10-Q/A 1 d23888_10q.txt FORM 10-Q/A #1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A (Amendment No. 1) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 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 October 19, 2000, the registrant had 13,703,690 Class "A" shares (without nominal or par value) outstanding. EXPLANATORY NOTE This Amendment No. 1 to Quarterly Report on Form 10-Q/A is being filed to correct errors that occurred during the EDGAR conversion process. In each of the Interim Statement of Earnings and Interim Statement of Deficit, the column headings in the two right-most columns should have been "Three months ended September 30, 1999" and "Nine months ended September 30, 1999." In the 10-Q as previously filed, both columns incorrectly referred to the year 2000. PART I. FINANCIAL STATEMENTS Item 1. Financial Statements The financial statements required by item 1 are set forth on pages 3-13. Optimal Robotics Corp. (Unaudited) Interim Financial Statements September 30, 2000 (stated in United States dollars) 2 Optimal Robotics Corp. Interim Balance Sheet ------------------------------------------------------------------------------- (stated in United States dollars, unless otherwise noted) September 30, December 31, 2000 1999 $ $ (unaudited) Assets Current assets Cash and U.S. Treasury bill, at cost 277,631 4,499,084 Short-term investments 70,378,565 24,636,606 Accounts receivable 21,629,045 4,641,566 Systems in transit 756,000 -- Inventory 13,164,456 3,363,943 Tax credits receivable 284,788 252,520 Future income taxes 2,212,799 3,012,997 Prepaid expenses 450,487 127,017 ---------------------------- 109,153,771 40,533,733 Loans receivable 137,383 155,643 Deferred share issue costs -- 56,985 Future income taxes 1,805,138 2,112,028 Capital assets 2,416,139 1,347,903 ---------------------------- 113,512,431 44,206,292 ============================ Liabilities Current liabilities Accounts payable and accrued liabilities 7,609,528 3,659,189 Deferred revenue 1,140,266 592,271 Contract advance 250,000 250,000 ---------------------------- 8,999,794 4,501,460 ============================ Shareholders' Equity Share capital 107,035,914 44,657,833 Other capital 9,684 20,559 Cumulative translation adjustment (1,484,471) 652,062 Deficit (1,048,490) (5,625,622) ============================ 104,512,637 39,704,832 ---------------------------- 113,512,431 44,206,292 ============================ 3 Optimal Robotics Corp. Interim Statement of Earnings (Unaudited) ------------------------------------------------------------------------------- (stated in United States dollars, unless otherwise noted)
Three months Nine months Three months Nine months ended ended ended ended September 30, September 30, September 30, September 30, 2000 2000 1999 1999 $ $ $ $ Revenues 20,300,510 48,427,768 10,686,086 22,799,610 Cost of sales 15,119,822 36,091,248 8,127,717 18,007,577 ------------------------------------------------------------- Gross margin 5,180,688 12,336,520 2,558,369 4,792,033 ------------------------------------------------------------- Research and development, net of tax credits 175,915 523,800 66,448 177,404 Selling, general, administrative and other expenses 3,035,155 6,535,590 1,289,917 3,667,662 Amortization of capital assets 262,162 664,522 101,135 222,487 Investment income (1,254,723) (2,801,770) (319,359) (549,284) ------------------------------------------------------------- 2,218,509 4,922,142 1,138,141 3,518,269 ------------------------------------------------------------- Earnings before income taxes 2,962,179 7,414,378 1,420,228 1,273,764 Provision for income taxes 1,133,626 2,837,246 -- -- ------------------------------------------------------------- Net earnings for the period 1,828,553 4,577,132 1,420,228 1,273,764 ============================================================= Net earnings per common share (note 6)
4 Optimal Robotics Corp. Interim Statement of Deficit (Unaudited) ------------------------------------------------------------------------------- (stated in United States dollars, unless otherwise noted)
Three months Nine months Three months Nine months ended ended ended ended September 30, September 30, September 30, September 30, 2000 2000 1999 1999 $ $ $ $ Deficit - Beginning of period (2,877,043) (5,625,622) (9,423,854) (9,277,390) Net earnings for the period 1,828,553 4,577,132 1,420,228 1,273,764 ---------------------------------------------------------- Deficit - End of period (1,048,490) (1,048,490) (8,003,626) (8,003,626) ==========================================================
5 Optimal Robotics Corp. Interim Statement of Cash Flows (Unaudited) Nine-months ended September 30, 2000 ------------------------------------------------------------------------------- (stated in United States dollars, unless otherwise noted)
2000 1999 $ $ Cash provided by (used in) Operating activities Net earnings for the period 4,577,132 1,273,764 Items not affecting cash Amortization of capital assets 664,522 222,487 Unrealized foreign exchange loss (gain) on contract advance 5,948 (11,041) Non-refundable tax credits (65,539) -- Future income taxes 2,837,246 -- Change in non-cash operating working capital items Increase in accounts receivable (17,226,353) (6,324,270) Increase in inventory and systems in transit (10,750,726) (952,678) Increase in tax credits receivable (38,451) (5,662) Increase in prepaid expenses (328,345) (72,765) Increase in accounts payable and accrued liabilities 4,354,648 782,584 Increase in deferred revenue 573,564 1,150,223 ---------------------------- (15,396,354) (3,937,358) ---------------------------- Financing activities Issuance of common shares 65,324,182 25,453,562 Share issue costs (4,673,729) -- Repayment of loan under Employee Stock Purchase Agreement -- 17,593 Decrease in contract advance -- (125,000) ---------------------------- 60,650,453 25,346,155 ---------------------------- Investing activities Purchase of capital assets (2,046,225) (488,645) Increase in short-term investments (46,944,079) (18,196,067) Repayment of loan receivable 14,782 -- ---------------------------- (48,975,522) (18,684,712) ---------------------------- Increase (decrease) in cash and cash equivalents during the period (3,721,423) 2,724,085 Effect of foreign exchange fluctuations on cash and cash equivalents (500,030) (361,411) Cash and cash equivalents - Beginning of period 4,499,084 538,490 ---------------------------- Cash and cash equivalents - End of period 277,631 2,901,164 ============================ Cash and cash equivalents is comprised of: Cash 277,631 2,342,937 U.S. Treasury bill -- 558,227 ---------------------------- 277,631 2,901,164 ============================
6 Optimal Robotics Corp. Notes to Interim Financial Statements (Unaudited) September 30, 2000 ------------------------------------------------------------------------------- 1 Interim financial information The financial information as at September 30, 2000 and for the periods ended September 30, 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. These interim financial statements have not been the subject of a review engagement by the Company's independent auditors. 2 Accounting policies Functional currency During the third quarter of fiscal 2000, the company determined that its functional currency had clearly changed from the Canadian dollar to the U.S. dollar as at the beginning of the quarter. As a result of this change, which has been applied prospectively from July 1, 2000, transactions denominated in currencies other than the U.S. dollar are now translated into U.S. dollars using the temporal method. Under this method, monetary assets and liabilities are translated into U.S. dollars at the exchange rate in effect on the balance sheet date. Non-monetary assets and liabilities are translated into U.S. dollars at historical exchange rates. Revenues and expenses are translated into U.S. dollars at the exchange rates prevailing at the dates of the respective transactions. Gains and losses resulting from translation of monetary assets and liabilities into U.S. dollars are reflected in the statement of earnings. Prior to July 1, 2000, the Company's functional currency was the Canadian dollar. Accordingly, the financial statements were translated from Canadian dollars into U.S. dollars using the current rate method. Gains and losses resulting from translation of the financial statements were included in the cumulative translation adjustment in shareholders' equity. The translated amounts for non-monetary items as at June 30, 2000 becomes the historical basis for those items in subsequent periods. 3 Inventory September 30, December 31, 2000 1999 $ $ Replacement parts 7,596,303 2,763,261 U-Scan(R) systems 3,528,000 600,682 Parts and staging units 2,040,153 -- ---------------------------- 13,164,456 3,363,943 ============================ 7 Optimal Robotics Corp. Notes to Interim Financial Statements (Unaudited) September 30, 2000 ------------------------------------------------------------------------------- 4 Capital stock On March 28, 2000, the Company filed a registration statement with the Securities and Exchange Commission qualifying the issuance of 1,625,000 common shares for gross proceeds of $39.00 per share. Net proceeds from the offering amounted to $60,418,000, after deducting underwriting commissions and other expenses of $2,957,000 (net of future income taxes of $1,774,000). On June 22, 2000, the Board of Directors amended the Company's stock option plan in order to increase the number of common shares that may be issued pursuant to the plan from 3,000,000 to 6,000,000. On July 29, 2000, the Company granted, to various employees, officers and directors, options to purchase 1,370,500 at an exercise price of $25.25 per common share. During the nine-month period ended September 30, 2000, 573,500 options with a weighted average exercise price of $3.08, and 70,769 warrants with a weighted average exercise price of $2.85 were exercised for a total cash consideration of $1,966,363. 5 Research and development
Three months Nine months Three months Nine months ended ended ended ended September 30, September 30, September 30, September 30, 2000 2000 1999 1999 $ $ $ $ Research and development expenses 219,915 664,119 102,832 286,478 Tax credits earned (44,000) (140,319) (36,384) (109,074) ----------------------------------------------------------- 175,915 523,800 66,448 177,404 ===========================================================
8 Optimal Robotics Corp. Notes to Interim Financial Statements (Unaudited) September 30, 2000 ------------------------------------------------------------------------------- 6 Net earnings per common share
Three months Nine months Three months Nine months ended ended ended ended September 30, September 30, September 30, September 30, 2000 2000 1999 1999 $ $ $ $ Weighted average number of common shares outstanding 13,677,286 12,894,858 10,784,114 9,212,360 ========================================================================= Basic net earnings per common share 0.13 0.35 0.13 0.14 ========================================================================= Fully diluted net earnings per common share 0.13 0.34 0.12 0.14 ========================================================================= Tax adjusted net earnings per common share(1) Basic 0.13 0.35 0.08 0.09 ========================================================================= Fully diluted 0.13 0.34 0.07 0.09 =========================================================================
(1) The 1999 earnings per common share have been adjusted to reflect the impact of having applied the statutory corporate tax rates. Basic net earnings per common share The basic net earnings per common share have been calculated on the weighted average number of shares outstanding. Fully diluted net earnings per common share Fully diluted net earnings per share have been determined using the weighted average number of common shares plus any dilutive common share equivalents outstanding during the period. Net earnings for the period are increased by the estimated additional earnings on the proceeds from the exercise of dilutive common share equivalents. 9 Optimal Robotics Corp. Notes to Interim Financial Statements (Unaudited) September 30, 2000 ------------------------------------------------------------------------------- 7 Other information During the nine-month period ended September 30, 2000, the Company entered into operating leases expiring through September 30, 2005 for additional office and warehouse space. The additional minimum annual rentals required under these leases in each of the years ending December 31 are as follows: $ 2001 276,780 2002 379,949 2003 278,198 2004 162,712 2005 58,896 --------- 1,156,535 ========= 8 Additional disclosures required by U.S. GAAP and differences between Canadian GAAP and U.S. GAAP Statement of earnings 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. Under Canadian GAAP, compensation expense is not recognized. Under U.S. GAAP, diluted earnings per share are calculated using the treasury stock method. 10 Optimal Robotics Corp. Notes to Interim Financial Statements (Unaudited) September 30, 2000 -------------------------------------------------------------------------------
Three months Nine months Three months Nine months ended ended ended ended September 30, September 30, September 30, September 30, 2000 2000 1999 1999 $ $ $ $ Net earnings for the period in accordance with Canadian GAAP 1,828,553 4,577,132 1,420,228 1,273,764 Stock-based compensation costs (25,816) (18,967,181) (603,839) (2,310,584) ----------------------------------------------------------------- Net earnings (loss) for the period in accordance with U.S. GAAP 1,802,737 (14,390,049) 816,389 (1,036,820) Other comprehensive income Foreign currency translation adjustments -- (2,136,533) 35,846 184,571 ================================================================= Comprehensive income (loss) 1,802,737 (16,526,582) 852,235 (852,249) ================================================================= Weighted average number of common shares outstanding 13,677,286 12,894,858 10,784,114 9,212,360 ================================================================= Basic net earnings (loss) per common share 0.13 (1.12) 0.08 (0.11) ================================================================= Diluted net earnings (loss) per common share 0.12 (1.12) 0.07 (0.11) =================================================================
During the three-month period ended September 30, 2000, there were no elements of other comprehensive income.
Three months Nine months Three months Nine months ended ended ended ended September 30, September 30, September 30, September 30, 2000 2000 1999 1999 $ $ $ $ Operating lease expense 216,866 410,481 65,848 174,298 =====================================================
11 Optimal Robotics Corp. Notes to Interim Financial Statements (Unaudited) September 30, 2000 -------------------------------------------------------------------------------
September 30, 2000 December 31, 1999 ---------------------------- ---------------------------- As reported U.S. GAAP As reported U.S. GAAP $ $ $ $ Loans receivable(1) 137,383 137,383 155,643 140,690 =============================================================== Shareholders' equity Share capital 107,035,914 149,081,602 44,657,833 62,342,671 Other capital 9,684 7,522,013 20,559 12,911,604 Deficit (1,048,490) (49,072,745) (5,625,622) (34,682,696) Cumulative translation adjustment (1,484,471) -- 652,062 -- Accumulated other comprehensive income -- (3,018,233) -- (881,700) --------------------------------------------------------------- 104,512,637 104,512,637 39,704,832 39,689,879 ===============================================================
(1) During the nine-month period ended September 30, 2000, the share purchase loan in the amount of $14,953, which was presented against capital stock under U.S. GAAP, was reimbursed in full. Accounts receivable Accounts receivable are presented net of an allowance for doubtful accounts of nil. 12 OPTIMAL ROBOTICS CORP. 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 Nine Months of 2000 compared with First Nine Months 1999 Total revenue increased by $25,628,158 or 112% from $22,799,610 in 1999 to $48,427,768 in 2000. In 2000, the Company sold 469 U-Scan(R) systems, compared with 224 systems in 1999. Total cost of sales increased by $18,083,671 or 100%, from $18,007,577 in 1999 to $36,091,248 in 2000. Overall gross margin as a percentage of sales increased from 21% in 1999 to 25% in 2000. This increase resulted primarily from economies of scale realized and the reduction of installation costs. Net research and development expenses increased by $346,396, or 195%, from 1999 to 2000. As a percentage of sales, research and development expenses remained unchanged at 1% from 1999 to 2000. Selling, general and administrative and other expenses increased by $2,867,928, or 78% in 2000 over 1999. As a percentage of sales, these expenses decreased from 16% in 1999 to 13% in 2000. This decrease resulted from the substantial increase in the number of U-Scan(R) systems sold in 2000 as compared to 1999. Third Quarter of 2000 Compared with Third Quarter of 1999 Total revenues increased by $9,614,424, or 90%, from $10,686,086 in 1999 to $20,300,510 in 2000. Sales of U-Scan(R) systems grew from 105 systems in 1999 to 196 systems in 2000. Total cost of sales increased by $6,992,105, or 86%, from $8,127,717 in 1999 to $15,119,822 in 2000. Overall gross margin increased as a percentage of sales from 24% in 1999 to 26% in 2000. Net research and development expenses increased by $109,467, or 165%, from 1999 to 2000. As a percentage of sales, research and development expenses remained unchanged at 1% in 1999 and 2000. 13 OPTIMAL ROBOTICS CORP. Selling, general, administrative and other expenses increased by $1,745,238, or 135% in 2000 compared to the second quarter of 1999. As a percentage of sales, these expenses increased from 12% in 1999 to 15% in 2000. This increase is the result of increased marketing efforts and the continuing growth of the Plattsburgh operation. Liquidity and Capital Resources As of September 30, 2000, the Company had working capital of $100,153,977, which included cash, cash equivalents and investment grade commercial paper of $70,656,196. Operating activities for the first nine months of 2000 used $15,396,354 as compared with $3,937,358 in 1999. The Company believes that it has sufficient working capital to meet its needs for the next 12 months. Inventory increased by $9,800,513 during the nine-month period ended September 30, 2000. As of September 30, 2000 the Company had parts and staging units of $2,040,153, in preparation of assuming the assembly function of our products as of January 1, 2001. Replacement parts inventory increased by $4,833,042 during this period to accommodate the servicing of the Company's expanding installed base. Our U-Scan(R) systems inventory has increased by $2,927,318, as a result of purchases made at the end of September for delivery in the fourth quarter. In the first nine months of 2000, the Company had capital expenditures of $2,046,225, principally relating to leasehold improvements, and the acquisition of computer equipment, furniture and fixtures and test units. On March 28, 2000, the Company filed a registration statement with the Securities and Exchange Commission qualifying the issuance of 1,625,000 common shares for gross proceeds of $39.00 per share. Net proceeds from the offering amounted to $60,418,000, after deducting underwriting commissions and other expenses of $2,957,000 (net of future income taxes of $1,774,000). On June 22, 2000, the Board of Directors amended the Company's stock option plan in order to increase the number of common shares that may be issued pursuant to the plan from 3,000,000 to 6,000,000. On July 29, 2000, the Company granted, to various employees, officers and directors, options to purchase 1,370,500 at an exercise price of $25.25 per common share. During the nine-month period ended September 30, 2000, 573,500 options with a weighted average exercise price of $3.08, and 70,769 warrants with a weighted average exercise price of $2.85 were exercised for a total cash consideration of $1,966,363. The Company maintains an operating line of credit in the amount of $500,000 CAD with its banker. 14 OPTIMAL ROBOTICS CORP. 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 effect on our business, results of operations or financial condition. 15 OPTIMAL ROBOTICS CORP. Item 3: Quantitative and Qualitative Disclosures about Market Risk There have been no material changes since December 31, 1999. 16 OPTIMAL ROBOTICS CORP. PART II. OTHER INFORMATION Item 1. 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. Item 2. The registrant has nothing to report under this item. Item 3. The registrant has nothing to report under this item. Item 4. The registrant has nothing to report under this item. Item 5. The registrant has nothing to report under this item. Item 6. (a) Exhibits - 27 - Financial Data Schedule (Previously filed on October 24, 2000) (b) Reports on Form 8K - None 17 OPTIMAL ROBOTICS CORP. 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: October 31, 2000 By: /s/ Holden L. Ostrin -------------------------------------------- Holden L. Ostrin Co-Chairman By: /s/ Gary S. Wechsler ------------------------------------------- Secretary, Treasurer and Chief Financial Officer 18