<PAGE> 1
Filed Pursuant to Rule 424(b)(1)
Registration No. 333-66133
1,809,000 Shares
Integrated Surgical Systems, Inc.
Common Stock
The selling securityholders named in this prospectus are offering and selling up
to 1,809,000 shares of the common stock of Integrated Surgical Systems, Inc.
They may acquire 1,760,000 of those shares upon conversion of 3,520 shares of
series A preferred stock and 44,000 shares upon exercise of warrants.
The common stock is quoted on The Nasdaq SmallCap Market under the symbol
"RDOC", and is listed on The Pacific Exchange Inc. under
the symbol "ROB". The common stock also has been admitted for trading on the
European Association of Securities Dealers' Automated Quotation system under the
symbol "RDOC".
THE COMMON STOCK IS A SPECULATIVE INVESTMENT AND INVOLVES A HIGH DEGREE OF RISK.
YOU SHOULD READ THE DESCRIPTION OF CERTAIN RISKS UNDER THE CAPTION "RISK
FACTORS" COMMENCING ON PAGE 2 BEFORE PURCHASING THE COMMON STOCK.
Our executive offices are at 1850 Research Park Drive, Davis, California
95616-4884, and our telephone number is 530-792-2600.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SEC OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SEC OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
-------------------------
THE DATE OF THIS PROSPECTUS IS MARCH 17, 1999
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Risk Factors................................................ 2
Forward Looking Statements.................................. 7
Selling Securityholders..................................... 8
Plan of Distribution........................................ 9
Information About the Company............................... 11
Legal Matters............................................... 12
Experts..................................................... 12
</TABLE>
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This prospectus is part of a registration statement we filed with the SEC. You
should rely only on the information or representations provided in this
prospectus. We have not authorized anyone to provide you with different
information. The common stock will not be offered in any state where an offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the cover of this prospectus.
<PAGE> 3
RISK FACTORS
OUR POTENTIAL FUTURE SUCCESS AND FINANCIAL PERFORMANCE WILL DEPEND ALMOST
ENTIRELY ON OUR ABILITY TO SUCCESSFULLY MARKET THE ROBODOC SYSTEM. For the near
term, we expect to derive most of our revenues from sales of the ROBODOC System.
Accordingly, our potential future success and financial performance will depend
almost entirely on our ability to successfully market the ROBODOC System. To
successfully market the ROBODOC System, we must commit substantial marketing
efforts, develop an effective sales and marketing organization, and expend
significant funds to inform potential customers, including hospitals and
physicians, of the distinctive characteristics and advantages of using the
ROBODOC System instead of traditional surgical tools and procedures. Since the
ROBODOC System employs innovative technology, rather than being an improvement
of existing technology, and represents a substantial capital expenditure, we
expect to encounter resistance to change, which we must overcome if the ROBODOC
System is to achieve significant market acceptance. Furthermore, our ability to
market the ROBODOC System in the United States is dependent upon approval by the
U.S. Food and Drug Administration. We cannot give you any assurance that we will
obtain FDA approval to market the ROBODOC System in the United States, or that
the ROBODOC System will achieve significant market acceptance in the United
States, Europe and other foreign markets to generate sufficient revenues to
become profitable.
ALTERNATIVES TO OUR PRODUCTS MAY AFFECT OUR POTENTIAL FUTURE SUCCESS. The
principal competition for the ROBODOC System is manual surgery performed by
orthopaedic surgeons, using surgical power tools and manual devices. The
providers of these instruments are the major orthopaedic companies, which
include Howmedica, Inc. (a subsidiary of Stryker Corporation), located in New
York; Zimmer, Inc. (a subsidiary of Bristol-Myers Squibb Company), located in
Indiana; Johnson & Johnson Orthopaedics, Inc. (a subsidiary of Johnson &
Johnson), located in New Jersey; DePuy, Inc. (a subsidiary of Johnson & Johnson)
located in Indiana; Biomet, Inc., located in Indiana; and Osteonics, Inc. (a
subsidiary of the Stryker Corporation), located in New Jersey. MAQUET, a
manufacturer of operating tables located in Germany, recently entered the market
with a device similar to the ROBODOC System. The principal competition for the
NeuroMate System are frame-based and frameless navigators, which are manually
operated. Approximately twenty navigator models have been introduced, including
those by Radionics, Sofamor-Danek and Ohio Medical Surgical products, all
located in the United States; Elekta, located in Sweden; and Fischer Leibingher
and Brain Lab, both located in Germany. In general, there are companies in the
medical products industry capable of developing and marketing
computer-controlled robotic systems for surgical applications, many of whom have
significantly greater financial, technical, manufacturing, marketing and
distribution resources than us, and have established reputations in the medical
device industry. Furthermore, we cannot give you any assurance that IBM or the
University of California, which developed the technology embodied in the ROBODOC
System and hold patents relating thereto, will not enter the market or license
the technology to other companies.
We cannot give you any assurance that future competition will not have a
material adverse effect on our business. The cost of our systems represents a
significant capital expenditure for a customer and accordingly may discourage
purchases by certain customers.
WE NEED BUT HAVE NOT YET OBTAINED APPROVAL OF THE U.S. FOOD AND DRUG
ADMINISTRATION TO MARKET THE ROBODOC SYSTEM IN THE UNITED STATES. Before a new
medical device can be introduced into the U.S. market, the manufacturer must
obtain FDA permission to market through either the 510(k) pre-market
notification process for medical devices which are substantially similar to
other approved medical devices or the costlier, lengthier and less certain
pre-market approval application process. Following a pre-filing meeting with
representatives of the FDA in early 1998, we stated that we intended to file our
pre-market approval application to market the ROBODOC System with the FDA in the
second quarter of 1998. As a result of further discussions with representatives
of the FDA as part of the pre-submission review process (which process is
intended to expedite the FDA's formal pre-market approval process), we have
deferred the filing of our pre-market approval application with the FDA so that
we may incorporate our DigiMatch Single
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Surgery System, and possibly other technical developments, as part of our
pre-market approval application. We believe, based upon our discussions with
representatives of the FDA, that the incorporation of the DigiMatch Single
Surgery System will enhance our prospects for obtaining FDA approval. However,
we cannot give you any assurance as to when or if the FDA will grant pre-market
approval for the ROBODOC System or that such approval, if obtained, will not
include unfavorable limitations or restrictions.
In order to obtain FDA clearance or approval, we must demonstrate that the
ROBODOC System is safe and effective, and we may be required to show a clinical
benefit to patients. We believe that a reduced incidence of intraoperative
fractures with the ROBODOC System compared to conventional total hip replacement
surgery would offer an important benefit. The number of patients enrolled in our
U.S. clinical study is less than the 300 patients (150 ROBODOC System; 150
control group) we initially requested to study in our investigational device
exemption application to the FDA. Nonetheless, over 3,300 primary surgeries have
been performed with the ROBODOC System in the U.S. clinical trial and the
European treatment population without a single reported intraoperative fracture.
Since the observed fracture rate in the control group in the U.S. clinical trial
was lower than anticipated, the data from this study are not sufficient to
establish a statistically significant reduction in intraoperative fractures
compared to the control group. Nevertheless, the data from both the U.S. and the
European group of patients suggest that the ROBODOC System reduces
intraoperative fractures when compared to the fracture rate of approximately 3
to 28 percent for conventional surgery reported in the scientific and medical
literature. However, we cannot give you any assurance that the FDA will agree
that the ROBODOC System offers a clinically significant reduction in
intraoperative fractures, in the absence of a controlled trial demonstrating
such a reduction, or that such a reduction is of clinical benefit to patients.
The FDA has advised us that it believes long-term functional assessments are the
primary endpoints for evaluating the safety and effectiveness of the ROBODOC
System. Our preliminary review of the functional assessment data from the U.S.
clinical trial shows equivalence between the ROBODOC System and conventional
surgery. We believe that achieving better implant fit and alignment in the
femoral cavity are significant factors in the success of cementless total hip
replacement surgery, although the FDA has questioned whether fit is an
appropriate endpoint and has not addressed alignment.
Our most recent statistical analysis of fit and alignment parameters from
3-month radiographs showed that the ROBODOC System surgeries produced better fit
and alignment when compared to conventional surgeries. We believe a more
accurate fit of the prosthesis reflects the implant manufacturers' design goals
for implant cavity preparation. We also reviewed 24-month radiographs evaluating
prosthesis stability. We cannot give you any assurance that the FDA will accept
our data that demonstrates the ROBODOC System achieves better implant fit,
alignment and stability, or that the FDA will agree that better fit and
alignment are significant surgical endpoints. In addition, we cannot give you
any assurance that the FDA will agree that the greater surgery time and blood
loss associated with the ROBODOC System does not pose a significant safety
concern or create an unfavorable risk/benefit ratio. Further, we cannot give you
any assurance that the FDA will not require us to obtain additional clinical
data from a randomized, controlled trial to resolve any concern about the
risk/benefit ratio offered by the ROBODOC System. If we must obtain such
additional data, the FDA review process could be prolonged by several years.
WE MAY NOT BE ABLE TO COMPLY WITH QUALITY SYSTEM AND OTHER FDA REPORTING AND
INSPECTION REQUIREMENTS. Assuming we obtain the necessary FDA approvals and
clearances for our products, in order to maintain such approvals and clearances
we must, among other things, register our establishment and list our devices
with the FDA and with certain state agencies, maintain extensive records, report
any adverse experiences on the use of our products and submit to periodic
inspections by the FDA and certain state agencies. The Food, Drug, and Cosmetic
Act also requires devices to be manufactured in accordance with the quality
system regulation, which sets forth good manufacturing practices requirements
with respect to manufacturing and quality assurance activities. The quality
system regulation revises the previous good manufacturing practices regulation
and imposes certain enhanced requirements that are likely to increase the cost
of compliance, including design controls.
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WE MAY NOT BE ABLE TO OBTAIN REGULATORY APPROVALS NEEDED TO SELL OUR PRODUCTS IN
FOREIGN MARKETS. The introduction of our products in foreign markets has
subjected and will continue to subject us to foreign regulatory clearances,
which may be unpredictable and uncertain, and which may impose substantial
additional costs and burdens. Many countries also impose product standards,
packaging requirements, labeling requirements and import restrictions on
devices. We cannot give you any assurance that any of our products will receive
further approvals or clearances, if required on a timely basis, or at all.
UNCERTAINTY REGARDING PATENTS AND PROTECTION OF PROPRIETARY TECHNOLOGY. Our
ability to compete successfully may depend, in part, on our ability to obtain
and protect patents, protect trade secrets and operate without infringing the
proprietary rights of others. Certain robotic medical technology underlying our
products is the subject of a United States patent issued to IBM, which IBM has
agreed not to enforce against the manufacture and sale of our products. We have
been issued four U.S. patents and filed seven patent applications covering
various aspects of our technology.
Our U.S. patents include
- Computer assisted software system for planning and performing hip
revision surgery
- Computer assisted system and method for creating cavities in the
femur that will accept a prosthesis
- Computer system and method for creating a pre-operative surgical
plan for hip replacement surgery
- Method for orienting real patient anatomy to a digital image of the
patient's anatomy
We cannot give you any assurance that our pending or future patent applications
will mature into issued patents, or that we will continue to develop our own
patentable technologies. Further, we cannot give you any assurance that any
patents that may be issued to us effectively protect our technology or provide a
competitive advantage for our products or will not be challenged, invalidated,
or circumvented in the future. In addition, we cannot give you any assurance
that competitors, many of which have substantially more resources than us and
have made substantial investments in competing technologies, will not obtain
patents that will prevent, limit or interfere with our ability to make, use or
sell our products either in the United States or internationally.
The medical device industry has been characterized by substantial competition
and litigation regarding patent and other proprietary rights. We intend to
vigorously protect and defend our patents and other proprietary rights relating
to our proprietary technology. Litigation alleging infringement claims against
us (with or without merit), or instituted by us to enforce patents and to
protect trade secrets or know-how owned by us or to determine the
enforceability, scope and validity of the proprietary rights of others, is
costly and time consuming. If any relevant claims of third-party patents are
upheld as valid and enforceable in any litigation or administrative proceedings,
we could be prevented from practicing the subject matter claimed in such
patents, or could be required to obtain licenses from the patent owners of each
patent, or to redesign our products or processes to avoid infringement. We
cannot give you any assurance that such licenses would be available or, if
available, would be available on terms acceptable to us or that we would be
successful in any attempt to redesign our products or processes to avoid
infringement. Accordingly, an adverse determination in a judicial or
administrative proceeding or failure to obtain necessary licenses could prevent
us from manufacturing and selling our products, which would have a material
adverse effect on our business, financial condition and results of operations.
LIMITED PRODUCTION EXPERIENCE. Our success will depends in part on our ability
to assemble our products in a timely, cost-effective manner and in compliance
with good manufacturing practices, and manufacturing requirements of other
countries, including the International Standards Organization 9000 standards and
other regulatory requirements. The assembly of our products is a complex
operation involving a number of separate processes and components. Our
production activities to date have consisted
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primarily of assembling limited quantities of systems for use in clinical trials
and systems for commercial sale. We do not have experience in assembling our
products in larger commercial quantities. Furthermore, as a condition to receipt
of pre-market approval, our facilities, procedures and practices will be subject
to pre-approval and ongoing good manufacturing practices inspections by the FDA.
Manufacturers often encounter difficulties in scaling up manufacturing of new
products, including problems involving product yields, quality control and
assurance, component and service availability, adequacy of control policies and
procedures, lack of qualified personnel, compliance with FDA regulations, and
the need for further FDA approval of new manufacturing processes and facilities.
We cannot give you any assurance that production yields, costs or quality will
not be adversely affected as we seek to increase production, and any such
adverse effect could have a material adverse effect on our business, financial
condition and results of operations.
DEPENDENCE ON SUPPLIER FOR ROBOT. Although we have multiple sources for most of
our components, parts and assemblies used in the ROBODOC and NeuroMate Systems,
we are dependent on Sankyo Seiki of Japan for the ROBODOC System robot arm and
Audemars-Piguet of Switzerland for the supply of the customized NeuroMate robot.
Although we can obtain the robot for either the ROBODOC System or the NeuroMate
System from other suppliers, with appropriate modifications and engineering
effort, we cannot give you any assurance that delays resulting from the required
modifications or engineering effort to adapt alternative components would not
have a material adverse effect on our business, financial condition and results
of operations.
RELIANCE ON FOREIGN SALES. Since we commenced operations, substantially all of
our sales have been to customers in Germany, Austria, France and Japan. We
believe that until such time, if ever, as we receive approval from the FDA to
market the ROBODOC System in the United States, substantially all of our sales
for the ROBODOC System will be derived from customers in foreign markets.
Foreign sales are subject to certain risks, including economic or political
instability, shipping delays, fluctuations in foreign currency exchange rates,
changes in regulatory requirements, custom duties and export quotas and other
trade restrictions, any of which could have a material adverse effect on our
business. To date, payment for substantially all ROBODOC Systems in Europe has
been fixed in U.S. Dollars. However, we cannot give you any assurance that in
the future customers will be willing to make payment for our products in U.S.
Dollars. If the U.S. Dollar strengthens substantially against the foreign
currency of a country in which we sell our products, the cost of purchasing our
products in U.S. Dollars would increase and may inhibit purchases of our
products by customers in that country. We are unable to predict the nature of
future changes in foreign markets or the effect, if any, they might have on us.
LENGTHY SALES CYCLE MAY CAUSE US TO RECOGNIZE THE SALES PRICE OF A SYSTEM IN A
SUBSEQUENT FISCAL QUARTER TO THE FISCAL QUARTER IN WHICH WE INCURRED RELATED
MARKETING AND SALES EXPENSES. Since the purchase of a ROBODOC System or
NeuroMate System represents a significant capital expenditure for a customer,
the placement of orders may be delayed due to customers' internal procedures to
approve large capital expenditures. We anticipate that the period between
initial contact of a customer for a system and submission of a purchase order by
that customer could be as long as 9 to 12 months. Furthermore, the current lead
time required by the supplier of the robot for either the ROBODOC System or the
NeuroMate System is approximately four months after receipt of the order. We may
be required to expend significant cash resources to fund our operations until
the purchase price is paid. Accordingly, we may not recognize the sales price of
a system until a fiscal quarter subsequent to the fiscal quarter in which we
incurred marketing and sales expenses associated with an order.
NEED FOR ADDITIONAL FINANCING. Depending upon our ability to generate
sufficient sales, collect outstanding accounts receivable and the timing of
required expenditures, we may require additional financing. We cannot give you
any assurance that such financing, if required, will be available on acceptable
terms, if at all. If we are unable to obtain such additional financing on
favorable terms, we may have to reduce or curtail certain activities.
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EXPOSURE TO PRODUCT LIABILITY CLAIMS. The manufacture and sale of medical
products exposes us to the risk of significant damages from product liability
claims. Although we maintain product liability insurance against product
liability claims in the amount of $5 million per occurrence and $5 million in
aggregate, we cannot give you any assurance that the coverage limits of our
insurance policies will be adequate or that such insurance can be maintained at
acceptable costs. Although we have not experienced any product liability claims
to date, a successful claim brought against us in excess of our insurance
coverage could have a materially adverse effect on our business, financial
condition and results of operations.
WE MAY NOT BE ABLE TO RETAIN OUR KEY PERSONNEL OR HIRE THE ADDITIONAL PERSONNEL
WE NEED TO SUCCEED. Our business and marketing plan was formulated by, and is
to be implemented under the direction of, Dr. Ramesh C. Trivedi, Chief Executive
Officer and President. Dr. Trivedi is employed pursuant to an employment
agreement that may be terminated by either Dr. Trivedi or us at any time. If we
terminate Dr. Trivedi's employment other than for cause, we must pay him his
monthly salary (currently, $23,320) for a period of 18 months following the date
of termination. We maintain key-man insurance on the life of Dr. Trivedi. Our
growth and future success also will depend in large part on the continued
contributions of key technical and senior management personnel, as well as our
ability to attract, motivate and retain highly qualified personnel generally
and, in particular, trained and experienced professionals capable of developing,
selling and installing the Systems and training surgeons in their use.
Competition for such personnel is intense, and we cannot give you any assurance
that we will be successful in hiring, motivating or retaining such qualified
personnel. None of our executive or key technical personnel, other than Dr.
Trivedi, is employed pursuant to an employment agreement. The loss of the
services of Dr. Trivedi or other senior management or key technical personnel,
or the inability to hire or retain qualified personnel, could have a material
adverse effect on our business, financial condition and results of operations.
IF WE CANNOT SATISFY NASDAQ'S MAINTENANCE REQUIREMENTS, IT MAY DELIST OUR COMMON
STOCK FROM ITS SMALLCAP MARKET. Our common stock is quoted on the Nasdaq
SmallCap Market. To continue to be listed, we are required to maintain net
tangible assets of $2,000,000 and our common stock must maintain a minimum bid
price of $1.00 per share. We may not be able to continue to satisfy those
requirements. If we are unable to satisfy Nasdaq's maintenance requirements, our
common stock may be delisted. If we are delisted and we are not then listed or
do not qualify for a listing on a stock exchange, our common stock would be
traded in the over-the-counter market and quoted in the NASD's "Electronic
Bulletin Board" or the "pink sheets." Consequently, it may be more difficult for
an investor to obtain price quotations for our common stock or to sell it.
IF OUR COMMON STOCK IS DELISTED, IT MAY BECOME SUBJECT TO THE SEC'S "PENNY
STOCK" RULES AND MORE DIFFICULT TO SELL. SEC rules require brokers to provide
information to purchasers of securities traded at less than $5.00 and not traded
on a national securities exchange or quoted on the Nasdaq Stock Market. If our
common stock becomes a "penny stock" that is not exempt from the SEC rules,
these disclosure requirements may have the effect of reducing trading activity
in our common stock and make it more difficult for investors to sell. The rules
require a broker-dealer to deliver a standardized risk disclosure document
prepared by the SEC that provides information about penny stocks and the nature
and level of risks in the penny market. The broker must also give bid and offer
quotations and broker and salesperson compensation information to the customer
orally or in writing before or with his confirmation. The SEC rules also require
a broker to make a special written determination that the penny stock is a
suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction before a transaction in a penny stock.
POSSIBLE ADVERSE EFFECT OF FUTURE SALES OF COMMON STOCK ON THE MARKET PRICE OF
OUR COMMON STOCK. Sales of substantial amounts of common stock, or the
possibility of such sales, could adversely affect the market price of our common
stock and also impair our ability to raise capital through an offering of equity
securities in the future. As of December 1, 1998, there were 5,643,372 shares of
common stock outstanding. Except for 1,039,792 shares of common stock
(representing approximately 18.4% of the outstanding common stock) owned by EJ
Financial Investments V, L.P., which may be sold in accordance with the volume
limitations of Rule 144, substantially all of the outstanding shares of common
stock are transferable without restriction under the Securities Act. An
additional
- 1,760,000 shares are issuable upon conversion of the Series A preferred
stock, at an assumed conversion price of $2.00 per share. The actual
conversion price is computed by reference to 85% of the lowest sale
price of one share of common stock for the five trading days preceding
the date of conversion.
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- 2,274,066 shares are issuable upon exercise of warrants owned by IBM at
exercise prices ranging from $.01 to $.07.
- 2,091,986 shares are issuable upon exercise of warrants issued in our
initial public offering at an exercise price of $5.47 per share.
- 1,321,058 shares are issuable upon exercise of stock options granted
pursuant to our employee stock option plans at exercise prices ranging
from $.07 to $8.63 per share.
- 408,155 shares are issuable upon exercise of warrants having exercise
prices ranging from $4.31 to $7.42 per share.
Substantially all of such shares (other than the shares issuable upon exercise
of the warrants owned by IBM), when issued, may be immediately resold in the
public market pursuant to effective registration statements under the Securities
Act or pursuant to Rule 144. In April 1998, we amended the warrants owned by IBM
to permit IBM to exercise them without the payment of cash for a lesser number
of shares, based upon the difference between the market price of the common
stock at the time of exercise and the exercise price, in which case such shares
could be sold immediately under Rule 144 since under applicable SEC
interpretations, the holding period under Rule 144 for shares acquired in this
manner includes the period for which the selling shareholder owned the warrants.
Certain securityholders have agreed to limit the number of shares they may sell:
- IBM has agreed to limit sales of shares acquired upon exercise of its
warrants to the volume limitations of Rule 144, whether or not
applicable, and has granted us or our designee a right of first refusal
with respect to such sales.
- Former securityholders of Innovative Medical Machines International,
S.A., which we acquired in September 1997 in exchange for shares of
common stock, have agreed to limit future sales of shares under a
currently effective registration statement to the volume limitations of
Rule 144, except that during the period from December 6, 1998 through
March 5, 1999, they may sell an aggregate of 100,000 shares plus 1% of
the total number of shares of common stock traded on Nasdaq during the
preceding three month period.
We have granted registration rights to:
- The selling securityholders with respect to the shares of common stock
covered by this prospectus.
- IBM, EJ Financial Investments V,L.P and certain other institutional
investors owning or having the right to acquire 4,030,649 shares of
common stock. These investors have agreed that they will not exercise
these registration rights prior to May 21, 1999.
- Holders of warrants to purchase 166,837 shares of common stock issued in
connection with our European offering in November 1997 have demand and
piggyback registration rights for those shares.
- The holder of warrants to purchase 27,706 shares of common stock has
piggyback registration rights for those shares, fully subordinated to
the registration rights of our other securityholders.
FORWARD LOOKING STATEMENTS
Some of the information in this prospectus and the documents we incorporate by
reference may contain forward-looking statements. Such statements can be
identified by the use of forward-looking terminology such as "may," "will,"
"expect," "believe," "intend," "anticipate," "estimate," "continue" or similar
words. These statements discuss future expectations, estimate the happening of
future events or our financial condition or state other "forward-looking"
information. When considering such forward-looking statements, you should keep
in mind the risk factors and other cautionary statements in this prospectus and
the documents that we incorporate by reference. The risk factors discussed in
this prospectus and other factors noted throughout this prospectus, including
certain risks and uncertainties, could cause our actual results to differ
materially from those contained in any forward-looking statement.
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SELLING SECURITYHOLDERS
The table below sets forth the name and address of each selling securityholder,
the number of shares of common stock beneficially owned by each selling
securityholder as of December 1, 1998, the number of shares that each selling
securityholder may offer, and the number of shares of common stock beneficially
owned by each selling securityholder upon completion of the Offering, assuming
all of the shares offered are sold. None of the selling securityholders has, or
within the past three years has had, any position, office or other material
relationship with us or any of our predecessors or affiliates.
The selling securityholders are offering up to 1,809,000 by this prospectus.
- - 1,760,000 shares may be acquired upon conversion of the series A preferred
stock, based upon an assumed conversion price of $2.00 per share. The
conversion price is computed by reference to 85% of the lowest sale price of
one share of common stock for the five trading days preceding the date of
conversion.
- - 44,000 shares may be acquired upon exercise of warrants.
- - 5,000 shares were acquired by one of the selling securityholders as a finder's
fee in connection with the sale of the series A preferred stock and warrants
to the other selling securityholders.
The number of shares listed below as beneficially owned before the offering by
each selling securityholder owning series A preferred stock has been computed,
in part, based upon the terms of the series A preferred stock, which provides
that the number of shares that the selling securityholders may acquire upon
conversion may not exceed that number which (1) would render a selling
securityholder the beneficial owner of more than five percent of the then issued
and outstanding shares of common stock, or (2) result in the issuance of more
than an aggregate of 1,127,674 shares, representing 20% of the number of shares
of common stock issued and outstanding on September 10, 1998, the date upon
which the series A preferred stock was issued, until stockholders approve the
issuance of more than 1,127,674 shares upon conversion. For purposes of
computing the number and percentage of shares beneficially owned by a selling
securityholder on December 1, 1998, any shares which such person has the right
to acquire within 60 days after such date are deemed to be outstanding, but
those shares are not deemed to be outstanding for the purpose of computing the
percentage ownership of any other selling securityholder. On December 1, 1998,
we had 5,643,372 shares of common stock outstanding.
<TABLE>
<CAPTION>
SHARES OF SHARES OF SHARES OF
COMMON STOCK COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED OFFERED IN THE BENEFICIALLY OWNED
BEFORE OFFERING OFFERING AFTER OFFERING
-------------------- ---------------- ------------------
NAME AND ADDRESS OF SELLING SECURITYHOLDER NUMBER PERCENT NUMBER NUMBER PERCENT
- ------------------------------------------ ------- ---------- ---------------- ------- --------
<S> <C> <C> <C> <C> <C>
The Shaar Fund Ltd......................... 297,020 5.0% 1,291,500 0 --
Citro Building,
Wickhams Cay,
P.O. Box 662,
Road Town, Tortola, B.V.I.
AMRO International, S.A. .................. 297,020 5.0% 512,500 0 --
c/o Ultrafinance,
Grossmunster Platz 26,
Zurich CH 8022
Trinity Capital Advisors, Inc. ............ 5,000 * 5,000 0 --
211 Sutter Street,
Suite 2000,
San Francisco, California 94104
</TABLE>
- -------------------------
* Less than one percent (1%).
We are registering the shares for resale by the selling securityholders in
accordance with registration rights granted to the selling securityholders. We
will pay the registration and filing fees, printing expenses, listing fees, blue
sky fees, if any, and fees and disbursements of our counsel in connection with
this offering, but the selling securityholders will pay any underwriting
discounts, selling commissions and similar expenses
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relating to the sale of the shares, as well as the fees and expenses of their
counsel. In addition, we have agreed to indemnify the selling securityholders,
underwriters who may be selected by the selling securityholders and certain
affiliated parties, against certain liabilities, including liabilities under the
Securities Act, in connection with the offering. The selling securityholders may
agree to indemnify any agent, dealer or broker-dealer that participates in
transactions involving sales of the shares against certain liabilities,
including liabilities under the Securities Act. The selling securityholders have
agreed to indemnify us and our directors and officers, as well as any person
controlling the company, against certain liabilities, including liabilities
under the Securities Act. Insofar as indemnification for liabilities under the
Securities Act may be permitted to our directors or officers, or persons
controlling the company, we have been informed that in the opinion of the SEC
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
PLAN OF DISTRIBUTION
The selling securityholders (or, subject to applicable law, their pledgees,
donees, distributees, transferees or other successors in interest)may sell
shares from time to time in public transactions, on or off The Nasdaq SmallCap
Market, or private transactions, at prevailing market prices or at privately
negotiated prices, including but not limited to the following types of
transactions:
- ordinary brokerage transactions and transactions in which the broker
solicits purchasers;
- a block trade in which the broker-dealer so engaged will attempt to sell
the shares as agent but may position and resell a portion of the block as
principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by such broker or
dealer for its account pursuant to this prospectus; and
- face-to-face transactions between sellers and purchasers without a
broker-dealer.
The selling securityholders also may sell shares that qualify under Section 4(1)
of the Securities Act or Rule 144.
In effecting sales, brokers or dealers engaged by the selling securityholders
may arrange for other brokers or dealers to participate in the resales. The
selling securityholders may enter into hedging transactions with broker-dealers,
and in connection with those transactions, broker-dealers may engage in short
sales of the shares. The selling securityholders also may sell shares short and
deliver the shares to close out such short positions, except that the selling
securityholders have agreed that they will not enter into any put option or
short position with respect to the common stock prior to the date of the
delivery of a conversion notice. The selling securityholders also may enter into
option or other transactions with broker-dealers which require the delivery to
the broker-dealer of the shares, which the broker-dealer may resell pursuant to
this prospectus. The selling securityholders also may pledge the shares to a
broker or dealer and upon a default, the broker or dealer may effect sales of
the pledged shares pursuant to this prospectus.
Brokers, dealers or agents may receive compensation in the form of commissions,
discounts or concessions from selling securityholders in amounts to be
negotiated in connection with the sale. The selling securityholders and any
participating brokers or dealers may be deemed to be "underwriters" within the
meaning of the Securities Act in connection with such sales and any such
commission, discount or concession may be deemed to be underwriting
compensation.
Information as to whether underwriters who may be selected by the selling
securityholders, or any other broker-dealer, is acting as principal or agent for
the selling securityholders, the compensation to be received by underwriters who
may be selected by the selling securityholders, or any broker-dealer, acting as
principal or agent for the selling securityholders and the compensation to be
received by other broker-dealers, in the event the compensation of such other
broker-dealers is in excess of usual and customary commissions, will, to the
extent required, be set forth in a supplement to this prospectus. Any dealer or
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broker participating in any distribution of the shares may be required to
deliver a copy of this prospectus, including a prospectus supplement, if any, to
any person who purchases any of the shares from or through such dealer or
broker.
We have advised the selling securityholders that during such time as they may be
engaged in a distribution of the shares they are required to comply with
Regulation M promulgated under the Securities Exchange Act. With certain
exceptions, Regulation M precludes any selling securityholder, any affiliated
purchasers and any broker-dealer or other person who participates in such
distribution from bidding for or purchasing, or attempting to induce any person
to bid for or purchase any security which is the subject of the distribution
until the entire distribution is complete. Regulation M also prohibits any bids
or purchases made in order to stabilize the price of a security in connection
with the distribution of that security. All of the foregoing may affect the
marketability of the common stock.
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INFORMATION ABOUT THE COMPANY
At Integrated Surgical Systems, Inc., we develop, assemble, market and service
image-directed, computer-controlled robotic products for orthopaedic and
neurosurgical applications. Our principal orthopaedic product is the ROBODOC(R)
Surgical Assistant System, consisting of a computer-controlled surgical robot
and our ORTHODOC(R) Presurgical Planner, and our principal neurosurgical product
is the NeuroMate System.(TM)
We file reports, proxy statements and other information with the SEC. You may
read and copy any document we file at the Public Reference Room of the SEC at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
Regional Offices of the SEC at Seven World Trade Center, Suite 1300, New York,
New York 10048 and at 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Please call 1-800-SEC-0330 for further information concerning the
Public Reference Room. Our filings also are available to the public from the
SEC's website at www.sec.gov. We distribute to our stockholders annual reports
containing audited financial statements.
INFORMATION INCORPORATED BY REFERENCE
The SEC allows us to "incorporate by reference" the information we file with it,
which means that we can disclose important information to you by referring to
those documents. The information incorporated by reference is considered to be
part of this prospectus, and information we file later with the SEC will
automatically update and supersede this information. We incorporate by reference
the documents listed below and any future filings we make with the SEC under
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act until the
offering is completed:
1. Annual Report on Form 10-KSB for the fiscal year ended December 31,
1997.
2. Proxy Statement dated March 26, 1998.
3. Quarterly Reports on Form 10-QSB for the fiscal quarters ended March
31, 1998, June 30, 1998 and September 30, 1998.
4. The description of the common stock contained in our Registration
Statement on Form 8-A (File No. 1-12471) under Section 12 of the
Securities Exchange Act.
You may request a copy of these filings, at no cost, by writing or calling us
at:
INTEGRATED SURGICAL SYSTEMS
1850 Research Park Drive
Davis, California 95616-4884
Attention: Corporate Secretary
Telephone: (530) 792-2600
RECENT DEVELOPMENT
We have developed and commenced marketing to our customers in Europe our
DigiMatch Single Surgery System, that, in most cases, eliminates the need for an
initial surgery to place registration pins in a patient's femur before using the
ROBODOC System in total hip replacement surgery. More than 150 patient surgeries
have been successfully performed at a clinic in Frankfurt, Germany with our
DigiMatch Single Surgery System.
We plan to amend our investigational device exemption under the Food, Drug and
Cosmetic Act, which allowed us to conduct clinical trials for the ROBODOC System
in the United States, to permit us to perform a relatively small clinical study
showing a correlation between the ROBODOC System using the DigiMatch technology
and the three pin system that we used in our initial clinical
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evaluations. We have deferred the filing of our pre-market approval application
to market the ROBODOC System in the United States so that we may incorporate our
DigiMatch Single Surgery System, and possibly other technical developments, as
part of our pre-market approval application. We believe, based upon our
discussions with representatives of the FDA, that the incorporation of the
DigiMatch Single Surgery System will enhance our prospects for obtaining FDA
approval. However, we cannot give you any assurance as to when or if the FDA
will approve our pre-market approval application to market the ROBODOC System or
that such approval, if obtained, will not include unfavorable limitations or
restrictions. See "Risk Factors -- Need to Obtain Approval of U.S. Food and Drug
Administration to Market the ROBODOC System in the United States."
LEGAL MATTERS
The validity of the shares of common stock offered hereby has been passed upon
by Snow Becker Krauss P.C., 605 Third Avenue, New York, New York 10158.
EXPERTS
The consolidated financial statements of Integrated Surgical Systems, Inc.
appearing in Integrated Surgical Systems, Inc. Annual Report (Form 10-KSB) for
the year ended December 31, 1997 have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon incorporated by
reference therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
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