<PAGE> 1
United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-QSB
(MARK ONE)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For the Period Ended March 31, 1997.
[ ] Transition Report Pursuant to 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 registrant as specified in its charter)
Delaware 68-0232575
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
829 West Stadium Lane
Sacramento, CA 95834
(Address of principal executive offices) (Zip Code)
916-646-3487
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed
since last report)
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 Act of 1934
during the preceding 12 months (or for such shorter periods 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 ___
Applicable Only to Issuers Involved in Bankruptcy
Proceedings During the Preceding Five Years
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a
plan confirmed by the court. Yes ___ No ___
Applicable Only to Corporate Issuers
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practical date.
Common Stock $.01 Par Value - 3,366,028 shares as of May 1, 1997.
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INTEGRATED SURGICAL SYSTEMS, INC.
Index
<TABLE>
<S> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheet - March 31, 1997
Consolidated Statements of Operations - Three months ended March 31, 1997 and 1996
Consolidated Statements of Cash Flows - Three months ended March 31, 1997 and 1996
Notes to Consolidated Financial Statements - March 31, 1997
Item 2. Management's Discussion and Analysis or Plan of Operation
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INTEGRATED SURGICAL SYSTEMS, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS March 31, 1997
Current assets: (unaudited)
------------
<S> <C>
Cash and cash equivalents $ 5,318,491
Accounts receivable 18,124
Inventory 1,372,592
Other current assets 173,048
------------
Total current assets 6,882,255
Net property and equipment 252,015
Other assets 17,423
------------
$ 7,151,693
============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 602,587
Value added taxes payable 272,139
Accrued payroll and related expenses 100,975
Customer deposits 250,000
Accrued product retrofit costs 135,348
Payable to subcontractor --
Other current liabilities 203,732
------------
Total current liabilities 1,564,781
Commitments
Stockholders' equity:
Preferred stock, $0.01 par value 1,000,000 shares
authorized; no shares issued and outstanding --
Common stock, $0.01 par value, 15,000,000 shares
authorized; 3,366,028 shares issued and outstanding 33,660
Additional paid-in capital 25,823,422
Deferred stock compensation (381,417)
Accumulated translation adjustment 14,472
Accumulated deficit (19,903,225)
------------
Total stockholder's equity 5,586,912
------------
$ 7,151,693
============
</TABLE>
See notes to consolidated financial statements.
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INTEGRATED SURGICAL SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------------
1997 1996
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<S> <C> <C>
Net Sales $ 641,989 $ 411,841
Cost of Sales 215,458 192,154
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426,531 219,687
Operating expenses:
Selling, general and administrative 624,664 448,875
Research and development 645,354 532,607
Stock compensation 45,000 225,000
----------- -----------
1,315,018 1,206,482
Other income (expense):
Interest income 71,342 18,819
Other 23,731 (25,199)
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Loss before provision for income taxes (793,414) (993,175)
Provision for income taxes 9,000 2,000
----------- -----------
Net loss $ (802,414) $ (995,175)
=========== ===========
Net loss applicable to common stockholders $ (802,414) $ (995,175)
Net loss per share $ (0.24) $ (0.23)
Shares used in per share calculations 3,362,513 4,315,260
</TABLE>
See notes to consolidated financial statements
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INTEGRATED SURGICAL SYSTEMS, INC.
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING EXPENSES
Net loss $ (802,414) $ (995,175)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 40,868 48,147
Stock compensation 45,000 225,000
Changes in operating assets and liabilities
Accounts receivable 582,444 50,656
Inventory (342,330) 53,199
Other current assets (43,985) 65,334
Note payable -- (201,513)
Accounts payable (73,614) (90,505)
Value added taxes payable (457) --
Accrued payroll and related expenses (94,767) (9,600)
Customer deposits 125,000 116,447
Accrued product retrofit costs -- (24,652)
Payable to subcontractor (110,176) --
Other current liabilities 11,668 (56,257)
Translation adjustment 5,815 5,781
----------- -----------
Net cash used in operating activities (656,948) (813,138)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (41,847) 32,679
Decrease (increase) in other assets -- 108
----------- -----------
Net cash provided by (used in) investing activities (41,847) 32,787
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of convertible preferred stock -- 1,000,000
Proceeds from exercise of stock options 16,207 --
----------- -----------
Net cash provided by financing activities 16,207 1,000,000
Net increase (decrease) in cash and cash equivalents (682,588) 219,649
Cash and cash equivalents at beginning of period 6,001,079 2,339,823
----------- -----------
Cash and cash equivalents at end of period $ 5,318,491 $ 2,559,472
=========== ===========
</TABLE>
See notes to consolidated financial statements.
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INTEGRATED SURGICAL SYSTEMS, INC.
Notes to Consolidated Financial Statements (unaudited)
March 31, 1997
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three-month period ended March 31, 1997 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1997. For further information, refer to the consolidated financial statements
and footnotes thereto included in Integrated Surgical Systems, Inc.'s annual
report on Form 10-KSB for the year ended December 31, 1996.
NOTE B - INVENTORIES
The components of inventory consist of the following:
<TABLE>
<CAPTION>
March 31, 1997
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<S> <C>
Raw Materials $ 620,796
Work in process 434,474
Finished goods 317,322
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$1,372,592
===========
</TABLE>
NOTE C - EARNINGS PER SHARE
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per share, which is required to be adopted on December 31, 1997.
At that time, the Company will be required to change the method currently used
to compute earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
stock options will be excluded. The impact of Statement 128 on the calculation
of earnings per share is not expected to be material.
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Results of Operations
Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996
Net Sales. The Company reported net sales of $642,000 in the first
quarter of 1997, approximately $230,000 higher than the same period in 1996.
The increase is attributable to sales at a higher selling price in the first
quarter of 1997. Sales in the first quarter of 1996 were discounted.
Cost of Sales. Cost of sales were $215,000, approximately $23,000
higher than the same period in 1996 due to increased manufacturing staffing in
1997.
Selling, General and Administrative. Selling, general and
administrative expenses were $625,000 in the first quarter of 1997,
approximately $176,000 higher than the same period in 1996 due primarily to
increased sales and marketing activity. A European based sales manager, trainer,
and service technician were added during the period. General and administrative
costs also increased to support the increased growth and investor relations
cost.
Research, and Development. Research and Development expenses
were $645,000 in the first quarter of 1997, approximately $112,000 higher than
the same period in 1996 primarily due to additional engineering staff required
to support new product development projects.
Stock Compensation. Stock compensation expense during the first quarter
of 1997 was $45,000, approximately $180,000 lower than the first quarter of
1996. This decrease is due to the immediate vesting of a portion of a large
grant of stock options in the first quarter 1996. The Company charged to
operations in 1996 deferred stock compensation relating to stock options granted
during 1996 with exercise prices less than the estimated fair value of the
Company's Common Stock, as determined by an independent valuation analysis, on
the date of grant. Deferred compensation for the non-vested portion is being
amortized into expense over the vesting period of the stock options, which
generally range from three to five years. Stock compensation expense in the
first quarter of 1997 represents the additional vesting which occurred in the
first quarter of 1997.
Interest Income. Interest income for the first quarter of 1997 was
$71,000, approximately $53,000 higher than the first quarter of 1996 due to
higher than average cash balances resulting from the issuance of Common Stock
in the Company's initial public offering in the fourth quarter of 1996.
Other Income and Expense. Other income for the first quarter was
$24,000 compared to an expense of $25,000 in the first quarter of 1996. The
primary reason for the difference is the strengthening of the Dutch Guilder
against the U.S. Dollar during 1996, as compared to a weakening of the Dutch
Guilder against the dollar in the first quarter of 1997. This resulted in
currency transaction gains and losses on the U.S. currency obligations of the
Company's wholly owned subsidiary in The Netherlands, Integrated Surgical
Systems B.V.
Liquidity and Capital Resources. The Company used $657,000 in cash from
the operating activities in the first quarter of 1997 compared to $813,000 usage
in the first quarter of 1996. Net cash used for operations in each of these
periods resulted primarily from the net loss.
The Company used $42,000 in cash in the first quarter of 1997 for the
purchase of equipment to support the increase in the number of employees.
The Company received $16,207 in the first quarter of 1997 on the
exercise of common stock options (4,867 shares).
The Company expects to incur additional operating losses at least
through 1997. These losses will be as a result of expenditures related to
product development projects and the establishment of
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marketing, sales, service and training organizations. The timing and amounts of
these expenditures will depend on many factors, some of which are beyond the
Company's control, such as the requirements for and time required to obtain FDA
authorization to market the ROBODOC System in the United States, the progress of
the Company's product development projects and market acceptance of the
Company's products. The Company expects that its cash and cash equivalents as of
March 31, 1997, will be sufficient to finance its operations through 1997.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports
The Company did not file any reports on Form 8-K during the
quarter ended March 31, 1997.
<PAGE> 9
Signatures
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
INTEGRATED SURGICAL SYSTEMS, INC.
Date: May 13, 1997 by: /s/ Michael J. Tomczak
------------------------------------------
Michael J. Tomczak, Vice President and CFO
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 5,318,491
<SECURITIES> 0
<RECEIVABLES> 18,124
<ALLOWANCES> 0
<INVENTORY> 1,372,592
<CURRENT-ASSETS> 6,882,255
<PP&E> 1,298,087
<DEPRECIATION> 1,046,072
<TOTAL-ASSETS> 7,151,693
<CURRENT-LIABILITIES> 1,564,781
<BONDS> 0
0
0
<COMMON> 33,660
<OTHER-SE> 5,553,252
<TOTAL-LIABILITY-AND-EQUITY> 7,151,693
<SALES> 641,989
<TOTAL-REVENUES> 641,989
<CGS> 215,458
<TOTAL-COSTS> 1,315,018
<OTHER-EXPENSES> (95,073)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (793,414)
<INCOME-TAX> 9,000
<INCOME-CONTINUING> (802,414)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (802,414)
<EPS-PRIMARY> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
