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 quarterly period ended March 31, 2000
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 Identification No.)
Incorporation or Organization)
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 April 18, 2000, the registrant had 13,647,933 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
(unaudited)
(stated in United States dollars)
March 31, 2000
3
<PAGE>
OPTIMAL ROBOTICS CORP.
INTERIM BALANCE SHEET
(stated in United States dollars, unless otherwise noted)
March 31 December 31
2000 1999
------------ ------------
(unaudited)
Assets
Current assets
Cash $ 313,936 $ 3,934,243
U.S. Treasury bill, at cost 569,232 564,841
Short-term investments 23,887,064 24,636,606
Accounts receivable, net of allowance for
doubtful accounts of nil 11,027,921 4,641,566
Inventory 4,565,942 3,363,943
Tax credits receivable 307,946 252,520
Future income taxes 2,608,075 3,012,997
Prepaid expenses 223,076 127,017
------------ ------------
43,503,192 40,533,733
Loans receivable 155,077 155,643
Deferred share issue costs 3,500,780 56,985
Future income taxes 2,104,337 2,112,028
Capital assets 1,787,904 1,347,903
------------ ------------
$ 51,051,290 $ 44,206,292
============ ============
Liabilities
Current liabilities
Advance from broker $ 2,835,629 $ --
Accounts payable and accrued liabilities 6,793,705 3,659,189
Deferred revenue 769,314 592,271
Contract advance 250,000 250,000
------------ ------------
10,648,648 4,501,460
------------ ------------
Shareholders' Equity
Share capital 44,803,095 44,657,833
Other capital 17,734 20,559
Cumulative translation adjustment 506,217 652,062
Deficit (4,924,404) (5,625,622)
------------ ------------
40,402,642 39,704,832
------------ ------------
$ 51,051,290 $ 44,206,292
============ ============
4
<PAGE>
OPTIMAL ROBOTICS CORP.
INTERIM STATEMENT OF OPERATIONS
(unaudited)
(stated in United States dollars, unless otherwise noted)
<TABLE>
<CAPTION>
Three months ended
March 31
2000 1999
------------ ------------
<S> <C> <C>
Revenues 12,004,159 5,090,265
Cost of sales 9,014,103 4,344,011
------------ ------------
Gross margin 2,990,056 746,254
------------ ------------
Research and development, net of tax credits 110,079 60,072
Selling, general, administrative and other expenses 1,900,145 1,101,998
Operating lease expense 81,477 49,098
Amortization of capital assets 139,379 49,419
Investment income (363,325) (29,213)
Foreign exchange (gain) loss (13,258) 89,706
------------ ------------
1,854,497 1,321,080
------------ ------------
Earnings (loss) before income taxes 1,135,559 (574,826)
Provision for income taxes 434,341 --
------------ ------------
Net earnings (loss) for the period $ 701,218 $ (574,826)
============ ============
Basic weighted average number of common shares outstanding 11,455,270 7,525,142
============ ============
Basic and fully diluted net earnings (loss) per common share $ 0.06 $ (0.08)
============ ============
</TABLE>
5
<PAGE>
OPTIMAL ROBOTICS CORP.
INTERIM STATEMENT OF DEFICIT
(unaudited)
(stated in United States dollars, unless otherwise noted)
Three months ended
March 31
2000 1999
----------- -----------
Deficit, beginning of period $(5,625,622) $(9,277,390)
Net earnings (loss) for the period 701,218 (574,826)
----------- -----------
Deficit, end of period $(4,924,404) $(9,852,216)
=========== ===========
6
<PAGE>
OPTIMAL ROBOTICS CORP.
INTERIM STATEMENT OF CASH FLOWS
(unaudited)
(stated in United States dollars, unless otherwise noted)
<TABLE>
<CAPTION>
Three months ended
March 31
2000 1999
----------- -----------
<S> <C> <C>
Cash provided by (used in)
Operating activities
Net earnings (loss) for the period $ 701,218 $ (574,826)
Items not affecting cash
Amortization of capital assets 139,379 49,419
Unrealized foreign exchange loss (gain) on contract advance 912 (3,986)
Future income taxes 434,341 --
Change in non-cash operating working capital items
Increase in accounts receivable (6,411,189) (2,909,595)
Decrease (increase) in inventory (1,215,753) 15,677
Increase in tax credits receivable (96,319) (39,770)
Increase in prepaid expenses (96,641) (32,834)
Increase in accounts payable and accrued liabilities 3,151,743 342,643
Increase in deferred revenue 179,421 212,547
----------- -----------
(3,212,888) (2,940,725)
Financing activities
Advance from broker 2,835,629 2,152,352
Issuance of common shares 142,436 80,787
Deferred share issue costs (3,448,268) --
Decrease in contract advance -- (125,000)
----------- -----------
(470,203) 2,108,139
Investing activities
Purchase of capital assets (584,839) (92,024)
Decrease in short-term investments 660,636 1,492,299
Repayment of loan receivable -- 1,223
----------- -----------
75,797 1,401,498
----------- -----------
Increase (decrease) in cash and cash equivalents during
the period (3,607,294) 568,912
Effect of exchange rate changes on cash and cash equivalents (8,622) 7,568
Cash and cash equivalents at beginning of period 4,499,084 538,490
----------- -----------
Cash and cash equivalents at end of period $ 883,168 $ 1,114,970
=========== ===========
Cash and cash equivalents is comprised of:
Cash $ 313,936 $ 569,940
U.S. Treasury bill 569,232 545,030
----------- -----------
$ 883,168 $ 1,114,970
----------- -----------
</TABLE>
7
<PAGE>
OPTIMAL ROBOTICS CORP.
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 31, 2000
(unaudited)
(stated in United States dollars, unless otherwise noted)
1 Interim financial information
The financial information as at March 31, 2000 and for the periods ended
March 31, 2000 and 1999 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 financial
statements for all periods prior to December 31, 1998 were translated into
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 monetary and non-monetary items at
December 31, 1998 became the historical basis for those items in subsequent
reporting periods.
Deferred share issue costs
The deferred share issue costs relate to a public offering of common shares
pursuant to a registration statement declared effective by the Securities
and Exchange Commission on March 28, 2000. These costs will be recorded as
a reduction of the gross proceeds of the offering at the time of issuance
of the common shares.
3 Advance from broker
March 31 December 31
2000 1999
---------- ------------
Advance from broker, US$2,835,629 face value,
bearing interest at prime rate $2,835,629 $ --
========== ========
The advance is secured by the short-term investments.
8
<PAGE>
OPTIMAL ROBOTICS CORP.
NOTES TO INTERIM FINANCIAL STATEMENTS ...continued
March 31, 2000 (unaudited)
(stated in United States dollars, unless otherwise noted)
4 Research and development
Three months ended March 31
2000 1999
--------- ---------
Research and development expenses $ 206,398 $ 99,750
Tax credits (96,319) (39,678)
--------- ---------
$ 110,079 $ 60,072
========= =========
5 Other information
Revenues and costs of sales are detailed as follows:
Three months ended March 31
2000 1999
----------- -----------
Revenues
Systems $11,376,369 $ 4,925,722
Development and customization 61,355 68,063
Hardware and software maintenance 566,435 96,480
----------- -----------
$12,004,159 $ 5,090,265
=========== ===========
Cost of sales
Systems $ 8,484,858 $ 4,195,675
Development and customization 27,090 22,802
Hardware and software maintenance 502,155 125,534
----------- -----------
$ 9,014,103 $ 4,344,011
=========== ===========
6 Net earnings (loss) per common share
The net earnings (loss) per common share has been calculated on the
weighted average number of common shares outstanding. Fully diluted net
earnings (loss) per common share has not been presented separately as the
effect would be anti-dilutive.
9
<PAGE>
OPTIMAL ROBOTICS CORP.
NOTES TO INTERIM FINANCIAL STATEMENTS ...continued
March 31, 2000 (unaudited)
(stated in United States dollars, unless otherwise noted)
7 Subsequent events
In April 2000, pursuant to a registration statement which was declared
effective on March 28, 2000, the Company issued 1,625,000 common shares for
gross cash proceeds of $39 per share. The estimated net proceeds of this
offering, after deducting underwriting commissions and other expenses of
approximately $2,723,000 (net of future income taxes of $1,688,000),
amounted to $60,652,000.
In addition, the Company issued 560,000 common shares pursuant to the
exercise of outstanding stock options and warrants for gross cash proceeds
of $1,587,000.
8 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
increases in the fair value of the underlying stock to be recorded as
additional 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 27, 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.
10
<PAGE>
OPTIMAL ROBOTICS CORP.
NOTES TO INTERIM FINANCIAL STATEMENTS ...continued
March 31, 2000 (unaudited)
(stated in United States dollars, unless otherwise noted)
8 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 month ended March 31
2000 1999
--------- ---------
<S> <C> <C>
Net earnings (loss) for the period in accordance with Canadian
GAAP $ 701,218 $(574,826)
Stock-based compensation costs (134,331) (362,931)
--------- ---------
Net earnings (loss) for the period in accordance with U.S. GAAP 566,887 (937,757)
Other comprehensive income
Foreign currency translation adjustments (145,893) 121,559
--------- ---------
Comprehensive income (loss) $ 420,994 $(816,198)
========= =========
Basic and fully diluted net earnings (loss) per common share $ 0.05 $ (0.12)
========= =========
</TABLE>
Balance sheet
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
As reported U.S. GAAP As reported U.S. GAAP
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Loan receivable $ 155,077 $ 140,177 $ 155,643 $ 140,690
============ ============ ============ ============
Shareholders' equity
Share capital $ 44,803,095 $ 62,520,160 $ 44,657,833 $ 62,342,671
Other capital 17,734 13,010,984 20,559 12,911,604
Deficit (4,924,404) (34,115,809) (5,625,622) (34,682,696)
Cumulative translation
adjustment 506,217 -- 652,062 --
Accumulated other
comprehensive loss -- (1,027,593) -- (881,700)
------------ ------------ ------------ ------------
$ 40,402,642 $ 40,387,742 $ 39,704,832 $ 39,689,879
============ ============ ============ ============
</TABLE>
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
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 8 to the financial statements, which explains the nature of
the differences between Canadian and U.S. GAAP and their impact on the financial
statements.
First Three Months of 2000 Compared with First Three Months of 1999
Total revenues increased by $6,913,894, or 136%, for the first three months
of 2000 compared to the first three months of 1999. Sales of U-Scan(R) Express
grew from 51 systems in 1999 to 115 systems in 2000, producing $6,450,647 of
additional systems revenue, an increase of 131%. The growth in sales was due to
a significant increase in orders for the Company's core product. Service
contract revenue recognized for hardware and software maintenance increased by
$469,955, or 487%, because of the increased number of customers that entered
into maintenance contracts with the Company after purchasing U-Scan(R) Express
systems.
Total cost of sales increased by $4,670,092, or 108%, for the first three
months of 2000 compared to the first three months of 1999. Overall gross margin
increased as a percentage of sales from 15% in 1999 to 25% in 2000. This
increase resulted primarily from economies of scale and the reduction of
installation costs.
Net research and development expenses increased by $50,007, or 83%, for the
first three months of 2000 compared to the first three months of 1999. As a
percentage of sales, net research and development expenses remained unchanged at
1%.
Selling, general and administrative expenses (including operating lease
expense) increased by $830,526, or 72%, for the first three months of 2000
compared to the first three months of 1999. However, as a percentage of sales,
these expenses decreased from 23% in 1999 to 17% in 2000. During the first
quarter of 2000, the Company continued to expand its infrastructure and hire
additional personnel.
12
<PAGE>
Liquidity and Capital Resources
As of March 31, 2000, the Company had cash, cash equivalents and short-term
investments of $24,770,232 and working capital of $32,854,544.
Operating activities used $3,212,888 in the first three months of 2000 as
compared to $2,940,725 in 1999. In the first three months of 2000, the Company
issued 25,692 (1999 - 64,271) common shares pursuant to the exercise of options
and warrants which resulted in cash proceeds of $142,436 (1999 - $80,787).
In the first three months of 2000, the Company had capital expenditures of
$584,839 (1999 - $92,024), principally relating to leasehold improvements.
The Company maintains an operating line of credit in the amount of
Cdn.$500,000 with its bank, in connection with which it has pledged a $US
treasury bill. As at March 31, 2000 there was no balance on this line of credit.
The Company believes that its cash, cash-equivalents, short-term
investments and this operating line will be adequate to meet its liquidity needs
for at least the next 12 months.
In April 2000, pursuant to a registration statement which was declared
effective on March 28, 2000, the Company issued 1,625,000 common shares for
gross cash proceeds of $39 per share. The estimated net proceeds of this
offering, after deducting underwriting commissions and other expenses of
approximately $2,723,000 (net of future income taxes of $1,688,000), amounted to
$60,652,000.
In addition, the Company issued 560,000 common shares pursuant to the
exercise of outstanding stock options and warrants for gross cash proceeds of
$1,587,000.
Year 2000 Issues
To date, none of our customers has informed us of any Year 2000 problems
with their systems and hardware, although some uncertainty remains in the
software industry and other industries concerning the scope and magnitude of
problems associated with the century change. Furthermore, we received no
indications that any material third party providers were not ready for the Year
2000, and we believe that any such unpreparedness discovered after January 2000
will not have a material affect on our business, results of operations or
financial condition.
13
<PAGE>
Item 3. There have been no material changes since December 31, 1999.
14
<PAGE>
PART II. OTHER INFORMATION
Item 1.
Legal Proceedings
In each of 1995 and 1996, we received a demand letter from the same claimant
alleging that U-Scan Express infringes upon the claimant's patent. In July 1999,
this claimant filed a civil action in the United States district Court for the
District of Utah against us and PSC, the current assembler of U-Scan Express,
alleging patent infringement. A second party also sent a demand letter to us
alleging a different patent infringement. Although after consultation with
counsel, we believe that the former claimant should not prevail in its lawsuit
and that the latter claimant should not prevail if a lawsuit is brought to
assert its claim, and that these claims will not have a material adverse effect
on our business or prospects, no assurance can be given that a court will not
find that the system infringes upon one or both of such claimants' rights.
Kroger has also been sued by the same claimant in the State of Utah based upon
the same issues underlying the suit filed against us in July. At our expense,
our counsel is also defending Kroger in such action. Furthermore, we are
contractually bound to indemnify Kroger for any damages that it may incur in
connection with such suit.
Item 2. The registrant has nothing to report under this item.
Items 3. through 5. The registrant has nothing to report under these items.
Item 6.
(a) Exhibits - Not applicable.
(b) Reports on Form 8K - None were filed in the quarter ended March 31, 2000
<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: April 25, 2000 By: /s/ Holden L. Ostrin
-----------------------
Holden L. Ostrin
Co-Chairman
By: /s/ Gary S. Wechsler
-----------------------
Gary S. Wechsler
Secretary, Treasurer and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMARY FINANCIAL INFORMATION EXTRACTED FROM THE INTERIM
FINANCIAL STATEMENTS OF OPTIMAL ROBOTICS CORP. DATED MARCH 31, 2000 AND IS
QUALIFIED IN ITS ENTRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 313,936<F1>
<SECURITIES> 24,456,296
<RECEIVABLES> 11,027,921
<ALLOWANCES> 0
<INVENTORY> 4,565,942
<CURRENT-ASSETS> 43,503,192
<PP&E> 1,787,904<F2>
<DEPRECIATION> 0
<TOTAL-ASSETS> 51,051,290
<CURRENT-LIABILITIES> 10,648,648
<BONDS> 0
0
0
<COMMON> 44,803,095
<OTHER-SE> 4,400,691<F3>
<TOTAL-LIABILITY-AND-EQUITY> 51,051,290
<SALES> 12,004,159
<TOTAL-REVENUES> 12,367,584
<CGS> 9,014,103
<TOTAL-COSTS> 11,231,925
<OTHER-EXPENSES> 2,217,822
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,135,559
<INCOME-TAX> 701,218
<INCOME-CONTINUING> 701,218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 701,218
<EPS-BASIC> 0.06
<EPS-DILUTED> 0<F4>
<FN>
(1) The Company's financial statements are prepared in accordance with
generally accepted accounting principles in Canada. See Note 8 to financial
statements for a reconciliation of Canadian and U.S. GAAP.
(2) Net of depreciation.
(3) Includes shareholder deficit of 4,924,404, capital attributable to warrants
of 17,734 and a cumulative translation adjustment of 506,217.
(4) Fully diluted net earnings per common share is not presented here, as the
effect thereof would be anti-dilutive. See note 6 to Notes to Interim
Financial Statements.
</FN>
</TABLE>
