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FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

Commission File Number 000-22755

COMPUTER MOTION, INC.

	Delaware		77-0458805
	(State or other jurisdiction of		(I.R.S. Employer
	incorporation or organization)		Identification Number)

130-B Cremona Drive
Goleta, CA 93117

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

Indicate by check /X/ whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve (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 ninety (90) days.

Yes        /X/             No        /  /

As of November 7, 2002 there were 17,456,405 shares of the Registrant’s Common Stock outstanding.

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COMPUTER MOTION, INC.
INDEX TO FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 2002

INDEX			PAGE
PART I. - FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Consolidated Statements of Operations		3
		Condensed Consolidated Balance Sheets		4
		Condensed Consolidated Statements of Cash Flows		5
		Notes to Condensed Consolidated Financial Statements		6
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		30
	Item 4.	Controls and Procedures		30
PART II. - OTHER INFORMATION
	Item 1.	Litigation		31
	Item 2.	Changes in Securities and Use of Proceeds		32
	Item 4.	Submissions of Matters to Vote of Security Holders		33
	Item 6.	Exhibits and Reports on Form 8-K		34
SIGNATURES				34

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COMPUTER MOTION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except per share amounts)
(unaudited)

	Three Months Ended September 30,												Nine Months Ended September 30,
	2002						2001							2002					2001
Revenue		$	4,534					$	7,158					$	15,289					$	16,877
Cost of revenue			1,997						2,939						6,859						7,261
Gross profit			2,537						4,219						8,430						9,616
Gross profit %			56	%					59	%					55	%					57	%
Research & development expense			2,943						2,744						8,454						8,384
Selling, general & administrative expense			5,138						4,390						14,887						13,728
Total operating expense			8,081						7,134						23,341						22,112
Loss from operations			(5,544	)					(2,915	)					(14,911	)					(12,496	)
Interest income			8						11						51						87
Interest expense			(12	)					(28	)					(31	)					(78	)
Foreign currency translation gain/(loss)			32						1						3						87
Other expense			—						—						(8	)					(19	)
Total other income/(expense)			28						(16	)					15						77
Loss before income tax provision			(5,516	)					(2,931	)					(14,896	)					(12,419	)
Income tax provision			10						6						22						18
Net loss			(5,526	)					(2,937	)					(14,918	)					(12,437	)
Dividend to Series B preferred shareholders			—						307						4,978						3,001
Net loss available to common shareholders		$	(5,526	)				$	(3,244	)				$	(19,896	)				$	(15,438	)
Weighted average common shares outstanding used to compute net loss per share - basic and diluted			17,395						10,367						16,382						10,206
Net loss per share - basic and diluted		$	(0.32	)				$	(0.31	)				$	(1.21	)				$	(1.51	)

See accompanying notes to condensed consolidated financial statements

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COMPUTER MOTION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except par value)

ASSETS	September 30, 2002 (unaudited)						December 31, 2001 (1)
Current assets:
Cash and cash equivalents		$	2,151					$	987
Restricted cash			173						80
Accounts receivable, net of allowance for doubtful accounts and returns of $466 at September 30, 2002; and $1,184 at December 31, 2001			2,510						8,594
Inventories			7,022						5,853
Other current assets			872						811
Total current assets			12,728						16,325
Property and equipment:
Furniture and fixtures			1,896						2,020
Computer equipment			2,943						2,889
Machinery and equipment			5,911						5,381
Accumulated depreciation			(6,869	)					(5,492	)
Property and equipment, net			3,881						4,798
Other assets			57						63
Total assets		$	16,666					$	21,186
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Note payable to shareholder		$	1,000					$	900
Accounts payable			4,855						6,497
Accrued expenses			4,361						4,551
Deferred revenue			2,568						3,628
Total current liabilities			12,784						15,576
Deferred revenue			1,404						1,711
Other liabilities			11						37
Total liabilities			14,199						17,324
Shareholders’ equity:
Mandatorily redeemable Series B convertible preferred stock, $.001 par value, authorized 5,000 shares, outstanding at 9/30/02-None; 12/31/01- 8.5 shares			—						8,674
Common stock, $.001 par value, authorized - 50,000 shares; Outstanding 09/30/02 - 17,420 shares; 12/31/01- 11,439 shares			18						11
Additional paid-in capital			107,309						80,343
Deferred compensation			(287	)					(326	)
Accumulated deficit			(104,491	)					(84,594	)
Other comprehensive loss			(82	)					(246	)
Total shareholders’ equity			2,467						3,862
Total liabilities & shareholders’ equity		$	16,666					$	21,186

(1) Derived from audited financial statements as of December 31, 2001

See accompanying notes to condensed consolidated financial statements

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COMPUTER MOTION INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

	Nine Months Ended September 30,
	2002						2001
Cash Flows from Operating Activities:
Net Loss		$	(14,918	)				$	(12,437	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			1,502						1,243
Provision for doubtful accounts and sales allowances			—						250
Common stock issued for services			1,395						—
Stock options issued for services			631						—
Amortization of deferred compensation			39						128
Other			1						(22	)
Decrease (Increase) in:
Accounts receivable			6,084						4,688
Inventories			(1,169	)					(2,432	)
Other current assets			(61	)					(469	)
Increase (Decrease) in: