<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1998
[ ] Transition report pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the transition period from _________ to __________
Commission File Number: 0-23081
FARO TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
FLORIDA 59-3157093
------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
125 TECHNOLOGY PARK DRIVE, LAKE MARY, FLORIDA 32746
--------------------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: 407-333-9911
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 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 the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:
<TABLE>
<S> <C>
Class: Voting Common Stock, $.001 Par Value Outstanding at May 13, 1998: 10,039,519 Par Value
</TABLE>
Page 1 of 15 Pages
The Exhibit Index Appears on Page 14
<PAGE> 2
FARO Technologies Inc.
Index to Form 10-Q
<TABLE>
<CAPTION>
Page Number
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1997 and
March 31,1998 3
Consolidated Statements of Income for the Three Months Ended
March 31, 1997 and 1998 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 1997 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1997 1998
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $28,815,069 $28,461,086
Accounts receivable, net of allowance 6,159,173 7,694,649
Inventories 4,275,376 4,606,008
Deferred tax asset 126,572 126,572
Prepaid expenses 109,649 39,430
----------- -----------
Total current assets 39,485,839 40,927,745
----------- -----------
PROPERTY AND EQUIPMENT - At cost:
Machinery and equipment 1,014,309 1,157,961
Furniture and fixtures 605,913 864,846
----------- -----------
Total 1,620,222 2,022,807
Less accumulated depreciation (792,442) (882,161)
----------- -----------
Property and equipment - net 827,780 1,140,646
----------- -----------
PATENTS , net of accumulated amortization
of $321,261 and $334,368, respectively 639,693 626,883
DEFERRED TAXES 130,735 116,640
PRODUCT DESIGN COSTS 108,286 260,644
----------- -----------
TOTAL ASSETS $41,192,333 $43,072,558
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 1,196,967 $ 1,902,142
Income taxes payable 413,167 403,497
Customer deposits 121,358 182,094
Current portion unearned service revenues 476,802 362,422
----------- -----------
Total current liabilities 2,208,294 2,850,155
UNEARNED SERVICE REVENUES - less current portion 44,628 24,607
----------- -----------
TOTAL LIABILITIES 2,252,922 2,874,762
----------- -----------
SHAREHOLDERS' EQUITY:
Class A preferred stock - par value $.001, 10,000,000
shares authorized, no shares issued and outstanding
Common stock - par value $.001, 50,000,000 shares
authorized, 9,919,000 and 9,971,241 issued and
outstanding, respectively 9,919 9,971
Additional paid-in-capital 36,502,004 36,737,691
Retained earnings 3,018,265 4,041,656
Unearned compensation (464,480) (421,439)
Accumulated other comprehensive income:
Cumulative translation adjustments (126,297) (170,083)
----------- -----------
Total shareholders' equity 38,939,411 40,197,796
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $41,192,333 $43,072,558
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------
1997 1998
---------- ----------
<S> <C> <C>
Sales $4,889,471 $6,682,201
Cost of Sales 1,948,549 2,681,762
---------- ----------
Gross Profit 2,940,922 4,000,439
Operating Expenses:
Selling 1,158,559 1,583,536
General and Administrative 302,523 598,582
Depreciation and amortization 58,873 110,362
Research and development 178,073 386,444
Employee stock options 3,270 43,041
---------- ----------
Total operating expenses 1,701,298 2,721,965
---------- ----------
Income From Operations 1,239,624 1,278,474
Interest Income -- 319,927
Other Expenses (5,810) (2,654)
Interest Expense (34,262) --
---------- ----------
Income Before Income Taxes 1,199,552 1,595,747
Income Tax Expense (479,821) (572,356)
---------- ----------
Net Income 719,731 1,023,391
Other Comprehensive Income
Foreign Currency Translation Adjustments -- (43,786)
---------- ----------
Other Comprehensive Income -- (43,786)
---------- ----------
Comprehensive Income $ 719,731 $ 979,605
========== ==========
Net Income Per Common Share - Basic $ 0.10 $ 0.10
========== ==========
Net Income Per Common Share -
Assuming Dilution $ 0.10 $ 0.10
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------
1997 1998
--------- ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 719,731 $ 1,023,391
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 58,873 110,362
Employee stock options 3,270 43,041
Change in operating assets and liabilities:
Decrease (Increase) in:
Accounts receivable (700,404) (1,579,264)
Inventories (246,720) (330,632)
Prepaid expenses (7,155) 70,219
Increase (Decrease) in:
Accounts payable and accrued liabilities (615,828) 705,175
Income taxes payable 277,620 221,359
Customer deposits 124,721 60,736
Deferred revenues 160,170 (134,401)
--------- ------------
Net cash (used in) provided by operating activities (225,722) 189,986
--------- ------------
INVESTING ACTIVITIES:
Purchases of property and equipment (102,971) (410,121)
Payments of patent costs (987) (297)
Payments of product design costs -- (152,358)
--------- ------------
Net cash used in investing activities (103,958) (562,776)
--------- ------------
FINANCING ACTIVITIES:
Proceeds from debt 197,071 --
Proceeds from issuance of common stock, net -- 18,807
--------- ------------
Net cash provided by financing activities 197,071 18,807
--------- ------------
DECREASE IN CASH AND CASH EQUIVALENTS (132,609) (353,983)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 263,342 28,815,069
--------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 130,733 $ 28,461,086
========= ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid for interest $ 34,262 $ --
========= ============
Cash paid for income taxes $ 202,201 $ 350,997
========= ============
Noncash financing activities:
Net decrease in deferred tax assets and current
tax liability due to exercise of employee stock options $ -- $ 216,934
========= ============
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
FARO TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 1997 and 1998
NOTE A - DESCRIPTION OF ORGANIZATION AND BUSINESS
FARO Technologies Inc. and Subsidiaries (the "Company") develops,
manufactures, markets and supports portable, software-driven, 3-D measurement
systems that are used in a broad range of manufacturing and industrial
applications. The Company has two wholly-owned subsidiaries, FARO Worldwide,
Inc. and FARO France, s.a.s., which distribute the Company's 3-D measurement
equipment throughout Europe through three primary offices located in France,
Germany and the United Kingdom. FARO France, s.a.s., commenced operations in
July 1996.
NOTE B - BASIS OF PRESENTATION
The accompanying consolidated financial statements have been prepared
in accordance with the instructions to Form 10-Q and do not include all the
information and footnote disclosure required by generally accepted accounting
principles for complete consolidated financial statements. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the consolidated financial position and
operating results for the interim periods have been included. The consolidated
results of operations for the three months ended March 31, 1998 are not
necessarily indicative of results that may be expected for the year ending
December 31, 1998. These consolidated financial statements should be read in
conjunction with the audited consolidated financial statements of the Company as
of December 31, 1996 and 1997, and for each of the three years in the period
ended December 31, 1997 included in the Company's Annual Report to Stockholders
included by reference within the Company's Annual Report of Form 10-K.
Effective January 1, 1998 the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" (SFAS No. 130). This
statement established standards for reporting and the display of comprehensive
income and its components (revenues, expenses, gains and losses) in a full set
of general-purpose financial statements. SFAS No. 130 requires that all items
that are required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed with
the same prominence as other financial statements. SFAS No. 130 does not require
a specific format for that financial statement but requires that an enterprise
display an amount representing total comprehensive income for the period in that
financial statement. Additionally, SFAS No. 130 requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in the equity
section of a statement of financial position.
6
<PAGE> 7
NOTE C - Earnings Per Share
A reconciliation of the number of common shares used in the calculation of basic
and diluted earnings per share ("EPS") is presented below:
<TABLE>
<CAPTION>
Three months ended March 31, 1997 1998
- -----------------------------------------------------------------------------------------------
Per-Share Per-Share
Shares Amount Shares Amount
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Basic EPS
Weighted-Average Shares 7,000,000 $.10 9,944,855 $.10
Effect of Dilutive Securities
Stock Options 333,290 286,301
Warrants 0 0
--------- ----------
Diluted EPS
Weighted-Average Shares and
Assumed Conversions 7,333,290 $.10 10,231,156 $.10
========= ==========
</TABLE>
NOTE D - INVENTORY
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
---------- ----------
<S> <C> <C>
Raw materials $2,432,194 $2,524,558
Finished goods 804,827 990,193
Sales demonstration 1,038,355 1,091,257
---------- ----------
$4,275,376 $4,606,008
========== ==========
</TABLE>
NOTE E - SUBSEQUENT EVENT
On May 8, 1998 the Company announced the execution of a definitive purchase
agreement whereby the Company will acquire all the stock of privately held CATS
Computer Aided Technologies, GmbH (CATS) of Karlsruhe, Germany for $5 million in
cash and approximately $15 million in stock.
Following the completion of the transaction, CATS will become a wholly owned
subsidiary of the Company and will operate as a separate entity under the name
of "CATS." The transaction, which is subject to the completion of certain
customary conditions, is expected to close by May 15, 1998. The acquisition will
be treated as a purchase for accounting purposes. In connection with the
closing, the Company is expected to take a one time charge in the second quarter
ending June 30, 1998 related to the write-off of in-process research and
development costs.
7
<PAGE> 8
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following information should be read in conjunction with the
Consolidated Financial Statements of the Company, including the notes thereto,
included elsewhere in this Form 10-Q, and the Management's Discussion and
Analysis of Financial Condition and Results of Operations included in the
Company's Annual Report on Form 10-K dated March 13, 1998.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
Sales. Sales increased $1.8 million, or 36.7% from $4.9 million for the
three months ended March 31, 1997 to $6.7 million for three months ended March
31, 1998. The increase was primarily due to increased unit sales resulting from
additional sales personnel and expanded promotional efforts, especially in the
international markets. International sales increased $1.4 million or 119% from
$1.2 million for the three months ended March 31, 1997, to $2.7 million for the
three months ended March 31, 1998.
Gross profit. Gross profit increased $1.1 million, or 36.0% from $2.9
million for the three months ended March 31, 1997 to $4.0 million for the three
months ended March 31, 1998. Gross margin was virtually unchanged at 59.9% for
the three months ended March 31, 1997 compared to 60.1% for the three months
ended March 31, 1998. Gross profit increased as a result of increased sales at
the same approximate average sale price for both periods.
Selling expenses. Selling expenses increased $425,000, or 36.7%, from
$1.2 million for the three months ended March 31, 1997 to $1.6 million for the
three months ended March 31, 1998. This increase was a result of the Company's
expansion of sales and marketing staff in the United States and Europe. Selling
expenses as a percentage of sales was unchanged at 23.7% for the three months
ended March 31, 1997 and the three months ended March 31, 1998.
General and administrative expenses. General and administrative
expenses increased $296,000, or 97.9%, from $303,000 for the three months ended
March 31, 1997 to $599,000 for the three months ended March 31, 1998. This
increase was due in part to an increase in the number of administration and
accounting employees to 20 in the first quarter of 1998 from nine in the first
quarter of 1997, resulting in an increase of $148,000 in salaries. Also,
professional and legal expenses increased $83,000 in the first quarter of 1998
compared to the same period in 1997, in part as a result of costs related to SEC
reporting and investor relations. General and administrative expenses as a
percentage of sales increased from 6.2% for the three months ended March 31,
1997 to 9.0% for the three months ended March 31, 1998.
Research and development expenses. Research and development expenses
increased $208,000, or 117.0%, from $178,000 for the three months ended March
31, 1997 to $386,000 for the three months ended March 31, 1998. This increase
was a result of the Company's continued activities associated with the
development of technologies related to new products. Current R&D expenses for
materials increased $41,000 in the first quarter of 1998 compared to same period
in 1997.
Interest Income. Interest income increased $320,000, or 100% to
$320,000 for the first three months of 1998, compared to zero in the first 3
months of 1997. The increase was attributable to interest on the $29.9 million
proceeds from the Company's initial public offering in 1997.
8
<PAGE> 9
Interest expense. Interest expense decreased $34,000, or 100% from
$34,000 for the three months ended March 31, 1997 to zero for the three months
ended March 31, 1998. This reduction was attributable to the elimination of the
Company's debt in September 1997 from use of proceeds from the Company's initial
public offering.
Income Tax Expense. Income tax expense increased $92,000, or 19.3%,
from $480,000 for the three months ended March 31, 1997 to $572,000 for the
three months ended March 31, 1998. The provision for income taxes as a
percentage of income before income taxes was 40.0% for the three months ended
March 31, 1997 and 35.9% for the three months ended March 31, 1998. The decrease
in the tax provision percentage was attributable to tax savings of approximately
$30,000 on $82,000 in non-taxable interest income, and an increase of $33,000 in
tax savings derived from the Company's Foreign Sales Corporation income
exemption.
Net Income. Net income increased $303,000, or 42.2%, from $720,000 for
the three months ended March 31, 1997 to $1,023,000 for the three months ended
March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
In September 1997, the Company completed an initial public offering of
stock which provided net cash after offering expenses, of $31.8 million.
For the three months ended March 31, 1998, net cash provided by
operating activities was $190,000 compared to net cash used by operating
activities of $227,000 for the same period of 1997. Net cash used in this period
decreased as a result of increases in net income ($303,000) and accounts payable
and accrued liabilities ($1,321,000), offset by an increase in accounts
receivable ($879,000) and decreases in income taxes payable ($56,000) and
deferred revenues ($295,000).
Net cash used in investing activities was $563,000 for the three months
ended March 31, 1998 compared to $104,000 for the three months ended March 31,
1997. Net cash used in investing activities increased for the first three months
of 1998 due to a $307,000 increase in purchases of property and equipment, and a
$152,000 increase in product design costs.
Net cash provided by financing activities for the three months ended
March 31, 1998 was $18,807 compared to $197,000 for the three months ended March
31, 1997. The decrease in net cash provided by financing activities was due
primarily to the elimination of loans payable.
The Company has a loan agreement (the "Agreement") in the form of a
term note and a line of credit. The Agreement combines the equivalent of three
successive one-year term loans, each equal to that portion of the loan that will
be fully amortized in the ensuing year, with a line of credit equal to that
portion of the loan that will not be fully amortized in the ensuing year. The
Company had available borrowings under the Agreement totaling approximately $2
million as of March 31, 1998. Interest accrues at the 30-day commercial paper
rate plus 2.7% and is paid monthly. Borrowings under the Agreement are
collateralized by the Company's accounts and notes receivable, inventory,
property and equipment, intangible assets, and deposits. The Agreement contains
restrictive covenants, including the maintenance of certain amounts of working
capital and tangible net worth and limits on loans to related parties, and
prohibits the Company from declaring dividends. There were no outstanding
borrowings under this loan agreement at March 31, 1998.
In April 1997, the Company obtained a one-year secured $1.0 million
line of credit which bears interest at the 30-day commercial paper rate plus
2.65% per annum. The line of credit was extended in 1998 and expires on March
31, 1999. There were no outstanding borrowings under this loan agreement at
March 31, 1998.
On May 8, 1998 the Company announced the execution of a definitive
purchase agreement whereby the Company will acquire all the stock of privately
held CATS Computer Aided Technologies, GmbH (CATS) of
9
<PAGE> 10
Karlsruhe, Germany for $5 million in cash and approximately $15 million in
stock. The transaction, which is subject to the completion of certain customary
conditions, is expected to close by May 15, 1998.
The Company's principal commitments at March 31, 1998 were leases on
its headquarters and regional offices, and there were no material commitments
for capital expenditures at that date. The Company believes that its cash,
investments, cash flows from operations and funds available from its credit
facilities will be sufficient to satisfy its working capital and capital
expenditure needs at least through 1998.
The proposed expansion of the Company's sales force is anticipated to
increase the Company's selling, general and administrative expenses over the
next 12 months. The Company believes that it will have adequate capital to cover
these expenses at least through 1998.
FOREIGN EXCHANGE EXPOSURE
Sales outside the United States represent a significant portion of the
Company's total revenues. Currently, the majority of the Company's revenues and
expenses are invoiced and paid in U.S. dollars. In the future, the Company
expects a greater portion of its revenues to be denominated in foreign
currencies. Fluctuations in exchange rates between the U.S. dollar and such
foreign currencies may have a material adverse effect on the Company's business,
results of operation and financial condition, particularly its operating
margins, and could also result in exchange losses. The impact of future exchange
rate fluctuations on the results of the Company's operations cannot be
accurately predicted. Historically, the Company has not managed the risks
associated with fluctuations in exchange rates but intends to undertake
transactions to manage such risks in the future. To the extent that the
percentage of the Company's non-U.S. dollar revenues derived from international
sales increases in the future, the risks associated with fluctuations in foreign
exchange rates will increase. The Company may use forward foreign exchange
contracts with foreign currency options to hedge these risks.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On April 2, 1998 the Company filed an action for declaratory judgement
action against Kosaka Laboratory Ltd. of Tokyo, Japan (Civil Action No.
98-381-CIV-ORL-19A in the Federal Court for the Middle District of Florida). The
Company seeks to have the Court declare its rights with regard to Kosaka's U.S.
Patent number 4,430,796 regarding a method of measuring an object using, for
example, a coordinate measuring machine (CMM), when an object is larger than the
coordinate system physically measurable by the CMM. Over the past one to two
years, the Company and Kosaka have sought to resolve this matter in an amicable
manner. However, Kosaka has persisted in its erroneous claims that its patent is
infringed by the Company, and has threatened to file suit if the Company did not
pay a relatively large licensing fee. In order to make it clear to the market
that the Company does not infringe the patent, the Company decided to file the
above mentioned action. The Company strongly believes that the outcome to this
declaratory judgement action will be favorable. It is expected that Kosaka will
file a counterclaim for patent infringement: however, the Company does not
believe that Kosaka's patent infringement claim will be meritorious.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
The effective date of the Company's first registration statement filed
under the Securities Act was September 17, 1997. The Commission file number
assigned to the registration statement was 333-32983. The offering date was
September 17, 1997, and the managing underwriters were Raymond James &
Associates, Inc. and Hanifen, Imhoff Inc. Common stock was the only class of
securities registered.
10
<PAGE> 11
The Company registered and sold 2,760,000 shares in the main offering,
plus 159,000 shares pursuant to the over-allotment option granted to the
underwriters. The aggregate price was $33,120,000 without the over-allotment
portion, and $35,028,000 with the over-allotment portion.
Expenses incurred by the Company from the effective date of the
Securities Act registration statement to March 31, 1998 include estimated
offering expenses of $899,000, and the underwriters' discount of $2,318,400
before the over-allotment option, and $2,452,000 after the over-allotment. No
payments were made to directors, officers, general partners of the Company or
their associates, to persons owning ten (10) percent or more of any class of
equity securities of the Company, or to affiliates of the Company. No payments
were made to any others.
The net offering proceeds to the Company after deducting the expenses
described in the preceding paragraph were $29,902,600 without the
over-allotment, and $31,677,000 with the over-allotment.
The selling shareholders registered and sold 600,000 shares, plus
345,000 shares pursuant to the over-allotment option granted to the
underwriters. The aggregate price without the over-allotment was $7,200,000, and
$11,340,000 with the over-allotment. The selling shareholders incurred
underwriters' discounts of $504,000 before the over-allotment option, and
$793,800 after the over-allotment option.
From the effective date of the Securities Act registration statement to
March 31, 1998 none of the net proceeds from the offering were used for
construction of plant, building and facilities; purchase and installation of
machinery and equipment; purchase of real estate; or acquisition of other
business(es). Approximately $600,000 was used to repay indebtedness, $3.2
million was used as working capital, and $28 million was invested in money
market investments, obligations of the US Government and its agencies and
obligations of state and local government agencies. No payments were made to
directors, officers, general partners of the Company or their associates, to
persons owning ten (10) percent or more of any class of equity securities of the
Company, or to affiliates of the Company. No payments were made to any others.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
1. The Company held an Annual Meeting of Stockholders on Monday,
April27, 1998. The Matters submitted for vote and the related election results
are as follows:
2. To elect Alexander Raab and Norman Schipper as directors of the
Company, each for a three-year term. The results of proxies voted for the
election of directors are as follows:
<TABLE>
<CAPTION>
Alexander Raab % Norman Schipper %
<S> <C> <C> <C> <C>
For 7,319,907 73.50 7,361,407 73.91
Withheld 55,176 0.55 13,676 0.14
Total 7,375,083 74.05 7,375,083 74.05
========= ====== ========= ======
Eligible 9,959,241 100.00 9,959,241 100.00
</TABLE>
No other matters were submitted to vote by the stockholders.
Five additional persons who did not stand for election at the Annual
Meeting continue to serve as members of the Board of Directors. These members
include Gregory A. Fraser and Philip R. Colley, whose terms expire in 1999, and
Simon Raab, Hubert d'Amours and Andre Julien, whose terms expire in 2000.
11
<PAGE> 12
ITEM 5. OTHER INFORMATION
On May 8, 1998 the Company announced the execution of a definitive
purchase agreement whereby the Company will acquire all the stock of privately
held CATS Computer Aided Technologies, GmbH (CATS) of Karlsruhe, Germany for $5
million in cash and approximately $15 million in stock.
Following the completion of the transaction, CATS will become a wholly
owned subsidiary of the Company and will operate as a separate entity under the
name of "CATS." The transaction, which is subject to the completion of certain
customary conditions, is expected to close by May 15, 1998. The acquisition will
be treated as a purchase for accounting purposes. In connection with the
closing, the Company is expected to take a one time charge in the second quarter
ending June 30, 1998 related to the write-off of in-process research and
development costs.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS.
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27.1 Financial Data Schedule for the three months ended March 31,
1998 (Filed herewith for SEC filing purposes only)
</TABLE>
(B) REPORTS ON FORM 8-K.
None.
12
<PAGE> 13
SIGNATURES
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.
Date: May 13, 1998 FARO TECHNOLOGIES, INC.
(Registrant)
By: /s/ Gregory A. Fraser
------------------------------------------
Gregory A. Fraser
Executive Vice President and Chief
Financial Officer (Duly Authorized Officer
and Principal Financial Officer)
13
<PAGE> 14
FARO TECHNOLOGIES, INC.
FORM 10-Q
(FOR THE THREE MONTHS ENDED MARCH 31, 1998)
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
27.1 Financial Data Schedule for the three months ended March 31,
1998 (Filed herewith for SEC filing purposes only)
</TABLE>
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY CONSOLIDATED FINANCIAL INFORMATION EXTRACTED FROM
FORM 10-Q OF FARO TECHNOLOGIES, INC. FOR THE THREE-MONTH PERIOD ENDED MARCH 31,
1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 28,461,086
<SECURITIES> 0
<RECEIVABLES> 7,704,183
<ALLOWANCES> 9,534
<INVENTORY> 4,606,008
<CURRENT-ASSETS> 40,927,745
<PP&E> 2,022,807
<DEPRECIATION> 882,161
<TOTAL-ASSETS> 43,072,558
<CURRENT-LIABILITIES> 2,850,155
<BONDS> 0
0
0
<COMMON> 9,971
<OTHER-SE> 40,187,825
<TOTAL-LIABILITY-AND-EQUITY> 43,072,558
<SALES> 6,682,201
<TOTAL-REVENUES> 7,002,128
<CGS> 2,681,762
<TOTAL-COSTS> 2,721,965
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,595,747
<INCOME-TAX> 572,356
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,023,391
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
