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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

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                                   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, 1999

                          COMMISSION FILE NO. 000-22755

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


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


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


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

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        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
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                                (Title of Class)

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         Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months; 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 $65.9 million at March 30, 2000, when the
closing sale price of such stock as reported on the NASDAQ National Market was
$9.50 per share.

         The number of shares outstanding of the Registrant's Common Stock,
$.001 par value, as of March 30, 2000 was 8,823,638 shares.

         Portions of the Annual Report to Shareholders for the year ended
December 31, 1999 are incorporated by reference in Parts II and IV. Portions of
the Proxy Statement for the Company's Annual Meeting of stockholders to be held
on June 15, 2000 are incorporated by reference in Part III.

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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 is 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's products are intended to provide better visualization and improved
dexterity for the surgeon, particularly for minimally invasive techniques.

         The Company currently markets the Automated Endoscopic System for
Optimal Positioning ("AESOP(R)"), a surgical robot capable of positioning an
endoscope in response to a surgeon's verbal commands. AESOP approximates the
form and function of a human arm and allows control of the endoscope through
simple verbal commands, eliminating the need for a member of a surgical staff to
manually control the camera, while providing a more stable and sustainable
endoscopic image. The Company estimates that over 85,000 MIS procedures have
been successfully assisted by 475 AESOP systems in 400 hospitals and surgery
centers around the world.

         The Company's product development strategy is intended to leverage the
AESOP system's broad-based technology platform, and lead to a family of products
that improves the control of devices in the operating room and enables new
minimally invasive surgical procedures. To centralize and simplify control of
the OR, Computer Motion is developing the HERMES(TM) Control Center for the
voice control of medical devices in the operating room. To enable new minimally
invasive microsurgery procedures, such as endoscopic coronary artery bypass
grafting ("E-CABG(TM)"), the Company is developing the ZEUS(TM) Robotic Surgical
System.

         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 can improve
safety, increase efficiency, shorten procedure times and reduce costs.


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         The ZEUS Robotic Surgical System is 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 Company believes that the ZEUS system will improve a
surgeon's dexterity and precision and enhance visualization of, and access to,
confined operative sites. The Company believes that new MIS procedures performed
with the ZEUS system can, like currently available MIS procedures, result in
reduced pain and trauma, fewer complications, lessened cosmetic concerns and
shortened convalescent periods and will increase the number of patients
qualified for certain surgical procedures.

AESOP PRODUCT LINE

         The Computer Motion AESOP system is a surgical robot capable of
positioning an endoscope (a specially designed optical tube which, when
connected to a medical video camera and light source, is passed into the body to
allow the surgeon to view the operative site on a video monitor) in response to
a surgeon's verbal commands. This allows the surgeon to have very direct control
over the endoscope in minimally invasive surgical procedures.

         The Company believes that 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 first introduced in the fourth quarter 1994. Since then,
the Company estimates that over 85,000 minimally invasive surgical procedures
have been successfully assisted by AESOP in 400 hospitals and surgery centers
around the world.

         AESOP 2000 with Voice Control was introduced in the fourth quarter
1996. The AESOP 3000 platform, introduced in December 1997, is the world's first
FDA-cleared surgical robot capable of assisting in new 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.

         Computer Motion is leveraging the core technologies underlying the
AESOP platform to develop the HERMES Control Center and the ZEUS Robotic
Surgical System.

HERMES PRODUCT LINE

         The Computer Motion HERMES Control Center is designed to serve as a
centralized and simplified interface for a surgeon to voice-control multiple
medical devices in the operating room. The HERMES system has the potential to
increase the effectiveness of a surgical team by enhancing the efficiency and
safety of surgical procedures, while reducing operating room 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 devices controlled by the HERMES system which are currently
FDA-cleared include the endoscopic camera and light source, insufflator,
arthroscopic shaver, VCR, video printer, video frame grabber 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 2000 for HERMES control of Valleylab's
electrocautery unit and Berchtold Corporation's OR overhead cameras and lights.
Also, the Company plans to begin marketing STERIS Corporation's OR table and
overhead cameras.

         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.


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ZEUS PRODUCT LINE

         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. Additionally, the Company believes that an increase in minimally
invasive procedures would result in lower overall healthcare costs to patients,
hospitals and healthcare payors.

         The ZEUS platform consists 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 filed an Investigational Device Exemption
supplement with the FDA to gain approval to begin a multi-center, pivotal
clinical evaluation of the product in 2000. The Company intends to sell the ZEUS
system on a direct basis in North America and co-market the ZEUS system with
Medtronic, Inc., a leading manufacturer of medical devices, in Europe, the
Middle East and Africa.

         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 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 1-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
or her range of motion to complete a particular movement, such as suturing,
without having to physically contort his or 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 manually manipulate 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 TACTILE FEEDBACK. The ZEUS platform is designed to provide a surgeon
with computerized, scalable feedback, which enhances and amplifies the surgeon's
sense of touch while grasping delicate tissue as compared to traditional
minimally invasive surgical instruments.

ENHANCED VISUALIZATION. The ZEUS platform incorporates a robotic arm, which
controls the endoscope to produce a steady, magnified video image, 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 5 millimeter ports.


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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 these enhanced ergonomics can extend the professional lives of surgeons
and increase the efficiency and effectiveness of demanding and lengthy
microsurgical procedures.

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 and 9002
certification 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 product and limited quantities
of its HERMES and ZEUS products. The Company does not have experience
manufacturing its products in the volumes that will be necessary to achieve
significant commercial sales. The Company may encounter difficulties in scaling
up production of its products, in procuring the necessary supply of materials,
components and contract services, or in hiring and training additional
manufacturing personnel to support domestic and international demand. If the
Company is unable to achieve commercial-scale production capability on a timely
basis with acceptable quality and manufacturing yields and costs, or to achieve
FDA and other governmental approvals, the ability of the Company to deliver
products on a timely basis could be impaired.

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. Beyond direct competition, there is
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 exists. No distributor organization
or single customer accounted for more than 10% of 1999 revenue. In the United
States, the Company sells directly to hospitals through an employee-based sales
organization. In Western Europe, the Company is developing an employee-based
sales organization, which will be 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 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 medical products and improvements to existing products. In
addition, research and development expense reflects the Company's efforts to
obtain FDA approval of certain products and processes and to maintain the
highest quality standards of existing products. The Company's research and
development expenses were $9,528,000 (53% of revenue), $7,905,000 (75% of
revenue), and $4,149,000 (63% of revenue) in 1999, 1998 and 1997, 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. The Company's ZEUS
product is subject to a PMA application.


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         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 recordkeeping 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. All the Company's
products, AESOP, HERMES and ZEUS, 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 19 issued United States patents, one
European patent and has 32 domestic and foreign patent applications pending
disclosing concepts related to medical devices and methods, medical robotics and
speech recognition applications. More particularly, the Company has issued
patents protecting several key aspects of its AESOP and ZEUS product lines. The
Company has additional patent applications pending disclosing key aspects of its
ZEUS Robotic Surgical System, as well as key aspects of its HERMES Control
Center. The Company has filed corresponding international patent applications on
certain of its key United States patents.

         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 result in substantial cost to and diversion of effort by
the Company, may 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 litigation could subject the Company to significant
liabilities to third parties, could require the Company to seek


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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.

         From time to time, the Company may be subject to claims of, and legal
actions alleging, infringement by the Company of the patent rights of others.
The Company believes that it has been vigilant in reviewing the patents of
others with regard to the Company's products. The Company is not currently a
party to any patent litigation or other litigation regarding proprietary rights
and is not aware of any challenge to its patents or proprietary rights

PRODUCTS LIABILITY AND INSURANCE

         The medical device industry has historically been subject to product
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, 1999, the Company had 161 full-time employees
including 44 employees in Sales and Marketing, 73 employees in Research and
Development, 26 employees in Production and 18 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 $6,143,000 (34% of
revenue), $1,225,000 (12% of revenue), and $1,871,000 (28% of revenue) in 1999,
1998 and 1997, 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 1999.

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.

         THE COMPANY HAS NEVER OPERATED PROFITABLY. The Company has incurred
significant losses from its inception to date. Further, the Company expects to
incur additional losses as it increases spending for marketing, research and
development efforts, clinical trials, manufacturing capacity and sales force
improvement. The Company cannot assure you that it will ever achieve significant
commercial revenues, particularly from sales of the ZEUS product line, which has
not yet received regulatory clearance from the FDA, or that the Company will
become profitable. It is possible that the Company may encounter substantial
delays or incur unexpected expenses related to the market introduction and
acceptance of the ZEUS platform, or any future products.

         RELIANCE ON FUTURE PRODUCTS AND UNCERTAINTY OF REGULATORY APPROVAL AND
MARKET ACCEPTANCE. The Company anticipates that HERMES and ZEUS platforms will
comprise a substantial majority of its sales in the future. Accordingly, the
future success of the Company depends on the successful development, regulatory
clearance or approval, commercialization and market acceptance of these
products. Even if the Company is successful in obtaining the necessary
regulatory clearances or approvals for the HERMES and ZEUS platforms, their
successful commercialization will depend upon the Company's ability to
demonstrate the clinical safety and effectiveness, ease-of-use, reliability and
cost-effectiveness of these products in a clinical setting. The HERMES system
has only recently begun to be marketed and the ZEUS system has been used in over
120 procedures, 40 of these being in the United States as part of the
Investigational Device Exemption ("IDE") application to the FDA. In order to


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conduct a multi-center clinical trial with the ZEUS system, the Company must
submit and obtain approval from the FDA of an IDE application. The Company can
not assure you that the FDA will allow it to conduct clinical trials or that the
ZEUS system will prove to be safe and effective in clinical trials under United
States or international regulatory requirements. It is also possible that the
Company may encounter problems in clinical testing that cause a delay in, or
prohibit commercialization of, the ZEUS system. 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 efficacy of procedures using the ZEUS platform 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 the 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.

GOVERNMENT REGULATION. The Company's products in the United States are regulated
as medical devices by the FDA. The process of obtaining United States regulatory
approvals and clearances is lengthy, expensive and uncertain. Commercial
distribution of the products in foreign countries is also subject to varying
government regulations, which could delay or restrict marketing of its products
in those countries. In addition, such regulatory authorities may impose
limitations on the use of its products. The Company has obtained the CE-Mark for
all of its products which means these products can be sold in all the member
countries of the European Union. The manufacturing operations are subject to the
FDA's Quality System Regulations and similar regulations in other countries
regarding the manufacturing, testing, labeling, recordkeeping and storage of
devices and the failure to maintain compliance would have an adverse effect on
the Company's operations.

INTENSE COMPETITION. 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 this Company. Many
medical conditions that can be treated using the Company's products,
particularly the ZEUS system, 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 the Company's products and could render
its products obsolete or unmarketable. The Company cannot be certain that
physicians will use its products to replace or supplement established treatments
or that its products will be competitive with current or future technologies.

LIMITATIONS ON THIRD-PARTY REIMBURSEMENT. In the United States, the Company's
products will be acquired primarily 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. The Company
believes that the procedures using its 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 the Company's products may depend
on the availability and level of reimbursement in international markets it
targets. The Company cannot be certain that it will obtain reimbursement in any
country within a particular time, or at all.

DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY. The Company's success will
depend, in part, on its ability to obtain and maintain patent protection for its
products, to preserve its trade secrets, and to operate without infringing the
proprietary rights of others. The Company seeks to protect its proprietary
positions by filing United States and foreign patent applications related to its
technology, inventions and improvements that are important to the development of
business. The Company can not be certain that its issued patents or any patents
that may be issued will not be challenged, invalidated or circumvented in the
future. Further, it is possible that competitors, many of which have
substantially more resources than the Company and have made substantial
investments in competing technologies, will apply for and obtain patents that
will prevent, limit or interfere with the Company's ability to make, use or sell
its products either in the United States or internationally. The Company cannot
assure you that it will not become subject to patent infringement claims or
litigation.

RAPID TECHNOLOGICAL CHANGE AND NEW PRODUCT DEVELOPMENT. The market for the
Company's products is characterized by rapidly changing technology and new
product introductions and enhancements. Its success will depend to a significant
extent upon the Company's ability to enhance and expand the utility of its
products so that they gain market acceptance.


                                       8


<PAGE>   9

The Company maintains research and development programs to continually improve
and refine its current product offerings and develop new products. The Company
cannot assure you that it will be successful in identifying, developing,
manufacturing and marketing new products or enhancing its existing products on a
timely or cost-effective basis. Moreover, the Company may encounter technical
problems in connection with its product development efforts that could delay the
introduction of new products or product enhancements.

CONTROL BY MANAGEMENT. The Company's present directors and executive officers
beneficially own approximately 25% of the Company's outstanding common stock.
These shareholders, acting together, have the ability to significantly influence
the election of the Company's directors and other shareholder actions and, as a
result, direct the operation of its business, including delaying or preventing
a proposed acquisition of the Company.

DEPENDENCE ON KEY PERSONNEL. The Company's future business and operating results
depend in significant part on its key management, scientific, technical and
sales personnel, many of whom would be difficult to replace, and future success
will depend partially upon the Company's 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 the Company may have difficulty in attracting or retaining such
personnel.

FLUCTUATIONS IN OPERATING RESULTS AND MARKET VOLATILITY. The Company's 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 the Company's products; (v) changes in pricing policies by the Company or
its competitors; (vi) the number, timing and significance of competitors'
product enhancements and new products; and (vii) product quality issues.

The market price of the Company's 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 the Company's or its competitors' products; (ii)
actual or anticipated fluctuations in operating results; (iii) announcements of
technological innovations; (iv) new commercial products announced or introduced
by the Company or its competitors; (v) changes in third-party reimbursement
policies; (vi) developments concerning the Company's or its 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.

EXPANSION OF MARKETING ACTIVITIES AND LIMITED DISTRIBUTION. The Company
anticipates significantly increasing the number of sales personnel to more fully
cover its target markets, particularly as the Company expands its product
offerings. It is possible the Company will be unable to compete effectively in
attracting, motivating and retaining qualified sales personnel. The Company
currently intends to market and sell its products outside the United States and
Europe principally through distributors. In order to accomplish this, the
Company will be required to expand its distributor network. The Company may not
be able to identify suitable distributors or negotiate acceptable distribution
agreements. Any such distribution agreements may not result in significant
sales.

DEPENDENCE ON INDEPENDENT CONTRACT MANUFACTURERS AND LIMITED MANUFACTURING
EXPERIENCE. The Company relies on independent contract manufacturers, some of
which are single source suppliers, for the manufacture of the principal
components of the AESOP system. Shortages of raw materials, production capacity
constraints or delays on the part of the contract manufacturers could negatively
affect the Company's ability to ship products and derive revenue. The Company
does not have experience manufacturing its products in commercial quantities.
Its manufacturing experience to date has been focused primarily on assembling
components produced by third-party manufacturers for the AESOP system. The
Company's manufacturing activities to date with respect the HERMES and ZEUS
systems have consisted primarily of manufacturing a limited number of products.
In scaling up manufacturing of new products, the Company may encounter
difficulties involving quality control and assurance, component availability,
adequacy of control policies and procedures, lack of qualified personnel and
compliance with FDA's Quality System Regulations requirements. The Company may
elect to internally manufacture components currently provided by third parties
or to implement new production processes. The Company can not 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.

RISK OF PRODUCT LIABILITY CLAIMS. The Company faces an inherent business risk of
financial exposure to product liability claims in the event that the use of its
products results in personal injury or death. The Company also faces the
possibility that defects in the design or manufacture of its products might
necessitate a product recall. It is possible that the Company will experience
losses due to product liability claims or recalls in the future. The Company
currently maintains product liability insurance with coverage limits of
$5,000,000, but future claims may exceed these coverage limits.


                                       9


<PAGE>   10

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

ADVERSE DILUTIVE IMPACT OF OPTIONS AND WARRANTS. The exercise of existing stock
options and warrants, totaling 3,004,104 shares, of which 1,905,622 were
exercisable at December 31, 1999, would have a dilutive effect on the interests
of current investors and may have an adverse effect on the market price of the
Company's common stock.

ITEM 2. PROPERTIES

        The Company leases approximately 50,000 square feet of office and
manufacturing space in an office park in Goleta, California and a small sales
office in Strasbourg, France. The Company is currently seeking to expand its
leased space in Strasbourg.

ITEM 3. LEGAL PROCEEDINGS

        From time to time, the Company may be involved in litigation relating to
claims arising out of our operations in the normal course of business. As of the
date of this report, the Company is not a party to any material legal
proceedings.

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            55         Chairman of the Board and Chief Executive Officer
Yulun Wang                  40         Chief Technical Officer, Founder and Director
Gordon L. Rogers            46         Vice President, Chief Financial Officer and Secretary
Richard J. DeRisio          55         Vice President of Clinical, Regulatory and Quality Affairs
David A. Stuart             43         Vice President of Operations
Gregory J. Ruehle           48         Vice President of Global Sales
Anita M. Chambers           41         Vice President of Marketing
</TABLE>

        ROBERT W. DUGGAN has been Chairman of the Board of Directors since 1990,
and Chief Executive Officer since October 1997. 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.

        GORDON L. ROGERS joined the Company as Vice President, Chief Financial
Officer and Secretary 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.


                                       10


<PAGE>   11

        RICHARD J. DERISIO joined the Company as Vice President of 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.

        GREGORY J. RUEHLE joined the Company as Vice President of Global Sales
in July 1999. Mr. Ruehle comes to the company with 20 years of medical device
experience, with particular expertise in cardiovascular sales. He previously
held senior sales management positions at St. Jude Medical, Inc., Sci-Med Life
Systems, Inc., Medtronic, Inc. and AorTech, Inc.

        ANITA M. CHAMBERS joined the Company as Vice President of Marketing in
February 2000. Ms. Chambers most recently served as Cardiovascular Business
Development Manager for Siemens Medical Systems, Inc., where she was responsible
for product, market and business development in a new corporate arena. From 1987
to 1997, she was employed by Acuson Corporation, where her principal experience
was in introducing and marketing high-end cardiology ultrasound equipment.


                                       11

<PAGE>   12

                                     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 1999, 1998 and 1997 (from August 12, 1997, the date trading in the stock
commenced) are set forth below.


                                                             HIGH     LOW
                                                            ------   -----
        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


                                                             HIGH     LOW
                                                            ------   -----
        Year Ended December 31, 1998
        Fourth Quarter..................................    $13.38   $7.50
        Third Quarter...................................    $13.06   $6.25
        Second Quarter..................................    $17.63   $9.88
        First Quarter...................................    $13.00   $8.81


                                                             HIGH     LOW
                                                            ------   ------
        Year Ended December 31, 1997
        Fourth Quarter.................................     $13.63   $ 7.88
        Third Quarter (commencing August 12, 1997).....     $15.00   $13.38
        Second Quarter.................................        N/A      N/A
        First Quarter..................................        N/A      N/A

        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 effectiveness
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 30, 2000,
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 1999 was from the conversion of
short-term investment grade debt securities to cash ($12,512,000). These
investments were initially funded with proceeds from the offering.


                                       12


<PAGE>   13

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 1999
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)
                               ------------------------------------------
                                 1999             1998             1997
                               --------         --------         --------
<S>                            <C>              <C>              <C>
Revenue                        $ 18,058         $ 10,586         $  6,611

Net loss                       $(13,375)        $(11,545)        $ (9,219)

Net loss per share             $  (1.57)        $  (1.45)        $  (2.12)

Weighted average common
shares outstanding                8,503            7,959            4,343

Total assets                   $ 23,361         $ 30,444         $ 37,313

Long-term liabilities          $  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" on pages 29 through
32 of the Company's 1999 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, 1999, the carrying values of
the Company's financial instruments approximated their fair values based on
current market prices and rates.

        It is the Company's policy not to enter into derivative financial
instruments. The Company does not currently have material foreign currency
exposure as the majority of its international transactions are denominated in
U.S. currency. Accordingly, the Company does not have significant overall
currency exposure at December 31, 1999.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The following Consolidated Financial Statements of the Company and
Report of Independent Public Accountants set forth on pages 33 through 44 of the
Company's 1999 Annual Report to Shareholders are incorporated herein by
reference:

        Consolidated Statements of Operations - Years ended December 31, 1999,
        1998 and 1997

        Consolidated Balance Sheets - December 31, 1999 and 1998

        Consolidated Statements of Shareholders' Equity (Deficit) - Years ended
        December 31, 1999, 1998 and 1997

        Consolidated Statements of Cash Flows - Years ended December 31, 1999,
        1998 and 1997

        Notes to Consolidated Financial Statements

        Report of Independent Public Accountants

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.


                                       13


<PAGE>   14

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

         The information set forth under the caption "Election of Directors" in
the Company's definitive proxy statement for the Company's Annual Meeting of
stockholders to be held on June 15, 2000, is incorporated herein by reference.
Information on executive officers is set forth in Part I, Item 4A hereto.

ITEM 11. EXECUTIVE COMPENSATION

         The information set forth under the caption "Executive Compensation and
Other Information" in the Company's definitive proxy statement for the Company's
Annual Meeting of stockholders to be held on June 15, 2000, is incorporated
herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information set forth under the caption "Security Ownership of
Certain Beneficial Owners and Management" and "Election of Directors" in the
Company's definitive proxy statement for the Company's Annual Meeting of
stockholders to be held on June 15, 2000, is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information set forth under the caption "Election of Directors" in
the Company's definitive proxy statement for the Company's Annual Meeting of
stockholders to be held on June 15, 2000, is incorporated herein by reference.

                                     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

                 The following Consolidated Financial Statements of the Company
                 and Report of Independent Public Accountants as set forth on
                 pages 33 through 37 of the Company's 1999 Annual Report to
                 Shareholders are incorporated herein by reference:

                 Consolidated Statements of Operations -Years ended December 31,
                 1999, 1998 and 1997

                 Consolidated Balance Sheets - December 31, 1999 and 1998

                 Consolidated Statements of Shareholders' Equity (Deficit) --
                 Years ended December 31, 1999, 1998 and 1997

                 Consolidated Statements of Cash Flows - Years ended December
                 31, 1999, 1998 and 1997

                 Notes to Consolidated Financial Statements

                 Report of Independent Public Accountants

             (2) FINANCIAL STATEMENT SCHEDULE

         The following financial statement schedule is filed as part of this
Report:


     SCHEDULE                                                           PAGE
      NUMBER                      DESCRIPTION                          NUMBER
     --------                     -----------                          ------
       II              Valuation and Qualifying Accounts                 17


                                       14

<PAGE>   15

         The report of the Company's independent public accountants with respect
to the above-listed financial statement schedule appears on page 34 of this
Report.

         All other financial statements and schedules not listed have been
omitted because the required information is included in the consolidated
financial statements or the notes thereto, or is not applicable.

    (3) EXHIBITS

        EXHIBIT
          NO.                               DESCRIPTION
        -------                             -----------
          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.*

         10.9   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.*

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

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

         10.13  Computer Motion, Inc. 1997 Stock Incentive Plan*

         13.1   Management's Discussion and Analysis of Financial Condition and
                Results of Operations and Consolidated Financial Statements from
                the 1999 Annual Report to Shareholders.

         21.1   Subsidiaries of the Company.

         23.1   Consent of Arthur Andersen LLP.

         27.1   Financial Data Schedule.

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

(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.

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

(b) REPORTS ON FORM 8-K

    None.

(c) EXHIBITS

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


                                       15

<PAGE>   16

                                   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, 2000                              /s/ Robert W. Duggan
--------------                              -----------------------------------
Date                                        Robert W. Duggan
                                            Chairman and Chief Executive Officer
                                            (Principal Executive Officer)

April 13, 2000                              /s/ Gordon L. Rogers
--------------                              -----------------------------------
Date                                        Gordon L. Rogers
                                            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, 2000
---------------------------------
    Daniel R. Doiron


/s/ Robert W. Duggan                            Director               April 13, 2000
---------------------------------
    Robert W. Duggan


/s/ W. Peter Geis                               Director               April 13, 2000
---------------------------------
    W. Peter Geis


/s/ M. Jacqueline Eastwood                      Director               April 13, 2000
---------------------------------
    M. Jacqueline Eastwood


/s/ Yulun Wang                                  Director               April 13, 2000
---------------------------------
    Yulun Wang
</TABLE>


                                       16

<PAGE>   17

                              COMPUTER MOTION, INC.

                          YEAR ENDED DECEMBER 31, 1999

                 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, 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

Year ended December 31, 1997
  Allowance for doubtful accounts       75,000        28,000      41,000            62,000
</TABLE>


                                       17
<PAGE>   18

                                 EXHIBIT INDEX

        EXHIBIT
          NO.                               DESCRIPTION
        -------                             -----------
          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.*

         10.9   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.*

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

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

         10.13  Computer Motion, Inc. 1997 Stock Incentive Plan*

         13.1   Management's Discussion and Analysis of Financial Condition and
                Results of Operations and Consolidated Financial Statements from
                the 1999 Annual Report to Shareholders.

         21.1   Subsidiaries of the Company.

         23.1   Consent of Arthur Andersen LLP.

         27.1   Financial Data Schedule.

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

(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.

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