49615--2/22/2006--ID_SYSTEMS

related topics

{product, market, service}

{stock, price, operating}

{property, intellectual, protect}

{acquisition, growth, future}

{customer, product, revenue}

{system, service, information}

{tax, income, asset}

{personnel, key, retain}

{provision, law, control}

{competitive, industry, competition}

{control, financial, internal}

{stock, price, share}

{financial, litigation, operation}

{regulation, government, change}

We have incurred significant losses and have a substantial accumulated deficit. If we cannot maintain our profitability, the market price of our common stock could decline significantly. We are highly dependent upon sales of our Wireless Asset Net system to a few customers. The loss of any of these customers, or any material reduction in the amount of our products they purchase, could materially and adversely affect our financial condition and results of operations. If the market for our technology does not continue to develop or become sustainable, expands more slowly than we expect or becomes saturated, our revenues will decline and our financial condition and results of operations could be materially and adversely affected. If we are unable to keep up with rapid technological change, we may be unable to meet the needs of our customers, which could materially and adversly affect our financial condition and results of operations and reduce our ability to grow our market share. If we are unable to effectively manage our growth, our business may become inefficient and we may not be able to effectively compete, increase our revenues or control our expenses. The long and variable sales cycles for our solutions may cause our revenues and operating results to vary significantly from quarter to quarter, which could adversely affect the market price of our common stock. If we are unable to protect our intellectual property rights, our financial condition and results of operations could be materially and adversely affected. We may become involved in an intellectual property dispute that could subject us to significant liability, divert the time and attention of our management and prevent us from selling our products, any of which could materially and adversely affect our financial condition and results of operations. The U.S. government s right to use technology developed by us with government funds could limit our intellectual property rights. We rely on subcontractors to manufacture and deliver our products. Any quality or performance failures by our subcontractors or changes in their financial condition could disrupt our ability to supply quality products to our customers in a timely manner, resulting in business interruptions, increased costs, claims for damages, reputational damage and reduced revenue. We rely on a limited number of suppliers for several significant components and raw materials in our products. If we are unable to obtain these components or raw materials on a timely basis, we will be unable to meet our customers orders, which could reduce our revenues, subject us to claims for damages and adversely affect our relationships with our customers. If we lose our executive officers, or are unable to recruit additional personnel, our ability to manage our business could be materially and adversely affected. The industry in which we operate is highly competitive, and competitive pressures from existing and new companies could have a material adverse effect on our financial condition and results of operations. The federal government or independent standards organizations may implement significant regulations or standards that could adversely affect our ability to produce or market our products. Because our products are complex, they may have undetected errors or failures when they are introduced that could seriously harm our business. We may need to obtain additional capital to fund our operations that could have negative consequences on our business. If we do not adequately anticipate and respond to the risks inherent in growing our business internationally, our operating results and the market price of our common stock could be materially and adversely effected. We have never made any acquisitions of any businesses and cannot assure you that we will be able to successfully integrate any businesses, products, technologies or personnel that we might acquire in the future. The concentration of common stock ownership among our executive officers and directors could limit your ability to influence the outcome of corporate transactions or other matters submitted for stockholder approval. Changes in stock option accounting rules will materially increase our operating expenses from historical levels, resulting in reduced net income and net income per share. The unpredictability of our quarterly operating results could adversely affect the market price of our common stock. Future sales of our common stock, including sales of our common stock acquired upon the exercise of outstanding options, may cause the market price of our common stock to decline. Provisions of Delaware law or our charter documents could delay or prevent an acquisition of our company, even if the acquisition would be beneficial to our stockholders, and could make it more difficult for you to change management. Cautionary Note Regarding Forward-Looking Statements.

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49615--2/22/2006--ID_SYSTEMS_INC