UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended March 31, 2004
[ ] Transition Report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the transition period from _______ to ________
Commission file number: 1-12471
INTEGRATED SURGICAL SYSTEMS, INC.
---------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 68-0232575
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1850 Research Park Drive, Davis, California 95616-4884
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(Address of principal executive offices)
(530) 792-2600
--------------
(Issuer's telephone number)
N/A
---
(Former name, former address and formal fiscal year,
if changed since last report)
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: The number of shares of the issuer's
common stock outstanding as of May 27, 2004 was 44,867,358.
Transitional Small Business Disclosure Format: Yes [ ] No [ X ]
Integrated Surgical Systems, Inc.
Form 10-QSB
For the quarter ended March 31, 2004
Table of Contents
Page
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements (unaudited) 2
Condensed Consolidated Balance Sheet at March 31, 2004 2
Condensed Consolidated Statements of Operations for the
three months ended March 31, 2004 and 2003 3
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 2004 and 2003 4
Notes to Condensed Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis 8
Item 3. Controls and Procedures 12
Part II. Other Information
Item 1. Legal Proceedings 12
Item 2. Changes in Securities 12
Item 3. Changes in and Disagreement with Accountants 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
Signature 13
Certifications 14
Part I. Financial Information
Item 1. Financial Statements (unaudited)
Integrated Surgical Systems, Inc.
Condensed Consolidated Balance Sheet
March 31, 2004
(Unaudited)
Assets
- ------
Current assets:
Cash $ 568
Accounts receivable 190,500
Inventory 495,951
Other current assets 110,215
------------
Total current assets 797,234
Property and equipment, net 27,951
------------
$ 825,185
============
Liabilities and stockholders' deficit
- -------------------------------------
Current liabilities:
Accounts payable $ 2,194,617
Accrued payroll and related expenses 1,243,485
Accrued liabilities 340,535
Unearned income 2,381,687
Other current liabilities 132,845
------------
Total current liabilities 6,293,170
Convertible preferred stock, $0.01 par value, 1,000,000 shares authorized;
168 shares issued and outstanding ($168,495 aggregate liquidation value) 168,495
Stockholders' deficit:
Common stock, $0.01 par value, 100,000,000 shares authorized;
44,867,358 shares issued and outstanding 448,674
Additional paid-in capital 61,902,692
Accumulated deficit (67,987,846)
------------
Total stockholders' deficit (5,636,480)
------------
$ 825,185
============
See accompanying notes to condensed consolidated financial statements.
2
Integrated Surgical Systems, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three months ended March 31,
----------------------------
2004 2003
------------ ------------
Net revenue $ 782,801 $ 3,020,602
Cost of revenue 295,099 1,666,931
------------ ------------
487,702 1,353,671
Operating expenses:
Selling, general and administrative 355,882 778,563
Research and development 387,482 448,269
------------ ------------
743,364 1,226,832
------------ ------------
Operating income (loss) (255,662) 126,839
Other income (expense), net (975) 43,152
------------ ------------
Net income (loss) $ (256,637) $ 169,991
============ ============
Basic net income (loss) per common share $ (0.01) $ 0.00
============ ============
Diluted net income (loss) per common share $ (0.01) $ 0.00
============ ============
Shares used in computing basic net income (loss) per share 44,867,358 41,978,469
============ ============
Shares used in computing diluted net income (loss) per share 44,867,358 53,349,941
============ ============
See accompanying notes to condensed consolidated financial statements.
3
Integrated Surgical Systems, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
Three months ended March 31,
----------------------------
2004 2003
----------- -----------
Cash flows from operating activities:
Net income (loss) $ (256,637) $ 169,991
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation 7,046 70,964
Changes in operating assets and liabilities:
Accounts receivable (79,744) 332,688
Inventory (8,996) 139,126
Other current assets 2,694 42,934
Accounts payable 231,768 146,945
Accrued payroll and related expenses 362,037 131,455
Accrued liabilities (14,379) (27,146)
Unearned income (462,486) (1,070,479)
Other current liabilities (17) 62,996
----------- -----------
Net cash used in operating activities (218,714) (526)
Cash flows from investing activities:
Purchases of property and equipment -- (17,708)
Cash flows from financing activities:
Proceeds from officer advances 136,573 22,645
Payments on officer advances (60,200) (13,252)
----------- -----------
Net cash provided by financing activities 76,373 9,393
Effect of exchange rate changes on cash -- 87,989
----------- -----------
Net increase (decrease) in cash (142,341) 79,150
Cash at beginning of period 142,909 82,069
----------- -----------
Cash at end of period $ 568 $ 161,219
=========== ===========
See accompanying notes to condensed consolidated financial statements.
4
Integrated Surgical Systems, Inc.
Notes to Condensed Consolidated Financial Statements (unaudited)
March 31, 2004
1. Basis of presentation
The condensed consolidated financial statements have been prepared by Integrated
Surgical Systems, Inc. ("the Company") pursuant to the rules and regulations of
the Securities and Exchange Commission ("SEC"). Certain information and footnote
disclosures normally included in annual financial statements prepared in
accordance with accounting principles generally accepted in the United States of
America have been condensed or omitted as permitted by such rules and
regulations. While the interim financial information contained in this filing is
unaudited, such financial statements reflect all adjustments, consisting only of
normal recurring adjustments, which the Company considers necessary for a fair
presentation. The results for interim periods are not necessarily indicative of
the results to be expected for the entire fiscal year. These financial
statements should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included in the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 2003.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and related
disclosures. Actual results could differ from those estimates.
Certain amounts for prior years have been reclassified to conform with 2004
financial statement presentations.
2. Results of Operations and Management's Plan
The accompanying condensed consolidated financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. As shown in the
accompanying condensed consolidated financial statements for the three month
period ended March 31, 2004, the Company incurred a net loss of $256,637 and has
an accumulated deficit of $67,987,846. For the year ended December 31, 2003, the
Company incurred a net loss of $3,250,219 and had an accumulated deficit of
$67,731,209 as of December 31, 2003. The report of independent auditors on the
Company's December 31, 2003 consolidated financial statements includes an
explanatory paragraph indicating there is substantial doubt about the Company's
ability to continue as a going concern. The Company believes that it has a plan
to address these issues and enable the Company to continue operating through
December 31, 2004. This plan includes obtaining additional equity or debt
financing, increasing product sales in existing markets, increasing sales of
system upgrades, and further reductions in operating expenses as necessary.
Although the Company believes that the plan will be realized, there is no
assurance that these events will occur. In the event that the Company is
unsuccessful, it is possible that it will cease operations or seek bankruptcy
protection. The condensed 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.
3. Inventories
At March 31, 2004, the components of inventory were:
Raw materials $157,089
Work-in-process 220,360
Finished goods 94,398
Deferred product development contract costs 24,104
--------
$495,951
========
5
4. Warranty and Service Contracts
The Company offers a one-year warranty for parts and labor on all ROBODOC
systems generally commencing upon the completion of training and installation.
In most cases, the Company's customers purchase a service contract, which
includes warranty coverage (parts and labor), unspecified product maintenance
updates, customer support services and various consumables required during
surgical procedures. Customers not covered by warranties or service contracts
are billed on a time and materials basis for service, and on a per unit basis
for products. At March 31, 2004, the Company had no recorded warranty liability
as all systems within the one-year warranty period were covered by service
contracts.
5. Stockholders' equity
During the three month period ended March 31, 2004, the Company issued no shares
of common stock.
6. Stock-Based Compensation
The Company uses the intrinsic value method in accounting for its employee stock
options in accordance with Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees". Under the intrinsic value method,
when the exercise price of the Company's employee stock options equals or
exceeds the market price of the underlying stock on the date of grant, no
compensation expense is recognized. Stock option awards which are granted at
less than fair market value result in the recognition of deferred compensation.
Deferred compensation is shown as a reduction of stockholders' equity and is
amortized to operating expenses over the vesting period of the stock award. The
Company had no deferred compensation at March 31, 2004.
Statement of Financial Accounting Standards No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure of an Amendment of SFAS No. 123" and
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation", require the disclosure of certain
information as if the Company had adopted the fair value provisions of SFAS No.
123. The table below illustrates the effect on net income (loss) and net income
(loss) per share had the Company adopted the fair value provisions of SFAS No.
123 using the following assumptions for the three months ended March 31, 2004
and 2003, respectively: risk-free interest rates of 2.0% and 3.0%; volatility
factors of the expected market price of the common stock of 1.007 and 0.931; and
an expected life of the option of 4 years.
Quarter Ended March 31,
------------------------
2004 2003
--------- ---------
Net income (loss), as reported $(256,637) $ 169,991
Add: stock-based employee compensation
included in reported net income (loss) -- --
Less: stock-based employee compensation
expense, determined under fair value
method for all awards (8,459) (26,131)
--------- ---------
Pro forma net income (loss) $(265,096) $ 143,860
========= =========
Income (loss) per share:
Basic net income (loss) per share $ (0.01) $ 0.00
========= =========
Diluted net income (loss) per share $ (0.01) $ 0.00
========= =========
Pro forma
Basic net income (loss) per share $ (0.01) $ 0.00
========= =========
Diluted net income (loss) per share $ (0.01) $ 0.00
========= =========
6
7. Net income (loss) per share
Basic net income (loss) per share is computed by dividing the net income (loss)
available to common stockholders for the period by the weighted average number
of common shares outstanding during the period. Diluted net income (loss) per
share is computed by dividing the net income (loss) for the period by the
weighted average number of common and potential common shares outstanding during
the period if their effect is dilutive. Potential common shares are comprised of
outstanding employee stock options, outstanding warrants and outstanding
preferred stock issuable upon the exercise of the stock option, warrant or
preferred stock. 8,106,871 potential common shares issuable under stock options,
warrants and preferred stock to purchase common shares have been excluded for
the three months ended March 31, 2004 from the determination of diluted net
income (loss) per share because the effect of such shares would have been
anti-dilutive.
At March 31, 2003, the Company had outstanding options to purchase 2,663,067
shares of common stock (with exercise prices ranging from $0.025 to $8.50),
7,476,354 outstanding warrants to purchase 8,011,544 shares of common stock
(with exercise prices from $0.01 to $8.34), and 12,524,800 shares of common
stock issuable upon conversion of Series G convertible preferred stock. Of these
options, warrants and preferred stock, 11,371,472 of these potential shares of
common stock were considered in the calculation of diluted earnings per share.
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.
8. Other comprehensive loss
Three months ended March 31,
----------------------------
2004 2003
--------- ---------
Net income (loss) $(256,637) $ 169,991
Other comprehensive income (loss):
Foreign currency translation -- (21,716)
--------- ---------
Comprehensive income (loss) $(256,637) $ 148,275
========= =========
9. Contingencies
The Company is subject to legal proceedings and claims that arise in the normal
course of business. The Company cannot assure that it would prevail in such
matters nor can it assure that any remedy could be reached on mutually agreeable
terms, if at all. Due to the inherent uncertainties of litigation, were there
any such matters, the Company would not be able to accurately predict their
ultimate outcome. As of March 31, 2004 there were no current proceedings or
litigation involving the Company that management believes would have a material
adverse impact on the Company's financial position, results of operations or
cash flows.
7
Item 2. Management's Discussion and Analysis
The discussion in this Quarterly Report on Form 10-QSB contains forward-looking
statements that have been made pursuant to the provisions of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
based on current expectations, estimates and projections about the software
industry and certain assumptions made by the Company's management. Words such as
"anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates,"
"could," "would," "may" and variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks, uncertainties
and assumptions that are difficult to predict; therefore, actual results may
differ materially from those expressed or forecasted in any such forward-looking
statements. Unless required by law, the Company undertakes no obligation to
update publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. However, readers should carefully
review the risk factors set forth in other reports or documents the Company
files from time to time with the SEC, particularly the Company's Annual Report
on Form 10-KSB, Quarterly Reports on Form 10-QSB and any Current Reports on Form
8-K.
The following discussion should be read in conjunction with the unaudited
Condensed Consolidated Financial Statements and Notes thereto in Part I, Item 1
of this Quarterly Report on Form 10-QSB and with the audited Consolidated
Financial Statements and Notes thereto, together with Management's Discussion
and Analysis of Financial Condition and Results of Operations, which are
included in the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2003 as filed with the SEC.
Overview
The Company designs, manufactures, sells and services image-directed,
computer-controlled robotic software and hardware products for use in
orthopaedic and neurosurgical procedures.
In 1997, the Company acquired a 100% interest in a French company, Innovative
Medical Machines International, S.A. ("ISS-SA"), involved in the manufacturing
and servicing of neurosurgical products.
Under French law, a company whose net assets are less than 50% of its capital
stock may come under the supervision and control of a regional administrative
tribunal. On September 30, 2003 the Tribunal de Commerce (the "Tribunal") in
Lyon, France determined that ISS-SA met the criteria for it to appoint an
administrator to manage the Company's operations. The Tribunal acted after a
hearing in which the Company and ISS-SA discussed the ability of ISS-SA to meet
its obligations over the next four months and the Company's unwillingness to
further fund its operations due to ISS-SA's history of operating losses. The
Tribunal authorized the administrator to manage ISS-SA's operations pending a
review of ISS-SA's operations and cash flow projections. Subsequent to its
appointment, the administrator exercised control over all aspects of ISS-SA's
operations including employee retention, purchasing, sales and inventory
management. As a result, effective with the administrator's appointment, the
Company no longer had access to the assets, personnel or records of ISS-SA.
On October 30, 2003, representatives of the Company met with the Tribunal to
review the status of ISS-SA. At this meeting, the Tribunal determined that
ISS-SA was making progress in improving its financial position and scheduled
another meeting for December 2003. Prior to such meeting, the Tribunal
reevaluated its decision to allow ISS-SA to continue operating and caused the
assets and operations of ISS-SA to be sold, effectively terminating ISS-SA's
operations on December 23, 2003. The Company recorded a loss of $1,516,519 in
connection with the liquidation of the Company's investment in ISS-SA and
closure of the Company's European operations in the fourth quarter of 2003.
8
The Company's revenue consists of product revenue, product development revenue,
parts and consumables and service revenue.
Product revenue consists of the Company's principal orthopaedic product, the
ROBODOC(R) Surgical Assistant System ("ROBODOC"), which integrates the
ORTHODOC(R) Presurgical Planner ("ORTHODOC") with a computer-controlled robot
for use in joint replacement surgeries. Also included in product revenue for the
first quarter of 2003 are sales of the NeuroMate(TM) System ("NeuroMate"), which
consists of a computer-controlled robotic arm, head stabilizer, presurgical
planning workstation and proprietary software used to position and precisely
hold critical tools during stereotactic brain surgery. The Company develops
specialized operating software for several implant manufacturing companies.
These implant manufacturers contract with the Company for the development of
particular lines of new prosthesis software to be used with the ROBODOC system.
The Company offers a one-year warranty for parts and labor on all ROBODOC
systems generally commencing upon the completion of training and installation.
In most cases, the Company's customers purchase a service contract, which
includes warranty coverage (parts and labor), unspecified product maintenance
updates, customer support services and various consumables required during
surgical procedures. Customers not covered by warranties or service contracts
are billed on a time and materials basis for service, and on a per unit basis
for products.
Results of Operations
The Company generated a net loss for the first quarter of 2004 of $257,000 or
$0.01 per basic and dilutive shares compared to net income for the first quarter
of 2003 of $170,000 or $0.0 per basic and dilutive shares. The gross margin
decreased by 64% during the first quarter of 2004 from the same quarter of 2003.
However, the gross margin percentage increased to 62% during the first quarter
of 2004 from 45% during the first quarter of 2003. Operating expenses decreased
39% from $1.2 million in the first quarter of 2003 to $0.7 million in the first
quarter of 2004.
Net revenue
Net revenue decreased 74% from $3.0 million during the first quarter of 2003 to
$0.8 million during the first quarter of 2004. The decrease in net revenue was
primarily due to the elimination of $1.5 million in net revenue generated by
ISS-SA and the Company's European operations, which were liquidated during the
fourth quarter of 2003. The remaining reduction of $0.7 million in revenue in
the first quarter of 2004, when compared to the first quarter of 2003, was
primarily the result of the decreases in the first quarter of 2004 in the number
of units shipped by the Company's non-European operations, with one less unit
being shipped.
Cost of revenue
The cost of revenue decreased 82% from $1.7 million during the first quarter of
2003 to $0.3 million during the first quarter of 2004. The decrease was
primarily due to the elimination of $1.1 million in cost of revenue attributable
to ISS-SA and the Company's European operations. The remaining reduction in cost
of revenue during the first quarter of 2004, when compared to the cost of
revenue for the same period of the prior year, was due to the decreases in the
number of units shipped.
Gross margin percentage increased to 62% during the first quarter of 2004 when
compared to 45% for the first quarter of 2003 and reflects the elimination of
the Company's ISS-SA and European operations with their higher operating costs
and the shipment of a refurbished Robodoc unit during the quarter. The Company
generally recognizes higher margins on sales of its refurbished units.
9
Operating expenses
Selling, general and administrative expense decreased 54% from $0.8 million
during the first quarter of 2003 to $0.4 million during the first quarter of
2004. The primary factor in the decrease in selling, general and administrative
expenses is the liquidation of ISS-SA and the Company's European operations
which contributed $0.3 million of expenses during the first quarter of 2003. The
remaining $0.1 million in the reduction of selling, general and administrative
expense was primarily due to decreases in commission expense incurred in the
first quarter of 2004 when compared to the same quarter of the previous year due
to lower sales volume.
Research and development expense decreased 14% during the first quarter of 2004
when compared to the first quarter of 2003. This decrease was the result of the
Company's overall cost reduction efforts. The minimal impact of the closure of
the Company's European operations on the Company's research and development
expense is the result of substantially all such activity being performed within
the Company's U.S. operations.
Other income (expense), net
During the first quarter of 2003, the Company recorded $43,152 primarily as the
result of favorable foreign currency exchange rates for that three-month period.
The Company was not affected during the first quarter of 2004 by foreign
currency exchange rates.
Critical Accounting Policies and Estimates
The preparation of the Company's unaudited condensed 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 the estimates, including those related to bad debts,
inventories, impairment of assets, warranties, contingencies and litigation. The
Company bases these estimates on historical experience and on other assumptions
believed 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. The Company has discussed its
critical accounting policies with the audit committee of the Company. Actual
results may differ from these estimates under different assumptions or
conditions.
The Company believes the following critical accounting policies affect the
Company's more significant judgments and estimates used in the preparation of
the condensed consolidated financial statements:
The Company recognizes revenue from sales of its products 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 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 periodically evaluates the need for allowances for doubtful
accounts for estimated losses resulting from the inability of the Company's
customers to make required payments. If the financial condition of its
customers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required.
Where the Company's products are not covered by separate service
agreements, the Company reserves against the estimated cost of product
warranties at the time revenue is recognized. The 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 these
estimates, revisions to the estimated warranty liability would be required.
10
The Company writes 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 the Company projected additional inventory write-downs
may be required.
Property, plant and equipment are amortized over their useful lives. Useful
lives are based on estimates of the period that the assets will generate
revenue. Property and equipment 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 cash position of the Company is inadequate and the Company has not yet
identified sources of sufficient cash to assure continuing operations. The
reports of the Company's independent auditors on the 2003 and 2002 consolidated
financial statements included explanatory paragraphs stating that there is
substantial doubt with respect to the Company's ability to continue as a going
concern. The Company has a plan to address these issues, which the Company
believes will enable the Company to continue operations through the end of 2004.
This plan includes obtaining additional equity or debt financing, increasing
sales of the products in existing markets, increasing sales of system upgrades,
and reducing operating expenses as necessary. Although the Company believes that
the plan will be realized, there is no assurance that these events will occur.
In the event that the Company is unsuccessful, it is possible that the Company
will cease operations or seek bankruptcy protection. The condensed 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.
At March 31, 2004, 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 .03. 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 2004.
Net cash used in operating activities was $219,000 for the three months ended
March 31, 2004. This primarily resulted from the net loss of $257,000, plus a
decrease in unearned income of $462,000, and an increase in accounts receivable
of $80,000. These amounts were partially offset by an increase of $232,000 in
accounts payable and $362,000 in accrued payroll and related expenses. The
increase in accounts payable is directly related to delayed vendor payments. The
Company expects to derive most of the cash required to support operations
through sales of the ROBODOC System, continued conversion of its inventory
balance into cash, as well as collection of the account receivables, and through
additional financing. It is critical for the Company to obtain cash from these
sources to survive in 2004. There can be no assurance given that the Company can
continue to convert inventory, collect receivables or raise additional funds on
acceptable terms or at all.
At March 31, 2004, the Company had amounts due to the executive officers of the
Company of approximately $847,000, in the aggregate, in the form of an interest
bearing advance, non-interest bearing advances, deferred salaries and
unreimbursed travel expenses. Approximately $269,000, $286,000 and $73,000 are
included in accrued payroll and related expenses, accounts payable and accrued
liabilities, respectively, and are due to Ramesh C. Trivedi, president and chief
executive officer of the Company. Approximately $76,000, $20,000 and $27,000 are
included in accrued payroll and related expense and accounts payable and accrued
liabilities respectively, due to Leland Witherspoon, vice president of
engineering of the Company. Approximately $59,000, $3,000 and $33,000 are
included in accrued payroll and related expense, accounts payable and accrued
liabilities, respectively, due to Charles J. Novak, chief financial officer of
the Company.
11
Item 3. Controls and Procedures
An evaluation was performed, as of March 31, 2004, under the supervision and
with the participation of the Company's management, including its President,
Chief Executive Officer and Chief Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures. Based
on such evaluation, the Company's management has concluded that its disclosure
controls and procedures were effective as of March 31, 2004. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect its internal controls subsequent to March 31, 2004.
Part II. Other Information
Item 1. Legal Proceedings
The Company is subject to legal proceedings and claims that arise in the normal
course of business. The Company cannot assure that it would prevail in such
matters nor can it assure that any remedy could be reached on mutually agreeable
terms, if at all. Due to the inherent uncertainties of litigation, were there
any such matters, the Company would not be able to accurately predict their
ultimate outcome. As of March 31, 2004, there were no current proceedings or
litigation involving the Company that management believes would have a material
adverse impact on its financial position, results of operations, or cash flows.
Item 2. Changes in Securities
None
Item 3. Changes in and Disagreements with Accountants
None
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
31.1 Certification Pursuant to Exchange Act Rule 13a-14(a) of Ramesh Trivedi
31.2 Certification Pursuant to Exchange Act Rule 13a-14(a) of Charles Novak
32.1 Certification Pursuant to Section 1350 of the Sarbanes-Oxley Act of 2002
of Ramesh Trivedi
32.2 Certification Pursuant to Section 1350 of the Sarbanes-Oxley
Act of 2002 of Charles Novak
(b) Reports on Form 8-K.
None.
12
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: June 4, 2004
13
Exhibit 31.1
CERTIFICATION
I, Ramesh C. Trivedi, Chief Executive Officer of Integrated Surgical Systems,
Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB for the quarter ended
March 31, 2004 of Integrated Surgical Systems, Inc.;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the small
business issue and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the small
business issuer, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusion
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small business
issuer's fourth quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
small business issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weakness in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: June 4, 2004 By: /s/ RAMESH C. TRIVEDI
------------------------------------
Ramesh C. Trivedi
Chief Executive Officer
Exhibit 31.2
CERTIFICATION
I, Charles J. Novak, Chief Financial Officer of Integrated Surgical Systems,
Inc., certify that:
1. I have reviewed this quarterly report on Form 10-QSB for the year quarter
ended March 31, 2004 of Integrated Surgical Systems, Inc.;
2. Based on my knowledge, this 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
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the small business issuer as of, and for, the periods presented in this
report;
4. The small business issuer's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the small
business issue and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the small
business issuer, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the small business issuer's disclosure
controls and procedures and presented in this report our conclusion
about the effectiveness of the disclosure controls and procedures, as
of the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the small business issuer's
internal control over financial reporting that occurred during the
small business issuer's most recent fiscal quarter (the small business
issuer's fourth quarter in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
small business issuer's internal control over financial reporting; and
5. The small business issuer's other certifying officer(s) and I have
disclosed, based on our most recent evaluation of internal control over
financial reporting, to the small business issuer's auditors and the audit
committee of the small business issuer's board of directors (or persons
performing the equivalent functions):
(a) All significant deficiencies and material weakness in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the small business issuer's
ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
control over financial reporting.
Date: June 4, 2004 By: /s/ CHARLES J. NOVAK
------------------------
Charles J. Novak
Chief Financial Officer
Exhibit 32.1
CERTIFICATION
I, Ramesh C. Trivedi, Chief Executive Officer of Integrated Surgical Systems,
Inc. (the "Company"), hereby certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Quarterly Report on Form 10-QSB of the Company for the quarter
ended March 31, 2004, which this certification accompanies (the
"Periodic Report"), fully complies with the requirements of Section
13(a) of the Securities Exchange Act of 1934; and
2. The information contained in the Periodic Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
Dated: June 4, 2004 /s/ Ramesh C. Trivedi
---------------------
Ramesh C. Trivedi
Chief Executive Officer
Exhibit 32.2
CERTIFICATION
I, Charles J. Novak, Chief Financial Officer of Integrated Surgical Systems,
Inc. (the "Company"), hereby certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
1. The Quarterly Report on Form 10-QSB of the Company for the quarter
ended March 31, 2004, which this certification accompanies (the
"Periodic Report"), fully complies with the requirements of Section
13(a) of the Securities Exchange Act of 1934; and
2. The information contained in the Periodic Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
Dated: June 4, 2004 /s/ Charles J. Novak
--------------------
Charles J. Novak
Chief Financial Officer