UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002

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

COMMISSION FILE NO. 000-31519

CURON MEDICAL, INC.
(Exact name of registrant as specified in its charter)

Delaware		77-0470324
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

735 Palomar Avenue
Sunnyvale, CA 94085
(Address of principal executive offices, including zip code)

(408) 733-9910
(Registrant’s telephone number, including area code)

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 ¨

As of November 8, 2002, 19,993,384 shares of the Registrant’s Common Stock were outstanding.

CURON MEDICAL, INC.

INDEX

			Page
PART I.	FINANCIAL INFORMATION

	Item 1.	Financial Statements (unaudited)

		Condensed Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001	3

		Condensed Consolidated Statements of Operations for the three and nine month periods ended September 30, 2002 and 2001	4

		Condensed Consolidated Statements of Cash Flows for the nine month periods ended September 30, 2002 and 2001	5

		Notes to Condensed Consolidated Financial Statements	6

	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	9

	Item 3.	Quantitative and Qualitative Disclosures of Market Risk	23

	Item 4.	Controls and Procedures	23

PART II.	OTHER INFORMATION

	Item 1.	Legal Proceedings	23

	Item 2.	Changes in Securities and Use of Proceeds	24

	Item 5.	Other Information	24

	Item 6.	Exhibits and Reports on Form 8-K	24

SIGNATURES			25

CERTIFICATIONS			26

PART I FINANCIAL INFORMATION
Item 1. Financial Statements

CURON MEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)

Assets	September 30, 2002			December 31, 2001
Current assets:
Cash and cash equivalents	$	8,445		$	7,509
Marketable securities		16,285			27,619
Accounts receivable, net of allowance for doubtful accounts of $40 and $20, respectively		622			666
Inventories, net		1,403			1,410
Related party notes receivable		19			144
Prepaid expenses and other current assets		1,091			883

Total current assets		27,865			38,231
Long term investments		2,069			3,048
Related party notes receivable		- --			354
Property and equipment, net		917			1,216
Intangible assets, net of amortization of $903 and $770, respectively		- --			133
Other assets		92			91

Total assets	$	30,943		$	43,073
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable	$	641		$	449
Accrued liabilities		944			1,077
Notes payable		85			207

Total current liabilities		1,670			1,733
Other liabilities		56			52

Total liabilities		1,726			1,785

Contingencies (Note 4)

Stockholders' equity:
Common stock		20			19
Additional paid-in capital		90,069			90,368
Deferred stock compensation		(288	)		(956	)
Accumulated deficit		(60,503	)		(48,291	)
Treasury stock		(117	)		- --
Accumulated other comprehensive income		36			148

Total stockholders' equity		29,217			41,288

Total liabilities and stockholders' equity	$	30,943		$	43,073

See accompanying notes to condensed consolidated financial statements

CURON MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)

	For the Three Months Ended						For the Nine Months Ended
	September 30, 2002			September 30, 2001			September 30, 2002			September 30, 2001
Revenues	$	746		$	826		$	2,562		$	2,612
Cost of goods sold		1,141			1,282			3,359			3,764

Gross loss		(395	)		(456	)		(797	)		(1,152	)

Operating expenses:
Research and development		630			653			2,261			1,977
Clinical and regulatory		395			411			1,046			1,365
Sales and marketing		1,701			1,717			5,561			5,178
General and administrative		1,197			1,086			3,196			3,339

Total operating expenses		3,923			3,867			12,064			11,859

Operating loss		(4,318	)		(4,323	)		(12,861	)		(13,011	)

Interest income, net		166			511			649			1,896

Net loss	$	(4,152	)	$	(3,812	)	$	(12,212	)	$	(11,115	)

Net loss per share, basic and diluted	$	(0.21	)	$	(0.20	)	$	(0.62	)	$	(0.59	)

Shares used in computing net loss per share, basic and diluted		19,774			19,210			19,564			18,995

See accompanying notes to condensed consolidated financial statements

CURON MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

	For the Nine Months Ended
	September 30, 2002				September 30, 2001
Cash Flows From Operating Activities
Net loss	$	(12,212	)		$	(11,115	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		534				565
Forgiveness of related party notes receivable		419				- --
Amortization of acquired technology		133				338
Amortization of stock-based compensation		194				1,072
Accretion of discount on securities, net		(103	)			(478	)
Loss on disposal of fixed assets		24				15
Changes in assets and liabilities:
Accounts receivable, net		44				(391	)
Inventories, net		7				(631	)
Prepaid expenses and other current assets		(236	)			318
Accounts payable		192				(36	)
Accrued liabilities		(133	)			(141	)
Other long-term assets and liabilities		3				15

Net cash used in operating activities		(11,134	)			(10,469	)

Cash Flows From Investing Activities
Purchase of property and equipment		(259	)			(510	)
Purchase of marketable securities		(18,125	)			(33,001	)
Proceeds from maturities of marketable securities		30,429				40,197

Net cash provided by investing activities		12,045				6,686

Cash Flows From Financing Activities
Principal payments on notes payable		(262	)			- --
Proceeds from issuance of notes payable		140				- --
Proceeds from related party notes receivable		143				250
Payments on related party notes receivable		(55	)			(371	)
Proceeds from issuance of common stock, net of issuance costs		176				251
Purchase of treasury stock		(117	)			- --

Net cash provided by financing activities		25				130

Net increase (decrease) in cash and cash equivalents		936				(3,653	)
Cash and cash equivalents at beginning of period		7,509				16,759

Cash and cash equivalents at end of period	$	8,445		$		13,106

See accompanying notes to condensed consolidated financial statements

CURON MEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, tabular amounts in thousands, except share and per share data)

September 30, 2002

NOTE 1. The Company and Summary of Significant Accounting Policies

The Company

Curon Medical, Inc. (the "Company") was incorporated in the State of Delaware on May 1, 1997. The Company develops, manufactures and markets proprietary products for the treatment of gastrointestinal disorders.

The Company has sustained operating losses and negative cash flows from operations and expects such losses to continue in the foreseeable future. The Company intends to finance its operations primarily through its cash and cash equivalents, marketable securities, future financing and future revenues, however, there can be no assurance that such efforts will succeed or that sufficient funds will be made available.

Basis of Presentation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries after elimination of all intercompany balances and transactions. Certain reclassifications have been made to prior year amounts in order to conform to current year presentation.

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (“SEC”). Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, contain all adjustments (all of which are normal and recurring in nature) necessary to present fairly the financial position, results of operations and cash flows of the Company for the periods indicated. Interim results of operations are not necessarily indicative of the results to be expected for the full year or any other interim periods.

These condensed consolidated financial statements should be read in conjunction with the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2001, as filed with the SEC.

Net Loss Per Share

Basic and diluted net loss per share is calculated as follows:
	Three Months Ended September 30,						Nine Months Ended September 30,
Numerator:	2002			2001			2002			2001
Net loss	$	(4,152	)	$	(3,812	)	$	(12,212	)	$	(11,115	)

Denominator:
Weighted average shares outstanding		19,816,000			19,535,000			19,728,000			19,414,000
Weighted average unvested common shares subject to repurchase		(42,000	)		(325,000	)		(164,000	)		(419,000	)

Weighted average shares used in basic and diluted net loss per share		19,774,000			19,210,000			19,564,000			18,995,000

Net loss per share	$	(0.21	)	$	(0.20	)	$	(0.62	)	$	(0.59	)

During 1999, the Company granted to certain employees and non-employees, options which were immediately exercisable into common stock, subject to repurchase by the Company based on the same remaining vesting schedule as the related option. Shares are subject to repurchase at the original option exercise price.

During the quarter ended September 30, 2002, 124,000 shares of restricted stock were vested under the terms of the severance agreement with John Morgan, the former President and CEO of the Company.

Equity instruments that could dilute basic earnings per share in the future, that were not included in the computation of diluted earnings per share as their effect is antidilutive, are as follows:

	September 30, 2002	September 30, 2001
Unvested common shares (shares subject to repurchase)	40,000	317,000
Shares issuable upon exercise of stock options	2,617,000	1,899,000
Shares issuable upon exercise of warrants	569,000	569,000

Total	3,226,000	2,785,000

Revenue Recognition

Revenue from product sales is recognized on product shipment against a signed purchase order or sales quote provided no significant obligations remain and collection of the receivables is deemed probable for both sales of control modules and catheters. Revenues for extended warranty contracts are recognized over the extended warranty period. To date, post-sale customer support and training have not been significant.

The Company may sell products under a purchase commitment, with delivery of the control module at inception of the contract and catheters generally delivered over a period of six months. Revenue for the control module is deferred and recognized ratably over shipment of catheters under contract. Revenue on the catheters is recognized upon shipment at an amount representing their fair value based on verifiable objective evidence of such.

Shipping and handling costs charged to customers are recognized as revenue and the associated costs incurred by the Company are expensed under cost of goods sold.

Recent Accounting Pronouncements

In July 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 146 (SFAS 146), “Accounting for Costs Associated with Exit or Disposal Activities”. This Statement addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3, (Issue 94-3) “Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).” This Statement requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. Under Issue 94-3, a liability for an exit cost as defined in Issue 94-3 was recognized at the date of an entity’s commitment to an exit plan. This Statement also establishes that fair value is the objective for initial measurement of the liability. SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002. The Company is currently evaluating the impact, if any, on the Company’s financial position or results of operations.

NOTE 2. Inventories

Inventories:	September 30, 2002			December 31, 2001
Raw materials	$	1,146		$	1,093
Work-in-process		27			7
Finished goods		325			370

Total gross inventories		1,498			1,470

Less reserves		(95	)		(60	)

Total inventories, net	$	1,403		$	1,410

NOTE 3. Deferred Stock Compensation

Stock-based compensation included in the Condensed Consolidated Statements of Operations is as follows:

	Three Months Ended September 30,					Nine Months Ended September 30,
	2002			2001		2002			2001
Cost of goods sold	$	9		$	10	$	(3	)	$	66
Research and development		3			70		49			129
Clinical and regulatory		13			27		45			91
Sales and marketing		21			66		26			239
General and administrative		(109	)		193		77			547

	$	(63	)	$	366	$	194		$	1,072

NOTE 4. Contingencies

In June 2001, a civil action was filed against the Company in the United States District Court, Western District of Kentucky, Louisville Division, alleging that the Plaintiff sustained a nerve injury and damage to his gastrointestinal tract during a Stretta procedure caused by the defective design and manufacture of the Company’s product. Plaintiff’s allegations against the Company include strict liability for a product that was in a defective and unreasonably dangerous condition, negligence in the design and manufacturing of the product, breach of implied warranty of merchantability, and loss of consortium. Plaintiff was a subject in a randomized clinical trial and had been provided with an approved Informed Consent form and counselling by the physician. Prior to treatment, the subject provided consent to proceed. Plaintiff is seeking a trial by jury and unspecified damages. Trial date is currently set in September 2003. The Company believes Plaintiff’s claim is without merit.

In September 2001, a civil action was filed against a number of defendants, including the Company, in the Superior Court of the State of California in and for the City and County of Santa Clara, alleging that the Plaintiff sustained injury when undergoing a procedure utilizing the Stretta System, caused by defects in design and manufacture. Plaintiff also alleges negligence in the design, manufacture, advertising and sale of the Stretta System and that its warnings, instructions and directions for use were inadequate. Additional defendants include the treating physicians and the associated medical institutions, which it is alleged, were medically negligent in treatment of Plaintiff. Plaintiff is seeking unspecified damages. Defendants are currently being deposed; no trial date has been set. The Company believes Plaintiff’s claim is without merit.

In June 2002, a civil action was filed against a number of defendants, including the Company, in the Court of Common Pleas, Philadelphia County, in the State of Pennsylvania, alleging that the Plaintiff sustained injury during a Secca procedure caused by the device being defective and/or in an unreasonably dangerous condition. Plaintiff was a subject in a clinical trial and had been provided with an approved Informed Consent form and counselling by the physician. Prior to treatment, the subject provided consent to proceed. Additional defendants include the treating physician, the associated medical institution who, it is alleged, were medically negligent in treatment of Plaintiff, and the members of the Institutional Review Board who approved the protocol for the clinical trial. Plaintiff has demanded a trial by jury and unspecified damages. The case has since been moved to the United States District Court for the Eastern District of Pennsylvania. The Company believes Plaintiff’s claim against the Company is without merit.

These matters are in their early stages and the Company believes that the resolution of any of these matters will not have a material effect, if any, on its business, financial position, and results of operations and cash flows.

NOTE 5. Notes Payable

The Company has a short-term note payable in the amount of $85,000 at September 30, 2002. This relates to a note financing the 2002 renewal of corporate insurance policies in the amount of $140,000 in June 2002. The remaining balance on the previous insurance note payable was paid in full in June 2002.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the attached financial statements and notes thereto, and with our audited financial statements and notes thereto for the fiscal year ended December 31, 2001.

This quarterly report, including the following sections, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements include statements relating to our expectations as to the timing and success of our clinical trials and regulatory submissions, the mix of our sales and revenues derived from generators and disposable devices, the rate of growth and success of our international sales and marketing efforts, our expectations regarding increased operating expenses and net losses as our business expands, the timing of new product introductions, and our ability to maintain current and planned operations through at least the next twelve months without raising additional funds. These forward-looking statements involve risks and uncertainties. The cautionary statements set forth below and those contained in “Factors That May Affect Future Results,” commencing on page 14, identify important factors that could cause actual results to differ materially from those predicted in any such forward-looking statements. Such factors include, but are not limited to, failure to obtain regulatory approvals as anticipated, a slower rate of market acceptance of our products than expected, increased competition, continued adverse changes in general economic conditions in the United States and internationally, including adverse changes in the specific markets for our products, adverse changes in customer order patterns, pricing pressures, risks associated with foreign operations, failure to reduce costs or improve operating efficiencies, and our ability to attract, hire and retain key and qualified employees.

Overview

We were incorporated in May 1997. Business activities before January 1998 were negligible. In 1998, our primary activity was developing the Curon Control Module and Stretta Catheter for the treatment of gastroesophageal reflux disease (“GERD”). Prior to December 31, 2000 we were in the development stage and until that time, we had devoted substantially all of our efforts to raising capital and developing, marketing and selling our products.

In early 1999, we began a multi-center clinical trial of the Stretta^® System in the United States. We also developed our manufacturing capability to support the production of Stretta Catheters and Curon Control Modules for the clinical trial. Based on the data acquired in the trial, we submitted a 510(k) notification to the FDA in January 2000 for clearance to market the Stretta System for treatment of GERD. We received 510(k) clearance in April 2000. In October 1999, we received CE Mark approval of the Stretta System, indicating that the Stretta System meets European medical device standards allowing us to market it within the European Union. In May 2000, we launched the Stretta System commercially at Digestive Disease Week, a large professional gastroenterology conference. Also, in May 2000, we initiated a randomized controlled trial of the Stretta System in the United States. In this trial, patients received either the Stretta procedure or a placebo procedure, and results were compared. The data generated is being used to influence physician adoption rates, facilitate reimbursement approvals and enhance marketing activity. The active clinical portion of this trial was completed in the quarter ended March 31, 2001. The abstracted data was presented in a plenary session at the Digestive Disease Week Conference in May 2002.

In April 1999, we began developing the Secca^® System for the treatment of fecal incontinence. In November 1999, we conducted a 10-patient human clinical pilot study outside the United States and, in July 2000, we began a U.S. multi-center clinical trial of the Secca System under an Investigational Device Exemption. In September 2001, we received CE Mark approval of the Secca System, indicating that the Secca System meets European medical device standards, allowing us to market it within the European Union. Our multi-center clinical trial was completed, and the results were used to support a 510(k) submission to the FDA in December 2001. We received 510(k) clearance from the FDA in March 2002 to market the system for the treatment of fecal incontinence in patients who have failed more conservative therapies such as diet modification and biofeedback. In May 2002, we initiated a randomized controlled trial in the U.S. for the Secca System. In this trial, patients will receive either the Secca procedure or a placebo procedure, and results will be compared. The data generated will be used to influence physician adoption rates, facilitate reimbursement approvals and enhance marketing activity. We made our first sales of the Secca System in June 2002.

To date, we have generated limited revenues. Our revenues are, and will be, derived from the sale of radiofrequency generators and our disposable devices, such as the Stretta Catheter and Secca Handpiece. We expect that disposable sales will form the basis of a recurring revenue stream. However, domestic disposable sales continue to grow more slowly than expected primarily due to difficulties encountered by our physician customers in easily obtaining reimbursement for the Stretta procedure on a case-by-case basis. Some of our customers also find the 45 minutes necessary to perform a Stretta procedure to be a limiting issue, as their endoscopy unit schedule is typically dominated by short diagnostic procedures. Although disposable sales from outside the United States are increasing, they are not yet sufficient to offset the current domestic situation. Our strategies of pursuing national reimbursement coverage, focusing on entrenching the therapy to promote repeat catheter sales and incorporating technical improvements to our systems to reduce treatment times are designed to address these issues and we expect that our revenue from disposables will increase on implementation.

Initially, we are focusing our sales efforts in the United States through a direct sales force. In international markets, we rely primarily on third-party distributors. In November 2000, we incorporated a subsidiary company in Belgium and hired a European manager to support European distributors’ sales, marketing and clinical efforts. At September 30, 2002, this subsidiary had three employees. In the quarter ended September 30, 2002, we entered into distribution agreements in Spain and France, giving us a total of 15 international distributors, who have all received shipments of product. Our gross margins on sales through international third-party distributors will be lower than our gross margins on U.S. sales as a result of distributor discounts.

Our costs of revenues represent the cost of producing generators and disposable devices. We also license a technology used in the generators that we sell. In addition to the up-front payment to license the technology, we are required to pay licensing fees based on the sales price of the units. We believe that there are alternative technologies that could be utilized should we choose to do so. Research and development expenses consist primarily of personnel costs, professional services, patent application and maintenance costs, materials, supplies and equipment. Clinical and regulatory expenses consist primarily of expenses associated with the costs of clinical trials, clinical support personnel, the collection and analysis of the results of these trials, and the costs of submission of the results to the FDA. Sales and marketing expenses consist of personnel related costs, advertising, public relations and attendance at selected medical conferences. General and administrative expenses consist primarily of the cost of corporate operations and personnel, legal, accounting and other general operating expenses of our company. Through September 30, 2002, we recorded limited product sales while incurring cumulative net losses of $60.5 million. In addition to increasing expenditures related to continuing selling activities of the Stretta System, we anticipate that our expenses will increase as we continue to develop new products, conduct clinical trials, commercialize our products and acquire additional technologies as opportunities arise. As a result, we expect our operating expenses and cumulative net losses to increase.

RESULTS OF OPERATIONS

Periods of three and nine months ended September 30, 2002 and 2001.

Revenues

Revenues for the quarter ended September 30, 2002, were $746,000 compared to $826,000 for the same quarter in 2001. The decrease in sales was primarily due to the sales and marketing efforts involved in repositioning the Stretta product as an alternative to anti-reflux surgery and therefore targeting primarily surgeons as opposed to gastroenterologists by refocusing the domestic sales force. Stretta System products accounted for 93% and Secca System products 7% of the quarter’s revenues. In the same quarter of 2001, all sales were of Stretta products. The Stretta Control Module and Catheter accounted for 44% and 51%, respectively, of the Stretta product line sales for the quarter ended September 30, 2002, compared to 50% and 45%, respectively, for the same period in 2001. International sales accounted for $88,000 in the third quarter of 2002, compared to $13,000 in the same quarter of 2001.

For the nine months ended September 30, 2002 and 2001, revenues were $2.6 million. Stretta System products accounted for 96% and Secca System products for 4% of the nine month’s revenue in 2002. In the same period in 2001, all sales were of Stretta products. The Stretta Control Module and Catheter accounted for 51% and 44%, respectively, of the Stretta product line sales for the nine months ended September 30, 2002, compared to 50% and 45%, respectively, for the same period in 2001. International sales accounted for $319,000 in the first nine months of 2002 compared to $105,000 for the same period in 2001.

Reimbursement remains an issue for many of our domestic customers and we continue to pursue national coverage by obtaining state-by-state coverage decisions. Sales of catheters to existing domestic customers in the third quarter of 2002, however, increased 50% and 77% over similar sales in the second and first quarters of 2002, respectively.

Cost of goods sold

In the quarter ended September 30, 2002, cost of goods sold was $1.1 million, compared to $1.3 million for the same quarter in 2001. For the nine months ended September 30, 2002, cost of goods sold was $3.4 million, and $3.8 million for the same period in 2001. As sales volume increases, we expect gross profit to become positive and increase accordingly. Our sales have not yet reached a level which absorbs our manufacturing capacity to the extent that we would experience positive gross profit.

Research and development expenses

Research and development expenses were $630,000 in the quarter ended September 30, 2002, and $653,000 for the same period in 2001. For the nine months ended September 30, 2002, research and development expenses were $2.3 million, and $2.0 million for the same period in 2001. Expenses for the nine months ended September 30, 2002 increased primarily due to increases in patent and trademark legal expense of $303,000 as compared to the same period in 2001. In addition, pilot manufacturing expenses related to the Secca System were $235,000 for the nine months ended September 30,2002. There was no pilot manufacturing of new products in 2001. The Secca System was commercialized in June of 2002, with the first sales being made in that month. Increases in research and development expenses in the nine months ended September 30, 2002 were offset by decreases of $190,000 in Secca development costs as compared to the same period in 2001. Amortization of stock-based compensation accounted for $3,000 in the quarter ended September 30, 2002, and $70,000 for the same period in 2001. For the nine months ended September 30, 2002 and 2001, amortization of stock-based compensation was $49,000 and $129,000, respectively. During the quarter ended September 30, 2002, research and development personnel were reduced from ten to seven. Termination costs paid in the quarter were $83,000.

Clinical and regulatory expenses

Clinical and regulatory expenses were $395,000 in the quarter ended September 30, 2002, and $411,000 for the same period in 2001. For the nine months ended September 30, 2002, clinical and regulatory expenses were $1.0 million, and $1.4 million for the same period in 2001. The decrease in spending in 2002 over 2001 was due to costs involved in the U.S. Secca trial and the Stretta randomized control trial, which were both ongoing in 2001, and have been completed as of 2002. Clinical trial costs include payments to hospitals, and the related travel expense for Curon employees. Clinical efforts on the Secca randomized trial began in May 2002, and the related spending has been limited to date. Amortization of stock-based compensation accounted for $13,000 in the quarter ended September 30, 2002 and $27,000 for the same period in 2001. For the nine months ended September 30, 2002 and 2001, amortization of stock-based compensation was $45,000 and $91,000, respectively. In the quarter ended September 30, 2002, $147,000 was charged to clinical and regulatory expenses in respect of forgiveness of a loan to Dr. David Utley, M.D., Chief Medical Officer. The balance of the $150,000 principal plus accrued interest thereon will be forgiven in the fourth quarter of 2002 pursuant to an agreement made in January 2001. During the quarter ended September 30, 2002, clinical personnel were reduced from four to three. Termination costs paid in the quarter were $13,000.

Sales and marketing expenses

Sales and marketing expenses were $1.7 million in the quarters ended September 30, 2002 and 2001. For the nine months ended September 30, 2002, sales and marketing expenses were $5.6 million, and $5.2 million for the same period in 2001. Spending for the first nine months of 2002 has increased over the same period in 2001 due to increased personnel costs of $560,000, partially offset by a recruiting cost decrease of $213,000. Amortization of stock-based compensation was $21,000 in the quarter ended September 30, 2002, and $66,000 for the same period in 2001. For the nine months ended September 30, 2002 and 2001, amortization of stock-based compensation was $26,000 and $239,000, respectively. During the quarter ended September 30, 2002, sales and marketing personnel were reduced from 28 to 26. Termination costs paid in the quarter were $147,000.

General and administrative expenses

General and administrative expenses were $1.2 million in the quarter ended September 30, 2002, and $1.1 million for the same period in 2001. For the nine months ended September 30, 2002, general and administrative expenses were $3.2 million, and $3.3 million for the same period in 2001. Spending for the quarter ended September 30, 2002 increased by approximately $547,000 due to expenses related to the resignation of the former President and CEO, John Morgan, offset by a $113,000 decrease in amortization of acquired technology, and personnel spending decreases of $100,000 as compared to the same period in 2001. Amortization of stock-based compensation accounted for a benefit of $109,000 in the quarter ended September 30, 2002, and an expense of $193,000 for the same period in 2001. For the nine months ended September 30, 2002 and 2001, amortization of stock-based compensation was $77,000 and $547,000, respectively. During the quarter ended September 30, 2002, general and administrative personnel were reduced from nine to seven. Termination costs incurred in the quarter were $555,000.

Interest Income, net

During the quarter ended September 30, 2002, compared to the quarter ended September 30, 2001, net interest income decreased by $345,000. The decrease was due to an approximate cash and investment decrease of $15.4 million, and a decrease in investment yields from approximately 4% to 2%. For the nine months ended September 30, 2002, compared to the same period in 2001, net interest income decreased by $1.2 million. Interest expense was not material.

LIQUIDITY AND CAPITAL RESOURCES

Since inception, we have funded our operations and capital investments with the proceeds from our initial public offering completed in September 2000 totaling $55.0 million, the partial exercise of the underwriter’s over-allotment provision totaling $5.2 million, the private sale of equity securities totaling $22.0 million, the issuance of convertible notes totaling $11.8 million and bank equipment line financing totaling $780,000. At September 30, 2002, we had $26.2 million in working capital and our primary source of liquidity was $24.7 million in cash and cash equivalents and marketable securities. In addition, we had $2.1 million invested in long term securities at that date. We intend to finance our operations primarily through our cash and cash equivalents, marketable securities, future financing and future revenues. We believe we have enough cash to fund operations for over twelve months, and that alternative financing is available, if needed, however, there can be no assurance that such efforts will succeed or that sufficient funds will be made available.

Cash used in operating activities was $11.1 million in the nine month period ended September 30, 2002, and $10.5 million for the same period in 2001. Our loss for the first nine months of 2002 was $12.2 million, compared to a loss of $11.1 million for the same period in 2001. Cash spent on operations has remained relatively stable between the two years, with interest income being the primary difference in total loss. Expenses related to the resignation of John Morgan, the former President and CEO, were partially offset by savings resulting from the reduction in work force in late July. During the quarter ended September 30, 2002, $419,000 of notes receivable and the related interest receivable were forgiven. Of this amount, $272,000 related to John Morgan’s resignation. The balance of the notes receivable and interest forgiven related to the note receivable from David Utley, Chief Medical Officer, which was forgiven based on a prior contractual agreement.

The Company leases office space under noncancelable operating leases expiring in September 2003. Future minimum payments due under operating leases are as follows:

Remainder of 2002	$	139
2003		409

Total future minimum operating lease payments	$	547

Cash provided by investing activities amounted to $12.0 million in the nine months ended September 30, 2002, which consisted primarily of proceeds from net maturities and sales of marketable securities of $12.3 million, partially offset by expenditures of $259,000 for property and equipment. As of September 30, 2002, we had no material commitments for capital expenditures. For the nine months ended September 30, 2001, net cash provided by investing activities was $6.7 million, which consisted primarily of $7.2 million provided by net maturities and sales of marketable securities, partially offset by expenditures of $510,000 for property and equipment. Higher property and equipment investment in 2001 was related to the headcount increases in the sales department.

Cash provided by financing activities was $25,000 in the nine months ended September 30, 2002, primarily related to $176,000 from the sale of stock through both the Employee Stock Purchase Plan and Stock Option Plan and $88,000 of net proceeds received on related party notes receivable, offset by net payments on notes payable of $122,000. In addition, in the quarter ended September 30, 2002, $117,000 was used to purchase treasury stock in a stock repurchase program. For the nine months ended September 30, 2001, net cash provided by financing activities was $130,000, primarily related to $251,000 from sale of stock through the Employee Stock Purchase Plan and Stock Option Plan, offset by net increases in related party notes receivable of $121,000. Related party notes receivable are loans to officers of the Company.

We expect to acquire additional capital equipment on an ongoing basis as we increase capacity and improve capabilities. We have not planned any significant capital expenditures during fiscal 2002. We expect that our existing capital resources and interest income will enable us to maintain current and planned operations through at least the next twelve months. In the event that we require additional funding at any point in the future, we will seek to raise such additional funding from other sources, including the public equity market, private financings, collaborative arrangements and debt. If additional capital is raised through the issuance of equity or securities convertible into equity, our stockholders may experience dilution, and such securities may have rights, preferences or privileges senior to those of the holders of our common stock. Additional financing may not be available to us on favorable terms, if at all. If we are unable to obtain financing, or to obtain it on acceptable terms, we may be unable to execute our business plan.

In August 2002, we announced that our Board of Directors had authorized a stock repurchase program permitting the purchase of up to 1,000,000 shares of our Common Stock in open market transactions at prices deemed appropriate by Management, and administered pursuant to Rule 10b-18 of the Securities Exchange Act of 1934. As of October 31, 2002, we have repurchased 326,000 shares at an aggregate cost of approximately $234,000.

Factors That May Affect Future Results

We may never achieve or maintain significant revenues or profitability.

We have only a limited operating history upon which you can evaluate our business. We have incurred losses every year since we began operations. In particular, we incurred net losses of $15.4 million in 2001, $15.8 million in 2000, $14.1 million in 1999 and $12.2 million for the nine months ended September 30, 2002. As of September 30, 2002, we had an accumulated deficit of approximately $60.5 million. We have generated limited revenues from the sale of our products, and it is possible that we will never generate significant revenues from product sales in the future. Even if we do achieve significant revenues from our product sales, we expect to incur significant net losses over the next several years and these losses may increase. It is possible that we will never achieve profitable operations.

Recent changes in our management and workforce may negatively impact our ability to manage our business.

Since the resignation of our former chief executive officer on July 17, 2002, our interim chief executive officer and board of directors have been searching for a new chief executive officer. The search for a new chief executive officer could divert management’s resources away from running the business and could negatively affect our operating results. Once a new chief executive officer is identified, the transition to new management could be disruptive to our business. In addition, we recently announced costs saving actions, which included a reduction in our workforce and additional operating expense cuts, as part of our effort to achieve operational savings throughout the organization. We can provide no assurance that the actions taken to cut costs will result in the anticipated savings. A reduction in our workforce and reallocation of employee duties also may make it difficult to motivate and retain existing employees which would affect our ability to deliver products and negatively impact our revenues.

If we fail to take adequate action to remedy problems that have adversely affected our operations our future performance may be harmed.

In the past, we became aware of some issues that negatively impacted our earnings. For example, we learned that it is time consuming to obtain purchase commitments for our products because of the number of individuals at hospitals who need to approve the purchase. As a result, we changed our sales and marketing models to more effectively address this issue. We also became aware of misinformation in the marketplace regarding past adverse events associated with our procedure. In response, we dedicated resources to educating physicians regarding the use of our products to combat this misinformation. Our efforts to rectify these situations may not be sufficient. In addition, the cost of our efforts in addressing these matters diverts resources that could be allocated to increasing revenues. In the future, we may experience similar problems and if we are unable to take appropriate action and take it quickly our results of operations and our financial performance will be harmed.

We may fail to meet the Nasdaq continued listing standards which would result in a listing on a lesser known market within Nasdaq or a delisting altogether. Any change in market listing may adversely affect our ability to raise capital.

Our stock is currently trading at less than $1.00. Under the continued listing standards for inclusion of our stock on the Nasdaq National Market, our stock cannot close below $1.00 for 30 consecutive trading days. We can give no assurance that our stock will trade above $1.00 in the future. If we cannot maintain Nasdaq maintenance standards we may be transferred from the Nasdaq National Market to the Nasdaq Small Cap or pink sheets or delisted altogether. If our stock is removed from the Nasdaq National Market, the liquidity and price of our stock may be adversely affected. As a result, there may be less demand for our stock and we may be unable to raise sufficient capital to fund our operations.

The Stretta System is currently our primary marketed product. If physicians do not generally adopt our Stretta System, we will not achieve future sales growth.

We commercially introduced our Stretta System, which consists of a radiofrequency generator and a disposable handheld device, in May 2000. We are highly dependent on Stretta System sales because we anticipate that the Stretta System will account for substantially all our revenue through at least 2002. To achieve increasing sales, our product must continue to gain recognition and adoption by physicians who treat gastrointestinal disorders. The Stretta System represents a significant departure from conventional GERD treatment methods. We believe that physicians will not use our Stretta System unless they determine, based on published peer-reviewed journal articles, long-term clinical data and their professional experience, that the Stretta System provides an effective and attractive alternative to conventional means of treatment for GERD. Currently, there are eight peer-reviewed journal articles, limited peer-reviewed clinical reports and 12-month clinical follow-up data on our Stretta System. Physicians are traditionally slow to adopt new products and treatment practices, partly because of perceived liability risks and uncertainty of third-party reimbursement. For example, we believe that physician adoption rates were negatively impacted by adverse events and a voluntary market withdrawal, which occurred early in the launch of the Stretta System. Future adverse events or recalls would also impact future acceptance rates. If physicians do not adopt our Stretta System, we may never achieve significant revenues or profitability.

If the effectiveness and safety of our products are not supported by long-term data, our sales could decline and we could be subject to liability.

If we do not produce clinical data supported by the independent efforts of clinicians, our products may never be accepted. We received clearance from the FDA for the use of the Stretta System to treat GERD based upon the study of 47 patients. Safety and efficacy data presented to the FDA for the Stretta System was based on six month follow-up studies on 44 of these patients. Although the twelve-month follow-up data supports the six-month data, we may find that data from longer-term patient follow-up studies is inconsistent with those indicated by our relatively short-term data. However, if longer-term patient studies or clinical experience indicate that treatment with the Stretta System does not provide patients with sustained benefits or that treatment with our product is less effective or less safe than our current data suggests, our sales could decline and we could be subject to significant liability. Further, we may find that our data is not substantiated in studies involving more patients, in which case we may never achieve significant revenues or profitability.

We received clearance from the FDA for the use of the Secca System to treat fecal incontinence, for patients who have failed more conservative treatments such as diet modification or biofeedback. This clearance was based upon the study of 50 patients. Safety and efficacy data presented to the FDA for the Secca System was based on six month follow-up studies on these patients. We may find that data from longer-term patient follow-up studies is inconsistent with those indicated by our relatively short-term data. However, if longer-term patient studies or clinical experience indicate that treatment with the Secca System does not provide patients with sustained benefits or that treatment with our product is less effective or less safe than our current data suggests, our sales could decline and we could be subject to significant liability. Further, we may find that our data is not substantiated in studies involving more patients, in which case we may never achieve significant revenues or profitability. If patient studies or clinical experience do not meet our expectations regarding the benefits of the Secca System, our expected revenues from this product may never materialize.

Any failure in our physician education efforts could significantly reduce product sales.

It is important to the success of our sales efforts to educate physicians in the techniques of using our products. We rely on physicians to spend their time and money to attend pre-sale educational sessions. Positive results using the Stretta and Secca Systems are highly dependent upon proper physician technique. If physicians use either system improperly, they may have unsatisfactory patient outcomes or cause patient injury, which may give rise to negative publicity or lawsuits against us, any of which could have a material adverse effect on our sales and profitability.

Because we have only recently shifted our marketing strategy to reposition the Stretta product as an alternative to anti-reflux surgery, targeting surgeons as opposed to gastroenterologists, we cannot predict the effect this shift will have on our future sales.

Because we are a young company, we are determining how best to market our Stretta system. We initially focused our marketing efforts toward gastroenterologists, but have recently shifted toward selling to general surgeons. There can be no assurance that this will result in increased sales.

If health care providers are not adequately reimbursed for the procedures that use our products, or for the products themselves, we may never achieve significant revenues.

Although the Center for Medicare and Medicaid Services (CMS) granted a new specific APC providing higher reimbursement levels for the Stretta Procedure for Medicare purposes on October 1, 2001, there is no assurance that private, third-party payers will conform to this. Physicians, hospitals and other health care providers are unlikely to purchase our products if they are not adequately reimbursed for the Stretta procedure or the products. To date, only a limited number of private third-party payers have agreed to reimburse for the cost of the Stretta procedure or products. Until a sufficient amount of positive peer-reviewed clinical data has been published, insurance companies and other payers may refuse to provide reimbursement for the cost of the Stretta procedure or may reimburse at levels that are not acceptable to providers. Some payers may refuse adequate reimbursement even upon publication of peer-reviewed data. If users of our products cannot obtain sufficient reimbursement from health care payers for the Stretta procedure or the Stretta System disposables, then it is unlikely that our product will ever achieve significant market acceptance. The Secca procedure has not yet received any coding decision and no tests have yet been made of the willingness of third party health care payers to reimburse the costs of the procedure. We cannot assure you that the procedure will ever be reimbursed. Failure to achieve reimbursement will have a serious negative effect on our revenues.

Reimbursement from third-party health care payers is uncertain due to factors beyond our control and changes in third-party health care payers’ policies could adversely affect our sales growth.

Even if third-party payers provide adequate reimbursement for the Stretta procedure, adverse changes in third-party payers’ policies toward reimbursement could preclude market acceptance for our products and have a material adverse effect on our sales and revenue growth. We are unable to predict what changes will be made in the reimbursement methods used by third-party health care payers.

For example, some health care payers are moving toward a managed care system in which providers contract to provide comprehensive health care for a fixed cost per person. We cannot assure you that in a prospective payment system, which is used in many managed care systems, the cost of our products will be incorporated into the overall payment for the procedure or that there will be adequate reimbursement for our products separate from reimbursement for the procedure.

Internationally, market acceptance of our products will be dependent upon the availability of adequate reimbursement within prevailing health care payment systems. Reimbursement and health care payment systems in international markets vary significantly by country and include both government-sponsored health care and private insurance. Although we are seeking international reimbursement approvals, we cannot assure you that any such approvals will be obtained in a timely manner or at all. If foreign third-party payers do not adequately reimburse providers for the Stretta procedure and the products used with it, then our sales and revenue growth may be limited.

We face competition from more established GERD treatments and from competitors with greater resources, which will make it difficult for us to achieve significant market penetration.

Companies that have well-established products, reputations and resources dominate the market for the treatment of GERD. When our primary marketing strategy was directed at gastroenterologists, we competed directly with large pharmaceutical manufacturers of anti-reflux drugs. Because we have shifted our marketing focus to general surgeons, our primary competitors are now large medical device manufacturers such as Ethicon Endosurgical and United States Surgical, manufacturers of instrumentation for anti-reflux surgery, and C.R. Bard, which manufactures an endoscopic sewing device for GERD. Other large, established companies have experimental products that may, in the future, provide competition for the Stretta procedure. These include Boston Scientific and Medtronic, Inc. who have experimental injectable products being studied for the treatment of GERD. Other, yet undisclosed, competitive devices may be developed.

These larger companies enjoy several competitive advantages over us, which may include:

existing anti-reflux surgical procedures and devices for the treatment of GERD;
established reputations within the surgical and gastroenterological community;
established distribution networks that permit these companies to introduce new products and have such products accepted by the physician community promptly;
established relationships with health care providers and payers that can be used to facilitate reimbursement for new treatments; and
greater resources for product development and sales and marketing.

We do not feel that we compete directly with large pharmaceutical companies, such as AstraZeneca, Takeda Abbott Pharmaceutical, Wyeth Laboratories and Eisai, because candidate patients for Stretta have, by definition, failed, or only partially responded to, drug therapy. However, these companies have an established relationship with the gastroenterology community and over $6 billion in annual U.S. revenues from the proton pump inhibitor drug class. We could be adversely affected if one or more pharmaceutical companies elects to market aggressively against our product, or if a new, more effective pharmaceutical product is developed. For example, AstraZeneca has developed a new proton pump inhibitor, Nexium, for the treatment of GERD, which doctors may prescribe in lieu of recommending the Stretta Procedure. Further, less expensive, generic drugs will be introduced to treat GERD as AstraZeneca’s patent for Prilosec, the leading prescription medication for the treatment of GERD, expired in 2001, although pending lawsuits may delay the significant availability of competition until early in 2003. If we cannot compete effectively in this highly competitive market, we may not be able to achieve our expected revenue growth.

We have limited sales and marketing experience, and failure to continue to build and manage our sales force or to market and distribute our products effectively will hurt our revenues and profits.

We have limited sales and marketing experience. As of September 30, 2002, we relied on 12 direct sales employees to sell our Stretta System in the United States. We must manage this sales team over the next 24 months to achieve our market share and revenue growth goals. Since we have only recently launched the Secca System, our sales force has little experience marketing the product, and we cannot predict how successful they will be in selling the product. There are significant risks involved in building and managing our sales force and marketing our products, including our:

Inability to hire a sufficient number of qualified sales people with the skills and understanding to sell the Stretta and Secca Systems effectively;
Failure to adequately train our sales force in the use and benefits of our products, making them less effective promoters; and
Failure to accurately price our products as attractive alternatives to conventional treatments.

Internationally, we rely on third-party distributors to sell our products, and we cannot assure you that these distributors will commit the necessary resources to effectively market and sell our products or that they will be successful in selling our products.

Internationally, we rely on a network of distributors to sell our products. We depend on these distributors in such markets and we will need to attract additional distributors to grow our business and expand the territories into which we sell our products. Distributors may not commit the necessary resources to market and sell our products to the level of our expectations. If current or future distributors do not perform adequately, we may not realize expected international revenue growth.

We have limited experience manufacturing our products in commercial quantities, which could adversely impact the rate at which we grow.

Because we have only limited experience in manufacturing our products in commercial quantities, we may encounter unforeseen situations that would result in delays or shortfalls. For example, in December 2000, we voluntarily withdrew certain of our catheters from the market because of manufacturing issues. We may encounter difficulties and delays in manufacturing our products for the following additional reasons:

We have limited experience manufacturing our products in compliance with the FDA’s Quality System Regulation;
To increase our manufacturing output significantly, we will have to attract and retain qualified employees, who are in short supply, for the assembly and testing operations; and
Some of the components and materials necessary for manufacturing our products are currently provided by a single and/or sole supplier.

Although we believe that our current manufacturing facility will be adequate to support our commercial manufacturing activities for the foreseeable future, we may be required to expand our manufacturing facilities to begin large-scale manufacturing. If we are unable to provide customers with high-quality products in a timely manner, we may not be able to achieve market acceptance for our Stretta or Secca Systems. Our inability to successfully manufacture or commercialize our devices could have a material adverse effect on our product sales.

If we lose our relationship with any individual suppliers of product components, we will face regulatory requirements with regard to replacement suppliers that could delay the manufacture of our products.

Third-party suppliers provide materials and components used in our products. If these suppliers become unwilling or unable to supply us with our requirements, replacement or alternative sources might not be readily obtainable due to regulatory requirements applicable to our manufacturing operations. Obtaining components from a new supplier may require a new or supplemental filing with applicable regulatory authorities and clearance or approval of the filing before we could resume product sales. This process may take a substantial period of time, and we cannot assure you that we would be able to obtain the necessary regulatory clearance or approval. This could create supply disruptions that would reduce our product sales and revenue.

If we or our suppliers fail to comply with the FDA quality system regulation, manufacturing operations could be delayed and our business could be harmed.

Our manufacturing processes are required to comply with the quality system regulation, or QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging and shipping of our products. The FDA enforces the QSR through inspections. In May 2001, we received the report on our first QSR inspection, which was completed in March 2001. There were no significant findings. If we fail any future QSR inspections, our operations could be disrupted and our manufacturing delayed. Failure to take corrective action in response to a QSR inspection could force a shut-down of our manufacturing operations and a recall of our products, which would have a material adverse effect on our product sales, revenues, and expected revenues and profitability. Furthermore, we cannot assure you that our key component suppliers are, or will continue to be, in compliance with applicable regulatory requirements, will not encounter any manufacturing difficulties, or will be able to maintain compliance with regulatory requirements. Any such event could have a material adverse effect on our available inventory and product sales.

Our failure to obtain or maintain necessary FDA clearances or approvals could hurt our ability to commercially distribute and market our products in the United States.

Our products are considered medical devices and are subject to extensive regulation in the United States and in foreign countries where we intend to do business. Unless an exemption applies, each medical device that we wish to market in the United States must first receive either 510(k) clearance or premarket approval from the FDA. Either process can be lengthy and expensive. The FDA’s 510(k) clearance process usually takes from four to twelve months, but may take longer. The premarket application (“PMA”) approval process is much more costly, lengthy and uncertain. It generally takes from one to three years or even longer. Delays in obtaining regulatory clearance or approval will adversely affect our revenues and profitability.

Although we have obtained 510(k) clearance for both the Stretta System, for use in treating GERD, and the Secca System, for treatment of fecal incontinence in patients who have failed more conservative therapies such as diet modification and biofeedback, our clearance can be revoked if postmarketing data demonstrates safety issues or lack of effectiveness. Moreover, we will need to obtain 510(k) clearance or PMA approval to market any other new products. We cannot assure you that the FDA will not impose the more burdensome PMA approval process upon this technology in the future. More generally, we cannot assure you that the FDA will ever grant 510(k) clearance or premarket approval for any product we propose to market. If the FDA withdraws or refuses to grant approvals, we will be unable to market such products in the United States.

If we market our products for uses that the FDA has not approved, we could be subject to FDA enforcement action.

Our Stretta and Secca Systems are cleared by the FDA; the Stretta System for the treatment of GERD and the Secca System for the treatment of fecal incontinence in patients who have failed more conservative therapies such as diet modification and biofeedback. FDA regulations prohibit us from promoting or advertising either system, or any future cleared or approved devices, for uses not within the scope of our clearances or approvals, and prohibit us from making unsupported safety and effectiveness claims. These determinations can be subjective, and the FDA may disagree with our promotional claims. If the FDA requires us to revise our promotional claims or takes enforcement action against us based upon our labeling and promotional materials, our sales could be delayed, our profitability could be harmed and we could be required to pay significant fines or penalties.

Modifications to our marketed devices may require new 510(k) clearances or PMA approvals or require us to cease marketing or recall the modified devices until such clearances are obtained.

Any modification to an FDA 510(k)-cleared device that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, requires a new FDA 510(k) clearance or, possibly, PMA approval. The FDA requires every manufacturer to make this determination in the first instance, but the FDA can review any such decision. We have modified aspects of our Stretta System, but we believe that new 510(k) clearances are not required. We may modify future products after they have received clearance or approval, and, in appropriate circumstances, we may determine that new clearance or approval is unnecessary. We cannot assure you that the FDA would agree with any of our decisions not to seek new clearance or approval. If the FDA requires us to seek 510(k) clearance or PMA approval for any modification to a previously cleared product, we also may be required to cease marketing or recall the modified device until we obtain such clearance or approval. Also, in such circumstances, we may be subject to significant regulatory fines or penalties.

Complying with FDA and other regulations is an expensive and time-consuming process, and any failure to comply could result in substantial penalties.

Our products are medical devices that are subject to extensive regulation. FDA regulations are wide-ranging and govern, among other things:

product design, development, manufacture and testing;
product labeling;
product storage;
premarket clearance or approval;
advertising and promotion; and product sales and distribution.

Noncompliance with applicable regulatory requirements can result in enforcement action which may include recalling products, ceasing product marketing, paying significant fines and penalties, and similar FDA actions which could limit product sales, delay product shipment, and adversely affect our profitability.

We face risks related to our international operations, including the need to obtain necessary foreign regulatory approvals.

In the quarter ended September 30, 2002, we entered into distribution agreements in France and Spain, and to date have international distribution agreements in 15 countries. We are training these distributors and only began selling our products in international markets in April 2001. To successfully market our products internationally, we must address many issues with which we have little or no experience. We have obtained regulatory clearance to market the Stretta System in the European Union, Australia and Canada and to market the Secca System in the European Union, but we have not obtained any other international regulatory approvals for other markets or products. We cannot assure you that we will be able to obtain or maintain such approvals. Furthermore, although contracts already signed with European distributors specify payment in U.S. dollars, future international sales may be made in currencies other than the U.S. dollar. As a result, currency fluctuations may impact the demand for our products in countries where the U.S. dollar has increased compared to the local currency. Engaging in international business involves the following additional risks:

export restrictions, tariff and trade regulations, and foreign tax laws;
customs duties, export quotas or other trade restrictions;
economic or political instability;
shipping delays;
and longer payment cycles

In addition, contracts may be difficult to enforce and receivables difficult to collect through a foreign country’s legal system, and the protection of intellectual property in foreign countries may be more difficult to enforce. Once we begin selling our products internationally, any of these factors could cause our international sales to decline, which would impact our expected sales and growth rates.

Product liability suits against us could result in expensive and time-consuming litigation, payment of substantial damages and an increase in our insurance rates.

The development, manufacture and sale of medical products involves a significant risk of product liability claims. The use of any of our products may expose us to liability claims, which could divert management’s attention from our core business, be expensive to defend, and result in substantial damage awards against us. For example, we are currently a party to three product liability lawsuits where there are allegations that our products are defectively designed and that we were negligent in manufacturing our products. We maintain product liability insurance at coverage levels which we believe to be commercially acceptable; however there can be no assurance that product liability or other claims will not exceed such insurance coverage limits or that such insurance will continue to be available on the same or substantially similar terms, or at all. We re-evaluate annually whether we need to obtain additional product liability insurance. Even if we obtain additional product liability insurance there can be no assurance that it would not have a material adverse effect on our business, financial condition, and results of operations. Any product liability claims brought against us, with or without merit, could increase our product liability insurance rates or prevent us from securing any coverage in the future. Even in the absence of a claim, our insurance rates may rise in the future to a point where we decide not to carry any insurance.

We have limited protection for our intellectual property. If our intellectual property does not sufficiently protect our products, third parties will be able to compete against us more directly and more effectively.

As of September 30, 2002, we had 43 issued or allowed U.S. patents and 37 pending U.S. patent applications; this includes 20 issued U.S. patents and 15 pending U.S. patent applications licensed in from third-parties. We rely on patent, copyright, trade secret and trademark laws to protect our products, including our Stretta Catheter, our Secca Handpiece and our Curon Control Module, from being duplicated by competitors. However, these laws afford only limited protection. Our patent applications and the notices of allowance we have received may not issue as patents or, if issued, may not issue in a form that will be advantageous to us. Patents we have obtained and may obtain in the future may be challenged, invalidated or legally circumvented by third parties. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by consultants, vendors, former employees or current employees, despite the existence of nondisclosure and confidentiality agreements and other contractual restrictions. Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of the United States. If our intellectual property rights do not adequately protect our commercial products, our competitors could develop new products or enhance existing products to compete more directly and effectively with us and harm our product sales and market position.

Because, in the United States, patent applications are secret unless and until issued as patents, or corresponding applications are published in other countries, and because publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot be certain that we were the first to file patent applications for such inventions. Litigation or regulatory proceedings, which could result in substantial cost and uncertainty, may also be necessary to enforce patent or other intellectual property rights or to determine the scope and validity of other parties’ proprietary rights. There can be no assurance that we will have the financial resources to defend our patents from infringement or claims of invalidity.

Because of our reliance on unique technology to develop and manufacture innovative products, we depend on our ability to operate without infringing or misappropriating the proprietary rights of others.

There is a substantial amount of litigation over patent and other intellectual property rights in the medical device industry. Because we rely on unique technology to develop and manufacture innovative products, we are especially sensitive to the risk of infringing intellectual property rights. While we attempt to ensure that our products do not infringe other parties’ patents and proprietary rights, our competitors may assert that our products and the methods they employ may be covered by patents held by them or invented by them before they were invented by us. Although we may seek to obtain a license or other agreement under a third party’s intellectual property rights to bring an end to certain claims or actions asserted against us, we may not be able to obtain such an agreement on reasonable terms or at all. If we were not successful in obtaining a license or redesigning our products, our product sales and profitability could suffer, and we could be subject to litigation and potentially substantial damage awards.

Also, one or more of our products may now be infringing inadvertently on existing patents. As the number of competitors in our markets grows, the possibility of a patent infringement claim against us increases. Whether a product infringes a patent involves complex legal and factual issues, the determination of which is often uncertain. Infringement and other intellectual property claims, with or without merit, can be expensive and time-consuming to litigate and divert management’s attention from our core business. If we lose in this kind of litigation, a court could require us to pay substantial damages or grant royalties, and prohibit us from using technologies essential to our products. This kind of litigation is expensive to all parties and consumes large amounts of management’s time and attention. In addition, because patent applications can take many years to issue, there may be applications now pending of which we are unaware and which may later result in issued patents that our products may infringe.

If we lose our rights to intellectual property that we have licensed we may be forced to develop new technology and we may not be able to develop that technology or may experience delays in manufacturing as a result.

Our license with Gyrus Group PLC, a public company incorporated and existing under the laws of England and Wales, allows us to manufacture and sell our products using their radiofrequency generator technology. In addition, the University of Kansas license allows us to apply radiofrequency energy to tissue. To the extent these license interests become jeopardized through termination or material breach of the license agreements, our operations may be harmed. We may have to develop new technology or license other technology. We cannot provide any assurance that we will be able to develop such technology or that other technology will be available for license. Even if such technology is available, we may experience delays in our manufacturing as we transition to a different technology.

If we are unable to attract and retain qualified personnel, we will be unable to expand our business.

We believe our future success will depend upon our ability to successfully manage our growth, including attracting and retaining engineers and other highly skilled personnel. Our employees are at-will employees and are not subject to employment contracts. The loss of services of one or more key employees could materially adversely affect our growth. In addition, hiring qualified management and technical personnel will be difficult due to the intense competition for qualified professionals within the medical device industry. In the past, we have experienced difficulty in recruiting qualified personnel. Failure to attract and retain personnel, particularly management and technical personnel, would materially harm our ability to grow our business rapidly and effectively.

Our directors, executive officers and principal stockholders have significant voting power and may take actions that may not be in the best interests of our other stockholders.

Our officers, directors and principal stockholders holding more than 5% of our common stock together control over 50% of our outstanding common stock. As a result, these stockholders, if they act together, will be able to control the management and affairs of our company and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of our common stock. This concentration of ownership may not be in the best interest of our other stockholders.

Our stockholder rights plan, certificate of incorporation, bylaws and Delaware law contain provisions that could discourage a takeover.

In November 2001, we adopted a stockholder rights plan. The purpose of the plan is to assure fair value in the event of a future unsolicited business combination or similar transaction involving Curon. If an individual or entity accumulates 15% of our stock, or 20% in the case of certain existing stockholders, the rights become exercisable for additional shares of our common stock or, if followed by a merger or other business combination where Curon does not survive, additional shares of the acquiror’s common stock. The intent of these rights is to force a potential acquiror to negotiate with the Board to increase the consideration paid for our stock. The existence of this plan, however, may deter a potential acquiror, which could negatively impact shareholder value.

In addition, our basic corporate documents and Delaware law contain provisions that might enable our management to resist a takeover. Any of the above provisions might discourage, delay or prevent a change in the control of our company or a change in our management. The existence of these provisions could adversely affect the voting power of holders of common stock and limit the price that investors might be willing to pay in the future for shares of our common stock.

We expect that the price of our common stock will fluctuate substantially.

The market price for the common stock may be affected by a number of factors, including:

the announcement of new products or product enhancements by us or our competitors;
quarterly variations in our or our competitors' results of operations;
changes in earnings estimates or recommendations by securities analysts, or our failure to achieve analyst earnings estimates;
developments in our industry; and
general market conditions and other factors, including factors unrelated to our operating performance or the operating performance of our competitors.

In addition, the stock prices of many companies in the medical device industry have experienced wide fluctuations that have often been unrelated to the operating performance of such companies. Such factors and fluctuations may materially and adversely affect the market price of our common stock, which, in turn, may negatively affect our ability to raise capital and to acquire technologies in the future.

A sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market, including shares issued upon the exercise of outstanding options, the market price of our common stock could fall. Such sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

Item 3. Quantitative and Qualitative Disclosures of Market Risk

We invest our excess cash primarily in U.S. government securities and marketable debt securities of financial institutions and corporations with strong credit ratings. These instruments have maturities of eighteen months or less when acquired, with an average maturity date of less than three months. We do not utilize derivative financial instruments, derivative commodity instruments or other market risk sensitive instruments, positions or transactions in any material fashion. Accordingly, we believe that while the instruments we hold are subject to changes in the financial standing of the issuer of such securities, we are not subject to any material risks arising from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices or other market changes that affect market risk sensitive instruments.

Item 4. Controls and Procedures

With the participation of management, our President and Chief Executive Officer and our Vice President of Finance and Chief Financial Officer evaluated our disclosure controls and procedures within 90 days of the filing date of this quarterly report. Based upon this evaluation, our President and Chief Executive Officer and our Vice President of Finance and Chief Financial Officer concluded that our disclosure controls and procedures are effective in ensuring that material information required to be disclosed is included in our reports that we file with the Securities and Exchange Commission.

There were no significant changes our internal controls or, to the knowledge of our management, in other factors that could significantly affect these controls subsequent to the evaluation date.

PART II OTHER INFORMATION

Item 1. Legal Proceedings

In June 2001, Hershel E. Fancher et al (“Fancher”) filed a civil action against us in the United States District Court, Western District of Kentucky, Louisville Division, alleging that he sustained a nerve injury and damage to his gastrointestinal tract during a Stretta procedure caused by the defective design and manufacture of our product. Fancher’s allegations against us include strict liability for a product that was in a defective and unreasonably dangerous condition, negligence in the design and manufacturing of the product, breach of implied warranty of merchantability, and loss of consortium. Fancher was a subject in a randomized clinical trial and had been provided with an approved Informed Consent form and counselling by the physician. Prior to treatment, Fancher provided consent to proceed. Fancher is seeking a trial by jury and unspecified damages. The trial date is currently set in September 2003. We believe Fancher’s claim is without merit.

In September 2001, Diana Conklin (“Conklin”) filed a civil action against a number of defendants, including Curon, in the Superior Court of the State of California in and for the City and County of Santa Clara, alleging that she sustained injury when undergoing a procedure utilizing the Stretta System, caused by defects in design and manufacture. Conklin also alleges negligence in the design, manufacture, advertising and sale of the Stretta System and that its warnings, instructions and directions for use were inadequate. Additional defendants include the treating physicians and the associated medical institutions, who, it is alleged, were medically negligent in treatment of Conklin. Conklin is seeking unspecified damages. Defendants are currently being deposed; no trial date has been set. We believe Conklin’s claim against us is without merit.

In June 2002, Eileen Guckin et al (“Guckin”) filed a civil action against a number of defendants, including Curon, in the Court of Common Pleas, Philadelphia County, in the State of Pennsylvania, alleging that she sustained injury during a Secca procedure caused by the device being defective and/or in an unreasonably dangerous condition. Guckin was a subject in a clinical trial and had been provided with an approved Informed Consent form and counselling by the physician. Prior to treatment, Guckin provided consent to proceed. Additional defendants include the treating physician, the associated medical institution who, it is alleged, were medically negligent in treatment of Guckin, and the members of the Institutional Review Board who approved the protocol for the clinical trial. Guckin has demanded a trial by jury and unspecified damages. The case has since been moved to the United States District Court for the Eastern District of Pennsylvania. We believe Guckin’s claim against us is without merit.

Item 2. Changes in Securities and Use of Proceeds

On September 26, 2000, we completed the sale of 5,000,000 shares of our common stock at a per share price of $11.00 in a firm commitment underwritten public offering. The offering was effected pursuant to a Registration Statement on Form S-1 (Registration No. 333-37866), which the United States Securities and Exchange Commission declared effective on September 21, 2000. On October 24, 2000, we completed the sale of an additional 475,000 shares of our common stock at a per share price of $11.00 pursuant to the exercise of the over-allotment option by the underwriters. Of the approximately $54.8 million in net offering proceeds, through September 30, 2002, we have used approximately $12.0 million for the repayment of debt and accrued interest, $7.0 million for research and development, $8.0 million for the manufacture of products, $3.0 million for clinical expense and reimbursement efforts, $12.8 million for sales and marketing initiatives to support the commercialization of the Stretta System and $8.4 million for general corporate purposes. All amounts represent estimates of direct or indirect payments of amounts to third parties.

We made a loan of $259,000 to John W. Morgan, our former President and Chief Executive Officer. As a result of Mr. Morgan’s severance agreement, the loan and accrued interest were forgiven, in the total amount of $272,000. In January 2001, we made a $150,000 loan to David S. Utley, M.D., our Chief Medical Officer. Amounts due under the loan are forgiven over time based upon Dr. Utley’s continued employment, and forgiven in full on January 4, 2003 or upon an earlier change in control. To date, $131,000 of principle and $16,000 of interest have been forgiven and expensed related to Utley’s note. Other than these loans, no amounts were paid directly or indirectly for the above purposes to directors or officers of the Company, to persons owning ten percent or more of any class of equity securities of the Company, or to affiliates of the Company, other than amounts related to the repayment of debt and accrued interest, which amounts matured less than one year from the date of issuance. The use of proceeds described above do not represent a material change in the use of proceeds describe in the Offering prospectus.

Item 5. Other Information

On July 17, 2002, John W. Morgan announced his resignation as our Chief Executive Officer, President and Board member. Michael Berman, Chairman of the Board, has assumed the position of interim Chief Executive Officer while we conduct a search for a new President and Chief Executive Officer. Under the terms of the severance agreement, Mr. Morgan received a $275,000 lump sum payment and six month’s accelerated vesting of his stock options, and his loan and accrued interest, in the amount of $272,000, were forgiven.

In accordance with Section 10A(i)(2) of the Securities Exchange Act of 1934, as added by Section 202 of the Sarbanes-Oxley Act of 2002 (the “Act”), we are required to disclose the non-audit services approved by our Audit Committee to be performed by PricewaterhouseCoopers LLP, our external auditor. Non-audit services are defined in the Act as services other than those provided in connection with an audit or a review of the financial statements of a company. The Audit committee has approved the engagement of PricewaterhouseCoopers LLP for the following non-audit services: the preparation of federal and state tax returns.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits. None.

(b) There were no reports on Form 8-K during the quarter ended September 30, 2002.

CURON MEDICAL, INC.

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.

	CURON MEDICAL, INC.
	(Registrant)
Date: November 12, 2002	By:	/s/ MICHAEL BERMAN
		Michael Berman Interim Chief Executive Officer (Principal Executive Officer)

	By:	/s/ ALISTAIR F. MCLAREN
		Alistair F. McLaren Vice President of Finance Chief Financial Officer and Chief Information Officer (Principal Financial Officer)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Berman, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Curon Medical, Inc.,
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
		a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
		b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
		c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
		a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 12, 2002	By:	/s/ MICHAEL BERMAN
		Michael Berman Interim Chief Executive Officer (Principal Executive Officer)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Alistair F. McLaren, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Curon Medical, Inc.,
2.	Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3.	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4.	The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
		a)	designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
		b)	evaluated the effectiveness of the registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and
		c)	presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.	The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):
		a)	all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant’s ability to record, process, summarize and report financial data and have identified for the registrant’s auditors any material weaknesses in internal controls; and
		b)	any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6.	The registrant’s other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 12, 2002	By:	/s/ ALISTAIR F. MCLAREN
		Alistair F. McLaren Vice President of Finance Chief Financial Officer and Chief Information Officer (Principal Financial Officer)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Michael Berman, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Curon Medical, Inc. on Form 10-Q for the fiscal quarter ended September 30, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Curon Medical, Inc.

	By:	/s/ MICHAEL BERMAN
		Michael Berman Interim Chief Executive Officer (Principal Executive Officer)

I, Alistair F. McLaren, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Curon Medical, Inc. on Form 10-Q for the fiscal quarter ended September 30, 2002 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Curon Medical, Inc.

	By:	/s/ ALISTAIR F. MCLAREN
		Alistair F. McLaren Vice President of Finance Chief Financial Officer and Chief Information Officer (Principal Financial Officer)

FORM 10-Q

COMMISSION FILE NO. 000-31519

CURON MEDICAL, INC. (Exact name of registrant as specified in its charter)

CURON MEDICAL, INC.

INDEX

CURON MEDICAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, in thousands)

CURON MEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per share amounts)

CURON MEDICAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)

CURON MEDICAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited, tabular amounts in thousands, except share and per share data)

PART II OTHER INFORMATION

CURON MEDICAL, INC.

SIGNATURES

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

CURON MEDICAL, INC.
(Exact name of registrant as specified in its charter)

CURON MEDICAL, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited, in thousands)

CURON MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per share amounts)

CURON MEDICAL, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)

CURON MEDICAL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, tabular amounts in thousands, except share and per share data)

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
SECTION 13(a) OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
AS ADOPTED PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002