS at a future date (any time during a two-year period beginning June 30, 2010).
The Offer also included a commitment to loan the Company 75% of the UBS-determined value
of the ARS at any time until the put is exercised at a variable interest rate that will
equal the lesser of: (i) the applicable reference rate plus a spread set forth in the
applicable credit agreement and (ii) the then-applicable weighted-average interest or
dividend rate paid to the Company by the issuer of the ARS that is pledged to UBS as
collateral. In November 2008, the Company accepted the Offer. In exchange for the Offer,
the Company provided UBS with a general release of claims (other than certain
consequential damages claims) concerning our ARS and granted UBS the right to purchase
the Companys ARS at any time for full par value. In June 2010 the Company exercised its
right under the ARSR to put back the ARS to UBS. During June and July 2010, UBS
repurchased the outstanding ARS at par value.
The Companys right under the ARSR is in substance a put option with the strike price
equal to the par value of the ARS which is recorded as an asset, measured at fair value
with the resultant gain (loss) recognized in earnings. The Company has classified the ARS
as trading securities. The Company recognized the following gain or (loss) in the
consolidated statement of operations for the three and six months ended June 30, 2010
from the change in the fair value of these instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at |
|
|
Net |
|
|
Unrealized |
|
|
Fair Value at |
|
|
|
March 31, |
|
|
Purchases |
|
|
Gain |
|
|
June 30, |
|
Three months ended June 30, 2010 |
|
2010 |
|
|
(Sales) |
|
|
(Loss) |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction Rate Securities |
|
$ |
15,830,000 |
|
|
$ |
(8,250,000 |
) |
|
$ |
528,000 |
|
|
$ |
8,108,000 |
|
Auction Rate Securities Rights |
|
|
1,395,000 |
|
|
|
|
|
|
|
(528,000 |
) |
|
|
867,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
$ |
17,225,000 |
|
|
$ |
(8,250,000 |
) |
|
$ |
|
|
|
$ |
8,975,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value at |
|
|
Net |
|
|
Unrealized |
|
|
Fair Value at |
|
|
|
January 1, |
|
|
Purchases |
|
|
Gain |
|
|
June 30, |
|
Six months ended June 30, 2010 |
|
2010 |
|
|
(Sales) |
|
|
(Loss) |
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction Rate Securities |
|
$ |
17,876,000 |
|
|
$ |
(10,400,000 |
) |
|
$ |
632,000 |
|
|
$ |
8,108,000 |
|
Auction Rate Securities Rights |
|
|
1,499,000 |
|
|
|
|
|
|
|
(632,000 |
) |
|
|
867,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2010 |
|
$ |
19,375,000 |
|
|
$ |
(10,400,000 |
) |
|
$ |
|
|
|
$ |
8,975,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of the ARSR was based on an approach in which the present value of
all expected future cash flows was subtracted from the current fair market value of the
security and the resultant value was calculated as a future value at an interest rate
reflective of counterparty risk.
7
The cost, gross unrealized gains (losses) and fair value of available for sale, held
to maturity and trading securities by major security type at June 30, 2010 are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
|
|
Cost |
|
|
Gain |
|
|
Loss |
|
|
Value |
|
Investments short term |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trading securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Auction rate |
|
$ |
8,975,000 |
|
|
$ |
|
|
|
$ |
(867,000 |
) |
|
$ |
8,108,000 |
|
Auction rate securities right |
|
|
|
|
|
|
867,000 |
|
|
|
|
|
|
|
867,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total trading securities |
|
|
8,975,000 |
|
|
|
867,000 |
|
|
|
(867,000 |
) |
|
|
8,975,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Available for sale |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate bonds |
|
|
503,000 |
|
|
|
4,000 |
|
|
|
|
|
|
|
507,000 |
|
Government agency |
|
|
1,812,000 |
|
|
|
23,000 |
|
|
|
|
|
|
|
1,835,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total available for sale |
|
|
2,315,000 |
|
|
|
27,000 |
|
|
|
|
|
|
|
2,342,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury Notes |
|
|
1,516,000 |
|
|
|
|
|
|
|
|
|
|
|
1,516,000 |
|
Government agency bonds |
|
|
3,240,000 |
|
|
|
|
|
|
|
|
|
|
|
3,240,000 |
|
Corporate bonds and commercial
paper |
|
|
1,030,000 |
|
|
|
|
|
|
|
|
|
|
|
1,030,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity |
|
|
5,786,000 |
|
|
|
|
|
|
|
|
|
|
|
5,786,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments short term |
|
|
17,076,000 |
|
|
|
894,000 |
|
|
|
(867,000 |
) |
|
|
17,103,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketable securities long term |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Held to maturity securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government agency bonds |
|
|
766,000 |
|
|
|
|
|
|
|
|
|
|
|
766,000 |
|
Corporate bonds and commercial
paper |
|
|
3,613,000 |
|
|
|
|
|
|
|
|
|
|
|
3,613,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total held to maturity securities |
|
|
4,379,000 |
|
|
|
|
|
|
|
|
|
|
|
4,379,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments long term |
|
|
4,379,000 |
|
|
|
|
|
|
|
|
|
|
|
4,379,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total investments |
|
$ |
21,455,000 |
|
|
$ |
894,000 |
|
|
$ |
(867,000 |
) |
|
$ |
21,482,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table above presents held to maturity investments at cost and amortized cost. At
June 30, 2010, the gross unrealized holding gains for held to maturity securities were
$31,000, short-term, and $102,000, long-term.
8
NOTE 6 Fair Value Measurements
The Company utilizes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value into three broad levels. The following is a brief
description of those levels:
|
|
|
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 entitys own assumptions. |
The following table summarizes the fair values of the Companys investments in the
condensed consolidated balance sheet:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at |
|
|
|
|
|
|
June 30, |
|
|
Basis of Fair Value Measurements |
|
|
|
2010 |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents |
|
$ |
719,000 |
|
|
$ |
719,000 |
|
|
|
|
|
|
|
|
|
Marketable securities short term |
|
|
17,103,000 |
|
|
|
8,128,000 |
|
|
|
|
|
|
$ |
8,975,000 |
|
Marketable securities long term |
|
|
4,379,000 |
|
|
|
4,379,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
22,201,000 |
|
|
$ |
13,226,000 |
|
|
|
|
|
|
$ |
8,975,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below includes a roll forward of the Companys investments in ARS and the
ARSR classified under Level 3 from January 1, 2010 to June 30, 2010:
|
|
|
|
|
Fair value, January 1, 2010 |
|
$ |
19,375,000 |
|
Net maturities |
|
|
(10,400,000 |
) |
Unrealized gain included in condensed consolidated statement of operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value, June 30, 2010 |
|
$ |
8,975,000 |
|
|
|
|
|
9
NOTE 7 Revenue Recognition
The Companys product revenue is derived from: (i) sales of our wireless asset management
system, which includes training and technical support; (ii) monitoring equipment and
spare parts sold to customers (for which title transfers on date of customer receipt) and
from the related customer service under contracts that generally provide for service over
periods from one to five years; (iii) post-contract maintenance and support agreements;
and (iv) periodically, from leasing arrangements.
Our wireless asset management system consists of on-asset hardware, communication
infrastructure and software. Revenue derived from the sale of our wireless asset
management system is allocated to each element based upon vendor specific objective
evidence (VSOE) of the fair value of the element. VSOE of the fair value is based upon
the price charged when the element is sold separately. Revenue is recognized as each
element is earned based on the selling price of each element, and when there are no
undelivered elements that are essential to the functionality of the delivered elements.
The Companys system is typically implemented by the customer or a third party and, as a
result, revenue is recognized when title and risk of loss passes to the customer, which
usually is upon delivery of the system, persuasive evidence of an arrangement exists,
sales price is fixed and determinable, collectability is reasonably assured and
contractual obligations have been satisfied. In some instances, we are also responsible
for providing installation services. The additional installation services, which could be
performed by third parties, are considered another element in a multi-element deliverable
and revenue for installation services is recognized at the time the installation is
provided. Training and technical support revenue are recognized at time of performance.
The Company recognizes revenues from the sale of monitoring equipment when persuasive
evidence of an arrangement exists, delivery has occurred, the price is fixed or
determinable, and collectability is reasonably assured. These criteria include
requirements that the delivery of future products or services under the arrangement is
not required for the delivered items to serve their intended purpose. The Company has
determined that the revenue derived from the sale of monitoring equipment does not have
stand alone value to the customer from the communication services provided and the
arrangements constitute a single unit of accounting. Under these provisions, all of the
Companys billings for equipment and the related cost are deferred, recorded, and
classified as a current and long-term liability and a current and long-term asset,
respectively. Deferred revenue and cost are recognized over the service contract life,
beginning at the time that a customer acknowledges acceptance of the equipment and
service. The customer service contracts typically range from one to five years. During
the three and six months ended June 30, 2010, the Company amortized deferred revenue of
$150,000 and $230,000, respectively.
The service revenue for our monitoring equipment relates to charges for monthly messaging
usage and value-added features charges. The usage fee is a monthly fixed charge based on
the expected utilization according to the rate plan chosen by the customer. Service
revenue generally commences upon equipment installation and customer acceptance, and is
recognized over the period such services are provided.
Other revenue, which consists primarily of installation and freight charges, is
recognized upon equipment installation and customer acceptance for installation and upon
shipment of equipment for freight. Spare parts sales are reflected in product revenues
and recognized on the date of customer receipt of the part.
The Company also enters into post-contract maintenance and support agreements for the
wireless asset management systems. Revenue is recognized over the service period and the
cost of providing these services is expensed as incurred.
Deferred revenue as of December 31, 2009 and June 30, 2010 consists of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2009 |
|
|
2010 |
|
Deferred maintenance revenue |
|
$ |
962,000 |
|
|
$ |
1,132,000 |
|
Deferred product revenue |
|
|
|
|
|
|
2,132,000 |
|
|
|
|
|
|
|
|
|
|
|
962,000 |
|
|
|
3,264,000 |
|
Less: Current portion |
|
|
501,000 |
|
|
|
1,131,000 |
|
|
|
|
|
|
|
|
Deferred revenue less current portion |
|
$ |
461,000 |
|
|
$ |
2,133,000 |
|
|
|
|
|
|
|
|
Sales taxes collected from customers and remitted to governmental authorities are
accounted for on a net basis and therefore are excluded from revenues in the condensed
consolidated statements of operations.
10
NOTE 8 Note Receivable and Net Investment in Sales-Type Lease
Note receivable of $279,000 at June 30, 2010 relates to product financing arrangement
that exceeds one year and bears interest at 8%. Interest is recognized over the life of
the note. The Company does not require collateral for the notes. The Company has not and
does not intend to sell these receivables. Amounts collected on the note receivable is
included in net cash provided by operating activities in the condensed consolidated
statements of cash flows. Unearned interest income is amortized to interest income over
the life of the note using the effective-interest method. The revenue derived from the
sale of monitoring equipment and the related cost are deferred (See
Notes 7 and 9). Deferred
revenue and cost are recognized over the service contract life, beginning at the time
that a customer acknowledges acceptance of the equipment and service.
Present value of net investment in sales-type lease of $962,000 is for a five-year lease
of the Companys product and is reflected net of unearned income of $169,000 discounted
at 8%.
Scheduled maturities of minimum lease payments outstanding as of June 30, 2010 are as
follows:
|
|
|
|
|
Year ending December 31: |
|
|
|
|
|
|
|
|
|
July December 2010 |
|
$ |
100,000 |
|
2011 |
|
|
216,000 |
|
2012 |
|
|
234,000 |
|
2013 |
|
|
253,000 |
|
2014 |
|
|
159,000 |
|
Thereafter |
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
962,000 |
|
|
|
|
|
NOTE 9 Deferred Costs
During 2009, the Company entered into a contract with a customer pursuant to which the
Companys system will be implemented on a portion of the customers fleet of vehicles.
The Company will be entitled to issue sixty monthly invoices of up to $57,000 per month.
Costs directly attributable to this contract, consisting principally of engineering and
manufacturing costs, are being deferred until implementation of the system is completed.
The deferred costs will be charged to cost of revenue in accordance with the cost
recovery method, pursuant to which the deferred contract costs will be reduced in each
period by an amount equal to the revenue recognized until all the capitalized costs are
written off at which time the Company will recognize a gross profit, if any. During
2010, the Company capitalized $416,000 of such contract costs and expects to incur
additional costs until the installation is complete. As of December 31, 2009, the Company
deferred $63,000 of such contract costs, which are included in prepaid expenses and other
current assets. The Company amortized $12,000 of such costs for the three and six-month periods ended June 30, 2010.
Deferred costs as of June 30, 2010 consists of the following:
|
|
|
|
|
|
|
June 30, |
|
|
|
2010 |
|
Deferred contract costs |
|
$ |
467,000 |
|
Deferred product costs (see Note 7) |
|
|
1,332,000 |
|
|
|
|
|
|
|
|
1,799,000 |
|
Less: Current portion |
|
|
566,000 |
|
|
|
|
|
Deferred costs less current portion |
|
$ |
1,233,000 |
|
|
|
|
|
The Company will continue to evaluate the realizability of the carrying amount of the
deferred contract costs on a quarterly basis. To the extent the carrying value of the
deferred contract costs exceed the contract revenue, an impairment loss will be
recognized.
11
NOTE 10 Inventory
Inventory, which primarily consists of finished goods and components used in the
Companys products, is stated at the lower of cost or market using the first-in first-out
(FIFO) method.
Inventories as of December 31, 2009 and June 30, 2010 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
June 30, |
|
|
|
2009 |
|
2010 |
|
Components |
|
$ |
898,000 |
|
|
$ |
4,501,000 |
|
Finished goods |
|
|
4,519,000 |
|
|
|
4,962,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,417,000 |
|
|
|
9,463,000 |
|
Less: Inventory reserves |
|
|
(930,000 |
) |
|
|
(872,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
4,487,000 |
|
|
$ |
8,591,000 |
|
|
|
|
|
|
|
|
Inventories
as June 30, 2010 include approximately $4.7 million of
inventory, which consisted primarily of components, from
the AI acquisition (see Note 12). The fair value of the acquired inventory is provisional
pending the completion of the valuation of the assets acquired and liabilities assumed.
NOTE 11 Fixed Assets
Fixed assets are stated at cost, less accumulated depreciation and amortization, and are
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2009 |
|
|
2010 |
|
Equipment |
|
$ |
1,011,000 |
|
|
$ |
1,033,000 |
|
Computer software and website development |
|
|
414,000 |
|
|
|
2,794,000 |
|
Computer hardware |
|
|
774,000 |
|
|
|
1,776,000 |
|
Furniture and fixtures |
|
|
184,000 |
|
|
|
311,000 |
|
Automobiles |
|
|
80,000 |
|
|
|
53,000 |
|
Leasehold improvements |
|
|
514,000 |
|
|
|
705,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,977,000 |
|
|
|
6,672,000 |
|
Accumulated depreciation and amortization |
|
|
(2,060,000 |
) |
|
|
(2,688,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
917,000 |
|
|
$ |
3,984,000 |
|
|
|
|
|
|
|
|
Depreciation and amortization expense for the three and six months ended June 30,
2009 was $139,000 and $277,000, respectively, and for the three and six months ended June
30, 2010 was $342,000 and $630,000, respectively.
The Company capitalizes in fixed assets the costs of software development and website
development. Specifically, the assets comprise an implementation of Oracle Enterprise
Resource Planning (ERP) software, enhancements to the Veriwise® systems, and a
customer interface website (which is the primary tool used to provide data to our
customers). The website employs updated web architecture and improved functionality and
features, including, but not limited to, customization at the customer level, enhanced
security features, custom virtual electronic geofencing of landmarks, GPS-based remote
mileage reporting, and richer mapping capabilities. The Company capitalized the costs
incurred during the development and enhancement stages of the software and website
development. Costs incurred during the planning and post implementation/operation
stages of
development were expensed. The Company capitalized $-0- and $659,000 for website
enhancements for the six months ended June 30, 2009 and 2010, respectively. Amortization
of costs associated with computer software and website development for the three and six
months ended June 30, 2009 was $30,000 and $60,000, respectively, and for the three and
six months ended June 30, 2010 was $150,000 and $282,000, respectively.
12
NOTE 12 Acquisitions, Goodwill and Other Intangible Assets
On October 19, 2009, the Company acquired Didbox Ltd. (Didbox), a privately held
manufacturer and marketer of vehicle operator identification systems based in the United
Kingdom (UK). The transaction was valued at approximately $660,000 and was structured
with $534,000 paid up front in cash and contingent consideration of $110,000 due in 12
months based upon achievement of certain revenue and operating profit targets. The
Company expects Didbox to meet the revenue and operating profit targets. The contingent
consideration will be evaluated at each reporting date and any change in estimate will be
recorded through earnings. The estimated potential undiscounted amount of all future
payments that could be required to be paid under the contingent consideration arrangement
is between $99,000 and $110,000. The Company incurred acquisition-related expenses of
approximately $43,000, which were included in selling, general and administrative
expenses in the consolidated statement of operations during the year ended December 31,
2009. The Didbox business complements the Companys existing businesses by allowing
access to the original equipment manufacturer (OEM) dealer network in the UK, and offers
the ability to add the I.D. Systems solution set to its product line. In addition, the
acquisition is expected to provide the Company with access to a broader base of customers
in Europe.
The Company has accounted for the Didbox transaction under the acquisition method of
accounting and recorded the assets and liabilities of the acquired business at their
estimated fair values at the date of acquisition. The excess of the purchase price over
the estimated fair values of the net assets acquired is recorded as goodwill. The
goodwill is not expected to be deductible for tax purposes. Allocation of the Didbox
purchase price consists of the following:
|
|
|
|
|
Current assets |
|
$ |
93,000 |
|
Other assets |
|
|
36,000 |
|
Current liabilities |
|
|
(104,000 |
) |
Goodwill |
|
|
419,000 |
|
Trademarks and tradenames |
|
|
61,000 |
|
Customer list |
|
|
56,000 |
|
Other intangibles |
|
|
83,000 |
|
|
|
|
|
|
|
|
|
|
Fair value of assets acquired |
|
$ |
644,000 |
|
|
|
|
|
The results of operations of Didbox have been included in the consolidated statement
of operations as of the effective date of the acquisition. Pro forma results of
operations have not been presented because the effects of the acquisition were not
material.
On January 7, 2010, the Company entered into a Membership Interest Purchase Agreement
(the Purchase Agreement) with General Electric Capital Corporation (GECC) and GE
Asset Intelligence, LLC (GEAI), pursuant to which the Company acquired GEAIs
telematics business (the GEAI Business) through the purchase of 100% of the membership
interests of Asset Intelligence, LLC ( AI), a newly formed, wholly owned subsidiary of
GEAI into which substantially all of the assets, including intellectual property, and
liabilities of the GEAI Business had been transferred immediately prior to the closing.
Effective with the closing of the transaction, AI became a wholly owned subsidiary of the
Company. In connection with the transaction, AI offered employment to all of the former
employees of the GEAI Business. The focus of AIs business is in trucking, rail, marine
and intermodal applications. The acquisition is expected to provide the Company with
access to a broader base of customers.
Under the terms of the Purchase Agreement, the Company paid consideration of $15 million
in cash at closing. In addition, the Company may be required to pay additional cash
consideration of up to $2 million in or about February 2011, contingent upon the number
of new units of telematics equipment sold or subject to a binding order to be sold by AI
during the year ending December 31, 2010. The purchase price is subject to a working
capital adjustment to be performed during 2010, pursuant to which a portion of the cash
consideration paid at closing may be returned to the Company to the extent that the
actual working capital of AI delivered at closing, determined in accordance with a
formula set forth in the Purchase Agreement, is less than $5.5 million.
13
The Company incurred acquisition-related expenses of approximately $1,355,000, of which
$1,241,000 were included in selling, general and administrative expenses in 2009 and
$114,000 during the six months ended June 30, 2010.
The transaction was accounted for using the acquisition method of accounting and the
purchase price was assigned to the net assets acquired based on the fair value of such
assets and liabilities at the date of acquisition. The Company is in the process of
finalizing the fair value of the assets acquired and liabilities assumed; thus, the
preliminary allocation of the purchase price may be subject to change. The Company
originally recorded $1,017,000 of contingent consideration based on the estimated number
of new units of telematics equipment expected to be sold in 2010. The contingent
consideration was estimated using a probability
weighted calculation of the number of new units of telematics equipment expected to be
sold in 2010 discounted at 20.5%, which represents the Companys weighted-average
discount rate. The contingent consideration was reversed during the second quarter of
2010 based on revised forecasts which indicated AI would not meet the required number of
new unit sales during the measurement period for the contingent
consideration. The preliminary allocation of the AI purchase price consists
of the following:
|
|
|
|
|
Current assets, excluding inventory |
|
$ |
4,709,000 |
|
Inventory |
|
|
5,236,000 |
|
Other assets, net |
|
|
3,211,000 |
|
Current liabilities |
|
|
(4,695,000 |
) |
Intangibles |
|
|
5,585,000 |
|
Goodwill |
|
|
954,000 |
|
|
|
|
|
|
|
|
|
|
Fair value of assets acquired |
|
$ |
15,000,000 |
|
|
|
|
|
14
The fair value of the assets acquired, liabilities assumed, acquired goodwill and
intangible assets is provisional pending the completion of the valuation of these assets.
The goodwill arising from the acquisition consists largely of the synergies and cost
reductions through economies of scale expected from combining the operations of the
Company and AI. The goodwill is expected to be fully deductible for tax purposes, except
the contingent consideration which is deductible only when paid.
The fair value of the current assets acquired includes trade accounts receivables with a
fair value of $3,272,000. The gross amount due is $3,966,000, of which $694,000 is
expected to be uncollectible.
The results of operations of AI have been included in the condensed consolidated
statement of operations as of the effective date of the acquisition.
The following revenue and operating loss of AI were included in the Companys condensed
consolidated results of operations for the three and six months ended June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
Six Months |
|
|
|
Ended |
|
|
Ended |
|
|
|
June 30, 2010 |
|
|
June 30, 2010 |
|
|
|
|
|
|
|
|
|
|
Revenues |
|
$ |
3,847,000 |
|
|
$ |
7,772,000 |
|
Operating loss |
|
|
(1,319,000 |
) |
|
|
(2,121,000 |
) |
The following table represents the combined pro forma revenue and earnings for the six
months ended June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months |
|
|
|
Six Months |
|
|
Ended |
|
|
|
Ended |
|
|
June 30, 2010 |
|
|
|
June 30, 2010 |
|
|
Pro Forma |
|
|
|
Historical |
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
12,137,000 |
|
|
$ |
12,379,000 |
|
Net loss |
|
|
(8,089,000 |
) |
|
|
(8,020,000 |
) |
Net loss per share
basic and diluted |
|
|
(0.72 |
) |
|
|
(0.71 |
) |
The following table represents the combined pro forma revenue and earnings for the three
and six months ended June 30, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months |
|
|
|
|
|
|
Six Months |
|
|
|
Three Months |
|
|
Ended |
|
|
Six Months |
|
|
Ended |
|
|
|
Ended |
|
|
June 30, 2009 |
|
|
Ended |
|
|
June 30, 2009 |
|
|
|
June 30, 2009 |
|
|
Pro Forma |
|
|
June 30, 2009 |
|
|
Pro Forma |
|
|
|
Historical |
|
|
Combined |
|
|
Historical |
|
|
Combined |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
2,684,000 |
|
|
$ |
9,560,000 |
|
|
$ |
5,618,000 |
|
|
$ |
19,369,000 |
|
Net loss |
|
|
(2,324,000 |
) |
|
|
(7,691,000 |
) |
|
|
(5,396,000 |
) |
|
|
(13,994,000 |
) |
Net loss per share
basic and
diluted |
|
|
(0.21 |
) |
|
|
(0.70 |
) |
|
|
(0.49 |
) |
|
|
(1.28 |
) |
The combined pro forma revenue and earnings for the three and six month periods ended
June 30, 2009 and 2010 were prepared as though the acquisition had occurred as of January
1, 2009 and 2010, respectively. This summary is not necessarily indicative of what the
results of operations would have been had this business acquisition occurred during such
period, nor does it purport to represent results of operations for any future periods.
The changes in the carrying amount of goodwill from January 1, 2010 to June 30, 2010 is
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IDS |
|
|
AI |
|
|
Total |
|
Balance of as January 1, 2010 |
|
$ |
619,000 |
|
|
|
|
|
|
$ |
619,000 |
|
Asset Intelligence acquisition |
|
|
|
|
|
$ |
954,000 |
|
|
|
954,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of June 30, 2010 |
|
$ |
619,000 |
|
|
$ |
954,000 |
|
|
$ |
1,573,000 |
|
|
|
|
|
|
|
|
|
|
|
15
Identifiable intangible assets are comprised of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Useful |
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
June 30, 2010 |
|
Lives |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
Amortized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Patents |
|
|
11 |
|
|
$ |
4,506,000 |
|
|
$ |
(205,000 |
) |
|
$ |
4,301,000 |
|
Tradename |
|
|
5 |
|
|
|
361,000 |
|
|
|
(36,000 |
) |
|
|
325,000 |
|
Non-competition agreement |
|
|
3 |
|
|
|
175,000 |
|
|
|
(29,000 |
) |
|
|
146,000 |
|
Technology |
|
|
5 |
|
|
|
50,000 |
|
|
|
(7,000 |
) |
|
|
43,000 |
|
Workforce |
|
|
5 |
|
|
|
33,000 |
|
|
|
(4,000 |
) |
|
|
29,000 |
|
Customer list |
|
|
5 |
|
|
|
599,000 |
|
|
|
(62,000 |
) |
|
|
537,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,724,000 |
|
|
|
(343,000 |
) |
|
|
5,381,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer list |
|
|
|
|
|
|
104,000 |
|
|
|
|
|
|
|
104,000 |
|
Trademark and Tradename |
|
|
|
|
|
|
135,000 |
|
|
|
|
|
|
|
135,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
239,000 |
|
|
$ |
|
|
|
|
239,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
5,963,000 |
|
|
|
(343,000 |
) |
|
$ |
5,620,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross |
|
|
|
|
|
|
Net |
|
|
|
Useful |
|
|
Carrying |
|
|
Accumulated |
|
|
Carrying |
|
December 31, 2009 |
|
Lives |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
Amortized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Technology |
|
|
5 |
|
|
$ |
50,000 |
|
|
$ |
(2,000 |
) |
|
$ |
48,000 |
|
Workforce |
|
|
5 |
|
|
|
33,000 |
|
|
|
(1,000 |
) |
|
|
32,000 |
|
Customer list |
|
|
5 |
|
|
|
56,000 |
|
|
|
|
|
|
|
56,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
139,000 |
|
|
|
(3,000 |
) |
|
|
136,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unamortized: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer list |
|
|
|
|
|
|
104,000 |
|
|
|
|
|
|
|
104,000 |
|
Trademark and Tradename |
|
|
|
|
|
|
135,000 |
|
|
|
|
|
|
|
135,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
239,000 |
|
|
$ |
|
|
|
|
239,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
$ |
378,000 |
|
|
|
(3,000 |
) |
|
$ |
375,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense for the three and six months ended June 30, 2009 was $-0-and
$-0-, respectively, and for the three and six months ended June 30, 2010 was $196,000 and
$340,000, respectively. Future amortization expense for these intangible assets is as
follows:
|
|
|
|
|
Year ending December 31: |
|
|
|
|
|
|
July December 2010 |
|
$ |
338,000 |
|
2011 |
|
|
676,000 |
|
2012 |
|
|
676,000 |
|
2013 |
|
|
618,000 |
|
2014 |
|
|
613,000 |
|
16
NOTE 13 Net Loss Per Share of Common Stock
Net loss per share for the three and six month periods ended June 30, 2009 and 2010 are
as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
Basic and diluted loss per share |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(2,324,000 |
) |
|
$ |
(4,026,000 |
) |
|
$ |
(5,396,000 |
) |
|
$ |
(8,089,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding |
|
|
10,916,000 |
|
|
|
11,253,000 |
|
|
|
10,906,000 |
|
|
|
11,219,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share |
|
$ |
(0.21 |
) |
|
$ |
(0.36 |
) |
|
$ |
(0.49 |
) |
|
$ |
(0.72 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share is calculated by dividing net loss by the weighted-average number of
common shares outstanding during the period. Diluted loss per share reflects the
potential dilution assuming common shares were issued upon the exercise of outstanding
options and the proceeds thereof were used to purchase outstanding common shares. For the
three- and six- month periods ended June 30, 2009, the basic and diluted weighted-average shares outstanding are the same, since the effect from the potential exercise of
outstanding stock options of 2,826,000 would have been anti-dilutive. For the three- and
six- month periods ended June 30, 2010, the basic and diluted weighted-average shares
outstanding are the same, since the effect from the potential exercise of outstanding
stock options of 2,877,000 would have been anti-dilutive.
17
NOTE 14 Stock-based Compensation
Stock Option Plans
The Company adopted the 1995 Non-Qualified Stock Option Plan, pursuant to which the
Company had the right to grant options to purchase up to an aggregate of 1,250,000 shares
of common stock. The Company also adopted the 1999 Stock Option Plan, pursuant to which
the Company had the right to grant stock awards and options to purchase up to 2,813,000
shares of common stock. The Company also adopted the 1999 Director Option Plan, pursuant
to which the Company had the right to grant options to purchase up to an aggregate of
600,000 shares of common stock. The 1995 Non-Qualified Stock Option Plan expired during
2005 and the 1999 Stock and Director Option Plans expired during 2009 and the Company
cannot issue additional options under these plans.
The Company adopted the 2007 Equity Compensation Plan, pursuant to which the Company may
grant options to purchase up to an aggregate of 2,000,000 shares of common stock. The
Company also adopted the 2009 Non-Employee Director Equity Compensation Plan, pursuant to
which the Company may grant options to purchase up to an aggregate of 300,000 shares of
common stock. The plans are administered by the Compensation Committee of the Companys
Board of Directors, which has the authority to determine, among other things, the term
during which an option may be exercised (but not more than 10 years), the exercise price
of an option and the vesting provisions.
The Company recognizes all share-based payments in the statement of operations as an
operating expense, based on their fair values on the applicable grant date. As a result,
the Company recorded stock-based compensation expense of $466,000 and $980,000,
respectively, for the three and six months ended June 30, 2009 and $350,000 and $720,000,
respectively, for the three and six months ended June 30, 2010.
The following table summarizes the activity of the Companys stock options for the six
months ended June 30, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
Average |
|
|
|
|
|
|
|
|
|
|
Average |
|
|
Remaining |
|
|
Aggregate |
|
|
|
|
|
|
|
Exercise |
|
|
Contractual |
|
|
Intrinsic |
|
|
|
Options |
|
|
Price |
|
|
Term |
|
|
Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at beginning of year |
|
|
2,659,000 |
|
|
$ |
8.88 |
|
|
|
|
|
|
|
|
|
Granted |
|
|
623,000 |
|
|
|
3.02 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
(1,000 |
) |
|
|
2.31 |
|
|
|
|
|
|
|
|
|
Expired |
|
|
(232,000 |
) |
|
|
7.48 |
|
|
|
|
|
|
|
|
|
Forfeited |
|
|
(172,000 |
) |
|
|
12.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of period |
|
|
2,877,000 |
|
|
$ |
7.54 |
|
|
7 years |
|
|
$ |
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at end of period |
|
|
1,529,000 |
|
|
$ |
9.85 |
|
|
4 years |
|
|
$ |
10,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18
As of June 30, 2010, there was approximately $2,868,000 of unrecognized compensation
cost related to non-vested options granted under the Companys option plans. That cost is
expected to be recognized over a weighted-average period of 2.15 years.
The fair value of each option grant on the date of grant is estimated using the
Black-Scholes option-pricing model reflecting the following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
|
|
June 30, |
|
|
|
2009 |
|
|
2010 |
|
Expected volatility |
|
|
54.1% 75.6 |
% |
|
|
53% 59 |
% |
Expected life of options |
|
5 years |
|
|
5 years |
|
Risk free interest rate |
|
|
2 |
% |
|
|
2 |
% |
Dividend yield |
|
|
0 |
% |
|
|
0 |
% |
Expected volatility is based on historical volatility of the Companys common stock and
the expected life of options is based on historical data with respect to employee
exercise periods.
The weighted-average fair value of options granted during the six months ended June 30,
2009 and 2010 was $1.85 and $1.34, respectively. The total intrinsic value of options
exercised during the six months ended June 30, 2009 and 2010 was $-0- and $1,000,
respectively.
The Company estimates forfeitures at the time of valuation and reduces expense ratably
over the vesting period. This estimate is adjusted periodically based on the extent to
which actual forfeitures differ, or are expected to differ, from the previous estimate.
Restricted Stock
In 2006, Company began granting restricted stock to employees, whereby the employees are
contractually restricted from transferring the shares until they are vested. The stock is
unvested stock at the time of grant and, upon vesting, there are no legal restrictions on
the stock. The fair value of each share is based on the Companys closing stock price on
the date of the grant. A summary of all non-vested shares for the six months ended June
30, 2010 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
Non-vested |
|
|
Grant Date |
|
|
|
Shares |
|
|
Fair Value |
|
|
|
|
|
|
|
|
|
|
Non-vested, beginning of year |
|
|
172,000 |
|
|
$ |
3.78 |
|
Granted |
|
|
181,000 |
|
|
|
2.84 |
|
Vested |
|
|
(20,000 |
) |
|
|
5.62 |
|
Forfeited |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-vested, end of period |
|
|
333,000 |
|
|
$ |
3.16 |
|
|
|
|
|
|
|
|
|
The Company recorded stock-based compensation expense of $33,000 and $78,000,
respectively, for the three and six months ended June 30, 2009 and $82,000 and $158,000,
respectively, for the three and six months ended June 30, 2010, in connection with
restricted stock grants. As of June 30, 2010, there was $836,000 of total unrecognized
compensation cost related to non-vested shares. That cost is expected to be recognized
over a weighted-average period of 2.4 years.
19
Performance Shares
In June 2009, the Compensation Committee of the Board of Directors granted 233,000
performance shares to key employees pursuant to the 2007 Equity Compensation Plan. The
issuance of the shares of the Companys common stock underlying the performance shares is
subject to the achievement of stock price targets of the Companys common stock at the
end of a three-year measurement period ending in January 2012, with the ability to
achieve prorated performance shares during interim annual measurement periods from
January 31, 2009 to January 31, 2012. If the performance triggers are not met, the
performance shares will not vest and will automatically be returned to the 2007 Equity
Compensation Plan. If the performance triggers are met, then the shares will be issued to
the employees. For the three and six months ended June 30, 2010, the Company recorded
$7,000 and $15,000, respectively, of stock-based compensation expense in connection with
the performance shares.
NOTE 15 Line of Credit
In October 2008, the Company received an offer (the Offer) from UBS for a put right
(the ARSR) permitting the Company to sell to UBS at par value all ARS held by the
Company, all of which were purchased by the Company from UBS, at a future date (any time
during a two-year period beginning June 30, 2010). Included as part of the Offer, the
Company received a commitment to obtain a loan for 75% of the UBS-determined value of the
ARS at any time until the put option is exercised at a variable interest rate (1.32% at
June 30, 2010) that will equal the lesser of: (i) the applicable reference rate plus a
spread set forth in the applicable credit agreement and (ii) the then-applicable
weighted-average interest or dividend rate paid to the Company by the issuer of the ARS
that is pledged to UBS as collateral. The Company accepted the Offer in November 2008. In
March 2009, the Company borrowed $12,900,000 (which amount was equal to 75% of the
UBS-determined value of the ARS) against this credit facility. Principal payments, funded
by receipt of ARS principal, reduced the Companys obligation to $1,161,000 at June 30,
2010. This line of credit facility is payable on demand. The line of credit facility was
repaid in July 2010 from the redemption of the ARS.
NOTE 16 Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consists of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
June 30, |
|
|
|
2009 |
|
|
2010 |
|
Accounts payable |
|
$ |
1,824,000 |
|
|
$ |
4,011,000 |
|
Accrued warranty |
|
|
|
|
|
|
1,501,000 |
|
Accrued contingent consideration |
|
|
110,000 |
|
|
|
110,000 |
|
Other current liabilities |
|
|
160,000 |
|
|
|
462,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
2,094,000 |
|
|
$ |
6,084,000 |
|
|
|
|
|
|
|
|
The Companys AI segment warrants its products against defects in materials and
workmanship for a period of 12 months from the date of acceptance of the product by the
customer. The customers may purchase an extended warranty providing coverage up to a
maximum of 60 months. A provision for estimated future warranty costs is recorded for
expected or historical warranty matters related to equipment shipped.
The following table summarizes warranty activity during the six months ended June 30,
2010:
|
|
|
|
|
|
|
June 30, |
|
|
|
2010 |
|
|
|
Accrued warranty reserve, January 7, 2010 (date of acquisition) |
|
$ |
2,053,000 |
|
Accrual for product warranties issued |
|
|
57,000 |
|
Product replacements and other warranty expenditures |
|
|
(598,000 |
) |
Expiration of warranties |
|
|
(11,000 |
) |
|
|
|
|
|
|
|
|
|
Accrued warranty reserve, end of period |
|
$ |
1,501,000 |
|
|
|
|
|
20
NOTE 17 Income Taxes
The Company accounts for income taxes under the asset and liability approach. Deferred
tax assets and liabilities are recognized for the expected future tax consequences
attributed to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis. Deferred tax assets and
liabilities are measured using the enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to reverse. As of June 30,
2010, the Company had provided a valuation allowance to fully reserve its net operating
loss carry forwards, primarily as a result of anticipated net losses for income tax
purposes.
NOTE 18 Fair Value of Financial Instruments
The carrying amounts of cash equivalents, accounts receivable, and investments in
securities, including ARS and the ARSR, are carried at fair value and accounts payable,
line of credit, and other liabilities approximate their fair values due to the short
period to maturity of these instruments. The fair value of the ARS was determined
utilizing a discounted cash flow approach and market evidence with respect to the ARS
collateral, ratings and insurance to assess default risk, credit spread risk and
downgrade risk.
NOTE 19 Concentration of Customers
One customer accounted for 30% of the Companys revenue and 18% of the Companys accounts
receivable during the six-month period ended June 30, 2010.
Two customers accounted for 29% and 16% of the Companys revenue during the six-month
period ended June 30, 2009. The same two customers accounted for 29% and 10% of the
Companys accounts receivable and unbilled receivables as of June 30, 2009.
NOTE 20 Stock Repurchase Program
On May 3, 2007, the Company announced that its Board of Directors had authorized the
repurchase of issued and outstanding shares of its common stock having an aggregate value
of up to $10,000,000 pursuant to a stock repurchase program established pursuant to Rule
10b-18 under the Securities Exchange Act of 1934, as amended. The amount and timing of
such repurchases are dependent upon the price and availability of shares, general market
conditions and the availability of cash, as determined at the discretion of the Companys
management. The repurchases are funded from the Companys working capital. The Companys
stock repurchase program does not have an expiration date, and the Company may
discontinue or suspend the share repurchase program at any time. All shares of common
stock repurchased under the Companys stock repurchase program are held as treasury
stock. The Company did not purchase any shares of its common stock under the stock
repurchase program during the six-month period ended June 30, 2010. As of June 30, 2010,
the Company has purchased approximately 1,075,000 shares of its common stock in open
market transactions under the stock repurchase program for an aggregate purchase price of
approximately $9,970,000, or an average cost of $9.27 per share.
NOTE 21 Comprehensive Loss
Comprehensive loss includes net loss and unrealized gains or losses on available-for-sale
investments and foreign currency translation gains and losses. Cumulative unrealized
gains and losses on available-for-sale investments are reflected as accumulated other
comprehensive loss in stockholders equity on the Companys condensed consolidated
balance sheet. The components of our comprehensive income are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
Net loss |
|
|
(2,324,000 |
) |
|
$ |
(4,026,000 |
) |
|
$ |
(5,396,000 |
) |
|
$ |
(8,089,000 |
) |
Unrealized gain (loss) on
available-for-sale marketable
securities |
|
|
39,000 |
|
|
|
22,000 |
|
|
|
(6,000 |
) |
|
|
88,000 |
|
Foreign currency translation |
|
|
2,000 |
|
|
|
(64,000 |
) |
|
|
2,000 |
|
|
|
(89,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss |
|
$ |
(2,283,000 |
) |
|
$ |
(4,068,000 |
) |
|
$ |
(5,400,000 |
) |
|
$ |
(8,090,000 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
21
NOTE 22 Wholly Owned Foreign Subsidiaries
In May 2009, the Company formed an entity in Germany called I.D. Systems, GmbH (the
GmbH). This foreign entity is wholly owned by I.D. Systems, Inc. The GmbH financial
statements are consolidated with the financial statements of I.D. Systems, Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
Net revenue |
|
$ |
6,000 |
|
|
$ |
31,000 |
|
|
$ |
6,000 |
|
|
$ |
388,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
6,000 |
|
|
|
(192,000 |
) |
|
|
6,000 |
|
|
|
(199,000 |
) |
Total assets were $584,000 as of June 30, 2010. The GmbH operates in a local currency
environment using the Euro as its functional currency.
Existing European sales orders/contracts prior to the formation of the GmbH and related
accounting activity will remain in I.D. Systems, Inc. until settled or completed.
Existing European employees and contractors and their related agreements were transferred
to the GmbH in August 2009.
In October 2009, the Company acquired Didbox Ltd. (Didbox). This foreign entity is
wholly owned by I.D. Systems, Inc. and is headquartered in the United Kingdom. The Didbox
financial statements are consolidated with the financial statements of I.D. Systems, Inc.
as of the effective date of acquisition.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
For the six months ended |
|
|
|
June 30, |
|
|
June 30, |
|
|
|
2009 |
|
|
2010 |
|
|
2009 |
|
|
2010 |
|
Net revenue |
|
$ |
|
|
|
$ |
108,000 |
|
|
$ |
|
|
|
$ |
207,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
|
|
|
|
(23,000 |
) |
|
|
|
|
|
|
(48,000 |
) |
Total assets of Didbox were $718,000 as of June 30, 2010. Didbox operates in a local
currency environment using the British Pound as its functional currency.
Income and expense accounts of foreign operations are translated at actual or
weighted-average exchange rates during the period. Assets and liabilities of foreign
operations that operate in a local currency environment are translated to U.S. dollars at
the exchange rates in effect at the balance sheet date, with the related translation
gains or losses reported as components of accumulated other comprehensive income/loss in
consolidated stockholders equity. Net exchange gains or losses resulting from the
translation of foreign financial statements and the effect of exchange rate changes on
intercompany transactions of a long-term investment nature with GmbH resulted in a
translation loss of $89,000 at June 30, 2010, which is included in comprehensive loss in
the condensed consolidated statement of changes in stockholders equity.
Gains and losses resulting from foreign currency transactions are included in determining
net income or loss. Foreign currency transactions gains (losses) for the three- and six-
month periods ended June 30, 2009 of $-0- and $22,000, respectively, and for the three
and six months ended June 30,2010 of $(15,000) and $(33,000), respectively, are included
as an offset to selling, general and administrative expenses in the condensed
consolidated statement of operations.
22
NOTE 23 Rights Agreement
In July 2009, the Company amended its Amended and Restated Certificate of Incorporation
in order to create a new series of preferred stock, to be designated the Series A Junior
Participating Preferred Stock (hereafter referred to as Preferred Stock). Shareholders
of the Preferred Stock will be entitled to certain minimum quarterly dividend rights,
voting rights, and liquidation preferences. Because of the nature of the Preferred
Stocks dividend, liquidation and voting rights, the value of a share of Preferred Stock
is expected to approximate the value of one share of the Companys common stock.
In July 2009, the Company also adopted a shareholder rights plan (the Rights Plan),
which entitles the holders of the rights to purchase from the Company
1/1,000th (subject to prospective anti-dilution adjustments) of a share of
Preferred Stock of the Company at a purchase price of $19.47 (a Right). The Rights Plan
has a three-year term with the possibility of two separate
three-year renewals. Until a Right is exercised or exchanged in accordance with the
provisions of the rights agreement governing the Rights Plan, the holder thereof, as
such, will have no rights as a stockholder of the Company, including, without limitation,
the right to vote for the election of directors or upon any matter submitted to
stockholders of the Company or to receive dividends or subscription rights. The Rights
were registered with the Securities and Exchange Commission in July 2009.
On June 29, 2009, the Board of Directors of the Company declared a dividend of one Right
for each outstanding share of common stock. The dividend was paid on July 13, 2009 to the
stockholders of record on that date.
23
NOTE 24 Operating Segments
Prior to the Asset Intelligence (AI) acquisition in January 2010, the Company operated
in a single reportable segment, consisting of the historical operations of I.D. Systems,
Inc. (IDS). Subsequent thereto, the Company has determined that it has two reportable
segments organized by product line: IDS and AI. The IDS operating segment includes the
Companys core wireless asset management systems operations: I.D. Systems, Inc., I.D.
Systems, GmbH, and Didbox Ltd. This core business develops, markets and sells wireless
solutions for managing and securing high-value enterprise assets such as industrial
trucks. The AI operating segment, which consists of Asset Intelligence, LLC, provides
data-driven telematics solutions for tracking and managing supply chain assets such as
trailers and containers.
The Company does not allocate indirect expenses, such as compensation to executives and
corporate personnel, professional fees, finance, stock based compensation expense, and
certain other operating costs, to the individual segments. These costs are included in
the IDS operating segment. The total assets of each segment are comprised of the assets
of the subsidiaries operating in that segment.
A summary of segment information for the three and six month periods ended June 30, 2009
and 2010 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Three Months Ended |
|
|
As of and for the Three Months Ended |
|
|
|
June 30, 2009 |
|
|
June 30, 2010 |
|
|
|
IDS |
|
|
AI |
|
|
Total |
|
|
IDS |
|
|
AI |
|
|
Total |
|
Revenues |
|
$ |
2,684,000 |
|
|
$ |
|
|
|
$ |
2,684,000 |
|
|
$ |
2,166,000 |
|
|
$ |
3,847,000 |
|
|
$ |
6,013,000 |
|
Depreciation and
amortization |
|
|
139,000 |
|
|
|
|
|
|
|
139,000 |
|
|
|
144,000 |
|
|
|
394,000 |
|
|
|
538,000 |
|
Operating loss |
|
|
(2,984,000 |
) |
|
|
|
|
|
|
(2,984,000 |
) |
|
|
(2,873,000 |
) |
|
|
(1,319,000 |
) |
|
|
(4,192,000 |
) |
Capital expenditures |
|
|
(80,000 |
) |
|
|
|
|
|
|
(80,000 |
) |
|
|
(182,000 |
) |
|
|
(273,000 |
) |
|
|
(455,000 |
) |
Segment assets |
|
|
77,230,000 |
|
|
|
|
|
|
|
77,230,000 |
|
|
|
38,062,000 |
|
|
|
21,124,000 |
|
|
|
59,186,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of and for the Six Months Ended |
|
|
As of and for Six Months Ended |
|
|
|
June 30, 2009 |
|
|
June 30, 2010 |
|
|
|
IDS |
|
|
AI |
|
|
Total |
|
|
IDS |
|
|
AI |
|
|
Total |
|
Revenues |
|
$ |
5,618,000 |
|
|
$ |
|
|
|
$ |
5,618,000 |
|
|
$ |
4,365,000 |
|
|
$ |
7,772,000 |
|
|
$ |
12,137,000 |
|
Depreciation and
amortization |
|
|
277,000 |
|
|
|
|
|
|
|
277,000 |
|
|
|
287,000 |
|
|
|
683,000 |
|
|
|
970,000 |
|
Operating loss |
|
|
(6,295,000 |
) |
|
|
|
|
|
|
(6,295,000 |
) |
|
|
(6,314,000 |
) |
|
|
(2,121,000 |
) |
|
|
(8,435,000 |
) |
Capital expenditures |
|
|
(278,000 |
) |
|
|
|
|
|
|
(278,000 |
) |
|
|
(222,000 |
) |
|
|
(739,000 |
) |
|
|
(961,000 |
) |
Segment assets |
|
|
77,230,000 |
|
|
|
|
|
|
|
77,230,000 |
|
|
|
38,062,000 |
|
|
|
21,124,000 |
|
|
|
59,186,000 |
|
Note 25 Reduction in Work Force
As a result of the integration of AI, the Company eliminated 39 positions, representing
approximately 32% of our total personnel. In order to earn a severance payment, affected
employees were required to complete their transition duties and execute a general release
agreement. Total severance costs incurred during the three months ended June 30, 2010
were $487,000, of which $100,000 is included in research and development expenses and
$387,000 is included in selling, general and administrative expenses in the condensed
consolidated statement of operations.
24
A summary of the 2010 restructuring charges and related payments is presented below:
|
|
|
|
|
|
|
June 30, |
|
|
|
2010 |
|
|
|
|
|
|
Severance charges |
|
$ |
487,000 |
|
Severance payments |
|
|
(414,000 |
) |
|
|
|
|
|
|
|
|
|
Accrued severance at June 30, 2010 |
|
$ |
73,000 |
|
|
|
|
|
NOTE 26 Commitments and Contingencies
Except for normal operating leases, the Company is not currently subject to any material
commitments.
Contingencies
On May 21, 2010, Crown Equipment Corporation (herein Crown) filed a Complaint in the Southern
District of Ohio against the Company in accordance with the Declaratory Judgment Act (Case
Number 2:10cv452). In the Complaint, Crown alleged that U.S. Patent No. 7,656,271, owned by the
Company, is both invalid and not infringed by Crowns InfoLink product. The Company is
currently in the process of preparing an Answer or otherwise moving to dismiss the Complaint on
or before the September 21, 2010 due date. The Company intends to provide a vigorous defense to
this litigation, however, we cannot predict the outcome and amount, if any, of this lawsuit.
Severance agreements
In September 2009, the Company entered into severance agreements with four of its
executive officers. The severance agreements, each of which is substantially identical in
form, provide each executive with certain severance and change in control benefits upon
the occurrence of a Trigger Event, as defined in the severance agreements. As a
condition to the Companys obligations under the severance agreements, each executive has
executed and delivered to the Company a restrictive covenants agreement.
Under the terms of the severance agreements, each executive is entitled to the following:
(i) a cash payment at the rate of the executives annual base salary as in effect
immediately prior to the Trigger Event for a period of 12 or 18 months, depending on the
executive, (ii) continued healthcare coverage during the severance period, (iii) partial
accelerated vesting of the executives previously granted stock options and restricted
stock awards, and (iv) an award of Performance Shares under the Restricted Stock Unit
Award Agreement previously entered into between the Company and the executive.
25
NOTE 27 Recent Accounting Pronouncements
In June 2009, the Financial Accounting Standards Board (the FASB) issued a standard
which provides guidance to improve the relevance, representational faithfulness, and
comparability of the information that a reporting entity provides in its financial
statements about a transfer of financial assets; the effects of a transfer on its
financial position, financial performance, and cash flows; and a transferors continuing
involvement, if any, in transferred financial assets. The standard is effective as of the
beginning of each reporting entitys first annual reporting period that begins after
November 15, 2009, for interim periods within that first annual reporting period and for
interim and annual reporting periods thereafter. The adoption of this guidance did not
have a material impact on the Companys consolidated financial position or results of
operations.
In October 2009, the FASB issued a standard which establishes the accounting and
reporting guidance for arrangements including multiple revenue-generating activities.
This standard provides amendments to the criteria for separating deliverables, measuring
and allocating arrangement consideration to one or more units of accounting. The
amendments in this standard also establish a selling price hierarchy for determining the
selling price of a deliverable. Significantly enhanced disclosures are also required to
provide information about a vendors multiple-deliverable revenue arrangements, including
information about the nature and terms, significant deliverables, and its performance
within arrangements. The amendments also require providing information about the
significant judgments made and changes to those judgments and about how the application
of the relative selling-price method affects the timing or amount of revenue recognition.
The amendments in this standard are effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June 15, 2010.
Early application is permitted. The Company is currently evaluating the impact that the
adoption of this standard will have on its consolidated financial statements but only if
adopted in tandem with the standard below.
In October 2009, the FASB issued a standard which changes the accounting model for
revenue arrangements that include both tangible products and software elements that are
essential to the functionality and scopes these products out of current software
revenue guidance. The new guidance will include factors to help companies determine what
software elements are considered essential to the functionality. The amendments will
now subject software-enabled products to other revenue guidance and disclosure
requirements, such as guidance surrounding revenue arrangements with multiple
deliverables. The amendments in this standard are effective prospectively for revenue
arrangements entered into or materially modified in the fiscal years beginning on or
after June 15, 2010. Early application is permitted. The Company is currently evaluating
the impact that the adoption of this standard will have on its consolidated financial
statements.
In January 2010, the FASB issued additional guidance for improving disclosures about fair
value measurement. Under this guidance, two new disclosures are required: (i) significant
transfers in and out of Level 1 and 2 measurements and the reasons for the transfers and
(ii) a gross presentation of activity within the Level 3 rollforward. The guidance is
effective for interim and annual reporting periods beginning after December 15, 2009,
except for the disclosures about purchases, sales, issuances, and settlements in the
rollforward of activity in Level 3 fair value measurements. Those disclosures are
effective for fiscal years beginning after December 15, 2010. The adoption of this
guidance did not have and is not expected to have a material impact on the Companys
consolidated results of operations or financial position.
In May 2009, and as amended in February 2010, new authoritative accounting literature
established general standards of accounting for and disclosure of events that occur after
the balance sheet date but before the financial statements are issued or are available to
be issued. This accounting principle was effective for us as of June 30, 2009, and did
not have a material impact on our consolidated financial statements.
26
|
|
|
Item 2. |
|
Managements Discussion and Analysis of Financial Condition and Results of Operations |
The following discussion and analysis of the consolidated financial condition and results
of operations of I.D. Systems, Inc. and its subsidiaries (I.D. Systems, the Company,
we, our or us) should be read in conjunction with the consolidated financial
statements and notes thereto appearing in Part I, Item 1, of this report. In the
following discussions, most percentages and dollar amounts have been rounded to aid
presentation, and, accordingly, all amounts are approximations.
Cautionary Note Regarding Forward-Looking Statements
This report contains various forward-looking statements made pursuant to the safe harbor
provisions under the Private Securities Litigation Reform Act of 1995 and information
that is based on managements beliefs as well as assumptions made by and information
currently available to management. Although the Company believes that the expectations
reflected in such forward-looking statements are reasonable, the Company can give no
assurance that such expectations will prove to be correct. When used in this report, the
words anticipate, believe, estimate, expect, predict, project, and similar
expressions or words, or the negatives of those words, are intended to identify
forward-looking statements. Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date hereof, and should be aware
that the Companys actual results could differ materially from those described in the
forward-looking statements due to a number of factors, including, without limitation,
business conditions and growth in the wireless tracking industries, general economic
conditions, lower than expected customer orders or variations in customer order patterns,
competitive factors including increased competition, changes in product and service mix,
and resource constraints encountered in developing new products, and other factors
described under Risk Factors set forth in the Companys Annual Report on Form 10-K for
the fiscal year ended December 31, 2009 and other filings with the Securities and
Exchange Commission (the SEC). Any forward-looking statements should be considered in
light of these factors. Unless otherwise required by law, the Company undertakes no
obligation, and expressly disclaims any obligation, to update or publicly release the
results of any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events, or otherwise.
The Company makes available through its internet website, free of charge, its Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and
amendments to such reports and other filings made by the Company with the SEC, as soon as
practicable after the Company electronically files such reports and filings with the SEC.
The Companys website address is www.id-systems.com. The information contained in the
Companys website is not incorporated by reference in this report.
Overview
We develop, market and sell wireless solutions for managing and securing high-value
enterprise assets. These assets include industrial vehicles, such as forklifts and
airport ground support equipment, rental vehicles, and transportation assets. Our
patented wireless asset management system addresses the needs of organizations to
control, track, monitor and analyze their assets. Our solutions enable our customers to
achieve tangible economic benefits by making timely, informed decisions that increase the
security, productivity and efficiency of their operations.
We have focused our core business activities on two primary applications: industrial
fleet management and rental fleet management. Our solution for industrial fleet
management allows our customers to reduce operating costs and capital expenditures and to
comply with certain safety regulations by accurately and reliably measuring and
controlling fleet activity. This solution also enhances security at industrial facilities
and areas of critical infrastructure, such as airports, by controlling access to, and
restricting the use of, vehicles and equipment. Our solution for rental fleet management
allows rental car companies to generate higher revenue by more accurately tracking
vehicle data, such as fuel consumption and odometer readings, and improve customer
service by expediting the rental and return processes. In addition to focusing on these
core applications, we have adapted, and intend to continue to adapt, our solutions to
meet our customers broader asset management needs.
We sell our system to both executive and division-level management. Typically, our
initial system deployment serves as a basis for potential expansion across the customers
organization. We work closely with customers to help maximize the utilization and
benefits of our system and demonstrate the value of enterprise-wide deployments.
We market and sell our solutions to a wide range of customers in the commercial and
government sectors. Our customers operate in diverse markets, such as automotive
manufacturing, heavy industry, retail and wholesale distribution, aerospace and defense,
homeland security and vehicle rental.
On January 7, 2010, we acquired the Asset Intelligence (AI) business unit of General
Electric Company, which provides trailer and container tracking solutions for
manufacturers, retailers, shippers and freight transportation providers. The focus of AI
on trucking, rail, marine and intermodal applications expands the scope of assets
addressed by I.D. Systems solutions, and the web
and mobile communications technologies of AI are complementary to I.D. Systems portfolio
of wireless asset management patents.
27
AI has long-term communication contracts that provide us with a recurring revenue
stream, which is expected to help reduce quarterly revenue volatility. We expect that AI
will contribute $12 to $15 million to our U.S. GAAP revenue for 2010, including
approximately $11 million from recurring services. We expect the combined gross margins
to remain consistent with our historical gross margins. We have already achieved
synergies integrating the AI unit into our core business and we expect to reduce annual
combined operating expenses by approximately $8 million. We expect the annual operating
expenses of the combined businesses to be approximately $22 million.
AI combines web-based software technologies with satellite and cellular communications to
deliver data-driven telematics solutions for supply chain asset management. These
solutions help secure and optimize the performance of trailers, railcars, containers, and
the freight they carry, enabling shippers and carriers to maximize security and
efficiency throughout their supply chains.
AIs VeriWise product platform provides comprehensive real-time data for faster, more
informed decision-making in multiple supply chain applications:
|
|
|
Asset Optimizationcombining web-based asset visibility and advanced telemetry data
to monitor the condition of fleet assets, streamline asset deployment, optimize
utilization, and maximize return on investment. |
|
|
|
|
Cold Chain Managementmaintaining the condition and quality of temperature-sensitive
cargo from point A to point B, and all the points in between. |
|
|
|
|
Fleet Maintenanceutilizing sensor technologies, real-time data and a wealth of
transportation maintenance knowledge to help control maintenance costs, improve
preventative maintenance practices, increase asset up-time, extend asset life, and
reduce overall cost of ownership. |
|
|
|
|
Fuel Managementmonitoring key factors in fuel consumption, such as tire pressure
and engine idle time, to help optimize fuel performance and reduce transportation
costs. |
|
|
|
|
Security and Safetyprotecting valuable assets and cargo throughout the supply chain. |
As a result of the integration of AI, we eliminated 39 positions within our Company,
representing approximately 32% of our total personnel. In order to earn a severance
payment, affected employees are required complete their transition duties and execute a
general release agreement. The total severance costs were $487,000. Severance payments
are expected to be incurred through the third quarter of 2010.
Risks
During the six months ended June 30, 2010, we generated revenues of $12.1 million, and
the Wal-Mart Stores, Inc. accounted for 30% of our revenues. During the six months ended
June 30, 2009, we generated revenues of $5.6 million, which period was prior to the
acquisition of AI, and thus does not include any revenues attributable to AI, and the
U.S. Postal Service and Wal-Mart Stores, Inc. accounted for 29% and 16% of our revenues,
respectively.
We are highly dependent upon sales of our system to a few customers. The loss of any of
these key customers, or any material reduction in the amount of our products they
purchase during a particular period, could materially and adversely affect our revenues
for such period. Conversely, a material increase in the amount of our products purchased
by a key customer (or customers) during a particular period could result in a significant
increase in our revenues for such period, and such increased revenues may not recur in
subsequent periods. Some of these key customers, as well as other customers of the
Company, operate in markets that have suffered business downturns in the past few years
or may so suffer in the future, particularly in light of the current global economic
downturn, and any material adverse change in the financial condition of such customers
could materially and adversely affect our financial condition and results of operations.
If we are unable to replace such revenue from existing or new customers, the market price
of our common stock could decline significantly.
28
We expect that customers who utilize our solutions will do so as part of a
large-scale deployment of these solutions across multiple or all divisions of their
organizations. A customers decision to deploy our solutions throughout its organization
will involve a significant commitment of its resources. Accordingly, initial
implementations may precede any decision to deploy our solutions enterprise-wide.
Throughout this sales cycle, we may spend considerable time and expense educating and
providing information to prospective customers about the benefits of our solutions.
The timing of the deployment of our solutions may vary widely and will depend on the
specific deployment plan of each customer, the complexity of the customers organization
and the difficulty of such deployment. Customers with substantial or complex
organizations may deploy our solutions in large increments on a periodic basis.
Accordingly, we may receive purchase orders for significant dollar amounts on an
irregular and unpredictable basis. Because of our limited operating history and the
nature of our business, we cannot predict the timing or size of these sales and
deployment cycles. Long sales cycles, as well as our expectation that customers will tend
to place large orders sporadically with short lead times, may cause our revenues and
results of operations to vary significantly and unexpectedly from quarter to quarter.
Our ability to increase our revenues and generate net income will depend on a number of
factors, including, for example, our ability to:
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increase sales of products and services to our existing customers; |
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convert our initial programs into larger or enterprise-wide purchases by our customers; |
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increase market acceptance and penetration of our products; and |
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develop and commercialize new products and technologies. |
Additional risks and uncertainties to which we are subject are described in our Annual
Report on Form 10-K for the year ended December 31, 2009.
Critical Accounting Policies
For the six months ended June 30, 2010, there were no significant changes to the
Companys critical accounting policies as identified in its Annual Report on Form 10-K
for the year ended December 31, 2009.
29
Results of Operations
The following table sets forth, for the periods indicated, certain operating information expressed
as a percentage of revenue:
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Three months ended |
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Six months ended |
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June 30, |
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June 30, |
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2009 |
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2010 |
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2008 |
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2010 |
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Revenue: |
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Products |
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66.0 |
% |
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30.4 |
% |
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56.1 |
% |
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31.7 |
% |
Services |
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34.0 |
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69.6 |
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43.9 |
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68.3 |
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100.0 |
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100.0 |
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100.0 |
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100.0 |
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Cost of revenues: |
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Cost of products |
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33.1 |
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14.4 |
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30.0 |
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15.2 |
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Cost of services |
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12.0 |
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25.5 |
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15.5 |
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27.2 |
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Total gross profit |
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54.9 |
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60.1 |
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54.5 |
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57.6 |
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Selling, general and administrative expenses |
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140.2 |
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111.2 |
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142.0 |
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108.5 |
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Research and development expenses |
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25.8 |
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18.6 |
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24.6 |
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18.7 |
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Loss from operations |
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(111.1 |
) |
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(69.7 |
) |
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(112.1 |
) |
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(69.6 |
) |
Interest income, net |
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10.5 |
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3.1 |
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11.2 |
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3.3 |
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Interest expense |
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(1.6 |
) |
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(0.4 |
) |
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(0.8 |
) |
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(0.5 |
) |
Other income |
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15.6 |
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0.1 |
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5.6 |
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Net loss |
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(86.6 |
)% |
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(66.9 |
)% |
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(96.0 |
)% |
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(66.8 |
)% |
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30
Three Months Ended June 30, 2010 Compared to Three Months Ended June 30, 2009
REVENUES. Revenues increased by $3.3 million, or 124%, to $6.0 million in the three
months ended June 30, 2010 from $2.7 million in the same period in 2009. The increase in
revenue is principally attributable to revenue of $3.8 million from AI, which was
acquired on January 7, 2010.
Revenues from products increased by $0.1 million, or 3.3%, to $1.8 million in the
three months ended June 30, 2010 from $1.8 million in the same period in 2009. Overall,
the increase in revenues was attributable to the AI product revenue of $0.5 million,
which includes $0.2 million of revenue from Wal-Mart Stores, Inc., offset by a decrease
in IDS product revenue of $0.4 million resulting principally from decreased product sales
to the United States Postal Service and Wal-Mart Stores, Inc.
Revenues from services increased by $3.3 million, or 358.3%, to $4.2 million in the
six months ended June 30, 2010 from $0.9 million in the same period in 2009. The increase
in service revenue is primarily attributable to AI service revenue of $3.4 million which
includes Wal-Mart Stores, Inc. and GE Trailer Fleet Services revenue of $1.4 million and
$0.4 million, respectively.
COST OF REVENUES. Cost of revenues increased by $1.2 million, or 97.6%, to $2.4 million
in the three months ended June 30, 2010 from $1.2 million for the same period in 2009.
The increase is attributable to the increase in revenue in 2010 resulting from the
acquisition of AI. Gross profit was $3.6 million in 2010 compared to $1.5 million in
2009. As a percentage of revenues, gross profit increased to 60.1% in 2010 from 54.8% in
2009.
Cost of products was $0.9 million in the three months ended June 30, 2009 and 2010.
Gross profit for products was $1.0 million in 2010 compared to $0.9 million in 2009. The
increase in gross profit was attributable to a $0.4 million gross profit contribution
from AI offset by a decrease of $0.3 million in the IDS gross profit. As a percentage of
product revenues, gross profit increased to 52.7% in 2010 from 49.7% in 2009. The
increase in gross profit as a percent of product revenue was due to AI product revenue
contributing a higher gross profit percentage of 74.1% in 2010 offset by a decrease in
the IDS gross profit percentage to 45.3% in 2010 from 49.7% in 2009 due to lower revenue
in 2010 resulting in fixed expenses having a greater impact on the gross profit
percentage in 2010.
Cost of services increased by $1.2 million, or 374.3%, to $1.5 million, in the three
months ended June 30, 2010 from $0.3 million in the same period in 2009. Gross profit for
services was $2.7 million in 2010 compared to $0.6 million in 2009. The increase in gross
profit was attributable to a gross profit contribution of $2.2 million from AI offset by
a decrease of $0.1 million in the IDS gross profit. As a percentage of service revenues,
gross profit decreased to 63.4% in 2010 from 64.6% in 2009. The decrease in gross profit
as a percent of service revenue was due to a decrease in the IDS gross profit percentage
to 57.9% in 2010 from 64.6% in 2009 and AI service revenue contributing a higher gross
profit percentage of 64.7% in 2010. The gross margin decrease in the IDS gross profit
margin was primarily due to a reduction in service revenue with fixed costs remaining
constant driving the margin down.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative
expenses increased by $2.9 million, or 77.7%, to $6.7 million in the three months ended
June 30, 2010 compared to $3.8 million in the same period in 2009. This increase was
primarily attributable to by AI selling, general and administrative expenses of $3.0
million consisting principally of payroll-related expenses of $1.1 million, consulting
expenses of $1.1 million, communications and technology expenses of $0.3 million and
travel expenses of $0.1 million, respectively, partially offset by decreases in
payroll-related and stock-based compensation expense of $0.4 million. As a percentage of
revenues, selling, general and administrative expenses decreased to 111.2% in the three
months ended June 30, 2010 from 140.2% in the same period in 2009, primarily due to the
increase in revenue from the AI acquisition.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased by $0.4
million, or 61.9%, to $1.1 million in the three months ended June 30, 2010 from $0.7
million in the same period in 2009 due primarily due to AI research and development
expenses of $0.6 million consisting principally of payroll-related and consulting
expenses of $0.5 million and $0.1 million, respectively, partially offset by a decrease
in payroll-related and stock compensation expense of $90,000 and consulting expenses of
$56,000. As a percentage of revenues, research and development expenses decreased to
18.6% in the three months ended June 30, 2010 from 25.8% in the same period in 2009,
primarily due to the increase in revenue resulting from the AI acquisition.
INTEREST INCOME. Interest income decreased by $96,000 to $187,000 in the three months
ended June 30, 2010 from $283,000 in the same period in 2009. This decrease was
attributable primarily to the decrease in cash and investments and in the rate of
interest earned on the Companys cash and investments.
INTEREST EXPENSE. Interest expense decreased by $18,000 to $25,000 in the three months
ended June 30, 2010 from $43,000 in the same period in 2009. This decrease was due to the
principal reduction in Companys line of credit borrowing facility.
31
OTHER INCOME/EXPENSE. Other income of $4,000 in the three months ended June 30, 2010
decreased $416,000 from other income of $420,000 in the same period in 2009. The decrease
consists principally of the change in the fair value of the Companys investment in
auction-rate securities and the auction-rate securities right.
NET LOSS. Net loss was $4.0 million, or $(0.36) per basic and diluted share, for the
three months ended June 30, 2010 as compared to net loss of $2.3 million, or $(0.21) per
basic and diluted share, for the same period in 2009. The increase in the net loss was
due primarily to the reasons described above.
Six Months Ended June 30, 2010 Compared to Six Months Ended June 30, 2009
REVENUES. Revenues increased by $6.5 million, or 116%, to $12.1 million in the six months
ended June 30, 2010 from $5.6 million in the same period in 2009. The increase in revenue
is principally attributable to revenue of $7.8 million from AI, which was acquired on
January 7, 2010.
Revenues from products increased by $0.7 million, or 22.3%, to $3.9 million in the
six months ended June 30, 2010 from $3.1 million in the same period in 2009. Overall, the
increase in revenues was attributable to the AI product revenue of $1.0 million, which
consists principally of $0.4 million of revenue from Wal-Mart Stores, Inc., offset by a
decrease in IDS product revenue of $0.3 million resulting principally from decreased
product sales to the United States Postal Service and Wal-Mart Stores, Inc.
Revenues from services increased by $5.8 million, or 235.6%, to $8.3 million in the
six months ended June 30, 2010 from $2.5 million in the same period in 2009. The
increase in service revenue is primarily attributable to AI service revenue of $6.8
million which consists principally of Wal-Mart Stores, Inc. and GE Trailer Fleet Services
revenue of $2.9 million and $0.8 million, respectively, partially offset by a decrease in
IDS service revenue of $1.0 million resulting from the amount of services rendered to the
United States Postal Service and Wal-Mart Stores, Inc.
COST OF REVENUES. Cost of revenues increased by $2.5 million, or 100.8%, to $5.1 million
in the six months ended June 30, 2010 from $2.6 million for the same period in 2009. The
increase is attributable to the increase in revenue in 2010 from the acquisition of AI.
Gross profit was $7.0 million in 2010 compared to $3.1 million in 2009. As a percentage
of revenues, gross profit increased to 57.6% in 2010 from 54.5% in 2009.
Cost of products increased by $0.1 million, or 9%, to $1.8 million in the six months
ended June 30, 2010 from $1.7 million in the same period in 2009. Gross profit for
products was $2.0 million in 2010 compared to $1.5 million in 2009. The increase in gross
profit was attributable to a contribution of $0.7 million from AI offset by a decrease of
$0.2 million in the IDS gross profit. As a percentage of product revenues, gross profit
increased to 52.2% in 2010 from 46.4% in 2009. The increase in gross profit as a percent
of product revenue was due to AI product revenue contributing a higher gross profit
percentage of 71.5% in 2010.
Cost of services increased by $2.4 million, or 278.9%, to $3.3 million, in the six
months ended June 30, 2010 from $0.9 million in the same period in 2009. Gross profit for
services was $5.0 million in 2010 compared to $1.6 million in 2009. The increase in gross
profit was attributable to a gross profit contribution of $4.2 million from AI partially
offset by a decrease of $0.8 million in the IDS gross profit. As a percentage of service
revenues, gross profit decreased to 60.2% in 2010 from 64.8% in 2009. The decrease in
gross profit as a percent of service revenue was due to a decrease in the IDS gross
profit percentage to 54.7% in 2010 from 64.8% in 2009 and AI service revenue contributing
a higher gross profit percentage of 60.2% in 2010. The gross margin decrease in the IDS
gross profit margin was primarily due to a reduction in service revenue with fixed costs
remaining constant driving the margin down.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative
expenses increased by $5.2 million, or 65.1%, to $13.2 million in the six months ended
June 30, 2010 compared to $8.0 million in the same period in 2009. This increase was
primarily attributable to by AI selling, general and administrative expenses of $5.5
million consisting principally of payroll-related expenses of $2.1 million, consulting
expenses of $1.9 million, travel expenses of $0.3 million and communication and
technology expenses $0.5 million, respectively, partially offset by decreases in payroll
related and stock-based compensation expense of $0.8 million. As a percentage of
revenues, selling, general and administrative expenses decreased to 108.5% in the six
months ended June 30, 2010 from 142.0% in the same period in 2009, primarily due to the
increase in revenue resulting from the AI acquisition.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses increased by $0.9
million, or 64.7%, to $2.3 million in the six months ended June 30, 2010 from $1.4
million in the same period in 2009 due primarily to AI research and development expenses
of $1.2 million consisting principally of payroll-related and consulting expenses of $0.9
million and $0.2 million, respectively, offset by a decrease in payroll-related and stock
compensation expense of $0.2 million and consulting expenses of $0.1 million. As a
percentage of revenues, research and development expenses decreased to 18.7% in the six
months ended June 30, 2010 from 24.6% in the same period in 2009, primarily due to the
increase in revenue resulting from the AI acquisition.
32
INTEREST INCOME. Interest income decreased by $234,000 to $396,000 in the six months
ended June 30, 2010 from $630,000 in the same period in 2009. This decrease was
attributable primarily to the decrease in cash and investments and in the rate of
interest earned on the Companys cash and investments.
INTEREST EXPENSE. Interest expense of $55,000 increased by $12,000 in the six months
ended June 30, 2010 from $43,000 in the same period in 2009. This increase was due to
interest expense incurred on the Companys line of credit borrowing facility, which was
not in place until March 2009.
OTHER INCOME/EXPENSE. Other income of $5,000 in the six months ended June 30, 2010
decreased $307,000 from other income of $312,000 in the same period in 2009. The increase
consists principally of the change in the fair value of the Companys investment in
auction-rate securities and the auction-rate securities right.
NET LOSS. Net loss was $8.1 million, or $(0.72) per basic and diluted share, for the six
months ended June 30, 2010 as compared to net loss of $5.4 million, or $(0.49) per basic
and diluted share, for the same period in 2009. The increase in the net loss was due
primarily to the reasons described above.
Liquidity and Capital Resources
Historically, the Companys capital requirements have been funded primarily from the net
proceeds from the sale of its securities, including the sale of its common stock upon the
exercise of options and warrants. As of June 30, 2010, the Company had cash and
marketable securities of $28.3 million, which include auction-rate securities and
auction-rate security rights of $9.0 million and working capital of $32.7 million
compared to $60.1 million and $47.7 million, respectively, as of December 31, 2009.
Operating Activities
Net cash used in operating activities was $5.5 million for the six months ended June 30,
2010, compared to net cash used in operating activities of $1.8 million for the same
period in 2009. The net cash used in operating activities for the six months ended June
30, 2010 reflects a net loss of $8.1 million and includes non-cash charges of $0.9
million for stock-based compensation and $1.0 million for depreciation and amortization
expense. Changes in working capital items, net of $5.3 million of working capital
acquired in the AI transaction, included:
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a decrease in accounts receivable of $0.6 million resulting from increased cash collections; |
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an increase in deferred costs, prepaid expenses and other assets of $1.7 million; |
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an increase in deferred revenue of $0.9 million; |
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a decrease in inventory of $1.1 million; and |
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a decrease in accounts payable and accrued expenses of $0.4 million, primarily due to the
timing of the payments to our vendors. |
Investing Activities
Net cash provided by investing activities was $3.3 million for the six months ended June
30, 2010, compared to net cash used in investing activities of $5.0 million for the same
period in 2009. The change was due primarily to $15.0 million used for the purchase of AI
and $1.0 million in fixed asset additions partially offset by a net increase in
redemptions of investments of $19.3 million.
Financing Activities
Net cash used in financing activities was $10.5 million for the six months ended June 30,
2010, compared to net cash provided by financing activities of $12.7 million for the same
period in 2009. The decrease was due to principal payments on the UBS line of credit of
$10.5 million in 2010 and the borrowing of $12.9 million from the UBS line of credit
facility in 2009.
33
Capital Requirements
We believe that with the proceeds received from our public offering that was completed by
us in March 2006 and the cash we have on hand we will have sufficient funds available to
cover our capital requirements for at least the next 12 months.
Our capital requirements depend on a variety of factors, including, but not limited to,
the length of the sales cycle, the rate of increase or decrease in our existing business
base, the success, timing, and amount of investment required to bring new products to
market, revenue growth or decline and potential acquisitions. Failure to generate
positive cash flow from operations will have a material adverse effect on our business,
financial condition and results of operations. We may determine in the future that we
require additional funds to meet our long-term strategic objectives, including for the
completion of potential acquisitions. Any additional equity financing may be dilutive to
stockholders, and debt financing, if available, may involve significant restrictive
covenants, and we cannot assure you that such financing will be extended on terms
acceptable to us, or at all.
At December 31, 2009 and June 30, 2010, we held approximately $19.4 million and $9.0
million fair value, respectively, in investments in ARS and ARSR. The Company purchased
all the ARS it holds from UBS. These ARS represent interests in collateralized pools of
student loan receivables issued by agencies established by counties, cities, states and
other municipal entities within the United States. Liquidity for these ARS is typically
provided by an auction process that resets the applicable interest rate at pre-determined
intervals. Starting in February 2008 and continuing into 2010, these securities failed to
sell at auction. Holders of the securities continue to receive interest on the
investments, and the securities continue to be auctioned at the pre-determined intervals
(typically every 28 days) until the auction succeeds, the issuer calls the securities, or
they mature. These failed auctions represent liquidity risk exposure and are not defaults
or credit events. A decline in the value of these securities that is not temporary could
materially adversely affect our liquidity and income. During June and July 2010, the
Company put back all of the ARS to UBS, as described below.
In October 2008, we received a non-transferable offer (the Offer) from UBS for a put
right (the ARSR) permitting the Company to sell all of its ARS to UBS at a future date
(any time during a two-year period beginning June 30, 2010). The Offer also included a
commitment to loan the Company 75% of the UBS-determined value of the ARS at any time
until the put is exercised at a variable interest rate that will equal the lesser of: (i)
the applicable reference rate plus a spread set forth in the applicable credit agreement
and (ii) the then-applicable weighted average interest or dividend rate paid to the
Company by the issuer of the ARS that is pledged to UBS as collateral. In November 2008,
the Company accepted the Offer. In exchange for the Offer, the Company provided UBS with
a general release of claims (other than certain consequential damages claims) concerning
the Companys ARS and granted UBS the right to purchase the Companys ARS at any time for
full par value. In June 2010 we exercised our right under the ARSR to put back the ARS to
UBS in June 2010. During June and July 2010, UBS repurchased the outstanding ARS at par
value.
In March 2009, the Company borrowed $12,900,000 (which amount was equal to 75% of the
UBS-determined value of the ARS) against the UBS line of credit facility. Principal
payments from the ARS maturities reduced this obligation to $1,161,000 at June 30, 2010.
This line of credit facility is payable on demand. The Company is paying interest on this
obligation based upon the methodology described above, which is partially offset by
interest earned on the underlying ARS.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have, or are reasonably likely to
have, a current or future effect on our financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.
34
Contractual Obligations
As of June 30, 2010, there have been no material charges in contractual obligations as
disclosed under the caption Contractual Obligations in Item 7 of our Annual Report on
Form 10-K for the fiscal year ended December 31, 2009, except as noted below.
On May 10, 2010, the Company entered into an office lease agreement for approximately
21,400 leasable square feet, which includes office space, storage space and data/server
space, in Woodcliff Lake, New Jersey, to be used as the Companys corporate headquarters.
Occupancy is expected to occur during the third quarter of 2010. The base rent for the
leased premises varies over the term of the lease and generally ranges from approximately
$457,200 to $534,700 per year. The Company also will be responsible for its pro rata
share of any operating expenses, taxes and insurance expenses incurred in connection with
the office building in which the leased premises are located. The initial term of the
lease agreement is for a period of ten years and seven months, and is scheduled to
commence on July 15, 2010 and to expire on February 28, 2021. Under the lease agreement,
the Company has the option to extend the term for up to two subsequent five-year periods,
provided that the base rent during any extension term will be at a market rate.
Inflation
Inflation has not had, nor is it expected to have, a material impact on our consolidated
financial results.
Impact of Recently Issued Accounting Pronouncements
The Company is subject to recently issued accounting standards, accounting guidance and
disclosure requirements. Note 27, Recent Accounting Standards, of Notes to Condensed
Consolidated Financial Statements, which is contained in Item 1 of Part I of this
Quarterly Report on Form 10-Q, describes these new accounting standards and is
incorporated herein by reference.
35
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Item 3. |
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Quantitative and Qualitative Disclosures About Market Risk |
We are subject to market risk from changes in interest rates, which could affect our
future results of operations and financial condition. We manage our exposure to these
risks through our regular operating and financing activities. As of June 30, 2010, we had
cash, cash equivalents and marketable securities of $28.3 million.
Our cash and cash equivalents consist of cash, money market funds, and short-term
investments with original maturities of three months or less. As of June 30, 2010, the
carrying value of our cash and cash equivalents approximated fair value. In a declining
interest rate environment, as short-term investments mature, reinvestment occurs at less
favorable market rates, negatively impacting future investment income. We maintain our
cash and cash equivalents with major financial institutions; however, our cash and cash
equivalent balances with these institutions exceed the Federal Deposit Insurance
Corporation (FDIC) insurance limits. While we monitor on a systematic basis the cash
and cash equivalent balances in our operating accounts and adjust the balances as
appropriate, these balances could be impacted if one or more of the financial
institutions with which we deposit fails or is subject to other adverse conditions in the
financial or credit markets. To date, we have experienced no loss of principal or lack of
access to our invested cash or cash equivalents; however, we can provide no assurance
that access to our invested cash and cash equivalents will not be affected if the
financial institutions in which we hold our cash and cash equivalents fail or the
financial and credit markets continue to deteriorate.
At June 30, 2010, we held approximately $9.0 million fair value, respectively, in
investments in ARS and ARSR. The Company purchased all the ARS it holds from UBS. These
ARS represent interests in collateralized pools of student loan receivables issued by
agencies established by counties, cities, states and other municipal entities within the
United States. Liquidity for these ARS is typically provided by an auction process that
resets the applicable interest rate at pre-determined intervals. Starting in February
2008 and continuing into 2010, these securities failed to sell at auction. Holders of the
securities continue to receive interest on the investments, and the securities continue
to be auctioned at the pre-determined intervals (typically every 28 days) until the
auction succeeds, the issuer calls the securities, or they mature. These failed auctions
represent liquidity risk exposure and are not defaults or credit events. A decline in the
value of these securities that is not temporary could materially adversely affect our
liquidity and income. During June and July 2010, the Company put back all of the ARS to
UBS as described below.
In October 2008, we received a non-transferable offer (the Offer) from UBS for a put right
(the ARSR) permitting the Company to sell all of its ARS to UBS at a future date (any time
during a two-year period beginning June 30, 2010). The Offer also included a commitment to loan
the Company 75% of the UBS-determined value of the ARS at any time until the put is exercised at
a variable interest rate that will equal the lesser of: (i) the applicable reference rate plus a
spread set forth in the applicable credit agreement and (ii) the then-applicable weighted
average interest or dividend rate paid to the Company by the issuer of the ARS that is pledged
to UBS as collateral. In November 2008, we accepted the Offer. In exchange for the Offer, the
Company provided UBS with a general release of claims (other than certain consequential damages
claims) concerning the Companys ARS and granted UBS the right to purchase the Companys ARS at
any time for full par value. In June 2010, we exercised our right under the ARSR to put back the
ARS to UBS. During June and July 2010, UBS repurchased the remaining ARS at par value.
36
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Item 4. |
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Controls And Procedures |
a. Disclosure controls and procedures.
During the six months ended June 30, 2010, our management, including the principal
executive officer and principal financial officer, evaluated our disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act
of 1934, as amended (the Exchange Act)) related to the recording, processing,
summarization and reporting of information in our reports that we file with the
Securities and Exchange Commission (SEC). These disclosure controls and procedures have
been designed to ensure that material information relating to us, including our
subsidiaries, is made known to our management, including these officers, by other of our
employees, and that this information is recorded, processed, summarized, evaluated and
reported, as applicable, within the time periods specified in the SECs rules and forms.
Due to the inherent limitations of control systems, not all misstatements may be
detected. These inherent limitations include the realities that judgments in
decision-making can be faulty and that breakdowns can occur because of simple error or
mistake. Additionally, controls can be circumvented by the individual acts of some
persons, by collusion of two or more people, or by management override of the control.
Our controls and procedures can only provide reasonable, not absolute, assurance that the
above objectives have been met.
Based on their evaluation as of June 30, 2010, our principal executive officer and
principal financial officer have concluded that our disclosure controls and procedures
(as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) are effective as of
June 30, 2010 to reasonably ensure that the information required to be disclosed by us in
the reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms and that
information required to be disclosed by us in the reports we file or submit under the
Exchange Act is accumulated and communicated to our management, including our principal
executive and principal financial officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure.
b. Changes in internal controls over financial reporting.
Except as set forth below, there have been no changes in our internal control over
financial reporting that occurred during the six months ended June 30, 2010 that have
materially affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
On January 7, 2010, we completed our acquisition of Asset Intelligence, LLC. We are
currently integrating policies, processes, personnel, technology and operations for the
combined company. Management will continue to evaluate our internal control over
financial reporting as we execute integration activities.
37
PART II OTHER INFORMATION
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Item 1. |
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Legal Proceedings |
On May 21, 2010, Crown Equipment Corporation (herein Crown) filed a Complaint in the Southern
District of Ohio against the Company in accordance with the Declaratory Judgment Act (Case
Number 2:10cv452). In the Complaint, Crown alleged that U.S. Patent No. 7,656,271, owned by the
Company, is both invalid and not infringed by Crowns InfoLink product. The Company is
currently in the process of preparing an Answer or otherwise moving to dismiss the Complaint on
or before the September 21, 2010 due date. The Company intends to provide a vigorous defense to
this litigation, however, we cannot predict the outcome and amount, if any, of this lawsuit.
Additional information on I.D. Systems commitments and contingencies can be found in I.D.
Systems Annual Report on Form 10-K for the year ended December 31, 2009.
In addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, Item 1A. Risk Factors, in the Companys
Annual Report on Form 10-K for the year ended December 31, 2009, as such factors could
materially affect the Companys business, financial condition, and future results. In the
three months ended June 30, 2010, there were no material changes to the risk factors
disclosed in the Companys 2009 Annual Report on Form 10-K. The risks described in the
Annual Report on Form 10-K are not the only risks that the Company faces. Additional
risks and uncertainties not currently known to the Company, or that the Company currently
deems to be immaterial, also may have a material adverse impact on the Companys
business, financial condition, or results.
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Item 2. |
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Unregistered Sales of Equity Securities and Use of Proceeds |
On May 3, 2008, the Company announced that its Board of Directors authorized the
repurchase of issued and outstanding shares of the Companys common stock having an
aggregate value of up to $10,000,000 pursuant to a share repurchase program established
under Rule 10b-18 of the Exchange Act. The amount and timing of such repurchases are
dependent upon the price and availability of shares, general market conditions and the
availability of cash, as determined in the discretion of our management. The repurchases
are funded from our working capital. Our share repurchase program does not have an
expiration date, and we may discontinue or suspend the share repurchase program at any
time. All shares of common stock repurchased under our share repurchase program are held
as treasury stock.
The Company did not purchase any shares of its common stock under the repurchase program
during the three months ended June 30, 2010.
The following exhibits are filed with this Quarterly Report on Form 10-Q:
Exhibits:
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10.1 |
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Office Lease Agreement, dated as of May 10, 2010, by and between IPC New York Properties, LLC, as
Landlord and I.D. Systems, Inc., as Tenant (incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q of I.D. Systems, Inc. (File No. 001-15087) filed with the SEC on May
17, 2010). |
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31.1 |
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Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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31.2 |
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Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32 |
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Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. |
38
Signatures
In accordance with the requirements of the Exchange Act, the Registrant has caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
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I.D. SYSTEMS, INC.
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Dated: August 13, 2010 |
By: |
/s/ Jeffrey M. Jagid
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Jeffrey M. Jagid |
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Chief Executive Officer
(Principal Executive Officer) |
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Dated: August 13, 2010 |
By: |
/s/ Ned Mavrommatis
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Ned Mavrommatis |
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Chief Financial Officer
(Principal Financial Officer) |
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39
INDEX TO EXHIBITS
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10.1 |
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Office Lease Agreement, dated as of May 10, 2010, by and between IPC New York Properties, LLC, as
Landlord and I.D. Systems, Inc., as Tenant (incorporated by reference to Exhibit 10.1 to the
Quarterly Report on Form 10-Q of I.D. Systems, Inc. (File No. 001-15087) filed with the SEC on May
17, 2010). |
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31.1 |
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Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
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31.2 |
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Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
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32 |
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Certification of Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002. |
40