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As Filed Pursuant to Rule 424(b)(3)
Registration No. 333-40710
PROSPECTUS
INTEGRATED SURGICAL SYSTEMS, INC.
COMMON STOCK
The selling securityholders named in this prospectus are offering and selling up
to 1,863,000 shares of our common stock, including 1,800,000 shares that they
may acquire upon conversion of our series G preferred stock.
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.
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THE DATE OF THIS PROSPECTUS IS JULY 28, 2000
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TABLE OF CONTENTS
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Risk Factors................................................ 2
Forward Looking Statements.................................. 10
Selling Securityholders..................................... 11
Plan of Distribution........................................ 13
Information About Integrated Surgical Systems, Inc. ........ 14
Recent Developments......................................... 14
Preferred Stock Financings.................................. 15
Where You Can Find More Information......................... 16
Information Incorporated By Reference....................... 16
Legal Matters............................................... 17
Experts..................................................... 17
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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.
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RISK FACTORS
WE HAVE A HISTORY OF OPERATING LOSSES AND THESE LOSSES MAY CONTINUE.
We have experienced significant losses since we began operations. We incurred
net losses of approximately $10.2 million for the year ended December 31, 1999
and approximately $10.3 million for the year ended December 31, 1998 and a net
loss of approximately $2.6 million for the three months ended March 31, 2000 as
compared to a net loss of approximately $2.3 million for the three months ended
March 31, 1999. As a result of these losses, we had an accumulated deficit of
approximately $51.1 million as of March 31, 2000. We will continue to incur
losses until such time, if ever, as we derive significant revenues from the sale
of our products.
THE REPORT OF INDEPENDENT AUDITORS ON OUR DECEMBER 31, 1999 CONSOLIDATED
FINANCIAL STATEMENTS INCLUDES AN EXPLANATORY PARAGRAPH CONCERNING OUR ABILITY TO
CONTINUE AS A GOING CONCERN.
The report of independent auditors on our December 31, 1999 consolidated
financial statements includes an explanatory paragraph which indicates there is
substantial doubt about our ability to continue as a going concern because of
recurring operating losses and an accumulated deficit of approximately
$45,800,000 as of December 31, 1999.
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.
Orto Maquet, a German manufacturer and major supplier of operating tables to
hospitals and physicians in Europe, has entered the market with a device
intended to compete with the ROBODOC System. Orto Maquet's system incorporates
pin-based registration and requires a second surgical procedure to place pins in
the patient's thigh bone prior to performing hip replacement surgery. Although
Orto Maquet offers a pre-surgical planning station, only our ROBODOC System
offers enhancements that allow the surgeon to plan and perform revision hip
surgery, the replacement of a previous hip implant. Orto Maquet has
relationships with hospitals and physicians throughout Europe as a supplier of
operating tables and has greater financial, marketing and distribution resources
than us. Several of our potential customers in
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Germany have decided to purchase the Orto Maquet system instead of the ROBODOC
System due to their preference for doing business with a German company.
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 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 8,000 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
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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.
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.
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.
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.
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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.
OUR PRODUCTION EXPERIENCE IS LIMITED.
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 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.
WE ARE DEPENDENT ON OUR SUPPLIER OF ROBOTS.
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
believe we can obtain a robot arm 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.
WE ARE DEPENDENT 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
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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.
WE ARE SUBJECT 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 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 is employed pursuant
to an employment agreement. The loss of the services of 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.
WE WILL NEED ADDITIONAL FINANCING FOR OUR OPERATIONS BEFORE WE ARE ABLE TO
OBTAIN FUNDS UNDER OUR EQUITY LINE OF CREDIT.
We have entered into an equity line of credit agreement for the sale of
$12,000,000 of our common stock. Under the terms of the agreement, we may sell
shares of common stock over a three-year period to the investors at a price
equal to the lowest bid price during the six trading days commencing two trading
days prior to the delivery of a put notice to the investors. At each closing, we
also will issue to each investor warrants to purchase 14% of the number of
shares purchased by the investor at that closing. These warrants will be
exercisable at the per share purchase price of the shares purchased at the
closing and may
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be exercised at any time prior to the first anniversary of the closing. The
equity line of credit agreement limits the number of shares that may be issued
under the line, including shares that may be acquired upon exercise of warrants,
to an aggregate of 3,357,471 shares, representing 19.9% of the shares
outstanding on April 17, 2000, the date of the equity line agreement, until
stockholders approve the issuance of shares in excess of that number. This
limitation is required under the corporate governance rules of the Nasdaq Stock
Market, Inc. We may not obtain funds under our equity line until the
registration statement for the resale of the shares that may be issued under
that line is declared effective by the SEC.
We will need additional financing prior to the date the registration statement
for the resale of the shares issued under the equity line is declared effective
by the SEC since we are experiencing severe short-term liquidity difficulties
due to lower than anticipated revenues from sales of our ROBODOC systems. We
have only sold one ROBODOC system since the termination of the distribution
agreement which granted Spark 1st Vision GmbH KG the exclusive right to
distribute our products in Europe, the principal market for our products. We are
in the process of reestablishing our marketing and sales operations in Europe.
We are engaged in discussions with potential investors for additional financing
to alleviate our liquidity difficulties until we are able to sell shares of our
common stock under our equity line of credit agreement and generate meaningful
cash flow from the sale of our products. If we are unable to obtain additional
financing in an amount sufficient to cover our operating and administrative
costs, we may have to delay payments to trade creditors and other vendors, and
curtail certain research and development activities.
We may issue common stock or debt or equity securities convertible into shares
of common stock to obtain additional financing, if required. Any additional
financing may result in substantial dilution to current holders of our common
stock.
CONVERSION OF OUR PREFERRED STOCK AND SUBSEQUENT PUBLIC SALE OF OUR COMMON STOCK
WHILE ITS MARKET PRICE IS DECLINING MAY RESULT IN FURTHER DECREASES IN ITS
PRICE.
As of June 1, 2000, we had outstanding 2,534 shares of convertible preferred
stock. Each share of preferred stock has a stated value of $1,000 per share and
is convertible into common stock at a conversion price equal to 85% of the
lowest sale price of the common stock on the Nasdaq SmallCap Market over the
five trading days preceding the date of conversion. The number of shares of
common stock that may be acquired upon conversion is determined by dividing the
stated value of the number of shares of preferred stock to be converted by the
conversion price, subject to a maximum conversion price of $1.22 as to 734
shares and $1.63 as to the remaining 1,800 shares. Since there is no minimum
conversion price, there is no limit on the number of shares of common stock that
holders of preferred stock may acquire upon conversion. For additional
information concerning our outstanding preferred stock, see "Preferred Stock
Financings." Holders of our preferred stock may sell at market price the shares
of common stock they have acquired upon conversion at a 15% discount to
prevailing market prices concurrently with, or shortly after, conversion,
realizing a profit equal to the difference between the market price and the
discounted conversion price. The holders of the preferred stock also could
engage in short sales of our common stock, after delivering a notice of
conversion to us, which could contribute to a decline in the market price of the
common stock and give them the opportunity to profit from that decrease by
covering their short position with shares acquired upon conversion at a 15%
discount to the prevailing market price. The conversion of the preferred stock
and subsequent sale of a large number of shares of common stock acquired upon
conversion during periods when the market price of the common stock declines, or
the possibility of such conversions and sales, may exacerbate the decline or
impede increases in the market price of the common stock.
OTHER ISSUANCES OF PREFERRED STOCK COULD ADVERSELY AFFECT EXISTING HOLDERS OF
OUR COMMON STOCK.
Under our certificate of incorporation, our Board of Directors may, without
further stockholder approval, issue up to an additional 985,930 shares of
preferred stock with dividend, liquidation, conversion, voting or other rights
that could adversely affect the voting power or other rights of the holders of
common stock. We could use new classes of preferred stock as a method of
discouraging, delaying or preventing a change
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in persons that control us. In particular, the terms of the preferred stock
could effectively restrict our ability to consummate a merger, reorganization,
sale of all or substantially all of our assets, liquidation or other
extraordinary corporate transaction without the approval of the holders of the
preferred stock. We could also create a class of preferred stock with rights and
preferences similar to those of our outstanding convertible preferred stock,
which could result in substantial dilution to holders of our common stock or
adversely affect its market price.
CONVERSION OF OUR OUTSTANDING PREFERRED STOCK, THE ISSUANCE OF SHARES AND
WARRANTS UNDER OUR EQUITY LINE OF CREDIT AND THE EXERCISE OF OUR OUTSTANDING
WARRANTS AND STOCK OPTIONS AND SUBSEQUENT PUBLIC SALE OF OUR COMMON STOCK WILL
RESULT IN SUBSTANTIAL DILUTION TO EXISTING STOCKHOLDERS.
As of June 1, 2000, we had outstanding 16,925,864 shares of common stock. In
addition,
- an indeterminate number of shares may be acquired upon conversion of our
outstanding preferred stock since there is no minimum conversion price.
At an assumed conversion price of $1.00 per share, holders of preferred
stock could acquire 2,534,000 shares of common stock, or approximately
15% of the 16,925,864 shares outstanding as of June 1, 2000.
- an indeterminate number of shares may be acquired under our $12,000,000
equity line of credit which has no minimum purchase price. Assuming a
purchase price of $1.00 per share, we will issue 12,000,000 shares under
the line, together with warrants to purchase an additional 1,680,000
shares at an exercise price of $1.00 per share. The issuance of those
shares and exercise of those warrants would result in the issuance of a
total of 13,680,000 shares, representing approximately 81% of the shares
outstanding as of June 1, 2000.
- 13,518,277 shares may be acquired upon exercise of outstanding warrants.
- 1,864,098 shares may be acquired upon exercise of outstanding stock
options.
Existing stockholders will experience substantial dilution in their percentage
ownership of our common stock if the preferred stock is converted, shares of
common stock and warrants are issued under our equity line of credit and
warrants and stock options are exercised. If all of the outstanding preferred
stock is converted at an assumed conversion price of $1.00 per share,
$12,000,000 of shares of common stock, together with warrants to purchase 14% of
the number of shares purchased, are issued under our equity line of credit at an
assumed purchase price of $1.00 per share and those warrants are exercised at
$1.00 per share, and all outstanding warrants and stock options are exercised,
the number of outstanding shares of common stock will increase by 31,596,375,
representing approximately 187% of the outstanding common stock as of June 1,
2000.
SALES OF SUBSTANTIAL AMOUNTS OF OUR COMMON STOCK, OR THE POSSIBILITY OF SUCH
SALES, MAY HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR COMMON STOCK AND
IMPAIR OUR ABILITY TO RAISE CAPITAL THROUGH AN OFFERING OF EQUITY SECURITIES IN
THE FUTURE.
As of June 1, 2000, there were 16,925,864 shares of common stock outstanding.
Except for 4,028,820 shares of common stock (representing approximately 24% of
the outstanding common stock), substantially all of the outstanding shares of
common stock are transferable without restriction under the Securities Act. In
addition,
- an indeterminate number of shares may be acquired upon conversion of our
outstanding preferred stock since there is no minimum conversion price.
At an assumed conversion price of $1.00 per share, holders of our
outstanding preferred stock could acquire 2,534,000 shares of common
stock. The number of shares that may be acquired upon conversion will
increase if the market price of the common stock declines below the
assumed conversion price.
- an indeterminate number of shares may be acquired under our $12,000,000
equity line of credit, which has no minimum purchase price. At an
assumed purchase price of $1.00 per share, we will issue 12,000,000
shares of our common stock and warrants to purchase an additional
1,680,000 shares at an exercise price of $1.00 per share.
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- 2,274,066 shares may be acquired upon exercise of warrants owned by IBM
at exercise prices ranging from $.01 to $.07.
- 4,123,389 shares may be acquired upon exercise of warrants issued in our
initial public offering at an exercise price of $2.79.
- 6,000,000 shares may be acquired upon exercise of warrants at an
exercise price of $1.027.
- 1,120,822 shares may be acquired upon exercise of warrants having
exercise prices ranging from $1.88 to $4.39 per share.
- 1,864,098 shares may be acquired upon exercise of stock options granted
pursuant to our stock option plans at exercise prices ranging from $.07
to $8.62 per share.
Substantially all of such shares, when issued, may be immediately resold in the
public market pursuant to effective registration statements under the Securities
Act or pursuant to Rule 144.
We have granted registration rights to:
- ILTAG International Licensing Holding S.A.L., Bernd Herrmann, Urs
Wettstein, IBM, EJ Financial Investments V,L.P. and certain other
institutional investors owning or having the right to acquire 12,538,861
shares of common stock.
- holders of warrants to purchase 353,506 shares of common stock issued in
connection with our European offering in November 1997 for those shares.
- holders of warrants to purchase 57,441 shares of common stock have
piggyback registration rights for those shares.
- the investor under our $12,000,000 equity line of credit.
If our securityholders sell publicly a substantial number of shares they own or
may acquire under our equity line of credit, upon exercise of outstanding
options and warrants or upon conversion of our preferred stock, then the market
price of our common stock may decline. Public perception that those sales will
occur may also exert downward pressure on our common stock. A decline in the
price of our common stock may also impair our ability to raise capital through
the sale of equity securities.
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.
The conversion of our convertible preferred stock may have consequences that
could cause Nasdaq to delist our common stock. The conversion of our preferred
stock and resale of the common stock acquired upon conversion, or the
possibility of the conversion of our preferred stock and resale of our common
stock, may depress or inhibit increases in the market price of our common stock.
As a result, the minimum bid price for our common stock may decline below $1.00.
Nasdaq also may delist our common stock if it deems it necessary to protect
investors and the public interest. If Nasdaq determines that the returns on our
convertible preferred stock are excessive compared with the returns received by
the holders of our common stock, and those excess returns were egregious, Nasdaq
could delist our common stock.
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.
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<PAGE> 11
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.
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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<PAGE> 12
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 securityholder
as of June 1, 2000, 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 this offering, assuming all of the
shares offered are sold. None of the selling securityholder 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 number of shares listed below as beneficially owned before the offering by
each selling securityholder owning series G preferred stock has been computed,
without giving effect to the terms of the certificate of designations for the
series G preferred stock, which provides that the number of shares that the
selling securityholders may acquire upon conversion may not exceed that number
which would render a selling securityholder the beneficial owner of more than
five percent of the then issued and outstanding shares of common stock, or
result in the issuance of more than an aggregate of 3,370,043 shares upon
conversion of the series G preferred stock, representing 19.9% of the shares
outstanding, on the date that series of preferred stock was issued, until
stockholders approve the issuance of shares in excess of that number.
On June 1, 2000, we had 16,925,864 shares of common stock outstanding. For
purposes of computing the number and percentage of shares beneficially owned by
a selling securityholder on June 1, 2000, 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.
<TABLE>
<CAPTION>
SHARES OF SHARES OF
COMMON STOCK COMMON STOCK
OWNED BEFORE SHARES OF BENEFICIALLY OWNED
OFFERING(1) COMMON STOCK AFTER OFFERING
NAME AND ADDRESS OF -------------------- OFFERED IN THE ------------------
SELLING SECURITYHOLDER NUMBER PERCENT OFFERING(2) NUMBER PERCENT
---------------------- --------- ------- -------------- ------- -------
<S> <C> <C> <C> <C> <C>
Holder of series G preferred stock and
warrants:
AMRO International, S.A.(3)............. 646,625 3.7% 621,000 25,625(4) *
c/o UltraFinanz, Grossmunster Platz 6
Switzerland Zurich CH 8022
Esquire Trade & Finance, Inc.(5)........ 319,874 1.9% 310,500 9,374(4) *
Trident Chambers, P.O. Box 146
Road Town, Tortola, B.V.I.
Celeste Trust Reg.(6)................... 319,875(7) 1.9% 310,500 9,375(7) *
c/o Trevisa-Treuhand-Anstalt
Landstrasse 8
9496 Furstentum
Balzers, Liechtenstein
Shmuli Margulies........................ 1,418,125(8) 7.7% 621,000 797,125 4.5%
The Endeavour Capital Fund S.A.
c/o Endeavour Advisory, Ltd.
P.O.B. 57116 Jerusalem 91570
46/21 Yirmeyahu Street
Jerusalem 94467
Israel
</TABLE>
-------------------------
* Less than one percent (1%).
(1) The information presented in the table does not give effect to the terms of
the certificate of designations for the preferred stock and the warrants
that limit the number of shares that a holder may acquire upon conversion
or exercise of these securities to 5% of the then issued and outstanding
shares of common stock.
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<PAGE> 13
(2) Represents the number of shares that the selling securityholder may acquire
upon exercise of warrants to purchase common stock and conversion of the
series G preferred stock at an assumed conversion price of $1.00 per share.
The actual conversion price is 85% of the lowest sale price of a share of
common stock for the five trading days preceding the date of conversion.
The number of shares of common stock that the selling securityholder may
acquire upon conversion is equal to the number of shares of preferred stock
to be converted times $1,000, the stated value of each share of preferred
stock, divided by the conversion price. The maximum conversion price of the
series G preferred stock is $1.63. Since there is no minimum conversion
price, if the market price of the common stock declines below the assumed
conversion price, the number of shares that the selling securityholder may
acquire upon conversion will increase. If following a sustained increase in
the market price of the common stock sufficient to offset the 15% discount
used in computing the conversion price the conversion price is higher than
the assumed conversion price, the number of shares that the selling
securityholder may acquire will decrease.
(3) Hans Ulrich Bachofen and Michael Klee share voting and dispositive power
with respect to shares owned by AMRO International, S.A.
(4) Represents warrants to purchase common stock.
(5) Gisela Kindla has sole voting and dispositive power with respect to shares
owned by Esquire Trade and Finance, Inc.
(6) Thomas Hackl has voting and dispositive power with respect to shares owned
by Celeste Trust Reg.
(7) Includes 9,375 shares that may be acquired upon exercise of warrants, by
Austinvest Anstalt Balzers, an affiliate of Celeste Trust Reg-, as to which
Walter Grill has voting and dispositive power.
(8) Includes 734,000 shares that may be acquired by Endeavour Management, Inc.
upon conversion of our series F convertible preferred stock at an assumed
conversion price of $1.00 per share.
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 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.
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<PAGE> 14
PLAN OF DISTRIBUTION
The selling securityholders 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. They may sell their
shares in 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. As used in this prospectus, selling
securityholders include donees, pledgees, distributees, transferees and other
successors-in-interest of the selling securityholders named in this prospectus.
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 under 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 under 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 them, and the
compensation to be received by other broker-dealers, in the event such
compensation 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
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.
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<PAGE> 15
INFORMATION ABOUT 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)
RECENT DEVELOPMENTS
EQUITY LINE FINANCING
We have entered into an equity line of credit agreement for the sale of
$12,000,000 of our common stock. Under the terms of the agreement, we may sell
shares of common stock over a three-year period to the investors at a price
equal to the lowest bid price during the six trading days commencing two trading
days prior to the delivery of a put notice to the investor. The number and
dollar amount of shares that may be purchased on each closing date is based upon
a formula that varies with the market price and trading volume of the common
stock, subject to a minimum of $100,000. We may not sell shares of common stock
under the agreement more often than once every fifteen days. At each closing, we
also will issue to each investor warrants to purchase 14% of the number of
shares purchased by the investor at that closing. These warrants will be
exercisable at the per share purchase price of the shares purchased at the
closing and may be exercised at any time prior to the first anniversary of the
closing. We also will issue warrants to purchase 35,000 shares of common stock
to the investors at the initial closing. This warrant will be exercisable at
$1.88 per share during the period commencing October 17, 2000 and ending on
April 16, 2003.
In addition, we will issue to a financial advisor 12,000 shares of common stock
for each one million dollars of shares sold to the investor. We issued 5,000
shares to the advisor upon signing the agreement. We also will pay the financial
advisor 3% of the gross proceeds from the sale of shares purchased at each
closing, plus an advisory fee of $20,000 at each of the first six closings.
We will file a registration statement for the resale of the shares issued under
the equity line. No shares will be sold under the equity line until the
registration statement is declared effective by the SEC.
TERMINATION OF DISTRIBUTION AGREEMENT
On May 9, 2000, we entered into an agreement with Spark 1st Vision GmbH & Co. KG
terminating the agreement that granted Spark 1st Vision exclusive distribution
rights for our products in Europe, the Middle East and Africa. We received
approximately $1,000,000 from Spark 1st Vision in connection with the
termination in settlement of its obligations under the distribution agreement.
EUROPEAN INVESTORS
ILTAG International Licensing Holding S.A.L., Bernd Herrmann and Urs Wettstein,
who purchased an aggregate of 2,922,396 shares of our common stock and warrants
to purchase an additional 11,700,000 shares of common stock in December 1999 for
a purchase price of $4,000,000 have agreed to surrender an aggregate of
5,700,000 warrants. In addition, they have agreed to exercise an aggregate of
2,000,000 of the remaining 6,000,000 warrants as follows: 500,000 warrants by
each of September 5, October 5, November 5 and December 5, 2000, provided the
market price of one share of our common stock is not less than $1.03, the
exercise price of the warrants. These 2,000,000 warrants will expire if they are
not exercised by those dates. The remaining 4,000,000 warrants are exercisable
until December 14, 2002.
Messrs. Wettstein and Herrmann have resigned from our Board of Directors.
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<PAGE> 16
PREFERRED STOCK FINANCINGS
Since September 1998, we have received aggregate net proceeds of approximately
$13.1 million from the sale of seven series of our convertible preferred stock.
Information concerning these preferred stock financings is set forth below.
<TABLE>
<CAPTION>
SHARES OF
PREFERRED
STOCK WARRANTS GROSS
SERIES DATE OF SALE SOLD ISSUED PROCEEDS
------ ------------ --------- -------- --------
<C> <S> <C> <C> <C>
A September 10, 1998 3,520 44,000 $3,520,000
B March 26, 1999 1,000 12,500 1,000,000
C June 10, 1999 750 9,375 750,000
D June 30, 1999 2,000 25,000 2,000,000
E July 30, 1999 3,000 37,500 3,000,000
F February 8, 2000 2,000 125,000 2,000,000
G May 30, 2000 1,800 63,000 1,800,000
</TABLE>
Each series of preferred stock has a stated value of $1,000 per share and is
convertible into common stock at a conversion price equal to 85% of the lowest
sale price of the common stock on the Nasdaq SmallCap Market over the five
trading days preceding the date of conversion subject to a maximum conversion
price. The number of shares of common stock that may be acquired upon conversion
is determined by dividing the stated value of the number of shares of preferred
stock to be converted by the conversion price. As of June 1, 2000, 734 shares of
series F preferred stock and 1,800 shares of series G preferred stock were
outstanding. No other shares of preferred stock are outstanding. On February 7,
2000 we redeemed the 1,085 shares of series E preferred stock outstanding for a
total redemption price of $1,085,000, or $1,000 per share, the stated value of a
share of series E preferred stock.
The maximum conversion price for the series F preferred stock is $1.22 per share
and the maximum conversion price of the series G preferred stock is $1.63.
There is no minimum conversion price for any series of preferred stock.
Consequently, there is no limit on the number of shares of common stock that may
be issued upon conversion, except that the terms of each series, set forth in
the certificate of designations for that series, limit:
- The number of shares of common stock that a holder of preferred stock may
acquire upon conversion, together with shares beneficially owned by the holder
and its affiliates, to five percent (5%) of the total outstanding shares of
common stock.
- The number of shares of common stock that the holders of a series of preferred
stock may acquire upon conversion to that number of shares representing 19.9%
of the shares outstanding on the date upon which that series was issued, until
stockholders approve the issuance upon conversion of shares in excess of that
number of shares. This limitation is required by the rules of The Nasdaq Stock
Market, Inc.
The number of shares of common stock issued upon conversion of each series of
preferred stock as of June 1, 2000 was as follows: series A -- 2,867,135; series
B -- 459,831; series C -- 563,497; series D -- 1,605,203; series E -- 1,490,101;
series F: 1,038,078 series G: none. The average actual conversion price for
shares of each series of preferred stock converted into shares of common stock
as of June 1, 2000 was as follows: series A -- $1.23; Series B -- $2.17; Series
C -- $1.33; Series D -- $1.25; Series E -- $1.22.; and series F -- $1.22.
The number of shares of common stock that may be acquired upon conversion of the
outstanding shares of preferred stock as of June 1, 2000, based upon an assumed
conversion prices of $1.00, the maximum conversion price, is as follows: Series
F -- 734,000; and series G -- 1,800,000.
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<PAGE> 17
The market price of the common stock on the date of issue of each series of
preferred stock was as follows: series A -- $3.56; series B -- $1.97; series
C -- $1.81; series D -- $2.97; series E -- $3.50; series F -- $2.38; and series
G -- $1.38.
The conversion price of each series of preferred stock on the date of issue
would have been as follows: series A -- $2.76; series B -- $1.49; series
C -- $1.41; series D -- $2.23; series E -- $2.87; series F -- $1.22; and series
G -- $1.06. The number of shares of common stock into which the preferred stock
would have been convertible on the date of issue would have been as follows:
series A -- 1,274,000; series B -- 672,000; series C -- 533,000; series
D -- 896,000; series E -- 1,046,000; series F -- 1,639,345; and series
G -- 1,694,118.
WHERE YOU CAN FIND MORE INFORMATION
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 and Form 10-KSB/A (Amendment No. 1) for
the fiscal year ended December 31, 1999, including any amendments to
that report.
2. Quarterly Report on Form 10-QSB for the fiscal quarter ended March 31,
2000, including any amendments to that report.
3. 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
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<PAGE> 18
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
Ernst & Young LLP, independent auditors, have audited our consolidated financial
statements included in our Annual Report on Form 10-KSB and Form 10-KSB/A
(Amendment No. 1) for the year ended December 31, 1999, as set forth in their
report (which contains an explanatory paragraph describing conditions that raise
substantial doubt about the Company's ability to continue as a going concern as
described in Note 1 to the consoliated financial statements), which is
incorporated by reference in this prospectus and elsewhere in the registration
statement. Our consolidated financial statements are incorporated by reference
in reliance on Ernst & Young LLP's report, given on their authority as experts
in accounting and auditing.
17
