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 September 30, 2002
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
(Address of Principal Executive Office) (Zip Code)
(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 28, 2002, the registrant had 14,936,235 Class "A" shares (without
nominal or par value) outstanding.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
- 2 -
OPTIMAL ROBOTICS CORP.
Consolidated Balance Sheets
(Unaudited)
September 30, 2002 and December 31, 2001
(expressed in US dollars)
====================================================================================================
September 30, December 31,
2002 2001
- ----------------------------------------------------------------------------------------------------
(Audited)
Assets
Current assets:
Cash and cash equivalents $ 5,260,286 $ 9,616,430
Short-term investments 67,422,912 94,487,326
Accounts receivable, net of allowance for doubtful accounts of
$66,494 ($300,000 at December 31, 2001) 23,148,511 9,009,445
Inventories (note 3) 24,302,512 22,355,267
Tax credits receivable 1,152,073 884,057
Future income taxes 154,635 284,253
Prepaid expenses and deposits 572,439 989,107
- ----------------------------------------------------------------------------------------------------
122,013,368 137,625,885
Property, plant and equipment 6,714,555 6,130,347
Goodwill 2,730,353 2,730,353
Intangibles (note 4) 1,192,160 904,810
- ----------------------------------------------------------------------------------------------------
$ 132,650,436 $ 147,391,395
====================================================================================================
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 6,080,458 $ 6,673,804
Income taxes payable 122,233 4,794,476
Deferred revenue 2,461,801 1,307,312
- ----------------------------------------------------------------------------------------------------
8,664,492 12,775,592
Future income taxes 560,635 1,143,213
Shareholders' equity:
Share capital (note 5) 122,102,244 126,476,633
Other capital 5,282 5,282
Retained earnings 2,802,254 8,475,146
Cumulative translation adjustment (1,484,471) (1,484,471)
- ----------------------------------------------------------------------------------------------------
123,425,309 133,472,590
Contingencies (note 6)
- ----------------------------------------------------------------------------------------------------
$ 132,650,436 $ 147,391,395
====================================================================================================
See accompanying notes to unaudited consolidated financial statements.
- 3 -
OPTIMAL ROBOTICS CORP.
Consolidated Statements of Operations
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
===================================================================================================================================
Three months ended Nine months ended
September 30, September 30,
-------------------------------- --------------------------------
2002 2001 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------------
Revenues $ 21,390,215 $ 33,757,420 $ 61,309,059 $ 84,450,156
Cost of sales 14,266,242 20,717,808 40,242,297 52,322,942
- -----------------------------------------------------------------------------------------------------------------------------------
Gross margin 7,123,973 13,039,612 21,066,762 32,127,214
Expenses (income):
Selling, general and
administrative 7,137,797 5,089,465 20,654,800 13,052,926
Research and development
(note 7) 46,338 63,239 1,155,257 820,811
Amortization 673,590 408,650 1,939,028 1,074,848
Operating lease 383,746 332,612 1,148,389 816,861
Investment income (332,072) (663,124) (1,512,254) (2,528,549)
- -----------------------------------------------------------------------------------------------------------------------------------
7,909,399 5,230,842 23,385,220 13,236,897
- -----------------------------------------------------------------------------------------------------------------------------------
(Loss) earnings before income taxes (785,426) 7,808,770 (2,318,458) 18,890,317
Income tax provision (recovery)
(note 8) 616,101 3,258,229 (955,507) 7,572,457
- -----------------------------------------------------------------------------------------------------------------------------------
Net (loss) earnings $ (1,401,527) $ 4,550,541 $ (1,362,951) $ 11,317,860
===================================================================================================================================
Weighted average number of
shares:
Basic 14,936,235 15,268,386 15,099,748 14,446,265
Plus impact of stock options
and warrants 2,655 1,148,038 57,136 1,120,505
- -----------------------------------------------------------------------------------------------------------------------------------
Diluted 14,938,890 16,416,424 15,156,884 15,566,770
- -----------------------------------------------------------------------------------------------------------------------------------
Earnings per share (note 10):
Basic $ (0.09) $ 0.30 $ (0.09) $ 0.78
Diluted (0.09) 0.28 (0.09) 0.73
===================================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
- 4 -
OPTIMAL ROBOTICS CORP.
Consolidated Statements of Retained Earnings
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
====================================================================================================================================
Three months ended Nine months ended
September 30, September 30,
-------------------------------- ---------------------------------
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Retained earnings (deficit),
beginning of period $ 4,203,781 $ 5,936,774 $ 8,475,146 $ (830,545)
Net (loss) earnings (1,401,527) 4,550,541 (1,362,951) 11,317,860
Excess of purchase price over
book value of shares (note 5) -- -- (4,309,941) --
- ------------------------------------------------------------------------------------------------------------------------------------
Retained earnings, end of period $ 2,802,254 $10,487,315 $ 2,802,254 $ 10,487,315
====================================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
- 5 -
OPTIMAL ROBOTICS CORP.
Consolidated Statements of Cash Flows
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
====================================================================================================================================
Three months ended Nine months ended
September 30, September 30,
------------------------------- --------------------------------
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net (loss) earnings $ (1,401,527) $ 4,550,541 $ (1,362,951) $ 11,317,860
Adjustments for:
Amortization 673,590 408,650 1,939,028 1,074,848
Future income taxes 808,148 137,755 (452,960) 2,427,097
Loss on sale of trade accounts
receivable -- -- -- 24,424
Changes in operating assets and
liabilities:
Accounts receivable (3,710,154) (1,774,837) (14,139,066) (22,733,788)
Proceeds from sale of
trade accounts receivable -- -- -- 3,038,907
Inventories 1,302,496 (357,139) (1,947,245) (3,704,550)
Tax credits receivable (862,665) (75,000) (268,016) (105,894)
Prepaid expenses and deposits 238,568 (20,278) 416,668 (466,540)
Accounts payable and
accrued liabilities (3,939,820) (3,623,299) (593,346) (1,176,249)
Income taxes payable (181,484) 2,747,228 (4,672,243) 4,780,222
Deferred revenue (2,483,733) (1,089,493) 1,154,489 1,020,471
- ------------------------------------------------------------------------------------------------------------------------------------
(9,556,581) 904,128 (19,925,642) (4,503,192)
Cash flows from financing activities:
Proceeds from issuance of
common shares -- 15,950,056 -- 19,421,317
Repurchase of common shares -- -- (8,684,330) --
- ------------------------------------------------------------------------------------------------------------------------------------
-- 15,950,056 (8,684,330) 19,421,317
Cash flows from investing activities:
Purchase of capital assets (772,408) (586,465) (2,810,586) (1,833,348)
Business acquisition -- -- -- (1,141,000)
Decrease (increase) in short-term
investments 7,996,591 (9,048,859) 27,064,414 (4,604,713)
- ------------------------------------------------------------------------------------------------------------------------------------
7,224,183 (9,635,324) 24,253,828 (7,579,061)
- ------------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash
equivalents during the period (2,332,398) 7,218,860 (4,356,144) 7,339,064
Cash and cash equivalents,
beginning of period 7,592,684 5,127,186 9,616,430 5,006,982
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 5,260,286 $ 12,346,046 $ 5,260,286 $ 12,346,046
====================================================================================================================================
Cash and cash equivalents consist of:
Cash balances with banks $ 5,260,286 $ 4,092,690 $ 5,260,286 $ 4,092,690
Short-term investments -- 8,253,356 -- 8,253,356
- ------------------------------------------------------------------------------------------------------------------------------------
$ 5,260,286 $ 12,346,046 $ 5,260,286 $ 12,346,046
====================================================================================================================================
Supplemental disclosure to cash flow statement:
Income taxes paid $ -- $ -- $ 3,380,258 $ 63,621
====================================================================================================================================
See accompanying notes to unaudited consolidated financial statements.
- 6 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
================================================================================
1. Interim financial information:
These consolidated financial statements have been prepared by management
in accordance with Canadian generally accepted accounting principles. The
unaudited balance sheet as at September 30, 2002 and the unaudited
statements of operations, retained earnings and cash flows for the periods
ended September 30, 2002 and 2001 reflect all adjustments which, in the
opinion of management, are necessary to a fair statement of the results of
the interim periods presented. The Company's revenue and income are
subject to seasonal variations. Consequently, the results of operations
for any quarter are not necessarily indicative of the results for the full
year. These interim consolidated financial statements follow the same
accounting policies and methods of their application as described in note
2 of the annual consolidated financial statements for the year ended
December 31, 2001. The interim consolidated financial statements do not
include all disclosures required for annual financial statements and
should be read in conjunction with the most recent annual consolidated
financial statements of the Company as at and for the year ended December
31, 2001.
Certain of the prior year amounts have been reclassified to conform to the
current fiscal year presentation. These changes had no impact on
previously reported results of operations, financial position, cash flow
or shareholders' equity.
All amounts in the attached notes are unaudited unless specifically
identified.
2. Significant accounting policies:
(a) Stock-based compensation:
Effective January 1, 2002, the Company adopted prospectively the new
recommendations of the Canadian Institute of Chartered Accountants
("CICA"), Handbook Section 3870, with respect to the accounting for
stock-based compensation and other stock-based payments. The new
recommendations require that all stock-based payments to non-employees,
and employee awards that are direct awards of stock, call for settlement
in cash or other assets, or are stock appreciation rights that call for
settlement by the issuance of equity instruments, granted on or after
January 1, 2002 be accounted for using the fair value method. The Company
presently does not have any such awards which must be accounted for using
the fair value method. For all other stock-based employee compensation
awards, the new standards permit the Company to continue to follow its
existing policy of using the settlement date method of accounting. Under
this method, no compensation expense is recognized when stock options are
issued to employees. Any consideration received from the plan participants
upon exercise of stock options is credited to share capital.
- 7 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
================================================================================
2. Significant accounting policies (continued):
(a) Stock-based compensation (continued):
The new standard requires that the Company disclose the pro forma effect
of accounting for all stock-based awards granted during the three and
nine-month periods ended September 30, 2002 under the fair value-based
method (refer to note 10). In the first year of application, comparative
disclosures need not be provided for prior periods.
(b) Goodwill and other intangible assets:
Effective January 1, 2002, the Company adopted the new recommendations of
the CICA, Handbook Section 3062, with respect to the accounting for
goodwill and other intangible assets. The standard changes the accounting
for goodwill from an amortization method to an impairment-only approach.
In addition, the standard requires acquired intangible assets to be
separately recognized if the benefit of the intangible assets is obtained
through contractual or other legal right, or if the intangible assets can
be sold, transferred, licensed, rented or exchanged.
The change was accounted for prospectively. The Company did not record
amortization of goodwill in the three and nine months ended September 30,
2002. Goodwill was tested for impairment during the first quarter of
fiscal 2002. The fair value of the Alpha Microsystems business, which was
acquired during the second quarter of fiscal 2001 and from which the
goodwill arose, was estimated using the expected present value of future
cash flows. Management considered that there was no impairment in the
carrying value of goodwill.
There has been no change in the estimated useful life of the other
intangible assets which continue to be amortized using the straight-line
method at the following annual rates:
================================================================================
Customer list 25%
Patents 5%
================================================================================
- 8 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
================================================================================
2. Significant accounting policies (continued):
(b) Goodwill and other intangible assets (continued):
As required under CICA Handbook Section 3062, the following information is
presented:
====================================================================================================================================
Three months ended Nine months ended
September 30, September 30,
----------------------------------- ------------------------------------
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Reported net (loss)
earnings $ (1,401,527) $4,550,541 $ (1,362,951) $11,317,860
Add back goodwill
amortization,
net of tax -- 37,056 -- 49,410
- ------------------------------------------------------------------------------------------------------------------------------------
Adjusted net (loss)
earnings $ (1,401,527) $4,587,597 $ (1,362,951) $11,367,270
====================================================================================================================================
Earnings per share:
Basic $ (0.09) $ 0.30 $ (0.09) $ 0.79
Diluted (0.09) 0.28 (0.09) 0.73
====================================================================================================================================
3. Inventories:
====================================================================================================================================
September 30, December 31,
2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
(Audited)
Finished goods $ 1,528,142 $ 2,778,678
Work in process 421,358 542,378
Raw materials 7,516,230 6,969,536
Replacement parts 14,836,782 12,064,675
- ------------------------------------------------------------------------------------------------------------------------------------
$ 24,302,512 $ 22,355,267
====================================================================================================================================
- 9 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
================================================================================
4. Intangibles:
================================================================================
September 30,
2002
- --------------------------------------------------------------------------------
Gross carrying Accumulated Net book
amount amortization value
- --------------------------------------------------------------------------------
Customer list $ 786,414 $143,962 $ 642,452
Patents 576,381 26,673 549,708
- --------------------------------------------------------------------------------
$1,362,795 $170,635 $1,192,160
================================================================================
================================================================================
December 31,
2001
- --------------------------------------------------------------------------------
(Audited)
Gross carrying Accumulated Net book
amount amortization value
- --------------------------------------------------------------------------------
Customer list $786,414 $26,000 $ 760,414
Patents 158,364 13,968 144,396
- --------------------------------------------------------------------------------
$944,778 $39,968 $ 904,810
================================================================================
- 10 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
================================================================================
5. Share capital:
Changes in the issued and outstanding share capital were as follows:
====================================================================================================================================
September 30, 2002 September 30, 2001
--------------------------------- ------------------------------
Number Dollars Number Dollars
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31,
2001 and 2000 15,471,335 $ 126,476,633 13,708,690 $107,050,914
Issued for cash pursuant to
exercise of stock options -- -- 1,409,225 17,433,431
Issued pursuant to exercise
of warrants: -- -- 353,420 --
- Ascribed value from other
capital -- -- -- 4,402
- Cash -- -- -- 1,987,886
Stock repurchase program (i (535,100) (4,374,389) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, September 30,
2002 and 2001 14,936,235 $ 122,102,244 15,471,335 $126,476,633
====================================================================================================================================
(i) On February 26, 2002, the Board of Directors approved a stock repurchase
program authorizing the Company to purchase up to 750,000 of the Company's
Class "A" shares in the open market commencing March 5, 2002 and ending
March 4, 2003. As at September 30, 2002, 535,100 shares having a book
value of $4,374,389 had been repurchased for a total consideration of
$8,684,330. The excess of the purchase price over book value of the shares
in the amount of $4,309,941 was charged to retained earnings.
(ii) On June 20, 2002, the shareholders approved an amendment to increase the
number of shares available for issuance under the Company's stock option
plan by 3,000,000 shares. The approval of the option plan amendment also
serves to approve 1,715,000 options granted on March 2, 2002 at an
exercise price of $13.86 which become immediately exercisable as to
1,385,000 of the underlying shares and exercisable as to 165,000 of the
underlying shares on each of March 2, 2003 and 2004. In May 2002, the
Company granted 45,000 options to acquire Class "A" shares at an exercise
price of $14.83. These options become exercisable as to 22,500 shares on
each of May 6, 2003 and 2004.
- 11 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
================================================================================
6. Contingencies:
(a) In 1995 and 1996, the Company received demand letters from the same
claimant alleging patent infringement. In July 1999, the claimant
filed a civil action alleging patent infringement in the United
States District Court for the District of Utah against the Company
and PSC Inc., one of the Company's suppliers. In addition, a similar
suit has been filed in the State of Utah against one of the
Company's customers. The Company is contractually bound to indemnify
the customer for any damages it incurs in connection with such suit.
At the Company's expense, the Company's legal counsel is defending
this suit. The Company also received a lawyer's letter from another
party in 1999, and again in February 2001, alleging infringement of
another patent.
The Company believes these claims to be without merit and intends to
vigorously defend its position. Consequently, no provision has been
made in these financial statements with respect to the above claims.
(b) The Company is party to litigation arising in the normal course of
operations. The Company does not expect the resolution of such
matters to have a materially adverse effect on the financial
position or results of operations of the Company.
7. Research and development:
====================================================================================================================================
Three months ended Nine months ended
September 30, September 30,
-------------------------------- -----------------------------------
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Research and development
expenses $ 909,003 $ 511,485 $ 2,317,922 $ 1,413,613
Less tax credits (862,665) (448,246) (1,162,665) (592,802)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 46,338 $ 63,239 $ 1,155,257 $ 820,811
====================================================================================================================================
- 12 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
================================================================================
8. Income taxes:
The income tax provision differs from the amount computed by applying the
combined Canadian federal and Quebec tax rates to earnings before income
taxes. The reasons for the difference and the related tax effects are as
follows:
====================================================================================================================================
Three months ended Nine months ended
September 30, September 30,
------------------------------- --------------------------------
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
(Loss) earnings before
income taxes $ (785,426) $7,808,770 $(2,318,458) $18,890,317
====================================================================================================================================
Combined Canadian federal and
Quebec provincial income taxes
at 36% (2001 - 37%) $ (282,753) $2,889,245 $ (834,645) $ 6,989,417
Foreign exchange (1) 1,393,952 -- 67,789 --
Difference in tax rates in
foreign jurisdictions (73,781) -- (123,620) --
Permanent differences and other (421,317) 368,984 (65,031) 583,040
- ------------------------------------------------------------------------------------------------------------------------------------
Income tax provision
(recovery) $ 616,101 $3,258,229 $ (955,507) $ 7,572,457
====================================================================================================================================
(1) For purposes of calculating the income tax provision of the Company, a tax
liability or recovery is recognized on foreign exchange gains and losses
which arise on the conversion into Canadian dollars of the net monetary
assets denominated in U.S. dollars which is required for tax purposes.
Because these financial statements are presented in U.S. dollars, these
foreign exchange gains and losses do not impact earnings before income
taxes even though the income tax provision includes a tax liability or
recovery for these items. Future fluctuations in the foreign exchange rate
between the Canadian and U.S. dollar will change the amount of the foreign
exchange gains (losses) and thus the provision or recovery for income
taxes thereon.
The provision for (recovery of) income taxes is composed of the following:
====================================================================================================================================
Three months ended Nine months ended
September 30, September 30,
------------------------------- --------------------------------
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Current income taxes $ (192,047) $3,120,474 $ (502,547) $ 5,145,360
Future income taxes 808,148 137,755 (452,960) 2,427,097
- ------------------------------------------------------------------------------------------------------------------------------------
$ 616,101 $3,258,229 $ (955,507) $ 7,572,457
====================================================================================================================================
- 13 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
- --------------------------------------------------------------------------------
9. Segmented information:
The Company operates in one segment, the development, marketing,
installation, servicing and sale of automated transaction products
designed for use in the retail sector. Substantially all of the Company's
revenue is derived from sales to retailers located in the United States
and is denominated in U.S. dollars. Property, plant and equipment,
goodwill and intangibles by geographic area are as follows:
================================================================================
September 30, December 31,
2002 2001
- --------------------------------------------------------------------------------
(Audited)
Canada $ 5,559,792 $4,436,119
United States 5,077,276 5,329,391
- --------------------------------------------------------------------------------
$10,637,068 $9,765,510
================================================================================
10. Earnings per share:
(a) Stock-based compensation:
If the fair value-based accounting method under Handbook Section 3870 had
been used to account for stock-based compensation costs relating to exempt
options and warrants issued to employees during the period ended September
30, 2002, the net earnings and related earnings per share figures would be
as follows:
- --------------------------------------------------------------------------------
September 30, 2002
-----------------------------
Three months Nine months
ended ended
- --------------------------------------------------------------------------------
Reported net loss $(1,401,527) $ (1,362,951)
Pro forma adjustments to compensation expen (814,824) (17,756,274)
- --------------------------------------------------------------------------------
Pro forma net loss $(2,216,351) $(19,119,225)
================================================================================
Pro forma loss per share:
Basic $ (0.15) $ (1.27)
Diluted (0.15) (1.27)
================================================================================
The fair value of each option grant was determined using the following method
and assumptions.
- 14 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
================================================================================
10. Earnings per share (continued):
(a) Stock-based compensation (continued):
The weighted average fair value of each option granted is estimated on the
date of grant using the Black-Scholes pricing model with the following
weighted average assumptions:
================================================================================
Risk free interest rate 3.32%
Expected volatility 81%
Expected life in years 10
Expected dividend yield nil
================================================================================
The following table summarizes the weighted average grant-date fair value
per share for options granted during the three and nine-month periods
ended September 30, 2002:
==========================================================================================================
Three months ended Nine months ended
September 30, 2002 September 30, 2002
- ----------------------------------------------------------------------------------------------------------
Weighted Weighted
average average
grant-date grant-date
Number of fair value Number of fair value
options per share options per share
- ----------------------------------------------------------------------------------------------------------
Exercise price per share
equal to market price
per share -- $ -- 1,760,000 $ 11.52
==========================================================================================================
Management believes that the effects of applying Handbook Section 3870 on
a pro forma basis are not likely to be representative of the effects on
reported pro forma net earnings for future years as the estimated
compensation costs reflect only options granted between January 1, 2002
and September 30, 2002 and do not consider awards which may occur in
future years, the terms and conditions of which may vary.
Dividend yield was excluded from the calculation since it is the present
policy of the Company to retain all earnings to finance operations. In
addition, option valuation models require the input of highly subjective
assumptions including the expected stock price volatility. Because the
Company's stock options have characteristics significantly different from
those of traded options, and because changes in the subjective input
assumptions can materially affect their fair value estimate, in
management's opinion, the existing models do not necessarily provide a
reliable single measure of the fair value of its stock options.
- 15 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
================================================================================
10. Earnings per share (continued):
(b) Supplementary measure of earnings per share:
Supplementary measures of earnings do not have any standardized meaning
prescribed by generally accepted accounting principles and are therefore
unlikely to be comparable to similar measures presented by other
companies. The purpose of presenting a supplementary measure of net
earnings and earnings per share is to illustrate the tax impact of the
foreign exchange gains and losses which arises on the conversion of the
short-term investments into Canadian dollars for purposes of determining
taxable income under Canadian income tax regulations as described in
note 8.
====================================================================================================================================
Three months ended Nine months ended
September 30, September 30,
---------------------------------- ----------------------------------
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Net (loss) earnings $ (1,401,527) $ 4,550,541 $ (1,362,951) $ 11,317,860
Add back effect of future
income taxes on foreign
exchange gains 1,393,952 -- 67,789 --
- ------------------------------------------------------------------------------------------------------------------------------------
Supplementary measure
of net (loss)
earnings $ (7,575) $ 4,550,541 $ (1,295,162) $ 11,317,860
====================================================================================================================================
Supplementary measure
of earnings
per share:
Basic $ -- $ 0.30 $ (0.09) $ 0.78
Diluted -- 0.28 (0.09) 0.73
====================================================================================================================================
- 16 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
================================================================================
11. Additional disclosures required by U.S. GAAP and differences between
Canadian GAAP and U.S. GAAP:
(a) Consolidated statement of operations:
The reconciliation of earnings reported in accordance with Canadian GAAP
with U.S. GAAP is as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Three months ended Nine months ended
September 30, September 30,
------------------------------- -------------------------------
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------------
Net (loss) earnings in
accordance with
Canadian GAAP $ (1,401,527) $ 4,550,541 $(1,362,951) $ 11,317,860
Stock-based
compensation (i) -- 8,703,560 9,778,143 (23,010,144)
- ------------------------------------------------------------------------------------------------------------------------------------
Net (loss) earnings in
accordance
with U.S. GAAP $ (1,401,527) $13,254,101 $ 8,415,192 $(11,692,284)
- ------------------------------------------------------------------------------------------------------------------------------------
Earnings (loss) per sh are:
Basic $ (0.09) $ 0.87 $ 0.56 $ (0.81)
Diluted (0.09) 0.81 0.56 (0.81)
- ------------------------------------------------------------------------------------------------------------------------------------
(i) Accounting for stock-based compensation:
For stock-based compensation plans, the Company has chosen to use,
for U.S. GAAP purposes, the intrinsic value method (APB Opinion No.
25), which requires compensation costs to be recognized on the
difference, if any, between the quoted market price of the stock at
the grant date and the amount the individual must pay to acquire the
stock. Certain of the Company's stock options are variable because
the exercise price is not known until the options are exercised. As
a result, compensation cost is estimated each quarter from the date
of grant until the options are exercised, based on the difference
between the quoted market price of the Company's stock and the
exercise price.
Under Canadian GAAP, the Company uses the settlement method of
accounting for options and compensation expense is not recognized.
- 17 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
================================================================================
11. Additional disclosures required by U.S. GAAP and differences between
Canadian GAAP and U.S. GAAP (continued):
(b) Consolidated balance sheets:
====================================================================================================================================
September 30, 2002 December 31, 2001
----------------------------------- -----------------------------------
Canadian US Canadian US
GAAP GAAP GAAP GAAP
- ------------------------------------------------------------------------------------------------------------------------------------
(Audited)
Shareholders' equity:
Share capital $ 122,102,244 $ 164,558,807 $ 126,476,633 $ 168,933,196
Other capital 5,282 29,862,009 5,282 39,640,152
Retained earnings
(deficit) 2,802,254 (67,977,274) 8,475,146 (72,082,525)
Cumulative translation
adjustment (1,484,471) -- (1,484,471) --
Accumulated other
comprehensive loss -- (3,018,233) -- (3,018,233)
- ------------------------------------------------------------------------------------------------------------------------------------
$ 123,425,309 $ 123,425,309 $ 133,472,590 $ 133,472,590
====================================================================================================================================
(c) Recent accounting pronouncements:
In August 2001, FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations". SFAS No. 143 requires the Company to record
the fair value of an asset retirement obligation as a liability in
the period in which it incurs a legal obligation associated with the
retirement of tangible long-lived assets. This statement is
effective for the Company's fiscal year beginning January 1, 2003.
The Company does not expect SFAS No. 143 to have a material impact
on its financial statements.
In October 2001, FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets". SFAS 144 establishes a
single accounting model, based on the framework established in
Statement of Financial Accounting Standards no. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" ("SFAS 121"), for long-lived assets to be disposed of
by sale, and resolves implementation issues related to SFAS 121.
This statement is effective for the Company's fiscal year beginning
January 1, 2002. The adoption of this standard did not have an
initial material impact on its financial statements.
- 18 -
OPTIMAL ROBOTICS CORP.
Notes to Consolidated Financial Statements, (continued)
(Unaudited)
Periods ended September 30, 2002 and 2001
(expressed in US dollars)
================================================================================
11. Additional disclosures required by U.S. GAAP and differences between
Canadian GAAP and U.S. GAAP (continued):
(c) Recent accounting pronouncements (continued):
In April 2002, FASB issued SFAS No 145, "Rescission of FASB
Statements No. 54 and 64, Amendment of FASB Statement No. 13 and
Technical Corrections". In June 2002, FASB issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities".
SFAS No. 145 and 146 will be effective for the Company's fiscal year
beginning January 1, 2003. The Company does not expect SFAS No. 145
and 146 to have a material impact on its financial statements.
In October 2002, FASB issued SFAS No. 147, "Acquisitions of Certain
Financial Institutions, an Amendment of SFAS No. 72 and 144 and FASB
Interpretation No. 9". The Company does not expect SFAS No. 147 to
have an impact on its financial statements.
- 19 -
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
This Form 10-Q contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to be
covered by the safe harbors created thereby. These statements are based on
current expectations and assumptions that are subject to risks and
uncertainties. Actual results could differ materially because of factors such
as: we principally depend on one line of products; we relied on one customer for
a majority of our revenues in 2001; we may not be able to manage our growth; we
rely on third party suppliers; our U-Scan(R) systems are assembled at two
facilities; we may not be able to keep pace with changes in technology; we
depend upon key personnel; competition could reduce revenue from the U-Scan
system; our products may contain defects; the adverse resolution of litigation
against us could adversely impact our business; organized labor may resist
U-Scan; we may be vulnerable to technological problems; and economic conditions
in the United States and Canada, affecting the self-checkout industry, are
beyond our control and may continue to result in reduced demand and pricing
pressure on our products, all as discussed in our annual report on Form 10-K for
the year ended December 31, 2001.
The following discussion of the financial condition and results of
operations of our Company should be read in conjunction with our audited
consolidated financial statements for the year ended December 31, 2001, and the
foregoing factors. All dollar amounts are expressed in U.S. dollars. Dollar
amounts expressed in millions or thousands of dollars, have been rounded to the
nearest million or thousand, respectively.
Overview
We are the leading provider of self-checkout systems to retailers in the
United States based on the current number of consumer self-checkout terminals
installed to date. Our principal product is the U-Scan automated self-checkout
system, which enables shoppers to scan, bag and pay for their purchases with
little or no assistance from store personnel.
The U-Scan system can be operated quickly and easily by shoppers and makes
the checkout process more convenient. The U-Scan system reduces the cost of
checkout transactions to retailers and addresses labor shortage problems by
replacing manned checkout counters with our automated self-checkout stations.
We believe that the potential market for self-checkout solutions includes
applications beyond supermarkets and supercenters. General merchandise stores,
home improvement stores and other big-box retailers have begun to purchase
self-checkout systems. Other types of stores that we have identified where
self-checkout systems could be used include drug stores, convenience stores,
warehouse stores, office superstores and toy stores.
Our revenue and gross margins vary from quarter to quarter as a result of
the level of business volumes, the competitive environment and seasonality of
demand. Our quarterly operating results are primarily affected by the level and
timing of customer orders.
We prepare our consolidated financial statements in accordance with
accounting principles which are generally accepted in Canada with a
reconciliation to accounting principles
- 20 -
generally accepted in the United States, as disclosed in note 11 of the notes to
our interim consolidated financial statements for the periods ended September
30, 2002 and 2001.
Change in accounting policy
Effective January 1, 2002, the Company adopted the new recommendations of
the Canadian Institute of Chartered Accountants with respect to the accounting
for goodwill and other intangible assets. The standard changes the accounting
for goodwill from an amortization method to an impairment-only approach. In
addition, the standard requires acquired intangible assets to be separately
recognized if the benefit of the intangible assets is obtained through
contractual or other legal right, or if the intangible assets can be sold,
transferred, licensed, rented or exchanged.
The change was accounted for prospectively. The Company did not record an
amortization of goodwill in the nine months ended September 30, 2002. Goodwill
was tested for impairment during the first quarter of fiscal 2002. The fair
value of the Alpha Microsystems ("Alpha") business, which was acquired during
the second quarter of fiscal 2001 and from which the goodwill arose, was
estimated using the expected present value of future cash flows. We considered
that there was no impairment in the carrying value of goodwill.
Financial Condition
Our cash and short-term investment portfolio amounted to $72,683,000 as at
September 30, 2002, compared to $104,104,000 as at December 31, 2001. The
decrease relates primarily to the repurchase of 535,100 Class "A" shares under
the Company's stock repurchase program for a total consideration of $8,684,000,
the additional investment in capital assets of $2,811,000, the reduction of
income taxes of $4,672,000 as well as the increase in accounts receivable of
$14,139,000. The accounts receivable amounted to $23,148,000 at September 30,
2002, of which $10 million was collected in October 2002. Furthermore the
Company sold no receivables as at September 30, 2002, whereas $6,469,000 were
sold as at December 31, 2001. Our portfolio of short-term investments consists
of short-term discounted notes. Our investments are liquid and investment grade.
The portfolio is invested in U.S. and Canadian dollar denominated securities,
which are short-term to minimize interest rate risk.
Our inventory position at September 30, 2002 was $24,303,000, up from
$22,355,000 at the end of 2001. This increase is mainly attributable to
replacement parts, amounting to $14,837,000 at September 30, 2002 as compared to
$12,065,000 at December 31, 2001. The replacement parts inventory increased in
order to service additional systems sold during the period. We believe that,
considering our current installed base, this level of replacement parts is
appropriate for the current servicing and support of our customers.
We have no long-term debt. Shareholders' equity at September 30, 2002 was
$123,425,000 as compared to $133,473,000 at December 31, 2001. The decrease is
attributable to the repurchase of shares under the Company's stock repurchase
program for a total consideration of $8,684,000, as well as the net loss for the
nine month period of $1,363,000. On February 26, 2002, the Board of Directors
approved the stock repurchase program authorizing the Company to purchase up to
750,000 Class "A" shares in the open market. The share repurchase program
expires March 4, 2003.
- 21 -
Results of Operations
First Nine Months of 2002 Compared with First Nine Months of 2001
Total revenues decreased by $23,141,000, or 27%, in the first nine months
of the year compared to last year. Our sales were impacted by a continued
weakness in the economy and in particular the postponement and reduction of
information technology spending by our customers, as well as a heightened
competitive environment.
Total cost of sales decreased by $12,081,000, or 23%, in the nine-month
period ended September 2002 compared to the nine-month period ended September
30, 2001. The decrease was consistent with the decrease in sales. Overall, gross
margins decreased as a percentage of sales from 38% to 34%. The decrease was
mainly attributable to changes in our revenue mix, specifically the increased
percentage of total revenues attributable to service. Service revenues carry a
lower gross margin than systems revenues.
Gross research and development expenses increased by $904,000, or 64%,
from 2001 to 2002. As a percentage of total revenues, gross research and
development expenses increased from 2% to 4%. Research and development expenses
for the nine-month period ended September 30, 2002 included continuing costs of
completion of the development of the U-Scan Mobile Attendant(TM) device and the
integration of an electronic signature capture interface and process;
integration of a biometric access interface and process; a lower profile,
smaller footprint U-Scan system; and the improvement of the graphical user
interface (GUI). In addition, we are expanding the range of point of sales
systems and devices that integrate seamlessly with the U-Scan system, as well as
enhancing our automated software updating mechanism in order to broaden our
target customer base and better service our existing customers.
Selling, general, administrative and operating lease expenses increased by
$7,933,000, or 57%, in 2002 compared to 2001. As a percentage of total revenues,
these expenses increased from 16% to 36%. The increase was attributable to the
following items: the inclusion of the operating costs of Optimal Systems
Services (formerly Alpha) which was acquired in May 2001; increased investment
in sales and marketing, including, in particular, the expansion of our sales and
business development group as well as an increase in trade show activity; and an
increase in support and technical staff in order to service the expanded
customer base.
The Company's net loss was $1,363,000 in the nine-month period compared to
net earnings of $11,318,000 in 2001. On a per share basis, the net loss amounted
to $0.09 (basic and diluted) compared to net earnings of $0.78 ($0.73 on a
diluted basis) in 2001.
Effective January 1, 2002, the Company adopted new recommendations of the
CICA with respect to the accounting for goodwill and other intangible assets, as
disclosed in note 2 (b) of our interim consolidated financial statements. The
Company did not record an amortization of goodwill in the nine-month period
ended September 30, 2002. For the nine-month period ended September 30, 2001,
goodwill amortization represented $81,000. Net earnings excluding amortization
of goodwill for 2001 amount to $0.79 ($0.73 on a diluted basis).
As a measure of our financial performance, management uses supplementary
net earnings of operating performance. Supplementary net earnings exclude the
effect of future income taxes on unrealized foreign exchange gains or losses, as
disclosed in note 10 (b) of our interim consolidated financial statements.
Excluding future income taxes on foreign exchange gains, the
- 22 -
supplementary measure of net loss was $1,295,000 ($0.09 per share basic and
diluted) for the nine-month period ended September 30, 2002.
Third Quarter of 2002 Compared with Third Quarter of 2001
Total revenues decreased by $12,367,000, or 37%, in the third quarter of
the year compared to last year. Our sales were impacted by a general weakness in
the economy and in particular the postponement and reduction of information
technology spending by our customers, as well as a heightened competitive
environment.
Total cost of sales decreased by $6,452,000, or 31%, in the third quarter
of 2002 as compared to the same period last year. The decrease was consistent
with the decrease in sales. Overall, gross margins decreased as a percentage of
sales from 39% to 33%. The decrease was mainly attributable to changes in our
revenue mix, specifically the increased percentage of total revenues that are
attributable to service. Service revenues carry a lower gross margin than
systems revenues.
Gross research and development expenses increased by $398,000, or 78%,
from 2001 to 2002. As a percentage of total revenues, gross research and
development expenses increased from 2% to 4%. Research and development expenses
for the three-month period ended September 30, 2002 included continuing costs of
completion of the development of the U-Scan Mobile Attendant device and the
integration of an electronic signature capture interface and process;
integration of a biometric access interface and process; a lower profile,
smaller footprint U-Scan system; and the improvement of the graphical user
interface (GUI). In addition, we are expanding the range of point of sales
systems and devices that integrate seamlessly with the U-Scan system, as well as
enhancing our automated software updating mechanism in order to broaden our
target customer base and better service our existing customers.
Selling, general, administrative and operating lease expenses increased by
$2,099,000 or 39%, in 2002 compared to 2001. As a percentage of total revenues,
these expenses increased from 16% to 35%. The increase was attributable to the
following items: increased investment in sales and marketing, including, in
particular, the expansion of our sales and business development group as well as
an increase in trade show activity; and an increase in support and technical
staff in order to service the expanded customer base.
The provision for income taxes amounted to $616,000 in the period. As
explained in note 8 to our interim consolidated financial statements, the most
significant component is $1.4 million of income taxes related to foreign
exchange gains. Because our consolidated financial statements are presented in
U.S. dollars, the foreign exchange gains, which for Canadian income tax purposes
arise on the conversion into Canadian dollars of our net monetary assets
denominated in U.S. dollars, give rise to a tax provision even though these
foreign exchange gains and losses do not impact our earnings before income
taxes.
The Company incurred a net loss of $1,402,000 in the quarter compared to
net earnings of $4,551,000 in 2001. On a per share basis the Company incurred a
net loss of $0.09 (basic and diluted) compared to net income of $0.30 ($0.28 on
a diluted basis) in 2001. There was no material impact on earnings per share for
fiscal 2001 as a result of the change in accounting policy related to goodwill
and other intangible assets, as disclosed in note 2 (b) of our interim
consolidated financial statements.
- 23 -
As a measure of our financial performance, management uses supplementary
net earnings of operating performance. Supplementary net earnings exclude the
effect of future income taxes on unrealized foreign exchange gains or losses, as
disclosed in note 10 (b) of our interim consolidated financial statements.
Excluding future income taxes on the foreign exchange gains, the supplementary
measure of net loss for the quarter was $8,000 ($0.00 per share basic and
diluted).
Liquidity and Capital Resources
As of September 30, 2002, we had cash, cash equivalents and short-term
investments of $72,683,000 (December 31, 2001 - $104,104,000), and working
capital of $113,349,000 (December 31, 2001 - $124,850,000).
Operating activities used $19,926,000 of cash and cash equivalents in the
first nine months of 2002, compared to $4,503,000 used during the first nine
months of 2001. The increase is mainly attributable to the increase in accounts
receivable of $14,139,000. The accounts receivable amounted to $23,148, 000 at
September 30, 2002, of which $10 million was collected in October 2002. Under an
agreement with a Canadian chartered bank, the Company has the right to sell
designated accounts receivable to the bank on a non-recourse basis. The Company
sold no receivables in the period ended September 30, 2002, whereas $6,469,000
were sold as at December 31, 2001.
During the first nine months of 2002, the Company, through its stock
repurchase program, repurchased for cancellation 535,100 Class "A" shares at an
average price of $16.23, for a total consideration of $8,684,000. In addition,
during the first nine months in 2002, the Company did not issue any Class "A"
shares pursuant to the exercise of options or warrants, whereas during the first
nine months of 2001, the Company issued 1,762,645 Class "A" shares pursuant to
the exercise of options and warrants, which resulted in net cash proceeds of
$19,421,000.
In the first nine months of 2002, the Company invested $2,811,000 (2001-
$1,833,000), for capital assets, which principally related to hardware and
software computer equipment, testing units, leasehold improvements and patents.
We believe that our cash, cash equivalents and short-term investments will
be adequate to meet our needs for at least the next 12 months.
- 24 -
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes to market risk, as discussed in our
Form 10-K annual report for the year ended December 31, 2001.
Item 4. Controls and Procedures
As of September 30, 2002 (the "Evaluation Date"), under the supervision
and with the participation of our management, including our Chief Executive
Officer and our Chief Financial Officer, we evaluated the effectiveness of the
design and operation of our disclosure controls and procedures, as required
pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Based upon this evaluation, our Chief Executive Officer
and our Chief Financial Officer concluded that, as of the Evaluation Date, our
disclosure controls and procedures were adequate to ensure that information
required to be disclosed by us in the reports filed or submitted by us under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms.
Additionally, our Chief Executive Officer and Chief Financial Officer have
determined that there have been no significant changes in our internal controls
or in other factors that could significantly affect our internal controls,
subsequent to the Evaluation Date.
- 25 -
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In 1995 and 1996, we received a demand letter from the same claimant
alleging that U-Scan 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 former assembler of U-Scan, alleging
patent infringement. A second party also sent a demand letter to us in 1999, and
again in February 2001, 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. A determination by a court that the system infringes upon
either of the claimant's rights would have a material adverse effect on our
business and results of operations.
Kroger and one of its subsidiaries have also been sued by the same
claimant in the State of Utah based upon the same issues underlying the suit
filed against us in 1999. At our expense, our counsel is also defending Kroger
and its subsidiary in such action. Furthermore, we are contractually bound to
indemnify Kroger for any damages that it may incur in connection with such suit.
We are also party to litigation arising in the normal course of
operations. We do not expect the resolution of such matters to have a materially
adverse effect on our financial position or results of operations.
Item 2. Changes in Securities
The registrant has nothing to report under this item.
Item 3. Defaults Upon Senior Securities
The registrant has nothing to report under this item.
Item 4. Submission of Matters to a Vote of Security Holders
The registrant has nothing to report under this item.
Item 5. Other Information
The registrant has nothing to report under this item.
- 26 -
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Exhibit
------ -------
99.1 Certification pursuant to Section 1350, Chapter 63 of Title 18, United
States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
99.2 Certification pursuant to Section 1350, Chapter 63 of Title 18, United
States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
- 27 -
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.
OPTIMAL ROBOTICS CORP.
Dated: October 30, 2002 By: /s/ Holden L. Ostrin
---------------------------------
Holden L. Ostrin
Co-Chairman
By: /s/ Gary S. Wechsler
---------------------------------
Gary S. Wechsler
Treasurer and Chief Financial
Officer
- 28 -
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Neil S. Wechsler, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Optimal Robotics
Corp. (the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:
i) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
ii) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
iii) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
i) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and
ii) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: October 30, 2002
By: /s/ Neil S. Wechsler
----------------------------------
Neil S. Wechsler
Co-Chairman and
Chief Executive Officer
- 29 -
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Gary S. Wechsler, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Optimal Robotics
Corp. (the "Registrant");
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the Registrant as of, and for, the periods presented in this
quarterly report;
4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and we
have:
i) designed such disclosure controls and procedures to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared;
ii) evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
iii) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officer and I have disclosed, based on
our most recent evaluation, to the Registrant's auditors and the audit
committee of Registrant's board of directors (or persons performing the
equivalent function):
iv) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and
v) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officer and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and
material weaknesses.
Date: October 30, 2002
By: /s/ Gary S. Wechsler
----------------------------------
Gary S. Wechsler
Treasurer and
Chief Financial Officer
- 30 -