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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDING JUNE 30, 2000
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
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(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 August 08, 2000 there were 9,436,081 of the Registrant's common stock
outstanding.
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COMPUTER MOTION, INC.
INDEX TO FORM 10-Q
QUARTER ENDED JUNE 30, 2000
INDEX PAGE
----- ----
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Statements of Operations 3
Condensed Balance Sheets 4
Condensed Statements of Cash Flows 5
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 11
PART II. - OTHER INFORMATION
Item 1. Litigation 11
Item 2. Changes in Securities and Use of Proceeds 11
Item 4. Submissions of Matters to Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 12
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COMPUTER MOTION, INC.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(Amounts in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
--------------------- -----------------------
2000 1999 2000 1999
------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenue $ 5,962 $ 4,699 $ 7,330 $ 8,651
Cost of revenue 2,382 1,979 3,071 3,693
------- ------- -------- --------
Gross profit 3,580 2,720 4,259 4,958
------- ------- -------- --------
Research & development expense 3,353 2,297 5,569 4,531
Selling, general & administrative expense 3,716 2,991 7,269 5,964
------- ------- -------- --------
Total operating expense 7,069 5,288 12,838 10,495
------- ------- -------- --------
Loss from operations (3,489) (2,568) (8,579) (5,537)
Other expense/(income) 113 (188) 37 (427)
------- ------- -------- --------
Loss before income taxes (3,602) (2,380) (8,616) (5,110)
Income tax provision 7 7 12 13
------- ------- -------- --------
Net loss $(3,609) $(2,387) $ (8,628) $ (5,123)
======= ======= ======== ========
Weighted average common shares outstanding
used to compute net loss per share - basic 8,831 8,419 8,806 8,404
======= ======= ======== ========
Loss per share - basic and diluted $ (0.41) $ (0.28) $ (0.98) $ (0.61)
======= ======= ======== ========
</TABLE>
See notes to condensed financial statements.
3
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COMPUTER MOTION, INC.
CONDENSED BALANCE SHEETS
(Amounts in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999(1)
--------- ------------
Unaudited
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,180 $ 4,297
Marketable securities -- 3,224
Accounts receivable 9,921 6,203
Inventories 5,013 5,009
Other current assets 517 332
-------- --------
Total current assets 16,631 19,065
Property and equipment, net 4,012 2,933
Other assets 102 1,363
-------- --------
Total assets $ 20,745 $ 23,361
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,325 $ 3,235
Accrued expenses 3,005 2,917
Deferred revenue 1,052 317
-------- --------
Total current liabilities 7,382 6,469
Deferred revenue 1,135 970
Other liabilities 3 103
-------- --------
Total liabilities 8,520 7,542
-------- --------
Shareholders' equity
Preferred stock, authorized 5,000 shares issued
and outstanding none -- --
Common stock, $.001 par value, authorized 25,000
shares outstanding - 9,434 and 8,745 shares 9 9
Additional paid-in capital 67,672 62,663
Deferred compensation expense (179) (247)
Accumulated deficit (55,201) (46,573)
Accrued comprehensive gain/(loss) (76) (33)
-------- --------
Total shareholders' equity 12,225 15,819
-------- --------
Total liabilities and shareholders' equity $ 20,745 $ 23,361
======== ========
</TABLE>
------------------
(1) Derived from audited financial statements for the year ended December 31,
1999. See notes to condensed financial statements.
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COMPUTER MOTION, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30
--------------------
2000 1999
------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(8,628) $ (5,123)
Adjustments to reconcile net loss to cash used by
operating activities:
Depreciation and amortization 642 435
Provision for doubtful accounts and sales allowances 550 160
Amortization of deferred compensation 68 124
Other -- 38
Decrease/(increase) in:
Accounts receivable (3,007) (2,864)
Inventories (4) 79
Prepaid and other current assets (185) (76)
Increase/(decrease) in:
Accounts payable 90 257
Deferred revenue 900
Accrued expenses 88 230
------- --------
Net cash used in operating activities 9,486 (6,740)
------- --------
Cash flows from investing activities:
Purchases of property and equipment (1,721) (835)
Net proceeds from short-term investments 3,224 10,618
------- --------
Net cash provided by investing activities 1,503 9,783
------- --------
Cash flows from financing activities:
Proceeds from common stock and warrant issuance 4,603 124
Options exercised 406 348
Other (143) --
------- --------
Net cash provided by financing activities 4,866 472
------- --------
Increase (decrease) in cash and cash equivalents (3,117) 3,515
Cash and cash equivalents at beginning of period 4,297 5,577
------- --------
Cash and cash equivalents at end of period $ 1,180 $ 9,092
======= ========
</TABLE>
See notes to condensed financial statements.
5
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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,
2000 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, 1999 included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1999 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. 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.
NOTE 4. CONVERTIBLE PROMISSORY NOTE AND PRIVATE PLACEMENT
On March 31, 2000, the Company issued a convertible promissory note to
the Company's Chief Executive Officer in the amount of $3,000,000. Interest on
the convertible note accrued at the prime rate. At the Annual Meeting held on
June 15, 2000, the stockholders approved the conversion of the note and accrued
interest outstanding to be converted into common stock. The conversion price per
share shall be derived from the price per share of the next private placement of
the Company's securities (the "Private Placement"). On June 29, 2000 the Company
completed a Private Placement for 594,891 shares of common stock at a price of
$7.67 totaling $4,562,219 which included the conversion of the promissory note
and accrued interest of $3,048,331.
NOTE 5. SHIPMENTS TO DISTRIBUTOR
In June, 2000 the Company shipped four (4) ZEUS(TM) systems and related
equipment totaling approximately $2,668,000 to Kino Corporation in Japan under
its Distribution Agreement dated April 25, 2000. The Company recorded
approximately $2,408,000 in revenue from this transaction during the quarter.
The product was shipped on irrevocable purchase orders and approximately 75%
backed by irrevocable Letters of Credit.
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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, 1999.
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 coronary artery bypass grafts ("E-CABG(TM)") on a beating heart,
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"). Based upon a series of meetings with FDA in May 2000,
the Company has submitted applications for IDE approval to commence multi center
pivotal ZEUS-based laparoscopic and cardiac clinical trials in the United
States. On July 11, 2000, the Company was notified by FDA that the ZEUS system
would be cleared for market under the 510(k) premarket notification process
instead of the longer premarket approval process. The Company has initiated a
Phase I clinical trial in which ZEUS is used in mitral valve repair and
replacement surgery.
7
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RESULTS OF OPERATIONS
Three months ended June 30, 2000 compared to the three months ended June 30,
1999.
Revenue. Revenue increased $1,263,000 (27%) to $5,962,000 for the three
months ended June 30, 2000 from $4,699,000 for the same period in 1999. The
Company's ZEUS and AESOP product lines were principally responsible for the
revenue increase. ZEUS revenue of $3,115,000 for the quarter was up 86% from
prior year levels and resulted mainly from shipments of four (4) systems and
related equipment to Kino Corporation. AESOP second quarter revenue of
$2,060,000 increased 17% over the previous year's second quarter level mainly as
a result of additional systems sold in the quarter. HERMES revenue of $787,000
for the quarter was down (38%) from prior year due to decrease systems shipped
to the Company's OEM initial HERMES alliance partner, Stryker Corporation.
Gross Profit. Gross profit increased $860,000 (32%) to $3,580,000 for
the three months ended June 30, 2000 from $2,720,000 for the same period in
1999. Gross margin increased slightly to 60% in the second quarter 2000 from 58%
in the second quarter 1999. Gross margin will continue to improve as the Company
is able to produce and sell at a greater volume.
Research and Development. Research and development expense increased
$1,056,000 (46%) to $3,353,000 for the three months ended June 30, 2000 from
$2,297,000 for the same period in 1999, primarily as a result of the addition of
personnel, and increased development efforts for pre-clinical and clinical trial
activities related principally to ZEUS. Professional fees increased
substantially related to the patent infringement lawsuit the Company has filed
against a competitor. The Company expects research and development expenditures
to increase as it continues to develop its products and conduct clinical trials.
Selling, General and Administrative. Selling, general and administrative
expense increased $725,000 (24%) to $3,716,000 for the three months ended June
30, 2000 from $2,991,000 for the same period in 1999. The increase was due
mainly to the addition of field support personnel as the Company expanded it
worldwide sales, service and training capability. The new hires caused increased
recruiting and relocation costs, 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.
Other Expense (Income). Other expense of $113,000 for the three months
ended June 30, 2000 compared to other income of $188,000 for the three months
ended June 30, 1999. Other expense for the current period was comprised of
interest expense on the Convertible Promissory Note (See Note 4) and other
expenses. For the prior period other income was principally comprised of
interest income derived from proceeds of the Company's IPO that 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, 1999, the
Company had federal and state net operating loss (NOL) carryforwards of
approximately $36,000,000 and $7,500,000, respectively which are available to
offset future federal and state taxable income. Federal carryforwards expire
twenty years after the year of loss and state carryforwards expire seven 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 second quarter 2000 was $3,609,000 ($.41
per share) compared to $2,387,000 ($.28 per share) for the second quarter 1999
as increased gross profit derived from increased revenue was more than offset by
the sum of increased operating expenses and reduced other income. Weighted
average shares increased from 8,419,000 to 8,831,000 mainly as a result of the
exercise of stock options, issuance of shares under the Company's employee stock
purchase plan and the Company's Private Placement (See Note 4).
8
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Six months ended June 30, 2000 compared to the six months ended June 30, 1999.
Revenue. Revenue decreased $1,321,000 (15%) to $7,330,000 for the six
months ended June 30, 2000 from $8,651,000 for the same period in 1999. The
decrease resulted principally from lower HERMES revenues which decreased
$1,739,000 (70%), along with decrease AESOP revenues of $193,000 (6%) while ZEUS
revenues increased $611,000 (22%).
Gross Profit. Gross profit decreased $699,000 (14%) to $4,259,000 for
the six months ended June 30, 2000 from $4,958,000 for the same period in 1999.
Gross margin increased to 58% from 57% between the two periods. Pressure on
gross margin will continue until the Company receives FDA clearance for ZEUS and
is able to produce and sell at greater volume.
Research and Development. Research and development expense increased
$1,038,000 (23%) to $5,569,000 for the first half of 2000 from $4,531,000 for
the first half of 1999, primarily as a result of additional personnel, increased
development efforts with respect to HERMES and ZEUS, and pre-clinical and
clinical activities associated with ZEUS, along with increased professional fees
associated with the patent infringement lawsuit the Company has filed against a
competitor.
Selling, General and Administrative. Selling, general and administrative
expense increased $1,305,000 (22%) to $7,269,000 for the first half of 2000 as
compared to $5,964,000 for the first half 1999. The increase was due to the
addition of sales and managerial personnel, related recruiting and relocation
costs, greater travel and business expenses.
Other Expense (Income). Other expense of $37,000 for the first half of
2000 compared to other income of $427,000 for the first half of 1999. Other
expense for the current period was comprised of interest expense on the
convertible promissory note (See Note 4) issued March 31, 2000 and converted
June 29, 2000 offset by interest income in the first quarter of the year. Other
income for the first half of the year of 1999 was mainly interest income derived
from the proceeds of the Company's IPO which was completed in August 1997.
Net Loss. The net loss for the first six months of 2000 was $8,628,000
($.98 per share) compared to $5,123,000 ($.61 per share) for the first six
months of 1999 was due to increased operating expenses and reduced other income.
Weighted average shares outstanding increased from 8,404,000 to 8,806,000 mainly
as a result of the exercise of stock options, issuance of shares under the
Company's employee stock purchase plan and the Company's Private Placement (See
Note 4).
FINANCIAL CONDITION
Since its inception, the Company's expenses have exceeded its revenues,
resulting in an accumulated deficit of $55,201,000 as of June 30, 2000. 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.
At June 30, 2000 the Company's current ratio (current assets divided by
current liabilities) was 2.3 to 1 versus 2.9 to 1 at December 31, 1999,
reflecting the decrease in cash and marketable securities as the proceeds from
the initial public offering were used to support operations, offset by the
increase in cash from the proceeds of the $4,562,000 private placement (See
Note 4).
For the six months ended June 30, 2000, the Company's use of cash in
operating activities of $9,424,000 was primarily attributable to the net loss
and increase in accounts receivable. Cash outflow from purchases of plant and
equipment was $1,718,000 for the six months ended June 30, 2000. The Company
currently has no material commitments for capital expenditures but has procured
additional leased space in anticipation of continued business growth. For the
six months ended June 30, 2000, net cash provided by financing activities of
$4,801,000 was attributable to the $4,562,000 private placement (See Note 4) and
the exercise of stock options totaling $344,000.
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The Company's operations to date have consumed substantial amounts of
cash, and the Company expects its capital and operating expenditures to continue
to exceed proceeds from ongoing sales at least through 2000. The Company's need
for additional financing will depend upon numerous factors, including, but not
limited to, the extent and duration of the Company's future-operating losses,
the level and timing of future revenues 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 the
Company's products and procedures, and the cost of developing appropriate sales
and marketing capabilities. The Company plans to raise additional funds through
public or private equity financing and is also planning to obtain a bank line of
credit. There can be no assurance that additional financing, when required,
would be available on acceptable terms, if at all. The Company believes that it
will be able to raise the funds necessary to sustain operations through December
31, 2000. However, we may require substantial working capital to fund our
business and may need to raise additional capital. We cannot be certain that
additional funds will be available on satisfactory terms when needed, if at all.
If adequate funds are not available, the Company's business, financial condition
and results of operations could be adversely affected.
The various elements of our business and growth strategies, including
our introduction of new products, the expansion of our marketing distribution
activities and obtaining regulatory approval or market acceptance will require
additional capital. If we are unable to raise additional necessary capital in
the future, we may be required to significantly curtail our operations or obtain
funding through the relinquishment of significant technology or markets.
The Company's financial instruments include cash and short-term
investment grade debt securities. At June 30, 2000, 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
currency exposure at June 30, 2000.
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.
Our growth and operating results could be impaired if we are unable to
meet our future capital requirements.
We have a limited operating history and have not yet made a profit. The
ZEUS product line is important to our future success and 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. Our patents may be challenged by others and
others may assert that we are infringing their proprietary rights. We cannot
predict the outcome of such disputes and the expenses of defending such actions
may be substantial. 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, 1999. We strongly encourage you to
review these risk factor disclosures and the Company's Registration Statement on
Form S-3 filed on May 19, 2000.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's financial instruments include cash and short-term
investment grade debt securities. At June 30, 2000 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 a significant currency
exposure at June 30, 2000.
PART II. OTHER INFORMATION
ITEM 1. LITIGATION
On May 10, 2000, the Company filed suit against Intuitive Surgical Inc.
alleging that Intuitive's da Vinci surgical infringes Computer's Motion's United
States Patent Nos. 5,878,193; 5,524,180; 5,762,458; 6,001,108; 5, 815,640;
5,907,664; 5,855,583. On June 1, 2000 Computer Motion filed an amended complaint
alleging that Intuitive has also infringed the Company's recently issued United
States Patent No. 6,063,095. The Company's complaint seeks damages for lost
profits, injunctive relief enjoining any future infringement of its patent
rights, treble damages and attorneys fees.
On June 30, 2000, Intuitive served its Answer and Counterclaim alleging
non-infringement of each patent-in-suit, patent invalidity and unenforceability.
Other than request for attorney's fees, Intuitive has not requested any damages.
The Company has served discovery requests seeking a statement of the facts that
support Intuitive's defenses, and to date, Intuitive has failed to give a
substantive answer. The Company has initiated a motion to compel responses to
its discovery requests.
A pre-trial schedule has not been entered in the case. The Company
expects that the Court will set a status conference, during which the pre-trial
schedule is set, sometime in the next 30 days. Intuitive has suggested that
after an initial discovery phase the parties evaluate the evidence and meet to
discuss a possible settlement. The Company currently intends to bring a motion
for preliminary injunction and a motion for summary judgment on the issues of
invalidity and infringement.
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.
On March 31, 2000, the Company issued a convertible promissory note to
the Company's Chief Executive Officer in the amount of $3,000,000. Interest on
the convertible note accrued at the prime rate. At the Annual Meeting held on
June 15, 2000, the stockholders approved the conversion of the note and accrued
interest outstanding to be converted into common stock. The conversion price per
share shall be derived from the price per share of the next private placement of
the Company's securities (the "Private Placement"). On June 29, 2000 the Company
completed a Private Placement for 594,891 shares of common stock at a price of
$7.67 totaling $4,562,219 which included the conversion of the promissory note
and accrued interest. The convertible promissory note was and the shares of
common or preferred stock to be issued upon the conversion of the promissory
note shall be issued in reliance upon the exemption provided by Section 4(2) of
the Securities Act.
ITEM 4. SUBMISSIONS OF MATTERS TO VOTE OF SECURITY HOLDERS
On June 15, 2000, the Company held its annual meeting of the
shareholders with shareholders holding 7,769,645 shares of common stock
(representing (88.9%) of the total number of shares outstanding and entitled to
vote) present in person or by proxy at the meeting. Proxies for the meeting were
solicited pursuant to Regulation 14A of the Securities Exchange Act of 1934.
Daniel R. Doiron, Robert W. Duggan, M. Jacqueline Eastwood, W. Peter Geis, and
Yulun Wang were listed as management's nominees in the proxy statement and were
elected as directors at the meeting. The votes for each nominee were as follows:
Number of Number of
Name Affirmative Votes Votes Withheld
---- ----------------- --------------
Daniel R. Doiron 7,449,978 319,667
Robert W. Duggan 7,450,072 319,573
M. Jacqueline Eastwood 7,450,072 319,573
W. Peter Geis 7,449,165 320,480
Yulun Wang 7,450,072 319,573
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Also at the meeting, the Company sought approval for a proposal to
convert a Promissory Note dated March 1, 2000 in the amount of $3,000,000 with
interest at the prime rate to a certain officer and director into securities of
the Company. The proposal was approved with 4,536,072 affirmative votes, 416,868
negative votes and 44,221 abstentions.
In addition, at the meeting, the Company sought approval for the
ratification of the re-appointment of Arthur Andersen LLP as its independent
public accountants for the fiscal year ending December 31, 2000. This proposal
was approved with 7,708,850 affirmative votes, 13,755 negative votes and 47,040
abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
10.1 - Stock Purchase Agreement between the Company and the
Investors listed on Schedule A Hereto, dated June 29, 2000.
27.1 - Financial data schedule
(b) No Reports on Form 8-K were filed during the quarter ended June 30,
2000.
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: August 11, 2000 COMPUTER MOTION, INC.
By: /s/ GORDON L. ROGERS
--------------------------------
GORDON L. ROGERS
Vice President, Chief Financial
Officer and Secretary
(Principal Financial and
Accounting Officer)
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