ISEC..$0.07028
iSECUREtrac Corp. and SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, 2009 December 31, 2008
ASSETS
Current Assets
Cash and cash equivalents $ 1,018,743 $ 423,361
Accounts receivable, net of allowance for doubtful accounts of $623,334
in 2009 and $462,553 in 2008 2,028,417 2,445,505
Inventories 256,619 193,820
Prepaid expenses and other 131,431 84,224
Total current assets 3,435,210 3,146,910
Leasehold improvements and equipment, net of accumulated depreciation of $10,212,734 in 2009 and $9,125,376 in 2008 4,883,640 4,229,319
Intangibles, net of accumulated amortization of $901,728
in 2009 and $892,128 in 2008 9,794 19,394
Goodwill 2,302,179 2,302,179
Other assets 77,691 83,386
Total assets $ 10,708,514 $ 9,781,188
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current Liabilities
Accounts payable $ 339,575 $ 403,399
Accrued expenses 1,138,064 524,339
Revolving Line of Credit 750,000 500,000
Current maturities of long-term debt 1,594,112 1,272,508
Deferred revenues & gain on sale-leaseback transactions 142,244 299,548
Accrued interest payable 1,086,640 776,011
Total current liabilities 5,050,635 3,775,805
Long-term debt, less current maturities 13,709,078 13,280,368
Redeemable convertible Series C preferred stock 13,752,411 13,106,407
At June 30, 2009, the Company had 2,654,986 outstanding stock options, 6,287,045 shares issuable upon exercise of warrants to be issued upon exchange of Preferred Stock, and 2,460,770 shares issuable upon the exercise of outstanding warrants that were not included in the computation of diluted EPS because to do so would have been anti-dilutive for the period presented.
Commitments and contingency
Stockholders' (deficit)
Common stock 10,808 10,799
Additional paid-in capital 55,482,443 55,369,880
Accumulated deficit (77,296,861 ) (75,762,071 )
Total stockholders' (deficit) (21,803,610 ) (20,381,392 )
Total liabilities and stockholders' (deficit) $ 10,708,514 $ 9,781,188
See Notes to Consolidated Financial Statements (unaudited).
iSECUREtrac Corp. and SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
2009 2008 2009 2008
Revenues:
Equipment leasing $ 2,947,849 $ 2,239,019 $ 5,518,732 $ 4,418,596
Administrative, field & support service revenues 116,065 86,700 247,866 161,153
Equipment sales 25,807 23,958 79,918 59,390
Other revenues 101,834 6,004 448,755 218,852
Total revenues 3,191,555 2,355,681 6,295,271 4,857,992
Operating expenses:
Cost of revenues 1,172,618 948,121 2,338,748 2,036,015
Research and development 250,963 328,747 569,438 668,558
Sales, general and administrative 1,861,908 2,046,532 3,777,952 4,298,335
Total operating expenses 3,285,489 3,323,400 6,686,138 7,002,908
Operating loss (93,934 ) (967,719 ) (390,867 ) (2,144,916 )
Other income (expense):
Interest income 314 4,843 600 24,067
Interest expense (306,155 ) (268,388 ) (594,356 ) (533,372 )
Total other income (expense) (305,841 ) (263,545 ) (593,756 ) (509,305 )
Loss before provision for income taxes (399,775 ) (1,231,264 ) (984,624 ) (2,654,220 )
Provision for income taxes 0 0 0 0
Net loss $ (399,776 ) $ (1,231,264 ) $ (984,624 ) $ (2,654,220 )
Preferred stock dividends and accretion (324,641 ) (305,190 ) (646,006 ) (610,380 )
Net loss available to common stockholders $ (724,417 ) $ (1,536,454 ) $ (1,630,630 ) $ (3,264,601 )
Basic and diluted loss per common share $ (0.07 ) $ (0.14 ) $ (0.15 ) $ (0.30 )
Weighted average shares of common stock outstanding 10,806,399 10,785,534 10,803,963 10,783,583
See Notes to Consolidated Financial Statements (unaudited).
iSECUREtrac Corp. AND SUBSIDIARY
STATEMENT OF STOCKHOLDERS' (DEFICIT)
For the Six Months Ended June 30, 2009
Additional
Common Stock Paid -in Accumulated
Shares Amount Capital Deficit Total
Balance, December 31, 2008 10,799,090 $ 10,799 $ 55,369,880 $ (75,762,071 ) $ (20,381,392 )
Shares issued for director's fees 8,612 9 3,991 - 4,000
Stock issued upon exercise of options - - 162 - 162
Stock based compensation - - 204,251 - 204,251
Series C preferred stock dividends - - - (550,166 ) (550,166 )
Accretion to redemption value of preferred stock - - (95,842 ) - (95,842 )
Net loss - - - (984,624 ) (984,624 )
Balance, June 30, 2009 10,807,702 $ 10,808 $ 55,482,443 $ (77,296,861 ) $ (21,803,610 )
See Notes to Consolidated Financial Statements (unaudited).
iSECUREtrac CORP. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30, 2009 and 2008
2009 2008
Cash Flows From Operating Activities
Net loss $ (984,624 ) $ (2,654,220 )
Depreciation and amortization 1,096,958 1,143,794
Stock based compensation 208,251 214,347
Increase in Allowance for Doubtful Accounts 160,781 33,112
(Increase) Decrease in accounts receivable 256,307 (254,606 )
(Increase) in inventories (62,799 ) (57,681 )
(Increase) Decrease in prepaid expenses (47,207 ) 29,129
(Decrease) in accounts payable (146,514 ) (708,771 )
Increase (Decrease) in accrued expenses 613,725 (23,625 )
(Decrease) in deferred revenues and gain on sale - leaseback transactions (157,304 ) (22,845 )
Increase in accrued interest payable 310,629 383,580
Net cash provided by (used in) operating activities 1,248,203 (1,917,786 )
Cash Flows From Investing Activities
Purchases of leasehold improvements and equipment (1,658,992 ) (1,960,112 )
Decrease in other assets 5,695 14,537
Net cash (used in) investing activities (1,653,297 ) (1,945,575 )
Cash Flows From Financing Activities
Principal proceeds from long-term debt 1,700,000 1,600,000
Proceeds from revolving line of credit 250,000 -
Principal payments on long-term debt (949,686 ) (473,109 )
Proceeds from the exercise of options and warrants 162 -
Net cash provided by financing activities 1,000,476 1,126,891
Increase (Decrease) in cash 595,382 (2,736,470 )
Cash at beginning of period 423,361 3,442,712
Cash at end of period $ 1,018,743 $ 706,242
Supplemental Disclosure of Cash Payments for
Interest 283,727 149,792
Supplemental Disclosure of Noncash Transactions
Purchase of leasehold improvements and equipment included in accounts payable 82,686 97,535
See Notes to Consolidated Financial Statements (unaudited).
iSECUREtrac CORP. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. General
The unaudited interim condensed consolidated financial statements as of June 30, 2009 and for the three and six month periods ended June 30, 2009 and 2008, included herein, have been prepared in accordance with accounting principals generally accepted in the United States of America for interim financial information and with the instructions for Form 10-Q and Article 10 of Regulation S-X.
The consolidated balance sheet of iSECUREtrac Corp. (“iSECUREtrac”, or the “Company”) and its wholly-owned subsidiary, iSt Services, Inc., at December 31, 2008, has been taken from the audited consolidated financial statements at that date. The condensed consolidated financial statements for the three and six months ended June 30, 2009 and June 30, 2008 are unaudited and reflect all normal and recurring accruals and adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position, operating results and cash flows for the interim periods presented in this quarterly report. The unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto, together with management’s discussion and analysis of financial condition and results of operations, contained in our Annual Report on Form 10-K for the year ended December 31, 2008. The results of operations and cash flows for the three and six months ended June 30, 2009 are not necessarily indicative of the results for the entire fiscal year ending December 31, 2009. Where appropriate, items of an insignificant nature within the condensed consolidated financial statements have been reclassified from the previous periods’ presentation.
The Company believes that its current working capital, combined with the expected amounts available through lease financing for its monitoring equipment described in note 5, and positive cash flow expected to be generated from operating activities will be sufficient to meet the Company’s liquidity needs through 2009.
Note 2. Common Stock Options and Warrants
The Company may issue stock options and other types of equity-based compensation under its 2006 Omnibus Equity Incentive Plan (the “2006 Plan”) which was implemented on May 31, 2006. This is the only plan under which the Company may now issue additional equity-based compensation. The Company also has outstanding stock options that were issued under its 2001 Omnibus Equity Incentive Plan (the “2001 Plan”) or which were issued under employment agreements with executive officers.
During the three and six months ended June 30, 2009, the Company granted options to purchase a total of 38,000 and 41,500 shares of common stock to nine and thirteen employees, respectively, pursuant to the 2006 Plan. During the three and six months ended June 30, 2009, 22,646 and 55,073 options issued under the 2006 Plan were forfeited, 2,500 and 9,275 options issued under the 2001 Plan were forfeited and 0 and 56,250 options issued under employment agreements outside the 2006 Plan and the 2001 Plan, respectively, were forfeited. During the three and six months ended June 30, 2009, 292 and 292 options were exercised. The following table shows stock option activity during the six month period ended June 30, 2009:
Options Number of
Shares Weighted
Average
Exercise Price
Per Share Weighted
Average
Remaining
Contractual Life
(Years) Aggregate
Intrinsic
Value
Outstanding at December 31, 2008 2,734,376 $ 1.59 $ -
Granted 41,500 0.64
Exercised (292 ) 0.56
Forfeited (120,598 ) 0.71
Outstanding at June 30, 2009 2,654,986 $ 1.56 6.26 $ 151,996
Exercisable at June 30, 2009 2,045,053 $ 1.88 5.38 $ 45,629
As of June 30, 2009, the aggregate intrinsic value of outstanding and exercisable options, which is the actual value of the options if exercised, was $151,996 and $45,629, respectively.
During the three and six months ended June 30, 2009, warrants to purchase up to 459,028 and 1,083,765 shares of common stock expired and no warrants were granted or exercised by warrant holders.
At June 30, 2009, the Company had 2,654,986 outstanding stock options, 6,287,045 shares issuable upon exercise of warrants to be issued upon exchange of Preferred Stock, and 2,460,770 shares issuable upon the exercise of outstanding warrants that were not included in the computation of diluted EPS because to do so would have been anti-dilutive for the period presented.
The Company accounts for its share-based compensation awards under Financial Accounting Standards Board (“FASB”) Statement No. 123 (revised 2004), “ Share-Based Payment ” (“FAS No. 123(R)” or the “Statement”) which requires that the compensation cost relating to share-based compensation awards, including grants of employee stock options, be recognized in financial statements as these awards become vested, based on the grant date fair value of the equity instruments issued.
For purposes of FAS No. 123(R), the Company estimated the grant date fair value of each option granted during the periods set forth below using the Black-Scholes option pricing model with the following weighted average assumptions:
