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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                ----------------

                             FORM 10-K ANNUAL REPORT

                   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
                          COMMISSION FILE NO. 000-22755

                                ----------------

                              COMPUTER MOTION, INC.
             (Exact name of Registrant as specified in its charter)

                  DELAWARE                               77-0458805
        (State or other jurisdiction                  (I.R.S. Employer
      of incorporation or organization)              Identification No.)

                               130-B CREMONA DRIVE
                                GOLETA, CA 93117
                    (Address of principal executive offices)

                                 (805) 968-9600
              (Registrant's telephone number, including area code)

                                ----------------

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: None

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                          COMMON STOCK, $.001 PAR VALUE
                                (Title of Class)

                                ----------------

        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; and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]

        Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, or will not be contained, to
the best of the Registrant's knowledge, in definitive proxy information
statement incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

        The aggregate market value of the voting stock held by non-affiliates of
the Registrant was approximately $53.4 million at March 19, 2001 when the
closing sale price of such stock, as reported on the NASDAQ National Market was
$5.25 per share.

        The number of shares outstanding of the Registrant's Common Stock, $.001
par value, as of March 19, 2001 was 10,179,563 shares.

        Information required in portions of Part III is incorporated by
reference to portions of the Registrant's Proxy Statement for the Annual Meeting
of Stockholders, which will be filed with the Securities and Exchange Commission
within 120 days after the close of the 2000 fiscal year.


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                                     PART I

ITEM 1. BUSINESS

        This Annual Report on Form 10-K contains forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the securities exchange act of 1934. Actual results could differ materially
from those projected in the forward-looking statements as a result of a number
of important factors. For a discussion of important factors that could affect
the Company's results, please refer to "Risk Factors that May Affect Future
Results" below.

COMPANY OVERVIEW

        Computer Motion, Inc. ("Computer Motion" or the "Company") is committed
to developing, manufacturing and marketing proprietary robotic and computerized
surgical systems that are intended to enhance a surgeon's performance and
centralize and simplify the surgeon's control of the operating room ("OR").

        The Company believes that its products have the potential to
revolutionize surgery and the OR by providing surgeons with the precision and
dexterity necessary to perform complex, minimally invasive surgical procedures,
and by enabling surgeons to control critical devices in the OR through simple
verbal commands. Computer Motion believes that its products have the potential
to broaden the scope and increase the effectiveness of minimally invasive
surgery ("MIS"), improve patient outcomes and create a safer, more efficient and
cost effective OR.

        Traditionally, the vast majority of all surgeries have been open,
requiring large incisions measuring up to 18 inches to access the operative
site. Although this approach can be highly effective, it often results in
significant trauma, pain and complications, as well as significant costs related
to lengthy convalescent periods for the patient. In an effort to minimize these
negative factors, minimally invasive surgical techniques and related
technologies have been developed. MIS has proven to be as effective as
traditional open surgery while offering patients substantially reduced pain and
trauma, shortened convalescent periods and decreased overall patient care costs.
While these benefits are significant, the minimally invasive approach presents
challenges to surgeons, including the intricate reconstruction of patient tissue
by suturing, delicate manipulation of small anatomical features and constrained
access to, and limited visualization of, the operative site.

        The Computer Motion vision is to bring the power of computers and
robotics to the operating room to facilitate a surgeon's ability to perform
complex surgical procedures and enable new, minimally invasive microsurgical
procedures that are currently very difficult or impossible to perform. The
Company works with the leading practitioners in multiple disciplines to develop
new procedures using the Company's products to provide better visualization and
improved dexterity for the surgeon, particularly for minimally invasive
techniques.

        The Company has developed four major products and a suite of supporting
supplies, accessories and services. The four major products are the
AESOP(R)Endoscope Postioner, a surgical robot capable of positioning an
endoscope in response to a surgeon's commands; the ZEUS(TM) Robotic Surgical
System, a robotic platform designed to improve a surgeon's ability to perform
complex surgical procedures and enable new, minimally invasive microsurgical
procedures that are currently impossible or very difficult to perform; the
HERMES(TM) Control Center, a voice activated operating room control system
designed to enable a surgeon to directly control multiple OR devices, including
the Company's AESOP system, through simple verbal commands; and the SOCRATES(TM)
Telementoring System, an interactive telecollaborative system allowing a surgeon
to mentor another surgeon during an operation.

        ROBOTIC SYSTEMS

        The Company's line of computer and robotic systems enhance a surgeon's
ability to perform complex, minimally invasive surgeries. The Company has
developed the EVOLVE surgical continuum to support a gradient learning curve for
surgeons to safely and economically develop the skills required to transition
from open to endoscopic surgery. All four of the Company's robotic products are
integral to the EVOLVE process.

        AESOP PLATFORM LINE

        The Computer Motion AESOP system is a surgical robot which approximates
the form and function of a human arm and allows control of the endoscope (a
specially designed optical tube which, when connected to a medical video camera
and light source, is


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passed into the body to allow the surgeon to view the operative site on a video
monitor) using simple verbal commands. This eliminates the need for a member of
a surgical staff to manually control the camera and provides a more stable
endoscopic image and more precise positioning. The Company estimates that over
100,000 MIS procedures have been successfully assisted by 535 AESOP systems in
more than 400 hospitals and surgery centers around the world.

        The AESOP platform is the world's first Food and Drug Administration
("FDA") cleared surgical robot and incorporates the world's first FDA-cleared
voice control interface for use in the operating room. The AESOP system was
introduced in the fourth quarter of 1994. AESOP 2000 with voice control was
introduced in the fourth quarter of 1996. The AESOP 3000 platform, introduced in
December 1997, is the world's first FDA cleared surgical robot capable of
assisting in advanced minimally invasive cardiothoracic procedures. The AESOP
3000 robotic arm features added flexibility and functionality over its
predecessor, providing the range of motion necessary for endoscopic viewing in
the thoracic (chest) cavity. The AESOP HR platform allows for control of AESOP
through the HERMES Control Center. AESOP HR enables the operative surgeon to
view the status of the AESOP device, saved memory positions, and the AESOP menu
structure on a surgical monitor. The AESOP HR platform also allows the surgeon
to adjust AESOP's speed to an optimal setting based on the constraints of the
procedure.

        The introduction of the Alpha(TM) Virtual Port in June 2000 enabled the
application of AESOP in open procedures. The Alpha Virtual Port provides a
free-space pivot point for the use of AESOP in sternotomy accessed cardiac
procedures as well as open abdominal procedures. The application of the Alpha
Virtual Port in conjunction with AESOP is the first step in the EVOLVE program's
step-wise transition from open to closed procedures. The Alpha Virtual Port
allows the operative surgeon in-training to gain experience with the technology
prior to advancing to a closed procedure approach.

        Computer Motion has leveraged the core technologies underlying the AESOP
platform to develop the ZEUS Robotic Surgical System, the HERMES Control Center,
and the SOCRATES Telementoring System.

        ZEUS PLATFORM

        The Computer Motion ZEUS Robotic Surgical System is designed to
fundamentally improve a surgeon's ability to perform complex, minimally invasive
surgical procedures and to enable new, minimally invasive microsurgical
procedures that are currently very difficult or impossible to perform with
conventional surgical methods. The Company believes that these new minimally
invasive surgical procedures 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. As a result, the Company believes that an increase in minimally
invasive procedures will produce lower overall healthcare costs to patients,
hospitals and healthcare payors.

        The ZEUS platform is comprised of three surgeon-controlled robotic arms,
one of which positions an endoscope while the other two hold disposable and
reusable surgical instruments. The ZEUS robotic arms are directly attached to
the surgical table to maintain a constant orientation to the patient. A surgeon
controls the movement of the robotic arms by manipulating two corresponding
robotic instrument handles, which are housed in a mobile console. These
instrument handles are similar to conventional surgical instrument handles. A
surgeon's precise manipulation of the instrument handles is communicated to a
proprietary computer controller which filters, scales and translates the
movements to the robotic surgical instruments. A surgeon can operate these
instrument handles from a comfortable, ergonomic position. The surgeon controls
the robotic arm, which holds the endoscope through means of simple verbal
commands spoken into a headset microphone. A video display of the endoscopic
image is placed directly in front of the surgeon, and a second monitor is
positioned next to the patient for use by the other members of the surgical
team.

        Computer Motion has completed multi-center Phase I clinical testing with
the ZEUS system and has begun clinical testing under the approved Investigation
Device Exemption involving multi-center, pivotal clinical evaluation of the
product. The Company is currently enrolling patients into three randomized
controlled clinical trials in the area of Coronary Artery Bypass Grafting,
Internal Mammary Artery Harvesting and General Laparoscopic Surgeries.
Feasibility studies are underway in several other surgical applications.

        The Company believes that the ZEUS platform will provide clinicians with
the following significant benefits:

        - IMPROVED PRECISION. The ZEUS platform incorporates technology that is
          designed to enable a surgeon to scale his or her movements, allowing
          manipulation of instruments on a microsurgical scale while utilizing
          normal hand and arm movements. For instance, in microsurgical
          procedures which involve extremely small anatomical structures and
          which utilize


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          sutures ranging from 20 to 40 microns (1/3 to 2/3 the width of a human
          hair), if a surgeon selects a scaling ratio of 4 to 1, each one inch
          movement by the surgeon would result in a 1/4 inch movement by the
          robotic surgical instruments.

        - IMPROVED DEXTERITY. The ZEUS platform is designed to enhance a
          surgeon's performance by enabling robotic manipulation of surgical
          instruments, as opposed to hand-held instruments, which are very
          difficult or impossible to manipulate manually when performing
          challenging minimally invasive surgery. For instance, a surgeon can
          activate and deactivate the instrument handles to further extend
          his/her range of motion to complete a particular movement, such as
          suturing, without having to physically contort his/her arms. In
          addition, in order to gain anatomical access to certain regions of the
          body in a minimally invasive manner, the instruments must be placed in
          positions that would be extremely difficult for a surgeon to
          manipulate manually using conventional minimally invasive surgical
          techniques due to the distance between the instruments and their
          relative positions to each other.

        - ELIMINATION OF INVOLUNTARY HAND TREMOR. The ZEUS platform is designed
          to hold the surgical instruments and the endoscope in a steady manner,
          eliminating a surgeon's incidental and unintended hand motions and
          tremors which are intensified when holding surgical instruments for
          extended periods of time.

        - ENHANCED VISUALIZATION. The ZEUS platform incorporates a robotic arm,
          which controls the endoscope to produce a steady, magnified video
          image displayed directly in front of the surgeon, which facilitates
          performance of minimally invasive surgical procedures.

        - IMPROVED MINIMALLY INVASIVE ANATOMICAL ACCESS. The ZEUS platform is
          designed to provide a surgeon with access to confined areas in the
          body and critical anatomical structures that are currently only
          accessible by means of highly invasive, open surgical procedures or
          multiple "less invasive" incisions. In the case of cardiac surgery,
          these less invasive approaches can require multiple 3 to 5 inch
          incisions and often involve the removal of rib cartilage. In contrast,
          the ZEUS system is designed to provide a surgeon with complete access
          to the heart through several 3 to 5 millimeter ports.

        - MINIMIZED SURGEON FATIGUE. The ZEUS platform allows a surgeon to
          operate the surgical instrument handles in a comfortable, ergonomic
          position, including sitting down and positioning his or her forearms
          on armrests. The Company believes this enhanced ergonomic design can
          extend the professional lives of surgeons and increase the efficiency
          and effectiveness of demanding and lengthy microsurgical procedures.

        HERMES PLATFORM

        The modernization of the OR has resulted in numerous medical devices
that aid a surgeon, but also increase the complexity and costs of the OR. In
many instances, these devices are manually controlled and monitored by someone
other than a surgeon in response to a surgeon's spoken commands and request for
status. The HERMES Control Center is designed to enable a surgeon to directly
control multiple OR devices, including the Company's AESOP system, through
simple verbal commands. The HERMES Control Center provides standardized visual
and digitized voice feedback to a surgical team. The Company believes that the
enhanced control and feedback provided by the HERMES Control Center will improve
safety, increase efficiency, shorten procedure times and reduce costs.

        The HERMES system is comprised of a control unit which can be networked
with multiple HERMES compatible ("HERMES-Ready"(TM)) devices and is controlled
by a surgeon using simple verbal commands or an interactive touch screen
pendant. The 27 FDA-cleared devices controlled by the HERMES system include the
endoscopic camera and light source, insufflator, arthroscopic shaver and pump,
VCR, video printer, video frame grabber, operating room lights, surgical table,
electrosurgical unit, telephone and the Computer Motion AESOP system. The HERMES
system provides both visual and digitized voice feedback to the surgical team.
The visual feedback is displayed on the endoscopic video monitor and the
digitized voice feedback is device-specific. Both feedback features are
customizable by a surgeon in real time, allowing a surgeon to modify the amount
and type of feedback received.

        To leverage its proprietary voice recognition technology in the
arthroscopic and laparoscopic markets, Computer Motion has partnered with
Stryker Corporation, a leading manufacturer of endoscopic equipment. Stryker
purchases the HERMES system as an original equipment manufacturer ("OEM") and
markets the HERMES system as an integrated component with several of its
laparoscopic and arthroscopic products. The Company expects to make additional
510(k) submissions to the FDA in 2001 for HERMES control of STERIS Corporation's
next generation operating room table, lights and overhead camera, SKYTRON
Corporation's operating room lights and ConMed Corporation's electrosurgical
unit. Also, the Company plans to include HERMES-Ready devices in the ZEUS
product line for the control of key functions currently accessed by touch-screen
only.


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        Computer Motion intends to partner with other leading medical device
manufacturers to expand the number and type of devices to be integrated with the
HERMES controller, including electrocautery devices, various imaging systems and
devices for the cardiac catheter laboratory and other medical clinic
environments.

        SOCRATES PLATFORM

        The SOCRATES Telementoring System is the latest generation technology
platform currently under development by Computer Motion. SOCRATES enables remote
access to HERMES networked devices via proprietary software and standard
teleconferencing components. The SOCRATES system allows an operative surgeon to
virtually, cost effectively, and on an as-needed basis, communicate with a
remote mentor surgeon. SOCRATES enables the remote surgeon to help direct a
surgical procedure thereby augmenting the operative surgeon's prior training
experience.

        The SOCRATES system enhances the utility of the HERMES Control Center
with the AESOP-HR system by providing shared-remote control capability of the
endoscope. The SOCRATES system provides the remote surgeon with an interface to
the AESOP-HR system, enabling the remote surgeon to share control of the
endoscope with the operative surgeon. AESOP's precision and stability ensure the
remote surgeon's views are tremor-free and accurately positioned. It is common
for surgeons to remotely collaborate, however, without the SOCRATES system a
remote surgeon is typically only able to view video of a procedure and provide
feedback through video overlay and verbal commands. The SOCRATES system enhances
this collaboration by making it more interactive.

MANUFACTURING AND SUPPLIERS

        The Company's manufacturing operations are required to comply with the
FDA's Quality System Regulation ("QSR"), which addresses the design, controls,
methods, facilities and quality assurance used in manufacturing, packing,
storing and installing medical devices. In addition, certain international
markets have quality assurance and manufacturing requirements. Specifically, the
Company is subject to the compliance requirements of ISO 9001, EN46001, the
Medical Device Directive and Conformity Europeane ("CE") mark directives which
impose certain procedural and documentation requirements with respect to device
design, development, manufacturing and quality assurance activities. The Company
has obtained such certification and is subject to audit on an annual basis for
compliance. The Company's manufacturing capability to date has been limited to
manufacturing moderate quantities of its AESOP and HERMES products, and limited
quantities of its ZEUS products.

COMPETITION

        The Company is aware that there are other companies working on design
and development of both endoscope holding robots and surgical robots, as well as
voice control of medical devices. These competitive companies include, but are
not limited to, Olympus, Brock Rogers, Armstrong, Karl Storz, Intuitive
Surgical, and Seimens. Beyond direct competition, there is also significant
indirect competition. Many medical conditions that can be treated by the
Company's products can also be treated with pharmaceuticals or other medical
devices and procedures. Many of these alternative treatments are widely accepted
in the medical community and have a long history of use.

MARKETING

        The Company's products are sold throughout the world. Payment terms
worldwide are consistent with local practice. Orders are shipped as they are
received and, therefore, no material backlog has existed to date. For the year
ended December 31, 2000 the Company had one customer that accounted for
approximately 21% of the revenue for the year and 18% of accounts receivable and
a second customer that accounted for approximately 10% of the revenue for the
year and 15% of accounts receivable. At December 31, 1999 and 1998 no single
customer accounted for more than 10% of revenue or accounts receivable
respectively. In the United States, the Company sells directly to hospitals
through an employee based sales organization. In Western Europe, the Company
also has an employee based sales organization, which is principally focused on
sales in France and Germany. The Company co-markets the ZEUS product line with
Medtronic, Inc. in Europe, the Middle East and Africa. Throughout the rest of
the world, the Company uses independent distributor organizations including Kino
Corporation and the Ethicon Endo-Surgery Division of Johnson & Johnson, Inc.
Under the Company's OEM agreement with Stryker Corporation, Stryker may
distribute the Company's HERMES product for control of various Stryker
endoscopic devices on a worldwide basis.

RESEARCH AND DEVELOPMENT

        The Company's research and development function is focused on the
development of new procedures, new medical products and improvements to existing
products. In addition, research and development expense reflects the Company's
efforts to obtain FDA


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approval of certain products and processes and to maintain the highest quality
standards of existing products. The Company's research and development expenses
were $11,564,000 (53% of revenue), $9,528,000 (53% of revenue), and $7,905,000
(75% of revenue), in 2000, 1999, and 1998 respectively.

GOVERNMENT REGULATION

        The medical devices manufactured and marketed by the Company are subject
to regulation by the FDA and, in most instances, by state and foreign
governmental authorities. Under the Federal Food, Drug and Cosmetic Act, and
regulations thereunder, manufacturers of medical devices must comply with
certain policies and procedures that regulate the composition, labeling,
testing, manufacturing, packaging and distribution of medical devices. Medical
devices are subject to different levels of government approval requirements, the
most comprehensive of which require the completion of an FDA approved clinical
evaluation program and submission and approval of a pre-market approval ("PMA")
application before a device may be commercially marketed. In July 2000, the
FDA notified the Company that in the future, robotic surgical systems would be
reviewed and cleared for market under the less stringent 510(k) premarket
notification pathway that is currently applied to the AESOP and HERMES products.
The 510(k) submissions require a minimum 90 day review cycle compared to the
six-month minimum for PMA devices. However, it is likely that many FDA
submissions for ZEUS 510(k) clearance will continue to require clinical studies.

        In addition, the FDA may require testing and surveillance programs to
monitor the effect of approved products which have been commercialized, and it
has the power to prevent or limit further marketing of a product based on the
results of these post-marketing programs. The FDA also conducts inspections to
determine compliance with both good manufacturing practice regulations and
medical device reporting regulations. If the FDA were to conclude that the
Company was not in compliance with applicable laws or regulations, it could
institute proceedings to detain or seize products, issue a recall, impose
operating restrictions, assess civil penalties against employees and recommend
criminal prosecution. Furthermore, the FDA could proceed to ban, or request
recall, repair, replacement or refund of the cost of, any device manufactured or
distributed.

        The FDA also regulates record keeping for medical devices and reviews
hospital and manufacturers' required reports of adverse experiences to identify
potential problems with FDA-cleared devices. Aggressive regulatory action may be
taken due to adverse experience reports. FDA device tracking and post-market
surveillance requirements are expected to increase future regulatory compliance
costs.

        Diagnostic-related groups ("DRG") reimbursement schedules regulate the
amount the United States government, through the Health Care Financing
Administration ("HCFA"), will reimburse hospitals and doctors for the inpatient
care of persons covered by Medicare. While the Company is unaware of specific
domestic price resistance as a result of DRG reimbursement policies, changes in
current DRG reimbursement levels could have an adverse effect on its domestic
pricing flexibility.

        The Company's business outside the United States is subject to medical
device laws in individual foreign countries. These laws range from extensive
device approval requirements in some countries to requests for data or
certifications in other countries. Generally, regulatory requirements are
increasing in these countries. In addition, government funding of medical
procedures is limited and in certain instances being reduced. In the European
Economic Union ("EEU"), the regulatory systems have been harmonized and approval
to market in EEU countries can be obtained through one agency. The Company's
AESOP, HERMES and ZEUS products, are approved for CE-marking, enabling marketing
of these devices throughout the EEU countries. The Company's products are
approved for marketing in Canada. AESOP is approved in Australia, Japan, Korea
and Singapore.

PATENTS, LICENSES AND PROPRIETARY RIGHTS

        Protection of the Company's intellectual property is important to the
Company's business. The Company maintains a policy of seeking device and method
patents on its inventions, obtaining copyrights on copyrightable materials and
entering into proprietary information agreements with its employees and
consultants with respect to technology which it considers important to its
business. The Company also files for trademark registration and service mark
registration on those marks which may be used in marketing efforts with respect
to the products developed, sold and distributed by the Company. The Company also
relies upon trade secrets, unpatented know-how and continuing technological
innovation to develop and maintain its competitive position.

        The Company currently holds 23 issued United States patents, two foreign
patents and has 47 domestic and foreign patent applications pending disclosing
concepts related to medical devices and methods, medical robotics and speech
recognition applications. The Company has filed corresponding international
patent applications on certain of its key United States patents.


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        There can be no assurance that patents will issue from any of the
pending applications, or that issued patents will be of sufficient scope to
provide meaningful protection of the Company's technology. In addition, there
can be no assurance that any patents issued to the Company will not be
challenged, invalidated or circumvented, or that the rights granted thereunder
will provide proprietary protection or commercial advantage to the Company.
Notwithstanding the scope of the patent protection available to the Company, a
competitor could develop other devices or methods for enabling minimally
invasive surgical procedures that do not require the use of robotics or speech
recognition aspects of which are patented or pending patents.

        Additionally, there has been substantial litigation regarding patents
and other intellectual property rights in the medical device industry.
Litigation, which could ultimately result in substantial cost to and diversion
of effort by the Company, has been necessary and may continue to be necessary to
enforce patents issued or licensed to the Company, to protect trade secrets or
know-how owned by the Company, or to defend the Company against claimed
infringement of the rights of others and to determine the scope and validity of
the proprietary rights of others. Adverse determinations in such litigation
could subject the Company to significant liabilities to third parties, could
require the Company to seek licenses from third parties and could prevent the
Company from manufacturing, selling or using some or all of its products, any of
which could have a material adverse affect on the Company's business, financial
condition or results of operations.

        The Company believes that it has been vigilant in reviewing the patents
of others with regard to the Company's products. However, from time to time, the
Company has been and may continue to be subject to claims of, and legal actions
alleging, infringement by the Company of the patent rights of others. For
further discussion of our current or threatened litigation see the "Litigation"
section below in this Part I, Item 1.

PRODUCTS LIABILITY AND INSURANCE

        The medical device industry has historically been subject to products
liability claims. Such claims could be asserted against the Company in the
future for events not known to management at this time. Management has adopted
risk management practices, including procurement of products liability insurance
coverage, which management believes are prudent.

EMPLOYEES

        As of December 31, 2000, the Company had 184 full-time employees
including 50 employees in sales and marketing, 76 employees in research and
development, 30 employees in production and 28 employees in administration. It
has never experienced a work stoppage as a result of labor disputes and none of
its employees are represented by a labor organization.

INDUSTRY SEGMENT AND INTERNATIONAL OPERATIONS

        The medical device industry is the single industry segment in which the
Company operates. The Company's export revenues were $9,290,000 (43% of
revenue), $6,980,000 (39% of revenue), and $1,290,000 (12% of revenue) in 2000,
1999 and 1998 respectively.

        As the Company's foreign business expands, it will be subject to such
special risks as exchange controls, currency devaluation, dividend restrictions,
the imposition or increase of import or export duties and surtaxes, and
international credit or financial problems. Since its international operations
will require the Company to hold assets in foreign countries denominated in
local currencies, some assets will be dependent for their U.S. dollar valuation
on the values of several foreign currencies in relation to the U.S. dollar.

OTHER

        The Company has not been materially impacted by the effects of inflation
or deflation during 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 its control. A number of these risks
are highlighted below. These risks could affect its actual future results and
could cause them to differ materially from any forward-looking statements the
Company has made.

WE HAVE A HISTORY OF LOSSES, EXPECT TO INCUR LOSSES IN THE FUTURE AND MAY NEVER
ACHIEVE PROFITABILITY.


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        From our formation, we have incurred significant losses. We expect to
incur additional losses as we continue spending for research and development
efforts, clinical trials, manufacturing capacity and sales force improvement. As
a result, we will need to generate significant revenues to achieve and maintain
profitability. We cannot assure you that we will ever achieve significant
commercial revenues, particularly from sales of our ZEUS product line, which is
still under development and awaiting FDA clearance, or that we will become
profitable. It is possible that we may encounter substantial delays or incur
unexpected expenses related to the market introduction and acceptance of the
ZEUS platform, or any future products. Failure to achieve significant commercial
revenues and profitability would have a material adverse effect on our business,
financial condition and results of operations.

FAILURE TO RAISE ADDITIONAL CAPITAL OR GENERATE REQUIRED WORKING CAPITAL COULD
REDUCE OUR ABILITY TO COMPETE AND PREVENT US FROM TAKING ADVANTAGE OF MARKET
OPPORTUNITIES.

        Our operations to date have consumed substantial amounts of cash, and we
expect our capital and operating expenditures will exceed revenues for at least
the next year. 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 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, competing technologies, the costs of training physicians
to become proficient in the use of our products and procedures, the cost of
developing marketing and distribution capabilities, and other market and
regulatory developments. We believe that our current cash and cash equivalent
balances, and our ability to borrow under the equity line of credit obtained in
April 2001, will allow us to fund our operations for at least twelve months.
However, we may require substantial working capital to fund our business after
December 31, 2001 and will need to raise additional capital. It is anticipated
that additional funding, as needed, to support operations through and after
December 31, 2001 will be obtained from the following sources: current cash
balances, the proceeds from the exercise of warrants, and the issuance of
additional debt or equity securities. We cannot assure you that additional
capital will be available on terms favorable to us, or at all. If adequate funds
are not available or are not available on acceptable terms, our ability to fund
our operations would be significantly limited. Our business, results of
operations and financial conditions would be materially adversely affected by
any such limitation.

        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.

OUR SUCCESS RELIES ON FUTURE PRODUCTS WHICH MAY NOT OBTAIN REGULATORY APPROVAL
OR MARKET ACCEPTANCE.

        We anticipate that ZEUS will comprise a majority of our sales in the
future. ZEUS has not yet achieved regulatory clearance and is currently
undergoing clinical evaluation in FDA-approved clinical studies conducted under
an Investigational Device Exemption. Accordingly, our future success depends on
the successful development, regulatory clearance or approval, commercialization
and market acceptance of this product. Even if we are successful in obtaining
the necessary regulatory clearances or approvals for ZEUS, our successful
commercialization will depend upon our ability to demonstrate the clinical
safety and effectiveness, ease-of-use, reliability and cost-effectiveness of
these products in a clinical setting. We cannot assure you that the FDA will
allow us to conduct further clinical trials or that ZEUS will prove to be safe
and effective in clinical trials under United States or international regulatory
requirements. It is also possible that we may encounter problems in clinical
testing that cause a delay in or prohibit commercialization of ZEUS. Moreover,
the clinical trials may identify significant technical or other obstacles to
overcome prior to obtaining necessary regulatory or reimbursement approvals,
resulting in significant additional product development expense and delays. Even
if the safety and effectiveness of procedures using ZEUS is established,
surgeons may elect not to recommend the use of these products for any number of
reasons, including inadequate levels of reimbursement. Broad use of our products
will require significant surgeon training and practice, and the time and expense
required to complete such training and practice could adversely affect market
acceptance. Successful commercialization of our products will also require that
we satisfactorily address the needs of various decision makers in the hospitals
that constitute the target market for our products and to address potential
resistance to change in existing surgical methods. If we are unable to gain
market acceptance of our products, our business, financial condition and results
of operations will be materially adversely affected.

IF WE DO NOT OBTAIN AND MAINTAIN NECESSARY GOVERNMENT REGULATORY APPROVALS, WE
WILL NOT BE ABLE TO MARKET AND SELL OUR PRODUCTS IN THE UNITED STATES AND/OR IN
FOREIGN COUNTRIES.


                                       8
<PAGE>   9

        Our products in the United States are regulated as medical devices by
the FDA. The process of obtaining required regulatory approvals and clearances
can be expensive, and there can be no assurance that we obtain such approvals or
clearances on a timely basis, if at all. There can be no assurance that the FDA
will act favorably or quickly on our current submissions for approval or
clearance of our products, and we may encounter significant difficulties and
costs in our efforts to obtain FDA approvals or clearances that could delay or
preclude us from selling our products in the United States. There can be no
assurance that the FDA will not change the classification of our devices or
their policies toward review, clearance or approval, as a result of changes in
FDA staffing including reviewers of approval submissions and their managers.
Furthermore, there can be no assurance that the FDA will not request additional
data, require that we conduct further clinical trials or significantly increase
the extent and time of premarket review, causing us to incur substantial costs
and delay. In addition, there can be no assurance that the FDA will not impose
strict labeling requirements, onerous operator training requirements or other
requirements as a condition to approval or clearance. The FDA strictly prohibits
the marketing of FDA-cleared or approved medical devices for unapproved uses.
Failure to receive or delays in receipt of FDA clearances or approvals,
including as a result of the need for additional clinical trials or data as a
prerequisite to approval or clearance, or any FDA conditions that limit our
ability to market our products for particular uses or indications, could have a
material adverse effect our business, financial condition and results of
operations.

        Commercial distribution of our products in foreign countries is also
subject to varying government regulations, which could delay or restrict
marketing of our products in those countries. In addition, such regulatory
authorities may impose limitations on the use of our products. We have obtained
the CE mark for all of our products, which means these products can be sold in
all the member countries of the European Union.

        Our operations are subject to the FDA's Quality System Regulation,
ISO-9001 and EN-46001 Standards, and similar regulations in other countries
regarding the design, manufacture, testing, labeling, record keeping and storage
of devices. Ongoing compliance with FDA's Quality System Regulation requirements
and other applicable regulatory requirements will be monitored through periodic
inspection by federal and state agencies, including the FDA, and comparable
agencies in other countries. Our manufacturing processes are subject to
stringent federal, state and local regulations governing the use, generation,
manufacture, storage, handling and disposal of certain materials and wastes.
Although we believe that we have complied in all material respects with such
laws and regulations, we are still subject to periodic inspection to ensure that
we remain compliant with such laws and regulations. There can be no assurance
that we will not be required to incur significant costs in the future in
complying with such laws and regulations, that these laws and regulations will
not become more stringent making it more difficult and more costly to achieve
compliance, or that we will not be required to cease operations in the event of
our failure to effect compliance.

        Failure to comply with applicable regulatory requirements can result in,
among other things, suspensions or withdrawals of approvals, product seizures,
injunctions, recalls of products, operating restrictions, and civil fines and
criminal prosecution. Delays or failure to receive approvals or clearances for
our current submissions, or loss of previously received approvals or clearances,
would materially adversely affect the marketing of our products and our
business, financial condition and results of operations.

BECAUSE OUR MARKETS ARE HIGHLY COMPETITIVE, CUSTOMERS MAY CHOOSE TO PURCHASE OUR
COMPETITORS' PRODUCTS OR MAY NOT ACCEPT OUR PRODUCTS.

        The minimally invasive surgery market has been, and will likely continue
to be, highly competitive. Many competitors in this market have significantly
greater financial resources and experience than us. In addition, some of these
companies may be able to market their products sooner than us if they are able
to achieve regulatory approval before us. Many medical conditions that can be
treated using our products can also be treated by pharmaceuticals or other
medical devices and procedures. Many of these alternative treatments are widely
accepted in the medical community and have a long history of use. In addition,
technological advances with other procedures could make such therapies more
effective or less expensive than using our products and could render our
products obsolete or unmarketable. We cannot be certain that physicians will use
our products to replace or supplement established treatments or that our
products will be competitive with current or future technologies.

IF SURGEONS OR INSTITUTIONS ARE UNABLE TO OBTAIN REIMBURSEMENT FROM THIRD-PARTY
PAYORS FOR PROCEDURES USING OUR PRODUCTS, OR IF REIMBURSEMENT IS INSUFFICIENT TO
COVER THE COSTS OF PURCHASING OUR PRODUCTS, WE MAY BE UNABLE TO GENERATE
SUFFICIENT SALES TO SUPPORT OUR BUSINESS.


                                       9
<PAGE>   10

        In the United States, our products are primarily acquired by medical
institutions which then bill various third-party payors, such as Medicare,
Medicaid and other government programs and private insurance plans for the
healthcare services they provide their patients. Government agencies, certain
private insurers and certain other payors generally reimburse hospitals for
medical treatment at a fixed rate based on schedules established by the Health
Care Finance Administration. We believe that the procedures using our products
will be eligible for reimbursement under existing reimbursement schedules.
However, Medicare and other third-party payors are increasingly scrutinizing
whether to cover new products and the level of reimbursement. Even if a
procedure is covered by such schedules, payors may deny reimbursement if they
determine that the device used in the treatment was unnecessary, inappropriate,
not cost-effective, experimental or used for a non-approved indication. Many
international markets have government-managed healthcare systems that control
reimbursement for new products and procedures. In most markets, there are
private insurance systems, as well as governmental managed systems, that control
reimbursement for new products and procedures. Market acceptance of our products
may depend on the availability and level of reimbursement in international
markets we target.

        There can be no assurance that third-party reimbursement and coverage
for our products will be available or adequate, that current reimbursement
amounts will not be decreased in the future, or that future legislation,
regulation or reimbursement policies of third-party payors will not otherwise
affect the demand for our products or our ability to sell our products on a
profitable basis, particularly if our products are more expensive than competing
surgical or other procedures. If third-party payor coverage or reimbursement is
unavailable or inadequate, our business, financial condition and results of
operations would be materially adversely affected.

IF WE ARE UNABLE TO PROTECT THE INTELLECTUAL PROPERTY CONTAINED IN OUR PRODUCTS
FROM USE BY THIRD PARTIES, OUR ABILITY TO COMPETE IN THE MARKET WILL BE HARMED.

        Our success depends, in part, on our ability to obtain and maintain
patent protection for our products, to preserve our trade secrets, and to
operate without infringing the proprietary rights of others. We seek to protect
our proprietary positions by filing United States and foreign patent
applications related to our technology, inventions and improvements that are
important to the development of our business.

        Patent applications in the United States are maintained in secrecy until
patents issue, and patent applications in foreign countries are maintained in
secrecy for a period after filing. Publication of discoveries in the scientific
or patent literature tends to lag behind actual discoveries and the filing of
related patent applications. Patents issued and patent applications filed
relating to medical devices and robotics are numerous and there can be no
assurance that current and potential competitors and other third parties have
not filed or in the future will not file applications for, or have not received
or in the future will not receive, patents or obtain additional proprietary
rights relating to our products or processes used or proposed to be used in the
future. There can be no assurance, however, that third parties will not seek to
assert that our devices and systems infringe their patents or seek to expand
their patent claims to cover aspects of our technology. In addition, the laws of
some foreign countries do not protect our proprietary rights to the same extent
as the laws of the United States.

        There can be no assurance that we will not become subject to future
patent infringement claims or litigation in a court of law, interference
proceedings, or opposition to a patent grants in a foreign jurisdiction. The
defense and prosecution of such intellectual property suits, U.S. Patent and
Trademark Office (USPTO) interference proceedings or opposition proceedings and
related legal and administrative proceedings are costly, time-consuming, divert
the attention of management and technical personnel and could result in
substantial uncertainty regarding our future viability. Future litigation or
regulatory proceedings, which could result in substantial cost and uncertainty,
may also be necessary to enforce our patent or other intellectual property
rights or to determine the scope and validity of other parties' proprietary
rights. If we fail to protect our intellectual property rights, it could have a
material adverse effect on our business, financial condition and results of
operations.

        We also rely upon trade secrets, technical know-how and continuing
technological innovation to develop and maintain our competitive position. We
typically require our employees, consultants and advisors to execute
confidentiality and assignment of inventions agreements in connection with their
employment, consulting or advisory relationships. There can be no assurance,
however, that these agreements will not be breached or that we will have
adequate remedies for any breach. Furthermore, no assurance can be given that
competitors will not independently develop substantially equivalent proprietary
information and technologies or otherwise gain access to our proprietary
technology, or that the we can meaningfully protect our rights in unpatented
proprietary technology.

WE ARE INVOLVED IN INTELLECTUAL PROPERTY LITIGATION WITH INTUITIVE SURGICAL AND
BROOKHILL-WILK THAT MAY HURT OUR COMPETITIVE POSITION, MAY BE COSTLY TO US AND
MAY PREVENT US FROM SELLING OUR PRODUCTS.


                                       10
<PAGE>   11

        There has been substantial litigation regarding patent and other
intellectual property rights in the medical device industry and companies in the
medical device industry have employed intellectual property litigation to gain a
competitive advantage. We recently filed a lawsuit in United States District
Court alleging that that Intuitive Surgical's da Vinci surgical robot system
infringes on our United States Patent Nos. 5,524,180, 5,878,193, 5,762,458,
6,001,108, 5,815,640, 5,907,664, 5,855,583 and 6,063,095. These patents concern
methods and devices for conducting various aspects of robotic surgery. On June
30, 2000, Intuitive served its Answer and Counterclaim alleging non-infringement
of each patent-in-suit, patent invalidity and unenforceability. On or about
December 7 and 8, 2000, the USPTO granted three of Intuitive's petitions for a
declaration of an interference relating to our 5,878,193, 5,907,664 and
5,855,583 patents. An interference is a proceeding within the USPTO to resolve
questions regarding who was the first to invent the subject matter of a patent
and/or a patent application. On February 21, 2001, Brookhill-Wilk filed suit
against us alleging that our products infringe upon Brookhill-Wilk's United
States Patent Nos. 5,217,005 and 5,368,015. Brookhill-Wilk's complaint seeks
damages, attorneys' fees and increased damages alleging willful patent
infringement. We do not believe that our products currently infringe either
patent. On March 21, 2001, we served our Answer and Counterclaim alleging
non-infringement of each patent-in-suit, patent invalidity and
unenforceability.

        On March 30, 2001, Intuitive Surgical Inc. and IBM Corporation filed
suit alleging that our AESOP, ZEUS and HERMES products infringe United States
Patent No. 6,201,984 which was recently issued on March 13, 2001. The complaint
seeks damages, a preliminary injunction, a permanent injunction, and costs and
attorneys fees. A preliminary review of the claims of this patent reveals that
each claim is limited to a surgical system employing voice recognition for
control of a surgical instrument. As this patent was only recently issued and as
we have not had prior notice of the patent or the claims of this patent, we are
currently evaluating the allegations of patent infringement and the validity of
the patent.

        If we lose the counterclaim on the patent suit brought by Intuitive or
the patent infringement claimed by Brookhill-Wilk or Intuitive and IBM, we may
be prevented from selling our products without first obtaining a license to the
disputed technology from the successful party. This license could be expensive,
or could require that we license to the other party some of our own proprietary
technology, each of which result could seriously harm our business. If any of
these adverse parties are successful in their claims or counterclaims, as the
case may be, against us and are unwilling to grant us a license, we will be
required to stop selling our products that are found to infringe the successful
party's patents unless we can redesign them so they do not infringe these
patents, which we may be unable to do. Whether or not we are successful in these
lawsuits, the litigation could consume substantial amounts of our financial and
managerial resources. Further, because of the substantial amount of discovery
often involved in connection with this type of litigation, there is a risk that
some of our confidential information could be compromised by disclosure.

BECAUSE OUR INDUSTRY IS SUBJECT TO RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCT
DEVELOPMENT, OUR FUTURE SUCCESS WILL DEPEND UPON OUR ABILITY TO EXPAND THE
APPLICATIONS OF OUR PRODUCTS.

        The market for our products is characterized by rapidly changing
technology and new product introductions and enhancements. Our success will
depend to a significant extent upon our ability to enhance and expand the
utility of our products so that they gain market acceptance. We maintain
research and development programs to continually improve and refine our current
product offerings and develop new products. We cannot assure you that we will be
successful in identifying, developing, manufacturing and marketing new products
or enhancing our existing products on a timely or cost-effective basis.
Moreover, we may encounter technical problems in connection with our product
development efforts that could delay the introduction of new products or product
enhancements. Failure to develop or introduce new products or product
enhancements on a timely basis that achieve market acceptance could have a
material adverse effect our business, financial condition and results of
operations. In addition, technological advances with other therapies could make
such therapies less expensive or more effective than using our products and
could render our technology obsolete or unmarketable. There can be no assurance
that physicians will use our products to replace or supplement established
treatments or that our products will be competitive with current or future
technologies.

WE NEED TO EXPAND OUR MARKETING DISTRIBUTION ACTIVITIES IN ORDER TO MARKET OUR
PRODUCTS COMPETITIVELY.

        We anticipate significantly increasing the number of sales personnel to
more fully cover our target markets, particularly as we expand our product
offerings. It is possible we will be unable to compete effectively in
attracting, motivating and retaining qualified sales personnel. We currently
intend to market and sell our products outside the United States and Europe
principally through distributors. In order to accomplish this, we will be
required to expand our distributor network. We may not be able to identify
suitable distributors or negotiate acceptable distribution agreements. Any such
distribution agreements may not result in significant sales.

CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS, DIRECTORS AND
PRINCIPAL STOCKHOLDERS MAY PREVENT NEW INVESTORS FROM INFLUENCING SIGNIFICANT
CORPORATE DECISIONS.

        Our present directors and executive officers beneficially own
approximately 33% of our outstanding common stock. These stockholders, acting
together, have the ability to significantly influence the election of our
directors and other stockholder actions and, as a result, direct the operation
of our business, including delaying or preventing a proposed acquisition of
Computer Motion.

                                       11
<PAGE>   12

IF WE LOSE OUR KEY PERSONNEL OR ARE UNABLE TO ATTRACT AND RETAIN ADDITIONAL
PERSONNEL, OUR ABILITY TO COMPETE WILL BE HARMED.

        Our future business and operating results depend in significant part on
our key management, scientific, technical and sales personnel, many of whom
would be difficult to replace, and future success will depend partially upon our
ability to retain these persons and recruit additional qualified management,
technical, marketing, sales, regulatory, clinical and manufacturing personnel.
Competition for such personnel is intense, and we may have difficulty in
attracting or retaining such personnel.

OUR FUTURE OPERATING RESULTS MAY BE BELOW SECURITIES ANALYSTS' OR INVESTORS'
EXPECTATIONS, WHICH COULD CAUSE OUR STOCK PRICE TO DECLINE OR BE SUBJECT TO
VOLATILITY.

        Our results of operations may vary significantly from quarter to quarter
depending upon numerous factors, including the following: (i) delays associated
with the FDA and other regulatory clearance and approval processes; (ii)
healthcare reimbursement policies; (iii) timing and results of clinical trials;
(iv) demand for our products; (v) changes in pricing policies by us or our
competitors; (vi) the number, timing and significance of our competitors'
product enhancements and new products; (vii) product quality issues; and
(viii)component availability and supplier delivery performance. Our operating
results in any particular period may not be a reliable indication of our future
performance. It is likely that in some future quarters, our operating results
will be below the expectations of securities analysts or investors. If this
occurs, the price of our common stock, and the value of your investment, will
likely decline.

        The market price of our common stock is likely to be volatile and may be
affected by: (i) actual or anticipated decisions by the FDA with respect to
approvals or clearances of our or our competitors' products; (ii) actual or
anticipated fluctuations in our operating results; (iii) announcements of
technological innovations; (iv) new commercial products announced or introduced
by us or our competitors; (v) changes in third party reimbursement policies;
(vi) developments concerning our or our competitors' proprietary rights; (vii)
conditions and trends in the medical device industry; (viii) governmental
regulation; (ix) changes in financial estimates by securities analysts; and (x)
general stock market conditions.

WE DEPEND ON INDEPENDENT CONTRACT MANUFACTURERS WHO MAY ENCOUNTER PROBLEMS OR
DELAYS THAT COULD RESULT IN LOST REVENUE.

        We rely on independent contract manufacturers, some of which are single
source suppliers, for the manufacture of the principal components of our
products. Shortages of raw materials, production capacity constraints or delays
on the part of our contract manufacturers could negatively affect our ability to
ship products and derive revenue. In some instances, we rely on companies that
are sole suppliers of key components of our products. If one of theses sole
suppliers goes out of business, we could face significant production delays
until an alternate supplier is found, or until the product could be redesigned
and revalidated to accommodate a new supplier's replacement component. We do not
have experience manufacturing our products in commercial quantities. Our
manufacturing experience to date has been focused primarily on assembling
components produced by third party manufacturers for our products. In scaling up
manufacturing of new products, we may encounter difficulties involving quality
control and assurance, component availability, adequacy of control policies and
procedures, lack of qualified personnel and compliance with the FDA's Quality
System Regulations requirements. We may elect to internally manufacture
components currently provided by third parties or to implement new production
processes. We cannot assure you that manufacturing yields or costs will not be
adversely affected by a transition to in-house production or to new production
processes if such efforts are undertaken. If necessary, this expansion will
require the commitment of capital resources for facilities, tooling and
equipment and for leasehold improvements. Further, our delay or inability to
expand our manufacturing capacity or obtain the commitment of such resources
could have a material adverse effect on our business, financial condition and
results of operations.

WE RELY ON A CONTINUOUS POWER SUPPLY TO CONDUCT OUR BUSINESS, AND CALIFORNIA'S
CURRENT ENERGY CRISIS COULD DISRUPT OUR OPERATIONS AND INCREASE OUR EXPENSES.

        California is in the midst of an energy crisis that could disrupt our
operations and increase our expenses. In the event of an acute power shortage,
that is, when power reserves for the state of California fall below certain
critical levels, California has on some occasions implemented, and may in the
future continue to implement, rolling blackouts throughout California. We
currently do not have backup generators or alternate sources of power in the
event of a blackout, and our current insurance does not provide coverage for any
damages we or our customers may suffer as a result of any interruption in our
power supply. Our corporate headquarters and our manufacturing facilities are
located in California. If blackouts interrupt our power supply, we would be
temporarily unable to continue operations at our California facilities. Any such
interruption in our ability to continue operations at our facilities


                                       12
<PAGE>   13

could damage our reputation, harm our ability to retain existing customers and
to obtain new customers, and could result in lost revenue, any of which could
substantially harm our business and results of operations.

        Furthermore, the deregulation of the energy industry instituted in 1996
by the California government has caused power prices to increase. Under
deregulation, utilities were encouraged to sell their plants, which
traditionally had produced most of California's power, to independent energy
companies that were expected to compete aggressively on price. Instead, due in
part to a shortage of supply, wholesale prices have skyrocketed over the past
year. If wholesale prices continue to increase, the operating expenses
associated with our facilities located in California will likely increase which
would harm our results of operations.

THE USE OF OUR PRODUCTS COULD RESULT IN PRODUCT LIABILITY CLAIMS THAT COULD BE
EXPENSIVE AND HARM OUR BUSINESS.

        We face an inherent business risk of financial exposure to product
liability claims in the event that the use of our products results in personal
injury or death. We also face the possibility that defects in the design or
manufacture of our products might necessitate a product recall. It is possible
that we will experience losses due to product liability claims or recalls in the
future. We currently maintain product liability insurance with coverage limits
of $5,000,000, but future claims may exceed these coverage limits. We may also
require increased product liability coverage as additional potential products
are successfully commercialized. Such insurance is expensive, difficult to
obtain and may not be available in the future on acceptable terms, or at all.
Any claims against us, regardless of their merit or eventual outcome, could have
a material adverse effect upon our business, financial condition and results of
operations.

IF WE FAIL TO CONTROL AND EFFECTIVELY MANAGE OUR GROWTH, OUR ABILITY TO COMPETE
WILL BE HARMED.

        Our growth will continue to place significant demands on our management
and resources. In order to compete effectively against current and future
competitors, prepare products for clinical trials and develop future products,
we believe we must continue to expand our operations, particularly in the areas
of research and development and sales and marketing. It is likely that we will
be required to implement additional operating and financial controls, hire and
train additional personnel, install additional reporting and management
information systems and expand our physical operations. Our future success will
depend, in part, on our ability to manage future growth and we cannot assure you
that we will be successful.

THE SUBSTANTIAL NUMBER OF SHARES THAT MAY BE ISSUED TO EXISTING OPTIONEES AND
WARRANT HOLDERS IN THE NEAR FUTURE MAY CAUSE THE MARKET PRICE FOR OUR COMMON
STOCK TO DROP.

        The exercise of existing stock options and warrants, totaling 3,765,492
shares, of which 1,861,856 were exercisable at December 31, 2000, would have a
dilutive effect on the interests of current investors and may have an adverse
effect on the market price of the our common stock. We have not paid any
dividends on our Common Stock since our inception and do not contemplate or
anticipate paying any dividends upon our Common Stock in the foreseeable future.
It is currently anticipated that earnings, if any, will be used to finance the
development and expansion of our business.

ITEM 2. PROPERTIES

        The Company leases approximately 50,000 square feet of office and
manufacturing space in an office park in Goleta, California and approximately
1,300 square feet of office space in Strasbourg, France. As of December 31,
2000, the Company had the following minimum lease payments for certain
facilities: 2001-$828,000; 2002-$845,000; 2003-$869,000; 2004-$893,000 and
thereafter $1,794,000.

ITEM 3. LEGAL PROCEEDINGS

        On May 10, 2000, the Company filed suit against Intuitive Surgical Inc.
alleging that the Intuitive Surgical da Vinci surgical robot system infringes on
the Company'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, the Company filed
an amended complaint alleging that Intuitive Surgical has also infringed the
Company's recently issued United States Patent No. 6,063,095. On November 1,
2000, the Company filed another amended complaint further alleging that
Intuitive Surgical is infringing on the Company's recently issued United States
Patent No. 6,102,850. 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 Surgical served its Answer and Counterclaim
alleging non-infringement of each patent-in-suit, patent invalidity and
unenforceability. Other than a request for attorney's fees, Intuitive Surgical
has not requested any damages. The


                                       13
<PAGE>   14

Company has served discovery requests seeking a statement of the facts that
support Intuitive Surgical's defenses. Intuitive Surgical has provided partial
responses to the Company's discovery. The responses have been served under seal
and the Company is not privy to much of the information to Intuitive Surgical's
underlying intentions.

        On or about December 7 and 8, 2000, the United States Patent Office
granted three of Intuitive Surgical's petitions for a declaration of an
Interference relating to the Company's 5,878,193, 5,907,664 and 5,855,583
patents.

        On February 13, 2001, the District Court issued an order staying the
infringement action for up to one year pending decision on preliminary motions
the parties intend to bring in the interference's.

        On February 21, 2001, Brookhill-Wilk filed suit against the Company
alleging that the Company's ZEUS Platform infringes upon Brookhill-Wilks United
States Patent Nos. 5,217,005 and 5,368,015. Brookhill-Wilk's complaint seeks
damages, attorneys fees and increased damages alleging willful patent
infringement. The Company does not believe that its ZEUS Platform currently
infringes either patent. On March 21, 2001, the Company served its Answer and
Counterclaim alleging non-infringement of each patent-in-suit, patent invalidity
and unenforceability.

        On March 30, 2001, Intuitive Surgical Inc. and IBM Corporation filed
suit alleging that the Company's AESOP, ZEUS and HERMES products infringe United
States Patent No. 6,201,984 which was recently issued on March 13, 2001. The
complaint seeks damages, a preliminary injunction, a permanent injunction, and
costs and attorneys fees. A preliminary review of the claims of this patent
reveals that each claim is limited to a surgical system employing voice
recognition for control of a surgical instrument. As this patent was only
recently issued and as the Company has not had prior notice of this patent or
the claims of this patent, the Company is currently evaluating the allegations
of patent infringement and the validity of the patent.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        Not applicable.

ITEM 4A. EXECUTIVE OFFICERS OF THE COMPANY

        Information on executive officers is set forth below:

<TABLE>
<CAPTION>
NAME                          AGE                           POSITION
----                          ---                           --------
<S>                           <C>         <C>
Robert W. Duggan              56          Chairman of the Board and Chief Executive Officer
Yulun Wang                    41          Chief Technical Officer, Founder and Director
Gordon L. Rogers              47          Vice President, Chief Financial Officer and Secretary
William J. Meloche            57          Executive Vice President of Sales and Marketing
Richard J. DeRisio            56          Vice President of Clinical, Regulatory and Quality Affairs
David A. Stuart               44          Vice President of Operations
Gregory J. Ruehle             49          Vice President of Global Sales
</TABLE>


        ROBERT W. DUGGAN has been Chief Executive Officer since October 1997,
and Chairman of the Board of Directors since 1990. Mr. Duggan has been a private
venture investor for more than 25 years, and has participated as a director of,
investor in and advisor to numerous small and large businesses in the medical
equipment, computer local and wide area network, PC hardware and software
distribution, digital encryption, consumer retail goods and outdoor media
communications industries. He has also assisted in corporate planning, capital
formation and management for his various investments. He is a member of the
University of California, Santa Barbara Foundation Board of Trustees, as well as
the University's Engineering Steering Committee.

        YULUN WANG, PH.D, has been Chief Technical Officer of the Company since
January 1996, and a Director since 1990, and has served in numerous other
capacities since he founded the Company in 1989. Dr. Wang is the principal
architect of the company's product strategy and inventor of many of the
technologies that are used to create the company's products. Dr. Wang has more
than 40 publications, and holds more than two dozen patents and patents pending.
He frequently gives presentations at major medical meetings on the future of
robotics and computers in the field of surgery. Prior to founding the company,
Dr. Wang taught at the University of California, Santa Barbara. He has also been
the recipient of many research grants from NASA, National Institute of Health,
and Defense Advanced Research Projects Agency (DARPA). Dr. Wang received his
B.S., M.S., and Ph.D. in electrical engineering from the University of
California, Santa Barbara.

        GORDON L. ROGERS joined the Company as Vice President / Chief Financial
Officer in March 2000. From 1999 to 2000, Mr. Rogers served as Vice President of
Finance at ViroLogic, Inc. a medical biotechnology company. Previously, he spent
five years at Nellcor Puritan Bennett, Inc., one of the world's largest medical
device manufacturers, most recently as Controller for Worldwide Field
Operations.


                                       14
<PAGE>   15

        WILLIAM J. MELOCHE joined the Company as Executive Vice President of
Sales and Marketing in July of 2000. Mr. Meloche was formerly president and CEO
of Meloche Communications International, a communications agency focused on
strategic marketing to global markets. Previous clients include American
Express, Air Canada, Timex and Toyota Corporation. He is a respected
communications innovator and the architect of the Customer Care Process, as
practiced by several leading service corporations.

        RICHARD J. DERISIO joined the Company as Vice President Clinical,
Regulatory and Quality Affairs in December 1999. Mr. DeRisio has held similar
positions at several medical device companies including Biosense Webster, Inc.,
a Johnson & Johnson Company, Sorin Biomedical Inc, Ventritex, Inc., Pfizer's
Hospital Products Group, the Ortho Diagnostics Division of Johnson & Johnson and
Johnson & Johnson Corporate Sterilization Sciences Group. Mr. DeRisio has also
held positions with the FDA involving engineering support to field offices,
management of FDA's foreign inspection program, and review of GMP compliance,
regulatory actions and product submissions for medical devices.

        DAVID A. STUART joined the Company as Vice President of Operations in
June 1996. From 1992 to 1996, Mr. Stuart served as Director of Materials at
Quantum Corporation, a disk drive manufacturer. Previously, he was Director of
Materials and Manager of Manufacturing Finance for LTX Corporation, a
manufacturer of semi-conductor test equipment. Mr. Stuart currently serves as a
board member of the American Management Association Executive Council for
Strategic Supply Management and Manufacturing.

        GREGORY J. RUEHLE joined the Company as Vice President of Global Sales
in July 1999. In January of 2001, Mr. Ruehle left the Company.


                                       15
<PAGE>   16

                                     PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS

        The Company's common stock is quoted on the NASDAQ National Market under
the symbol "RBOT." The high and low sale prices for the Company's common stock
during 2000 and 1999 are set forth below.

<TABLE>
<CAPTION>
                                                               HIGH       LOW
                                                               ----       ---
<S>                                                          <C>       <C>
Year Ended December 31, 2000
Fourth Quarter..........................................     $   9.94  $  3.00
Third Quarter...........................................     $  13.00  $  6.25
Second Quarter..........................................     $   9.63  $  5.88
First Quarter...........................................     $  11.31  $  9.00
</TABLE>


<TABLE>
<CAPTION>
                                                               HIGH       LOW
                                                               ----       ---
<S>                                                          <C>       <C>
Year Ended December 31, 1999
Fourth Quarter..........................................     $  14.38  $  9.50
Third Quarter...........................................     $  14.75  $  9.38
Second Quarter..........................................     $  11.25  $  8.63
First Quarter...........................................     $  14.13  $  8.38
</TABLE>

        The stock market has from time to time experienced significant price and
volume fluctuations that are unrelated to the operating performance of
particular companies. Like the stock prices of other medical device companies,
the market price of the Company's common stock has been and will be, subject to
significant volatility. Factors such as reports on the clinical efficacy and
safety of the Company's products, government approval status, fluctuations in
the Company's operating results, announcements of technological innovations or
new products by the Company or its competitors, changes in estimates of the
Company's performance by securities analysts, failure to meet securities
analysts' expectations and developments with respect to patents or proprietary
rights, may have a significant effect on the market price of the common stock.
In addition, the price of the Company's common stock could be affected by stock
price volatility in the medical device industry or the capital markets in
general without regard to the Company's operating performance.

        The Company currently intends to retain future earnings to fund the
development and growth of its business and, therefore, does not anticipate
paying cash dividends within the foreseeable future. Any future payment of
dividends will be determined by the Company's Board of Directors and will depend
on the Company's financial condition, results of operations and other factors
deemed relevant by its Board of Directors at the time. As of March 31, 2001,
there were approximately 3,200 shareholders of record.

        The Company's Registration Statement on Form S-1 filed with the
Securities Exchange Commission (Registration No. 333-29505) for 2,875,000 shares
of its common stock was declared effective on August 11, 1997. Proceeds from the
offering, net of underwriting discounts and commissions and direct offering
expenses, were $36,740,000. During 1999, the Company used $1,280,000 of these
proceeds. The proceeds were principally used to support the cash loss from
operations, increase working capital and purchase property and equipment. The
primary source of funding for operations in 2000 was from the proceeds of
common stock issued, warrants exercised and note payable to shareholder.


                                       16
<PAGE>   17

ITEM 6. SELECTED FINANCIAL DATA

        The following table summarizes certain selected financial data and is
qualified by reference to, and should be read in conjunction with, the Company's
consolidated financial statements and with "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included in the Company's 2000
Annual Report to Shareholders. The selected financial data is derived from
consolidated financial statements that have been audited by Arthur Andersen LLP,
independent public accountants.

<TABLE>
<CAPTION>
                                   YEARS ENDING DECEMBER 31.
                              (IN THOUSANDS EXCEPT PER SHARE DATA)
                             --------------------------------------
                               2000           1999           1998
                             --------       --------       --------
<S>                          <C>            <C>            <C>
Revenue                      $ 21,732       $ 18,058       $ 10,586

Net loss                     $(16,349)      $(13,375)      $(11,545)

Net loss per share           $  (1.90)      $  (1.57)      $  (1.45)

Weighted average common
shares outstanding              9,309          8,503          7,959

Total assets                 $ 23,089       $ 23,361       $ 30,444

Long-term liabilities        $  1,475       $  1,073       $    131
</TABLE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION

        The information set forth under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's 2000
Annual Report to Shareholders is incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        The Company's financial instruments include cash and short-term
investment grade debt securities. At December 31, 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 overall
currency exposure at December 31, 2000.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The following Consolidated Financial Statements of the Company and
Report of Independent Public Accountants set forth in the Company's 2000 Annual
Report to Shareholders are incorporated herein by reference:

        Report of Independent Public Accountants

        Consolidated Statements of Operations - Years ended December 31, 2000,
1999 and 1998

        Consolidated Balance Sheets - December 31, 2000 and 1999

        Consolidated Statements of Shareholders' Equity (Deficit) - Years ended
December 31, 2000, 1999 and 1998

        Consolidated Statements of Cash Flows - Years ended December 31, 2000,
1999 and 1998

        Notes to Consolidated Financial Statements

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.


                                       17
<PAGE>   18

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

        The information required hereunder is incorporated by reference to the
Company's Proxy Statement under the heading "Directors and Executive Officers
of the Registrant" to be filed within 120 days of December 31, 2000 in
connection with its Annual Meeting of Stockholders.

ITEM 11. EXECUTIVE COMPENSATION

        The information required hereunder is incorporated by reference to the
Company's Proxy Statement under the headings "Executive Compensation",
"Compensation Committee Interlocks and Insider Participation" and "Stock
Performance Graph" to be filed within 120 days of December 31, 2000 in
connection with its Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

        The information required hereunder is incorporated by reference to the
Company's Proxy Statement under the heading "Security Ownership of Beneficial
Owners" to be filed within 120 days of December 31, 2000 in connection with its
Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information required hereunder is incorporated by reference to the
Company's Proxy Statement under the heading "Compensation Committee Interlocks
and Insider Participation" to be filed within 120 days of December 31, 2000 in
connection with its Annual Meeting of Stockholders.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) LIST OF DOCUMENTS FILED AS PART OF THIS REPORT

        (1) FINANCIAL STATEMENTS

See Index to Financial Statements and Schedule on page F-1.

        (2) REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS -- SCHEDULE II -- VALUATION
            AND QUALIFYING ACCOUNTS

        (3) FINANCIAL STATEMENT SCHEDULE

See Index to Financial Statements and Schedule on page F-1.

        (4) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
  NO.                              DESCRIPTION
-------                            -----------
<S>          <C>
  3.1        Second Amended and Restated Certificate of Incorporation.*

  3.2        Bylaws of the Company.*

 10.1        Computer Motion, Inc. Tandem Stock Option Plan.*

 10.2        Development and Supply Agreement between the Stryker Endoscopy
             Division of Stryker Corporation and the Company dated August 21,
             1996.*(1)

 10.3        Registration Agreement between the Company and certain
             shareholders.*

 10.4        Sales Agreement between the Company and Medtronic, Inc. dated May
             28, 1997.*(1)

 10.5        Form of Warrant to Purchase Common Stock issued in connection with
             Bridge Financing Agreements.*

 10.6        Purchaser Representation and Subscription Agreement relating to the
             Company's Series E Preferred Stock and Warrant to Purchase Common
             Stock.*

 10.7        Form of Redeemable Warrant to Purchase Common Stock of the Company
             issued in conjunction with the Company's Series E Preferred Stock.*

 10.8        Business Agreement between the Company and Bulova Technologies,
             L.L.C. dated February 18, 1997.*(1)

 10.9        Lease between the Company and University Business Center Associates
             dated March 1, 1994 and amendment
</TABLE>


                                       18
<PAGE>   19

<TABLE>
<S>          <C>
             thereto dated October 19, 1996.*

 10.10       Form of Indemnification Agreement for Officers and Directors of the
             Company.*

 10.12       Computer Motion, Inc. Employee Stock Purchase Plan, as amended
             through September 30, 1997.**

 10.13       Leases between the Company and University Business Center
             Associates dated September 19, 1997.**

 10.14       Computer Motion, Inc. 1997 Stock Incentive Plan*

 10.15       Stock Purchase Agreement between the Company and the Investors
             listed on Schedule A thereto, dated June 29, 2000.***

 10.16       Promissory Note between the Company and Robert W. Duggan, dated
             July 25, 2000.***

 10.17       Form of Redeemable Warrant to Purchase common stock of Computer
             Motion, Inc.***

 10.18       Promissory Note between the Company and Robert W. Duggan, dated
             December 12, 2000.

 13.1        Management's Discussion and Analysis of Financial Condition and
             Results of Operations and Consolidated Financial Statements from
             the 2000 Annual Report to Shareholders.

 21.1        Subsidiaries of the Company.

 23.1        Consent of Arthur Andersen LLP.
</TABLE>

------------

*   Incorporated by reference to the Company's Form S-1 Registration Statement
    No. 333-29505 declared effective August 11, 1997.

**  Incorporated by reference to the Company's Annual Report on Form 10-K for
    the year ended December 31, 1997.

*** Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
    the period ended September 30, 2001.

(1) Registrant has sought confidential treatment pursuant to Rule 406 for a
    portion of the referenced exhibit and has separately filed such exhibit with
    the Commission.

(b) REPORTS ON FORM 8-K

        None.

(c) EXHIBITS

        See Item 14(a)(3) of this Report.


                                       19
<PAGE>   20

                                   SIGNATURES

Pursuant to the requirements of Sections 13 or 15(d) 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.


                                            COMPUTER MOTION, INC.


April 13, 2001                              /s/     Robert W. Duggan
--------------                              ------------------------------------
Date                                        Robert W. Duggan
                                            Chairman and Chief Executive Officer
                                            (Principal Executive Officer)


April 13, 2001                              /s/     Gordon L. Rogers
--------------                              ------------------------------------
Date                                        Gordon L. Rogers
                                            Executive Vice President, Chief
                                            Financial Officer and Secretary
                                            (Principal Financial and Accounting
                                            Officer)

        Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the date indicated.


<TABLE>
<S>                                            <C>                     <C>
/s/      Daniel R. Doiron                      Director                April 13, 2001
-----------------------------------
Daniel R. Doiron


/s/      Robert W. Duggan                      Director                April 13, 2001
-----------------------------------
Robert W. Duggan


/s/      M. Jacqueline Eastwood                Director                April 13, 2001
-----------------------------------
M. Jacqueline Eastwood


/s/      Jeffery O. Henley                     Director                April 13, 2001
-----------------------------------
Jeffrey O. Henley


/s/      Yulun Wang                            Director                April 13, 2001
-----------------------------------
Yulun Wang
</TABLE>


                                       20
<PAGE>   21

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors
  of Computer Motion, Inc.

Our audit was made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. Schedule II- Valuation and
Qualifying Accounts is presented for purposes of additional analysis and is not
a required part of the basic consolidated financial statements. This
information has been subjected to the auditing procedures applied in our audit
of the basic consolidated financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic consolidated financial
statements taken as a whole.


/s/ ARTHUR ANDERSEN
-----------------------
    Arthur Andersen LLP


Los Angeles, California
April 10, 2001
<PAGE>   22

                              COMPUTER MOTION, INC.

                          YEAR ENDED DECEMBER 31, 2000

                 SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS


<TABLE>
<CAPTION>
                                            BALANCE AT
                                             BEGINNING                                            BALANCE AT
             DESCRIPTION                     OF PERIOD        ADDITIONS       DEDUCTIONS         END OF PERIOD
-----------------------------------     -----------------  --------------  ----------------  -----------------
<S>                                     <C>                <C>             <C>               <C>
Year ended December 31, 2000
  Allowance for doubtful accounts           $1,203,000       $  931,000        $760,000          $1,374,000

Year ended December 31, 1999
  Allowance for doubtful accounts              254,000        1,068,000         119,000           1,203,000

Year ended December 31, 1998
  Allowance for doubtful accounts               62,000          298,000         106,000             254,000
</TABLE>






                                       21
<PAGE>   23

                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
  NO.                              DESCRIPTION
-------                            -----------
<S>          <C>
  3.1        Second Amended and Restated Certificate of Incorporation.*

  3.2        Bylaws of the Company.*

 10.1        Computer Motion, Inc. Tandem Stock Option Plan.*

 10.2        Development and Supply Agreement between the Stryker Endoscopy
             Division of Stryker Corporation and the Company dated August 21,
             1996.*(1)

 10.3        Registration Agreement between the Company and certain
             shareholders.*

 10.4        Sales Agreement between the Company and Medtronic, Inc. dated May
             28, 1997.*(1)

 10.5        Form of Warrant to Purchase Common Stock issued in connection with
             Bridge Financing Agreements.*

 10.6        Purchaser Representation and Subscription Agreement relating to the
             Company's Series E Preferred Stock and Warrant to Purchase Common
             Stock.*

 10.7        Form of Redeemable Warrant to Purchase Common Stock of the Company
             issued in conjunction with the Company's Series E Preferred Stock.*

 10.8        Business Agreement between the Company and Bulova Technologies,
             L.L.C. dated February 18, 1997.*(1)

 10.9        Lease between the Company and University Business Center Associates
             dated March 1, 1994 and amendment thereto dated October 19, 1996.*

 10.10       Form of Indemnification Agreement for Officers and Directors of the
             Company.*

 10.12       Computer Motion, Inc. Employee Stock Purchase Plan, as amended
             through September 30, 1997.**

 10.13       Leases between the Company and University Business Center
             Associates dated September 19, 1997.**

 10.14       Computer Motion, Inc. 1997 Stock Incentive Plan*

 10.15       Stock Purchase Agreement between the Company and the Investors
             listed on Schedule A thereto, dated June 29, 2000.***

 10.16       Promissory Note between the Company and Robert W. Duggan, dated
             July 25, 2000.***

 10.17       Form of Redeemable Warrant to Purchase common stock of Computer
             Motion, Inc.***

 10.18       Promissory Note between the Company and Robert W. Duggan, dated
             December 12, 2000.

 13.1        Management's Discussion and Analysis of Financial Condition and
             Results of Operations and Consolidated Financial Statements from
             the 2000 Annual Report to Shareholders.

 21.1        Subsidiaries of the Company.

 23.1        Consent of Arthur Andersen LLP.
</TABLE>

------------

*   Incorporated by reference to the Company's Form S-1 Registration Statement
    No. 333-29505 declared effective August 11, 1997.

**  Incorporated by reference to the Company's Annual Report on Form 10-K for
    the year ended December 31, 1997.

*** Incorporated by reference to the Company's Quarterly Report on Form 10-Q for
    the period ended September 30, 2001.

(1) Registrant has sought confidential treatment pursuant to Rule 406 for a
    portion of the referenced exhibit and has separately filed such exhibit with
    the Commission.