<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended September 30, 2000
------------------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Transition Period From to
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Commission File Number 0-20532
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DEXTERITY SURGICAL, INC.
(Exact name of registrant as specified in its charter)
Delaware 74-2559866
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12961 Park Central, Suite 1300
San Antonio, Texas 78216
(Address of principal executive offices)
(Zip Code)
(210) 495-8787
(Registrant's telephone number, including area code)
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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 [ ]
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Indicate the number of shares outstanding of each of the issuer's
classes of Common Stock, as of the latest practicable date.
On November 9, 2000, there were outstanding 11,496,492 shares of Common
Stock, $.001 par value, of the registrant.
<PAGE> 2
DEXTERITY SURGICAL, INC. AND SUBSIDIARY
FORM 10-QSB
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1: Consolidated Financial Statements - (Unaudited)
Consolidated Balance Sheets - September 30, 2000 and December 31, 1999 3
Consolidated Statements of Operations - For the Three Months and Nine Months
Ended September 30, 2000 and 1999 4
Consolidated Statements of Cash Flows - For the Three Months and Nine Months
Ended September 30, 2000 and 1999 5
Condensed Notes to Consolidated Financial Statements 6
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 16
Item 2. Changes in Securities 16
Item 3. Defaults Upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 17
</TABLE>
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<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
DEXTERITY SURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 2000 1999
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(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 53,068 $ 113,384
Accounts receivable (net of allowance for doubtful accounts of
$81,914 in 2000 and $105,000 in 1999) 589,302 2,865,824
Accounts receivable from related party 12,830 41,066
Inventories, net 1,489,819 2,315,875
Prepaid and other assets 307,640 120,006
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Total current assets 2,452,659 5,456,155
Property, Plant and Equipment, Net 607,021 647,174
Investments, at cost 1,202,500 1,202,500
Deferred finance charges 234,203 290,326
Intangible Assets:
Licensed technology rights and other, net 15,545,904 17,030,212
Goodwill, net 1,345,435 1,464,406
------------ ------------
Total assets $ 21,387,722 $ 26,090,773
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,441,793 $ 2,847,579
Accrued expenses 114,640 782,359
Convertible debentures in default 3,000,000 --
Current portion of long-term obligations 1,811,312 2,569,378
------------ ------------
Total current liabilities 7,367,745 6,199,316
Long-term notes payable 1,000,000 1,000,000
Convertible Debentures -- 2,970,000
Royalty Obligation 5,131,557 5,432,382
Minority Interest 47,248 106,544
Commitments and Contingencies (Note 6)
Stockholders' Equity:
Preferred Stock, $.001 par value; 2,000,000 shares authorized;
shares issued and outstanding: 2,445 (2000) and 2,195 (1999) 2 2
Common stock, $.001 par value; 50,000,000 shares authorized;
shares issued and outstanding: 11,496,492 (2000) and
10,212,742 (1999) 11,497 10,213
Additional paid-in capital 32,331,029 30,742,313
Warrants 2,370,900 2,370,900
Accumulated deficit (26,872,256) (22,740,897)
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Total stockholders' equity 7,841,172 10,382,531
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Total liabilities and stockholders' equity $ 21,387,722 $ 26,090,773
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
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<PAGE> 4
DEXTERITY SURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30, Ended September 30,
---------------------------- ----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net Sales $ 1,069,918 $ 4,848,694 $ 5,383,458 $ 16,137,035
------------ ------------ ------------ ------------
Cost And Expenses:
Cost of sales 596,632 2,484,651 2,326,369 9,166,942
Research and development 1,500 2,915 6,265 63,796
Selling, general and administrative 791,105 2,288,265 3,982,308 7,468,854
Depreciation and amortization 490,316 479,262 1,471,671 1,050,754
Impairment of intangible assets 627,273 -- 627,273 --
------------ ------------ ------------ ------------
2,506,826 5,255,093 8,413,886 17,750,346
------------ ------------ ------------ ------------
Loss From Operations (1,436,908) (406,399) (3,030,428) (1,613,311)
Other Income (Expense):
Gain on sale of assets -- -- -- 61,878
Investment income 3,552 11,444 15,684 51,062
Interest expense (341,208) (347,404) (1,047,491) (746,443)
Loss on investment in affiliate -- -- -- (30,000)
------------ ------------ ------------ ------------
Net Loss Before Minority Interest (1,774,564) (742,359) (4,062,235) (2,276,814)
Minority Interest in Net Loss of
Consolidated Subsidiary 58,909 -- 58,909 --
------------ ------------ ------------ ------------
Net Loss (1,715,655) (742,359) (4,003,326) (2,276,814)
Less dividend requirement on
cumulative convertible preferred stock 46,233 43,900 128,033 131,583
------------ ------------ ------------ ------------
Net loss applicable to common stock $ (1,761,888) $ (786,259) $ (4,131,359) $ (2,408,397)
============ ============ ============ ============
Basic and Diluted Loss Per Share of
Common Stock $ (.15) $ (.08) $ (.38) $ (.26)
============ ============ ============ ============
Weighted Average Shares Used In
Computing Basic and Diluted Loss
Per Share of Common Stock 11,496,492 10,212,742 11,000,867 9,357,186
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
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<PAGE> 5
DEXTERITY SURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30,
--------------------------
2000 1999
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<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $(4,003,326) $ (2,276,814)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities -
Depreciation and amortization 1,471,671 1,050,754
Accretion of royalty obligation 559,650 366,756
Amortization of deferred finance charges 56,124 42,206
Deferred compensation -- 6,857
Impairment of intangible assets 627,273 --
Noncash interest expense 270,000 --
Gain on disposal of fixed assets -- (61,878)
Loss on investment in affiliate -- 30,000
Minority interest in net loss of consolidated subsidiary (58,909) --
Noncash consulting expense 32,625 --
Changes in operating assets and liabilities -
Decrease (Increase) in accounts receivable, net 2,276,522 (155,764)
Decrease in accounts receivable from related party 28,236 10,552
Decrease (Increase) in inventories, net 844,446 (1,309,257)
Increase in prepaid and other assets (100,259) (26,346)
Increase (Decrease) in accounts payable (405,786) 1,915,909
Decrease in accrued expenses (668,106) (350,731)
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Net cash provided by (used in) operating activities 930,161 (757,756)
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Cash Flows From Investing Activities:
Additions to property and equipment (49,318) (141,473)
Proceeds from sale of assets 13,500 154,835
Investment redemptions -- 983,714
Payments made to obtain distribution rights -- (40,126)
Acquisitions, net of cash received -- (2,009,521)
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Net cash used in investing activities (35,818) (1,052,571)
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Cash Flows From Financing Activities:
Dividends paid to preferred stockholders (128,033) (131,583)
Payments on debt -- net (1,079,117) --
Proceeds from debt -- net -- 1,133,731
Payments on royalty obligations (147,509) (201,729)
Payments of deferred finance charges -- (184,382)
Issuance of preferred stock 400,000 25,000
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Net cash (used in) provided by financing activities (954,659) 641,037
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Net decrease in cash and cash equivalents (60,316) (1,169,290)
Cash and cash equivalents, beginning of period 113,384 1,644,535
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Cash and cash equivalents, end of period $ 53,068 $ 475,245
=========== ============
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
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<PAGE> 6
DEXTERITY SURGICAL, INC. AND SUBSIDIARY
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 2000
NOTE 1 -- BASIS OF PRESENTATION
The consolidated financial statements include the accounts of Dexterity
Surgical, Inc. (the "Company") and the Company's 82% ownership interest in
ValQuest Medical, Inc. All significant intercompany accounts and transactions
have been eliminated in consolidation. The consolidated financial statements
included herein have been prepared by the Company, without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. However,
all adjustments have been made which are, in the opinion of the Company,
necessary for a fair presentation of the results of operations for the periods
covered. In addition, all such adjustments are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures are adequate to make the information
presented not misleading. It is recommended that these consolidated financial
statements be read in conjunction with the financial statements and the notes
thereto for the fiscal year ended December 31, 1999, included in the Company's
Form 10-KSB. Certain reclassifications have been made in the prior period
financial statements to conform with the current period presentation.
The Common Stock was delisted from the NASDAQ SmallCap Market on October 24,
2000. Trading in the Common Stock is now conducted on the National Association
of Securities Dealer's "Electronic Bulletin Board." Consequently, the liquidity
of the Company's Common Stock may likely be impaired, not only in the number of
shares which can be bought and sold, but also through delays in the timing of
the transactions, reduction in security analysts' and the news media's coverage,
if any, of the Company and lower prices for the Company's securities than might
otherwise prevail.
The Company is in violation of certain affirmative financial covenant
requirements associated with its convertible debentures. Also, certain
redemption rights of the holder associated with its convertible debentures were
triggered by the delisting of the Company's Common Stock from the NASDAQ
SmallCap Market. Therefore, the Company is in technical default under the
Debentures and the holder has the right to demand immediate repayment of the
entire amount outstanding. The Company currently does not have sufficient
resources to fund such amounts in the event of such acceleration. In the event
the Company is required to raise additional funds, it does not believe it will
be able to obtain such financing from traditional commercial lenders. Rather,
the Company likely will have to conduct additional sales of its equity and/or
debt securities through public or private financings, collaborative
relationships or other arrangements. Substantial and immediate dilution to
existing stockholders likely would result from any sales of equity securities or
other securities convertible into equity securities.
As of September 30, 2000, the Company had an accumulated deficit of
approximately $26,872,000. There can be no assurance that the Company will not
continue to incur losses, that the Company will be able to raise cash as
necessary to fund operations or that the Company will ever achieve
profitability. However, the Company has taken steps to improve its 2000
operating results. The Company has restructured its debt obligations, modified
its royalty agreement to provide for partial non-cash royalty payments, reduced
its general and administrative costs by converting its entire sales force from
employees to independent sale representatives and eliminated additional
administrative staff. In addition, certain officers of the Company have agreed
to restructure their compensation packages to increase short term cash flow.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes revenue when each of the following four criteria are met:
1) a contract or sales arrangement exists; 2) products have been shipped or
services have been rendered; 3) the price of the products or services is fixed
or determinable; and 4) collectibility is reasonably assured.
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<PAGE> 7
Product sales are recognized upon the shipment of products to the customer.
Commissions earned are recognized when customer orders are placed with product
suppliers. Customers may return products in the event of product defect or
inaccurate order fulfillment. The Company maintains an allowance for sales
returns based upon a historical analysis of returns. Substantially all returns
relate to inaccurate order fulfillment.
Licensed Technology Rights
Licensed technology rights are amortized upon the commencement of commercial
sales of the underlying products. The carrying value of the licensed technology
is periodically reviewed by the Company with impairments being recognized when
the expected future operating cash flows derived from such licensed technology
rights is less than their carrying value. Except for the royalty obligation
component, licensed technology rights acquired in conjunction with the merger
with Dexterity Incorporated (see "Note 5 -- Merger) are amortized over a 17 year
period. The royalty obligation component of licensed technology rights is
amortized over the royalty agreement period of 7 years.
During the three months ended September 30, 2000, based on the Company's
periodic review, certain licensed technology rights were determined to be
impaired and a loss of $627, 273 was recognized as "impairment of intangible
assets."
NOTE 3 -- BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share ("EPS") is computed by dividing net income
(loss) by the weighted average number of shares of common stock outstanding
during the period. Diluted EPS reflects the potential dilution that could occur
if securities or other contracts to issue common stock were exercised or
converted into common stock or resulted in the issuance of common stock that
then shared in the earnings of the Company. As the Company had a net loss for
the three and nine months ended September 30, 2000 and 1999, Diluted EPS equals
Basic EPS as potentially dilutive common stock equivalents are antidilutive in
loss periods.
NOTE 4 -- INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31
2000 1999
------------ -----------
<S> <C> <C>
Raw materials $ 5,458 $ 34,284
Work-in-process 341,964 338,048
Finished Goods 1,712,397 2,185,025
Allowances (570,000) (241,482)
----------- -----------
$ 1,489,819 $ 2,315,875
=========== ===========
</TABLE>
NOTE 5 -- MERGER
On March 18, 1999, the Company's stockholders approved the Merger between the
Company and Dexterity Incorporated ("DI"). Contemporaneously with the Merger,
the Company changed its name to Dexterity Surgical, Inc. The Company accounted
for this business combination as a purchase. The consideration given to the
selling stockholders by the Company for the DI stock it did not previously own
consisted of an aggregate of:
(a) $1.5 million cash.
(b) Three million shares of the Company's common stock valued at
approximately $5.6 million.
(c) Warrants to purchase 1.5 million shares of the Company's
common stock valued at approximately $2.3 million.
(d) A one year, $1 million promissory note bearing interest at 12
percent.
(e) A royalty to be paid to the selling stockholders in an amount
equal to 15 percent of all sales of DI products for a period
of seven years. The royalty is subject to minimum payments
which aggregate approximately $9.7 million over the seven-year
royalty period, with a net present value, discounted at 12
percent, of approximately $5.95 million.
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<PAGE> 8
The results of operations for the three months and nine months ended September
30, 2000 and 1999, include the operations of Dexterity Incorporated from March
18, 1999. Unaudited pro forma consolidated results of operations, assuming the
Dexterity Incorporated merger had occurred at January 1, 1999, would have been
as follows:
<TABLE>
<CAPTION>
Pro Forma (Unaudited)
-----------------------------
Three months Nine months
ended ended
September 30, September 30,
1999 1999
------------- -------------
<S> <C> <C>
Net sales $ 4,848,694 $ 16,157,118
Net loss $ (742,359) $ (2,973,245)
Basic and diluted loss per share of common stock $ (.08) $ (.30)
</TABLE>
The foregoing pro forma information is presented in response to applicable
accounting rules relating to business acquisitions and is not necessarily
indicative of the actual results that would have been achieved had the Dexterity
Incorporated merger occurred at the beginning of 1999, nor is it indicative of
future results of operations.
NOTE 6 -- COMMITMENTS AND CONTINGENCIES
The Company is a party to claims and legal proceedings arising in the ordinary
course of business. The Company believes it is unlikely that the final outcome
of any of the claims or proceedings to which the Company is a party would have a
material adverse effect on the Company's financial statements; however, due to
the inherent uncertainty of litigation, the range of possible loss, if any,
cannot be estimated with a reasonable degree of precision and there can be no
assurance that the resolution of any particular claim or proceeding would not
have an adverse effect on the Company's results of operations for the interim
period in which such resolution occurred.
NOTE 7 -- OBLIGATIONS
The Company had the following current and long-term obligations:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
------------- ------------
<S> <C> <C>
Unsecured notes payable related to Dexterity acquisition, bearing interest
at 12 percent, interest due quarterly, maturing October 18, 2001 $ 1,000,000 $ 1,000,000
Revolving line of credit secured by accounts receivable, inventories and
intangible assets bearing interest at prime rate plus 1.5 percent. The
line of credit has a maximum of $5 million and expires in 2003 743,335 1,822,452
Royalty obligation related to Dexterity acquisition, subject to annual
minimum payments over a period of seven years discounted at 12%. The
minimum payments aggregate approximately $9.7 million over the seven
year royalty period 6,199,534 6,149,308
Convertible Debentures, see Note 8 3,000,000 3,000,000
----------- -----------
Total obligations 10,942,869 11,971,760
Less - Current portion 4,811,312 2,569,378
----------- -----------
Long-term obligations $ 6,131,557 $ 9,402,382
=========== ===========
</TABLE>
In March 2000, the Company modified several of its obligations to provide for
payment of interest and minimum royalties in shares of Common Stock, valued at
$1.00 per share. The Company issued 120,000 shares of Common Stock in advance of
-8-
<PAGE> 9
interest due on the unsecured notes payable through December 31, 2000, and
400,000 shares of Common Stock in advance of minimum royalty payments due in
2000.
The carrying amount of the Company's debt approximates the fair value of the
debt. This determination is based on management's estimate of the fair value at
which such instruments could be sold or obtained in a third-party transaction.
NOTE 8 -- CONVERTIBLE DEBENTURES IN DEFAULT
In December 1997, the Company sold 250,000 shares of Common Stock to Renaissance
in a private placement for aggregate proceeds of $1,000,000 and placed
$3,000,000 in 9% Convertible Debentures (the "Debentures") with Renaissance. The
proceeds from the private placement were used to repay the Company's line of
credit with another financial institution, to make the January 1998 equity
investment in Dexterity, and for working capital purposes. The Debentures are
secured by substantially all of the assets of the Company and require monthly
payments of interest and, unless sooner paid, redeemed or converted, require
monthly principal payments commencing in December 2000 of $10 per $1000 of the
then remaining principal amount. The remaining principal balance will mature in
December 2004. In March 2000, the Debentures were modified to provide that the
interest payable between February 1, 2000 through January 31, 2001 shall be paid
in shares of Common Stock, valued at $1.00 per share. Upon modification, 270,000
shares of Common Stock valued at $270,000 were issued in advance of interest due
through January 31, 2001.
The Debentures currently require the Company to comply with the following
financial covenants: (i) a Debt to Net Worth Ratio of no greater than .99:1;
(ii) an Interest Coverage Ratio of at least .60:1; (iii) a Debt Coverage Ratio
of at least .10:1; and (iv) a Current Ratio of at least .68:1. The Company is
currently not in compliance and therefore, is in technical default under the
Debentures. Accordingly, the holders have the right to demand the immediate
repayment of the entire amount outstanding. The Company currently does not have
sufficient resources to fund such amounts in the event of such acceleration.
The holders of the Debentures have the option to convert at any time all or a
portion of the Debentures into shares of Common Stock at an initial price of
$1.00 per share of Common Stock. The conversion price is subject to downward
revision if the Company sells shares of its Common Stock, or securities
convertible into Common Stock, at a price less than $1.00 per share of Common
Stock, subject to certain allowed exceptions, during the term of the Debentures.
The Debentures are currently convertible for an aggregate of 3,000,000 shares of
Common Stock; however, since the conversion price is subject to downward
adjustment as described above, and there is no minimum conversion price, the
maximum number of shares of Common Stock which may be issued pursuant to the
Debentures is undeterminable. The provisions of the Debentures provide that the
holders of the Debentures have an option to redeem the Debentures, in an amount
equal to an 18 percent annual yield on the principal balance, upon the
occurrence of certain events, including the delisting of Common Stock from the
NASDAQ SmallCap Market and certain "change of control" provisions, as defined in
the Debentures, as they relate to the Company. As the Common Stock was delisted
from the NASDAQ SmallCap Market on October 24, 2000, the holder now has the
option to exercise these redemption rights. The Company may redeem the
Debentures at its option subject to certain share price and market activity
levels being obtained. The Company's right of redemption is subject to the
holder's prior right of conversion of the Debenture.
Trading in the Common Stock is now conducted on the National Association of
Securities Dealer's "Electronic Bulletin Board." Consequently, the liquidity of
the Company's Common Stock may likely be impaired, not only in the number of
shares which can be bought and sold, but also through delays in the timing of
the transactions, reduction in security analysts' and the news media's coverage,
if any, of the Company and lower prices for the Company's securities than might
otherwise prevail.
NOTE 9 -- PREFERRED STOCK PLACEMENTS
Pursuant to a private placement which occurred in July and August 2000, the
Company issued to TFX Equities, Inc., a business development subsidiary of
Teleflex, Inc., and Cuda Products Company, whose chief executive officer is a
director of the Company, an aggregate of 400 shares of Series C Cumulative
Convertible Preferred Stock, $.001 par value ("Series C Preferred Stock") for
aggregate proceeds of $400,000. The Company used such proceeds for working
capital. The annual dividends on the Series C Preferred Stock are cumulative at
a rate of $80 per share. The Series C Preferred Stock is currently convertible
into shares of Common Stock at a conversion price of $1.00 per share, for an
aggregate of 400,000 shares of
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<PAGE> 10
Common Stock. The conversion price for the Series C Preferred Stock is subject
to downward adjustment in the event the Company sells shares of Common Stock, or
securities convertible into shares of Common Stock, at a per share price less
than $1.00. The holders of Series C Preferred Stock, are entitled to one vote
per share on all matters submitted to a vote of the stockholders of the Company,
and the affirmative vote of the holders of 66 2/3% of the votes entitled to be
cast by the holders of the Series C Preferred Stock is required in order to
amend the Company's Certificate of Incorporation or Bylaws to materially affect
the rights of the holders of Series C Preferred Stock, including authorizing and
creating a class of stock having rights prior to or senior to the Series C
Preferred Stock. In the event two quarterly dividends payable on the Series C
Preferred Stock are in arrears, the holders of the Series C Preferred Stock, by
a majority vote, shall be entitled to designate two additional directors to
serve on the Company's Board of Directors.
Pursuant to a private placement which occurred in November 1998, the Company
issued to two affiliates of Renaissance Capital Group, Inc. (collectively,
"Renaissance") and one individual, who is an officer and director of the
Company, an aggregate of 1,025 shares of Series B Cumulative Convertible
Preferred Stock, $.001 par value ("Series B Preferred Stock") for aggregate
proceeds of $1,025,000. The Company used such proceeds for working capital. The
annual dividends on the Series B Preferred Stock are cumulative at a rate of $80
per share. The Series B Preferred Stock is currently convertible into shares of
Common Stock at a conversion price of $1.54 per share, for an aggregate of
665,584 shares of Common Stock. The conversion price for the Series B Preferred
Stock is subject to downward adjustment in the event the Company sells shares of
Common Stock, or securities convertible into shares of Common Stock, at a per
share price less than $1.54. The holders of Series B Preferred Stock, are
entitled to one vote per share on all matters submitted to a vote of the
stockholders of the Company, and the affirmative vote of the holders of 66 2/3%
of the votes entitled to be cast by the holders of the Series B Preferred Stock
is required in order to amend the Company's Certificate of Incorporation or
Bylaws to materially affect the rights of the holders of Series B Preferred
Stock, including authorizing and creating a class of stock having rights prior
to or senior to the Series B Preferred Stock. In the event two quarterly
dividends payable on the series B Preferred Stock are in arrears, the holders of
Series B Preferred Stock, by a majority vote, shall be entitled to designate two
additional directors to serve on the Company's Board of Directors.
In August 1998, pursuant to a private placement, the Company issued to
Renaissance and two individuals, including one who is an officer and director of
the Company, an aggregate of 1,170 shares of series A Cumulative Convertible
Preferred Stock, $.001 par value ("Series A Preferred Stock"), for aggregate
proceeds of $1,170,000. The Company used such proceeds for working capital.
During March 2000, 150 shares of Series A Preferred stock were converted to
93,750 shares of Common Stock. Annual dividends on the Series A Preferred Stock
are cumulative at a rate of $80 per share. The Series A Preferred Stock is
currently convertible into share of Common Stock at a conversion price of $1.54
per share, for an aggregate of 662,337 shares of Common Stock. The conversion
price for the Series A Preferred Stock is subject to downward adjustment in the
event the Company sells shares of Common Stock, or securities convertible into
shares of common Stock, at a per share price less than $1.54. The holders of
Series A Preferred Stock are entitled to one vote per share on all matters
submitted to a vote of the stockholders of the Company, and the affirmative vote
of the holders of 66 2/3% of the votes entitled to be cast by the holders of the
Series A Preferred Stock is required in order to amend the Company's Certificate
of Incorporation or Bylaws to materially affect the rights of the holders of
Series A Preferred Stock, including authorizing and creating a class of stock
having rights prior to or senior to the Series A Preferred Stock. In the event
two quarterly dividends payable on the Series A Preferred Stock are in arrears,
the holders of Series A Preferred Stock, by a majority vote, shall be entitled
to designate two additional directors to serve on the Company's Board of
Directors.
NOTE 10 -- WECK AGREEMENT
On June 29, 2000, the Company announced it had signed an exclusive agreement
under which Weck Closure Systems (WCS) will distribute the Dexterity(R) Pneumo
Sleeve(R) and the Dexterity(R) Protractor(R) in the United States. The agreement
also covers international distribution except in those areas for which Dexterity
has signed previous exclusive sales and distribution agreements still in effect.
Under the terms of the agreement, WCS (a unit of Teleflex Incorporated) is
required to purchase certain minimum quantities. Also, per the agreement, WCS
and the Company will combine elements of both sales forces under the WCS
umbrella. The Company and WCS will continue as separate business entities. The
Company believes this agreement will allow it to benefit from a large,
established worldwide sales force and to continue to reduce overhead expenses.
Revenue from WCS represented 64% and 18% of the Company's net sales for the
three and nine months ended September 30, 2000. Receivables from WCS represent
67% of net accounts receivable at September 30, 2000.
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<PAGE> 11
Item 2. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations
Certain statements contained in this Item 2, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," are
"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. Specifically, all statements other than statements of historical
fact included in this Item 2 regarding Dexterity Surgical, Inc. and its
subsidiary's and affiliates' (collectively, the "Company") financial position,
business strategy and plans and objectives of management of the Company for
future operations are forward-looking statements. These forward-looking
statements are based on the beliefs of the Company's management, as well as
assumptions made by and information currently available to the Company's
management. When used in this report, the words "anticipate," "believe,"
"estimate," "expect" and "intend" and words or phrases of similar import, as
they relate to the Company or Company's management are intended to identify
forward-looking statements. Such statements reflect the current view of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions related to certain factors including, without
limitation, the Company's ability to manufacture, market and distribute safe and
effective products on a cost-effective basis, demand for and acceptance of the
Company's products, the level of competition in the marketplace, the ability of
the Company's customers to be reimbursed by third-party payors, competitive
factors, general economic conditions, customer relations, relationships with
vendors, the interest rate environment, governmental regulation and supervision,
product introductions and acceptance, technological change, changes in industry
practices, one-time events and other factors described herein, in the Company's
Registration Statement on Form S-3 (File No. 333-58849) filed with the
Securities and Exchange Commission ("SEC") on October 13, 1998, and in the
Company's annual, quarterly and other reports filed with the SEC (collectively,
"cautionary statements"). Although the Company believes that its expectations
are reasonable, it can give no assurance that such expectations will prove to be
correct. Based upon changing conditions, should any one or more of these risks
or uncertainties materialize, or should any underlying assumptions prove
incorrect, actual results may vary materially from those described herein as
anticipated, believed, estimated, expected or intended. All subsequent written
and oral forward-looking statements attributable to the Company or persons
acting on its behalf are expressly qualified in their entirety by the applicable
cautionary statements. The Company does not intend to update these
forward-looking statements.
OVERVIEW
From inception through December 31, 1995, the Company was a development
stage enterprise whose efforts and resources were devoted primarily to research
and development activities related to its initial products. During this
development stage, the Company generated minimal operating revenues and, thus,
was unprofitable. In 1996, the Company reduced investment in research and
development related to such technologies and focused its efforts on acquiring
and distributing minimally invasive surgical devices. Accordingly, during the
last four fiscal years, the Company has continued to decrease its engagement in
Company sponsored research and development. As of September 30, 2000, the
Company had an accumulated deficit of approximately $26,872,000. There can be no
assurance that the Company will not continue to incur losses, that the Company
will be able to raise cash as necessary to fund operations or that the Company
will ever achieve profitability.
The Company's future operating results will depend on many factors,
including the Company's ability to manufacture, market and distribute safe and
effective products on a cost-effective basis, demand for and acceptance of the
Company's products, the level of competition in the marketplace, the ability of
the Company to create, obtain and maintain scientifically advanced technology,
the ability of the Company's customers to be reimbursed by third-party payors
and other factors described on Form 10-KSB for the year ended December 31, 1999.
Effective October 24, 2000, following the delisting of the Company's
Common Stock from trading on the NASDAQ SmallCap Market, the Company's Common
Stock began trading on the National Association of Securities Dealer's
"Electronic Bulletin Board." Consequently, the liquidity of the Company's Common
Stock may likely be impaired, not only in the number of shares which can be
bought and sold, but also through delays in the timing of the transactions,
reduction in security analysts' and the news media's coverage, if any, of the
Company and lower prices for the Company's securities than might otherwise
prevail.
As the Company's Common Stock was delisted from trading on The Nasdaq
SmallCap Market and the trading price of the Common Stock is below $5.00 per
share, trading in the Common Stock is subject to the requirements of certain
rules promulgated under the Exchange Act, which require additional disclosures
by broker-dealers in connection with any trades involving a stock defined as a
penny stock (generally, any non-Nasdaq equity security that has a market price
of less than $5.00 per share, subject to certain exceptions). Such rules require
the delivery, prior to any penny stock transaction, of a
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<PAGE> 12
disclosure schedule explaining the penny stock market and the risks associated
therewith, and impose various sales practice requirements on broker-dealers who
sell penny stock to persons other than established customers and accredited
investors (which are generally institutions). For these types of transactions,
the broker-dealer must make a special suitability determination for the purchase
and have received the purchaser's written consent to the transaction prior to
the sale. The additional burdens imposed upon broker-dealers by such
requirements may discourage broker-dealers from effecting transactions in the
Common Stock which could severely limit the market liquidity of Common Stock and
the ability of stockholders to sell their shares of Common Stock in the
secondary market.
In January 1998, the Company acquired approximately 20% of the common
stock of Dexterity Incorporated ("Dexterity"), a business development subsidiary
of Teleflex, Inc. In March 1999, the Company acquired the remaining common stock
of Dexterity by merging Dexterity into the Company (the "Dexterity Merger")
pursuant to a Plan of Merger and Acquisition agreement between the Company and
Dexterity (the "Dexterity Agreement"). Simultaneous with the effectiveness of
the Dexterity Merger, the Company changed its name to Dexterity Surgical, Inc.
Under the terms of the Dexterity Agreement, which was approved by the
stockholders of the Company at a special meeting held March 18, 1999, the
Dexterity stockholders, other than the Company, received an aggregate of:
o $1,500,000;
o 3,000,000 shares of Common Stock;
o warrants to purchase an aggregate of 1,500,000 shares of Common
Stock, at an exercise price per share of $2.00 (the "Warrants");
o promissory notes in the aggregate amount of $1,000,000 (the
"Notes"); and
o a royalty for seven years in an amount equal to 15% of all sales
of Dexterity products (the "Royalty") pursuant to a royalty
agreement (the "Royalty Agreement") among the Company and the
Dexterity stockholders, other than the Company. The Royalty is
subject to minimum annual payments which aggregate, over the
seven years of the Royalty Agreement, approximately $9,695,095.
The Company determined the fair market value of the above consideration
to be approximately $16,000,000. The Company launched distribution of
Dexterity's primary products, the Dexterity(R) Pneumo Sleeve and Dexterity(R)
Protractor, in March 1998. The Dexterity Merger was accounted for using the
purchase method of accounting.
On June 29, 2000, the Company announced it had signed an exclusive
agreement under which Weck Closure Systems (WCS) will distribute the
Dexterity(R) Pneumo Sleeve(R) and the Dexterity(R) Protractor(R) in the United
States. The agreement also covers international distribution except in those
areas for which Dexterity has signed previous exclusive sales and distribution
agreements still in effect. Under the terms of the agreement, WCS (a unit of
Teleflex Incorporated) is required to purchase certain minimum quantities. Also,
per the agreement, WCS and the Company will combine elements of both sales
forces under the WCS umbrella. The Company and WCS will continue as separate
business entities. The Company believes this agreement will allow it to benefit
from a large, established worldwide sales force and to continue to reduce
overhead expenses.
LIQUIDITY AND CAPITAL RESOURCES
Pursuant to a private placement which occurred in July and August 2000,
the Company issued to TFX Equities, Inc., a business development subsidiary of
Teleflex, Inc., and Cuda Products Company, whose chief executive officer is a
director of the Company, an aggregate of 400 shares of Series C Cumulative
Convertible Preferred Stock, $.001 par value ("Series C Preferred Stock") for
aggregate proceeds of $400,000. The Company used such proceeds for working
capital. The annual dividends on the Series C Preferred Stock are cumulative at
a rate of $80 per share. The Series C Preferred Stock is currently convertible
into shares of Common Stock at a conversion price of $1.00 per share, for an
aggregate of 400,000 shares of Common Stock. The conversion price for the Series
C Preferred Stock is subject to downward adjustment in the event the Company
sells shares of Common Stock, or securities convertible into shares of Common
Stock, at a per share price less than $1.00. The holders of Series C Preferred
Stock, are entitled to one vote per share on all matters submitted to a vote of
the stockholders of the Company, and the affirmative vote of the holders of
66 2/3% of the votes entitled to be cast by the holders of the Series C
Preferred Stock is required in order to amend the Company's Certificate of
Incorporation or Bylaws to materially affect the rights of the holders of Series
C Preferred Stock, including authorizing and creating a class of stock having
rights prior to or senior to the Series C Preferred Stock. In the event
two quarterly dividends payable on the Series C Preferred Stock are
in arrears, the holders of the Series C Preferred Stock, by a majority vote,
shall be entitled to designate two additional directors to serve on the
Company's Board of Directors.
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<PAGE> 13
In March 2000, the Warrants, Notes and Royalty Agreement were
restructured. The maturity date of the Notes was extended by 19 months to
October 18, 2001. The interest payable on the Notes for the year 2000 shall be
paid in shares of Common Stock at a per share price of $1.00. The Warrants have
been amended to reflect an exercise price per share of Common Stock of $1.00. In
addition, the Royalty Agreement has been restructured to allow the Company to
pay the first $400,000 in Royalty due for 2000 in shares of Common Stock, valued
at $1.00 per share.
At September 30, 2000, the Company had current assets of $2,453,000 and
current liabilities of $7,368,000 resulting in a working capital deficit of
$4,915,000. This compares to a working capital deficit of $743,000 at December
31, 1999. The increase in working capital deficit is primarily due to the
operating losses incurred during the first nine months of 2000 as well as the
classification of convertible debentures in default as current at September 30,
2000.
In April 1999, the Company acquired a new maximum $5,000,000 revolving
line of credit from a financial institution whereby all inventories, accounts
receivable and intangibles of the Company are pledged as collateral. At
September 30, 2000, the outstanding balance due on such line of credit was
$743,000 and an additional $163,000 was available under the current borrowing
base.
Pursuant to a private placement which occurred in November 1998, the
Company issued to two affiliates of Renaissance Capital Group, Inc.
(collectively, "Renaissance") and one individual, who is an officer and director
of the Company, an aggregate of 1,025 shares of Series B Cumulative Convertible
Preferred Stock, $.001 par value ("Series B Preferred Stock") for aggregate
proceeds of $1,025,000. The Company used such proceeds for working capital. The
annual dividends on the Series B Preferred Stock are cumulative at a rate of $80
per share. The Series B Preferred Stock is currently convertible into shares of
Common Stock at a conversion price of $1.54 per share, for an aggregate of
665,584 shares of Common Stock. The conversion price for the Series B Preferred
Stock is subject to downward adjustment in the event the Company sells shares of
Common Stock, or securities convertible into shares of Common Stock, at a per
share price less than $1.54. The holders of Series B Preferred Stock, are
entitled to one vote per share on all matters submitted to a vote of the
stockholders of the Company, and the affirmative vote of the holders of 66 2/3%
of the votes entitled to be cast by the holders of the Series B Preferred Stock
is required in order to amend the Company's Certificate of Incorporation or
Bylaws to materially affect the rights of the holders of Series B Preferred
Stock, including authorizing and creating a class of stock having rights prior
to or senior to the Series B Preferred Stock. In the event two quarterly
dividends payable on the series B Preferred Stock are in arrears, the holders of
Series B Preferred Stock, by a majority vote, shall be entitled to designate two
additional directors to serve on the Company's Board of Directors.
In August 1998, pursuant to a private placement, the Company issued to
Renaissance and two individuals, including one who is an officer and director of
the Company, an aggregate of 1,170 shares of series A Cumulative Convertible
Preferred Stock, $.001 par value ("Series A Preferred Stock"), for aggregate
proceeds of $1,170,000. The Company used such proceeds for working capital.
During March 2000, 150 shares of Series A Preferred stock were converted to
93,750 shares of Common Stock. Annual dividends on the Series A Preferred Stock
are cumulative at a rate of $80 per share. The Series A Preferred Stock is
currently convertible into share of Common Stock at a conversion price of $1.54
per share, for an aggregate of 662,337 shares of Common Stock. The conversion
price for the Series A Preferred Stock is subject to downward adjustment in the
event the Company sells shares of Common Stock, or securities convertible into
shares of common Stock, at a per share price less than $1.54. The holders of
Series A Preferred Stock are entitled to one vote per share on all matters
submitted to a vote of the stockholders of the Company, and the affirmative vote
of the holders of 66 2/3% of the votes entitled to be cast by the holders of the
Series A Preferred Stock is required in order to amend the Company's Certificate
of Incorporation or Bylaws to materially affect the rights of the holders of
Series A Preferred Stock, including authorizing and creating a class of stock
having rights prior to or senior to the Series A Preferred Stock. In the event
two quarterly dividends payable on the Series A Preferred Stock are in arrears,
the holders of Series A Preferred Stock, by a majority vote, shall be entitled
to designate two additional directors to serve on the Company's Board of
Directors.
In December 1997, the Company sold 250,000 shares of Common Stock to
Renaissance in a private placement for aggregate proceeds of $1,000,000 and
placed $3,000,000 in 9% Convertible Debentures (the "Debentures") with
Renaissance. The proceeds from the private placement were used to repay the
Company's line of credit with another financial institution, to make the January
1998 equity investment in Dexterity, and for working capital purposes. The
Debentures are secured by substantially all of the assets of the Company and
require monthly payments of interest and, unless sooner paid, redeemed or
converted, require monthly principal payments commencing in December 2000 of $10
per $1000 of the then remaining principal amount. The remaining principal
balance will mature in December 2004. In March 2000, the Debentures were
modified to provide that the interest payable between February 1, 2000 through
January 31, 2001
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<PAGE> 14
shall be paid in shares of Common Stock, valued at $1.00 per share. Upon
modification, 270,000 shares of Common Stock valued at $270,000 were issued in
advance of interest due through January 31, 2001.
The Debentures currently require the Company to comply with the following
financial covenants: (i) a Debt to Net Worth Ratio of no greater than .99:1;
(ii) an Interest Coverage Ratio of at least .60:1; (iii) a Debt Coverage Ratio
of at least .10:1; and (iv) a Current Ratio of at least .68:1. The Company is
currently not in compliance and therefore, is in technical default under the
Debentures. Accordingly, the holders have the right to demand the immediate
repayment of the entire amount outstanding. The Company currently does not have
sufficient resources to fund such amounts in the event of such acceleration.
The holders of the Debentures have the option to convert at any time all or a
portion of the Debentures into shares of Common Stock at an initial price of
$1.00 per share of Common Stock. The conversion price is subject to downward
revision if the Company sells shares of its Common Stock, or securities
convertible into Common Stock, at a price less than $1.00 per share of Common
Stock, subject to certain allowed exceptions, during the term of the Debentures.
The Debentures are currently convertible for an aggregate of 3,000,000 shares of
Common Stock; however, since the conversion price is subject to downward
adjustment as described above, and there is no minimum conversion price, the
maximum number of shares of Common Stock which may be issued pursuant to the
Debentures is undeterminable. The provisions of the Debentures provide that the
holders of the Debentures have an option to redeem the Debentures, in an amount
equal to an 18 percent annual yield on the principal balance, upon the
occurrence of certain events, including the delisting of Common Stock from the
NASDAQ SmallCap Market and certain "change of control" provisions, as defined in
the Debentures, as they relate to the Company. As the Common Stock was delisted
from the NASDAQ SmallCap Market on October 24, 2000, the holder now has the
option to exercise these redemption rights. The Company may redeem the
Debentures at its option subject to certain share price and market activity
levels being obtained. The Company's right of redemption is subject to the
holder's prior right of conversion of the Debenture.
For the nine month period ended September 30, 2000, operating
activities provided cash of $930,000. Investment activities during the period
utilized cash of $36,000. During the period, the Company's financing activities
used cash of $955,000 primarily from the net decrease in the outstanding balance
of the line of credit.
For the nine month period ended September 30, 1999, operating
activities utilized cash of $758,000. Investment activities during the period
utilized cash of $1,053,000, primarily due to the acquisition of Dexterity.
During the period, the Company's financing activities provided $641,000
primarily from new borrowings.
The Company believes that its revenues and other sources of liquidity
will provide adequate funding for its capital requirements through at least the
year 2000. However, there can be no assurance that the Company will not require
additional funding sooner or that such additional funding, if needed, will be
available on terms attractive to the Company or at all. In the event the Company
is required to raise additional funds, it does not believe it will be able to
obtain such financing from traditional commercial lenders. Rather, the Company
likely will have to conduct additional sales of its equity and/or debt
securities through public or private financings, collaborative relationships or
other arrangements. Substantial and immediate dilution to existing stockholders
likely would result from any sales of equity securities or other securities
convertible into equity securities.
RESULTS OF OPERATIONS
In February 2000, the Company's principal supplier, General Surgical
Innovations, Inc. ("GSI"), terminated its distribution agreement with the
Company. GSI supplied products which accounted for 38% of the Company's revenue
in 1999 and 50% of the Company's revenue from May 1999, the effective month of
the distribution agreement, through February 2000, the termination month. The
Company has taken several steps in response to this action. The Company has
restructured its debt obligations, modified its royalty agreement to provide for
partial non-cash royalty payments, reduced its general and administrative costs
by converting its entire sales force from employees to independent sale
representatives and eliminated additional administrative staff. In addition,
certain officers of the Company have agreed to restructure their compensation
packages to increase short term cash flow. As a further consequence to the
cancelled GSI agreement, accounts receivable declined 79% to $589,000 at
September 30, 2000, from $2,866,000 at December 31, 1999.
For the three months ended September 30, 2000, the Company reported a
net loss applicable to common stock of $1,762,000 or $.15 per basic and diluted
share. This compares with a net loss of $786,000 for the three months ended
September 30, 1999 or $.08 per basic and diluted share. The third quarter 2000
net loss includes the impairment loss related
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<PAGE> 15
to the licensed rights to the impact mount technology of $427,000 and the Apollo
clip applier technology of $200,000. For the nine months ended September 30,
2000, the Company reported a net loss of $4,131,000 versus a net loss of
$2,408,000 for the comparable period of 1999. The increased loss was primarily
due to the aforementioned cancelled GSI agreement.
Net sales decreased 78% in the third quarter 2000 and 67% in the first
nine months of 2000 as compared with the same periods in 1999. Net sales were
$1,070,000 for the third quarter of 2000 and $4,849,000 for the third quarter of
1999. Net sales for the first nine months of 2000 and 1999 were $5,383,000 and
$16,137,000 respectively. These declines were due primarily to the cancelled GSI
agreement.
Gross profit from net sales in the third quarter was $473,000 in 2000
versus $2,364,000 in 1999. The corresponding gross profit margin decreased to
44% in 2000 from 49% in 1999. The decline in gross profit margin was mainly
caused by a $200,000 addition to the inventory reserve for discontinued product
lines. For the nine months ended September 30, gross profit was $3,057,000 or
57% in 2000 and $6,970,000 or 43% in 1999. The improvement in gross profit
margin was primarily due to the increased proportion of the Company's
proprietary products, the Dexterity(R) Pneumo Sleeve(R) and the Dexterity(R)
Protractor(R), within the sales mix.
For the third quarter, selling, general and administrative expenses,
which consist primarily of sales commissions, salaries and other costs necessary
to support the Company's infrastructure, decreased 65% to $791,000 in 2000 from
$2,288,000 in 1999. For the first nine months of 2000, these expenses decreased
47% to $3,982,000 from $7,469,000. The decline in these expenses was primarily
due to the previously discussed cost cutting actions taken by the Company in
response to the cancellation of the GSI agreement. However, as a percentage of
net sales, selling, general and administrative expenses have increased: 74% for
2000 versus 47% for 1999 for the quarter periods and 74% for 2000 versus 46% for
1999 for the nine months periods. These percentage increases are due to fixed
expenses and the sales decline. The Company continues to strive to reduce fixed
costs whenever possible. In May 2000, the Company subleased approximately 65% of
the San Antonio facility at a savings of $8,000 per month.
Depreciation and amortization expense increased 2% to $490,000 for the
third quarter of 2000 from $479,000 for the third quarter of 1999. There was a
40% increase in the comparable nine month periods. This increase is due to the
amortization of the licensed technology rights acquired in conjunction with
Dexterity.
Interest expense was $341,000 for the quarter ended September 30, 2000
and $347,000 for the comparable 1999 quarter, a decrease of 2%. For the nine
months period, interest expense was $1,047,000 in 2000 and $746,000 in 1999, an
increase of 40%. Interest expense includes the non-cash accretion of the minimum
royalty obligation, interest on the line of credit and interest on the note
payable due to the former stockholders of Dexterity.
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<PAGE> 16
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to claims and legal proceedings arising in the
ordinary course of business. The Company believes it is unlikely that
the final outcome of any of the claims or proceedings to which the
Company is a party would have a material adverse effect on the
Company's financial statements; however, due to the inherent
uncertainty of litigation, the range of possible loss, if any, cannot
be estimated with a reasonable degree of precision and there can be no
assurance that the resolution of any particular claim or proceeding
would not have an adverse effect on the Company's results of operations
for the interim period in which such resolution occurred.
Item 2. Changes in Securities
(a) Not applicable.
(b) Not applicable.
(c) Recent Sales of Unregistered Securities. Pursuant to a private
placement which occurred in July and August 2000, the Company
issued to TFX Equities, Inc., a business development
subsidiary of Teleflex, Inc., and Cuda Products Company, whose
chief executive officer is a director of the Company, an
aggregate of 400 shares of Series C Cumulative Preferred
Stock, $.001 par value ("Series C Preferred Stock") for
aggregate proceeds of $400,000. The Series C Preferred Stock
is currently convertible into 400,000 shares of Common Stock
at a per share conversion price of $1.00. The conversion price
for the Series C Preferred Stock is subject to downward
adjustment in the event the Company sells shares of Common
Stock, or securities convertible into shares of Common Stock,
at a per shares price less than $1.00. The Series C Preferred
Stock was not registered under the Securities Act of 1933, as
amended (the "Securities Act"), pursuant to the exemptions of
such registration provided under Regulation D ("Regulation D")
of the rules and regulations promulgated under the Securities
Act by the Securities and Exchange Commission and Section 4(2)
of the Securities Act. The Company relied on certain
representations and warranties of the private placement
investors, including, among other things, their ability to
evaluate the merits and risks of investing in the Company,
their status as "accredited investors" (as that term is
defined in Rule 501(a) of Regulation D) and that the Series C
Preferred Stock was acquired solely for their own accounts for
investment and not with a view to distribution.
(d) Not applicable.
Item 3. Defaults Upon Senior Securities - Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders - Not Applicable
Item 5. Other Information - Not Applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11(*) Computation of Earnings (Loss) Per Share
Exhibit 27.1(*) Financial Data Schedule for the three months
ended September 30, 2000
(b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K on September 13,
2000 reporting the Exclusive Distribution Agreement between
Dexterity Surgical, Inc. and Weck Closure Systems, LLC.
(*) Filed herewith
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<PAGE> 17
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.
DEXTERITY SURGICAL, INC.
------------------------
(Registrant)
Dated: November 10, 2000 By /s/ RICHARD A. WOODFIELD
-------------------------------------
Richard A. Woodfield
President and Chief Executive Officer
(Principal Executive Officer)
Dated: November 10, 2000 By /s/ RANDALL K. BOATRIGHT
-------------------------------------
Randall K. Boatright
Executive Vice President and
Chief Financial Officer
(Principal Accounting Officer)
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<PAGE> 18
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- ------------
<S> <C>
11 Computation of Earnings (Loss) Per Share
27.1 Financial Data Schedule for the three months
ended September 30, 2000
</TABLE>
