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UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-Q

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x QUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For
the quarterly period ended: March 31, 2010

or

oTRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________
to___________________

Commission
File Number: 001-33966

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|                                                      
|------------------------------------------------------
|MAKO
 Surgical Corp.                                  
|(Exact name of registrant as specified in its charter)

|                                               |  |                                      
|---------------------------------------------- |  | -------------------------------------
|Delaware                                       |  | 20-1901148                           
|                                               |  |                                      
|(State or
 Other Jurisdiction of Incorporation |  | (I.R.S.
 Employer Identification No.)
|or
 Organization)                              |  |                                      

|                                                   
|---------------------------------------------------
|2555 Davie Road, Fort
 Lauderdale, Florida 33317   
|(Address of Principal Executive Offices) (Zip Code)

|                                                    
|----------------------------------------------------
|(954) 927-2044                                      
|                                                    
|(Registrants Telephone Number, Including Area Code)

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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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

Yes x No o

Indicate by
check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files).

Yes o No o

Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer, non-accelerated filer or a smaller reporting company. See definitions of
large accelerated filer, accelerated filer, and smaller reporting company
in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o Accelerated Filerx Non-accelerated
Filero Smaller reporting companyo

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).

Yeso No x

Number of
shares outstanding of each of the issuers classes of common stock as of April
29, 2010:

|             |  |                              
|------------ |  | -----------------------------
|Class        |  | Outstanding at April 29, 2010
|             |  |                              
|Common Stock |  | 33,767,675                   







MAKO
Surgical Corp.

INDEX TO FORM 10-Q

|                               |                                                                                        |    |          
|------------------------------ | -------------------------------------------------------------------------------------- | -- | ---------
|                               |                                                                                        |    | Page
 No.
|Part I  Financial Information
|                               |                                                                                        |    |          
|Item
 1                        | Financial Statements (unaudited)                                                       |    | 1        
|                               | Condensed Balance Sheets as of March 31,
 2010 and December 31, 2009                   |    | 1        
|                               | Condensed Statements of Operations for the
 three months ended March 31, 2010 and 2009 |    | 2        
|                               | Condensed Statements of Cash Flows for the
 three months ended March 31, 2010 and 2009 |    | 3        
|                               | Notes to Condensed Financial Statements                                                |    | 4        
|Item
 2                        | Managements Discussion and Analysis of
 Financial Condition and Results of Operations |    | 14       
|Item
 3                        | Quantitative and Qualitative Disclosures
 about Market Risk                            |    | 21       
|Item
 4                        | Controls and Procedures                                                                |    | 22       
|                               |                                                                                        |    |          
|Part II  Other Information   
|                               |                                                                                        |    |          
|Item
 1A                       | Risk
 Factors                                                                          |    | 23       
|Item
 2                        | Unregistered
 Sales of Equity Securities and Use of Proceeds                           |    | 23       
|Item
 6                        | Exhibits                                                                               |    | 24       
|                               |                                                                                        |    |          
|Signatures                     |                                                                                        |    | 25       
|                               |                                                                                        |    |          
|Exhibit Index                  |                                                                                        | 26
|Exhibit 10.4                   |                                                                                        |   
|Exhibit 10.5                   |                                                                                        |   
|Exhibit 31.1                   |                                                                                        |   
|Exhibit 31.2                   |                                                                                        |   
|Exhibit 32.1                   |                                                                                        |   
|Exhibit 32.2                   |                                                                                        |   

i

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Table of Contents

PART IFINANCIAL
INFORMATION

ITEM
1. FINANCIAL STATEMENTS.

MAKO SURGICAL CORP.Condensed Balance Sheets(in thousands, except share and per share data)
(Unaudited)

|                                                                                                                                                                           |  |                 |          |                    |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | -------- | ------------------ | - | -------- | -
|                                                                                                                                                                           |  | March 31,
 2010 |          | December 31,
 2009 |  
|ASSETS                                                                                                                                                                     |  |                 |          |                    |   |          |  
|Current Assets:                                                                                                                                                            |  |                 |          |                    |   |          |  
|Cash and cash equivalents                                                                                                                                                  |  | $               | 9,757    |                    | $ | 17,159   |  
|Short-term investments                                                                                                                                                     |  |                 | 49,600   |                    |   | 44,686   |  
|Accounts receivable                                                                                                                                                        |  |                 | 5,246    |                    |   | 6,536    |  
|Inventory                                                                                                                                                                  |  |                 | 9,659    |                    |   | 8,377    |  
|Prepaids and other assets                                                                                                                                                  |  |                 | 1,218    |                    |   | 532      |  
|Total current assets                                                                                                                                                       |  |                 | 75,480   |                    |   | 77,290   |  
|Long-term investments                                                                                                                                                      |  |                 | 1,258    |                    |   | 9,368    |  
|Property and equipment, net                                                                                                                                                |  |                 | 7,729    |                    |   | 8,018    |  
|Intangible assets, net                                                                                                                                                     |  |                 | 7,180    |                    |   | 4,234    |  
|Other assets                                                                                                                                                               |  |                 | 199      |                    |   | 193      |  
|Total assets                                                                                                                                                               |  | $               | 91,846   |                    | $ | 99,103   |  
|                                                                                                                                                                           |  |                 |          |                    |   |          |  
|LIABILITIES AND
 STOCKHOLDERS EQUITY                                                                                                                                      |  |                 |          |                    |   |          |  
|Current Liabilities:                                                                                                                                                       |  |                 |          |                    |   |          |  
|Accounts payable                                                                                                                                                           |  | $               | 1,481    |                    | $ | 1,159    |  
|Accrued compensation and employee benefits                                                                                                                                 |  |                 | 1,839    |                    |   | 3,709    |  
|Other accrued liabilities                                                                                                                                                  |  |                 | 4,090    |                    |   | 2,872    |  
|Deferred revenue                                                                                                                                                           |  |                 | 434      |                    |   | 548      |  
|Total current liabilities                                                                                                                                                  |  |                 | 7,844    |                    |   | 8,288    |  
|                                                                                                                                                                           |  |                 |          |                    |   |          |  
|Deferred revenue                                                                                                                                                           |  |                 | 8        |                    |   | 21       |  
|Total liabilities                                                                                                                                                          |  |                 | 7,852    |                    |   | 8,309    |  
|                                                                                                                                                                           |  |                 |          |                    |   |          |  
|Stockholders equity:                                                                                                                                                      |  |                 |          |                    |   |          |  
|Preferred stock, $0.001 par value; 27,000,000 authorized; 0 shares
 issued and outstanding as of March 31, 2010 and December 31, 2009                                      |  |                 | ―        |                    |   | ―        |  
|Common stock, $0.001 par value; 135,000,000 authorized; 33,371,230 and
 33,036,378 shares issued and outstanding as of March 31, 2010 and December
 31, 2009, respectively |  |                 | 33       |                    |   | 33       |  
|Additional paid-in capital                                                                                                                                                 |  |                 | 209,580  |                    |   | 204,977  |  
|Accumulated deficit                                                                                                                                                        |  |                 | (125,603 | )                  |   | (114,195 | )
|Accumulated other comprehensive loss                                                                                                                                       |  |                 | (16      | )                  |   | (21      | )
|Total stockholders equity                                                                                                                                                 |  |                 | 83,994   |                    |   | 90,794   |  
|Total liabilities and stockholders equity                                                                                                                                 |  | $               | 91,846   |                    | $ | 99,103   |  

See accompanying notes.

1

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Table of Contents

MAKO SURGICAL CORP.

Condensed
Statements of Operations(in thousands, except per share data)
(Unaudited)

|                                                                |  |                              |         |      |   |        |  
|--------------------------------------------------------------- |  | ---------------------------- | ------- | ---- | - | ------ | -
|                                                                |  | Three months ended March 31, |        
|                                                                |  | 2010                         |         | 2009 |  
|Revenue:                                                        |  |                              |         |      |   |        |  
|Procedures                                                      |  | $                            | 3,628   |      | $ | 1,155  |  
|Systems  RIO                                                   |  |                              | 3,390   |      |   | ―      |  
|Systems  TGS, previously deferred                              |  |                              | ―       |      |   | 2,490  |  
|Service and other                                               |  |                              | 231     |      |   | 82     |  
|Total revenue                                                   |  |                              | 7,249   |      |   | 3,727  |  
|Cost of revenue:                                                |  |                              |         |      |   |        |  
|Procedures                                                      |  |                              | 1,955   |      |   | 487    |  
|Systems  RIO                                                   |  |                              | 1,740   |      |   | 252    |  
|Systems  RIO upgrades                                          |  |                              | ―       |      |   | 1,213  |  
|Systems  TGS, previously deferred                              |  |                              | ―       |      |   | 972    |  
|Service and other                                               |  |                              | 301     |      |   | 106    |  
|Total cost of revenue                                           |  |                              | 3,996   |      |   | 3,030  |  
|Gross profit                                                    |  |                              | 3,253   |      |   | 697    |  
|Operating costs and
 expenses:                                  |  |                              |         |      |   |        |  
|Selling, general and administrative                             |  |                              | 10,818  |      |   | 6,808  |  
|Research and development                                        |  |                              | 3,283   |      |   | 2,513  |  
|Depreciation and amortization                                   |  |                              | 622     |      |   | 478    |  
|Total operating costs and
 expenses                             |  |                              | 14,723  |      |   | 9,799  |  
|Loss from operations                                            |  |                              | (11,470 | )    |   | (9,102 | )
|Interest and other income                                       |  |                              | 108     |      |   | 222    |  
|Loss before income taxes                                        |  |                              | (11,362 | )    |   | (8,880 | )
|Income tax expense                                              |  |                              | 46      |      |   | 5      |  
|Net loss                                                        |  | $                            | (11,408 | )    | $ | (8,885 | )
|Net loss per share  Basic
 and diluted                         |  | $                            | (0.34   | )    | $ | (0.36  | )
|Weighted average common
 shares outstanding  Basic and diluted |  |                              | 33,180  |      |   | 24,741 |  

See accompanying notes.

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MAKO SURGICAL CORP.

Condensed
Statements of Cash Flows(in thousands, except share data)
(Unaudited)

|                                                                               |  |                              |         |      |   |         |  
|------------------------------------------------------------------------------ |  | ---------------------------- | ------- | ---- | - | ------- | -
|                                                                               |  | Three months ended March 31, |        
|                                                                               |  | 2010                         |         | 2009 |  
|Operating activities:                                                          |  |                              |         |      |   |         |  
|Net loss                                                                       |  | $                            | (11,408 | )    | $ | (8,885  | )
|Adjustments to reconcile
 net loss to net cash used in operating activities:   |  |                              |         |      |   |         |  
|Depreciation                                                                   |  |                              | 516     |      |   | 437     |  
|Amortization of intangible
 assets                                             |  |                              | 205     |      |   | 165     |  
|Stock-based compensation                                                       |  |                              | 1,303   |      |   | 830     |  
|Inventory write-down                                                           |  |                              | 1,057   |      |   | 86      |  
|Amortization of premium on
 investment securities                              |  |                              | 158     |      |   | ―       |  
|Loss on asset impairment                                                       |  |                              | 899     |      |   | ―       |  
|Changes in operating assets
 and liabilities:                                  |  |                              |         |      |   |         |  
|Accounts receivable                                                            |  |                              | 1,290   |      |   | (86     | )
|Inventory                                                                      |  |                              | (2,641  | )    |   | (4,712  | )
|Prepaid and other assets                                                       |  |                              | (686    | )    |   | (147    | )
|Other assets                                                                   |  |                              | (6      | )    |   | 47      |  
|Accounts payable                                                               |  |                              | 322     |      |   | 1,139   |  
|Accrued compensation and employee benefits                                     |  |                              | (1,870  | )    |   | (803    | )
|Other accrued liabilities                                                      |  |                              | 1,218   |      |   | (390    | )
|Deferred cost of revenue                                                       |  |                              | ―       |      |   | (115    | )
|Deferred revenue                                                               |  |                              | (127    | )    |   | (539    | )
|Net cash used in operating
 activities                                         |  |                              | (9,770  | )    |   | (12,973 | )
|Investing
 activities:                                                         |  |                              |         |      |   |         |  
|Purchase of investments                                                        |  |                              | (6,908  | )    |   | (14,700 | )
|Proceeds from sales and
 maturities of investments                             |  |                              | 9,951   |      |   | 1,025   |  
|Acquisition of property and
 equipment                                         |  |                              | (824    | )    |   | (1,452  | )
|Acquisition of intangible
 assets                                              |  |                              | (98     | )    |   | ―       |  
|Net cash provided by (used
 in) investing activities                           |  |                              | 2,121   |      |   | (15,127 | )
|Financing
 activities:                                                         |  |                              |         |      |   |         |  
|Proceeds from employee stock
 purchase plan                                    |  |                              | 147     |      |   | 101     |  
|Exercise of common stock
 options and warrants for cash                        |  |                              | 204     |      |   | 26      |  
|Payment of payroll taxes
 relating to vesting of restricted stock              |  |                              | (104    | )    |   | ―       |  
|Net cash provided by
 financing activities                                     |  |                              | 247     |      |   | 127     |  
|Net decrease in cash and
 cash equivalents                                     |  |                              | (7,402  | )    |   | (27,973 | )
|Cash and cash equivalents
 at beginning of period                              |  |                              | 17,159  |      |   | 62,547  |  
|Cash and cash equivalents
 at end of period                                    |  | $                            | 9,757   |      | $ | 34,574  |  
|                                                                               |  |                              |         |      |   |         |  
|Non-cash
 investing and financing activities:                                  |  |                              |         |      |   |         |  
|Transfers of inventory to
 property and equipment                              |  | $                            | 302     |      | $ | 1,046   |  
|Issuance of stock for
 intangible asset                                        |  |                              | 3,053   |      |   | ―       |  
|Receipt of 7,917 shares of
 common stock delivered in payment of payroll taxes |  |                              | 104     |      |   | ―       |  

See accompanying notes.

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MAKO SURGICAL CORP.

Notes
to Condensed Financial Statements
March 31, 2010
(Unaudited)

1. Description of the Business

MAKO
Surgical Corp. (the Company or MAKO) is an emerging medical device company
that markets its advanced robotic arm solution and orthopedic implants for
minimally invasive orthopedic knee procedures called MAKOplasty®.
The Company was incorporated in the State of Delaware on November 12, 2004 and
is headquartered in Fort Lauderdale, Florida. In February 2008, the Companys
common stock began trading on The NASDAQ Global Market under the ticker symbol
MAKO in connection with the closing of its initial public offering.

2. Summary of Significant Accounting Policies

Basis of
Presentation

In
the opinion of management, the accompanying unaudited condensed financial
statements (condensed financial statements) of the Company have been prepared
on a basis consistent with the Companys December 31, 2009 audited financial
statements and include all adjustments, consisting of only normal recurring
adjustments, necessary to fairly state the information set forth herein. These
condensed financial statements have been prepared in accordance with the
regulations of the Securities and Exchange Commission and, therefore, omit
certain information and footnote disclosure necessary to present the statements
in accordance with accounting principles generally accepted in the United
States of America. These quarterly condensed financial statements should be
read in conjunction with the audited financial statements and notes thereto
included in the Companys annual report on Form 10-K for the year ended
December 31, 2009 (the Form 10-K). The results of operations for the first
quarter of 2010 may not be indicative of the results to be expected for the
entire year or any future periods.

Liquidity and
Operations

In
executing its current business plan, the Company believes its existing cash,
cash equivalents and investment balances and interest income earned on these
balances will be sufficient to meet its anticipated cash requirements for at
least the next twelve months. To the extent the Companys available cash, cash
equivalents and investment balances are insufficient to satisfy its operating
requirements after that period, the Company will need to seek additional
sources of funds, including selling additional equity, debt or other securities
or entering into a credit facility, or modifying its current business plan. The
sale of additional equity and convertible debt securities may result in
dilution to the Companys current stockholders. If the Company raises
additional funds through the issuance of debt securities, these securities may
have rights senior to those of its common stock and could contain covenants
that could restrict its operations and issuance of dividends. The Company may
also require additional capital beyond its currently forecasted amounts. Any
required additional capital, whether forecasted or not, may not be available on
reasonable terms, or at all. If the Company is unable to obtain additional
financing, the Company may be required to reduce the scope of, delay or
eliminate some or all of its planned research, development and
commercialization activities, which could materially harm its business and
results of operations.

Concentrations of
Credit Risk and Other Risks and Uncertainties

Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist primarily of cash and cash equivalents and investments.
The Companys cash and cash equivalents are held in demand and money market
accounts at three large financial institutions. The Companys investments are
held in a variety of interest bearing instruments, including notes and bonds
from U.S. government agencies, certificates of
deposit and investment grade rated U.S. corporate debt at three large
financial institutions. Such deposits are generally in excess of insured
limits. The Company has not experienced any historical losses on its deposits
of cash and cash equivalents.

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The
Company is subject to risks common to emerging companies in the medical device
industry including, but not limited to: new technological innovations,
dependence on key personnel, dependence on key suppliers, changes in general
economic conditions and interest rates, protection of proprietary technology,
compliance with changing government regulations and taxes, uncertainty of
widespread market acceptance of products, access to credit for capital
purchases by our customers, product liability and the need to obtain additional
financing. The Companys products include components subject to rapid technological
change. Certain components used in manufacturing have relatively few
alternative sources of supply and establishing additional or replacement
suppliers for such components cannot be accomplished quickly. The inability of
any of these suppliers to fulfill the Companys supply requirements may
negatively impact future operating results. While the Company has ongoing
programs to minimize the adverse effect of such uncertainty and considers
technological change in estimating the net realizable value of its inventory,
uncertainty continues to exist.

The
Companys current versions of its RIO® Robotic Arm Interactive
Orthopedic (RIO) system, which is the version 2.0 of its Tactile Guidance
System (TGS), its RESTORIS® unicompartmental and RESTORIS MCK
multicompartmental knee implant systems and its TGS have been cleared by the
U.S. Food and Drug Administration (FDA). Certain products currently under
development by the Company will require clearance or approval by the FDA or
other international regulatory agencies prior to commercial sale. There can be
no assurance that the Companys products will receive the necessary clearances
or approvals. If the Company were to be denied such clearance or approval or
such clearance or approval were delayed, it could have a material adverse
impact on the Company.

The
Company may perform credit evaluations of its customers financial condition
and, generally, requires no collateral from its customers. The Company will
provide an allowance for doubtful accounts when collections become doubtful but
has not experienced any credit losses to date.

Revenue Recognition

Revenue
is generated from unit sales of the Companys RIO system, including associated
instrumentation, installation services and training, from sales of implants and
disposable products, and by providing extended warranty services. The Company
recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition, when persuasive
evidence of an arrangement exists, the fee is fixed or determinable, collection
of the fee is probable and delivery has occurred. For all sales, the Company
uses either a signed agreement or a binding purchase order as evidence of an
arrangement.

Effective
January 1, 2010, the Company early adopted the Financial Accounting Standards
Board (FASB) Accounting Standard Update No. 2009-13, Multiple-Deliverable Revenue Arrangementsa consensus
of the FASB Emerging Issues Task Force (ASU 2009-13) and Update
No. 2009-14,Certain Revenue Arrangements
That Include Software Elements, a consensus of the FASB Emerging Issues Task
Force (ASU 2009-14) on a prospective basis for applicable
transactions originating or materially modified after December 31, 2009. In
accordance with ASU 2009-13 (as codified under Accounting Standards
Codification (ASC) 605-25, Multiple-Element
Arrangements) and ASU 2009-14, the Company allocates arrangement
consideration to the RIO systems, associated instrumentation and services based
upon the relative selling-price method. Under this method, revenue is allocated
at the time of sale to all deliverables based on their relative selling price
using a specific hierarchy. The hierarchy is as follows: vendor-specific
objective evidence (VSOE) of fair value of the respective elements,
third-party evidence of selling price, or best estimate of selling price.

Prior
to the adoption of ASU 2009-13 and ASU 2009-14, the Company accounted for the
sale of the RIO systems pursuant to ASC 985-605, Software  Revenue Recognition, which required the Company
allocate arrangement consideration to the RIO systems, associated
instrumentation and services based upon VSOE of fair value of the respective
elements. Had the new accounting guidance been applied to revenue at the
beginning of 2009, the resultant
revenue and net loss for the year ended December 31, 2009 would have been
substantially the same.

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Subsequent
to December 31, 2008, the Company no longer manufactures TGS units, to which
associated TGS sales arrangements required it to provide upgrades and
enhancements, through and including the delivery of the RIO system. The Company
commercially released the RIO system in the first quarter of 2009. Sales
arrangements for RIO systems do not require the Company to provide upgrades and
enhancements. As a result, revenues related to RIO system sales are recognized
upon installation of the system and training of at least one surgeon.

For
sales of TGS units through December 31, 2008, VSOE of fair value was not
established for upgrades and enhancements (through and including delivery of
the RIO system), which the TGS sales arrangements required the Company to
provide. Accordingly, prior to delivery of the RIO system, sales of TGS units
were recorded as deferred revenue and the direct cost of revenue associated
with the sale of TGS units was recorded as deferred cost of revenue. Revenue
for all previously deferred TGS sales was recognized in our statement of
operations during the year ended December 31, 2009, upon delivery of the RIO
system. As of March 31, 2010, the deferred revenue balance consists primarily
of deferred service revenue as discussed below.

A
portion of the Companys customers acquire the RIO system through a leasing arrangement
with a third-party leasing company. In these instances, the Company typically
sells the RIO system to the leasing company, and the customer enters into an
independent leasing arrangement with the leasing company. The Company treats
these leasing transactions the same as sales transactions for purposes of
recognizing revenue for the sale. The Company sells implants and disposable
products utilized in knee MAKOplasty procedures directly to the customers.

Procedure
revenue from the sale of implants and disposable products utilized in knee
MAKOplasty procedures is recognized at the time of sale (i.e., at the time of
the related surgical procedure).

Costs
associated with establishing an accrual for the RIO system standard one-year warranty
liability and royalties covered by licensing arrangements related to the sale
of RIO systems are expensed upon installation and are included in cost of
revenue - systems, in the statements of operations.

Service
revenue, which is included in other revenue, consists of extended warranty
services on the RIO system hardware, and is deferred and recognized ratably
over the service period until no further obligation exists. Costs associated
with providing extended warranty services are expensed as incurred.

Deferred Revenue and
Deferred Cost of Revenue

Deferred
revenue consists of deferred system revenue and deferred service revenue.
Deferred system revenue arises from timing differences between the installation
of RIO systems and satisfaction of all revenue recognition criteria consistent
with the Companys revenue recognition policy. Deferred service revenue results
from the advance payment for services to be delivered over a period of time,
usually in one-year increments. Service revenue is recognized ratably over the
service period. Deferred cost of revenue consisted of the direct costs
associated with the manufacture of RIO systems for which the revenue has been
deferred in accordance with the Companys revenue recognition policy. Deferred
revenue expected to be realized within one year is classified as a current
liability. The deferred revenue balance as of March 31, 2010 consists primarily
of deferred service revenue for extended warranty services on the RIO system
hardware. As of December 31, 2009, all deferred cost of revenue associated with
the sale of TGS units was recognized in our statement of operations upon
delivery of the RIO system.

Intangible Assets

The
Companys intangible assets are comprised of patents, patent applications and
licenses to intellectual property rights. These intangible assets are carried
at cost, net of accumulated amortization. Amortization is recorded using the
straight-line method over their respective useful lives, which range from 5 to
13 years based on the respective anticipated lives of the underlying patents
and patent applications.

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Inventory

Inventory
is stated at the lower of cost or market value on a first-in, first-out basis.
Inventory costs include direct materials, direct labor and manufacturing
overhead. The Company reviews its inventory periodically to determine net
realizable value and considers product upgrades in its periodic review of
realizability. The Company writes down inventory, if required, based on forecasted
demand and technological obsolescence. These factors are impacted by market and
economic conditions, technology changes and new product introductions and
require estimates that may include uncertain elements.

Beginning
with the fourth quarter of 2008, manufacturing overhead costs have been
capitalized and included in inventory. As of March 31, 2010 and December 31,
2009, capitalized manufacturing overhead included in inventory was
approximately $1.2 million and $1.1 million, respectively. Previously, such
overhead costs were fully expensed as selling, general and administrative
expense as capitalizable amounts that were not significant.

Net Loss Per Share

The
Company calculated net loss per share in accordance with ASC 260, Earnings per Share. Basic earnings per
share (EPS) is calculated by dividing the net income or loss by the weighted
average number of common shares outstanding for the period, without
consideration for common stock equivalents. Diluted EPS is computed by dividing
the net income or loss by the weighted average number of common shares
outstanding for the period and the weighted average number of dilutive common
stock equivalents outstanding for the period determined using the treasury
stock method. The following table sets forth potential shares of common stock
that are not included in the calculation of diluted net loss per share because
to do so would be anti-dilutive as of the end of each period presented:

|                                   |  |           |       |      |  |       | 
|---------------------------------- |  | --------- | ----- | ---- |  | ----- | 
|(in thousands)                     |  | March 31, |      
|                                   |  | 2010      |       | 2009 | 
|Stock options outstanding          |  |           | 4,416 |      |  | 3,343 | 
|Warrants to purchase common
 stock |  |           | 2,043 |      |  | 2,076 | 
|Unvested restricted stock          |  |           | 292   |      |  | 226   | 

Reclassifications

Certain
reclassifications have been made to the prior periods statement of cash flows
and to the prior periods statement of operations to conform to the current
periods presentation.

The
Company loans instrumentation to its customers, which are used to perform
MAKOplasty procedures in conjunction with using the RIO system. These loaned
instrument sets are comprised of tools and equipment which facilitate the
implantation of the Companys knee implants (Implant Instruments). Implant
Instruments loaned to customers are not part of the tangible product sold and
title of loaned Implant Instruments never passes to the surgeon or hospital. To
better reflect the true economic nature and enhance comparability with other
companies in our industry, depreciation expense on loaned Implant Instruments
has been reclassified from cost of revenue  procedures to selling, general and
administrative expense. Depreciation expense for loaned Implant Instruments was
approximately $90,000 and $42,000 for the three months ended March 31, 2010 and
2009, respectively.

In
addition to loaning Implant Instruments to customers, prior to 2010, Implant
Instruments were also included as components of a RIO system sale and
undeployed Implant Instruments were classified as inventory. Once deployed and
placed into service, loaned Implant Instruments were classified as a long-lived
asset and included in property and equipment, net of accumulated depreciation.
Beginning in the first quarter of 2010, Implant Instruments are no longer
included as components of a RIO system sale. To better reflect the true
economic nature of the Implant Instruments and be consistent with industry
practice, undeployed Implant Instruments have been reclassified from inventory
to property and equipment. Undeployed Implant Instruments are carried at cost,
net of allowances for excess and obsolete instruments. Loaned Implant
Instruments in the field are carried at cost less accumulated depreciation.
Depreciation is computed using the straight-line method based on the estimated
useful life of five years. The Company reviews instruments for impairment
whenever events or changes in circumstances indicate that the carrying value of
an instrument may not be recoverable. As of March 31, 2010 and December 31,
2009, approximately $1.5 million and $1.8 million, respectively, of undeployed
Implant Instruments have been included as property and equipment.

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3. Investments

The
Companys investments are classified as available-for-sale. Available-for-sale
securities are carried at fair value, with the unrealized gains and losses included
in other comprehensive income within stockholders equity. Realized losses and
declines in value determined to be other-than-temporary on available-for-sale
securities are included in interest and other expenses. Realized gains and
interest and dividends on securities classified as available-for-sale are
included in interest and other income. The cost of securities sold is based on
the specific identification method.

The
amortized cost and fair value of short and long-term investments, with gross
unrealized gains and losses, were as follows:

As
of March 31, 2010

|                         |  |                 |        |                          |   |                           |  |   |     |   |   |        | 
|------------------------ |  | --------------- | ------ | ------------------------ | - | ------------------------- |  | - | --- | - | - | ------ | 
|                         |  |                 |        | Gross
 Unrealized
 Gains |   | Gross
 Unrealized
 Losses |  |   |    
|                         |  | Amortized
 Cost |        |                          |   | Fair
 Value               | 
|(in thousands)           |  |                 |        |                          |  
|Short-term investments:  |  |                 |        |                          |   |                           |  |   |     |   |   |        | 
|U.S. government agencies |  | $               | 33,696 |                          | $ | 12                        |  | $ | (22 | ) | $ | 33,686 | 
|Certificates of deposit  |  |                 | 13,392 |                          |   | 4                         |  |   | (34 | ) |   | 13,362 | 
|U.S. corporate debt      |  |                 | 2,532  |                          |   | 20                        |  |   | ―   |   |   | 2,552  | 
|Long-term investments:   |  |                 |        |                          |   |                           |  |   |     |   |   |        | 
|U.S. government agencies |  |                 | 750    |                          |   | 2                         |  |   | ―   |   |   | 752    | 
|U.S. corporate debt      |  |                 | 504    |                          |   | 2                         |  |   | ―   |   |   | 506    | 
|Total investments        |  | $               | 50,874 |                          | $ | 40                        |  | $ | (56 | ) | $ | 50,858 | 

As
of December 31, 2009

|                         |  |                 |        |                          |   |             |  |   |     |   |   |        | 
|------------------------ |  | --------------- | ------ | ------------------------ | - | ----------- |  | - | --- | - | - | ------ | 
|                         |  | Amortized
 Cost |        | Gross
 Unrealized
 Gains |   |             |  |   |    
|                         |  |                 |        | GrossUnrealized
 Losses  |   | Fair
 Value | 
|(in
 thousands)          |  |                 |        |                          |  
|Short-term investments:  |  |                 |        |                          |   |             |  |   |     |   |   |        | 
|U.S. government agencies |  | $               | 32,860 |                          | $ | 31          |  | $ | (24 | ) | $ | 32,867 | 
|Certificates of deposit  |  |                 | 10,297 |                          |   | 1           |  |   | (25 | ) |   | 10,273 | 
|U.S. corporate debt      |  |                 | 1,532  |                          |   | 14          |  |   | ―   |   |   | 1,546  | 
|Long-term investments:   |  |                 |        |                          |   |             |  |   |     |   |   |        | 
|U.S. government agencies |  |                 | 5,418  |                          |   | ―           |  |   | (18 | ) |   | 5,400  | 
|Certificates of deposit  |  |                 | 2,462  |                          |   | ―           |  |   | (10 | ) |   | 2,452  | 
|U.S. corporate debt      |  |                 | 1,506  |                          |   | 10          |  |   | ―   |   |   | 1,516  | 
|Total investments        |  | $               | 54,075 |                          | $ | 56          |  | $ | (77 | ) | $ | 54,054 | 

As
of March 31, 2010, all short-term investments had maturity dates of less than
one year. As of March 31, 2010, all long-term investments had maturity dates
between one and two years.

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The
fair values of the Companys investments based on the level of inputs are
summarized below:

|                         |  |                 |        |                                                                      |                                                     |                                                   |  |                                              |   |  |   |   | 
|------------------------ |  | --------------- | ------ | -------------------------------------------------------------------- | --------------------------------------------------- | ------------------------------------------------- |  | -------------------------------------------- | - |  | - | - | 
|(in thousands)           |  |                 |        |                                                                      | Fair Value Measurements at the Reporting Date Using |                                                  
|                         |  | March 31,
 2010 |        | Quoted
 Prices in
 Active
 Markets for
 Identical
 Assets
 (Level 1) |                                                     | Significant
 Other
 Observable
 Inputs
 (Level 2) |  | Significant
 Unobservable
 Inputs
 (Level 3) |  
|Short-term investments:  |  |                 |        |                                                                      |                                                     |                                                   |  |                                              |   |  |   |   | 
|U.S. government agencies |  | $               | 33,686 |                                                                      | $                                                   | 33,686                                            |  | $                                            | ― |  | $ | ― | 
|Certificates of deposit  |  |                 | 13,362 |                                                                      |                                                     | 13,362                                            |  |                                              |   |  |   |   | 
|U.S. corporate debt      |  |                 | 2,552  |                                                                      |                                                     | 2,552                                             |  |                                              |   |  |   |   | 
|Long-term investments:   |  |                 |        |                                                                      |                                                     |                                                   |  |                                              |   |  |   |   | 
|U.S. government agencies |  |                 | 752    |                                                                      |                                                     | 752                                               |  |                                              | ― |  |   | ― | 
|U.S. corporate debt      |  |                 | 506    |                                                                      |                                                     | 506                                               |  |                                              | ― |  |   | ― | 
|Total investments        |  | $               | 50,858 |                                                                      | $                                                   | 50,858                                            |  | $                                            | ― |  | $ | ― | 

No
investments measured at fair value on a recurring basis used Level 3 or
significant unobservable inputs for the three months ended March 31, 2010.
There have been no transfers between Level 1 and Level 2 measurements during
the three months ended March 31, 2010.

Fair Value of Financial Instruments

Carrying
amounts of certain of the Companys financial instruments, including cash and
cash equivalents, investments, accounts receivable and other accrued
liabilities approximate fair value due to their short maturities or market
rates of interest.

4. Inventory

Inventory
consisted of the following:

|                |  |                 |       |                    |   |       | 
|--------------- |  | --------------- | ----- | ------------------ | - | ----- | 
|(in thousands)  |  | March 31,
 2010 |       | December 31,
 2009 |  
|Raw materials   |  | $               | 2,768 |                    | $ | 1,809 | 
|Work-in-process |  |                 | 1,211 |                    |   | 884   | 
|Finished goods  |  |                 | 5,680 |                    |   | 5,684 | 
|Total inventory |  | $               | 9,659 |                    | $ | 8,377 | 

For
the three months ended March 31, 2010, the Company wrote-off approximately $1.9
million, or $(0.06) per basic and diluted share, of excess RESTORIS
unicompartmental knee implant system (RESTORIS Classic) implants and related
instrumentation with excess implants of approximately $1.0 million charged to
cost of revenue  procedures, cancellation charges of $130,000 charged to cost
of revenue  service and other and excess instrumentation of approximately
$808,000 charged to selling, general and administrative expenses. These charges
were necessitated by the rapid adoption of the RESTORIS MCK multicompartmental
knee implant system and the corresponding decline in the usage of RESTORIS
Classic. RESTORIS Classic was introduced in the third quarter of 2008 and was
modeled after existing well-known unicompartmental designs. In connection with
the launch of the RIO system, in the second quarter of 2009, the Company
launched its next generation RESTORIS MCK multicompartmental knee implant
system (RESTORIS MCK). RESTORIS MCK was designed as a premium addition to the
RESTORIS product family with the goal of delivering a more natural feeling knee
by preserving bone and providing anatomical features such as high flexion.

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The
Company reviews its inventory periodically to determine net realizable value
and considers product upgrades in its periodic review of realizability.
Depending on demand for the Companys products and technical obsolescence,
additional future write-offs of the Companys inventory may occur.

5. Commitments and Contingencies

Purchase Commitments

At
March 31, 2010, the Company was committed to make future purchases for
inventory related items and instrumentation under various purchase arrangements
with fixed purchase provisions aggregating approximately $6.1 million.

Contingencies

The
Company is a party to legal contingencies or claims arising in the normal
course of business, none of which the Company believes is material to its
financial position, results of operations or cash flows.

Development
Agreement

In
June 2009, the Company entered into a Research and Development License and
Supply Agreement, or the R&D Agreement, associated with a potential future
product for RIO enabled hip MAKOplasty procedures. The R&D Agreement
required an up-front payment of $450,000, and requires future milestone
payments based on development progress. The aggregate milestone payments the
Company is obligated to pay under the R&D Agreement are $1.6 million
assuming the achievement of all development milestones. Through March 31, 2010,
the Company paid the $450,000 up-front payment and the Company paid $550,000 of
milestone payments which became due upon the achievement of the related
milestones. The aggregate up-front payment and milestone payments of $2.0
million the Company is required to pay under the R&D Agreement are being
recognized as research and development expense on a straight-line basis over
the period development services are performed based on the current expectation
that all development milestones will be achieved.

6. Related Party Transaction

In
February 2010, the Company completed the acquisition of substantially all of
the intellectual property portfolio of Z-Kat, Inc. (Z-Kat). The terms of the
Asset Purchase Agreement between the Company and Z-Kat (the Asset Purchase Agreement)
terminated the Companys prior licenses with Z-Kat, including Z-Kats
nonexclusive sublicense to the Companys intellectual property portfolio, and
transferred to the Company ownership rights to certain intellectual property
assets for core technologies in computer assisted surgery (CAS), haptics and
robotics, including U.S. and foreign patents and patent applications,
proprietary software and documentation, trade secrets and trademarks owned by
Z-Kat, and certain contractual and other rights to patents, patent applications
and other intellectual property licensed to Z-Kat under licenses. In connection
with the acquisition, the Company also entered into a new license agreement
with Z-Kat (the License Agreement) pursuant to which the Company obtained an
exclusive worldwide, fully transferable, perpetual, royalty-free and fully
paid-up sublicense to certain intellectual property for technologies in CAS
licensed by Z-Kat. This new License Agreement expands the Companys rights in
this intellectual property from the field of orthopedics to the medical field
generally. Certain of the Companys rights under the Asset Purchase Agreement
and License Agreement remain subject to any prior license granted by Z-Kat,
including a license to Biomet Manufacturing Corp. In consideration for
consummation of the transactions contemplated by the Asset Purchase Agreement
and License Agreement, the Company issued 230,458 shares of its unregistered
common stock to Z-Kat in a private placement, which was treated as a related
party transaction because certain directors and executive officers of the
Company have a material interest in Z-Kat by virtue of their ownership of Z-Kat
stock. The Asset Purchase Agreement and License Agreement were approved by the
independent members of the board of directors and audit committee of the
Company.

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7. Stockholders Equity

Common Stock

As
of March 31, 2010 and December 31, 2009, the Company was authorized to issue
135,000,000 shares of $0.001 par value common stock. Common stockholders are
entitled to dividends as and if declared by the Board of Directors, subject to
the rights of holders of all classes of stock outstanding having priority
rights as to dividends. There have been no dividends declared to date on the
common stock. The holder of each share of common stock is entitled to one vote.

Comprehensive Loss

Comprehensive
loss is defined as the change in equity from transactions and other events and
circumstances other than those resulting from investments by owners and
distributions to owners. For the three months ended March 31, 2010 and 2009,
the Company recorded comprehensive losses of approximately $11,403,000 and
$8,925,000, respectively. The difference between comprehensive loss and net
loss for the three months ending March 31, 2010 and 2009 is due to changes in
unrealized gains and losses on the Companys available-for-sale securities.

Stock Option Plans
and Stock-Based Compensation

The
Company recognizes compensation expense for its stock-based awards in
accordance with ASC 718, Compensation-Stock
Compensation. ASC 718 requires the recognition of compensation
expense, using a fair value based method, for costs related to all stock-based
payments including stock options. ASC 718 requires companies to estimate the
fair value of stock-based payment awards on the date of grant using an
option-pricing model.

On
February 4, 2010, the Company issued 100,000 shares of restricted stock to its
CEO at a fair value of $11.95 per share on the date of issuance. The restricted
stock will vest over a four-year period. For the three months ended March 31,
2010, 7,917 shares of common stock were surrendered by the CEO to the Company
to cover payroll taxes associated with the taxable income from the vesting of
restricted stock previously granted to the Companys CEO. As of March 31, 2010,
825,113 shares of restricted stock granted to the Companys CEO were issued and
outstanding.

During
the three months ended March 31, 2010 and 2009, stock-based compensation
expense was approximately $1.3 million and $830,000, respectively. Included
within stock-based compensation expense for the three months ended March 31,
2010 were $953,000 related to stock option grants, $297,000 related to the partial
vesting of shares of restricted stock granted to the Companys CEO at various
dates from 2006 through 2010, and $53,000 related to employee stock purchases
under the MAKO Surgical Corp. 2008 Employee Stock Purchase Plan (the 2008
Employee Stock Purchase Plan).

The
Companys 2004 Stock Incentive Plan (the 2004 Plan), its MAKO Surgical Corp.
2008 Omnibus Incentive Plan (the 2008 Plan, and together with the 2004 Plan,
the Plans), and its 2008 Employee Stock Purchase Plan are described in the
notes to financial statements in the Form 10-K. Generally, the Companys
outstanding stock options vest over four years. Stock options granted to
certain non-employee directors generally vest over three years. Continued
vesting typically terminates when the employment or consulting relationship
ends. Vesting generally begins on the date of grant; however, certain stock
options granted in 2007 began vesting upon the achievement of performance
conditions.

The
2008 Plan contains an evergreen provision whereby the authorized shares
available under the 2008 Plan increase on January 1st of each year in an amount
equal to the least of (1) four percent (4%) of the total number of shares of
the Companys common stock outstanding on December 31st of the preceding year,
(2) 2.5 million shares and (3) a number of shares determined by the Companys
Board of Directors that is lesser than (1) and (2). The number of additional
shares authorized under the 2008 Plan on January 1, 2009 and 2010 were
approximately 998,000 and 1,330,000, respectively.

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Under
the terms of the Plans, the maximum term of options intended to be incentive
stock options granted to persons who own at least 10% of the voting power of
all outstanding stock on the date of grant is 5 years. The maximum term of all
other options is 10 years. Options issued under the 2008 Plan that are
forfeited or expire will again be made available for issuing grants under the
2008 Plan. Options issued under the 2004 Plan that are forfeited or expire will
not be made available for issuing grants under the 2008 Plan. All future equity
awards will be made under the Companys 2008 Plan.

Activity
under the Plans is summarized as follows:

|                                       |  |                                      |       |                     |  |                                    |   |   |       | 
|-------------------------------------- |  | ------------------------------------ | ----- | ------------------- |  | ---------------------------------- | - | - | ----- | 
|(in thousands, except per share data)  |  |                                      |       | Outstanding Options | 
|                                       |  |                                      |       |                     |  | Weighted
 Average
 Exercise
 Price |  
|                                       |  | Shares/Options
 Available
 For Grant |       | Number of
 Options  |  |                                   
|                                       |  |                                      |       |                    
|Balance at
 December 31, 2009          |  |                                      | 174   |                     |  | 3,478                              |   | $ | 6.71  | 
|Shares reserved                        |  |                                      | 1,330 |                     |  | ―                                  |   |   | ―     | 
|Restricted stock issued                |  |                                      | (100  | )                   |  | ―                                  |   |   | ―     | 
|Options granted                        |  |                                      | (991  | )                   |  | 991                                |   |   | 12.26 | 
|Options exercised                      |  |                                      | ―     |                     |  | (41                                | ) |   | 3.40  | 
|Options forfeited under the
 2004 Plan |  |                                      | ―     |                     |  | (8                                 | ) |   | 3.21  | 
|Options forfeited under the
 2008 Plan |  |                                      | 4     |                     |  | (4                                 | ) |   | 8.26  | 
|Balance at
 March 31, 2010             |  |                                      | 417   |                     |  | 4,416                              |   |   | 7.99  | 

The
Company records stock-based compensation expense on a straight-line basis over
the vesting period. As of March 31, 2010, there was total unrecognized
compensation cost of approximately $15.9 million, net of estimated forfeitures,
related to non-vested stock-based payments (including stock option grants,
restricted stock grants and compensation expense relating to shares issued
under the 2008 Employee Stock Purchase Plan) granted to the Companys employees
and non-employee directors. The unrecognized compensation cost will be adjusted
for future changes in estimated forfeitures, and is expected to be recognized
over a remaining weighted average period of 3.0 years as of March 31, 2010.

The
estimated grant date fair values of the employee stock options were calculated
using the Black-Scholes-Merton valuation model, based on the following
assumptions:

|                        |  |                              |  |                 | 
|----------------------- |  | ---------------------------- |  | --------------- | 
|                        |  | Three Months Ended March 31, | 
|                        |  | 2010                         |  | 2009            | 
|Risk-free interest rate |  | 3.06%
 - 3.36%               |  | 1.99%
 - 2.42%  | 
|Expected life           |  | 6.25
 years                  |  | 6.25
 years     | 
|Expected dividends      |  | ―                            |  | ―               | 
|Expected volatility     |  | 50.33% - 50.43%              |  | 56.80% - 56.86% | 

Warrants

In
December 2004, the Company issued at the purchase price of $0.03 per share
warrants to purchase 462,716 shares of common stock. The warrants are
immediately exercisable at an exercise price of $3.00 per share, with the
exercise period expiring in December 2014. As of March 31, 2010, 429,862
warrants were outstanding and exercisable.

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In
October 2008, the Company entered into a Securities Purchase Agreement for an
equity financing with gross proceeds of approximately $40.2 million. In
connection with the financing, the Company issued warrants to the participating
investors to purchase 1,290,323 shares of common stock at a purchase price of
$0.125 per warrant and an exercise price of $7.44 per share. The warrants
became exercisable on April 29, 2009 and have a seven-year term. As of March
31, 2010, all the warrants were outstanding and exercisable. In addition, in
consideration for the right (the Call Right) to require certain participants
in the financing to purchase an additional $20 million of common stock and
warrants to purchase common stock, the Company issued warrants to purchase 322,581
shares of common stock at a purchase price of $0.125 per warrant and an
exercise price of $6.20 per share to participating investors. These warrants
became exercisable on December 31, 2009 and have a seven-year term. As of March
31, 2010, all the warrants were outstanding and exercisable. The Company did
not exercise its Call Right, which expired on December 31, 2009.

8. Income Taxes

The
Company accounts for income taxes under ASC 740, Income Taxes. Deferred income taxes are determined based
upon differences between financial reporting and income tax bases of assets and
liabilities and are measured using the enacted income tax rates and laws that
will be in effect when the differences are expected to reverse. The Company
recognizes any interest and penalties related to unrecognized tax benefits as a
component of income tax expense.

Due
to uncertainty surrounding realization of the deferred income tax assets in
future periods, the Company has recorded a 100% valuation allowance against its
net deferred tax assets. If it is determined in the future that it is more
likely than not that the deferred income tax assets are realizable, the
valuation allowance will be reduced.

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ITEM 2. MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

In
this report, MAKO Surgical, MAKO, the Company, we, us and our refer
to MAKO Surgical Corp.

The
following discussion and analysis of our financial condition and results of
operations should be read together with our financial statements and related
notes appearing elsewhere in this report. This report contains forward-looking
statements regarding, among other things, statements related to expectations,
goals, plans, objectives and future events. We intend such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in Section 21E of the Securities Exchange Act of 1934 and
the Private Securities Reform Act of 1995. In some cases, you can identify
forward-looking statements by the following words: may, will, could,
would, should, expect, intend, plan, anticipate, believe,
estimate, predict, project, potential, continue, ongoing or the
negative of these terms or other comparable terminology, although not all
forward-looking statements contain these words. Examples of such statements
include, but are not limited to, statements about the nature, timing and number
of planned new product introductions; market acceptance of the MAKOplasty®
solution; the future availability from third-party suppliers, including single
source suppliers, of implants for and components of our RIO® Robotic Arm Interactive
Orthopedic system, or RIO system; the anticipated adequacy of our capital
resources to meet the needs of our business; our ability to sustain, and our
goals for, sales and earnings growth including projections regarding systems
installations; and our success in achieving timely approval or clearance of
products with domestic and foreign regulatory entities. These statements are
based on the current estimates and assumptions of our management as of the date
of this report and are subject to risks, uncertainties, changes in
circumstances, assumptions and other factors that may cause actual results to
differ materially from those indicated by forward-looking statements, many of
which are beyond our ability to control or predict. Such factors, among others,
may have a material adverse effect on our business, financial condition and
results of operations and may include the potentially significant impact of a
continued economic downturn or delayed economic recovery on the ability of our
customers to secure adequate funding, including access to credit, for the
purchase of our products or cause our customers to delay a purchasing decision,
changes in competitive conditions and prices in our markets, unanticipated
issues relating to intended product launches, decreases in sales of our
principal product lines, increases in expenditures related to increased or
changing governmental regulation or taxation of our business, unanticipated
issues in securing regulatory clearance or approvals for new products or
upgrades or changes to our current products, the impact of the recently enacted
United States healthcare reform legislation on hospital spending,
reimbursement, and the taxing of medical device companies, loss of key
management and other personnel or inability to attract such management and
other personnel and unanticipated intellectual property expenditures required
to develop, market, and defend our products. These and other risks are
described in greater detail under Item 1A, Risk Factors, contained in our Annual
Report on Form 10-K for the year ended December 31, 2009 and under Item 1A,
Risk Factors, contained in Part II, Item 1A of this Quarterly Report on Form
10-Q. Given these uncertainties, you should not place undue reliance on these
forward-looking statements. We do not undertake any obligation to release any
revisions to these forward-looking statements publicly to reflect events or
circumstances after the date of this report or to reflect the occurrence of
unanticipated events.

We
have received or applied for trademark registration of and/or claim trademark
rights for the following marks: MAKOplasty®, RIO®, RESTORIS®, Tactile
Guidance System and TGS, as well as in the MAKO Surgical Corp. MAKO logo,
whether standing alone or in connection with the words MAKO Surgical Corp.

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Overview

We
are an emerging medical device company that markets our advanced robotic arm
solution and orthopedic implants for minimally invasive orthopedic knee
procedures. We offer MAKOplasty, an innovative, restorative surgical solution
that enables orthopedic surgeons to consistently, reproducibly and precisely
treat patient specific, early to mid-stage osteoarthritic knee disease. In
February 2008, our common stock began trading on The NASDAQ Global Market under
the ticker symbol MAKO in connection with the closing of our initial public
offering.

We
have incurred net losses in each year since our inception and, as of March 31,
2010, we had an accumulated deficit of $125.6 million. We expect to continue to
incur significant operating losses as we increase our sales and marketing
activities and otherwise continue to invest capital in the development and
expansion of our products and our business generally. We expect that our
general and administrative expenses will increase to support the sales and
marketing efforts associated with the growing commercialization of MAKOplasty,
and to support our continued growth in operations. We also expect our research
and development expenses to increase as we continue to expand our research and
development activities, including the support of existing products and the
research of potential future products.

Recent
key milestones in the development of our business include the following:

| |                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 
 During the three month period ended March 31, 2010, a total of 731 knee
 MAKOplasty procedures were performed, including unicompartmental and
 bicompartmental procedures, representing a 176% increase over the same period
 in 2009.                                                                                                                                                         
| |                                                                                                                                                                                                                                                                                                                                                                                                   
| | 
 In February 2010, we received 510(k) marketing clearance from the FDA for an
 application that assists a surgeon in performing all components of a total
 hip arthroplasty using the RIO system. We believe this represents achievement
 of a necessary milestone towards what we anticipate will be our continuing
 development and future commercialization of a RIO-enabled hip application.
| |                                                                                                                                                                                                                                                                                                                                                                                                   
| | 
 In April 2010, we finalized securing the necessary European Union CE markings
 for our RIO system and our RESTORIS MCK multicompartmental knee implant
 system, which is a legal requirement for medical devices intended for sale in
 Europe.                                                                                                                                                 

We
believe that the key to growing our near term business is expanding the
acceptance and application of MAKOplasty to unicompartmental and
multicompartmental knee resurfacing procedures by offering implants that
address early to mid-stage, unicompartmental and multicompartmental knee
degeneration. To successfully commercialize our products and grow our business,
we must gain market acceptance for knee MAKOplasty.

Factors Which May Influence Future
Results of Operations

The
following is a description of factors that may influence our future results of
operations, including significant trends and challenges that we believe are important
to an understanding of our business and results of operations.

Revenue

Revenue
is generated from unit sales of our RIO system, including associated
instrumentation, installation services and training, from sales of implants and
disposable products, and by providing extended warranty services. We recognize
revenue in accordance with Staff Accounting Bulletin No. 104, Revenue
Recognition, when persuasive evidence of an arrangement exists, the
fee is fixed or determinable, collection of the fee is probable and delivery
has occurred. For all sales, we use either a signed agreement or a binding
purchase order as evidence of an arrangement.

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Table of Contents

Since
December 31, 2008, we no longer manufacture TGS units, to which associated TGS
sales arrangements required us to provide upgrades and enhancements, through
and including the delivery of the RIO system. We commercially released the RIO
system in the first quarter of 2009. Sales arrangements for RIO systems do not
require us to provide upgrades and enhancements. As a result, we recognize
revenues related to RIO system sales upon installation of the system and
training of at least one surgeon.

For
sales of TGS units through December 31, 2008, the sales arrangements required
us to provide upgrades and enhancements to the TGS unit through and including
delivery of the RIO system. Prior to delivery of the RIO system, sales of TGS
units were recorded as deferred revenue and the direct cost of revenue
associated with the sale of TGS units was recorded as deferred cost of revenue.
Upon satisfaction of the final deliverable of the RIO system, the revenue and
direct cost of revenue associated with the sale of TGS units was recognized in
our statement of operations. Revenue for all previously deferred TGS sales was
recognized in our statement of operations during the year ended December 31,
2009, upon delivery of the RIO system. Our deferred revenue balance as of March
31, 2010 consists primarily of deferred service revenue for extended warranty services
on the RIO system hardware.

A
portion of our customers acquire our RIO system through a leasing
arrangement with a third-party leasing company. In these instances, we
typically sell the RIO system to the leasing company, and our customer enters
into an independent leasing arrangement with the leasing company. We treat
these leasing transactions the same as sales transactions for purposes of
recognizing revenue for the sale.

Procedure
revenue from the sale of implants and disposable products utilized in knee
MAKOplasty procedures is recognized at the time of sale (i.e., at the time of
the related surgical procedure).

Service
revenue consists of extended warranty services on the RIO system hardware, and
is deferred and recognized ratably over the service period until no further
obligation exists. Costs associated with providing extended warranty services
are expensed as incurred.

Future
revenue from sales of our products is difficult to predict and we expect that
it will only modestly reduce our continuing and increasing losses resulting
from selling, general and administrative expenses, research and development
expenses and other activities for at least the next two or three years. Our
future revenue may also be adversely affected by the current general economic
downturn and the resulting tightening of the credit markets, which may cause
purchasing decisions to be delayed or cause our customers to experience
difficulties in securing adequate funding to buy our products.

The
generation of recurring revenue through sales of our knee implants, disposable
products and extended warranty service contracts is an important part of the
MAKOplasty business model. We anticipate that recurring revenue will constitute
an increasing percentage of our total revenue as we leverage each new
installation of our RIO system to generate recurring sales of implants and
disposable products and as we expand our implant product offering.

Cost of Revenue

Cost
of revenue primarily consists of the direct costs associated with the
manufacture of RIO systems, implants and disposable products for which revenue
has been recognized in accordance with our revenue recognition policy. Costs
associated with providing services are expensed as incurred. Cost of revenue
also includes the allocation of manufacturing overhead costs, the cost
associated with establishing at the time of installation an accrual for the RIO
system standard one-year warranty liability, royalties related to the sale of
products covered by licensing arrangements and write-offs of obsolete, impaired
or excess inventory.

For
the three months ended March 31, 2010, we wrote-off approximately $1.9 million,
or $(0.06) per basic and diluted share, of excess RESTORIS unicompartmental
knee implant system, or RESTORIS Classic, implants and related instrumentation
with excess implants of approximately $1.0 million charged to cost of revenue 
procedures, cancellation charges of $130,000 charged to cost of revenue  service
and other and excess instrumentation of approximately $808,000 charged to
selling, general and administrative expenses. These charges were necessitated
by the rapid adoption of the RESTORIS MCK multicompartmental knee implant system
and the corresponding decline in the usage of RESTORIS Classic. RESTORIS
Classic was introduced in the third quarter of 2008 and was modeled after
existing well-known unicompartmental designs. In connection with the launch of
the RIO system, in the second quarter of 2009, we launched our next generation
RESTORIS MCK multicompartmental knee implant system, or RESTORIS MCK. RESTORIS
MCK was designed as a premium addition to the RESTORIS product family with the
goal of delivering a more natural feeling knee by preserving bone and providing
anatomical features such as high flexion.

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Selling, General and
Administrative Expenses

Our
selling, general and administrative expenses consist primarily of compensation,
including stock-based compensation and benefits, for sales, marketing, clinical
research, operations, regulatory, quality, executive, finance, legal and
administrative personnel. Other significant expenses include costs associated
with sales and marketing activities, marketing and advertising materials,
insurance, professional fees for legal and accounting services, consulting
fees, travel expenses, facility and related operating costs, and recruiting
expenses. Our selling, general and administrative expenses are expected to
continue to increase due to the planned increase in the number of employees
necessary to support the sales and marketing efforts associated with the
growing commercialization of MAKOplasty and an increased number of employees
necessary to support our continued growth in operations. In addition, we expect
to incur additional costs associated with securing and protecting our
intellectual property rights as necessary to support our future product
offerings.

We
loan instrumentation to our customers, which are used to perform MAKOplasty
procedures in conjunction with using the RIO system. These loaned instrument
sets are comprised of tools and equipment which facilitate the implantation of
our RESTORIS family of knee implants. Instrument sets loaned to customers are
not part of the tangible product sold and title of loaned instrument sets never
passes to the surgeon or hospital. To better reflect the true economic nature
and enhance comparability with other companies in our industry, depreciation
expense on loaned instrument sets has been reclassified from cost of revenue 
procedures to selling, general and administrative expense. Depreciation expense
for loaned instrument sets was approximately $90,000 and $42,000 for the three
months ended March 31, 2010 and 2009, respectively.

Research and
Development Expenses

Costs
related to research, design and development of products are charged to research
and development expense as incurred. These costs include direct salary and
benefit costs for research and development employees including stock-based
compensation, cost for materials used in research and development activities
and costs for outside services. We expect our research and development expense
to increase as we continue to expand our research and development activities,
including the support of existing products and the research and development of
potential future products, including our RIO-enabled hip application.

Critical Accounting Policies

Effective
January 1, 2010, we early adopted the Financial Accounting Standards Board, or
FASB, Accounting Standard Update No. 2009-13, Multiple-Deliverable Revenue
Arrangementsa consensus of the FASB Emerging Issues Task Force, or
ASU 2009-13, and Update No. 2009-14,Certain
Revenue Arrangements That Include Software Elements, a consensus of the FASB
Emerging Issues Task Force, or ASU 2009-14, on a prospective basis
for applicable transactions originating or materially modified after December
31, 2009. In accordance with ASU 2009-13 (as codified under Accounting Standards
Codification 605-25, Multiple-Element Arrangements) and ASU
2009-14, we allocate arrangement consideration to the RIO systems, associated
instrumentation and services based upon the relative selling-price method.
Under this method, revenue is allocated at the time of sale to all deliverables
based on their relative selling price using a specific hierarchy. The hierarchy
is as follows: vendor-specific objective evidence, or VSOE, of fair value of
the respective elements, third-party evidence of selling price, or best
estimate of selling price.

Prior
to the adoption of ASU 2009-13 and ASU 2009-14, we accounted for the sale of
the RIO systems pursuant to ASC 985-605, Software  Revenue Recognition, which
required us to allocate arrangement consideration to the RIO systems,
associated instrumentation and services based upon VSOE of fair value of the
respective elements. Had the new accounting guidance been applied to revenue at
the beginning of 2009, the resultant revenue and net loss for the year ended
December 31, 2009 would have been substantially the same.

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Other
than as described above, there have been no significant changes in our critical
accounting policies during the three months ended March 31, 2010 as compared to
the critical accounting policies described in our Form 10-K for the year ended
December 31, 2009.

Results of Operations

Comparison of the
Three Months Ended March 31, 2010 to the Three Months Ended March 31, 2009

Revenue. Revenue was $7.2 million for the
three months ended March 31, 2010, compared to $3.7 million for the three
months ended March 31, 2009. The increase in revenue of $3.5 million, or 94%,
was primarily due to a $2.5 million, or 214%, increase in procedure revenue and
a $900,000, or 36%, increase in RIO system revenue. The $2.5 million increase
in procedure revenue was attributable to an increase in knee MAKOplasty
procedures performed during the three months ended March 31, 2010 as compared
with the three months ended March 31, 2009. There were 731 knee MAKOplasty
procedures performed during the three months ended March 31, 2010 compared to
265 knee MAKOplasty procedures performed during three months ended March 31,
2009. The increase in MAKOplasty procedures performed was driven by the continued
adoption of MAKOplasty, both in terms of utilization per commercial site and
total commercial installed base. Total revenue was also positively impacted by
$3.4 million of revenue from four unit sales of our RIO system as compared to
the recognition of approximately $2.5 million of revenue from four previously
deferred unit sales of our TGS during three months ended March 31, 2009. In
accordance with our revenue recognition policy, recognition of revenue on unit
sales of our TGS was deferred until delivery of the RIO system, which we
commercially released in the first quarter of 2009. Prior to 2009, recognized
revenue was primarily generated from the sale of implants and disposable
products utilized in knee MAKOplasty procedures. For the three months ended
March 31, 2009, we deferred recognition of the revenue and the direct cost of
revenue associated with three new unit sales of our RIO system, which occurred
in the first quarter of 2009. Due to the timing of the release of the RIO
system near the end of the first quarter of 2009, all related revenue
recognition criteria had not been satisfied for these RIO system sales, and
recognition of the revenue and the direct cost of revenue for these sales were
deferred and recognized in the second quarter of 2009. We expect our revenue to
continue to increase as unit sales of our RIO system increase in future periods
and the number of knee MAKOplasty procedures performed increases in future
periods.

Cost of Revenue. Cost of revenue was $4.0
million for the three months ended March 31, 2010, compared to $3.0 million for
the three months ended March 31, 2009. The increase in cost of revenue of $1.0
million, or 32%, was primarily due to the recognition of the cost of revenue
from four unit sales of our RIO system and to an increase in knee MAKOplasty
procedures performed. Cost of revenue for the three months ended March 31, 2010
was also impacted by a write-off of approximately $1.0 million of excess
RESTORIS Classic implants as discussed in Factors Which May Influence Future
Results of Operations above. This was partially offset by the recognition of
the direct cost of revenue from four previously deferred unit sales of our TGS,
including the cost of providing the RIO system upgrades, during the three months
ended March 31, 2009. We expect our cost of revenue to continue to increase as
unit sales of our RIO system increase in future periods and the number of knee
MAKOplasty procedures performed increases in future periods.

Selling, General and Administrative.
Selling, general and administrative expense was $10.8 million for the
three months ended March 31, 2010, compared to $6.8 million for the three
months ended March 31, 2009. The increase of $4.0 million, or 59%, was
primarily due to an increase in sales, marketing and operations costs
associated with the production and commercialization of our products and an
increase in general and administrative costs to support our continued growth.
Selling, general and administrative expense for the three months ended March
31, 2010 was also impacted by a write-off of approximately $808,000 of excess
RESTORIS classic instrumentation as discussed in Factors Which May Influence
Future Results of Operations above. Selling, general and administrative
expense for the three months ended March 31, 2010 also included $1.1 million of
stock-based compensation expense compared to $642,000 for the three months
ended March 31, 2009. The increase in stock-based compensation expense was
primarily due to additional option grants and restricted stock grants made in
2009 and 2010. We expect our selling, general and administrative expenses to
continue to increase substantially due to our planned increase in the number of
employees necessary to support the sales and marketing efforts associated with
the growing commercialization of our products and an increased number of
employees necessary to support our continued growth in operations.

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Research and Development. Research and
development expense was $3.3 million for the three months ended March 31,
2010, compared to $2.5 million for the three months ended March 31, 2009.
The increase of $770,000, or 31%, was primarily due to an increase in research
and development activities associated with on-going development of our RIO
system, our MAKO implant systems and potential future products, including our
RIO-enabled hip application. We expect our research and development expense to
increase as we continue to expand our research and development activities,
including the support of existing products and the research of potential future
products.

Depreciation and Amortization.
Depreciation and amortization expense was $622,000 for the three months ended
March 31, 2010, compared to $478,000 for the three months ended March 31, 2009.
The increase of $144,000, or 30%, was primarily due to an increase in
depreciation of property and equipment as a result of purchases made during
2010 and 2009.

Interest and Other Income. Interest and
other income was $108,000 for the three months ended March 31, 2010, compared
to $222,000 for the three months ended March 31, 2009. The decrease of
$114,000, or 51%, was primarily due to lower yields realized on our cash, cash
equivalents and investments for the three months ended March 31, 2010 compared
with the same period of 2009.

Income Taxes. No federal income taxes were
recognized for the three months ended March 31, 2010 and 2009, due to net
operating losses in each period. State and local income taxes were $46,000 for
the three months ended March 31, 2010, compared to $5,000 for the three months
ended March 31, 2009. Income taxes recognized to date have not been significant
due to net operating losses we have incurred in each period since our inception
in November 2004. In addition, no current or deferred income taxes were
recorded for the three months ended March 31, 2010 and 2009, as all income tax
benefits were fully offset by a valuation allowance against our net deferred
income tax assets.

Liquidity and Capital Resources

|                                                 |  |                               |        |      |   |         |  
|------------------------------------------------ |  | ----------------------------- | ------ | ---- | - | ------- | -
|(in
 thousands)                                  |  | Three
 Months Ended March 31, |       
|                                                 |  | 2010                          |        | 2009 |  
|Cash used in operating
 activities               |  | $                             | (9,770 | )    | $ | (12,973 | )
|Cash provided by (used) in
 investing activities |  |                               | 2,121  |      |   | (15,127 | )
|Net cash provided by
 financing activities       |  |                               | 247    |      |   | 127     |  
|Net decrease in cash and
 cash equivalents       |  | $                             | (7,402 | )    | $ | (27,973 | )

We
have incurred net losses and negative cash flow from operating activities for
each period since our inception in November 2004. As of March 31, 2010, we had
an accumulated deficit of $125.6 million and have financed our operations
principally through the sale of our equity securities.

In
August 2009, we completed a public offering of our common stock, issuing
8,050,000 shares at an offering price to the public of $7.25 per share,
resulting in net proceeds of approximately $54.3 million, after underwriting
discounts and commissions and expenses.

As
of March 31, 2010, we had approximately $60.6 million in cash, cash equivalents
and investments. Our cash and investment balances are held in a variety of
interest bearing instruments, including notes and bonds from U.S. government
agencies, certificates of deposit and investment grade rated U.S. corporate
debt.

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Net Cash Used in
Operating Activities

Net
cash used in operating activities primarily reflects the net loss for those
periods, which was reduced in part by depreciation and amortization,
stock-based compensation, inventory write-downs and property and equipment
write-downs. For the three months ended March 31, 2010, inventory write-downs
of $1.1 million and property and equipment write-downs of $899,000 were
incurred primarily due to the write-off of excess RESTORIS Classic implants and
instrumentation as discussed in Factors Which May Influence Future Results of
Operations above. Net cash used in operating activities was also affected by
changes in operating assets and liabilities. Included in changes in operating
assets and liabilities for the three months ended March 31, 2010 are
approximately $2.6 million of increases in inventory necessitated by increased
sales of implants and disposable products, $1.9 million of decreases in accrued
compensation and employee benefits due primarily to the payment of year-end
bonuses, which was partially offset by $1.3 million of decreases in accounts
receivable. Included in changes in operating assets for the three months ended
March 31, 2009 is approximately $4.7 million of increases in inventory
necessitated by the commercial release of the RIO system and increased sales of
implants and disposable products.

Net Cash Provided by
(Used in) Investing Activities

Net
cash provided by investing activities for the three months ended March 31, 2010
was primarily attributable to proceeds of $10.0 million from sales and
maturities of investments, which was partially offset by the purchase of
investments of $6.9 million. Net cash used in investing activities for the
three months ended March 31, 2009 was primarily attributable to the purchase of
investments of $14.7 million and purchases of property and equipment of $1.5
million, which was partially offset by proceeds of $1.0 million from sales and
maturities of investments.

Net Cash Provided by
Financing Activities

Net
cash provided by our financing activities for the three months ended March 31,
2010 was primarily attributable to proceeds received under our employee stock
purchase plan and to proceeds received on the exercise of stock options and
warrants. Net cash provided by our financing activities for the three months
ended March 31, 2009 was primarily attributable to proceeds received under our
employee stock purchase plan.

Operating Capital
and Capital Expenditure Requirements

To
date, we have not achieved profitability. We anticipate that we will continue
to incur substantial net losses for at least the next two or three years as we
expand our sales and marketing capabilities in the orthopedic products market,
continue to commercialize our RIO system and RESTORIS MCK multicompartmental
knee implant system, continue research and development of existing and future
products and continue development of the corporate infrastructure required to
sell and market our products and support operations. We also expect to experience increased cash requirements for inventory
and property and equipment in conjunction with the continued commercialization
of our RESTORIS MCK multicompartmental knee implant system and our RIO system.

In
executing our current business plan, we believe our existing cash, cash
equivalents and investment balances, and interest income we earn on these
balances will be sufficient to meet our anticipated cash requirements for at
least the next twelve months. To the extent our available cash, cash
equivalents and investment balances are insufficient to satisfy our operating
requirements after that period, we will need to seek additional sources of
funds, including selling additional equity, debt or other securities or
entering into a credit facility, or modify our current business plan. The sale
of additional equity and convertible debt securities may result in dilution to
our current stockholders. If we raise additional funds through the issuance of
debt securities, these securities may have rights senior to those of our common
stock and could contain covenants that could restrict our operations and
issuance of dividends. We may also require additional capital beyond our
currently forecasted amounts. Any required additional capital, whether
forecasted or not, may not be available on reasonable terms, or at all. If we
are unable to obtain additional financing, we may be required to reduce the
scope of, delay or eliminate some or all of our planned research, development
and commercialization activities, which could materially harm our business and
results of operations.

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Because
of the numerous risks and uncertainties associated with the development of
medical devices and the current economic situation, we are unable to estimate
the exact amounts of capital outlays and operating expenditures necessary to
complete the development of our products and successfully deliver commercial
products to the market. Our future capital requirements will depend on many
factors, including but not limited to the following:

| |   |                                                                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the revenue
 generated by sales of our current and future products;                                                                                                                        
| |   |                                                                                                                                                                                            
| |  | the expenses
 we incur in selling and marketing our products;                                                                                                                              
| |   |                                                                                                                                                                                            
| |  | the costs
 and timing of regulatory clearance or approvals for upgrades or changes to
 our existing products as well as future products;                                                   
| |   |                                                                                                                                                                                            
| |  | the rate of
 progress, cost and success of on-going product development activities;                                                                                                        
| |   |                                                                                                                                                                                            
| |  | the
 emergence of competing or complementary technological developments;                                                                                                                   
| |   |                                                                                                                                                                                            
| |  | the costs of
 filing, prosecuting, defending and enforcing any patent or license claims and
 other intellectual property rights, or participating in litigation related
 activities;       
| |   |                                                                                                                                                                                            
| |  | the future
 unknown impact of recently enacted healthcare legislation;                                                                                                                     
| |   |                                                                                                                                                                                            
| |  | the
 acquisition of businesses, products and technologies, although we currently
 have no understandings, commitments or agreements relating to any material
 transaction of this type; and
| |   |                                                                                                                                                                                            
| |  | the
 continued downturn in general economic conditions and interest rates.                                                                                                                 

Contractual
Obligations

At
March 31, 2010, we were committed to make future purchases for inventory
related items and instrumentation under various purchase arrangements with
fixed purchase provisions aggregating approximately $6.1 million.

Other
than as described above and scheduled payments through March 31, 2010, there
have been no significant changes in our contractual obligations during the
three months ended March 31, 2010 as compared to the contractual obligations
described in our Form 10-K for the year ended December 31, 2009.

Off-Balance Sheet Arrangements

We
do not have any off-balance sheet arrangements.

ITEM 3. QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Our
exposure to market risk is confined to our cash, cash equivalents and
investments. The goals of our cash investment policy are the security of the
principal invested and fulfillment of liquidity needs, with the need to
maximize value being an important consideration. To achieve our goals, we
maintain a portfolio of cash equivalents and investments in a variety of
securities including notes and bonds from U.S. government agencies,
certificates of deposit and investment grade rated U.S. corporate debt. The
securities in our investment portfolio are not leveraged and are classified as
available-for-sale. We currently do not hedge interest rate exposure. We do not
believe that a variation in market rates of interest would significantly impact
the value of our investment portfolio.

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ITEM 4. CONTROLS AND PROCEDURES.

Disclosure
Controls and Procedures.

In
accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934, or the
Exchange Act, our management evaluated, with the participation of our chief
executive officer and chief financial officer, or the Certifying Officers, the
effectiveness of the design and operation of our disclosure controls and
procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of March
31, 2010. Based upon their evaluation of these disclosure controls and
procedures, our Certifying Officers concluded that the disclosure controls and
procedures were effective as of March 31, 2010 to provide reasonable assurance
that information required to be disclosed by us in the reports we file or
submit under the Exchange Act is recorded, processed, summarized and reported
within the time period specified in the Securities and Exchange Commission
rules and forms, and to provide reasonable assurance that information required
to be disclosed by us in the reports we file or submit under the Exchange Act
is accumulated and communicated to our management, including our principal
executive and principal financial officers, as appropriate, to allow timely
decisions regarding required disclosure.

We
believe that a controls system, no matter how well designed and operated, is
based in part upon certain assumptions about the likelihood of future events,
and therefore can only provide reasonable, not absolute, assurance that the
objectives of the controls system are met, and no evaluation of controls can
provide absolute assurance that all control issues and instances of fraud, if
any, within a company have been detected.

Changes in Internal Control over Financial
Reporting.

There
have been no changes in our internal control over financial reporting during
the quarter ended March 31, 2010 that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.

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PART IIOTHER INFORMATION

ITEM 1A. RISK FACTORS.

There
have been no material changes in our risk factors from those disclosed in our
Form 10-K for the year ended December 31, 2009, except for the risk factor
listed below:

Healthcare
reforms, changes in healthcare policies and changes to third-party coverage and
reimbursements, including recently enacted legislation reforming the U.S.
healthcare system, may affect demand for our systems and products and may have
a material adverse effect on our financial condition and results of operations.

In
March 2010, the U.S. Congress adopted and the President signed into law
comprehensive health care reform legislation through the passage of the Patient
Protection and Affordable Care Act and the Health Care and Education
Affordability Reconciliation Act. These bills include new taxes impacting
certain health-related industries, including medical device manufacturers.
Beginning in 2013, each medical device manufacturer will have to pay an excise
tax (or sales tax) in an amount equal to 2.3% of the price for which such
manufacturer sells its medical devices. We believe that this excise tax will
apply to our products. Other significant measures contained in these bills
include initiatives to revise Medicare payment methodologies, initiatives to
promote quality indicators in payment methodologies, initiatives related to the
coordination and promotion of research on comparative clinical effectiveness of
different technologies and procedures, and annual reporting requirements
related to payments to physicians and teaching hospitals. These bills also
include significant new fraud and abuse measures, lowering the governments
thresholds to find violations and increasing potential penalties for such violations.

In
addition to the bills discussed above, various healthcare reform proposals have
also emerged at the state level. We cannot predict whether future healthcare
initiatives will be implemented at the federal or state level or internationally,
or the effect any future legislation or regulation will have on us. The taxes
imposed by the new federal legislation and the expansion in governments role
in the U.S. healthcare industry may result in decreased profits to us, lower
reimbursements by payors for our products, and reduced medical procedure
volumes, all of which may adversely affect our business, financial condition
and results of operations, possibly materially.

ITEM 2. UNREGISTERED SALES OF
EQUITY SECURITIES AND USE OF PROCEEDS.

(a)     Sales of Unregistered Securities

On
January 8, 2010, we entered into an asset purchase agreement with Z-Kat to
acquire certain intellectual property assets from Z-Kat in consideration for
$3,053,569, payable in shares of our common stock. We closed this transaction
and issued 230,458 shares of our common stock to Z-Kat in a private placement
on February 25, 2010. These shares were issued in a transaction exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933, as amended.

(c)     Issuer Purchases of Equity Securities

The
following table summarizes the surrenders of the Companys common stock during
the three month period ended March 31, 2010:

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|                       |  |                                        |       |                                   |   |                                                                                        |  |                                                                                            |   |  |   |   | 
|---------------------- |  | -------------------------------------- | ----- | --------------------------------- | - | -------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------ | - |  | - | - | 
|                       |  | Total
 Number of
 Shares
 Purchased(1) |       | Average
 Price Paid
 per Share(1) |   | Total Number
 of Shares
 Purchased as
 Part of Publicly
 Announced
 Plans or
 Programs |  | Maximum
 Dollar Value of
 Shares that May
 Yet be
 Purchased
 Under the Plans
 or Programs |  
|Period                 |  |                                        |       |                                   |   |                                                                                        |  |                                                                                            |   |  |   |   | 
|January 1 to 31, 2010  |  |                                        |      |                                   | $ |                                                                                       |  |                                                                                            |  |  | $ |  | 
|February 1 to 28, 2010 |  |                                        | 7,917 |                                   |   | 13.09                                                                                  |  |                                                                                            |  |  |   |  | 
|March 1 to 31, 2010    |  |                                        |      |                                   |   |                                                                                       |  |                                                                                            |  |  |   |  | 
|                       |  |                                        | 7,917 |                                   | $ | 13.09                                                                                  |  |                                                                                            |  |  | $ |  | 

|    |                                                                                                                                                                
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Represents the surrender of
 shares of common stock of the Company to satisfy the tax withholding
 obligations associated with the vesting of restricted stock.

ITEM 6. EXHIBITS.

|             |  |                                                                                                                                    | 
|------------ |  | ---------------------------------------------------------------------------------------------------------------------------------- | 
|Exhibit
 No. |  | Description                                                                                                                        | 
|             |  |                                                                                                                                   
|10.1         |  | Employment
 Agreement between MAKO Surgical Corp. and James E. Keller, effective as of
 March 22, 2010 (1)                        
|10.2         |  | Employment
 Agreement between MAKO Surgical Corp. and Richard Leparmentier, effective as
 of March 29, 2010 (2)                   
|10.3         |  | First
 Amended and Restated Employment Agreement between MAKO Surgical Corp. and
 Rony Abovitz, effective as of March 29, 2010 (2)
|10.4         |  | First
 Amendment to Employment Agreement between MAKO Surgical Corp. and Ivan
 Delevic, effective as of April 13, 2010            
|10.5         |  | Form of
 Subscription Agreement related to the 2008 Employee Stock Purchase Plan                                                  
|31.1         |  | Certification
 of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act                                          
|31.2         |  | Certification
 of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act                                          
|32.1         |  | Certification
 of Chief Executive Officer pursuant to 18 U.S.C. §1350                                                             
|32.2         |  | Certification
 of Chief Financial Officer pursuant to 18 U.S.C. §1350                                                             

|    |                                                                                          
|--- | -----------------------------------------------------------------------------------------
|(1) | Incorporated
 by reference to the Companys Form 8-K filed with the SEC on March 24, 2010
|    |                                                                                          
|(2) | Incorporated
 by reference to the Companys Form 8-K filed with the SEC on March 29, 2010

24

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Table of Contents

SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

|                   |                      |                                              | 
|------------------ | -------------------- | -------------------------------------------- | 
|                   | MAKO
 Surgical Corp. |                                             
|                   |                      |                                              | 
|Date: May 7,
 2010 | By:                  | /s/ Fritz L.
 LaPorte                        | 
|                   |                      | Fritz L.
 LaPorte                           
|                   |                      | Senior Vice
 President of Finance and       
|                   |                      | Administration,
 Chief Financial Officer and
|                   |                      | Treasurer                                   

25

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Table of Contents

EXHIBIT
INDEX

|             |  |                                                                                                                        | 
|------------ |  | ---------------------------------------------------------------------------------------------------------------------- | 
|Exhibit
 No. |  | Description                                                                                                            | 
|             |  |                                                                                                                       
|10.4         |  | First
 Amendment to Employment Agreement between MAKO Surgical Corp. and Ivan
 Delevic, effective as of April 13, 2010
|10.5         |  | Form of
 Subscription Agreement related to the 2008 Employee Stock Purchase Plan                                      
|31.1         |  | Certification
 of Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act                              
|31.2         |  | Certification
 of Chief Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act                              
|32.1         |  | Certification
 of Chief Executive Officer pursuant to 18 U.S.C. §1350                                                 
|32.2         |  | Certification
 of Chief Financial Officer pursuant to 18 U.S.C. §1350                                                 

26

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