Quarterly report pursuant to Section 13 or 15(d)

Description of the Company and Basis of Presentation

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Description of the Company and Basis of Presentation
9 Months Ended
Sep. 30, 2019
Accounting Policies [Abstract]  
Description of the Company and Basis of Presentation

NOTE 1 - DESCRIPTION OF THE COMPANY AND BASIS OF PRESENTATION

 

Description of the Company

 

On October 3, 2019, pursuant to the transactions (the “Transactions”) contemplated by (i) the Agreement and Plan of Merger, dated as of March 13, 2019 (the “Merger Agreement”), by and among I.D. Systems, Inc., a Delaware corporation (“I.D. Systems”), PowerFleet, Inc., a Delaware corporation and a wholly-owned subsidiary of I.D. Systems prior to the Transactions (“PowerFleet” or the “Company”), Pointer Telocation Ltd., a public company limited by shares formed under the laws of the State of Israel (“Pointer”), Powerfleet Israel Holding Company Ltd., a private company limited by shares formed under the laws of the State of Israel and a wholly-owned subsidiary of PowerFleet (“Pointer Holdco”), and Powerfleet Israel Acquisition Company Ltd., a private company limited by shares formed under the laws of the State of Israel and a wholly-owned subsidiary of Pointer Holdco prior to the Transactions (“Pointer Merger Sub”), and (ii) the Investment and Transaction Agreement, dated as of March 13, 2019, as amended by Amendment No. 1 thereto dated as of May 16, 2019, Amendment No. 2 thereto dated as of June 27, 2019 and Amendment No. 3 thereto dated as of October 3, 2019 (the “Investment Agreement,” and together with the Merger Agreement, the “Agreements”), by and among I.D. Systems, PowerFleet, PowerFleet US Acquisition Inc., a Delaware corporation and a wholly-owned subsidiary of PowerFleet prior to the Transactions (“I.D. Systems Merger Sub”), and ABRY Senior Equity V, L.P., ABRY Senior Equity Co-Investment Fund V, L.P. and ABRY Investment Partnership, L.P. (the “Investors”), I.D. Systems reorganized into a new holding company structure by merging I.D. Systems Merger Sub with and into I.D. Systems, with I.D. Systems surviving as a direct, wholly-owned subsidiary of PowerFleet, and Pointer Merger Sub merged with and into Pointer, with Pointer surviving as a direct, wholly owned subsidiary of Pointer Holdco and an indirect, wholly-owned subsidiary of PowerFleet. Prior to the Transactions, PowerFleet had no material assets, did not operate any business and did not conduct any activities, other than those incidental to its formation and matters contemplated by the Agreements. I.D. Systems was determined to be the accounting acquirer in the Transactions. As a result, the historical financial statements of I.D. Systems for the periods prior to the Transactions are considered to be the historical financial statements of PowerFleet and the Condensed Consolidated Financial Statements only include the financial results for I.D. Systems as of and for the three- and nine-month periods ended September 30, 2019. See Note 23 for additional information regarding the Transactions.

 

I.D. Systems and its subsidiaries (collectively, “I.D. Systems,” “we,” “our” or “us”) develop, market and sell wireless machine-to-machine 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, such as trucks, semi-tractors, dry van trailers, refrigerated trailers, railcars and containers. I.D. Systems’ patented wireless asset management systems utilize radio frequency identification (RFID), Wi-Fi, Bluetooth, satellite or cellular communications, and sensor technology and software to address the needs of organizations to control, track, monitor and analyze their assets. Our cloud-based analytics software application for both industrial trucks and logistics assets is designed to provide a single, integrated view of asset activity across multiple locations, generating enterprise-wide benchmarks and peer-industry comparisons to provide an even deeper layer of insights into asset operations. Analytics determines key performance indicators relating to the performance of managed assets. I.D. Systems’ solutions enable customers to achieve tangible economic benefits by making timely, informed decisions that increase the safety, security, revenue, productivity and efficiency of their operations. I.D. Systems outsources its hardware manufacturing operations to contract manufacturers.

 

I.D. Systems, Inc. was incorporated in Delaware in 1993 and commenced operations in January 1994. PowerFleet, Inc. was incorporated in Delaware in 2019 and commenced operations in October 2019.

 

Basis of Presentation

 

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 (“IDS GmbH”), I.D. Systems (UK) Ltd (formerly Didbox Ltd.) (“IDS Ltd”) and Keytroller, LLC (collectively referred to as “I.D. Systems”). 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 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 I.D. Systems as of September 30, 2019, the consolidated results of its operations for the three- and nine-month periods ended September 30, 2018 and 2019, the consolidated change in stockholders’ equity for the three-month periods ended March 31, June 30, and September 30, 2018 and 2019 and the consolidated cash flows for the nine-month periods ended September 30, 2018 and 2019. The results of operations for the three- and nine-month periods ended September 30, 2019 are not necessarily indicative of the operating results for the full year. These financial statements should be read in conjunction with the audited consolidated financial statements and related disclosures for the year ended December 31, 2018 included in I.D. Systems’ Annual Report on Form 10-K for the year then ended.

 

Certain amounts included in selling, general and administrative expenses in the prior period’s consolidated financial statements have been reclassified to acquisition-related expenses to conform to the current period presentation for comparative purposes.

 

Acquisition

 

On January 30, 2019, I.D. Systems completed the acquisition (the “CarrierWeb US Acquisition”) of substantially all of the assets of CarrierWeb, L.L.C. (“CarrierWeb”), an Atlanta-based provider of real-time in-cab mobile communications technology, electronic logging devices, two-way refrigerated command and control, and trailer tracking. On July 30, 2019, I.D. Systems completed the acquisition (the “CarrierWeb Ireland Acquisition” and together with the CarrierWeb US Acquisition, the “CarrierWeb Acquisitions”) of substantially all of the assets of CarrierWeb Services Ltd. (“CarrierWeb Ireland”), an affiliate of CarrierWeb, from e*freightrac Holding B.V., the owner of the outstanding equity of CarrierWeb Ireland. The assets I.D. Systems acquired in the CarrierWeb Acquisitions will be integrated into the Company’s logistics visibility solutions and product line. The CarrierWeb Acquisitions allow the Company to offer a full complement of highly-integrated logistics technology solutions to its current customers and prospects and immediately add customers and subscriber units.

  

Liquidity

 

As of September 30, 2019, I.D. Systems had cash (including restricted cash) and cash equivalents of $5.9 million and working capital of $11.6 million. The Company’s primary sources of cash are cash flows from operating activities and the Company’s holdings of cash and cash equivalents from the sale of common stock. To date, the Company has not generated sufficient cash flows solely from operating activities to fund its operations.

 

The Company believes that its available working capital, anticipated level of future revenues, expected cash flows from operations and available borrowings under its revolving credit facility with Bank Hapoalim B.M. (see Note 23) will provide sufficient funds to cover capital requirements through at least November 14, 2020.