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ADVANCED ID CORP Files SEC form 10-Q, Quarterly ReportEDGAR Online
Form 10-Q for ADVANCED ID CORP
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19-Nov-2008
Quarterly Report
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion is intended to assist in understanding the financial condition and results of operations of Advanced ID. You should read the following discussion along with our financial statements and related notes included in this Form 10-Q. The following discussion contains forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results, performance and achievements in 2008 and beyond may differ materially from those expressed in, or implied by, these forward looking statements.
Overview.
Advanced ID is a complete solutions provider in the Radio Frequency Identification business with a focus on the tire management industry. Advanced ID is also involved in the tire inspection business through its UK based Pneu-Logic subsidiary. Advanced ID is active in the pet recovery business through its AVID Canada subsidiary in Calgary, Alberta and has developed a UHF RFID reader product line for global supply chain applications. Recently Advanced ID has expanded to other countries in Europe, China and is currently evaluating setting up a minority owned subsidiary in Brazil to address the rapidly growing RFID market in South America.
Results of Operations for the Nine Months Ended September 30, 2008 and September 30, 2007.
The net loss of $1,856,354 for the nine months ended September 30, 2008 was lower by $376,917 compared to last year due to a larger impairment of goodwill in the previous year.
Revenues
Revenues of $934,250 during the nine months ended September 30, 2008 increased by $265,096 or 39.62% from last year. This increase can be attributed to higher bulk tag, reader and revenues from the recently acquired wholly owned subsidiary, Pneu-Logic. These sales increases are attributed to increased sales focus on animal shelters and broadening of sales of readers and sale of newly developed RFID reader, PR500.
We are actively promoting the ISO microchip throughout Canada and Asia. Of the total revenues earned of $934,250 for the nine months ended September 30, 2008, $729,120 or 78.04% were from our companion
14 animal/biological sciences division in Canada and the remainder $205,130 or 21.96% were comprised from our ultra high frequency division with sales throughout the world.
Cost of Revenues
Cost of Revenues of $517,989 for the nine months ended September 30, 2008 increased by $172,945 or 50.12% over same period in the previous year. The increase in Cost of Revenues is attributed to higher sales levels. Gross profit of $416,261 increased by $92,151 from the corresponding nine month period end September 30, 2007. The gross profit margin decreased from 48.44% to 44.56%, reflecting a change in product mix.
Research and Development
Research and development expenses of $34,630 for the nine months ended September 30, 2008 decreased by $162,363 or 82.42% from last year's comparable period. This was a result of the completion of the development of one of Advanced ID's products.
General, administrative and selling expense
For the nine months ended September 30, 2008, general and administrative and selling expenses of $2,104,173 were higher by $369,497 or 21.30% than last year due mainly to the fair value charge to income for options issued in the amount of $273,241 as well as a general increase in operating expenses.
Interest income (expense)
During the nine months ended September 30, 2008, interest expense was $11,344 as compared to income of $521 during the same period last year.
Liquidity and Capital Resources
As at September 30, 2008, we had cash and cash equivalents of $182,217.
During the nine months ended September 30, 2008, net cash used in operating activities of $917,369 was higher by $436,903 or 90.93% as compared to the quarter ended September 30, 2007. The increase in cash used by operating activities during 2008 resulted primarily from an overall increase in cash general and administrative expenses offset in part by lower cash generated from non-cash working capital amounts.
During the nine months ended September 30, 2008, net cash used in investing activities was $93,989 compared to cash used in investing activities of $30,153 for the nine months ended September 30, 2007. The increase of $63,836 was mainly a result of an advance to DDCT for $80,000 during the quarter ended September 30, 2008.
15 During the nine months ended September 30, 2008, net cash provided by financing activities of $1,138,019 was higher by $796,660 or 233.38% as compared to the nine months ended September 30, 2007. The higher cash generated is a result of higher proceeds from sales of stock.
Results of Operations for the Three Months Ended September 30, 2008 and September 30, 2007.
The net loss of $533,255 for the three months ended September 30, 2008 was lower by $492,764 compared to last year due higher research and development costs as well as impairment of goodwill of $486,488 and loss from discontinued operations of $152,194 in the three months ended September 30, 2007.
Revenues
Revenues of $222,229 during the three months ended September 30, 2008 decreased by $65,145 or 22.67% from last year. This decrease can be attributed to declining sales for animal tags due to lack of sales staff, and timing of new orders for tire tags.
Cost of Revenues
Cost of Revenues of $115,613 for the three months ended September 30, 2008 decreased by $34,957 or 23.22% over same period in the previous year. The decrease in Cost of Revenues is attributed to slight changes in the product sales mix, slightly lower sales and the recognition of net revenues on the sales of PLL. Gross profit of $106,616 decreased by $30,188 from the corresponding three month period end September. The gross profit margin increased slightly from 47.60% to 47.98%, reflecting the change in product mix.
Research and Development
Research and development expenses of $224 for the three months ended September 30, 2008 decreased by $94,682 or 99.76% from last year's comparable period.
General, administrative and selling expense
For the three months ended September 30, 2008, general and administrative and selling expenses of $508,796 were comparable to general and administrative and selling expenses of $428,970 for the three months ended September 30, 2007. The difference was mainly due to the cost of the addition of staff in Asia.
Other income (expense)
During the three months ended September 30, 2008, interest expense was $8,383 as compared to $265 during the same period last year.
Liquidity and Capital Resources
Our internal and external sources of liquidity have included cash generated from the exercise of options and warrants, proceeds raised from subscription agreements and private placements, and advances from related parties. We are currently not aware of any trends that are reasonably likely to have a material impact on our liquidity. We are attempting to increase the sales to raise much needed cash for the remainder of the year, which will be supplemented by our efforts to
16 raise cash through the issuance of equities securities. It is our intent to secure a market share in the livestock and inanimate identification industry which we feel will require additional capital over the long term to undertake sales and marketing initiatives, further our research and development, and to manage timing differences in cash flows from the time product is manufactured to the time it is sold and cash is collected from the sale. Our capital strategy is to increase our cash balance through financing transactions, including the issuance of debt and/or equity securities.
Additionally, we will require additional cash resources of $70,000 to fund the remainder of our acquisition of Pneu-Logic as well as $4,800,000 to provide working capital to DDCT as part of the term sheet if the transaction closes, both of which we expect to fund through the issuance of stock.
OFF-BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING INFORMATION
Certain information set forth in this report contains "forward-looking statements" within the meaning of federal securities laws. Forward looking statements include statements concerning our plans, objectives, goals, strategies, future events, future revenues or performance, capital expenditures, and financing needs and other information that is not historical information. When used in this report, the words "estimates," "expects," "anticipates," "forecasts," "plans," "intends," "believes" and variations of such words or similar expressions are intended to identify forward-looking statements. Additional forward- looking statements may be made by us from time to time. All such subsequent forward-looking statements, whether written or oral and whether made by us or on our behalf, are also expressly qualified by these cautionary statements.
Our forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs and projections are expressed in good faith and are believed by us to have a reasonable basis, including without limitation, our examination of historical operating trends, data contained in our records and other data available from third parties, but there can be no assurance that our expectations, beliefs and projections will result or be achieved or accomplished. Our forward-looking statements apply only as of the date made. We undertake no obligation to publicly update or revise forward- looking statements which may be made to reflect events or circumstances after the date made or to reflect the occurrence of unanticipated events.
There are a number of risks and uncertainties that could cause actual results to differ materially from those set forth in, contemplated by or underlying the forward-looking statements contained in this report. Those risks and uncertainties include, but are not limited to, our history of operating losses, lack of liquidity in our common stock, our
17 dependence on key personnel, the expression by our auditors of uncertainty as to our ability to continue as a going concern, and the fact that we face substantial competition. Those risks and certain other uncertainties are discussed in more detail in our 2007 Annual Report on Form 10-KSB and our subsequent filings with the SEC. There may also be other factors, including those discussed elsewhere in this report that may cause our actual results to differ from the forward- looking statements. Any forward-looking statements made by us or on our behalf should be considered in light of these factors.
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