<PAGE>   1

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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, 1997
                          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 $60.5 million at March 23, 1998 when the
closing sale price of such stock, as reported on the NASDAQ National Market was
$10.00 per share.

        The number of shares outstanding of the Registrant's Common Stock, $.001
par value, as of March 23, 1998 was 7,916,316 shares.

        Portions of the Annual Report to Shareholders for the year ended
December 31, 1997 are incorporated by reference in Parts II and IV. Portions of
the Proxy Statement dated March 26, 1998 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 and technologies under
development 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 and technologies under development 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.

        Computer Motion's 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 and technologies 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. Over 35,000 MIS procedures have been successfully assisted by
AESOP in over 350 hospitals and surgery centers around the world.

        The Company's product development strategy is intended to leverage
AESOP's broad-based technology platform, and lead to a family of products that
improve the control of devices in the operating room and enable new minimally
invasive surgical procedures. To centralize and simplify control of the OR,
Computer Motion is developing the HERMES(TM) OR Control Center for the voice
control of medical devices in the operating room. To enable new minimally
invasive microsurgery procedures, such as


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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 OR Control Center is designed to enable a surgeon to directly
control multiple OR devices, as well as the Company's robotic devices, through
simple verbal commands. HERMES provides standardized visual and digitized voice
feedback to a surgical team. The Company believes that the enhanced control and
feedback provided by HERMES can improve safety, increase efficiency, shorten
procedure times and reduce costs.

        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 ZEUS 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
ZEUS 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

        Computer Motion's AESOP 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 operation on a video monitor) in response to a surgeon's verbal
commands. This allows the surgeon to have direct control over the endoscope in
minimally invasive surgical procedures.

        The Company believes that AESOP is the world's first FDA-cleared
surgical robot and incorporates the world's first FDA-cleared voice control
interface for use in the operating room. AESOP was first introduced in the
fourth quarter 1994. Since then, over 35,000 minimally invasive surgical
procedures have been successfully assisted by AESOP in over 350 hospitals and
surgery centers around the world.

        AESOP 2000 with voice control was introduced in the fourth quarter 1996.
AESOP 3000, 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 AESOP to
develop the HERMES OR Control Center and the ZEUS Robotic Surgical System.

HERMES PRODUCT LINE

        Computer Motion's HERMES OR 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. HERMES has the potential to increase the
effectiveness of a surgical team by enhancing the efficiency and safety of
surgical procedures, while reducing operating costs.

        HERMES is comprised of a control unit which is networked with multiple
HERMES-compatible devices and is controlled by a surgeon using simple verbal
commands or an interactive touch screen pendant. The devices controlled by
HERMES currently include the endoscopic camera and light source,


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insufflator, arthroscopic shaver, VCR, video printer, video frame grabber and
Computer Motion's proprietary robotic devices. The HERMES system also 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
will purchase HERMES on an original equipment manufacturer ("OEM") basis and
will market HERMES as an integrated component of several of its laparoscopic and
arthroscopic products. Computer Motion is currently performing HERMES
functionality testing in human clinical procedures. Several 510(k) submissions
relating to HERMES are pending with the FDA. Human clinical evaluation of the
product began in January 1998. The Company expects to receive regulatory
clearance and to market HERMES through its OEM agreement with Stryker in 1998.

        Computer Motion plans to partner with other leading medical device
manufacturers on an OEM basis to expand the number and type of devices to be
integrated with HERMES, including the OR table, OR lights, electrocautery
devices, various imaging systems and devices for the cardiac catheter laboratory
and other medical clinic environments.

ZEUS PRODUCT LINE

        Computer Motion's ZEUS Robotic Surgical System under development is
designed to fundamentally improve a surgeon's ability to perform complex,
minimally invasive procedures and to enable new, minimally invasive
microsurgical procedures that are currently very difficult or impossible 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.

        ZEUS 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 can be 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 commenced limited experimental testing with ZEUS at
several medical centers and intends in the second half of 1998 to seek approval
from the Food and Drug Administration to market ZEUS. Computer Motion intends to
sell ZEUS on a direct basis in North America. Computer Motion and Medtronic,
Inc., a leading manufacturer of medical devices, have entered into an agreement
whereby Medtronic will co-market ZEUS, for cardiovascular applications, in North
America, and distribute ZEUS, for cardiac applications, in Europe, the Middle
East and Africa.


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

Improved Precision. ZEUS incorporates technology that is designed to enable a
surgeon to scale his/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 one inch
movement by the surgeon would result in a 1/4 inch movement by the robotic
surgical instruments.

Improved Dexterity. ZEUS 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. ZEUS 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. ZEUS 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. ZEUS 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. ZEUS 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, ZEUS is
designed to provide a surgeon with complete access to the heart through several
3-5 millimeter ports.

Minimized Surgeon Fatigue. ZEUS allows a surgeon to operate the surgical
instrument handles in a comfortable, ergonomic position, including sitting down
and positioning his/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 Regulations ("QSR"), which address 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 is in
the process of obtaining such certification and will be audited on a semiannual
basis for compliance. The Company has a limited history of operations that, to
date, have consisted primarily of manufacturing moderate quantities of its AESOP
products, and limited quantities of its HERMES and

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ZEUS products for clinical investigations. 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 yield 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

        While the Company believes that it is currently the only Company
marketing a surgical robot, it 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 back orders exist. No distributor
organization or single customer accounted for more than 10% of 1997 net sales.
In the United States, the Company sells directly to hospitals through an
employee based sales organization. In Western Europe, the Company is beginning
to develop an employee based sales organization which will be principally
focused on sales of AESOP in France and Germany. The Company has an agreement
with Medtronic, Inc. whereby Medtronic will distribute the Company's ZEUS
product for cardiovascular applications on an exclusive basis in Europe, the
Middle East and Africa, and provide co-marketing assistance for ZEUS in North
America. 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 will distribute the Company's HERMES product for control of various
Stryker endoscopic devices on a worldwide basis.

RESEARCH AND DEVELOPMENT

        The Company is focused on the development of new 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 $4,149,000 (62.8% of net
sales), $1,359,000 (33.5% of net sales) and $739,000 (32.5% of net sales) in
1997, 1996 and 1995, respectively.

GOVERNMENT REGULATION

         The medical devices manufactured and marketed by the Company are
subject to regulation by the FDA and, in some 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 may be subject to a PMA.


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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 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 ("HFCA"), will reimburse hospitals and doctors for the inpatient
care of persons covered by Medicare. Several legislative proposals have been
advanced which would restrict future funding increases for these programs. While
the Company has been unaware of significant domestic price resistance directly
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 the European Economic Union ("EEU"), the
regulatory systems have been harmonized and approval to market in EEU countries
can be obtained through one agency. In addition, government funding of medical
procedures is limited and in certain instances being reduced.

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, acquiring licenses for selected patents of third
parties, obtaining copyrights on copyrightable materials and entering into
invention and proprietary information agreements with its employees and
consultants with respect to technology which it considers important to its
business. Computer Motion 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. Computer Motion
also relies upon trade secrets, unpatented know-how and continuing technological
innovation to develop and maintain its competitive position.

        The Company currently holds seven issued United States patents and has
patent applications pending disclosing concepts generally 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 product line. The Company has patent applications pending disclosing
key aspects of its ZEUS Robotic Surgical System, as well as key aspects of its
HERMES OR Control Center. The Company has filed corresponding international
patent applications on certain of its key United States patent applications.


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        There can be no assurance that patents will issue from any of the
remaining applications or, if patents are issued, that they 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,
aspects of which are patented by the Company.

        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 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 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 significant
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 products liability insurance
coverage, which management believes are prudent.

EMPLOYEES

        As of December 31, 1997, the Company had 94 full-time employees
including 33 employees in sales and marketing, 39 employees in research and
development, 10 employees in production and 12 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 net sales were $1,871,000 (28% of
revenue), $1,147,000 (28% of revenue) and $350,000 (15% of revenue) in 1997,
1996 and 1995, 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 is not materially impacted by the effects of inflation and
does not expect to be materially impacted by changes required by the effect of
the year 2000.


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RISK FACTORS THAT MAY AFFECT FUTURE RESULTS

        The Company operates in a rapidly changing environment that involves a
number of risks, some of which are beyond the Company's control. The following
discussion highlights some of these risks. These risks could affect the
Company's actual future results and could cause them to differ materially from
any forward-looking statements made by the Company.

ABSENCE OF PROFITABILITY. The Company has incurred significant losses from its
inception and expects to incur significant additional losses as it increases its
spending with respect to research and development efforts, clinical trials,
manufacturing and distribution. There can be no assurance that the Company will
ever achieve significant commercial revenues, particularly from sales of its
HERMES or ZEUS product lines, or that the Company will be profitable. There can
be no assurance that the Company will not encounter substantial delays or incur
unexpected expenses related to the introduction of HERMES and ZEUS, or future
products.

RELIANCE ON FUTURE PRODUCTS; UNCERTAINTY OF REGULATORY APPROVAL AND MARKET
ACCEPTANCE. The Company has been producing and selling its AESOP products since
1994, but the Company has not received regulatory clearance or approval to
market its other products. If regulatory clearance or approval for HERMES and
ZEUS is obtained, the Company anticipates that HERMES and ZEUS will comprise a
substantial majority of the Company's sales. Accordingly, the Company's future
success 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
HERMES and ZEUS, their successful commercialization will depend upon the
Company's ability to demonstrate the clinical safety and efficacy, ease-of-use,
reliability and cost-effectiveness of such products in a clinical setting.
HERMES has only recently begun its initial human clinical applications and ZEUS
has not yet been operated in human clinical practice. In order to conduct
clinical trials with ZEUS, the Company must submit and obtain approval of an
Investigational Device Exemption ("IDE") application. There can be no assurance
that the FDA will allow the Company to conduct clinical trials or that ZEUS will
prove to be safe and effective in clinical trials under United States or
international regulatory requirements or that the Company will not encounter
problems in clinical testing that will 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
efficacy of procedures using HERMES and 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 the Company's products will
require training surgeons and the time and expense required to complete such
training 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 Company's products in foreign countries is also subject to
varying government regulations which may delay or restrict marketing of the
Company's products in those countries. In addition, such regulatory authorities
may impose limitations on the use of the Company's products. After mid-1998, the
Company will be required to obtain the certifications necessary to enable the CE
mark to be affixed to the Company's products in order to sell its products in
member countries of the European Union. The Company is in the process of
obtaining such certification, but there can be no assurance it will be able to
do so for all its products in a timely manner. The Company's manufacturing
operations are subject to the FDA's QSR and similar regulations in other
countries regarding the manufacturing, testing, labeling, record keeping and
storage of devices and the failure to maintain compliance would have an adverse
effect on the Company and its 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


<PAGE>   10

experience than the Company. Many medical conditions that can be treated using
the Company's systems, particularly ZEUS, 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 the Company's technology obsolete or unmarketable. There can be no
assurance that physicians will use the Company's products to replace or
supplement established treatments or that the Company's products will be
competitive with current or future technologies.

LIMITATIONS ON THIRD PARTY REIMBURSEMENT. In the United States, the Company's
products would 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 health care services provided to
their patients. Government agencies, certain private insurers and certain other
payors generally reimburse hospitals for medical treatment at a fixed rate based
on the DRG established by the HCFA. The Company believes that the procedures
using AESOP are eligible and that future products will be eligible for
reimbursement under existing DRG reimbursement codes. 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 DRG,
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 health care 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 will depend on the
availability and level of reimbursement in international markets targeted by the
Company. There can be no assurance that the Company will obtain reimbursement in
any country within a particular time, or at all.

DEPENDENCE ON PATENTS AND PROPRIETARY TECHNOLOGY. The success of the Company
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 its business. There can be no assurance that the Company's issued
patents or any patents that may be issued will not be challenged, invalidated or
circumvented in the future. Further, there can be no assurance that competitors,
many of which have substantially more resources than the Company and have made
substantial investments in competing technologies, will not seek to 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. There can be no assurance that the Company 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. The Company's success will depend to a
significant extent upon its ability to enhance and expand the utility of AESOP
and its other products and to develop and introduce additional innovative
products that gain market acceptance. The Company maintains research and
development programs to continually improve and refine its product offerings and
those under development. There can be no assurance, however, that such efforts
will be successful or that the Company will be successful in selecting,
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 introduction of new products or product enhancements.

CONTROL BY MANAGEMENT AND DEPENDENCE ON KEY PERSONNEL. The present directors and
executive officers of the Company and their affiliates, in the aggregate,
beneficially own approximately 30% of the


<PAGE>   11

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 Company's affairs and
business, including delaying or preventing a change in control of the Company.

The Company's future business and operating results depend in significant part
on its key management, scientific and technical personnel, many of whom would be
difficult to replace, and its future success will depend partially upon its
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 there can be no assurance that
the Company will be successful in attracting or retaining such personnel.

FLUCTUATIONS IN OPERATING RESULTS; MARKET VOLATILITY. The Company's results of
operations may vary significantly from quarter to quarter depending upon
numerous factors, including the following: delays associated with the FDA and
other regulatory approval processes; health care reimbursement policies; timing
and results of clinical trials; demand for the Company's products; changes in
pricing policies by the Company or its competitors; the number, timing and
significance of product enhancements and new products by the Company and its
competitors; and product quality issues. The market price of the Company's
common stock is likely to be volatile and may be affected by actual or
anticipated decisions by the FDA with respect to approvals or clearances of the
Company's or competitors' products, actual or anticipated fluctuations in the
Company's operating results, announcements of technological innovations, new
commercial products announced or introduced by the Company or its competitors,
changes in third party reimbursement policies, developments concerning
proprietary rights, conditions and trends in the medical device industry,
governmental regulation, changes in financial estimates by securities analysts,
and general stock market conditions.

EXPANSION OF MARKETING ACTIVITIES AND LIMITED DISTRIBUTION. The Company
anticipates it will significantly increase the number of sales personnel to more
fully cover its target markets, particularly as additional products become
commercially available. There can be no assurance that the Company will be able
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 principally through distributors. In order to accomplish this,
the Company will be required to significantly expand its distributor network.
There can be no assurance that the Company will be able to identify suitable
distribution agreements on acceptable terms, if at all, or that such
distribution agreements will result in significant sales.

DEPENDENCE ON INDEPENDENT CONTRACT MANUFACTURERS; 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 AESOP. Shortages of raw materials, production capacity constraints
or delays on the part of the Company's 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.
The Company's manufacturing experience to date has been focused primarily on
assembling components produced by third party manufacturers for its AESOP
product. The Company's manufacturing activities to date with respect to HERMES
and ZEUS have consisted primarily of manufacturing a limited number of
prototypes. In scaling up manufacturing of new products, the Company may
encounter difficulties involving quality control and assurance, component and
service availability, adequacy of control policies and procedures, lack of
qualified personnel and compliance with FDA QSR requirements. The Company may
elect to internally manufacture components currently provided by third parties
or to implement new production processes. There can be no assurance 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.


<PAGE>   12

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 the Company's products
might necessitate a product recall. There can be no assurance that the Company
will not experience losses due to product liability claims or recall in the
future. The Company currently maintains product liability insurance with
coverage limits of $5,000,000. There can be no assurance that these coverage
limits will be adequate.

MANAGEMENT OF GROWTH. The Company's growth will continue to place significant
demands on the Company's 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 physical 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 management's ability to manage future growth
and there can be no assurance that these efforts will be successful.

ADVERSE IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE. The exercise of existing
stock options and warrants, totaling approximately 3,360,000 shares, of which
approximately 2,187,000 were exercisable at December 31, 1997, would have a
dilutive effect on the interests of current investors.

ITEM 2. PROPERTIES

        The Company leases approximately 28,000 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 looking to expand its
leased space in Goleta.

ITEM 3. LEGAL PROCEEDINGS

        The Company is not currently 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                  53       Chairman of the Board and Chief Executive Officer
Yulun Wang                        37       Chief Technical Officer, Founder and Director
Stephen L. Wilson                 45       Executive Vice President, Chief Financial Officer and
                                           Secretary
Kermit R. (Kerry) Pope, Jr.       52       Executive Vice President of Sales and Marketing
John M. Greathouse                36       Vice President of Business Development
David A. Stuart                   42       Vice President of Operations
</TABLE>



<PAGE>   13



        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. Formerly, Mr. Duggan served as
a Board of Trustee for the Santa Barbara Museum of Art and the Santa Barbara
Symphony.

        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.

        STEPHEN L. WILSON joined the Company as Executive Vice President, Chief
Financial Officer and Secretary in June 1997. Prior to joining the Company, Mr.
Wilson had served as the Vice President of Finance and Chief Financial Officer
of St. Jude Medical Inc., a medical device manufacturer, since 1990.

        KERRY R. POPE, JR. joined the Company in May 1997 as Executive Vice
President of Sales and Marketing. Prior to joining the Company, Mr. Pope served
as a Vice President of Baxter Healthcare's Vascular Systems Division since 1994.
Prior to that, Mr. Pope served in several sales related capacities at Vitaphore
Corporation, a manufacturer of collagen-based medical devices, since 1986.

        JOHN M. GREATHOUSE joined the Company as Director of Finance in 1993 and
has served as the Company's Vice President of Business Development since
February 1997. Prior to joining the Company, Mr. Greathouse served as Manager of
Corporate Development with Mitchell Humphrey & Co., a developer of financial
software, from 1990 to 1993.

        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.


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

<TABLE>
<CAPTION>
      Year Ended December 31, 1997                                 High          Low
                                                                   ----          ---
<S>                                                               <C>           <C>
      First Quarter.............................................    N/A           N/A
      Second Quarter............................................    N/A           N/A
      Third Quarter (commencing August 12, 1997)................  $15.00        $13.38
      Fourth Quarter............................................  $13.63        $7.88
</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,

<PAGE>   14

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 23, 1998,
there were approximately 2,000 stockholders of record.

        The Company's Registration Statement on Form S-1 filed with the
Securities Exchange Commission (Registration No. 33-29505) 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 the quarter ended December 31, 1997, the
Company used $2,845,000 of these proceeds. The proceeds were principally used to
support the cash loss from operations of $2,019,000, increase working capital by
$487,000 and purchase property and equipment for $382,000. The remaining
proceeds of the offering have been invested in short-term investment grade debt
securities. Proceeds from the offering will continue to be used to fund the
Company's operating losses and capital requirements.

        The following is a summary of transactions by the Company during 1997
involving sales of the Company's securities that were not registered under the
Securities Act:

        During 1997, the Company issued 11,437 shares of its common stock to
five providers of services to the Company and 242,810 shares of its Series E
preferred stock together with an equal number of warrants to purchase its common
stock to 39 accredited investors. Subsequently, the number of shares of common
stock into which the Series E preferred stock is convertible was increased to
303,484 by an adjustment to the conversion ratio. The warrants to purchase
common stock underwent a similar adjustment and are now exercisable for 303,484
shares of common stock at an exercise price of $7.71 per share. The aggregate
consideration for the Series E preferred stock issued during 1997 totaled
$2,341,000.

        In March 1997, Medtronic, Inc. invested $4,000,000 in the Company in the
form of a convertible loan bearing interest at a rate equal to prime plus 1%.
Such loan was converted into 363,743 shares of common stock on August 11, 1997.
In connection with the issuance of this convertible loan, Medtronic was granted
an option to purchase shares of the Company's common stock at a price equal to
the public offering price in the Company's initial public offering. On August
11, 1997, Medtronic exercised such option and purchased 76,805 shares of the
Company's common stock for $13.02 per share.

        In June 1997, Stephen L. Wilson purchased 32,417 shares of common stock
for $4.57 per share pursuant to the terms of his employment agreement with the
Company.

        Exemption from the registration requirement of the Act for the
transactions described above is claimed under Section 4(2) of the Act, among
others, on the basis that such transactions did not involve any public offering
and the purchasers were sophisticated with access to the kind of information
registration would provide. No underwriting fees or broker's commissions were
paid in connection with the foregoing transactions.


<PAGE>   15

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 1997
Annual Report to Shareholders. The selected financial data is derived from
consolidated financial statements that have been audited by Arthur Andersen LLP,
independent auditors.


<TABLE>
<CAPTION>
                                                   Year Ended December 31,
                           ----------------------------------------------------------------------------
                               1997             1996            1995            1994         1993(1)
                           ------------    ------------    --------------  -------------   ------------
<S>                        <C>             <C>             <C>             <C>             <C>
Revenue                    $  6,611,000    $  4,057,000    $  2,271,000    $    607,000    $     66,000
Net loss                   ($ 9,219,000)   ($ 4,559,000)   ($ 3,590,000)   ($ 3,244,000)   ($   874,000)
Net loss per share basic
  and diluted                    ($2.12)         ($2.68)         ($2.12)         ($1.90)         ($0.54)
Weighted average common
  shares outstanding          4,343,000       1,701,000       1,691,000       1,706,000       1,629,000
Total assets
                           $ 37,313,000    $  3,489,000    $  2,017,000    $  4,699,000    $    595,000
Long-term liabilities      $         --    $  9,132,000    $    605,000    $    126,000    $      2,000
                           ----------------------------------------------------------------------------
</TABLE>
----------
(1) In 1993, the Company changed its fiscal year-end from March 31 to December
    31. Therefore, 1993 includes only nine months of operations.

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 Results of Operations and Financial Condition" on pages 14 through
18 of the Company's 1997 Annual Report to Shareholders is incorporated herein by
reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        The following Consolidated Financial Statements of the Company and
Report of Independent Auditors set forth on pages 18 through 28 of the Company's
1997 Annual Report to Shareholders are incorporated herein by reference:

        Consolidated Statements of Operations - Years ended December 31, 1997,
        1996 and 1995 Consolidated Balance Sheets - December 31, 1997 and 1996

        Consolidated Statements of Shareholders' Equity (Deficit) - Years ended
        December 31, 1997, 1996 and 1995

        Consolidated Statements of Cash Flows - Years ended December 31, 1997,
        1996 and 1995

        Notes to Consolidated Financial Statements

        Report of Independent Auditors

ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None.


<PAGE>   16

                                    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 dated March 26, 1998, 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 dated March 26,
1998, 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 dated March 26, 1998, 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 dated March 26, 1998, 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 Auditors as set forth on pages 18 through 28 of
        the Company's 1997 Annual Report to Shareholders are incorporated herein
        by reference:

        Consolidated Statements of Operations -Years ended December 31, 1997,
        1996 and 1995

        Consolidated Balance Sheets - December 31, 1997 and 1996

        Consolidated Statements of Shareholders' Equity (Deficit) - Years ended
        December 31, 1997, 1996 and 1995

        Consolidated Statements of Cash Flows - Years ended December 31, 1997,
        1996 and 1995

        Notes to Consolidated Financial Statements

        Report of Independent Auditors



<PAGE>   17

        (2) Financial Statement Schedule

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

<TABLE>
<CAPTION>
         SCHEDULE                                                              PAGE
          NUMBER                           DESCRIPTION                        NUMBER
          ------                           -----------                        ------
<S>                           <C>                                               <C>
            II                  Valuation and Qualifying Accounts               20
---------------------------------------------------------------------------------------------
</TABLE>

        The report of the Company's Independent Auditors with respect to the
above-listed financial statement schedule appears on page 19 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

<TABLE>
<CAPTION>
      Exhibit
        No.                       Description
        ---                       -----------
<C>             <S>
        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     Computer Motion, Inc. 1997 Stock Incentive Plan.*

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

       10.4     Series D Convertible Preferred Stock and Warrant Purchase
                Agreement dated as of August 24, 1994 between Chase Manhattan
                Capital Corporation and the Company.*

       10.5     Registration Agreement between the Company and certain
                shareholders.*

       10.6     Stockholders Agreement dated August 24, 1994 between Chase
                Manhattan Capital Corporation, the Company and the Executives
                designated therein.*

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

       10.8     Secured Convertible Debenture of the Company to Medtronic, Inc.
                dated March, 19, 1997.*

       10.9     Form of Bridge Financing Agreements.*

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

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

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

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

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

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

       10.16    Agreement relating to the Company's employment of Stephen L.
                Wilson.*
</TABLE>

<PAGE>   18

<TABLE>
<C>             <S>
       10.17    Stock Purchase Agreement between the Company and Medtronic Asset
                Management, Inc. dated as of August 11, 1997.

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

       10.19    Leases between the Company and University Business Center
                Associates dated as of September, 1997.

       13.1     Management's Discussion and Analysis of Financial Condition and
                Results of Operations and Consolidated Financial Statements
                from the 1997 Annual Report to Shareholders.

       21.1     Subsidiaries of the Company..

       23.1     Consent of Arthur Andersen LLP.

       27.1     Financial Data Schedule.
</TABLE>

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

 *      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.

(b)     Reports on Form 8-K

        None

(c)     Exhibits

        See Item 14(a)(2) of this Report.
<PAGE>   19

                                   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.


March 26, 1998                 /s/   Robert W. Duggan
-------------------------      -------------------------------------------------
Date                           Robert W. Duggan
                               Chairman and Chief Executive Officer
                               (Principal Executive Officer)


March 26, 1998                 /s/   Stephen L. Wilson
-------------------------      -------------------------------------------------
Date                           Stephen L. Wilson
                               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                  March 26, 1998
--------------------------------
Daniel R. Doiron

/s/   Robert W. Duggan                      Director                  March 26, 1998
--------------------------------
Robert W. Duggan

/s/   W. Peter Geis                         Director                  March 26, 1998
--------------------------------
W. Peter Geis

/s/   M. Jacqueline Eastwood                Director                  March 26, 1998
--------------------------------
M. Jacqueline Eastwood

/s/   William D. Williams                   Director                  March 26, 1998
--------------------------------
William D. Williams

/s/   Yulun Wang                            Director                  March 26, 1998
--------------------------------
Yulun Wang
</TABLE>

<PAGE>   20

                         REPORT OF INDEPENDENT AUDITORS


To the Board of Directors of
    Computer Motion, Inc.:

We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Computer Motion, Inc.'s annual
report to shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated February 5, 1998. Our audits were made for the
purpose of performing an opinion on those statements taken as a whole. The
schedule listed in the index above is presented for purposes of complying with
the Securities and Exchange Commission's rules and is not part of the basic
financial statements. This schedule has been subject to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.




/s/  Arthur Andersen LLP

Woodland Hills, California
February 5, 1998



<PAGE>   21

                              COMPUTER MOTION, INC.
                          YEAR ENDED DECEMBER 31, 1997


                 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, 1997
  Allowance for doubtful
  accounts                          $75,000         $28,000          $41,000          $62,000

Year ended December 31, 1996
  Allowance for doubtful
  accounts                            5,000         118,000           48,000           75,000

Year ended December 31, 1995
  Allowance for doubtful
  accounts                            5,000             -                -              5,000
</TABLE>