<PAGE> 1
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDING SEPTEMBER 30, 1999
COMMISSION FILE NUMBER 000-22755
COMPUTER MOTION, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified on in its charter)
DELAWARE 77-0458805
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
130-B CREMONA DRIVE
GOLETA, CA 93117
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(805) 968-9600
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check [X] whether the registrant (1) has filed all reports required
to be filed by Sections 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 ___
As of November 10, 1999 there were 8,640,477 shares of the Registrant's common
stock outstanding.
<PAGE> 2
COMPUTER MOTION, INC.
INDEX TO FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1999
INDEX PAGE
- ----- -----
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Income Statements 3
Balance Sheets 4
Cash Flow Statements 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
PART II. - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 10
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMPUTER MOTION, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- -------------------------------
1999 1998 1999 1998
------------ ------------ ------------ -----------
<S> <C> <C> <C> <C>
Revenue $ 5,358,000 $ 2,807,000 $ 14,009,000 $ 7,157,000
Cost of revenue 2,143,000 1,218,000 5,836,000 3,062,000
------------ ------------ ------------ -----------
Gross profit 3,215,000 1,589,000 8,173,000 4,095,000
Selling, general and administrative expense 3,202,000 2,775,000 9,166,000 8,216,000
Research and development expense 2,134,000 2,129,000 6,665,000 5,713,000
------------ ------------ ------------ -----------
Loss from operations (2,121,000) (3,315,000) (7,658,000) (9,834,000)
Other income (145,000) (327,000) (572,000) (1,125,000)
----------- ----------- ----------- -----------
Loss before income tax provision (1,976,000) (2,988,000) (7,086,000) (8,709,000)
Income tax provision 7,000 6,000 20,000 19,000
----------- ----------- ----------- -----------
Net loss $(1,983,000) $(2,994,000) $ (7,106,000) $(8,728,000)
=========== =========== ============ ===========
Weighted average common shares outstanding used
to compute net loss per share -- basic and diluted 8,540,000 8,011,000 8,449,000 7,916,000
=========== =========== ============ ===========
Net loss per share - basic and diluted $ (0.23) $ (0.37) $ (0.84) $ (1.10)
=========== =========== ============ ===========
</TABLE>
See notes to condensed financial statements.
3
<PAGE> 4
COMPUTER MOTION, INC.
CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998(1)
------------ ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,976,000 $ 5,577,000
Marketable securities 5,934,000 15,736,000
Accounts receivable 8,822,000 2,856,000
Inventories 3,585,000 3,281,000
Prepaid expenses 566,000 347,000
------------ ------------
Total current assets 22,883,000 27,797,000
Plant and equipment, net 2,841,000 2,375,000
Other assets 199,000 272,000
------------ ------------
Total assets $ 25,923,000 $ 30,444,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,187,000 $ 1,623,000
Accrued expenses 2,626,000 1,951,000
------------ ------------
Total current liabilities 4,813,000 3,574,000
Shareholders' equity:
Preferred stock, $.001 par value; authorized
5,000,000 shares -- --
Common stock, $.001 par value; authorized 25,000,000
shares outstanding - 8,539,700 and 8,353,725 shares 9,000 8,000
Additional paid-in capital 61,914,000 60,813,000
Deferred compensation expense (508,000) (753,000)
Accumulated deficit (40,305,000) (33,198,000)
------------ ------------
Total shareholders' equity 21,110,000 26,870,000
------------ ------------
Total liabilities and shareholders' equity $ 25,923,000 $ 30,444,000
============ ============
</TABLE>
- --------------
(1) Derived from audited financial statements for the year ended December 31,
1998.
See notes to condensed financial statements.
4
<PAGE> 5
COMPUTER MOTION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
--------------------------------
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(7,106,000) $(8,728,000)
Adjustments to reconcile net loss to cash
used by operating activities:
Depreciation and amortization 672,000 336,000
Provision for doubtful accounts 579,000 178,000
Loss on sale of fixed assets 11,000 --
Common stock issued for services -- 46,000
Compensation expense for stock options, warrants
and common stock issued below fair market value 187,000 485,000
Other 34,000 51,000
Increase in working capital (5,797,000) (1,535,000)
----------- -----------
Net cash used in operating activities (11,420,000) (9,167,000)
Cash flows from investing activities:
Purchase of plant and equipment (1,144,000) (1,508,000)
Net proceeds from short-term investments 9,802,000 1,376,000
------------ -----------
Net cash provided by (used in) investing activities 8,658,000 (132,000)
Cash flows from financing activities:
Proceeds from common stock issuance 124,000 --
------------ -----------
Proceeds from stock option exercises 1,053,000 1,278,000
Unrealized gain due to currency translation (16,000) --
------------ -----------
Net cash provided by financing activities 1,161,000 1,278,000
------------ -----------
Decrease in cash and cash equivalents (1,601,000) (8,021,000)
Cash and cash equivalents at beginning of period 5,577,000 22,555,000
------------ -----------
Cash and cash equivalents at end of period $ 3,976,000 $14,534,000
============ ===========
</TABLE>
See notes to condensed financial statements.
5
<PAGE> 6
COMPUTER MOTION, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1. BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and in accordance with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
financial information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included.
The operating results of the interim periods presented are not
necessarily indicative of the results expected for the year ending December 31,
1999 or for any other interim period. The accompanying condensed financial
statements should be read in conjunction with the audited financial statements
and notes thereto for the year ended December 31, 1998 included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998 as filed with
the Securities and Exchange Commission.
NOTE 2. NET LOSS PER SHARE
Statement of Financial Accounting Standard ("SFAS") No. 128, "Earnings
Per Share," requires presentation of both basic and diluted net loss per share
in the financial statements. The Company's basic net loss per share is the same
as its diluted net loss per share because inclusion of outstanding stock options
and warrants in the calculation is antidilutive. Net loss per share is based on
the weighted average number of common shares outstanding.
NOTE 3. INITIAL PUBLIC OFFERING
The Company closed its initial public offering ("IPO") of 2,500,000
shares of common stock at a price of $14.00 per share in August 1997. In
September 1997, the underwriters exercised an option to purchase an additional
375,000 shares of common stock at $14.00 per share. Net proceeds of
approximately $37,000,000 were received by the Company. All shares of
convertible preferred stock were converted to common stock upon the IPO.
NOTE 4. SHAREHOLDER RIGHTS
On June 14, 1999, the Board of Directors of the Company approved the
adoption of a Shareholder Rights Plan and declared a dividend distribution of
one Right for each outstanding share of the Company's common stock to
shareholders of record on the close of business on June 28, 1999. Reference is
made to the Company's Registration Statement on Form 8-A filed with the
Securities and Exchange Commission on June 18, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
This report contains forward looking statements that involve risks and
uncertainties. The Company's actual results may differ materially due to factors
that include, but are not limited to, the risks discussed herein under "Risk
Factors That May Affect Future Results" as well as those discussed in the "Risk
Factors That May Affect Future Results" section of the Company's Annual Report
on Form 10-K for the year ended December 31, 1998.
6
<PAGE> 7
OVERVIEW
Computer Motion, Inc. (the "Company") develops and markets proprietary
robotic and computerized surgical systems that are intended to enhance a
surgeon's performance and centralize and simplify a surgeon's control of the
operating room ("OR"). The Company believes that its products will provide
surgeons with the precision and dexterity necessary to perform complex,
minimally invasive surgical procedures, as well as enable surgeons to control
critical devices in the OR through simple verbal commands. The Company believes
that its products will broaden the scope and increase the effectiveness of
minimally invasive surgery, improve patient outcomes, and create a safer, more
efficient and cost effective OR.
The Company's AESOP(R) robotic endoscope positioning system is Food and
Drug Administration ("FDA") cleared. AESOP allows direct surgeon control of the
endoscope through simple verbal commands, eliminating the need for a member of a
surgical staff to manually control the camera and providing a more stable and
sustainable endoscopic image. The Company believes that AESOP is the world's
first FDA-cleared robot and first voice control interface for a surgical device.
Several hundred AESOP units have been sold worldwide, which the Company believes
have been used to perform tens of thousands of procedures.
The Company's HERMES(TM) Control Center is designed to enable a surgeon
to directly control multiple OR devices, including various laparoscopic,
arthroscopic and video devices, as well as the Company's robotic devices,
through simple verbal commands. HERMES also provides standardized visual and
digitized voice feedback to a surgical team. The Company believes that the
enhanced control and feedback provided by HERMES has the potential to improve
safety, increase efficiency, shorten procedure times and reduce costs. Ten 510
(k) submissions relating to HERMES have been cleared by the FDA and Stryker
Corporation's Endoscopy Division is currently marketing HERMES under an OEM
agreement with the Company.
The Company's ZEUS(TM) Robotic Surgical System is designed to
fundamentally improve a surgeon's ability to perform complex surgical procedures
and enable new, minimally invasive surgical procedures, including fully
endoscopic multivessel coronary artery bypass grafts ("E-CABG(TM)") which are
currently very difficult or impossible to perform endoscopically. ZEUS is
comprised of three surgeon-controlled robotic arms, one of which positions the
endoscope and two of which manipulate surgical instruments. The Company believes
that ZEUS will improve a surgeon's dexterity and precision and enhance
visualization of, and access to, confined operative sites. The Company also
believes that new minimally invasive surgical procedures performed with ZEUS
will result in reduced patient pain and trauma, fewer complications, lessened
cosmetic concerns and shortened convalescent periods and will increase the
number of patients qualified for certain surgical procedures. In addition, the
Company believes that an increase in minimally invasive procedures will
ultimately result in lower overall healthcare costs to providers, payors and
patients. The Company has completed Phase I clinical trials for both ZEUS-based
laparoscopic procedures and ZEUS-based cardiac procedures under Investigational
Device Exemptions ("IDE"). The Company is currently seeking clearance from the
FDA to commence multi-center pivotal ZEUS-based laparoscopic and cardiac
clinical trials in the United States.
The Company has sustained significant losses since inception and expects
to continue to incur significant losses due to research and development efforts,
costs associated with obtaining regulatory approvals and clearances, continued
sales and marketing expenditures to increase sales and other costs associated
with the Company's anticipated growth. Furthermore, the Company anticipates that
its operating results may fluctuate significantly from quarter to quarter in the
future, depending on a number of factors, many of which are outside the
Company's control. These factors include timing and results of clinical trials,
delays associated with FDA and other clearance processes, clinician, hospital
and payor acceptance of the Company's products, the number, timing and
significance of product enhancements and new products by the Company and its
competitors, health care reimbursement policies and product performance and
quality issues.
7
<PAGE> 8
RESULTS OF OPERATIONS
Three Months Ended September 30, 1999 compared to the Three Months Ended
September 30, 1998.
Revenue. Revenue increased $2,551,000 (91%) to $5,358,000 for the three
months ended September 30, 1999 from $2,807,000 for the same period in 1998. The
Company's HERMES and ZEUS product lines were principally responsible for the
revenue increase. HERMES revenue of $812,000 for the quarter was up 128% from
prior year levels and resulted mainly from commercial and marketing related
shipments of the HERMES Control Center under the Company's OEM arrangement with
its initial HERMES alliance partner, Stryker Corporation. ZEUS revenue of
$2,490,000 for the quarter was up 1,428% from prior year levels and related to
the sale of one unit in the U.S. and two units outside the U.S., one rental in
the U.S., and one conversion of a rental to a sale, as well as on-going
contractual payments from hospitals where ZEUS Robotic Surgical Systems have
been previously installed under rental-based research and clinical development
arrangements. AESOP(R) third quarter revenue of $2,056,000 decreased 10% over
the previous year's third quarter level mainly as a result of lower unit sales,
offset somewhat by higher average selling prices
Gross Profit. Gross profit increased $1,626,000 (102%) to $3,215,000 for
the three months ended September 30, 1999 from $1,589,000 for the same period in
1998. Gross margin increased to 60.0 % in the third quarter 1999 from 56.6% in
the third quarter 1998. While gross margin was favorably impacted by the sale of
three ZEUS units, pressure on gross margin will continue until the Company is
able to produce and sell at a greater volume, particularly with regard to the
ZEUS product line.
Selling, General and Administrative. Selling, general and administrative
expense increased $427,000 (15%) to $3,202,000 for the three months ended
September 30, 1999 from $2,775,000 for the same period in 1998. The increase was
due mainly to increased commissions resulting from the increased revenue, the
addition of field support personnel as the Company expanded its domestic service
and training capability and higher travel and business related expenses. The
Company expects selling, general and administrative expense to increase in
future periods as it continues to expand its revenue and its sales, service and
training capability.
Research and Development. Research and development expense essentially
remained flat with a minimal increase of $5,000 to $2,134,000 for the three
months ended September 30, 1999 from $2,129,000 for the same period in 1998, as
increased expenses for ZEUS pre-clinical and clinical trial activities were
largely offset by decreasing AESOP and HERMES related development expenses. The
Company does expect research and development expenditures to increase as it
continues to develop its products and conduct clinical trials, particularly for
the ZEUS product line.
Other Income. Other income of $145,000 for the three months ended
September 30, 1999 compared to other income of $327,000 for the three months
ended September 30, 1998. Other income for both periods was principally
comprised of interest income derived from proceeds of the Company's IPO which
was completed in August 1997.
Income Taxes. Minimal provisions for state franchise taxes have been
recorded on the Company's pre-tax losses to date. As of December 31, 1998, the
Company had federal and state net operating loss (NOL) carryforwards of
approximately $28,000,000 and $8,000,000, respectively which are available to
offset future federal and state taxable income. Federal carryforwards expire
fifteen years after the year of loss and state carryforwards expire five years
after the year of loss. The Company has provided a full valuation allowance on
the deferred tax asset because of the uncertainty regarding its realization.
Net Loss. The net loss for the third quarter 1999 was $1,983,000 ($.23
per share) compared to $2,994,000 ($.37 per share) for the third quarter 1998 as
increased gross profit derived from increased revenue more than offset the sum
of increased selling, general and administrative expense and reduced other
income. Weighted average shares
8
<PAGE> 9
increased from 8,011,000 in the third quarter 1998 to 8,540,000 in the third
quarter 1999 mainly as a result of the exercise of stock options and the
issuance on shares under the Company's employee stock purchase plan.
Nine Months Ended September 30, 1999 compared to the Nine Months Ended
September 30, 1998.
Revenue. Revenue increased $6,852,000 (96%) to $14,009,000 for the nine
months ended September 30, 1999 from $7,157,000 for the same period in 1998. The
increase resulted principally from higher HERMES and ZEUS revenues which
increased $2,181,000 (207%) and $4,705,000 (705%), respectively.
Gross Profit. Gross profit increased $4,078,000 (100%) to $8,173,000 for
the nine months ended September 30, 1999 from $4,095,000 for the same period in
1998. Gross margin increased to 58.3% from 57.2% between the two periods. While
gross margin is improving with more sales of ZEUS, pressure on gross margin will
continue until the Company is able to produce and sell at greater volume,
particularly with regard to the ZEUS product line.
Selling, General and Administrative. Selling, general and administrative
expense increased $950,000 (12%) to $9,166,000 for the first nine months of 1999
as compared to $8,216,000 for the first nine months of 1998. The increase was
due to the addition of sales and managerial personnel, related recruiting and
relocation costs, greater travel and business expenses and higher commissions
based on increased sales.
Research and Development. Research and development expense increased
$952,000 (17%) to $6,665,000 for the first nine months of 1999 from $5,713,000
for the first nine months of 1998, primarily as a result of additional
personnel, increased development efforts with respect to ZEUS, and pre-clinical
and clinical activities associated with ZEUS.
Other Income. Other income of $572,000 in the first nine months 1999
compared to other income of $1,125,000 for the first nine months of 1998. Other
income for both periods was mainly interest income derived from proceeds of the
Company's IPO which was completed in August 1997.
Net Loss. The net loss for the first nine months of 1999 was $7,106,000
($.84 per share) compared to $8,728,000 ($1.10 per share) for the first nine
months of 1998 as increased gross profit derived from increased revenue more
than offset the sum of increased operating expenses and reduced other income.
Weighted average shares outstanding increased from 7,916,000 in the first nine
months of 1998 to 8,449,000 in the first nine months of 1999, mainly as a result
of the exercise of stock options and warrants and the issuance of shares under
the Company's employee stock purchase plan.
FINANCIAL CONDITION
Since its inception, the Company's expenses have significantly exceeded
its revenue, resulting in an accumulated deficit of $40,305,000 as of September
30, 1999. Until its initial public offering in August 1997, the Company had
primarily relied on proceeds from issuance of preferred and common stock and
bridge debt financing to fund its operations.
In August 1997, pursuant to an S-1 registration statement filed with the
Securities and Exchange Commission (Registration No. 333-29505) for 2,875,000
shares of its common stock, the Company completed its initial public offering by
selling 2,500,000 shares of common stock, to its underwriters, Montgomery
Securities and Piper Jaffray, Inc. The Company received net proceeds of
$32,550,000 from this sale before deducting offering expenses. Effective upon
the closing of the IPO, all of the outstanding shares of convertible preferred
stock of the Company were converted into 2,344,387 shares of common stock.
In September 1997, the underwriters exercised their option to purchase
an additional 375,000 shares of common stock directly from the Company. The
Company received net proceeds of $4,883,000 from this sale before deducting
offering expenses.
9
<PAGE> 10
In conjunction with completing the IPO, the Company incurred total
direct offering expenses of $727,000. Total net proceeds to the Company from the
IPO and the exercise of the over-allotment option, after deducting underwriting
discounts and commissions and total direct offering expenses, was $36,706,000.
In 1997, the Company used $3,250,000 of the net proceeds from the IPO
for repayment of certain outstanding indebtedness and $490,000 to make capital
purchases. In 1998, the Company made capital purchases totaling $1,784,000. For
the first nine months of 1999, capital purchases were $1,144,000. Proceeds from
the IPO are also funding the Company's current operating losses and working
capital increases. The remaining net proceeds of the IPO at September 30, 1999
of $9,910,000 have been invested in short-term investment grade debt securities.
At September 30, 1999, the Company's current ratio (current assets
divided by current liabilities) was 4.8 to 1 versus 7.8 to 1 at December 31,
1998, and reflects the use of the initial public offering proceeds to fund
operations and working capital requirements.
For the nine months ended September 30, 1999, the Company's net cash
used by operating activities of $11,420,000 was primarily attributable to the
net loss of $7,106,000 and an increase in accounts receivable of $5,966,000.
For the nine months ended September 30, 1999, cash outflow from purchase
of plant and equipment was $1,144,000. The Company currently has no material
commitments for capital expenditures, but is in the process of procuring
additional leased space in the fourth quarter 1999 in anticipation of continued
business growth.
For the nine months ended September 30, 1999, net cash provided by
financing activities of $1,161,000 was attributable to proceeds from stock
option and warrant exercises and the issuance of common stock under the
Company's employee stock purchase plan.
Our operations to date have consumed substantial amounts of cash, and
we expect our capital and operating expenditures to continue to increase. We
believe that our current cash balance should be adequate to fund our expected
operating losses and satisfy our capital requirements into the second half of
2000. Our need for additional financing will depend upon numerous factors,
including, but not limited to, the extent and duration of our future operating
losses, the level and timing of future revenue and expenditures, the progress
and scope of clinical trials, the timing and costs required to receive both
United States and international governmental approvals or clearances, market
acceptance of new products, the results and scope of ongoing research and
development projects, the costs of training physicians to become proficient in
the use of our products and the costs of further developing marketing and
distribution capabilities. To the extent that existing resources are
insufficient to fund our activities, we may seek to raise additional funds
through public or private financing. We can not assure you that additional
financing, if required, would be available on acceptable terms, if at all. If
adequate funds are not available, our business, financial condition and results
of operations would be materially adversely affected.
YEAR 2000 MATTERS
Many existing information technology ("IT") systems, such as computer
systems and software products, were not designed to correctly process dates
after December 31, 1999. We have assessed the impact of such Year 2000 issues on
our products and internal IT systems, as well as on our significant suppliers.
Our products are and have always been Year 2000 compliant. We have recently
implemented a new Year 2000 compliant business system. We have had discussions
with our significant suppliers regarding their plans to investigate, identify
and remedy their Year 2000 issues, but they are outside our control and if they
fail to appropriately address their Year 2000 issues, such failure could have a
material adverse effect on our business, financial condition and results of
operations. For example, if Year 2000 problems experienced by any of our
significant suppliers result in or contribute to delays or interruptions of our
delivery of products or services, such delays or interruptions could have a
material adverse effect on our business, financial condition and results of
operations. In addition, many of our customers depend, in part, on third-party
payors,
10
<PAGE> 11
both private and governmental, for much of their revenues. Any inability of our
customers to obtain payment from such payors could impact their ability to pay
for our products. Finally, we could be materially adversely effected by a
disruption in the economy generally resulting from Year 2000 issues.
Should we not be completely successful in mitigating internal and
external Year 2000 risks, the result could be a disruption of our operations,
including among other things, a temporary inability to process transactions,
manufacture products, send invoices, or engage in similar normal business
activities. We believe that under a worst case scenario, we could continue the
majority of normal business activities on a manual basis.
RISK FACTORS THAT MAY AFFECT FUTURE RESULTS
Computer Motion operates in a rapidly changing environment that involves
a number of risks, some of which are beyond our control. The following
discussion summarizes some of these risks which could affect our actual future
results and could cause them to differ materially from any forward-looking
statements we have made.
We have a limited operating history and have not yet made a profit. The
HERMES and ZEUS product lines are important to our future success and ZEUS has
not achieved U.S. regulatory clearance, and none of our products have yet
achieved significant market acceptance. Government regulation of the medical
device industry is strict and regulatory approvals are generally lengthy,
expensive and uncertain. Third-party payors may be unwilling to reimburse
hospitals for use of our products. We have competition and there are alternative
treatments and procedures to using our products. Our products are subject to
rapid technological change and our success, in part, is based on our ability to
obtain patent protection for our products. We are dependent on sole source
suppliers for principal components of our products. Our anticipated growth will
place significant demands on our management and resources, particularly in
research and development, sales and marketing and manufacturing. A more detailed
discussion of factors that could affect our future results can be found in the
"Risk Factors That May Affect Future Results" section of the Company's Annual
Report on Form 10-K for the year ended December 31, 1998 and we strongly
encourage you to review same.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's financial instruments include cash and short-term
investment grade debt securities. At September 30, 1999, the carrying values of
the Company's financial instruments approximated their fair values based on
current market prices and rates.
It is the Company's policy not to enter into derivative financial
instruments. The Company does not currently have material foreign currency
exposure as the majority of its international transactions are denominated in
U.S. currency. Accordingly, the Company does not have significant overall
currency exposure at September 30, 1999.
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Reference is made to the discussion of the use of proceeds of the
Company's initial public offering under the caption "Financial Condition" in
Management's Discussion and Analysis.
11
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27.1 -- Financial data schedule
(b) No Reports on Form 8-K were filed during the quarter ended
September 30, 1999.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: November 10, 1999 COMPUTER MOTION, INC.
By: /s/ STEPHEN L. WILSON
------------------------------------
Stephen L. Wilson
Executive Vice President, Chief
Financial Officer and Secretary
(Principal Financial and Accounting
Officer)
12
<PAGE> 13
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED BALANCE SHEETS AND CONDENSED STATEMENTS OF OPERATIONS FOUND ON PAGES
THREE AND FOUR OF THE COMPANY'S FORM 10-Q FOR THE YEAR TO DATE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,976,000
<SECURITIES> 5,934,000
<RECEIVABLES> 9,174,000
<ALLOWANCES> 352,000
<INVENTORY> 3,585,000
<CURRENT-ASSETS> 22,883,000
<PP&E> 5,193,000
<DEPRECIATION> 2,352,000
<TOTAL-ASSETS> 25,923,000
<CURRENT-LIABILITIES> 4,813,000
<BONDS> 0
0
0
<COMMON> 9,000
<OTHER-SE> 21,101,000
<TOTAL-LIABILITY-AND-EQUITY> 25,923,000
<SALES> 14,009,000
<TOTAL-REVENUES> 14,009,000
<CGS> 5,836,000
<TOTAL-COSTS> 5,836,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 217,000
<INTEREST-EXPENSE> 10,000
<INCOME-PRETAX> (7,086,000)
<INCOME-TAX> 20,000
<INCOME-CONTINUING> (7,106,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,106,000)
<EPS-BASIC> (.84)
<EPS-DILUTED> (.84)
</TABLE>
