U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 30, 2002
Commission file number 1-12471
INTEGRATED SURGICAL SYSTEMS, INC.
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(Name of Small Business Issuer in its Charter)
Delaware 68-0232575
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(State of incorporation) (IRS Employer Identification Number)
1850 Research Park Drive, Davis, CA 95616-4884
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(Address of principal executive offices) (Zip Code)
(530) 792-2600
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(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
----- -----
On November 8, 2002 the issuer had 38,900,469 shares of common stock, $.01 par
value, outstanding.
Integrated Surgical Systems, Inc.
Form 10-QSB
For the quarter ended September 30, 2002
Table of Contents
Page
Part I. Financial Information
Item 1. Financial Statements (unaudited) 2
Consolidated Balance Sheet at September 30, 2002 2
Consolidated Statements of Operations for the
three months ended September 30, 2002 and 2001 3
Consolidated Statements of Operations for the
nine months ended September 30, 2002 and 2001 4
Consolidated Statements of Cash Flows for
the nine months ended September 30, 2002 and 2001 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis 8
Item 3. Controls and Procedures 10
Part II. Other Information
Item 2. Changes in Securities 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signature 12
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Integrated Surgical Systems, Inc.
Consolidated Balance Sheet
September 30, 2002
(Unaudited)
Assets
Current assets:
Cash $ 127,921
Accounts receivable less allowance for doubtful accounts of $62,839 1,391,456
Inventory 1,924,153
Other current assets 271,592
------------
Total current assets 3,715,122
Net property and equipment 176,253
Leased equipment, net 220,762
Other assets 10,603
------------
$ 4,122,740
============
Liabilities and stockholders' deficit
Current liabilities:
Accounts payable $ 1,874,797
Accrued payroll and related expense 526,697
Accrued liabilities 157,828
Unearned income 4,338,095
Other current liabilities 433,420
------------
Total current liabilities 7,330,837
Note payable 96,505
Commitments and contingencies
Convertible preferred stock, $0.01 par value, 1,000,000 shares authorized;
312 shares issued and outstanding ($312,056 aggregate liquidation value) 312,056
Stockholders' deficit:
Common stock, $0.01 par value, 100,000,000 shares authorized;
38,825,469 shares issued and outstanding 388,255
Additional paid-in capital 61,814,800
Accumulated other comprehensive loss (1,148,473)
Accumulated deficit (64,671,240)
------------
Total stockholders' deficit (3,616,658)
------------
$ 4,122,740
============
See accompanying notes.
-2-
Integrated Surgical Systems, Inc.
Consolidated Statements of Operations
(Unaudited)
Three months ended September 30,
--------------------------------
2002 2001
(Restated)
------------ ------------
Net revenue $ 1,273,104 $ 2,667,660
Cost of revenue 511,474 1,264,882
------------ ------------
761,630 1,402,778
Operating expenses:
Selling, general and administrative 730,813 1,004,258
Research and development 545,732 845,706
Amortization of intangibles 78,338 209,760
------------ ------------
1,354,883 2,059,724
------------ ------------
Operating loss (593,253) (656,946)
Other income (expense), net: (4,071) 166,532
------------ ------------
Loss before preferred stock accretion (597,324) (490,414)
Preferred stock accretion -- (38,275)
------------ ------------
Net loss $ (597,324) $ (528,689)
============ ============
Basic and diluted net loss per common share $ (0.02) $ (0.01)
============ ============
Shares used in computing basic net loss per share 38,719,316 36,878,894
============ ============
See accompanying notes.
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Integrated Surgical Systems, Inc.
Consolidated Statements of Operations
(Unaudited)
Nine months ended September 30,
--------------------------------
2002 2001
(Restated)
------------ ------------
Net revenue $ 2,973,663 $ 6,244,633
Cost of revenue 1,237,324 2,369,129
------------ ------------
1,736,339 3,875,504
Operating expenses:
Selling, general and administrative 2,406,231 3,185,214
Research and development 1,995,751 2,696,968
Amortization of intangibles 497,858 629,280
------------ ------------
4,899,840 6,511,462
------------ ------------
Operating loss (3,163,501) (2,635,958)
Other income (expense), net: 155,504 (76,675)
------------ ------------
Loss before preferred stock accretion (3,007,997) (2,712,633)
Preferred stock accretion -- (38,275)
------------ ------------
Net loss $ (3,007,997) $ (2,750,908)
============ ============
Basic and diluted net loss per common share $ (0.08) $ (0.08)
============ ============
Shares used in computing basic net loss per share 38,448,332 35,304,598
============ ============
See accompanying notes.
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Integrated Surgical Systems, Inc.
Consolidated Statements Cash Flows (Unaudited)
Increase (Decrease) in Cash
Nine months ended September 30,
-------------------------------
2002 2001
----------- -----------
Cash flows from operating activities:
Net loss $(3,007,997) $(2,712,633)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation 231,445 259,513
Amortization of intangible assets 497,858 629,280
Stock compensation 26,207 58,289
Changes in operating assets and liabilities:
Accounts receivable (800,704) (1,050,108)
Inventory 30,557 1,758,783
Other current assets (28,565) 150,368
Accounts payable 52,879 362,630
Accrued payroll and related expenses 62,742 45,569
Accrued liabilities (69,777) (63,652)
Unearned income 2,122,844 649,931
Other current liabilities (76,980) (282,560)
----------- -----------
Net cash used in operating activities (959,491) (194,590)
Cash flows from investing activities:
Principal payments received on sales-type lease 44,628 58,311
Purchases of property and equipment (20,527) --
Disposals of property and equipment 93,438 --
----------- -----------
Net cash provided by investing activities 117,539 58,311
Cash flows from financing activities:
Payments on bank loan -- (40,962)
Proceeds from sale of common stock and warrants -- 632,000
Proceeds from officer advance and deferred salaries 285,445 --
Payments on officer advance and deferred salaries (146,539) --
----------- -----------
Net cash provided by financing activities 138,906 591,038
Effect of exchange rate changes on cash 30,593 (259,862)
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Net increase (decrease) in cash (672,453) 194,897
Cash at beginning of period 800,374 276,322
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Cash at end of period $ 127,921 $ 471,219
=========== ===========
Supplemental disclosure of non-cash investing activity:
Transfer of inventory to leased equipment: $ 76,700 $ --
See accompanying notes.
-5-
Integrated Surgical Systems, Inc.
Notes to Consolidated Financial Statements (unaudited)
September 30, 2002
1. Basis of presentation.
The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements. In our opinion, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation have been
included.
The Company's cash position is below required working capital limits and the
Company has not yet identified sources of sufficient cash to assure continuing
operations. At November 8, 2002, the Company was in default of certain financing
arrangements with vendors.
The Company is working to address this shortfall by attempting to negotiate cash
advances for undelivered systems, accelerated payment terms of other contracts,
additional salary deferrals from employees and new equity investment. However,
the Company can offer no assurance that attempts to strengthen cash flows will
be successful. Unless the Company can secure sufficient funds on a timely basis
to satisfy short-term operating requirements, the Company may have to cease
operations or file for bankruptcy.
The reports of the Company's independent auditors in the 2001 and 2000
consolidated financial statements included explanatory paragraphs stating that
there is substantial doubt with respect to the Company's ability to continue
operating as a going concern. The Company's plan to address this issue -
increasing sales of products in existing markets, increasing sales of system
upgrades and reducing operating expenses - can only be realized to the extent
that the Company generates sufficient cashflow to meet obligations. In the event
that the Company is unsuccessful, it is possible that the Company will cease
operations or file for bankruptcy. The consolidated financial statements do not
include any adjustments to reflect the uncertainties related to the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from an inability on the Company's part to continue
as a going concern.
Operating results for the nine month period ended September 30, 2002 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2002. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Integrated Surgical Systems,
Inc. annual report on Form 10-KSB for the year ended December 31, 2001.
2. Inventories.
At September 30, 2002, the components of inventory were:
Raw materials $ 383,657
Work-in-process 289,576
Finished goods 974,501
Deferred product development contract costs 276,419
---------------
$1,924,153
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3. Stockholders' equity.
During the three month period ended September 30, 2002, the Company issued
514,005 shares of common stock to a vendor in exchange for the vendors payment
of property taxes related to the leased facility occupied by the Company.
4. Net loss per share.
At September 30, 2002, outstanding options to purchase 1,653,991 shares of
common stock (with exercise prices ranging from $0.05 to $8.63), 9,447,604
outstanding warrants to purchase 16,023,324 shares of common stock (with
exercise prices from $0.01 to $8.34), and 13,002,333 shares of common stock
issuable upon conversion of Series G and H convertible preferred stock could
potentially dilute basic earnings per share in the future and have not been
included in the computation of diluted net loss per share because to do so would
have been antidilutive for the periods presented. The exercise price and the
ultimate number of shares of common stock issuable upon conversion of the
warrants are subject to adjustments based upon the occurrence of certain future
events.
5. Accumulated other comprehensive loss.
Three months ended Nine months ended
September 30 September 30
-------------------------- --------------------------
2002 2001 2002 2001
----------- ----------- ----------- -----------
Net Loss $ (597,324) $ (490,414) $(3,007,997) $(2,712,633)
Other comprehensive loss:
Foreign currency translation 19,318 (87,588) 139,964 (503,506)
----------- ----------- ----------- -----------
Comprehensive loss $ (578,006) $ (578,002) $(2,868,033) $(3,216,139)
=========== =========== =========== ===========
6. Recent accounting pronouncements.
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
142, "Goodwill and Other Intangible Assets", on January 1, 2002. Under SFAS No.
142, goodwill and indefinite lived intangible assets are no longer amortized but
are reviewed annually, or more frequently if impairment indicators arise, for
impairment. Intangible assets whose lives are not indefinite are amortized over
their useful lives, and reviewed for impairment in accordance with SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of". The adoption of SFAS No. 142 on January 1, 2002 had no impact
on the Company's consolidated financial position or results of operations.
The Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", on January 1, 2002. SFAS No. 144, which supersedes SFAS No.
121, provides a single accounting model for long-lived assets to be disposed of.
Although retaining many of the fundamental recognition and measurement
provisions of SFAS No. 121, SFAS No. 144 significantly changes the criteria that
would have to be met to classify an asset as held-for-sale. The distinction is
important because assets held-for-sale are stated at the lower of their fair
values or carrying amounts and depreciation is no longer recognized. The
adoption of SFAS No. 144 on January 1, 2002 had no impact on the Company's
consolidated financial position or results of operations.
7. Unaudited Interim Financial Information.
During the fourth quarter of 2001, the Company discovered clerical errors which
arose in 2001 relating to the elimination of certain intercompany sales by the
Company's wholly-owned French subsidiary. In 2001, the Company recorded a fourth
quarter adjustment to reduce net revenue by approximately $516,000 and to reduce
cost of revenue by an equivalent amount. This adjustment related to an
-7-
equivalent amount of net revenue and cost of revenue for the first three
quarters of 2001 of approximately $299,000, $150,000 and $67,000 respectively,
which have been included in the 2001 restated consolidated statements of
operations for the three and nine month periods ending September 30, 2001. The
impact of this adjustment had no effect on previously reported gross margin,
operating loss, net loss or net loss per share for the Company's 2001 interim
periods or the fourth quarter of 2001.
Item 2. Management's Discussion and Analysis
Results of Operations
Net revenue of $1,273,000 for the three months ending September 30, 2002 was
$1,395,000 lower than the level achieved in the same period of 2001, resulting
in net revenue for the nine months ending September 30, 2002 of $3,271,000 below
the same period in 2001. The Company has not recognized revenue for four systems
shipped in the first three quarters of 2002 as installation and training were
not completed as of September 30, 2002.
Gross margin was 60% for the three month period ending September 30, 2002 and
53% for the three month period ending September 30, 2001. The higher margin in
the three months ending September 30, 2002 was due to the product mix being
mostly service revenue with one system recognized when compared to the three
systems recognized in the three months ending September 30, 2001. Gross margin
was 58% for the nine month period ending September 30, 2002 and 62% for the nine
month period ending September 30, 2001. The higher margin in the first nine
months of 2001 was due to the relatively higher margin upgrades and increased
services sold in the first three quarters of 2001.
Total operating expenses have continued to decline as a result of the Company's
cost reduction program. Selling and general administrative expenses decreased
27% during the three month period ending September 30, 2002 as compared to the
three month period ending September 30, 2001. Research and development expenses
decreased 35% during the three month period ended September 30, 2002 as compared
to the three month period ending September 30, 2001. Selling and general
administrative expenses decreased 24% during the nine month period ending
September 30, 2002 as compared to the nine month period ending September 30,
2001 and, research and development expenses decreased 26% as compared to the
same nine month period ending September 30, 2002.
Other expense, net of $4,000 when compared to other income, net of $167,000 for
the three months ending September 30, 2002 and 2001, respectively, changed due
to relatively flat currency exchange rates in the three months ending September
2002 compared to favorable rates for the three months ending September 2001.
Other income, net of $156,000 when compared to other expense, net of $77,000 for
the nine months ending September 30, 2002 and 2001, respectively, changed due to
favorable currency exchange rates of the euro related to the Company's business
in Europe in 2002, compared to unfavorable rates in 2001.
Critical Accounting Policies and Estimates
The Company's discussion and analysis of the financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these consolidated financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenue and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company evaluates
estimates, including those related to bad debts, inventories, warranties,
contingencies and litigation. Estimates are based on historical experience and
on other assumptions that the Company believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
-8-
The Company believes the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of consolidated
financial statements:
The Company recognizes revenue from sales of systems upon the completion of
equipment installation and training at the end-user's site, except when the
sales contract requires formal customer acceptance. Equipment sales with
contractual customer acceptance provisions are recognized as revenue upon
written notification of customer acceptance, which generally occurs after the
completion of installation and training. Furthermore, due to business customs in
Japan and the Company's interpretation of Japanese law, all equipment sales to
Japan are recognized after customer acceptance, which generally occurs after the
completion of installation and training. Revenue related to maintenance and
service contracts is recognized ratably over the duration of the contracts.
The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of customers to make required payments. If the
financial condition of customers were to deteriorate, resulting in an impairment
of their ability to make payments, additional allowances may be required.
Where products are not covered by separate service agreements, the Company
provides for the estimated cost of product warranties at the time revenue is
recognized. The Company's warranty obligation is affected by product failure
rates, material usage and service delivery costs incurred in correcting a
product failure. Should actual product failure rates, material usage or service
delivery costs differ from estimates, revisions to the estimated warranty
liability would be required.
It is Company policy to write down inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected,
additional inventory write-downs may be required.
Property, plant and equipment and intangible assets are amortized over their
useful lives. Useful lives are based on estimates of the period that the assets
will generate revenue. Property and equipment and intangible assets are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
Liquidity and Capital Resources
The Company's cash position is below required working capital limits and the
Company has not yet identified sources of sufficient cash to assure continuing
operations. At November 8, 2002, the Company was in default of certain financing
arrangements with vendors.
The Company is working to address this shortfall by attempting to negotiate cash
advances for undelivered systems, accelerated payment terms of other contracts,
additional salary deferrals from employees and new equity investment. However,
the Company can offer no assurance that attempts to strengthen cash flows will
be successful. Unless the Company can secure sufficient funds on a timely basis
to satisfy short-term operating requirements, the Company may have to cease
operations or file for bankruptcy.
The reports of our independent auditors on the Company's 2001 and 2000
consolidated financial statements included explanatory paragraphs stating that
there is substantial doubt with respect to the Company's ability to continue
operating as a going concern. The Company's plan to address this issue -
increasing sales of the Company's products in existing markets, increasing sales
of system upgrades and reducing operating expenses - can only be realized to the
extent that the Company can generate sufficient cash to meet obligations. In the
event that the Company is unsuccessful, it is possible that the Company will
cease operations or file for bankruptcy. The consolidated financial statements
do not include any adjustments to reflect the uncertainties related to the
recoverability and classification of assets or the amounts and classification of
liabilities that may result from an inability on the Company's part to continue
as a going concern.
-9-
At September 30, 2002 the Company's "quick ratio" (cash and accounts receivable
divided by current liabilities), a conservative liquidity measure designed to
predict the Company's ability to pay bills, was only .21. It has been difficult
for the Company to meet obligations, including payroll, as they come due, and
the Company expects this situation to continue through 2002.
In April 2002, an officer of the Company advanced the Company $70,000, bearing
interest at 7.25% per annum, to meet payroll obligations. The Company paid
$20,000 against the principal and interest of this advance to the officer in
June 2002. At November 8, 2002, the Company had amounts due to an officer of the
Company of approximately $304,000. Of this amount, $50,000 related to salary
deferred in the fourth quarter of 2001 and $16,000 related to salary deferred in
the second quarter of 2002, and $52,000 related to an advance to meet payroll
obligations in the second quarter of 2002, included in accrued payroll and
related expense, and $186,000 related to unreimbursed travel expenses, included
in accounts payable.
Several payrolls during the quarter ending June 30, 2002 were late and several
senior management members volunteered to defer payment of their salary to make
cash available to pay employees. As a result, these members of the senior
management staff were receiving their salary as much as one month in arrears.
Deferred payroll and payroll related expenses to Company employees at September
30, 2002 was $102,000. This amount is still deferred as of November 8, 2002.
Unearned income, payments for system sales on which revenue is not yet
recognized, and advance payments for service contracts with revenue recognized
ratably over the period of the contract, were the largest source of cash for the
three month and nine month periods ending September 30, 2002 and represents 58%
of the Company's liabilities at September 30, 2002.
The financial statements of Integrated Surgical Systems, S.A. ("ISS-SA"), the
Company's wholly-owned French subsidiary, for the nine months ended September
30, 2002 have net assets of less than 50% of ISS-SA's capital stock. This equity
deficit is considered to be a sign of bankruptcy under French law. Unless this
situation is remedied before December 31, 2002, a third party or the French
courts could petition for correction or the dissolution of ISS-SA. The Company
plans to correct this equity deficiency by converting a portion of ISS-SA's
intercompany payables into equity of ISS-SA.
On November 8, 2002 there were 38.9 million shares of common stock outstanding,
trading in the over-the-counter market at $0.045 per share, giving the Company a
market capitalization of $1.8 million. It is not likely, therefore, that the
Company will be able to raise significant funds in the equity markets.
For further information, refer to our Management's Discussion and Analysis
included in the Company's annual report on Form 10-KSB for the year ended
December 31, 2001.
Item 3. Controls and Procedures
Within the 90 days prior to the filing of this report, the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design of the Company's disclosure controls
and procedures, as defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and
the Chief Financial Officer concluded that the Company's disclosure controls and
procedures were effective, in all material respects, to ensure that the
information required to be disclosed in the reports the Company files and
submits under the Exchange Act is recorded, processed, summarized and reported
as and when required.
There have been no significant changes (including corrective actions with
regards to significant deficiencies and material weaknesses) in the Company's
internal controls or in other factors subsequent to the date the Company carried
out its evaluation that could significantly affect these controls.
-10-
Part II. Other Information
Item 2. Changes in Securities
During the three month period ended September 30, 2002, the Company issued
514,005 shares of common stock to a vendor in exchange for the vendors payment
of property taxes related to the leased facility occupied by the Company.
On November 6, 2002, the Company issued 75,000 shares of common stock to a
Japanese medical device distributor for services rendered.
The issuance of these shares was exempt from the registration requirements of
the Securities Act under section 4(2) of the Act. There were no underwriters
involved in the transactions and there were no underwriting discounts of
commissions paid in connection therewith. The purchasers of the shares in each
such transaction represented their intention to acquire the shares for
investment only and not with a view to or for sale in connection with any
distribution thereof and appropriate legends were affixed to the certificates
for the shares issued in such transactions. The purchasers of the shares in each
such transaction had adequate access to information about the Company, and were
sophisticated investors.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a)Exhibits
None.
(b)Reports on Form 8-K.
None.
11
SIGNATURE
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
INTEGRATED SURGICAL SYSTEMS, INC.
By: /s/ CHARLES J. NOVAK
---------------------------------
Charles J. Novak
(Principal Financial and
Accounting Officer)
Dated: November 13, 2002
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I, Ramesh C. Trivedi, Chief Executive Officer of Integrated Surgical Systems,
Inc., certify, pursuant to 18 U.S.C.ss.1350, as enacted byss.906 of the
Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report on Form 10-QSB for the quarterly period ended
September 30, 2002 (the "Periodic Report") which this statement accompanies
fully complies with the requirements of Section 13(a) of the Securities Exchange
Act of 1934; and
(2) information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of
Integrated Surgical Systems, Inc.
Dated: November 13, 2002 By: /s/ RAMESH C. TRIVEDI
--------------------------------
Ramesh C. Trivedi
Chief Executive Officer
I, Charles J. Novak, Chief Financial Officer of Integrated Surgical Systems,
Inc., certify, pursuant to 18 U.S.C. ss.1350, as enacted byss.906 of the
Sarbanes-Oxley Act of 2002, that:
(1) the Quarterly Report on Form 10-QSB for the quarterly period ended
September 30, 2002 (the "Periodic Report") which this statement accompanies
fully complies with the requirements of Section 13(a) of the Securities Exchange
Act of 1934; and
(2) information contained in the Periodic Report fairly presents, in all
material respects, the financial condition and results of operations of
Integrated Surgical Systems, Inc.
Dated: November 13, 2002 By: /s/ CHARLES J. NOVAK
--------------------------------
Charles J. Novak
Chief Financial Officer
-13-
I, Ramesh C. Trivedi, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Integrated
Surgical Systems, 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 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 September 30, 2002; 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 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 13, 2002 By: /s/ RAMESH C. TRIVEDI
--------------------------------
Ramesh C. Trivedi
Chief Executive Officer
-14-
I, Charles J. Novak, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Integrated
Surgical Systems, 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 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 September 30, 2002; 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 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 13, 2002 By: /s/ CHARLES J. NOVAK
--------------------------------
Charles J. Novak
Chief Financial Officer
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