SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549

                                   FORM 10-KSB

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended:                      Commission file number:  1-15087
December 31, 2000

                               I.D. SYSTEMS, INC.
                 (Name of small business issuer in its charter)

Delaware                                                     22-3270799
(State or other jurisdiction                                 (I.R.S. Employer
of incorporation or organization)                            Identification No.)


One University Plaza, Hackensack, New Jersey                07601
(Address of Principal Executive Offices)                    (Zip Code)

         Issuer's telephone number, including area code: (201) 670-9000

        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None

Check  whether  the Issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes [x] No [_] .

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-B is not contained  herein,  and will not be contained,  to the
best of Issuer's  knowledge,  in the definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB. x

State issuer's revenues for its most recent fiscal year = $945,000.

The  aggregate  market  value of the Common Stock held by  nonaffiliates  of the
Issuer was  approximately  $21,154,000  based upon the last sales  price of such
stock on March 28, 2001, as disclosed on The NASDAQ Small Cap Market (IDSY).


                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

<PAGE>

                                TABLE OF CONTENTS


<TABLE>
<S>                                                                                                             <C>
PART I

         Item 1.  Description of Business ...................................................................    1
         Item 2.  Description of Properties .................................................................   11
         Item 3.  Legal Proceedings 11
         Item 4.  Submission of Matters to a Vote of Security Holders .......................................   11

PART II

         Item 5.  Market For the Registrant's Common Equity
                   and Related Stockholder Matters ..........................................................   12
         Item 6.  Management's Discussion and Analysis ......................................................   12
         Item 7.  Financial Statements ......................................................................   18
         Item 8.  Changes in and Disagreements With Accountants on
                   Accounting and Financial Disclosure ......................................................   35

PART III

         Item 9.  Directors and Executive Officers of the Registrant ........................................   36
         Item 10.  Executive Compensation ...................................................................   38
         Item 11.  Security Ownership of Certain Beneficial Owners and Management ...........................   40
         Item 12.  Certain Relationships and Related Transactions ...........................................   42
         Item 13.  Exhibits, List and Reports on Form 8-K ...................................................   43

Exhibit Index ...............................................................................................   46
</TABLE>



                                       i

<PAGE>


                                     PART I

Item 1.  Description of Business

     I.D. Systems, Inc. (the "Company"),  a Delaware corporation formed in 1993,
is a leading  provider of end-to-end  wireless asset management  solutions.  The
Company  designs,  develops,  and produces  innovative  wireless  monitoring and
tracking  solutions that utilize its patented radio  frequency-based  system and
Internet-based data management  technology.  The Company's products are designed
to enable users to improve  operating  efficiencies,  reduce costs, and increase
profits.

Industry Overview

     Growth of the Automatic Data Collection Market

     The  Company's  products  are  targeted to the  automatic  data  collection
market.  That is,  companies  that use  bar-coding  equipment to  electronically
identify and track objects.  Bar coding  technology  poses numerous  limitations
including  line-of-sight-only   capability,   required  human  intervention  and
inability to monitor and control the item to which a bar code is affixed.

     Conventional Radio Frequency Identification Systems

     Radio frequency  identification  has been developed to address the problems
presented by bar-coding technology.  The basic components of any radio frequency
identification  system  are tags and  readers.  Each tag  contains  a  miniature
receiver/transmitter  and an antenna,  controlled by a computer chip. The reader
is a more sophisticated microprocessor controlled transmitter and receiver. Tags
typically  contain  information  uniquely  identifying the persons or objects to
which they are attached. Tags transmit data to a central computer, which decides
on a  subsequent  course of action,  such as opening a door,  sounding an alarm,
debiting an account, sending routing instructions or similar activities.

     Radio  frequency has many advantages  over  bar-coding  systems,  including
greater  range  and  accuracy,   reduced   line-of-sight   requirements,   rapid
identification and resistance to environmental influences such as dirt, rain and
extreme temperatures.

     Current radio frequency  identification products are typically divided into
two categories: read-only systems and read-write systems.

     o Read-Only  Systems.  Read-only products were the first wireless automatic
identification products and were designed to, in certain circumstances,  replace
bar-code  technology.  By using  wireless  identification  tags,  these products
reduce line-of-sight reading requirements,  increase the amount of data that can
be  transferred  and allow for accurate  readings in harsh  environments  and on
moving objects. These systems read, store, and maintain such


<PAGE>



information in a database in a centralized  computer.  The Company believes that
read-only  systems have not gained  widespread  acceptance  because of the large
costs associated with their use as compared to the benefits they provide.

     o Read-Write  Systems.  Read-write systems were developed in order to solve
some of the  limitations  presented by read-only  systems.  Read-write  products
store specific information directly on the tags,  eliminating the need to access
a database in a centralized computer. However, a central controlling computer or
mainframe  is needed to interpret  the  information  received  from the tags and
manage the decisions based on that  information.  The continued need for central
computer control results in systems that are relatively expensive.

The ID System

     The Company has improved the  conventional  read-write  system by providing
processing power, memory and data storage into its asset communicators, or tags,
and system  monitors,  or readers.  As a result,  the Company's  system (the "ID
System") does not require a controlling central or mainframe computer to perform
data communication and analysis functions. This distinguishes the ID System from
competing systems.

     The main components of the ID System are miniature  computers  called asset
communicators that attach to the objects being tracked or monitored.  Each asset
communicator  has its own  unique  identification  code.  Once  attached  to its
assigned  item,  an asset  communicator  provides  for the  two-way  transfer of
information  using  radio  transmissions  to  and  from  strategically   located
monitoring  devices  called  system  monitors.   The  two-way  communication  is
accomplished  without a central or controlling  mainframe computer network.  The
Company's asset communicators can be tailored to fit the dimension and functions
of various objects.  This flexibility  allows the ID System to be used in a wide
variety of  applications.  The Company has obtained a patent for the ID System's
architecture.

     The ID System includes  operating  system software that runs on an existing
mainframe or personal  computer to allow the system user to collect,  manipulate
and display data from system  monitors and asset  communicators.  This  software
also enables data to be exchanged  between existing  computer  databases and the
system monitor network.  Customers with multiple  facilities can access the data
for each facility over the Internet.

     The Company  believes that one of the more  significant  features of the ID
System is that the  asset  communicator  is a  mini-computer,  capable  of being
programmed.  Similar to a personal computer,  the software can be customized for
several different  applications by changing its program. For example, the United
States Postal  Service may elect to use the same asset  communicator  and system
monitor  hardware to track mail as Federal Express does to track  vehicles.  The
difference  lies in the software that controls when,  how, what and to whom each
asset  communicator  communicates,  including  storage and analysis.  Each asset
communicator and system monitor is capable of controlling  other devices such as
keypads,  displays,  locks, or  thermometers.  This  flexibility  will allow the
Company's  products to meet the  requirements  of a wide range of markets  while
minimizing  additional  hardware  design and  development  costs.


                                       2
<PAGE>


The ID System Solution and Benefits

     The benefits and advantages of the ID System include the following:

     o  Increased  Flexibility.  The  ID  System  is  capable  of  meeting  each
customer's requirements through low-cost  customization.  Due to the ID System's
flexibility,  the Company can readily  market the system to a diverse  number of
industries  by modifying the system  software,  as well as the size and shape of
its devices.

     o Low Cost.  By  providing  processing  power and  memory  into the  system
components,  the Company  eliminates  the need for  customers  to  purchase  and
install a dedicated  central or mainframe  computer and associated  software and
required  communication links. As a result, the Company believes that its system
costs substantially less than competitive systems.

     o Highly  Reliable.  The ID System  eliminates  system-wide  failures  that
result from "crashing" at the mainframe central station, or broken communication
links  between a network of  conventional  readers and the  central  controlling
computer.

     o Highly  Functional.  By providing  computer  capabilities  into the asset
communicators and system monitors,  the ID System can monitor, track and control
the  object  to which it is  attached,  as well as  control  various  peripheral
devices, such as magnetic card readers, displays, and keypads.

Initial Target Markets

     The Company  emphasizes the ID System's  ability to adapt to the individual
needs of customers in a broad range of industries and applications. By modifying
its software without  modifying the core technology,  the Company can easily and
cost-effectively customize the system for a wide variety of uses. Initially, the
Company has targeted the following market segments:

     o    shipping and delivery companies;

     o    companies with fleets of forklift trucks and other similar vehicles;

     o    car rental companies; and

     o    railroad and transportation companies.



                                       3
<PAGE>



     Shipping and Delivery Companies

     The ID System can be used by postal  services and private  sector  shipping
companies to track  packages as they travel  through key points in  distribution
centers. In these facilities, the system can be used to:

     o    analyze the speed and efficiency of package handling operations;

     o    identify bottlenecks in package handling operations;

     o    indicate where packages become misrouted; and

     o    locate misrouted packages.

     Companies with Fleets of Forklifts and Other Similar Vehicles

     A wide  variety of  businesses  can use the ID System to manage and monitor
fleet operations, such as forklift trucks and other similar vehicles in order to
become more efficient and provide security.

     During a work  shift,  the system  continually  monitors  and  tracks  each
vehicle. The system:

          continually updates each vehicle's location;

          enables  real-time,  two-way  communication  with  individual  vehicle
          operators;

          provides maintenance schedules;

          warns of mechanical problems;

          tracks each vehicle's use,  including  engine hours,  battery  charge,
          time spent in motion and time spent idle;

          requires  an  operator  to enter a PIN  authorization  code or swipe a
          security card to secure the vehicle; and

          requires  the operator to complete an  Occupational  Safety and Health
          Administration checklist.

     The ID System provides  benefits after the shift has completed.  The system
can provide an evaluation of vehicle condition after the trip is completed,  log
the operator off the vehicle without paperwork or direct human supervision,  and
shut off the vehicle automatically.  A manager can evaluate data in real-time or
study historical information stored in the system's databases.


                                       4
<PAGE>


     Car Rental Companies

     Car rental companies can use the ID System for security, inventory control,
and value-added services, as well as to improve overall operations. By attaching
asset  communicators  to rental cars, car rental  companies can obtain real-time
information  regarding all available  rental cars at any site. This  information
may include:

          number of available rental cars;

          vehicle identification numbers, make, model and year;

          fuel level and mileage;

          service and maintenance history; and

          rental history.

     The ID System also  provides car rental  companies  with an  automated  and
efficient  vehicle check-in and checkout  process.  The Company believe that car
rental  companies  desire to offer value added  services  and that the ID System
provides competitive advantages to them. Since the ID System is fully automated,
the  Company  believes  that  it  offers  a  major  reduction  in the  time  and
inconvenience  typically associated with the pick-up and return of a rental car.
Also,  the system offers rental car  companies the  opportunity  to reduce their
staffs because the Company believes that fewer service  representatives  will be
required at each location at which the system is installed.

     Railcar and transportation companies

     Conventional radio frequency  identification tags used in this industry are
typical  tags that are  "read-only."  With the ID System,  railcars  communicate
vital data (order of the train, status of contents, geographical location, etc.)
utilizing a combination of radio  frequency,  cellular or satellite link and the
Internet. The Company's customers will be able to view and analyze data remotely
- and in real time - using the ID System's web-based reporting tools and on-line
graphical route maps. The ID System is unique because it communicates  data from
the entire train of railcars with just one cellular or satellite link.  Compared
to  railcar-tracking  systems  that  rely on  satellite  transmitters  on  every
railcar,  the  Company's  approach  can save  millions  of  dollars  in  ongoing
satellite communications charges. This approach also provides significantly more
information than the railroads'  existing  railcar-tracking  system which cannot
provide  data in real time as it  relies  on only  about  1,200  "reader"  sites
throughout the United States. As a result, the Company believes that the railcar
and container industry will benefit from the advantages of a wireless monitoring
and tracking system.  The Company believe that the ID System will allow users in
this industry to:


                                       5
<PAGE>


          cost-effectively  locate specific railcars and containers  anywhere in
          the world;

          monitor a railcar and containers' environment and pressure;

          keep an accurate inventory of containers at each depot;

          prevent theft, misuse or accidental use of containers as they arrive;

          ensure that railcars and containers are inspected on schedule; and

          keep an accurate history of the use of each railcar and container.

Strategy

     The  Company's  objective  is  to  be  the  leading  provider  of  wireless
solutions. Key elements of the Company's strategy are as follows:

     Expand  Product  Capabilities  and  Applications.  The  Company  intends to
continue to expand the ID System's  capabilities and  applications.  The Company
believes that the fundamental architecture of the ID System can be customized to
support  additional  features and  functions,  which will broaden the  Company's
customer  base.  As part of this  strategy,  the  Company  has  devoted and will
continue  to  commit  significant  resources  to  develop  Application  Specific
Integrated Circuits that decreases the size of the Company's asset communicators
as well as increase the functionality of the system.

     Strengthen Sales and Marketing  Efforts.  The Company intends to capitalize
on the growth in demand for automatic identification by continuing to market and
support its products and  services.  The Company  also plans to  strengthen  its
marketing,  sales and customer support efforts,  including internet advertising,
as the size of its market  opportunity and customer base increases.  The Company
will continue to target large corporations and government  agencies,  as well as
develop strategic relationships with system integrators and distributors in each
of its  target  markets.  The  Company  will  also  continue  to form  strategic
relationships  with partners that have the potential to rapidly  accelerate  its
sales growth in its target markets.

     Develop  Additional  Revenue  Sources.  The  Company  intends  to  generate
significant  revenues  beyond  the  initial  sale and  installation  of its base
systems.  It expects to sell software and hardware upgrades,  as well as ongoing
maintenance and support contracts to its existing customers.


                                       6
<PAGE>


Customers

     Shipping and Delivery Companies

     The United States Postal Service inserts the Company's asset  communicators
into standard business envelopes which are tracked by system monitors throughout
the mail collection and distribution process and then uses the collected data to
analyze performance and highlight problem areas in the processing of mail.

     Companies with Fleets of Forklifts and Other Similar Vehicles

     The Company has received orders from the DaimlerChrysler Corporation,  Dana
Commercial Credit Corporation ("DCC"),  Federal Express Corporation,  Ford Motor
Company, General Motor Corporation, Hallmark Cards, Inc., John Deere, the United
States  Navy and  various  United  States  Postal  Bulk Mail  Centers to monitor
certain of their  forklift  trucks and other similar  vehicles.  The Company has
also  entered  into a joint  marketing  agreement  with DCC,  one of the largest
industrial  fleet leasing and management  companies in the United States.  Under
the  agreement,  DCC will  exclusively  promote  the  Company's  wireless  fleet
management  systems to its  customers in North  America.  DCC will also actively
market the ID System through its existing distribution channels, which include a
direct  sales  force and a  network  of  several  hundred  industrial  equipment
dealers.  Under the agreement,  the Company  granted DCC an exclusive  option to
provide  financial  services to any customer who finances its acquisition of the
Company's products.

     Car Rental Companies

     The Company  completed a Pilot Program with Avis Rent-a-Car which automated
its car rental and return process.  The Pilot Program quantified the benefits of
the ID System.

     Railcar and transportation Companies

     The Company was awarded an initial pilot program by Union Pacific  Railroad
(UP), to monitor  trains using the ID System.  The ID System will provide UP and
one of its customers,  FMC  Corporation,  with real-time  location and status of
railcars.  The Company has also entered into a strategic  teaming agreement with
GE Harris Railway  Electronics,  L.L.C.,  the leading  provider of  electronics,
communications  and train control  technology for the global railroad  industry.
Under the  agreement,  the  Company and GE Harris  will  collaborate  to develop
applications  and  opportunities  in the railroad  industry  that  integrate the
Company's technology and GE Harris technology.



                                       7
<PAGE>


Sales and Marketing

     The  Company's  sales  force  consists of  employees  who market the system
directly to large  corporations  and government  agencies and by attending trade
shows.

     In April 1999,  the Company was awarded a United  States  General  Services
Administration  contract  which  enables any  government  agency to purchase the
Company's products on an off-the-shelf basis, without competitive bidding, for a
period  of  five  years.  The  Company  believes  that  this  contract  provides
significant sales opportunities with other government agencies.

     The Company  plans to add features to its website to introduce  prospective
customers to the ID System and its benefits.  Visitors to the Company's  website
will be able to compare their vehicle  performance to industry  averages,  "test
drive" the system,  and forecast their potential  return on an investment in the
system. The Company intends to increase traffic on its website by advertising on
other strategic websites.

Manufacturing

     The  software  and  hardware  components  of  the  Company's  products  are
designed,  integrated and tested at the Company's  facilities.  The Company also
manufactures initial prototypes at its facilities.  The Company has entered into
arrangements with two  subcontractors to produce products.  The Company does not
invest in the costly production  equipment,  employees and facilities that would
be required if it were to manufacture  the products in high volume.  The Company
has not, however, entered into an agreement providing for a long-term commitment
with these subcontractors to manufacture products.

Research and Development

     The Company  believes that its current  products can be readily adapted for
use in a wide variety of markets.  To maintain its competitive  advantage in the
market, the Company plans to continue its research and development efforts to:

     Expand the  flexibility of the Company's  products.  The Company intends to
concentrate  its  software  design  efforts on  developing  systems for each new
customer's  needs.  The  Company  will,  at the same  time,  attempt  to develop
"off-the-shelf"  systems to allow for widespread  use of the Company's  hardware
and software.

     Reduce the cost and size of the  Company's  system.  The  Company's  design
objective is to integrate the asset  communicator's  electronic  components into
its Application  Specific  Integrated  Circuits.  This will allow the Company to
reduce the size of the ID System significantly and permit high volume production
which, in turn, will enable the Company to reduce the cost of the ID System.  To
accomplish  this,  the Company  intends to expand its in-house  hardware  design
capability to design,  test, and support the  development of this computer chip.


                                       8
<PAGE>


Competition

     The market for wireless  monitoring and tracking systems is relatively new,
constantly  evolving  and  intensely  competitive.   The  Company  expects  that
competition will intensify in the near future. Many of the Company's current and
potential competitors have longer operating histories,  greater name recognition
and significantly greater financial,  technical and marketing resources than the
Company. The Company's principal competitors in the development and distribution
of wireless  monitoring and tracking systems  include:  Unova,  Inc.,  Motorola,
Inc., Texas Instruments  Incorporated,  Raytheon  Company,  Kasten Chase Applied
Research and Micron  Communications,  Inc. As a result,  its  competitors may be
able to develop  products  comparable or superior to us or adapt more quickly to
new technologies or evolving customer requirements.  Competitive factors in this
market include:

     o    the ability to customize technology to a customer's particular use;

     o    quality and reliability of products and software;

     o    ease of use and interactive features;

     o    cost per system; and

     o    compatibility with the user's existing network components and software
          systems.

Intellectual Property

     The  Company  currently  has  one  United  States  patent  relating  to the
Company's  product's  architecture  and  technology.  It also has  corresponding
applications in selected  foreign  countries.  The patent and currently  pending
corresponding  foreign  applications  may  not  provide  the  Company  with  any
competitive  advantage.  Many of the Company's current and potential competitors
dedicate  substantially  greater  resources to  protection  and  enforcement  of
intellectual  property rights,  especially patents. If a patent is issued in the
future to a competitor  which covers the Company's  products,  the Company would
need to either obtain a license or design around the patent. The Company may not
be able to obtain  such a license on  acceptable  terms,  if at all,  nor design
around the patent.

     The Company attempts to avoid infringing known proprietary  rights of third
parties  in its  product  development  efforts.  However,  the  Company  has not
conducted  and does not  conduct  comprehensive  patent  searches  to  determine
whether it infringes patents or other proprietary  rights held by third parties.
In addition,  it is difficult  to proceed with  certainty in a rapidly  evolving
technological  environment  in which there may be numerous  patent  applications
pending,  many of which are  confidential  when  filed,  with  regard to similar
technologies.  If the  Company  were  to  discover  that  its  products  violate
third-party proprietary rights, the Company may not be able to:



                                       9
<PAGE>


     o    obtain licenses to continue offering such products without substantial
          reengineering;

     o    reengineer the Company's products successfully;

     o    obtain licenses on commercially reasonable terms, if at all; or

     o    litigate  an  alleged  infringement  successfully  or  settle  without
          substantial expense and damage awards.

     Any claims against the Company  relating to the infringement of third-party
proprietary  rights,  even if without merit,  could result in the expenditure of
significant  financial and managerial resources or in injunctions  preventing us
from  distributing  certain  products.  Such claims could  materially  adversely
affect the Company's business, financial condition and results of operations.

     The Company's software products are susceptible to unauthorized copying and
uses that may go undetected, and policing such unauthorized use is difficult. In
general,  the  Company's  efforts to protect its  intellectual  property  rights
through patent, copyright,  trademark and trade secret laws may not be effective
to prevent misappropriation of the technology, or to prevent the development and
design by others of  products or  technologies  similar to or  competitive  with
those  developed by the Company.  The Company's  failure or inability to protect
the its  proprietary  rights could  materially  adversely  affect the  Company's
business, financial condition and results of operations.

Employees

     The  Company  currently  has  thirty-seven  full time  employees,  of which
eighteen are engaged in product  development and customization,  four in project
management and customer support,  six in operations and  manufacturing,  five in
sales and marketing and four in finance and administration.

Public Offering

     The Company  completed  an initial  public  offering of its common stock in
August 1999. The offering  provided net proceeds to the Company of approximately
$13,921,000  from the sale of 2,300,000  shares at $7.00 per share.  The Company
has been applying the proceeds in accordance with its Prospectus  dated June 30,
1999.



                                       10
<PAGE>



Item 2.  Description of Properties

     In November  1999,  the Company  entered into a lease that expires on March
31,  2010 for its new  facility in  Hackensack,  NJ. The  Company  occupied  the
approximately  22,500 square feet in March 2000.  The rent is currently  $31,060
per month and will  increase  to $34,835 per month from the 61st month until the
end of the lease.

Item 3.  Legal Proceedings

     None.

Item 4.  Submission of Matters to a Vote of Security Holders

     None.


                                       11
<PAGE>


                                     PART II

Item 5.  Market for Registrant's Common Equity and Related Stockholder Matters

     The Company  completed its initial  public on June 30, 1999.  The Company's
Common Stock is traded on The Nasdaq  SmallCap Market under the symbol IDSY. The
following table sets forth,  for the periods  indicated,  the high and low sales
price for the Company's common stock as reported on such quotation systems.

        Quarter Ending:                       High              Low
        ---------------                       ----              ---

        1999
        ----
        September 30, 1999                 $  9.500           $5.500
        December 31, 1999                  $  6.500           $4.125

        2000
        ----
        March 31, 2000                     $17.500            $5.625
        June 30, 2000                      $  9.000           $3.500
        September 30, 2000                 $  7.625           $4.875
        December 31, 2000                  $  4.313           $1.750

        2001
        ----
        January 1, 2001 - March 23, 2001   $  5.000           $2.000

     There were  approximately  42 registered  holders and  approximately  1,200
beneficial  owners of the Company's Common Stock of record as of March 28, 2001.
The Company has not  declared or paid  dividends on its Common Stock to date and
intends to retain  future  earnings,  if any,  for use in its  business  for the
foreseeable future.

Item 6. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

     The following  discussion and analysis of the Company's financial condition
and  results of  operations  should be read in  conjunction  with its  financial
statements and notes thereto appearing elsewhere herein.

     The Company was incorporated in August 1993 and began to derive revenues in
March 1995.  Revenues are generated from design and engineering fees, as well as
sales of the ID System.  The Company's  revenues relate to the time expended and
expertise  involved in customizing the ID System to the needs of each individual
customer and related material costs. The Company intends to generate  additional
revenues  by  selling  software  and  hardware  upgrades,  as well  as  on-going
maintenance and support contracts to its existing customers.


                                       12
<PAGE>


     Results of Operations

     The  following  table  sets  forth,  for  the  periods  indicated,  certain
operating information expressed as a percentage of revenue:

                                                               Year Ended
                                                               December 31,
                                                             1999         2000
                                                           ------       ------

Revenues                                                    100.0%       100.0%
Cost of revenues                                             57.0         76.4
                                                           ------       ------

Gross profit                                                 43.0         23.6
Selling, general and administrative expenses                 38.2        427.0
Research and development expenses                             4.2        185.3
                                                           ------       ------

Income (loss) from operations                                 0.6       (588.7)
Interest income                                               6.7         75.6
Interest expense                                             (0.9)        (0.5)
                                                           ------       ------

Income (loss) before taxes                                    6.4       (513.6)
Income tax provision (benefit)                                2.7         (3.6)
                                                           ------       ------

Historical net income                                         3.7       (510.0)
                                                           ======       ======


Year Ended December 31, 2000 Compared to the Year Ended December 31, 1999

REVENUES. Revenues decreased 83% to $945,000 in the year ended December 31, 2000
from  $5,555,000 in the year ended December 31, 1999. This decrease is primarily
attributable  to the Company's  focus on finalizing  its  technology  for volume
commercial production,  upgrading existing customer deployments and establishing
new customer  relationships.  Revenue was also affected by the completion of the
initial  letter  and  package-tracing  contract  with the United  States  Postal
Service in January, 2000.

COST OF REVENUES.  Cost of revenues  decreased 77% to $722,000 in the year ended
December 31, 2000 from  $3,167,000  in the year ended  December  31, 1999.  As a
percentage  of  revenues,  cost of revenues  increased  to 76% in the year ended
December 31, 2000 from 57.0% in the year ended December 31, 1999.  This increase
is  attributable  to a $200,000  reserve on inventory  recorded during the year.
Excluding the reserve, the cost of revenues as a percentage of revenues would be
55% which is  comparable  to the  prior  year.  Gross  profit  decreased  91% to
$223,000 from $2,388,000 in the year ended December 31, 1999. As a percentage of
revenues, gross profit decreased to 24% in the year ended December 31, 2000 from
43.0% in the year ended December 31, 1999.


                                       13
<PAGE>


SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative  expenses  increased 90% to $4,035,000 in the year ended December
31, 2000 from  $2,121,000 in the year ended  December 31, 1999. The increase was
attributable  to an increase in payroll  expenses  associated with the Company's
concentrated  effort  on  system  optimization.  As a  percentage  of  revenues,
selling, general and administrative expenses increased to 427% in the year ended
December 31, 2000 from 38.2% in the year ended December 31, 1999.

RESEARCH AND DEVELOPMENT  EXPENSES.  Research and development expenses increased
655% to $1,751,000 in the year ended December 31, 2000 from $232,000 in the year
ended December 31, 1999. This increase was  attributable  to increased  research
and  development  costs to complete the  commercial  transition of the Company's
technology.  This  investment has resulted in major  improvements in procurement
and mass production capability, a reduced sales cycle and quicker time to market
following customer orders, an enhanced more user-friendly customer interface and
a faster, easier implementation  process. As a percentage of revenues,  research
and development expenses increased to 185.3% in the year ended December 31, 2000
from 4.2% in the year ended December 31, 1999.

NET INTEREST  (EXPENSE)  INCOME.  Interest  income was $714.00 in the year ended
December  31, 2000 as compared to $374,000 in the year ended  December 31, 1999.
This increase was attributable to larger average cash and investment balances in
the entire year of 2000 as compared to 1999 as the Company received the proceeds
from the Company's initial public offering of its common stock.

Interest  expense was $5,000 in the year ended  December 31, 2000 as compared to
$53,000 in the year ended December 31, 1999.  This decrease is  attributable  to
amortization  of the debt  discount  of  stockholder  loans which were repaid in
1999.

INCOME TAXES. Income tax benefit was $34,000 in the year ended December 31, 2000
as compared to income tax  expense of  $149,000 in the year ended  December  31,
1999.

NET  INCOME.  Net loss was  $4,820,000  in the year ended  December  31, 2000 as
compared to net income of $207,000 in the year ended  December  31,  1999.  This
decrease was due primarily to the reasons described above.

Liquidity and Capital Resources

     As of  December  31,  2000,  the  Company  had  $8,673,000  of  cash,  cash
equivalents  and short-term  investments  and  $9,471,000 of working  capital as
compared to $13,026,000 and $14,582,000, respectively at December 31, 1999.

     Net cash used in operating  activities  was  $3,902,000  for the year ended
December  31,  2000 as  compared  to net cash used in  operating  activities  of
$1,627,000  for the year ended  December  31,  1999.  Net cash used in operating
activities in the year ended December 31, 2000 was primarily due to the net loss
of  $4,820,000  and an increase in inventory of $625,000  partially  offset by a
decrease in accounts  and  unbilled  receivables  of  $1,196,000,  a decrease in
prepaid



                                       14
<PAGE>


expenses and other  assets of $205,000  and an increase in accounts  payable and
accrued expenses of $154,000.  Net cash used in operating activities in the year
ended  December  31, 1999 was  primarily  due to an  increase  in  accounts  and
unbilled  receivables of $1,101,000,  an increase in prepaid  expenses and other
assets of  $455,000,  partially  offset by an increase  in  deferred  revenue of
$545,000,  partially  offset by an  increase  in  accounts  payable  and accrued
expenses of $222,000 and net income of $207,000.

     Cash used in investing  activities for the year ended December 31, 2000 was
$24,000 as compared to $6,218,000  for the year ended December 31, 2000. The use
of cash in  investing  activities  for the  year  ended  December  31,  1999 was
$441,000  for  capital  expenditures  for fixed  assets  offset by  $417,000  of
maturities of investments.

     Net cash  used in  financing  activities  was  $10,000  for the year  ended
December  31,1999  as  compared  to net cash  used in  financing  activities  of
$13,736,000  for the year  ended  December  31,  1999.  Cash  used in  financing
activities for the year ended December 31, 2000 was $14,000 for payment of lease
obligations,  partially offset by $4,000 of proceeds  received from the exercise
of stock options.

     The Company  completed  its initial  public  offering of its common  stock,
which  closed  in July  1999 and  August  1999  (over-allotment).  The  offering
provided net proceeds to the Company of approximately  $13,921,000 from the sale
of 2,300,000 shares at $7.00 per share.

     The Company  believes its operations  have not been and, in the foreseeable
future,  will not be  materially  adversely  affected by  inflation  or changing
prices.

Year Ended December 31, 1999 Compared to the Year Ended December 31, 1998

REVENUES.  Revenues increased 67.1% to $5,555,000 in the year ended December 31,
1999 from  $3,324,000  in the year ended  December 31, 1998.  This  increase was
attributable  to an increase in the amount of work  performed by the Company for
the United States Postal  Service and work  performed  under  contracts with new
customers such as Dana  Commercial  Credit,  Federal Express  Corporation,  Ford
Motor Company, Avis Rent A Car System, Inc. and Hallmark Cards.

COST OF REVENUES.  Cost of revenues  increased  93.9% to  $3,167,000 in the year
ended December 31, 1999 from  $1,633,000 in the year ended December 31, 1998. As
a percentage of revenues,  cost of revenues increased to 57.0% in the year ended
December 31, 1999 from 49.1% in the year ended December 31, 1998.  This increase
was primarily  attributable  to an increase in the portion of revenues under the
United  States Postal  Service  contract  attributable  to materials in the year
ended December 31, 1999 as compared to the year ended  December 31, 1998,  which
under this  contract  have lower  margins than  revenues  related to labor.  The
United States Postal Service contract accounted for 95% and 70% of the Company's
revenue  in  1998  and  1999  respectively.  Gross  profit  increased  41.2%  to
$2,388,000 in the year ended December 31, 1999 from $1,691,000 in the year ended
December 31, 1998. As a percentage of revenues,  gross profit



                                       15
<PAGE>


decreased  to 43.0% in the year ended  December  31, 1999 from 50.9% in the year
ended December 31, 1998.

SELLING,   GENERAL   AND   ADMINISTRATIVE   EXPENSES.   Selling,   general   and
administrative expenses increased 95.8% to $2,121,000 in the year ended December
31, 1999 from  $1,083,000 in the year ended  December 31, 1998. The increase was
attributable  to an increase in salaries and  recruiting  fees resulting from an
increase in personnel hired to accommodate the Company's growth. As a percentage
of revenues,  selling, general and administrative expenses increased to 38.2% in
the year ended December 31, 1999 from 32.6% in the year ended December 31, 1998.

RESEARCH AND DEVELOPMENT  EXPENSES.  Research and development expenses increased
262.5% to $232,000 in the year ended  December 31, 1999 from $64,000 in the year
ended December 31, 1998. This increase was  attributable  to increased  research
and development  costs related to developing new  applications for the Company's
products.  As a  percentage  of  revenues,  research  and  development  expenses
increased  to 4.2% in the year  ended  December  31,  1999 from 1.9% in the year
ended December 31, 1998.

NET INTEREST  (EXPENSE)  INCOME.  Interest income was $374,000 in the year ended
December  31, 1999 as compared to $25,000 in the year ended  December  31, 1998.
This increase was attributable to larger average cash and investment balances in
1999 as compared to 1998 as the Company received the proceeds from the Company's
initial public offering in July and August of 1999.

Interest  expense was $53,000 in the year ended December 31, 1999 as compared to
$48,000 in the year ended December 31, 1998.  This increase is  attributable  to
accelerated   amortization  of  the  debt  discount  due  to  the  repayment  of
stockholder loans.

INCOME  TAXES.  Income tax expense was  $149,000 in the year ended  December 31,
1999 as  compared  to $45,000 in the year ended  December  31,  1998.  Beginning
January 1, 1999, the Company became subject to federal and state income taxes as
a C corporation.  Prior to January 1, 1999, the Company was an S corporation for
federal and state tax purposes  and was only  subject to local taxes.  Pro forma
net income for the year ended December 31, 1998 reflects $192,000 of federal and
state  income  taxes  which  would have been  recognized  had the S  corporation
election not been in effect.

NET  INCOME.  Net income was  $207,000  in the year ended  December  31, 1999 as
compared  to pro forma net income of  $284,000  in the year ended  December  31,
1998. This decrease was due primarily to the reasons described above.


                                       16
<PAGE>


Inflation

     The impact of inflation of the Company's revenues and results of operations
has not been significant.

Forward Looking Statements

Certain  statements  in this Annual  Report on Form  10-KSB,  under the sections
"Management  Discussion  and  Analysis  of  Financial  Condition  and Results of
Operations,"  "Business" and elsewhere  relate to future events and expectations
and as such constitute  "forward-looking  statements"  within the meaning of the
Private  Securities  Litigation  Reform  Act  of  1995.  The  words  "believes,"
"anticipates,"  "plans,"  "expects,"  and similar  expressions  are  intended to
identify  forward-looking  statements.  Such forward-looking  statements involve
known and unknown  risks,  uncertainties,  and other factors which may cause the
actual  results,  performance  or  achievements  of the Company to be materially
different  from any future  results,  performance or  achievements  expressed or
implied  by  such  forward-looking  statements  and to vary  significantly  from
reporting  period to reporting  period.  These forward  looking  statements were
based  on  various  factors  and  were  derived  utilizing   numerous  important
assumptions  and  other  factors  that  could  cause  actual  results  to differ
materially  from those in the forward  looking  statements,  including,  but not
limited  to:  uncertainty  as to the  Company's  future  profitability  and  the
Company's ability to develop and implement  operational and financial systems to
manage rapidly  growing  operations,  competition in the Company's  existing and
potential  future  lines of  business,  and other  factors.  Other  factors  and
assumptions  not identified  above were also involved in the derivation of these
forward  looking  statements,  and the failure of such other  assumptions  to be
realized,  as well as other  factors,  may also cause  actual  results to differ
materially  from those  projected.  The Company  assumes no obligation to update
these  forward  looking  statements  to  reflect  actual  results,   changes  in
assumptions  or  changes  in  other  factors   affecting  such  forward  looking
statements.


                                       17
<PAGE>



Item 7  Financial Statements
                                                                            Page
                                                                            ----

Independent Auditors' Report                                                 19

Balance sheets as of December 31, 2000                                       20

Statements of operations for the years ended December 31, 2000 and 1999      21

Statements of changes in stockholders' equity for the years ended
 December 31, 2000 and 1999                                                  22

Statements of cash flows for the years ended December 31, 2000 and 1999      23

Notes to financial statements                                                25



                                       18
<PAGE>


                          INDEPENDENT AUDITORS' REPORT


Board of Directors and Stockholders
I.D. Systems, Inc.
Hackensack, New Jersey


We have  audited the  accompanying  balance  sheet of I.D.  Systems,  Inc. as of
December  31,  2000  and  the  related  statements  of  operations,  changes  in
stockholders'  equity and cash flows for the years ended  December  31, 1999 and
2000.  These  financial  statements  are  the  responsibility  of the  Company's
management.  Our  responsibility  is to express  an  opinion on these  financial
statements based on our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements enumerated above present fairly, in all
material respects,  the financial position of I.D. Systems,  Inc. as of December
31,  2000 and the  results  of its  operations  and its cash flows for the years
ended  December  31,  1999 and  2000,  in  conformity  with  generally  accepted
accounting principles.



/s/ Richard A. Eisner & Company, LLP
------------------------------------

New York, New York
March 27, 2001



                                       19
<PAGE>


                               I.D. Systems, Inc.
                                 Balance Sheets
                                December 31, 2000

ASSETS
Current assets:
   Cash and cash equivalents                                       $  3,085,000
   Investments                                                        5,588,000
   Accounts receivable (net of allowance of $48,000)                    297,000
   Unbilled receivables                                                 349,000
   Inventory                                                            748,000
   Prepaid expenses and other current assets                            125,000
                                                                   ------------

      Total current assets                                           10,192,000

Fixed assets -- net                                                     632,000
Other assets                                                            146,000
                                                                   ------------

                                                                   $ 10,970,000

LIABILITIES
Current liabilities:                                               $    699,000
   Accounts payable                                                      14,000
   Capital lease obligations                                              8,000
                                                                   ------------
   Income taxes payable
                                                                        721,000
      Total current liabilities
                                                                         18,000
Capital lease obligations                                                19,000
                                                                   ------------
Deferred rent
                                                                        758,000

STOCKHOLDERS' EQUITY
Preferred stock; authorized 5,000,000 shares, $.01 par value;
   none issued
Common stock; authorized 15,000,000 shares, $.01 par value;
   issued and outstanding 5,721,000 shares                               57,000
Additional paid-in capital                                           15,558,000
Accumulated deficit                                                  (5,403,000)
                                                                   ------------

                                                                     10,212,000

                                                                   $ 10,970,000

See notes to financial statements


                                       20
<PAGE>


                               I.D. Systems, Inc.
                            Statements of Operations


<TABLE>
<CAPTION>
                                                                          Year Ended December 31,
                                                                          -----------------------
                                                                            1999           2000
                                                                        -----------    -----------

<S>                                                                     <C>            <C>
Revenues                                                                $ 5,555,000    $   945,000
Cost of revenues                                                          3,167,000        722,000
                                                                        -----------    -----------

Gross profit                                                              2,388,000        223,000
Selling, general and administrative expenses                              2,121,000      4,035,000
Research and development expenses                                           232,000      1,751,000
                                                                        -----------    -----------

Income (loss) from operations                                                35,000     (5,563,000)
Interest income                                                             374,000        714,000
Interest expense                                                            (53,000)        (5,000)
                                                                        -----------    -----------

Income (loss) before taxes                                                  356,000     (4,854,000)
Income tax provision                                                        149,000         77,000
                                                                        -----------    -----------

Net income (loss)                                                       $   207,000    $(4,931,000)
                                                                        ===========    ===========

Net income (loss) per share -- basic                                    $       .05          ($.86)
                                                                        ===========    ===========

Net income (loss) per share -- diluted                                  $       .04          ($.86)
                                                                        ===========    ===========

Weighted average common shares outstanding -- basic income per share
                                                                          5,721,000     4,545,000
Effect of potential common shares from exercise of options                1,021,000
                                                                        -----------

Weighted average common shares outstanding -- diluted income per share
                                                                          5,566,000      5,721,000
                                                                        ===========    ===========
</TABLE>


See notes to financial statements



                                       21
<PAGE>



                               I.D. Systems, Inc.
                  Statements of Changes in Stockholders' Equity


<TABLE>
<CAPTION>
                                                          Common Stock
                                                          ------------
                                                     Number                          Additional
                                                       of                             Paid-in        Accumulated     Stockholders'
                                                     Shares          Amount           Capital          Deficit          Equity
                                                   ----------      -----------      -----------     ------------      -----------

<S>                                                 <C>            <C>                <C>           <C>                 <C>
BALANCE -- JANUARY 1, 1999                          3,414,000      $    34,000        1,653,000     $   (679,000)       1,008,000
Shares issued pursuant to initial public
offering                                            2,300,000           23,000       13,898,000                        13,921,000


Shares issued pursuant to exercise of
   stock options                                        3,000                             3,000                             3,000
Net income for the year ended
   December 31, 1999                                                                                     207,000          207,000
                                                   ----------      -----------      -----------     ------------      -----------

BALANCE -- DECEMBER 31, 1999                        5,717,000           57,000      $15,554,000         (472,000)      15,139,000
Shares issued pursuant to exercise of
   stock options                                        4,000                             4,000                             4,000

Net loss for the year ended
   December 31, 1999                                                                                  (4,931,000)      (4,931,000)
                                                   ----------      -----------      -----------     ------------      -----------

BALANCE -- DECEMBER 31, 2000                        5,721,000      $    57,000      $15,558,000     $ (5,403,000)     $10,212,000
                                                   ==========      ===========      ===========     ============      ===========
</TABLE>

See notes to financial statements


                                       22
<PAGE>


                               I.D. Systems, Inc.
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                       Year Ended December 31,
                                                                                                       -----------------------
                                                                                                      1999                  2000
                                                                                                      ----                  ----
<S>                                                                                              <C>                   <C>
Cash flows from operating activities:
   Net (loss) income                                                                             $    207,000          $ (4,931,000)
   Adjustments to reconcile net income (loss) to net cash provided by
    (used in) operating activities:
        Depreciation and amortization                                                                  57,000               116,000
        Amortization of debt discount                                                                  44,000
        Deferred taxes                                                                                 18,000                49,000
        Deferred rent expense                                                                           4,000               (23,000)
        Changes in:
           Accounts receivable                                                                       (139,000)              583,000
           Unbilled receivables                                                                      (962,000)              613,000
           Inventory                                                                                 (123,000)             (625,000)
           Prepaid expenses and other assets                                                         (455,000)              205,000
           Accounts payable and accrued expenses                                                      222,000               154,000
           Income taxes payable                                                                        45,000               (43,000)
           Deferred revenue                                                                          (545,000)
                                                                                                 ------------          ------------

              Net cash provided by (used in) operating activities                                  (1,627,000)           (3,902,000)
                                                                                                 ------------          ------------

Cash flows from investing activities:
   Purchase of fixed assets                                                                          (213,000)             (441,000)
   Purchases of investments                                                                        (5,929,000)          (10,140,000)
   Maturities and sales of securities                                                                                    10,740,000
   Amortization of discount on investments                                                                                 (183,000)
                                                                                                                       ------------

              Net cash used in investing activities                                                (6,218,000)              (24,000)
                                                                                                 ------------          ------------

Cash flows from financing activities:
   Payment of lease obligations                                                                       (11,000)              (14,000)
   Receipt of amount due from stockholder                                                              23,000
   Payment of stockholder loans                                                                      (200,000)
   Proceeds from exercise of stock options                                                              3,000                 4,000
   Net proceeds from sale of stock in initial public offering                                      13,921,000
                                                                                                 ------------          ------------

              Net cash provided by (used in) financing activities                                  13,736,000               (10,000)
                                                                                                 ------------          ------------
</TABLE>


                                       23
<PAGE>


                               I.D. Systems, Inc.
                      Statements of Cash Flows (continued)


<TABLE>
<CAPTION>
                                                               Year Ended December 31,
                                                                 1999          2000
                                                              ----------   -----------

<S>                                                            <C>           <C>
Net increase (decrease) in cash and cash equivalents           5,891,000    (3,936,000)
Cash and cash equivalents -- January 1                         1,130,000     7,021,000
                                                              ----------   -----------

Cash and cash equivalents -- December 31                      $7,021,000   $ 3,085,000
                                                              ==========   ===========

Supplemental disclosure of cash flow information:
   Cash paid for interest                                     $   37,000   $     5,000
   Cash paid for income taxes                                 $   98,000   $    58,000

Supplemental disclosure of noncash financing information:
   Equipment acquired pursuant to capital lease obligations   $   31,000
</TABLE>


See notes to financial statements



                                       24
<PAGE>


                               I.D. Systems, Inc.
                          Notes to Financial Statements
                                December 31, 1999

Note A -- The Company

I.D.  Systems,  Inc. (the  "Company") is a provider of wireless  solutions.  The
Company  designs,  develops  and produces  innovative  wireless  monitoring  and
tracking  products  that utilize its patented  radio-frequency-based  system and
Internet-based data management  systems.  The Company's products are designed to
enable users to improve operating efficiencies and reduce costs. The Company was
incorporated in Delaware in 1993 and commenced operations in January 1994.

Note B -- Summary of Significant Accounting Policies

[1]  Use of estimates:

     The  preparation  of financial  statements  in  conformity  with  generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions  that affect the reported amounts of assets and liabilities and
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements  and the  reported  amounts of revenues  and expenses
     during  the  reporting  period.  Actual  results  could  differ  from those
     estimates.

[2]  Stock split:

     On June 29,  1999,  the  Company  effected  a 1.25 for 1 stock  split.  The
     accompanying  financial statements and notes hereto give retroactive effect
     to the stock  split and  accordingly,  the number of shares for all periods
     are stated on a post split basis.

[3]  Cash and cash equivalents:

     The Company  considers all highly liquid investment  instruments  purchased
     with a maturity of three months or less to be cash equivalents.

[4]  Inventory:

     Inventory which consists of components for the Company's  systems is stated
     at cost using the first-in first-out method.

[5]  Fixed assets and depreciation:

     Fixed assets are recorded at cost and depreciated  using the  straight-line
     method over the estimated useful lives of the assets which range from three
     to ten  years.  Equipment  under  capital  leases are  amortized  using the
     straight-line  method  over the terms of the  respective  leases,  or their
     estimated useful lives, whichever is shorter.


                                       25
<PAGE>


                               I.D. Systems, Inc.
                          Notes to Financial Statements
                                December 31, 2000

Note B -- Summary of Significant Accounting Policies  (continued)

[6]  Research and development:

     Research and development costs are charged to expense as incurred.

[7]  Patent costs:

     Costs incurred in connection  with  acquiring  patent rights are charged to
     expense as incurred.

[8]  Revenue recognition:

     The majority of 1998  revenues  (95%) and 1999  revenues  (55%) were earned
     pursuant  to  contracts  under which  revenues  have been  recognized  when
     related time and material  charges were  incurred.  All other revenues have
     been recognized  either when services were performed,  goods were delivered
     or as work progressed, measured by the percentage-of-completion  method, in
     accordance  with  conditions  of  related  contracts.   Amounts  billed  to
     customers  that  did not  meet  the  conditions  of the  Company's  revenue
     recognition  policy were recorded as deferred revenue until such conditions
     were met. Unbilled receivables were recorded if conditions of the Company's
     revenue recognition policy were met.

[9]  Benefit plan:

     The  Company  maintains  a  retirement  plan  under  Section  401(k) of the
     Internal  Revenue  Code which covers all  eligible  employees.  The Company
     contributed  approximately  $36,000 and $6,000 to the plan during the years
     ended December 31, 2000 and 1999, respectively.

[10] Rent expense:

     Expense  related  to  the  Company's   facility  lease  is  recorded  on  a
     straight-line  basis  over the lease  term.  The  difference  between  rent
     expense  incurred  and the amount paid is recorded as deferred  rent and is
     amortized over the lease term.


                                       26
<PAGE>


                               I.D. Systems, Inc.
                          Notes to Financial Statements
                                December 31, 2000

[11] Stock based compensation:

     The Company accounts for stock-based employee compensation under Accounting
     Principles  Board ("APB")  Opinion No. 25,  "Accounting for Stock Issued to
     Employees,"  and  related  interpretations.  The  Company  has  adopted the
     disclosure-only  provisions of Statement of Financial  Accounting Standards
     ("SFAS") No. 123, "Accounting for Stock- Based Compensation."

[12] Income taxes:

     The Company had elected to be treated as an S  corporation  for federal and
     state income tax purposes. As a result of this election,  the income of the
     Company was taxed  directly  to the  individual  stockholders.  The Company
     continued  to be subject to New York City income tax. In 1999,  the Company
     filed an election to be taxed as a C corporation and,  effective January 1,
     1999, became subject to federal,  state and local income taxes. The Company
     uses the asset  and  liability  method  of  accounting  for  income  taxes.
     Deferred income taxes are measured by applying  enacted  statutory rates to
     net  operating  loss  carryforwards  and to  the  differences  between  the
     financial  reporting and tax bases of assets and liabilities.  Deferred tax
     assets are reduced,  if  necessary,  by a valuation  allowance  for any tax
     benefits which are not expected to be realized.

[13] Net income loss per share:

     The Company  calculates its income (loss) per share in accordance  with the
     provisions  of SFAS No. 128,  "Earnings Per Share." SFAS No. 128 requires a
     dual  presentation of "basic" and "diluted" income per share on the face of
     the statements of operations.  Basic income (loss) per share is computed by
     dividing the net income by the weighted  average number of shares of common
     stock  outstanding  during each  period.  Diluted  income  (loss) per share
     includes the effect,  if any, from the potential  exercise or conversion of
     securities,  such as stock options and warrants,  which would result in the
     issuance of incremental shares of common stock. For the year ended December
     31, 2000 the basic and diluted weighted average shares  outstanding are the
     same since the effect  from the  potential  exercise of  outstanding  stock
     options would have been anti-dilutive.



                                       27
<PAGE>


                               I.D. Systems, Inc.
                          Notes to Financial Statements
                                December 31, 2000


[14] Financial instruments:

     The carrying  amounts of cash and cash  equivalents,  accounts  receivable,
     accounts  payable,  accrued  expenses,  capital lease obligations and notes
     payable  approximate  their fair values due to the short period to maturity
     of these instruments.

Note C -- Investments

The Company's investments at December 31, 2000 consist principally of short-term
commercial  paper which  mature  within one year and are  classified  as held to
maturity. Accordingly, investments are carried at amortized cost.

Note D -- Fixed Assets

Fixed  assets are stated at cost and, at December 31, 2000,  are  summarized  as
follows:

     Laboratory equipment                                   $ 106,000
     Computer software                                        127,000
     Computer hardware                                        180,000
     Furniture and fixtures                                   114,000
     Leasehold improvements                                   275,000
     Equipment under capital lease                             70,000
                                                            ---------

                                                              872,000
     Accumulated depreciation and amortization                240,000
                                                            ---------

                                                            $ 632,000
                                                            =========


                                       28
<PAGE>



                               I.D. Systems, Inc.
                          Notes to Financial Statements
                                December 31, 2000

Note E -- Equipment Lease Obligations

The Company leases equipment under various  agreements with original terms of 36
to 60 months and accounts for these leases as capital leases. The net book value
of the equipment held under capital leases was approximately $41,000 at December
31, 2000.

Future lease payments as of December 31, 2000 are as follows:

            YEAR ENDING
            DECEMBER 31,
            ------------

                 2001                                              $  17,000
                 2002                                                 15,000
                 2003                                                  4,000
                                                                   ---------

           Amount representing interest                               36,000
                                                                       4,000

           Present value of future lease payments                     32,000
           Amount due within one year                                 14,000
                                                                   ---------

                                                                   $  18,000

Note F -- Stockholders' Equity

[1]  Common stock:

     In April 1997, the Company  completed a private  placement  whereby it sold
     167,000  shares of common  stock and issued  $200,000 of  promissory  notes
     maturing in April 2002 bearing  interest at 8% per annum for gross proceeds
     of $200,000.  The common  stock  issued was valued at $68,000  representing
     debt  discount  which is being  amortized  over the  five-year  term of the
     promissory  notes.  As a result,  the  effective  annual  interest rate was
     approximately  15%.  During 1999, the Company repaid the notes plus $35,000
     of  accrued  interest   pursuant  to  payment   provisions  of  the  notes.
     Accordingly,  interest expense in 1999 includes $44,000 related to the debt
     discount.


                                       29
<PAGE>



                               I.D. Systems, Inc.
                          Notes to Financial Statements
                                December 31, 2000

Note F -- Stockholders' Equity (continued)

     In June 1999, the Company sold  2,300,000  shares of its common stock in an
initial  public  offering.  In connection  therewith,  the Company  received net
proceeds of $13,921,000

     In June 1999, the Company  increased the number of common shares authorized
to 15,000,000.

[2]  Preferred stock:

     In June 1999,  the Company  authorized  5,000,000  shares of $.01 par value
     preferred  stock.  The  Company's  Board of Directors  has the authority to
     issue  shares of preferred  stock and to  determine  the price and terms of
     those shares.

[3]  Stock options:

     The Company has adopted the 1995 Stock Option  Plan,  pursuant to which the
     Company  may grant  options to  purchase up to an  aggregate  of  1,250,000
     shares of common stock.  The Company has also adopted the 1999 Stock Option
     Plan and the 1999  Director  Plan,  pursuant to which the Company may grant
     options to  purchase  up to 812,500  and  300,000  shares of common  stock,
     respectively.  The Plans are administered by the Board of Directors,  which
     has the  authority  to  determine  the term  during  which an option may be
     exercised (not more than 10 years), the exercise price of an option and the
     rate at which options may be exercised.

     A summary of the status of the  Company's  stock options as of December 31,
1999 and 2000 and changes  during the years ending on those dates,  is presented
below:

<TABLE>
<CAPTION>
                                                  1999                       2000
                                          -------------------------  --------------------------
                                                       Weighted
                                                        Average                     Average
                                           Shares    Exercise Price    Shares    Exercise Price

<S>                                      <C>             <C>         <C>             <C>
     Outstanding at beginning of year    1,238,000       $1.09       1,479,000       $1.79
     Granted                               275,000        5.18         590,000        5.59
     Exercised                              (3,000)       1.20          (4,000)       1.20
     Forfeited                             (31,000)       4.16         (90,000)       5.36
                                         ----------                  ---------       -----

     Outstanding at end of year          1,479,000        1.79       1,975,000        2.76
                                        ==========                   =========       =====

     Exercisable at end of year            574,000        1.01         848,000        1.20
                                        ==========                   =========       =====
</TABLE>

                                       30
<PAGE>


                               I.D. Systems, Inc.
                          Notes to Financial Statements
                                December 31, 2000

Note F -- Stockholders' Equity (continued)

     As of December  31, 2000 there were  381,000  options  available  for grant
under the Company's stock option plans.

     The  following  table  summarizes   information   about  stock  options  at
December 31, 2000:

<TABLE>
<CAPTION>
                                 Options Outstanding                               Options Exercisable
                         -----------------------------------------------       -----------------------------


                            Number            Weighted                               Number
                          Outstanding          Average          Weighted          Exercisable       Weighted
                              at              Remaining          Average               at            Average
        Exercise         December 31,        Contractual        Exercise          December 31,       Exercise
         Prices              2000               Life              Price               2000            Price
        -------          -----------         -----------        --------         ------------       -------
<S>       <C>                <C>                <C>              <C>                 <C>              <C>
          $0.80              338,000            5 years          $0.80               338,000          $0.80
          1.20               875,000            7 years           1.20               475,000           1.20
       2.00-3.625            238,000           10 years           3.13
       4.125-5.625           179,000            9 years           4.23                27,000          4.125
        7.38-8.00            345,000            9 years           7.61                 8,000           7.56
                       -------------                                            --------------

                           1,975,000            7 years           2.76               848,000           1.20
                       =============                                            ==============
</TABLE>


The Company applies APB Opinion 25 and related interpretations in accounting for
options.  Accordingly,  no  compensation  cost has been  recognized for employee
stock option grants. Had compensation cost for employee stock option grants been
determined based on the fair value at the grant dates for awards consistent with
the method of SFAS No. 123, the Company's net income, net income (basic) and net
income per share  (diluted) for the year ended  December 31 1999 would have been
approximately $131,000, $.03 and $.02, respectively.  The Company's net loss and
net loss per share  (basic and  diluted)  for the year ended  December  31, 2000
would have been  approximately  $5,505,000  , and $.96,  respectively.  The fair
value  of each  option  grant  on the  date of  grant  is  estimated  using  the
Black-Scholes option-pricing model with a volatility of 58% for 1999 and 70% for
2000,  expected  life of options  of 5 to 7 years,  risk free  interest  rate of
approximately  6% and a dividend yield of 0%. The weighted average fair value of
options granted during the years ended December 31, 1999 and 2000 were $2.79 and
$3.55, respectively.



                                       31
<PAGE>


                               I.D. Systems, Inc.
                          Notes to Financial Statements
                                December 31, 2000

Note F -- Stockholders' Equity (continued)

     Warrants:

     In connection  with the  Company's  initial  public  offering in June 1999,
     warrants  to  purchase  200,000  shares of common  stock were issued to the
     underwriter for nominal  consideration.  The warrants are exercisable for a
     period of four  years,  commencing  in June 2000,  at a price of $11.55 per
     share.

Note G -- Income Taxes

     Through  December  31, 1998 the Company  was subject  only to local  income
     taxes.  Effective  January 1, 1999,  the  Company  elected to be taxed as a
     corporation and  accordingly is subject to federal,  state and local income
     taxes. The Company has a deferred tax asset of approximately  $1,970,000 at
     December 31, 2000.  This reflects a net  operating  loss  carryforward  for
     Federal,   New  York  State,   New  York  City  and  New  Jersey  purposes,
     substantially  all of which expires in 2020 and certain timing  differences
     between  financial and tax  reporting.  The Company is subject to an annual
     limitation  on the  utilization  of a  portion  of its net  operating  loss
     carryforward.  Future stock issuances may subject the Company to additional
     limitations.   The  Company  has  provided  a  valuation  allowance,  which
     increased  by  $1,970,000  during  2000,  against  the full  amount  of its
     deferred  tax  asset,   since  the  likelihood  of  realization  cannot  be
     determined.

     The components of income tax expense are approximately as follows:

                                                           Year Ended
                                                           December 31,
                                                        1999        2000
                                                      --------    --------

     Current:
        Federal                                       $115,000    $ (2,000)
        State                                           16,000      18,000
        Local                                           12,000
                                                      --------    --------

                                                       131,000      28,000

     Deferred:
        Local                                           18,000      49,000
                                                      --------    --------

                                                      $149,000    $ 77,000
                                                      ========    ========


                                       32
<PAGE>


                               I.D. Systems, Inc.
                          Notes to Financial Statements
                                December 31, 2000

Note G -- Income Taxes (continued)

The difference between income taxes at the statutory federal income tax rate and
income taxes reported in the statements of operations  are  attributable  to the
following:

<TABLE>
<CAPTION>
                                                                           Year Ended
                                                                           December 31,
                                                                        1999           2000
                                                                    -----------    -----------


<S>                                                                 <C>            <C>
     Income taxes at the federal statutory rate                     $   121,000    $(1,651,000)
     State and local income taxes, net of effect on federal taxes        33,000       (270,000)
     Increase in valuation allowance                                  1,970,000
     Other                                                               (5,000)        28,000
                                                                    -----------    -----------

                                                                    $   149,000    $    77,000
                                                                    ===========    ===========
</TABLE>

Components of the deferred tax asset at December 31, 2000 are as follows:

     Net operating loss carryforward                           $ 1,808,000
     Allowance for receivables                                      82,000
     Allowance for inventory obsolescence                           80,000
                                                               -----------

                                                                 1,970,000
     Valuation allowance                                        (1,970,000)
                                                               -----------

                                                               $         0
                                                               ===========


                                       33
<PAGE>


                               I.D. Systems, Inc.
                          Notes to Financial Statements
                                December 31, 2000

Note H -- Commitments and Other Matters

[1]  Operating leases:

     The Company is obligated under operating leases for its facility,  which it
     occupied in March 2000,  and for  furniture  and  fixtures.  The  Company's
     operating leases provide for minimum annual rental payments as follows:

<TABLE>
<CAPTION>
                                                          Furniture
                                                             and
                                    Facility               Fixtures                Total
                                    --------              ----------               -----

<S>                               <C>                   <C>                  <C>
       2001                       $     373,000         $   124,000          $      497,000
       2002                             373,000             124,000                 497,000
       2003                             373,000              10,000                 383,000
       2004                             373,000                                     373,000
       20005                            410,000                                     410,000
       Thereafter                     1,845,000                                   1,845,000
                                  -------------         -----------          --------------

                                  $   3,747,000         $   258,000          $    4,005,000
                                  =============         ===========          ==============
</TABLE>

     The office  lease,  which  expires in 2010,  also  provide for  escalations
     relating to increases in real estate taxes and certain operating  expenses.
     Expenses relating to operating leases aggregated approximately $113,000 and
     $___ for the years ended December 31, 1999 and 2000, respectively.

     When the  Company  vacates  its  current  premises,  it will be required to
     record a charge to operations for the current value of the anticipated loss
     if it has not sublet the space.  Additionally,  pursuant  to the new lease,
     the Company  has issued a letter of credit in the amount of $317,703  which
     remains open as of December 31, 1999.

[2]  Employment agreements:

     In June 1999, the Company  entered into  three-year  employment  agreements
     with four  executives  which provide for aggregate  annual  compensation of
     $408,000 and entitle the executives to salary increases,  bonuses and stock
     options to be  determined by the Board of Directors.  The  agreements  also
     provide for severance payments through the end of the agreements.


                                       34
<PAGE>


                               I.D. Systems, Inc.
                          Notes to Financial Statements
                                December 31, 2000

[3]  Concentration of customers:

     One customer  accounted  for 7% of the Company's  revenues  during the year
     ended December 31, 1999.

     A second  customer  accounted for 12% of the Company's  revenues during the
     year ended December 31, 1999.

     A third  customer  accounted for 20% of the Company's  revenues  during the
     year ended December 31, 2000.

[4]  Related party transactions:

     During  the  year  ended   December   31,  1999,   the  Company   purchased
     approximately  $262,000  of  components  from a  company  where  two of the
     Company's  directors  were  formerly  directors.  During 2000,  the Company
     cancelled a purchase order,  originally  issued in 1998,  which had an open
     balance of $95,000.



                                       35
<PAGE>



Item  8.  Changes  In and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure

     None.



                                       36
<PAGE>


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons, Compliance
        With Section 16(a) of the Exchange Act

Directors and Executive Officers

The following  table sets forth  certain  information  concerning  the Executive
Officers and Directors of the Company.

<TABLE>
<CAPTION>
         Name                               Age        Position
         ----                               ---        --------
<S>                                          <C>
         Jeffrey M. Jagid                    32        Chief Executive Officer, General Counsel
                                                       and Director
         Kenneth S. Ehrman                   31        Chief Operating Officer and Director
         Michael L. Ehrman                   28        Executive Vice President - Engineering
         Ned Mavrommatis                     30        Chief Financial Officer
         Bruce Jagid (1)                     61        Director
         Martin G. Rosansky (1)              61        Director
         Lawrence Burstein (1)               57        Director
         N. Bert Loosmore                    31        Director
</TABLE>

     (1)  Member of the Compensation and Audit Committees

     Jeffrey M. Jagid has been Chief Executive Officer since June 1, 2000. Prior
to that,  he had served as the  Company's  Chief  Operating  Officer.  Since her
joined the Company in 1995,  Mr.  Jagid has served as a Director of the Company,
as well as its  General  Counsel.  Mr.  Jagid  received a Bachelor  of  Business
Administration  from Emory University in 1991 and a Juris Doctor degree from the
Benjamin N. Cardozo  School of Law in 1994.  Prior to joining the  Company,  Mr.
Jagid was a corporate litigation associate at the law firm of Tannenbaum Helpern
Syracuse &  Hirschtritt  LLP, in New York City. He is a member of the Bar of the
States of New York and New Jersey. Mr. Jagid is Bruce Jagid's son.

     Kenneth  S.  Ehrman  is a  founder  of the  Company  and has been its Chief
Operating  Officer since June 1, 2000.  Prior to that, and since  inception,  he
served as the Company's President. Mr. Ehrman has been a Director of the Company
since inception.  He graduated from Stanford  University in 1991 with a Bachelor
of Science in Industrial  Engineering,  where he studied Management,  Production
and  Finance.  Upon his  graduation,  and until the  inception of the Company in
1993, Mr. Ehrman worked as a production manager with a Silicon Valley networking
company. Mr. Ehrman is Michael L. Ehrman's brother.



                                       37
<PAGE>


     Michael L. Ehrman has served as the Company's  Executive  Vice President of
Engineering  since August 1999.  Prior to that, he served as its Executive  Vice
President of Software Development since he joined the Company in 1995. He served
as a director  of the Company  from the date he joined the  Company  until April
1999.  Mr. Ehrman  graduated  from Stanford  University in 1994 with a Master of
Science in  Engineering  Economics  Systems as well as a Bachelor  of Science in
Computer  Systems  Engineering.  Upon his  graduation  in 1994,  Mr.  Ehrman was
employed as a Consultant  for Anderson  Consulting  in New York.  Mr.  Ehrman is
Kenneth Ehrman's brother.

     Ned Mavrommatis has served as the Chief Financial Officer since joining the
Company in August 1999. Prior to joining the Company, he was a Senior Manager at
the  accounting  firm of Richard A. Eisner & Company  L.L.P.  He was a member of
Eisner's  New  Media/Technology  Group  in  the  public  company  practice.  Mr.
Mavrommatis received a Bachelor of Business  Administration  degree from Bernard
M. Baruch  College,  The City  University of New York in 1993. He is a member of
The New York State  Society of  Certified  Public  Accountants  and The American
Institute of Certified Public Accountants.

     Bruce Jagid is a founder of the Company and has served as its Treasurer and
as a Director  since  inception.  Mr.  Jagid  served as Chairman of the Board of
Directors  of  Ultralife  Batteries,  Inc.,  a  public  company  devoted  to the
development  and manufacture of primary and secondary  lithium battery  systems,
from March 1991 to January  1999,  served as its Chief  Executive  Officer  from
January 1992 to January 1999, and served as a director until June of 2000. Prior
to Mr. Jagid's  involvement with Ultralife,  he co-founded Power Conversion Inc.
and was its President  until January 1989.  Mr. Jagid is a director of THQ, Inc.
Mr. Jagid  received his Bachelor of Science in Mechanical  Engineering  from the
City  College  of New  York  and  obtained  his  masters  degree  in  Mechanical
Engineering  from  Rensselaer  Polytechnic  Institute.  Mr.  Jagid is Jeffrey M.
Jagid's father.

     Martin  G.  Rosansky  is a founder  of the  Company  and has  served as its
Secretary and as a Director of the Company since  inception.  In March 1991, Mr.
Rosansky co-founded and served as the Vice Chairman of Ultralife Batteries, Inc.
Prior to Ultralife,  in 1970, Mr. Rosansky  co-founded Power  Conversion,  Inc.,
where he was Chairman of the Board, Secretary and Treasurer from 1970 to January
1986. Mr. Rosansky earned a Bachelor of Science in Mechanical  Engineering  from
Polytechnic Institute of Brooklyn in 1960.

     Lawrence  Burstein  has served as a Director of the  Company  since June of
1999.  Since March 1996,  Mr.  Burstein has served as President  and director of
Unity Venture  Capital  Associates,  Ltd., a private  investment  company.  From
January  1982 to March  1996,  Mr.  Burstein  was  Chairman  of the  Board and a
principal  stockholder  of Trinity  Capital  Corporation,  a private  investment
company.  Mr. Burstein is a director of THQ, Inc.,  Brazil Fast Food Corp.,  CAS
Medical  Systems,  Inc.,  Traffix,  Inc. and Gender  Science  Inc. Mr.  Burstein
received a Bachelor of Arts in Economics  from the University of Wisconsin and a
Bachelor of Law from Columbia Law School.


                                       38
<PAGE>


     N. Bert  Loosmore is a founder of the  Company and served as its  Executive
Vice President of Technology from August 1999 until December 15, 2000.  Prior to
that,  since inception,  he served as the Company's  Executive Vice President of
Engineering. Mr. Loosmore has been a Director of the Company since inception. He
graduated  from  Stanford  University  in 1991 with a  Bachelor  of  Science  in
Electrical Engineering, where he concentrated on computer hardware and software,
including  microprocessor  design. From 1991 to 1992, he worked at International
Business Machines,  Inc. as a Design and Test Engineer and later as a Production
Engineer. From 1992 until the Company's inception, Mr. Loosmore was a Production
Engineer at a Silicon Valley networking company.

     All  directors  currently  hold  office  until the next  annual  meeting of
stockholders  and until their  successors  are duly elected and  qualified.  The
Company's  executive  officers serve at the discretion of the Board of Directors
and until their successors are duly elected and qualified.

Item 10.  Executive Compensation

     The following table sets forth the  compensation  paid or accrued,  for the
fiscal years ended December 31, 2000 and 1999 and 1998, for the Company's  Chief
Executive Officer and four most highly compensated executive officers other than
its Chief Executive  Officer,  whose salary and bonus were in excess of $100,000
(the "Named Officers") who were employed by the Company on December 31, 2000.



                                       39
<PAGE>


                           Summary Compensation Table

<TABLE>
<CAPTION>
                                                                                           Long Term
                                                          Annual Compensation          Compensation Awards ($)
                                                    -----------------------------------------------------------
                                                                                                     Securities
                                                                                     Restricted     Underlying
             Name and                                                                  Stock         Options/
        Principal Position             Year            Salary            Bonus           Award         SARs (#)
---------------------------------------------------------------------------------------------------------------
<S>                                     <C>           <C>               <C>              <C>          <C>
     Jeffrey M. Jagid                   2000          $119,500             --            --           --
     Chief Executive Officer            1999          $114,500          $12,000          --           --
     and General Counsel                1998           $80,000          $40,000          --           --

     Kenneth S. Ehrman                  2000          $119,500             --            --           --
     Chief Operating Officer            1999          $114,500          $12,000          --           --
                                        1998           $80,000          $40,000          --           --

     Michael L. Ehrman                  2000          $107,500             --            --           --
     Executive Vice President           1999          $109,000          $24,000          --           --
                                        1998           $80,000          $40,000          --           --

     Ned Mavrommatis (1)                2000          $100,000             $???          --           --
     Chief Financial Officer            1999           $34,000             $???          --           --
                                        1998              --               --            --           --

     N. Bert Loosmore (2)               2000          $103,000             --            --           --
                                        1999          $109,000          $24,000          --           --
                                        1998           $80,000          $40,000          --           --
</TABLE>

----------

(1)  Mr. Mavrommatis joined the Company in August 1999. His annualized salary in
     1999 would have been $100,000.

(2)  Mr. Loosmore served as the Company's Executive Vice President of Technology
     until  December 15, 2000.  His  annualized  salary for 2000 would have been
     $107,500.

Option Grants in Last Fiscal Year

     During  the last  fiscal  year,  the  options  to  purchase  shares  of the
Company's  common stock were granted  under the Company's  1999  Director  Stock
Option Plan and 1999 Employee  Stock Option Plan to the below named officers and
directors in the amounts and at the per share  exercise price set forth opposite
their names. All options vest over a five year period after the date of grant in
20% installments.



                                       40
<PAGE>



     Jeffrey M. Jagid           1/19/2000        75,000 at $7.56
     Michael L. Ehrman          1/19/2000        75,000 at $7.56
     Kenneth S. Ehrman          1/19/2000        37,500 at $7.56
     N. Bert Loosmore           1/19/2000        37,500 at $7.56
     Ned Mavrommatis            1/19/2000        20,000 at $7.56
     ????                       6/01/2000        50,000 at $3.56

Employment Agreements

     In June 1999 the Company entered into three-year employment agreements with
Kenneth Ehrman,  Jeffrey Jagid and Michael  Ehrman.  Pursuant to the agreements,
Messrs.  Ehrman and Jagid are each entitled to base salaries of $108,000 and Mr.
Ehrman is entitled to a base salary of $96,000.  Each employment  agreement also
provides  that the employee is entitled to a bonus as determined by the board of
directors,  from time to time, and options under the Company's 1999 Stock Option
Plan.  Each  employment  agreement  provides  for a term of three  years  and is
renewable upon mutual consent. A similar agreement with N. Bert Loosmore expired
on December 15, 2000.

     The employment  agreements may be terminated for cause and, in the event of
change in  control of the  Company,  each  employee  is  entitled  to a lump sum
payment  equal to the  greater  of one  year's  salary  or the base  salary  and
benefits  that would  have been  received  by the  employee  if he had  remained
employed by the Company the remainder of the three year term.

     The employment agreements also contain  confidentiality and non-competition
provisions  prohibiting  the  employee  from  competing  against the Company and
disclosing trade secrets and other proprietary information.

Director Compensation

     The  Company  reimburses  its  directors  for  reasonable  travel  expenses
incurred in connection  with their  activities on behalf of the Company but does
not pay its directors any fees for board participation.

     Non-employee  directors  are entitled to  participate  in the 1999 Director
Option Plan. This plan was adopted by the board of directors and approved by the
stockholders in April 1999. This plan has a term of ten years, unless terminated
sooner  by the  board.  A total of  300,000  shares of  common  stock  have been
reserved for issuance under this plan.

     This plan provides for the automatic grant of 15,000 shares of common stock
to each  non-employee  director  at the time he or she is first  elected  to the
board of directors.  He or she will automatically be granted a subsequent option
to purchase  5,000  shares on the first day of each fiscal  quarter,  if on such
date he or she has  served on the board for at least  six  months.  Each  option
grant under this plan will have a term of 10 years and will vest on a cumulative
monthly basis over a four-year period. The exercise price of all options will be
equal to the fair market  value of the common  stock on the date of grant.


                                       41
<PAGE>


Item 11. Security Ownership of Certain Beneficial Owners and Management


The  following  table  sets forth  information  with  respect to the  beneficial
ownership of shares of common stock as of March 28, 2001:

     each person or entity who is known by the Company to beneficially owns five
     percent or more of the common stock;

     each director and executive officer of The Company; and

     all directors and executive officers of The Company as a group.

<TABLE>
<CAPTION>
           Name of Beneficial Owner (1)                                Number of Shares           Percentage (2)
----------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>                      <C>
     Jeffrey M. Jagid                                                        321,000(3)               5.33%

     Kenneth S. Ehrman                                                       598,963(4)              10.07%

     Michael L. Ehrman                                                       265,275(5)               4.41%

     Ned Mavrommatis                                                          14,500(6)               0.25%

     Bruce Jagid                                                             553,679(7)               9.36%

     Martin Rosansky                                                         589,517(8)               9.97%

     Lawrence Burstein                                                         8,000(9)               0.14%

     N. Bert Loosmore                                                        575,447                  9.86%

     Jack Silver                                                             308,200(10)              5.40%

     President and Fellow of Harvard College                                 375,000(11)              6.60%

     All Directors and Executive Officers as a group
     (7 persons)                                                           2,926,381(12)             45.05%
</TABLE>

----------


(1)  Unless otherwise indicated,  the address for each named individual or group
     is  in  care  of  the  Company,  Inc.,  One  University  Plaza,  6th  Floor
     Hackensack, NJ 07601.

(2)  Unless otherwise  indicated,  the Company believe that all persons named in
     the table have sole voting and investment  power with respect to all shares
     of common  stock  beneficially  owned by them. A person is deemed to be the
     beneficial  owner of securities  that can be acquired by such person within
     60 days after  March 27, 2001 upon the  exercise  of  options,  warrants or


                                       42
<PAGE>


     convertible  securities (in any case, the "Currently Exercisable Options").
     Each beneficial owner's percentage ownership is determined by assuming that
     the  Currently  Exercisable  Options  that are held by such person (but not
     those held by any other person) have been exercised and converted.

(3)  Includes  183,750 shares of common stock underlying  Currently  Exercisable
     Options granted to Mr. Jagid, pursuant to the Company's 1995 Employee Stock
     Option Plan.

(4)  Includes  115,000 shares of common stock underlying  Currently  Exercisable
     Options granted to Mr. Ehrman pursuant to the Company's 1995 Employee Stock
     Option Plan.

(5)  Includes  183,750 shares of common stock underlying  Currently  Exercisable
     Options granted to Mr. Ehrman pursuant to the Company's 1995 Employee Stock
     Option Plan.

(6)  Includes  12,000 shares of common stock  underlying  Currently  Exercisable
     Options to Mr.  Mavrommatis  pursuant to the  Company's  1999 Stock  Option
     Plan.

(7)  Includes  78,979 shares of common stock  underlying  Currently  Exercisable
     Options  granted to Mr. Jagid pursuant to the Company's 1995 Employee Stock
     Option Plan and its 1999 Director Option Plan.

(8)  Includes  78,979 shares of common stock  underlying  Currently  Exercisable
     Options  granted to Mr.  Rosansky  pursuant to the Company's  1995 Employee
     Stock Option Plan and its 1999 Director Option Plan.

(9)  Includes  8,000 shares of common  stock  underlying  currently  exercisable
     options  granted to Mr.  Burstein  pursuant to the Company's  1999 Director
     Option Plan.

(10) Principal  office is 660 Madison  Avenue,  15th Floor,  New York,  New York
     10021.

(11) Principal  office is c/o Harvard  Management  Company,  Inc.,  600 Atlantic
     Avenue, Boston, Massachusetts 02210.

(12) Includes  660,450 shares of common stock underlying  Currently  Exercisable
     Options granted to such individuals pursuant to the Company's 1995 Employee
     Stock Option Plan, 1999 Stock Option Plan and 1999 Directors Option Plan.

1995 Employee Stock Option Plan

     The Company's 1995 Employee Stock Option Plan (the "1995 Plan")  authorizes
the granting of non-qualified  options to purchase up to an aggregate  1,250,000
shares of common stock to key employees and consultants. The options vest over a
period of five years.  The 1995 Plan terminates at the close of business on July
8, 2005.


                                       43
<PAGE>



     As of December 31,  2000,  options to purchase  1,212,500  shares of common
stock were outstanding  under the 1995 Plan.  Options to purchase 337,500 shares
(of which an aggregate of 250,000 options are held by directors) are exercisable
at $0.80 per share and options to purchase 875,000 shares (of which an aggregate
of 546,875 options are held by directors) are exercisable at $1.20 per share.

1999 Stock Option Plan

     In April 1999,  the Company  adopted the 1999 Stock  Option Plan (the "1999
Plan"),  pursuant  to which  812,500  shares of common  stock are  reserved  for
issuance upon the exercise of options.  The 1999 Plan is designed to serve as an
incentive  for  retaining  qualified  and  competent  employees,  directors  and
consultants.

     The Company's board of directors, or a committee, administers the 1999 Plan
and  is  authorized,  in its  discretion,  to  grant  options  to  all  eligible
employees, including officers and directors of, and consultants to, the Company.
The 1999  Plan  provides  for the  grant of both  incentive  stock  options  and
non-qualified  stock  options at prices as determined by the board of directors,
or a committee  of the board of  directors,  except that the  exercise  price of
incentive  options  cannot be less than the fair market value of common stock on
the date of  grant.  In the  case of an  incentive  stock  option  granted  to a
stockholder  who owns more than 10% of the total  combined  voting  power of all
classes of the Company's stock,  the per share exercise  proceeds cannot be less
than 110% of the fair  market  value on the date of grant.  The  aggregate  fair
market  value of the shares  covered by  incentive  stock  options  that  become
exercisable by a grantee for the first time in any calendar year is subject to a
$100,000 limit, determined on the date of the grant.

     As of December 31, 2000, options to purchase 696,000 shares of common stock
are  outstanding  under the 1999 Plan at the exercise  prices  shown below.  All
options are held by  non-director  employees  with the  exception  of options to
purchase 150,000 shares at $7.56 per share held by directors.


              # of Options                    Exercise Price
              ----------------------------------------------

                 25,000                           $8.000
                 25,000                            7.670
                265,000                            7.560
                 10,000                            4.750
                 50,000                            4.500
                142,500                            4.125
                157,500                            3.560
                 66,000                            2.000



                                       44
<PAGE>



1999 Director Option Plan

     Non-employee  directors  are entitled to  participate  in the 1999 Director
Option Plan,  adopted in April 1999 (the "Director Plan"). The Director Plan has
a term of ten years,  unless  terminated sooner by the board. A total of 300,000
shares of common stock have been reserved for issuance under the Director Plan.

     The Director  Plan  provides for the  automatic  grant of 15,000  shares of
common  stock  to each  non-employee  director  at the  time he or she is  first
elected to the board of directors.  The director will automatically be granted a
subsequent  option to  purchase  5,000  shares  on the first day of each  fiscal
quarter,  if on such date the  director has served on the board for at least six
months.  Each option grant under the Director  Plan will have a term of 10 years
and will  vest on a  cumulative  monthly  basis  over a  four-year  period.  The
exercise  price of all  options  will be equal to the fair  market  value of the
common stock on the date of grant.

     As of December 31, 2000 options to purchase  66,000  shares of common stock
at prices  ranging  from $3.625 to $8.00 per share were  outstanding  under this
plan.

Item 12. Certain Relationships and Related Transactions

None.

Item 13. Exhibits, Lists and Reports on Form 8-K

(a)  Exhibits

     The following  exhibits are filed  herewith or are  incorporated  herein by
reference, as indicated.

Number      Description of Exhibit
------      ----------------------

23.1        Consent of Richard A. Eisner & Company, LLP

b)   Reports on Form 8-K

     None.





                                       45
<PAGE>


                                   SIGNATURES

         Pursuant to the  requirements  of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.

                                     I.D. SYSTEMS, INC.


                                     By: /s/ Jeffrey M. Jagid
                                         ---------------------------------------
                                         Jeffrey M. Jagid
                                         President (Principal Executive Officer)

                                     By:  /s/ Ned Mavrommatis
                                          --------------------------------------
                                          Ned Mavrommatis
                                          Chief Financial Officer
                                          (Principal Accounting Officer)

March 30, 2001

     Pursuant to the  requirements  of the Securities  Act of 1934,  this Annual
Report on Form 10-KSB is signed below by the following  persons on behalf of the
registrant and in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature                                     Title                                       Date
---------                                     -----                                       ----

<S>                                          <C>                                         <C>
/s/ Jeffrey M. Jagid                         Chief Operating Officer                     March 30, 2001
--------------------------------              and Director
Jeffrey M. Jagid

/s/ Kenneth S. Ehrman                        Chief Executive Officer                     March 30, 2001
--------------------------------              and Director
Kenneth S. Ehrman


/s/ Bruce Jagid                              Director                                    March 30, 2001
--------------------------------
Bruce Jagid

 /s/ Martin G. Rosansky                       Director                                   March 30, 2001
--------------------------------
Martin G. Rosansky

/s/ Lawrence Burstein                         Director                                   March 30, 2001
--------------------------------
Lawrence Burstein

 /s/ N. Bert Loosmore                         Director                                   March 30, 2001
--------------------------------
N. Bert Loosmore
</TABLE>



                                       46
<PAGE>

                             EXHIBIT INDEX

Number    Description                                                       Page
------    -----------                                                       ----

3.1       Amended and Restated  Certificate  of  Incorporation  of the
          Company  (incorporated  herein by reference to the Company's
          Form SB-2 filed with the Commission on June 30, 1999).               X

3.2       Amended and  Restated  By-Laws of the Company  (incorporated
          herein by  reference to the  Company's  Form SB-2 filed with
          the Commission on June 30, 1999).                                    X

4.1       Specimen   Certificate   of  the   Company's   Common  Stock
          (incorporated herein by reference to the Company's Form SB-2
          filed with the Commission on June 30, 1999).                         X

4.2       Form of Underwriter's  Warrant Agreement,  including Form of
          Warrant Certificate (incorporated herein by reference to the
          Company's  Form SB-2 filed with the  Commission  on June 30,
          1999).                                                               X

10.1      Agreement  between  the  Registrant  and the  United  States
          Postal  Service:  Offer and Award  Standard dated August 22,
          1997,  as modified on May 12, 1998,  September 8, 1998,  and
          March 5,  1999  (incorporated  herein  by  reference  to the
          Company's  Form SB-2 filed with the  Commission  on June 30,
          1999).                                                               X

10.2      Federal Supply Service Information Technology schedule Award
          effective   April  16,   1999   through   April   15,   2004
          (incorporated herein by reference to the Company's Form SB-2
          filed with the Commission on June 30, 1999).                         X

10.3      Form of  Employment  Agreement  between  the Company and its
          executive officers  (incorporated herein by reference to the
          Company's  Form SB-2 filed with the  Commission  on June 30,
          1999).                                                               X

10.5      1995 Non-Qualified Stock Option Plan (incorporated herein by
          reference  to  the  Company's   Form  SB-2  filed  with  the
          Commission on June 30, 1999).                                        X

10.6      1999 Stock Option Plan (incorporated  herein by reference to
          the  Company's  Form SB-2 filed with the  Commission on June
          30, 1999).                                                           X

10.7      Form of Indemnification  Agreement  (incorporated  herein by
          reference  to  the  Company's   Form  SB-2  filed  with  the
          Commission on June 30, 1999).                                        X

10.8      1999 Director Option Plan (incorporated  herein by reference
          to the Company's Form SB-2 filed with the Commission on June
          30, 1999).                                                           X



                                  47
<PAGE>


10.9      Office Lease dated  November 4, 1999 between the Company and
          Venture Hackensack Holding, Inc ..................................   X

23.1      Consent of Richard A. Eisner & Company, LLP ......................  46




                                  48