SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the six month period ended June 30, 1999
Commission file number 0-28572
OPTIMAL ROBOTICS CORP.
(Exact name of registrant as specified in its charter)
CANADA 98-0160833
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
4700 de la Savane, Suite 101, Montreal, Quebec, Canada H4P 1T7
(514) 738-8885
(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the registrant (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 |_|
At July 23, 1999, the registrant had 10,701,549 Class "A" shares (without
nominal or par value) outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
2
<PAGE>
Optimal Robotics Corp.
INTERIM
FINANCIAL STATEMENTS
(stated in United States dollars)
June 30, 1999
3
<PAGE>
OPTIMAL ROBOTICS CORP.
INTERIM BALANCE SHEET
(stated in United States dollars, unless otherwise noted)
December 31 June 30
1998 1999
----------------------------
(unaudited)
Assets
Current assets
Cash $ -- $ 3,238,784
U.S. Treasury bill, at cost 538,490 549,578
Short-term investments 5,524,819 24,126,282
Accounts receivable, net of allowance for 1,219,716 5,991,547
doubtful accounts of nil
Inventory 1,401,049 1,977,755
Tax credits receivable 114,494 194,216
Prepaid expenses 2,935 46,975
----------------------------
8,801,503 36,125,137
Loans receivable 161,807 168,319
Capital assets 365,869 613,913
----------------------------
$ 9,329,179 $ 36,907,369
============================
Liabilities
Current liabilities
Accounts payable and accrued liabilities $ 1,233,014 $ 3,419,788
Deferred revenue 124,784 846,960
Current portion of contract advance 125,000 --
----------------------------
1,482,798 4,266,748
Contract advance 250,000 250,000
----------------------------
1,732,798 4,516,748
Shareholders' Equity
Share capital 16,850,531 41,562,155
Other capital 23,240 23,240
Cumulative translation adjustment -- 229,080
Deficit (9,277,390) (9,423,854)
----------------------------
7,596,381 32,390,621
----------------------------
$ 9,329,179 $ 36,907,369
============================
4
<PAGE>
OPTIMAL ROBOTICS CORP.
INTERIM STATEMENT OF OPERATIONS
(unaudited)
(stated in United States dollars, unless otherwise noted)
<TABLE>
<CAPTION>
Three months Six months ended Three months ended Six months ended
ended June 30 June 30 June 30 June 30
1998 1998 1999 1999
=====================================================================
(Note 2) (Note 2)
<S> <C> <C> <C> <C>
Revenues
Systems $ 517,036 $ 985,939 $ 6,748,348 $ 11,674,070
Development 45,906 90,091 81,287 149,350
Hardware and software maintenance 15,098 27,043 193,624 290,104
Other 118,286 118,286 -- --
---------------------------------------------------------------------
696,326 1,221,359 7,023,259 12,113,524
Cost of sales
Systems 471,115 818,209 5,295,951 9,491,626
Development 19,152 36,736 31,443 54,245
Hardware and software maintenance -- 8,757 208,455 333,989
Other 92,267 92,267 -- --
---------------------------------------------------------------------
582,534 955,969 5,535,849 9,879,860
---------------------------------------------------------------------
Gross margin 113,792 265,390 1,487,410 2,233,664
Research and development, net of tax
credits 83,703 116,686 50,884 110,956
Selling, general, administrative and
other expenses 1,398,162 2,320,068 1,005,674 2,156,770
Amortization of capital assets 34,268 68,156 71,933 121,352
---------------------------------------------------------------------
Earnings (loss) before undernoted
items (1,402,341) (2,239,520) 358,919 (155,414)
Other
Investment income 134,374 245,239 200,712 229,925
Foreign exchange gain (loss) 319,180 246,168 (131,269) (220,975)
---------------------------------------------------------------------
453,554 491,407 69,443 8,950
---------------------------------------------------------------------
Net earnings (loss) for the period $ (948,787) $ (1,748,113) $ 428,362 $ (146,464)
=====================================================================
Weighted average number of common
shares outstanding 7,470,408 7,448,117 9,292,011 8,413,457
=====================================================================
Net earnings (loss) per common share $ (0.13) $ (0.23) $ 0.05 $ (0.02)
=====================================================================
</TABLE>
5
<PAGE>
OPTIMAL ROBOTICS CORP.
INTERIM STATEMENT OF DEFICIT
(unaudited)
(stated in United States dollars, unless otherwise noted)
<TABLE>
<CAPTION>
Three months Six months Three months Six months
ended June 30 ended June 30 ended June 30 ended June 30
1998 1998 1999 1999
-------------------------------------------------------------
(Note 2) (Note 2)
<S> <C> <C> <C> <C>
Deficit, beginning of period $(6,165,952) $(5,366,626) $(9,852,216) $(9,277,390)
Net earnings (loss) for the period (948,787) (1,748,113) 428,362 (146,464)
-------------------------------------------------------------
Deficit, end of period $(7,114,739) $(7,114,739) $(9,423,854) $(9,423,854)
=============================================================
</TABLE>
6
<PAGE>
OPTIMAL ROBOTICS CORP.
INTERIM STATEMENT OF CASH FLOWS
(unaudited)
(stated in United States dollars, unless otherwise noted)
<TABLE>
<CAPTION>
Six months ended June 30
1998 1999
============================
(Note 2)
<S> <C> <C>
Cash provided by (used in)
Operating activities
Net loss for the period $ (1,748,113) $ (146,464)
Items not affecting cash
Amortization of capital assets 68,156 121,352
Unrealized foreign exchange gain on contract advance -- (11,778)
Change in non-cash operating working capital items
Increase in accounts receivable (31,867) (4,621,835)
Increase in inventory (14,496) (499,448)
Increase in tax credits receivable (58,685) (72,773)
Decrease (increase) in prepaid expenses 10,322 (43,043)
Increase in accounts payable and accrued liabilities 129,443 2,086,032
Increase in deferred revenue -- 702,212
----------------------------
(1,645,240) (2,485,745)
Financing activities
Issuance of common shares 432,596 24,711,624
Decrease in contract advance 33,327 (125,000)
----------------------------
465,923 24,586,624
Investing activities
Purchase of capital assets (17,909) (347,026)
Decrease (increase) in short-term investments 9,977,461 (18,172,026)
Repayment of loan receivable -- 1,239
----------------------------
9,959,552 (18,517,813)
----------------------------
Increase in cash and cash equivalents
during the period 8,780,235 3,583,066
Effect of foreign exchange fluctuations on cash -- (333,194)
Cash and cash equivalents at beginning of period 269,793 538,490
----------------------------
Cash and cash equivalents at end of period $ 9,050,028 $ 3,788,362
============================
Cash and cash equivalents is comprised of:
Cash $ 8,545,879 $ 3,238,784
U.S. Treasury bill 504,149 549,578
----------------------------
$ 9,050,028 $ 3,788,362
============================
</TABLE>
7
<PAGE>
OPTIMAL ROBOTICS CORP.
1. Interim financial information
The financial information as at June 30, 1999 and for the periods ended
June 30, 1999 and 1998 is unaudited; however, in the opinion of management,
all adjustments necessary to present fairly the results of the periods have
been included. The adjustments made were of a normal, recurring nature.
Interim results may not necessarily be indicative of results expected for
the year.
2. Accounting policies
Change in reporting currency
The financial statements of the Company were presented in Canadian dollars
up to December 31, 1997. Effective December 31, 1998, the U.S. dollar has
been adopted as the reporting currency. The functional currency continues
to be the Canadian dollar. The statements of operations and deficit for the
three and six months ended June 30, 1998 and cash flows for the six months
ended June 30, 1998 are presented in U.S. dollars in accordance with a
translation of convenience method using the representative exchange rate at
December 31, 1998 of US$1.00 = Cdn$1.5333. The translated amount for
non-monetary items at December 31, 1998 became the historical basis for
those items in subsequent reporting periods. The financial statements for
the three and six months ended June 30, 1999 have been translated using the
current rate method.
3. Capital stock
On May 10, 1999, the Company filed a registration statement with the
Securities and Exchange Commission qualifying the issuance of 3,000,000
common shares for gross proceeds of $9.00 per share. Proceeds from the
offering amounted to $24,414,125 net of underwriting discounts and other
expenses of $2,585,875.
4. Research and development
<TABLE>
<CAPTION>
Three months Six months ended Three months Six months ended
ended June 30 June 30 ended June 30 June 30
1998 1998 1999 1999
--------------------------------------------------------------------
<S> <C> <C> <C> <C>
Research and development
expenses $ 111,996 $ 175,371 $ 83,896 $ 183,646
Tax credits earned (28,293) (58,685) (33,012) (72,690)
--------------------------------------------------------------------
$ 83,703 $ 116,686 $ 50,884 $ 110,956
--------------------------------------------------------------------
</TABLE>
5. Net earnings (loss) per common share
The net earnings (loss) per common share has been calculated on the
weighted average number of shares outstanding. Fully diluted net earnings
(loss) per common share has not been presented as the effect would be
anti-dilutive.
8
<PAGE>
OPTIMAL ROBOTICS CORP.
6. Additional disclosures required by U.S. GAAP and differences between
Canadian GAAP and U.S. GAAP
Statement of operations
Transactions entered into after December 15, 1995 in which an entity
acquires goods and services from non-employees in exchange for equity
instruments are required to be recorded at fair value (SFAS No. 123).
For stock-based compensation plans, the Company has chosen to use the
intrinsic value method (APB Opinion No. 25), which requires compensation
cost to be recognized on the difference, if any, between the quoted market
price of the stock as at the grant date and the amount the individual must
pay to acquire the stock. Variable stock option plans require subsequent
changes in the fair value of the underlying stock to be recorded as an
adjustment to compensation cost. The options issued in 1997 have a cashless
exercise option and accordingly, they are accounted for as variable stock
option plans. On April 22, 1998, option holders waived the cashless
exercise option on options to acquire 1,507,000 common shares. Therefore,
subsequent changes in the fair value of the underlying stock are no longer
recorded as an increase or decrease of compensation cost until the options
are exercised.
9
<PAGE>
OPTIMAL ROBOTICS CORP.
6. Additional disclosures required by U.S. GAAP and differences between
Canadian GAAP and U.S. GAAP ...continued
Under Canadian GAAP, compensation expense is not recognized.
<TABLE>
<CAPTION>
Three months Six months Three months Six months
ended June 30 ended June 30 ended June 30 ended June 30
1998 1998 1999 1999
======================================================================
<S> <C> <C> <C> <C>
Net earnings (loss) for the
period in accordance
with Canadian GAAP $ (948,787) $ (1,748,112) $ 428,362 $ (146,464)
Stock-based compensation
costs (2,805,004) (11,412,387) (1,343,814) (1,706,745)
Change in reporting currency (56,795) (114,297) -- --
----------------------------------------------------------------------
Net loss for the period in
accordance with
U.S. GAAP (3,810,586) (13,274,796) (915,452) (1,853,209)
Other comprehensive income
Foreign currency
translation adjustments (386,514) (301,176) 27,166 148,725
----------------------------------------------------------------------
Comprehensive loss $ (4,197,100) $(13,575,972) $ (888,286) $ (1,704,484)
======================================================================
Weighted average number of
common shares outstanding 7,470,408 7,448,117 9,292,011 8,413,457
======================================================================
Net loss per common share $ (0.51) $ (1.78) $ (0.10) $ (0.22)
======================================================================
</TABLE>
10
<PAGE>
OPTIMAL ROBOTICS CORP.
6. Additional disclosures required by U.S. GAAP and differences between
Canadian GAAP and U.S. GAAP ...continued
Balance sheet
<TABLE>
<CAPTION>
December 31, 1998 June 30, 1999
As reported U.S. GAAP As reported U.S. GAAP
=====================================================================
<S> <C> <C> <C> <C>
Loans receivable $ 161,807 $ 144,133 $ 168,319 $ 151,059
=====================================================================
Shareholders' equity
Share capital $ 16,850,531 $ 19,420,856 $ 41,562,155 $ 44,269,186
Other capital 23,240 18,798,880 23,240 20,449,688
Deficit (9,277,390) (29,107,267) (9,451,242) (30,960,476)
Cumulative translation
adjustment -- -- 229,080 --
Accumulated other
comprehensive
income -- (1,533,762) -- (1,385,037)
---------------------------------------------------------------------
$ 7,596,381 $ 7,578,707 $ 32,363,233 $ 32,373,361
=====================================================================
</TABLE>
11
<PAGE>
OPTIMAL ROBOTICS CORP.
6. Additional disclosures required by U.S. GAAP and differences
between Canadian GAAP and U.S. GAAP ...continued
Change in reporting currency
As mentioned in Note 2, the Company adopted in 1998 the U.S. dollar as its
reporting currency. Under U.S. GAAP, the financial statements, including
prior years, are translated according to the current rate method. Under
Canadian GAAP, at the time of change in reporting currency, the historical
financial statements are presented using a translation of convenience (see
Note 2).
Under Canadian GAAP, the statements of operations for the three and six
months ended June 30, 1998 were translated into U.S. dollars using an
exchange rate of US$1.00 = Cdn$1.5333 (see Note 2). Under U.S. GAAP,
revenues and expenses would be translated at exchange rates prevailing at
the respective transaction dates. The average exchange rates for the three
and six months ended June 30, 1998 were 1.4467 and 1.4386, respectively.
Statement of cash flows
Under Canadian GAAP, the statement of cash flows for the six months ended
June 30, 1998 was translated into U.S. dollars using an exchange rate of
US$1.00 = Cdn$1.5333 (see Note 2). Under U.S. GAAP, the historical exchange
rate on the dates of the cash flow activities would be used. For the six
months ended June 30, 1999, there were no material differences in the
statement of cash flows under U.S. GAAP versus Canadian GAAP. Following is
a summary cash flow statement for the six months ended June 30, 1998 under
U.S. GAAP:
Operating activities $ (1,759,537)
Financing activities 496,594
Investing activities 10,615,168
------------
Increase in cash and cash equivalents for the period 9,352,225
Effect of foreign exchange fluctuations on cash (571,990)
Cash and cash equivalents at beginning of period 269,793
------------
Cash and cash equivalents at end of period $ 9,050,028
============
12
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Some of the statements contained in this quarterly report contain
forward-looking statements, which may include information concerning growth and
operating strategies, liquidity and capital expenditures and financing plans.
These forward-looking statements involve known and unknown risks, uncertainties
and other factors that could cause the Company's actual results to differ
materially from those anticipated in these forward-looking statements.
Results of Operations
The following discussion and analysis of the Company's results of
operations and liquidity and capital resources should be read in conjunction
with the financial information and the financial statements of the Company and
their related notes appearing elsewhere herein. The financial statements have
been prepared in accordance with Generally Accepted Accounting Principles
("GAAP") in Canada, which conform in all material respects with U.S. GAAP except
as disclosed in Note 6 to the financial statements, which explains the nature of
the differences between Canadian and U.S. GAAP and their impact on the financial
statements.
13
<PAGE>
First six months of 1999 compared with First Six Months 1998
Total revenue increased by $10,892,165, or 892% from $1,221,359 in 1998 to
$12,113,524 in 1999. In 1999, the Company sold 119 U-Scan(R) Express systems,
compared with 16 systems in 1998. The growth in systems sales is due to a
significant increase in orders from existing customers, which produced
$10,688,131 of additional systems revenue. Development revenue, which relates to
the POS business, increased by $59,259, or 66%. Service contract revenue
recognized for hardware and software maintenance increased by $263,061, or 973%,
because of the increased number of stores that entered into contracts with the
Company after purchasing U-Scan(R) Express systems.
Total cost of sales increased by $8,923,891, or 933%, from $955,969 in 1998
to $9,879,860 in 1999. Overall gross margin as a percentage of sales decreased
from 22% in 1998 to 18% in 1999. This decrease resulted primarily from
additional software and hardware maintenance costs. In addition, the gross
margin in 1999 is lower than it would have been if the PSC arrangement had not
been altered on April 1, 1998. Gross margin on system sales increased from 17%
in 1998 to 19% in 1999. In the first six months of 1999, a negative gross margin
of 15% was realized on hardware and software maintenance revenue because
hardware maintenance costs, which are recognized as incurred, exceeded hardware
maintenance revenues, which are fixed by contract and recognized evenly over the
term thereof. The gross margin on development revenues increased from 59% in
1998 to 64% in 1999.
Net research and development expenses decreased by $5,730, or 5%, from 1998
to 1999. As a percentage of sales, research and development expenses decreased
from 10% in 1998 to 1% in 1999. This decrease resulted from the substantial
increase in the number of U-Scan(R) Express systems sold in 1999 as compared to
1998.
Selling, general and administrative and other expenses decreased by
$163,298, or 7% in 1999 compared to 1998. As a percentage of sales, these
expenses decreased from 190% in 1998 to 18% in 1999. This decrease resulted from
the substantial increase in the number of U-Scan(R) Express systems sold in 1999
as compared to 1998.
14
<PAGE>
Second Quarter of 1999 Compared with Second Quarter of 1998
Total revenues increased by $6,326,933, or 909%, from $696,326 in 1998 to
$7,023,259 in 1999. Sales of U-Scan(R) Express grew from 9 systems in 1998 to 68
systems in 1999, producing $6,231,312 of additional systems revenue, an increase
of 1205%. Development revenues increased by $35,381, or 77%. Service contract
revenue recognized for hardware and software maintenance increased by $178,526,
or 1182%.
Total cost of sales increased by $4,953,315, or 850%, from $582,534 in 1998
to $5,535,849 in 1999. Gross margin increased as a percentage of sales from 16%
in 1998 to 21% in 1999 which was primarily due to the increased gross margin on
system sales from 9% in 1998 to 21% in 1999. In the second quarter of 1999, a
negative gross margin of 8% was realized on hardware and software maintenance
revenue. The gross margin on development revenue increased from 58% in 1998 to
61% in 1999.
Net research and development expenses decreased by $32,819, or 39%, from
1998 to 1999. As a percentage of sales, research and development expenses
decreased from 12% in 1998 to 1% in 1999. This decrease resulted from the
substantial increase in the number of U-Scan(R) Express systems sold in 1999 as
compared to 1998.
Selling, general and administrative and other expenses decreased by
$392,488, or 28% in 1999 compared to the second quarter of 1998. As a percentage
of sales, these expenses decreased from 201% in 1998 to 14% in 1999. This
decrease resulted from the substantial increase in the number of U-Scan(R)
Express systems sold in 1999 as compared to 1998.
15
<PAGE>
Liquidity and Capital Resources
As of June 30, 1999, the Company had working capital of $31,858,389 which
included cash, cash equivalents and investment grade commercial paper of
$27,914,644. Operating activities for the first six months of 1999 used
$2,485,745 as compared with $1,645,240 in 1998.
The Company believes that it has sufficient working capital to meet its
needs for the next 12 months.
In the first six months of 1999, the Company had capital expenditures of
$347,026, principally relating to the acquisition of computer equipment and
office furniture. Until June 1999, the Company was leasing all of the office
furniture at its head office in Montreal. In June 1999, the balance of this
lease was paid in full.
On May 20, 1999, the Company sold 3,000,000 Class "A" shares to the public
at a price of $9.00 per share, less offering costs and commissions for a net
cash proceeds of $24,414,125. For the six month period ended June 30, 1999 the
Company also issued 226,271 Class "A" shares pursuant to the exercise of options
and warrants, resulting in net cash proceeds of $297,499.
The Company maintains an operating line of credit in the amount of $500,000
CAD with its banker. In March 1999, the Company increased its credit through the
opening of a brokerage margin account and closed this account in June 1999 as it
was no longer necessary after the May 20, 1999 public offering.
In connection with the original agreement with PSC, the Company received a
$500,000 contract advance. In 1998, a repayment of $125,000 was made and in
January 1999, a further $125,000 repayment was made. The final repayment of
$250,000 is due on December 31, 2000.
16
<PAGE>
Year 2000 Issues
Many currently installed computer systems are not capable of distinguishing
21st century dates from 20th century dates. As a result, beginning on January 1,
2000, computer systems and software used by the Company's customers will produce
erroneous results or fail unless they have been modified or upgraded to process
date information correctly. Significant uncertainty exists in the software
industry and other industries concerning the scope and magnitude of problems
associated with the century change. The Company recognizes the need to ensure
that its operations will not be adversely affected by Year 2000 software
problems.
The Company has completed its assessment of the Year 2000 issues in the
software contained in its products and the software contained in its internal
systems. Based on its current assessment, the Company has determined that the
consequences of the Year 2000 issues with respect thereto will not have a
material effect on its business, results of operation or financial condition.
Upgrades required to make current internal systems Year 2000 ready were
installed and tested by June 30, 1999, at a cost that was not material to the
Company. All internal systems installed hereafter will be tested and verified
for Year 2000 readiness at the time of installation at no additional cost. No
alteration to the software contained in the Company's products will be
necessary. However, the Company's products are generally integrated into a
store's information systems, which we may not be able to adequately evaluate for
Year 2000 readiness. Although it has not been a party to any litigation or
arbitration involving its products or services related to Year 2000 readiness
issues, the Company may in the future be required to defend its products or
services in such proceedings, or to negotiate resolutions of claims based on
Year 2000 issues. The costs of defending and resolving Year 2000 related
disputes, regardless of the merits of such disputes, and any liability the
Company may have for Year 2000 related damages, including consequential damages,
could materially adversely affect its business, financial condition and
operating results.
The Company has prepared a questionnaire to verify the Year 2000 readiness
of all third parties that could cause a material impact on the Company. When
these questionnaires have been completed and returned by such third parties, the
Company should be able to assess their Year 2000 readiness. Even if certain
third parties are not ready for the Year 2000, however, the Company believes
that their situation will not have a material effect on the Company's business,
results of operation or financial condition. The Company has multiple suppliers
for each component of its products and, accordingly, the readiness of any single
supplier of a component would not be expected to have a material impact on the
Company. If any of its major suppliers are unprepared for the Year 2000, the
Company believes that it could perform the function currently being performed by
any of its major suppliers or could find a substitute supplier without suffering
a material effect on business, results of operation or financial condition. The
Company does
17
<PAGE>
not have any ongoing responsibility for the Year 2000 readiness of customers
(other than in regard to the Company's products) or the vendors to those
customers. Should such a customer suffer Year 2000 related problems, the Company
would not necessarily share the effects of the problems. For example, the
software in the U-Scan(R) Express reads dates on credit, debit and other similar
cards and accesses third party systems such as bank networks (which may not be
Year 2000 ready) to obtain authorization for the use of the cards. The customer
alone is responsible for dealing with these networks to ensure that they are
Year 2000 ready. If, in the future, a potential customer should suffer from Year
2000 related problems or make expenditures on Year 2000 related matters, it is
likely that the purchase of the Company's products would be delayed. The Company
is not aware of any such delays to date.
To date, the Company has not incurred any material costs directly
associated with its Year 2000 readiness efforts, except for compensation
expenses associated with its salaried employees who have devoted some of their
time to the Company's Year 2000 assessment and remediation efforts. As discussed
above, the Company does not expect the total cost of Year 2000 problems to be
material to its business, financial condition and operating results. However,
during the months prior to the century change, it will continue to evaluate new
versions of its software and products supplied to it. Despite its current
assessment, the Company may not identify and correct all significant Year 2000
problems on a timely basis.
The reasonable worst case Year 2000 scenario for the Company would include
the partial or complete shutdown of potential and existing customers'
information systems. A shutdown would prevent or delay purchases of U-Scan(R)
Express systems. The Company has no contingency plan for dealing with this
scenario and is not planning to develop one. The cost to the Company should this
scenario occur would be the sales that are lost or deferred until customers'
Year 2000 problems are remedied. The Company will seek to mitigate its losses by
dealing with customers, if any, that do not suffer Year 2000 problems. If PSC
encounters Year 2000 problems and is unable to perform its obligations under its
agreement with the Company, the Company's contingency plan is to replace PSC by
developing in-house capability or by finding a different third-party
manufacturer that continues to operate. The Company believes that it could
develop this capability within 60 days at a cost not to exceed $100,000. The
reasonable worst case scenario would also include the failure of infrastructure,
such as electricity and water supplies. The Company relies upon governmental
supplies for water, electricity and other infrastructure services. Any
significant failure of the infrastructure would completely shut down the
Company. The Company does not have its own ability to produce infrastructure
services and does not plan to develop it. The contingency plan for dealing with
a failure of infrastructure is for the Company to use its best efforts to find
alternate governmental or private suppliers. If the Company were unable to find
alternate suppliers, all of the Company's operations would be halted unless they
could be moved to a location where infrastructure supplies are available.
18
<PAGE>
Item 3: Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes since December 31, 1998.
19
<PAGE>
PART II. OTHER INFORMATION
Item 1. In each of 1995 and 1996, the Company received a lawyer's letter from
International Automated Systems ("IAS") alleging that the Company's U-Scan(R)
Express system infringes upon IAS's patent. At such times, the Company had
reviewed the claim and believed that IAS would not prevail in any lawsuit and
that such a lawsuit would not have a material adverse effect on the Company's
business or prospects.
The Company has been informed that on July 2, 1999, IAS alleging patent
infringement filed a complaint against the Company in the State of Utah. The
complaint has not yet been served on the Company. The Company continues to
believe that IAS will not prevail, believes that the lawsuit will not have a
material adverse effect on the Company's business or prospects, and intends to
vigorously defend the claim.
Item 2. The registrant has nothing to report under this item.
Items 3. The registrant has nothing to report under this item.
Item 4. The registrant held its annual meeting of the shareholders on June 28,
1999. The following resolutions were adopted:
- - --------------------------------------------------------------------------------
Resolution Votes For Votes Against Withheld
- - --------------------------------------------------------------------------------
Election of Directors 7,276,647 2,367
- - --------------------------------------------------------------------------------
Re-appointment of Price 7,283,776 2,192
WaterhouseCoopers as
Auditors
- - --------------------------------------------------------------------------------
Items 5. The registrant has nothing to report under this item.
Item 6.
(a) Exhibits - Not applicable.
(b) Reports on Form 8K - None
20
<PAGE>
Signature
Pursuant to the requirements 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.
OPTIMAL ROBOTICS CORP.
Dated: July 23, 1999 By: /s/ Gary S. Wechsler
----------------------------------
Gary S. Wechsler, C.A.
Secretary, Treasurer and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM INTERIM
FINANCIAL STATEMENTS OF OPTIMAL ROBOTICS CORP. DATED JUNE 30, 1999 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,238,784<F1>
<SECURITIES> 24,675,860
<RECEIVABLES> 5,991,547
<ALLOWANCES> 0
<INVENTORY> 1,977,755
<CURRENT-ASSETS> 36,125,137
<PP&E> 613,913<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 36,907,369
<CURRENT-LIABILITIES> 4,266,748
<BONDS> 250,000<F3>
0
0
<COMMON> 41,562,155
<OTHER-SE> (9,171,534)<F4>
<TOTAL-LIABILITY-AND-EQUITY> 36,907,369
<SALES> 12,113,524
<TOTAL-REVENUES> 12,113,524
<CGS> 9,879,860
<TOTAL-COSTS> 9,879,860
<OTHER-EXPENSES> 2,168,103
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (229,925)<F5>
<INCOME-PRETAX> (146,464)
<INCOME-TAX> (146,464)
<INCOME-CONTINUING> (146,464)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (146,464)
<EPS-BASIC> (0.02)
<EPS-DILUTED> 0<F6>
<FN>
<F1>
The Company's financial statements are prepared in accordance with
generally accepted accounting principles in Cananda. See Note 6 to
financial statements for a reconciliation of Canadian and U.S. GAAP.
<F2>
Net of depreciation
<F3>
Contract advance
<F4>
Includes shareholder deficit, capital attributable to warrants and a
cumulative translation adjustment
<F5>
Represents net investment income, comprised primarily of interest income
offset by interest expense
<F6>
Results would be anti-dilutive. See Note 5 to financial statements.
</FN>
</TABLE>
