x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
For
the transition period from ___________________________ to
____________________
|
|
Commission
File
Number: 1-15087
|
Delaware
|
22-3270799
|
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification No.)
|
|
One University Plaza,
Hackensack,
New
Jersey |
07601
|
|
(Address
of principal executive
offices)
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(Zip
Code)
|
Large
accelerated filer
o
|
Accelerated
filer
x
|
Non-accelerated
filer
o (Do not check if smaller reporting
company)
|
|
Smaller
reporting company
o
|
Page
|
|||
PART
I - FINANCIAL INFORMATION
|
|||
Item
1. Condensed Consolidated Financial Statements
|
|||
Condensed
Consolidated Balance Sheets as of December 31, 2008
and
June 30, 2009 (unaudited)
|
1
|
||
Condensed
Consolidated Statements of Operations (unaudited) -
for
the three months and six months ended June 30, 2008 and
2009
|
2
|
||
Condensed
Consolidated Statement of Changes in Stockholders’ Equity (unaudited)
-
for
the six months ended June 30, 2009
|
3
|
||
Condensed
Consolidated Statements of Cash Flows (unaudited) -
for
the six months ended June 30, 2008 and 2009
|
4
|
||
Notes
to Unaudited Condensed Consolidated Financial Statements
|
5
|
||
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
15
|
|
|
Item
3. Quantitative and Qualitative Disclosures About Market
Risk
|
23
|
||
Item
4. Controls and Procedures
|
24
|
||
PART
II - OTHER INFORMATION
|
|||
Item
1a. Risk Factors
|
25
|
||
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
25
|
||
Item 4. Submission of Matters to a Vote of Security Holders | 25 | ||
Item
6. Exhibits
|
25
|
||
Signatures
|
26
|
December 31, 2008*
|
June 30, 2009
|
|||||||
|
(Unaudited)
|
|||||||
ASSETS
|
||||||||
Cash
and cash equivalents
|
$ | 12,558,000 | $ | 18,436,000 | ||||
Restricted
cash
|
230,000 | - | ||||||
Investments
– short term
|
8,550,000 | 12,357,000 | ||||||
Accounts
receivable, net
|
8,245,000 | 2,680,000 | ||||||
Unbilled
receivables
|
168,000 | 124,000 | ||||||
Inventory,
net
|
3,273,000 | 5,509,000 | ||||||
Interest
receivable
|
217,000 | 171,000 | ||||||
Prepaid
expenses and other current assets
|
261,000 | 255,000 | ||||||
Total
current assets
|
33,502,000 | 39,532,000 | ||||||
Investments
– long term
|
34,911,000 | 36,162,000 | ||||||
Fixed
assets, net
|
1,050,000 | 1,051,000 | ||||||
Goodwill
|
200,000 | 200,000 | ||||||
Other
intangible assets
|
178,000 | 178,000 | ||||||
Other
assets
|
107,000 | 107,000 | ||||||
$ | 69,948,000 | $ | 77,230,000 | |||||
LIABILITIES
|
||||||||
Accounts
payable and accrued expenses
|
$ | 2,175,000 | $ | 1,223,000 | ||||
Line
of credit
|
- | 12,666,000 | ||||||
Deferred
revenue
|
424,000 | 253,000 | ||||||
Total
current liabilities
|
2,599,000 | 14,142,000 | ||||||
Deferred
revenue
|
231,000 | 388,000 | ||||||
Deferred
rent
|
33,000 | 22,000 ,000 | ||||||
Total
liabilities
|
2,863,000 | 14,552,000 | ||||||
STOCKHOLDERS'
EQUITY
|
||||||||
Preferred
stock; authorized 5,000,000 shares, $.01 par value; none
issued
|
—
|
— | ||||||
Common
stock; authorized 50,000,000 shares, $.01 par value; 12,082,000 and
12,283,000 shares issued at December 31, 2008 and June 30, 2009,
respectively; shares outstanding, 10,893,000 and 11,074,000 at December
31, 2008 and June 30, 2009, respectively
|
120,000 | 120,000 | ||||||
Additional
paid-in capital
|
101,437,000 | 102,495,000 | ||||||
Accumulated
deficit
|
(23,667,000 | ) | (29,063,000 | ) | ||||
Accumulated
other comprehensive income
|
46,000 | 42,000 | ||||||
77,936,000 | 73,594,000 | |||||||
Treasury
stock; 1,189,000 shares and 1,209,000 shares at cost at December 31, 2008
and June 30, 2009, respectively
|
(10,851,000 | ) | (10,916,000 | ) | ||||
Total
stockholders’ equity
|
67,085,000 | 62,678,000 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 69,948,000 | $ | 77,230,000 |
Three months ended
June 30,
|
Six months ended
June 30,
|
|||||||||||||||
2008
|
2009
|
2008
|
2009
|
|||||||||||||
Revenue:
|
||||||||||||||||
Products
|
$ | 3,471,000 | $ | 1,771,000 | $ | 6,724,000 | $ | 3,149,000 | ||||||||
Services
|
1,989,000 | 913,000 | 3,064,000 | 2,469,000 | ||||||||||||
5,460,000 | 2,684,000 | 9,788,000 | 5,618,000 | |||||||||||||
Cost
of Revenue:
|
||||||||||||||||
Cost
of products
|
1,678,000 | 890,000 | 3,214,000 | 1,688,000 | ||||||||||||
Cost
of services
|
917,000 | 323,000 | 1,597,000 | 870,000 | ||||||||||||
2,595,000 | 1,213,000 | 4,811,000 | 2,558,000 | |||||||||||||
Gross
Profit
|
2,865,000 | 1,471,000 | 4,977,000 | 3,060,000 | ||||||||||||
Selling,
general and administrative expenses
|
4,278,000 | 3,764,000 | 8,539,000 | 7,975,000 | ||||||||||||
Research
and development expenses
|
708,000 | 691,000 | 1,419,000 | 1,380,000 | ||||||||||||
Loss
from operations
|
(2,121,000 | ) | (2,984,000 | ) | (4,981,000 | ) | (6,295,000 | ) | ||||||||
Interest
income
|
593,000 | 283,000 | 1,419,000 | 630,000 | ||||||||||||
Interest
expense
|
— | (43,000 | ) | — | (43,000 | ) | ||||||||||
Other
income, net
|
— | 420,000 | — | 312,000 | ||||||||||||
Net
loss
|
$ | (1,528,000 | ) | $ | (2,324,000 | ) | $ | (3,562,000 | ) | $ | (5,396,000 | ) | ||||
Net
loss per share – basic and diluted
|
$ | (0.14 | ) | $ | (0.21 | ) | $ | (0.33 | ) | $ | (0.49 | ) | ||||
Weighted
average common shares outstanding – basic and diluted
|
10,857,000 | 10,916,000 | 10,869,000 | 10,906,000 |
Accumulated
|
||||||||||||||||||||||||||||
Common
Stock
|
Additional
|
Other
|
||||||||||||||||||||||||||
Number
of
|
Paid-in
|
Accumulated
|
Comprehensive
|
Treasury
|
Stockholders'
|
|||||||||||||||||||||||
Shares
|
Amount
|
Capital
|
Deficit
|
Income
(loss)
|
Stock
|
Equity
|
||||||||||||||||||||||
Balance
at December 31, 2008
|
12,082,000 | $ | 120,000 | $ | 101,437,000 | $ | (23,667,000 | ) | $ | 46,000 | $ | (10,851,000 | ) | $ | 67,085,000 | |||||||||||||
Net
loss
|
(5,396,000 | ) | (5,396,000 | ) | ||||||||||||||||||||||||
Comprehensive
loss - unrealized loss on investments
|
(6,000 | ) | (6,000 | ) | ||||||||||||||||||||||||
Foreign
currency translation adjustment
|
|
2,000 | 2,000 | |||||||||||||||||||||||||
Total
comprehensive loss
|
(5,400,000 | ) | ||||||||||||||||||||||||||
Shares
withheld pursuant to issuance
|
||||||||||||||||||||||||||||
of
restricted and performance stock
|
(65,000 | ) | (65,000 | ) | ||||||||||||||||||||||||
Issuance
of restricted and performance stock
|
201,000 | |||||||||||||||||||||||||||
Stock
based compensation – restricted stock
|
78,000 | 78,000 | ||||||||||||||||||||||||||
Stock
based compensation - options
|
980,000 | 980,000 | ||||||||||||||||||||||||||
Balance
at June 30, 2009 (Unaudited)
|
12,283,000 | $ | 120,000 | $ | 102,495,000 | $ | (29,063,000 | ) | $ | 42,000 | $ | (10,916,000 | ) | $ | 62,678,000 |
Six months ended
June 30,
|
||||||||
2008
|
2009
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
loss
|
$
|
(3,562,000
|
)
|
$
|
(5,396,000
|
)
|
||
Adjustments
to reconcile net loss to cash used in operating
activities:
|
||||||||
Accrued
interest income
|
33,000
|
46,000
|
||||||
Stock-based
compensation expense
|
1,642,000
|
1,058,000
|
||||||
Depreciation
and amortization
|
283,000
|
277,000
|
||||||
Change
in fair value of investments
|
—
|
(312,000
|
) | |||||
Deferred
rent expense
|
(11,000
|
)
|
(11,000
|
)
|
||||
Deferred
revenue
|
590,000
|
(14,000
|
) | |||||
Changes
in:
|
||||||||
Restricted
cash
|
—
|
230,000
|
||||||
Accounts
receivable
|
(2,671,000
|
)
|
5,565,000
|
|||||
Unbilled
receivables
|
(914,000
|
)
|
44,000
|
|||||
Inventory
|
1,172,000
|
(2,236,000
|
)
|
|||||
Prepaid
expenses and other assets
|
(10,000
|
) |
6,000
|
|||||
Accounts
payable and accrued expenses
|
(910,000
|
)
|
(1,017,000
|
)
|
||||
Net
cash used in operating activities
|
(4,358,000
|
)
|
(1,760,000
|
)
|
||||
Cash
flows from investing activities:
|
||||||||
Purchase
of fixed assets
|
(77,000
|
)
|
(278,000
|
)
|
||||
Business
acquisition
|
(573,000
|
) |
—
|
|||||
Purchase
of investments
|
(4,526,000
|
)
|
(34,607,000
|
)
|
||||
Maturities
of investments
|
18,955,000
|
29,855,000
|
||||||
Net
cash provided by (used in) investing activities
|
13,779,000
|
(5,030,000
|
)
|
|||||
Cash
flows from financing activities:
|
||||||||
Repayment
of term loan
|
(19,000
|
)
|
—
|
|||||
Proceeds
from exercise of stock options
|
1,106,000
|
—
|
||||||
Purchase
of treasury shares
|
(3,161,000
|
)
|
—
|
|||||
Borrowing
on line of credit
|
—
|
12,900,000
|
||||||
Principal
payments on line of credit
|
—
|
(234,000
|
)
|
|||||
Net
cash (used in) provided by financing activities
|
(2,074,000
|
)
|
12,666,000
|
|||||
Effects
of foreign currency translation adjustment
|
—
|
2,000
|
||||||
Net
increase in cash and cash equivalents
|
7,347,000
|
5,878,000
|
||||||
Cash
and cash equivalents - beginning of period
|
5,103,000
|
12,558,000
|
||||||
Cash
and cash equivalents - end of period
|
$
|
12,450,000
|
18,436,000
|
|||||
Supplemental
disclosure of cash flow information:
|
||||||||
Cash
paid for:
|
||||||||
Interest
|
$
|
—
|
$
|
43,000
|
||||
Noncash
activities:
|
||||||||
Unrealized
loss on investments
|
$
|
(1,462,000
|
)
|
$
|
(6,000
|
)
|
||
Shares
withheld pursuant to stock issuance
|
$
|
89,000
|
$
|
65,000
|
Unrealized
|
||||||||||||
Fair Value at
|
Fair Value at
|
Gain
|
||||||||||
Three months ended June 30, 2009
|
March 31, 2009
|
June 30, 2009
|
(Loss)
|
|||||||||
Auction
Rate Securities
|
$ | 18,179,000 | $ | 18,681,000 | $ | 502,000 | ||||||
Auction
Rate Securities – Rights
|
1,800,000 | 1,718,000 | (82,000 | ) | ||||||||
Net
unrealized gain recognized for the three months ended June 30,
2009
|
$ | 19,979,000 | $ | 20,399,000 | $ | 420,000 |
Unrealized
|
||||||||||||
Fair Value at
|
Fair Value at
|
Gain
|
||||||||||
Six months ended June 30, 2009
|
December 31, 2008
|
June 30, 2009
|
(Loss)
|
|||||||||
Auction
Rate Securities
|
$ | 18,117,000 | $ | 18,681,000 | $ | 564,000 | ||||||
Auction
Rate Securities – Rights
|
1,970,000 | 1,718,000 | (252,000 | ) | ||||||||
Net
unrealized gain recognized for the six months ended June 30,
2009
|
$ | 20,087,000 | $ | 20,399,000 | $ | 312,000 |
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
|||||||||||||||
2008
|
2009
|
2008
|
2009
|
|||||||||||||
Basic and diluted loss per
share
|
||||||||||||||||
Net
loss
|
$ | (1,528,000 | ) | $ | (2,324,000 | ) | $ | (3,562,000 | ) | $ | (5,396,000 | ) | ||||
Weighted
average shares outstanding
|
10,857,000 | 10,916,000 | 10,869,000 | 10,906,000 | ||||||||||||
Basic
and diluted net loss per share
|
$ | (0.14 | ) | $ | (0.21 | ) | $ | (0.33 | ) | $ | (0.49 | ) |
Weighted
|
|||||||||||||
Weighted
|
Average
|
||||||||||||
Average
|
Remaining
|
Aggregate
|
|||||||||||
Exercise
|
Contractual
|
Intrinsic
|
|||||||||||
Options
|
Price
|
Term
|
Value
|
||||||||||
Outstanding
at beginning of year
|
2,601,000
|
$
|
9.81
|
||||||||||
Granted
|
317,000
|
3.58
|
|||||||||||
Exercised
|
-
|
-
|
|||||||||||
Forfeited
|
(92,000
|
)
|
10.92
|
||||||||||
Outstanding
at end of period
|
2,826,000
|
$
|
9.08
|
6
years
|
$
|
70,000
|
|||||||
Exercisable
at end of period
|
1,758,000
|
$
|
9.69
|
4
years
|
$
|
46,000
|
June 30
|
||||||||
2008
|
2009
|
|||||||
Volatility
|
74
|
%
|
72
|
%
|
||||
Expected
life of options
|
5
years
|
5
years
|
||||||
Risk
free interest rate
|
3
|
%
|
2
|
%
|
||||
Dividend
yield
|
0
|
%
|
0
|
%
|
Weighted
|
||||||||
Average
|
||||||||
Non-vested
Shares
|
Grant Date
Fair Value
|
|||||||
Non-vested
at January 1, 2009
|
31,000 | $ | 9.49 | |||||
Granted
|
161,000 | 3.54 | ||||||
Vested
|
(20,000 | ) | 10.55 | |||||
Forfeited
|
- | |||||||
Non-vested
at June 30, 2009
|
172,000 | $ | 3.78 |
§
|
Level
1: Unadjusted quoted prices in active markets for identical assets or
liabilities.
|
§
|
Level
2: Inputs other than quoted prices that are observable for the asset or
liability, either directly or indirectly. These include quoted prices for
similar assets or liabilities in active markets and quoted prices for
identical or similar assets or liabilities in markets that are not
active.
|
§
|
Level
3: Unobservable inputs that reflect the reporting entity’s own
assumptions.
|
Balance at
June 30,
|
Basis of Fair Value Measurements
|
|||||||||||||||
2009
|
Level 1
|
Level 2
|
Level 3
|
|||||||||||||
Assets:
|
||||||||||||||||
Marketable
securities – short term
|
$
|
12,357,000
|
$
|
12,357,000
|
$
|
—
|
$
|
—
|
||||||||
Marketable
securities – long term
|
36,162,000
|
15,763,000
|
—
|
20,399,000
|
||||||||||||
$
|
48,519,000
|
$
|
28,120,000
|
$
|
—
|
$
|
20,399,000
|
Fair
value, January 1, 2009
|
$
|
20,087,000
|
||
Unrealized
gain included in condensed consolidated statement of
operations
|
312,000
|
|||
Fair
value, June 30, 2009
|
$
|
20,399,000
|
·
|
increase
sales of products and services to our existing
customers;
|
·
|
convert
our initial programs into larger or enterprise-wide purchases by our
customers;
|
·
|
increase
market acceptance and penetration of our products;
and
|
·
|
develop
and commercialize new products and
technologies.
|
Three months ended
June 30, |
Six months ended
June 30, |
|||||||||||||||
2008
|
2009
|
2008
|
2009
|
|||||||||||||
Revenue:
|
||||||||||||||||
Products
|
63.6 | % | 66.0 | % | 68.7 | % | 56.1 | % | ||||||||
Services
|
36.4 | 34.0 | 31.3 | 43.9 | ||||||||||||
100.0 | 100.0 | 100.0 | 100.0 | |||||||||||||
Cost
of revenues:
|
||||||||||||||||
Cost
of products
|
30.7 | 33.1 | 32.8 | 30.0 | ||||||||||||
Cost
of services
|
16.8 | 12.0 | 16.3 | 15.5 | ||||||||||||
Total
gross profit
|
52.5 | 54.9 | 50.8 | 54.5 | ||||||||||||
Selling,
general and administrative expenses
|
78.4 | 140.2 | 87.2 | 142.0 | ||||||||||||
Research
and development expenses
|
13.0 | 25.8 | 14.5 | 24.6 | ||||||||||||
Loss
from operations
|
(38.9 | ) | (111.1 | ) | (50.9 | ) | (112.1 | ) | ||||||||
Interest
income, net
|
10.9 | 10.5 | 14.5 | 11.2 | ||||||||||||
Interest
expense
|
— | (1.6 | ) | (0.8 | ) | |||||||||||
Other
income
|
— | 15.6 | — | 5.6 | ||||||||||||
Net
loss
|
(28.0 | )% | (86.6 | )% | (36.4 | )% | (96.0 | )% |
Name
|
Votes For
|
Votes Withheld
|
||
Jeffrey
M. Jagid
|
8,525,120
|
1,699,136
|
||
Kenneth
S. Ehrman
|
9,275,443
|
948,813
|
||
Lawrence
Burstein
|
8,510,165
|
1,714,091
|
||
Harold
D. Copperman
|
9,173,906
|
1,050,350
|
||
Michael
Monaco
|
|
9,299,066
|
|
925,190
|
3.3
|
Form
of Certificate of Designation for the Company’s Series A Junior
Participating Preferred Stock (incorporated by reference to Exhibit 3.3 to
the Company’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 8, 2009).
|
|
4.2
|
|
Rights
Agreement, dated as of July 1, 2009, between the Company and American
Stock Transfer & Trust Company, LLC, as Rights Agent, which includes
the Form of Certificate of Designation for the Series A Junior
Participating Preferred Stock as Exhibit A, the Form of
Right Certificate as Exhibit B and the
Summary of Rights as Exhibit C (incorporated
by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on July 8,
2009).
|
31.1
|
Certification
of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
31.2
|
Certification
of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
32
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002.
|
I.D.
Systems, Inc.
|
|||
Dated:
August 10, 2009
|
By:
|
/s/ Jeffrey
M. Jagid
|
|
Jeffrey
M. Jagid
|
|||
Chief
Executive Officer
(Principal
Executive Officer)
|
Dated:
August 10, 2009
|
By:
|
/s/ Ned
Mavrommatis
|
|
Ned
Mavrommatis
|
|||
Chief
Financial Officer
(Principal
Financial Officer)
|
3.3
|
Form
of Certificate of Designation for the Company’s Series A Junior
Participating Preferred Stock (incorporated by reference to Exhibit 3.3 to
the Company’s Current Report on Form 8-K filed with the Securities and
Exchange Commission on July 8,
2009).
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4.2
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Rights
Agreement, dated as of July 1, 2009, between the Company and American
Stock Transfer & Trust Company, LLC, as Rights Agent, which includes
the Form of Certificate of Designation for the Series A Junior
Participating Preferred Stock as Exhibit A, the Form of
Right Certificate as Exhibit B and the
Summary of Rights as Exhibit C (incorporated
by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K
filed with the Securities and Exchange Commission on July 8,
2009).
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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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32.1
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to Section
906 of the Sarbanes-Oxley Act of
2002.
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