ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Our financial statements are presented in United States dollars,
and dollar figures stated in this quarterly report refer to
United States dollars, except where specified otherwise. As our
head office is in Canada, many of our transactions, including
payment of salaries to our employees, are completed in Canadian
dollars ("Cdn$"). For purposes of this quarterly report, other
than amounts extracted from our financial statements, Canadian
dollar amounts have been converted to United States dollars at an
exchange rate of Cdn$1.00 = US$0.65, being the average exchange
rate for the quarter ending March 31, 2001.
As of March 31, 2001, we have incurred aggregate net losses of
approximately $7.9 million since entering the technology field in
1994. We expect to continue to incur significant operating
losses over the foreseeable future. Operating losses may
fluctuate from quarter to quarter as a result of differences in
the timing of expenses incurred and revenue recognized.
RESULTS OF OPERATIONS
THREE-MONTH PERIOD ENDED MARCH 31, 2001 COMPARED WITH THE THREE-
MONTH PERIOD ENDED MARCH 31, 2000
We recorded no revenue from operations during the three-month
period ended March 31, 2001.
During the three month period ended March 31, 2000, we recorded
revenue from operations of $69,886. This amount included:
- $58,429 for a brake shoe sorting and inspection system
developed for Satisfied Brake Products Inc.; and
- $11,387 for the Wizmaster program developed for Sideware
As we had no revenue during the three month period ended March
31, 2001, we recorded no cost of sales during that period either.
Cost of sales for the three-month period ended March 31, 2000 was
$31,199. This amount consisted of:
- $26,105 paid to a systems integrator working on the Satisfied
Brake Products Inc. project; and
- Approximately $5,000 for equipment for our transmission
casing inspection project with ABB.
Research and development expenses for the three-month period
ended March 31, 2001 were $118,271, compared with $151,027 for
the three-month period ended March 31, 2000. This change
resulted principally from the following factors:
- Salaries allocated to research and development increased from
approximately $90,000 for the three-month period ended March 31,
2000 to approximately $100,000 for the three-month period
ended March 31, 2001, principally as a result of hiring
an additional employee during the first quarter of 2001 to work
in research development.
- Payments to North Shore Circuit Design for work on the IMPAC
accelerator board decreased from approximately $47,000 to nil.
Our work on the IMPAC board ceased during 2000, and as a
result, payments to North Shore Circuit have ceased.
Selling, general, and administrative expenses increased from
$215,512 for the three-month period ended March 31, 2000 to
$292,183 for the three-month period ended March 31, 2001.
Several factors contributed to the change. The principal factors
were as follows:
- Amortization expenses increased from 14,275 to 31,333.
- Legal expenses decreased from $56,400 to $47,180.
- Filing and transfer fees decreased from $11,307 to $1,020,
principally as a result of a decrease in fees paid on the
filing of a registration statement on Form S-1 to qualify up
to 11,900,003 shares for resale under the Securities Act of
- During the three-month period ended March 31, 2000, we
incurred a foreign exchange loss of $18,903. The comparative
figure for 2001 was $1,301. Our foreign exchange losses
result principally from adjusting entries made in respect of
transactions recorded in United States dollars, but actually
carried out in Canadian dollars.
- During the three-month period ended March 31, 2001, we paid
$7,714 for public relations services. There were no similar
payments during the three-month period ended March 31, 2000.
- Travel and promotion expenses decreased from $10,331 to
$2,673, principally as a result of reduced trade show
- Accounting and audit fees increased from $9,450 to $22,598.
- General and administrative salaries increased from
approximately $62,000 to approximately $160,000, principally
because we increased our workforce during the first quarter
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 2001, we completed a private
placement of 7,600,000 shares at a price of $0.15 per share. In
addition, for every two shares purchased, each purchaser received
one share purchase warrant. Each share purchase warrant entitles
the holder to purchase one additional share for one year at $0.20
per share. Net proceeds from the private placement were
approximately $1.1 million.
As of March 31, 2001, inclusive of the private placement and
option proceeds described above, our cash balance was approximately
$812,000. As of May 11, 2001, our cash balance is approximately
At our current level of operation, we estimate that our cash
expenses are approximately $164,000 per month. We base this
estimate on the following data:
- As at April 30, 2001, we employ 22 people either as officers,
employees or contractors. Our monthly salary costs are
approximately $90,000 per month.
- For the period ended March 31, 2001 our average monthly
general, overhead and administrative costs, exclusive of
salary costs, were approximately $74,000 per month.
- During the year ended December 31, 2000 we incurred capital
expenditures of approximately $136,000, principally for
leasehold improvements, furniture and fixtures, and computer
equipment. Between December 31, 2000 and May 11, 2001, we
incurred capital expenditures of approximately $75,000,
principally for leasehold improvements, furniture and
fixtures, computer equipment and computer software related to
the expansion of our
staff and to our move into new premises.
We do not expect to incur significant capital expenditures
during the remainder of 2001 unless they result from an
increase in our level of operation.
Based on the foregoing, we estimate that our total cash
expenditures for the period May 15, 2001 to September 30, 2001,
will be approximately $738,000. Accordingly, at our current
level of operation, our existing cash balances should be
sufficient to pay our anticipated cash expenditures to
approximately September 15, 2001.
PLAN OF OPERATION
Our first priority during the balance of 2001 is to build upon
our relationship with ABB Flexible Automation, a division of
ABB Inc. for the purpose of becoming a principal supplier
of vision systems to ABB and its customers. If we are able
to obtain additional contracts for the design and
installation of our custom machine vision systems through ABB, we
believe we could generate sufficient sales revenue to achieve
positive cash flow.
Our second priority during the balance of 2001 is to continue
development of our Internet based service and support system and
the eVisionFactory program. eVision Factory is a computer
program that performs functions similar to those functions
performed by Odysee Development Studio. We expect eVision
Factory will support the development of new vision systems by
integrating different components through a "drag and drop"
procedure. We plan to configure eVision Factory so that it will
provide for efficient integration of vision systems with robotic
and other industrial control systems. Components of eVision
Factory will likely include:
- Our Internet based service and support system; and
- Maintenance and support features to monitor the performance of
vision systems to detect errors and to notify operators when
an error has been detected.
Taking into account our current cash balance and our anticipated
cash expenditures for the remainder of 2001, we are working
towards releasing a final production version of the
eVisionFactory program, including our Internet based service and
support system, by the fourth quarter of 2001. We currently use
eVision Factory as a development tool and we plan to sell certain
components of the program in conjunction with our customized
machine vision systems.
We do not plan to increase our operating expenses significantly,
or to incur substantial capital expenditures, unless we begin to
generate sales revenue or unless we raise additional capital.
At present, we do not have specific plans to raise additional
capital. We believe that if we identify additional development
projects that we consider worth pursuing, we will likely try to
raise additional private placement financing.