UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

[X]   Quarterly Report under Section 13 or 15(d) of the Securities Exchange
      Act of 1934

                  For the quarterly period ended June 30, 2003

[ ]   Transition Report under Section 13 or 15(d) of the Securities Exchange
      Act of 1934

               For the transition period from _______ to ________

                         Commission file number: 1-12471

                        INTEGRATED SURGICAL SYSTEMS, INC.
        (Exact name of small business issuer as specified in its charter)

         Delaware                                68-0232575
(State or other jurisdiction of               (IRS Employer Identification No.)
incorporation or organization)

             1850 Research Park Drive, Davis, California 95616-4884
                    (Address of principal executive offices)

                                 (530) 792-2600
                           (Issuer's telephone number)

                                       N/A
              (Former name, former address and formal fiscal year,
                          if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes [ X ]  No [   ]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: The number of shares of the issuer's
common stock outstanding as of August 8, 2003 was 43,478,469.

Transitional Small Business Disclosure Format: Yes [   ] No [ X ]

<PAGE>


                        Integrated Surgical Systems, Inc.
                                   Form 10-QSB
                       For the quarter ended June 30, 2003
                                Table of Contents



                                                                            Page
Part I.  Financial Information

         Item 1.    Financial Statements (unaudited)                          2

                    Consolidated Balance Sheet at June 30, 2003               2

                    Consolidated Statements of Operations for the
                    three months ended June 30, 2003 and 2002                 3

                    Consolidated Statements of Operations for the
                    six months ended June 30, 2003 and 2002                   4

                    Consolidated Statements of Cash Flows for the
                    six months ended June 30, 2003 and 2002                   5

                    Notes to Consolidated Financial Statements                6

         Item 2.    Management's Discussion and Analysis                     10

         Item 3.    Controls and Procedures                                  14

Part II. Other Information

         Item 2.    Changes in Securities                                    15

         Item 6.    Exhibits and Reports on Form 8-K                         15

Signature                                                                    16

Certifications                                                               17


<PAGE>
<TABLE>
<CAPTION>


Part I. Financial Information

        Item 1.  Financial Statements (unaudited)


                               Integrated Surgical Systems, Inc.
                                  Consolidated Balance Sheet
                                         June 30, 2003
                                          (Unaudited)

Assets
<S>                                                                             <C>
Current assets:
     Cash                                                                        $    287,938
     Accounts receivable, less allowance for doubtful accounts of $67,003             789,477
     Inventories                                                                    1,356,157
     Other current assets                                                             263,682
                                                                                 ------------
Total current assets                                                                2,697,254

Property and equipment, net                                                           123,807
Leased equipment, net                                                                 141,440
Other assets                                                                           10,603
                                                                                 ------------
                                                                                 $  2,973,104
                                                                                 ============

Liabilities and stockholders' deficit
Current liabilities:
     Note payable                                                                $    112,517
     Accounts payable                                                               2,454,230
     Accrued payroll and related expense                                            1,002,903
     Accrued liabilities                                                              316,956
     Unearned income                                                                2,078,704
     Other current liabilities                                                        429,950
                                                                                 ------------
Total current liabilities                                                           6,395,260

Commitments and contingencies

Convertible preferred stock, $0.01 par value, 1,000,000 shares authorized;
     218 shares issued and outstanding ($218,496 aggregate liquidation value)         218,496

Stockholders' deficit:
     Common stock, $0.01 par value, 100,000,000 shares authorized;
         43,478,469 shares issued and outstanding                                     434,785
     Additional paid-in capital                                                    61,866,581
     Accumulated other comprehensive loss                                          (1,276,182)
     Accumulated deficit                                                          (64,665,836)
                                                                                 ------------
Total stockholders' deficit                                                        (3,640,652)
                                                                                 ------------
                                                                                 $  2,973,104
                                                                                 ============



See accompanying notes.

                                                     -2-
<PAGE>



                                     Integrated Surgical Systems, Inc.
                                   Consolidated Statements of Operations
                                                (Unaudited)



                                                                     Three months ended June 30,
                                                                 -----------------------------------
                                                                     2003                    2002
                                                                 ------------            -----------

Net revenue                                                      $  1,941,194            $    791,824
Cost of revenue                                                     1,469,206                 337,235
                                                                 ------------            ------------
                                                                      471,988                 454,589
Operating expenses:
     Selling, general and administrative                              592,420                 829,732
     Research and development                                         288,143                 744,214
     Amortization of intangibles                                         --                   209,760
                                                                 ------------            ------------
                                                                      880,563               1,783,706
                                                                 ------------            ------------
Operating loss                                                       (408,575)             (1,329,117)

Other income, net:                                                     53,738                 182,416
                                                                 ------------            ------------
Net loss                                                         $   (354,837)           $ (1,146,701)
                                                                 ============            ============


Basic and diluted net loss per common share                      $      (0.01)           $      (0.03)
                                                                 ============            ============

Shares used in computing basic and diluted net loss per share      42,571,876              38,311,464
                                                                 ============            ============



See accompanying notes.

                                                       -3-
<PAGE>



                                  Integrated Surgical Systems, Inc.
                                Consolidated Statements of Operations
                                            (Unaudited)



                                                                       Six months ended June 30,
                                                                 ------------------------------------
                                                                      2003                   2002
                                                                 ------------            ------------

Net revenue                                                      $  4,961,796            $  1,700,559
Cost of revenue                                                     3,136,137                 725,850
                                                                 ------------            ------------
                                                                    1,825,659                 974,709
Operating expenses:
     Selling, general and administrative                            1,370,983               1,675,418
     Research and development                                         736,412               1,450,019
     Amortization of intangibles                                         --                   419,520
                                                                 ------------            ------------
                                                                    2,107,395               3,544,957
                                                                 ------------            ------------
Operating loss                                                       (281,736)             (2,570,248)

Other income, net:                                                     96,890                 159,575
                                                                 ------------            ------------
Net loss                                                         $   (184,846)           $ (2,410,673)
                                                                 ============            ============


Basic and diluted net loss per common share                      $      (0.00)           $      (0.06)
                                                                 ============            ============

Shares used in computing basic and diluted net loss per share      42,276,812              38,310,594
                                                                 ============            ============



See accompanying notes.

                                                       -4-
<PAGE>



                                          Integrated Surgical Systems, Inc.
                                  Consolidated Statements Cash Flows (Unaudited)
                                           Increase (Decrease) in Cash



                                                                                 Six months ended June 30,
                                                                             ---------------------------------
                                                                                  2003                 2002
                                                                             -----------           -----------

Cash flows from operating activities:
Net loss                                                                     $  (184,846)          $(2,410,673)
Adjustments to reconcile net loss to net cash provided by (used in)
 operating activities:
     Depreciation                                                                147,244               299,591
     Amortization of intangible assets                                              --                 419,520
     Stock compensation, non-employees                                              --                     508
     Changes in operating assets and liabilities:
        Accounts receivable                                                      783,067              (839,219)
        Inventory                                                                425,907              (197,616)
        Other current assets                                                      36,035               (14,281)
        Accounts payable                                                         111,255               318,496
        Accrued payroll and related expenses                                     285,819                81,907
        Accrued liabilities                                                       28,189               (66,730)
        Unearned income                                                       (1,548,762)            1,665,052
        Other current liabilities                                                 28,899               (79,960)
                                                                             -----------           -----------
Net cash provided by (used in) operating activities                              112,807              (823,405)

Cash flows from investing activities:
Principal payments received on sales-type lease                                     --                  44,295
Purchases of property and equipment                                              (17,708)              (19,992)
                                                                             -----------           -----------
Net cash provided by (used in) investing activities                              (17,708)               24,303

Cash flows from financing activities:
Proceeds from officer advances and deferrals of salaries and
    unreimbursed travel expenses                                                 339,847               283,683
Payments on officer advances, deferred salaries and
    unreimbursed travel expenses                                                (140,962)              (20,000)
                                                                             -----------           -----------
Net cash provided by financing activities                                        198,885               263,683

Effect of exchange rate changes on cash                                          (88,115)             (118,452)
                                                                             -----------           -----------
Net increase (decrease) in cash                                                  205,869              (653,871)
Cash at beginning of period                                                       82,069               800,374
                                                                             -----------           -----------
Cash at end of period                                                        $   287,938           $   146,503
                                                                             ===========           ===========

Supplemental disclosure of non-cash investing activity:
Transfer of inventory to leased equipment:                                          --             $    76,700
Conversion of preferred stock:                                               $    32,000                  --

See accompanying notes.

                                                      -5-

</TABLE>

<PAGE>



                        Integrated Surgical Systems, Inc.
             Notes to Consolidated Financial Statements (unaudited)
                                  June 30, 2003

1. Basis of presentation

The accompanying unaudited consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States
for interim financial information and the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and footnotes required
by accounting principles generally accepted in the United States for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring adjustments) considered necessary for a fair presentation
have been included.

The cash position of Integrated Surgical Systems, Inc. (the "Company") is
inadequate and the Company has not yet identified sources of sufficient cash to
assure continuing operations. At August 8, 2003, the Company was in violation of
certain covenants contained in financing arrangements with vendors. The Company
is working to address this shortfall by attempting to negotiate cash advances
for undelivered systems, accelerate payment terms of other contracts, defer
additional salary to employees and obtain new equity investment. However, the
Company can offer no assurance that attempts to strengthen cash flows will be
successful. Unless the Company can secure sufficient funds on a timely basis to
satisfy short-term operating requirements, the Company may have to cease
operations or seek bankruptcy protection.

The reports of the Company's independent auditors on the 2002 and 2001
consolidated financial statements included explanatory paragraphs stating that
there is substantial doubt with respect to the Company's ability to continue
operating as a going concern. The Company's plan to address this issue -
increasing sales of products in existing markets, increasing sales of system
upgrades, obtaining new equity investments and reducing operating expenses - can
only be realized to the extent that the Company generates sufficient cashflow to
meet obligations. In the event that the Company is unsuccessful, it is possible
that the Company will cease operations or seek bankruptcy protection. The
consolidated financial statements do not include any adjustments to reflect the
uncertainties related to the recoverability and classification of assets or the
amounts and classification of liabilities that may result from an inability on
the Company's part to continue as a going concern.

Operating results for the six month period ending June 30, 2003 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2003. For further information, refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual Report on Form
10-KSB for the year ending December 31, 2002.

2. Stock Based Compensation

The Company uses the intrinsic value method in accounting for its employee stock
options because, as discussed below, the alternative fair value accounting
requires the use of option valuation models that were not developed for use in
valuing employee stock options. Under the intrinsic value method, when the
exercise price of the Company's employee stock options equals or exceeds the
market price of the underlying stock on the date of grant, no compensation
expense is recognized.

Option valuation models were developed for use in estimating the fair value of
traded options that have no vesting restrictions and are fully transferable. In
addition, option valuation models require the input of highly subjective
assumptions, including the expected life of the option. Because the Company's
employee stock options have characteristics significantly different from those
of traded options and because changes in the subjective input assumptions can

                                      -6-

<PAGE>


materially affect the fair value estimates, in management's opinion, the
existing models do not necessarily provide a reliable single measure of the fair
value of its employee stock options.

For the three and six months ending June 30, 2003 and 2002, respectively, the
fair value of the Company's stock-based awards to employees was estimated using
the following weighted-average assumptions: risk-free interest rates of 3.0% and
3.5%; dividend yield of 0%; volatility factors of the expected market price of
the common stock of 0.950 and 0.955; and an expected life of the option of 4
years.

The following table sets forth the pro forma net loss of the Company after
considering the effect to stock-based employee compensation:

<TABLE>
<CAPTION>

                                                             Three Months Ended June 30,          Six Months Ended June 30,
                                                                2003              2002             2003              2002
                                                            -----------       -----------       -----------       -----------

<S>                                                         <C>               <C>               <C>               <C>
Net loss, as reported                                       $  (354,837)      $(1,146,701)      $  (184,846)      $(2,410,673)
Add: stock-based employee compensation
         included in reported net loss                             --                --                --                --
Less: stock-based employee compensation
         expense, determined under fair value
         method for all awards                                  (35,376)           (9,432)          (61,507)          (44,081)
                                                            -----------       -----------       -----------       -----------
Pro forma net loss                                          $  (390,213)      $(1,156,133)      $  (246,353)      $(2,454,754)
                                                            ===========       ===========       ===========       ===========

Net loss per share:
   Basic and diluted net loss per share, as reported        $     (0.01)      $     (0.03)      $     (0.00)      $     (0.06)
                                                            ===========       ===========       ===========       ===========

   Basic and diluted net loss per share, pro forma          $     (0.01)      $     (0.03)      $     (0.01)      $     (0.06)
                                                            ===========       ===========       ===========       ===========
</TABLE>

3. Inventories

At June 30, 2003, the components of inventories were:

Raw materials                                                 $  449,899
Work-in-process                                                  334,151
Finished goods                                                   528,555
Deferred product development contract costs                       43,552
                                                              ----------
                                                              $1,356,157
                                                              ==========

4. Warranty and Service Contracts

The Company offers a one-year warranty for parts and labor on all ROBODOC and
NeuroMate systems commencing upon the completion of training and installation,
except when the sales contract requires formal customer acceptance. In most
cases, the Company's customers purchase a service contract, which includes
warranty coverage (parts and labor), unspecified product maintenance updates,
customer support services and various consumables required during surgical
procedures. Revenue from service contracts is initially deferred and then
recognized ratably over the term of the agreements. Service contracts can be
renewed at the customers' option, annually thereafter. Where the Company's
products are not covered by separate service agreements, the Company provides
for the estimated cost of product warranties at the time revenue is recognized,
based on historical results. The warranty obligation is affected by product
failure rates, material usage and service delivery costs incurred in correcting

                                      -7-

<PAGE>


a product failure. Should actual product failure rates, material usage or
service delivery costs differ from these estimates, revisions to the estimated
warranty liability would be required. The Company periodically assesses the
adequacy of its recorded warranty liabilities and adjusts the amounts as
necessary. Changes in the Company's product liability for warranties included in
accrued liabilities and deferred service revenue included in unearned income
during the period are as follows:

     December 31, 2002 balance                                      $   666,000
     Service contracts and warranties issued during the period        1,208,000
     Settlements made during the period                                 (30,000)
     Changes in liability for pre-existing service contracts and
        warranties during the period, including expirations            (915,000)
                                                                    -----------

     June 30, 2003 balance                                          $   929,000
                                                                    ===========

5. Stockholders' equity

During the three months ended June 30, 2003, 32 shares of convertible preferred
stock were converted into 1,500,000 shares of common stock at an average
conversion price of $0.021 per share. The issuance of these shares were exempt
from the registration requirements of the Securities Act under Sections 3(a)(9)
and 4 (2).

6. Net loss per share

Basic net loss per share is computed by dividing the net loss available to
common stockholders for the period by the weighted average number of common
shares outstanding during the period. Diluted net loss per share is computed by
dividing the net loss for the period by the weighted average number of common
and potential common shares outstanding during the period if their effect is
dilutive. Potential common shares are comprised of outstanding employee stock
options, outstanding warrants and outstanding preferred stock issuable upon the
exercise of the stock option, warrant or preferred stock. The potential common
shares issuable under stock options, warrants and preferred stock to purchase
common shares have been excluded for the three and six month periods ending June
30, 2003 and 2002 from the diluted calculation because the effect of such shares
would have been anti-dilutive.

At June 30, 2003, the Company had outstanding options to purchase 2,600,867
shares of common stock (with exercise prices ranging from $0.025 to $8.50 per
share), 7,441,979 outstanding warrants to purchase 7,977,170 shares of common
stock (with exercise prices from $0.01 to $8.34 per share), and 7,187,368 shares
of common stock issuable upon conversion of Series G convertible preferred
stock. The exercise price and the ultimate number of shares of common stock
issuable upon conversion of the warrants are subject to adjustments based upon
the occurrence of certain future events.

7. Accumulated other comprehensive loss
<TABLE>
<CAPTION>
                                                  Three months ended June 30,              Six months ended June 30,
                                                -------------------------------         -------------------------------
                                                    2003               2002                 2003              2002
                                                -----------         -----------         -----------         -----------

<S>                                             <C>                 <C>                 <C>                 <C>
Net Loss                                        $  (354,837)        $(1,146,701)        $  (184,846)        $(2,410,673)

Other comprehensive loss:

             Foreign currency
                      translation                   (36,559)            (37,481)            (58,275)            120,646
                                                -----------         -----------         -----------         -----------

Comprehensive loss                              $  (391,396)        $(1,184,182)        $  (243,121)        $(2,290,027)
                                                ===========         ===========         ===========         ===========
</TABLE>

8. Income Taxes

The Company recorded no income tax expense during the six month periods ending
June 30, 2003 and June 30, 2002. The Company had, at December 31, 2002, a net
operating loss carry-forward of approximately $40,544,000 for federal income tax

                                      -8-

<PAGE>


purposes which expires between 2005 and 2022, a net operating loss carryforward
of approximately $8,150,000 for state income tax purposes which expires between
2004 and 2012, and a net operating loss carryforward of approximately
$1,541,000, for foreign income tax purposes of which approximately $347,000
expires between 2003 and 2007. The Company had, at December 31, 2002, research
and development credit carry-forwards of approximately $1,256,000 and $1,017,000
for federal and state income tax purposes, respectively.

Under certian provisions of the Internal Revenue Code of 1986, as amended, a
portion of the federal net operating loss carryforward may be subject to an
annual utilization limitation as a result of change in ownership of the Company.

9. Recent accounting pronouncements

In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations," which addresses financial accounting and reporting for obligations
associated with the retirement of tangible long-lived assets and associated
asset retirement costs. The new rules apply to legal obligations associated with
the retirement of long-lived assets that result from the acquisition,
construction, development and (or) normal operation of a long-lived asset. The
Company adopted SFAS No. 143 on January 1, 2003, and the adoption did not have
an impact on the consolidated financial position, cash flows or results of
operations.

In December 2002, FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure" ("SFAS 148"). SFAS 148
amends SFAS No. 123, "Accounting for Stock-Based Compensation," and provides
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. SFAS 148 also amends
the disclosure requirements of SFAS 123 to require more prominent and frequent
disclosure requirements in financial statements about the effects of stock-based
compensation. The transition guidance and annual disclosure provisions of SFAS
148 are effective for financial statements issued for fiscal years ending after
December 15, 2002. The interim disclosure provisions are effective for financial
reports containing financial statements for interim periods beginning after
December 15, 2002. The adoption of SFAS 148 did not have a material impact on
the Company's consolidated financial position, cash flows or results of
operations.

In May 2003, the FASB issued Statement of Financial Accounting
Standards No. (SFAS 150), "Accounting for Certain Financial Instruments with
Characteristics of Both Liabilities and Equity." SFAS 150 requires certain
financial instruments that embody obligations of the issuer and have
characteristics of both liabilities and equity to be classified as liabilities.
Many of these instruments previously were classified as equity or temporary
equity and as such, SFAS 150 represents a significant change in practice in the
accounting for a number of mandatorily redeemable equity instruments and certain
equity derivatives that frequently are used in connection with share repurchase
programs. SFAS 150 is effective for all financial instruments created or
modified after May 31, 2003, and to other instruments at the beginning of the
first interim period beginning June 15, 2003. The Company is currently assessing
the impacts of this statement.

In November 2002, FASB issued Interpretation Number 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). This interpretation elaborates on the
disclosures to be made by a guarantor in its interim and annual financial
statements about its obligations under certain guarantees that it has issued. It
also clarifies that a guarantor is required to recognize, at the inception of a
guarantee, a liability for the fair value of the obligation undertaken in
issuing the guarantee. The disclosure requirements of FIN 45 are effective for
interim and annual periods ending after December 15, 2002 and the Company has
adopted those requirements for the financial statements included in this Form
10-QSB. The initial recognition and initial measurement requirements of FIN 45

                                      -9-

<PAGE>


are effective prospectively for guarantees issued or modified after December 31,
2002. The adoption of FIN 45 did not have a material impact on the consolidated
financial position, cash flows or results of operations.

In January 2003, FASB issued Interpretation Number 46, "Consolidation of
Variable Interest Entities" ("FIN 46"). This interpretation clarifies the
application of Accounting Research Bulletin No. 51, "Consolidated Financial
Statements," to certain entities in which equity investors do not have the
characteristics of a controlling financial interest or do not have sufficient
equity at risk for the entity to finance its activities without additional
subordinated financial support from other parties. FIN 46 applies immediately to
variable interest entities created after January 31, 2003, and to variable
interest entities in which an enterprise obtains an interest after that date. It
applies to the first fiscal year or interim period beginning after June 15,
2003, to variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. The Company does not believe
the adoption of FIN 46 will have a material impact on the consolidated financial
position, cash flows or results of operations.

In November 2002, the EITF reached a consensus on Issue 00-21,
"Multiple-Deliverable Revenue Arrangements" ("EITF 00-21"). EITF 00-21 addresses
how to account for arrangements that may involve the delivery or performance of
multiple products, services, and/or rights to use assets. The consensus mandates
how to identify whether goods or services or both that are to be delivered
separately in a bundled sales arrangement should be accounted for separately
because they are "separate units of accounting." The guidance can affect the
timing of revenue recognition for such arrangements, even though it does not
change rules governing the timing or pattern of revenue recognition of
individual items accounted for separately. The final consensus will be
applicable to agreements entered into in fiscal years beginning after June 15,
2003, with early adoption permitted. Additionally, companies will be permitted
to apply the consensus guidance to all existing arrangements as the cumulative
effect of a change in accounting principle in accordance with APB Opinion No.
20, "Accounting Changes." The Company is assessing whether the adoption of EITF
00-21 will have a material impact on the Company's consolidated financial
position, cash flows or results of operations, but at this time does not believe
such adoption will have a material impact.

     Item 2. Management's Discussion and Analysis

Overview

The following discussion and analysis relates to the consolidated operations of
the Company and should be read in conjunction with the unaudited consolidated
financial statements of the Company, including the notes thereto, appearing
elsewhere in this report.

The Company designs, manufactures, sells and services image-directed,
computer-controlled robotic software and hardware products for use in
orthopaedic and neurosurgical procedures.

The Company's revenue consists of product revenue, specialized product
development revenue and parts and service revenue.

Product revenue consists of revenues generated from sales of the Company's
principal orthopaedic product, the ROBODOC(R) Surgical Assistant System
("ROBODOC"), which integrates the ORTHODOC(R) Presurgical Planner ("ORTHODOC")
with a computer-controlled robot for use in joint replacement surgeries. Also
included in product revenue is revenues generated from sales of the
NeuroMate(TM) System ("NeuroMate"), which consists of a computer-controlled
robotic arm, head stabilizer, presurgical planning workstation and proprietary
software used to position and precisely hold critical tools during stereotactic
brain surgery.

The Company develops specialized operating software for several implant
manufacturing companies. These implant manufacturers contract with the Company
for the development of particular lines of new prosthesis software to be used
with the ROBODOC system.

The Company's customers purchase warranty coverage (parts and labor) as well as
surgical disposables through annual service and maintenance agreements. The
Company's technical staff trains medical professionals in the use of the
products and provides field service.

                                      -10-

<PAGE>


Results of Operations

For the three months ending June 30, 2003, revenue increased and operating
expenses were reduced when compared to the three months ending June 30, 2002,
with an operating loss of approximately $409,000 and net loss of $355,000 as
compared to an operating loss of $1,329,000 and net loss of $1,147,000,
respectively. In the six months ending June 30, 2003, revenue increased and
operating expenses were reduced when compared to the six months ending June 30,
2002, with an operating loss of $282,000 and net loss of $185,000 as compared to
an operating loss of $2,570,000 and net loss of $2,411,000, respectively.

Revenue of $1,941,000 for the three months ending June 30, 2003, increased
approximately 145% or $1,149,000 when compared to $792,000 for the three months
ending June 30, 2002. Revenue of $4,962,000 for the six months ending June 30,
2003, increased 192% or $3,261,000 when compared to $1,701,000 for the six
months ending June 30, 2002. There can be no assurance that the Company will be
able to maintain such revenue levels in future periods.

The majority of the increase in revenue for the three month period ending June
30, 2003 was a result of the Company recognizing revenue of approximately
$1,030,000 from previous unearned income generated by sales for one ROBODOC
system (in Japan) and two NeuroMate systems (in Italy) as well as a product
development project completed in the period as compared to no revenue recognized
on systems or projects for the three month period ending June 30, 2002. Revenue
for the six month period ending June 30, 2003 includes four ROBODOC systems,
three NeuroMate systems and one product development project recognized as
compared to one NeuroMate system recognized for the six month period ending June
30, 2002. As of June 30, 2003, the Company's unearned income is comprised of
product development projects and ongoing installed base service contracts.

Gross margin decreased from approximately 57% for the three months ending June
30, 2002 to 24% for the three months ending June 30, 2003 and decreased from 57%
for the six months ending June 30, 2002 to 37% for the six months ending June
30, 2003 due to the change in product mix favoring the stronger margins of
system parts and service revenue for the three and six month periods ending June
30, 2002 over the lower margins realized in system sales for the three and six
month periods ending June 30, 2003.

Total operating expenses have continued to decline as a result of the Company's
cost reduction program. Selling and general administrative expenses are
comprised of salaries, commissions, travel expenses and costs associated with
trade shows as well as the finance, legal and human resources departments and
professional support fees for these functions. Selling and general
administrative expenses for the three month period ending June 30, 2003
decreased approximately 29% to $592,000 from $830,000 for the three month period
ending June 30, 2002. Selling and general administrative expenses for the six
month period ending June 30, 2003 decreased 18% to $1,371,000 from $1,675,000
for the six month period ending June 30, 2002. The decrease in selling and
general administrative expenses was primarily due to decreased staffing and
staffing related expenses.

Research and development expenses are comprised of the engineering and related
costs associated with the development of innovative image-directed
computer-controlled robotic products for surgical applications, along with
specialized operating software and hardware systems to support these products,
quality assurance and testing. Research and development expenses decreased
approximately 61% to $288,000 during the three month period ending June 30, 2003
as compared to $744,000 for the three month period ending June 30, 2002.
Research and development expenses decreased 49% to $736,000 during the six month
period ending June 30, 2003 as compared to $1,450,000 for the six month period
ending June 30, 2002. The decrease in the three and six month periods ending
June 30, 2003 is due to decreased staffing and staffing related expenses and
approximately $125,000 final grant payment received in the three month period
ending June 30, 2003 from the National Institute for Standards and Technology of
the United States Department of Commerce ("NIST"). Under the terms of the NIST
grant, the Company was entitled to reimbursement for certain of the expenses

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incurred in connection with the development of its revision hip surgery product.
As of June 30, 2003, the Company had received a cumulative total of
approximately $1,221,000 in funding from NIST beginning in 1995. All expenses
related to the grant have been submitted and paid, thereby closing the grant.

Other income, net of approximately $54,000 when compared to other income, net of
approximately $182,000 for the three month periods ending June 30, 2003 and
2002, respectively, changed due to a favorable currency exchange rate of the
Euro in the three months ending June 2003 compared to a slightly more favorable
exchange rate of the Euro and sublease rent income for the three months ending
June 2002. Other income, net of approximately $97,000 when compared to other
income, net of approximately $160,000 for the six months ending June 30, 2003
and 2002, respectively, changed due to a favorable currency exchange rate of the
Euro related to the Company's business in Europe and one month of sublease rent
income in 2003 compared to a slightly more favorable rate and sublease rent
income in 2002.

Critical Accounting Policies and Estimates

The Company's discussion and analysis of the financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these consolidated financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenue and expenses, and related disclosure of
contingent assets and liabilities. On an on-going basis, the Company evaluates
estimates, including those related to bad debts, inventories, warranties,
contingencies and litigation. Estimates are based on historical experience and
on other assumptions that the Company believes to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

The Company believes the following critical accounting policies affect the more
significant judgments and estimates used in the preparation of consolidated
financial statements:

      The Company recognizes revenue from sales of systems upon the completion
      of equipment installation and training at the end-user's site, except when
      the sales contract requires formal customer acceptance. Equipment sales
      with contractual customer acceptance provisions are recognized as revenue
      upon written notification of customer acceptance, which generally occurs
      after the completion of installation and training. Furthermore, due to
      business customs in Japan and the Company's interpretation of Japanese
      law, all equipment sales to Japan are recognized after customer
      acceptance, which generally occurs after the completion of installation
      and training.

      The Company maintains allowances for doubtful accounts for estimated
      losses resulting from the inability of customers to make required
      payments. If the financial condition of customers were to deteriorate,
      resulting in an impairment of their ability to make payments, additional
      allowances may be required.

      The Company offers a one-year warranty for parts and labor on all ROBODOC
      and NeuroMate systems commencing upon the completion of training and
      installation, except when the sales contract requires formal customer
      acceptance. In most cases, the Company's customers purchase a service
      contract, which includes warranty coverage (parts and labor), unspecified
      product maintenance updates, customer support services and various
      consumables required during surgical procedures. Revenue from service
      contracts is initially deferred and then recognized ratably over the term
      of the agreements. Service contracts can be renewed at the customers'
      option, annually thereafter. Where the Company's products are not covered
      by separate service agreements, the Company provides for the estimated
      cost of product warranties at the time revenue is recognized, based on

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<PAGE>


      historical results. The warranty obligation is affected by product failure
      rates, material usage and service delivery costs incurred in correcting a
      product failure. Should actual product failure rates, material usage or
      service delivery costs differ from these estimates, revisions to the
      estimated warranty liability would be required. The Company periodically
      assesses the adequacy of its recorded warranty liabilities and adjusts the
      amounts as necessary.

      It is Company policy to write down inventory for estimated obsolescence or
      unmarketable inventory equal to the difference between the cost of
      inventory and the estimated market value based upon assumptions about
      future demand and market conditions. If actual market conditions are less
      favorable than those projected, additional inventory write-downs may be
      required.

      Property, plant and equipment and intangible assets are amortized over
      their useful lives. Useful lives are based on estimates of the period that
      the assets will generate revenue. Property and equipment and intangible
      assets are reviewed for impairment whenever events or changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable.

Liquidity and Capital Resources

The cash position of Integrated Surgical Systems, Inc. (the "Company") is
inadequate and the Company has not yet identified sources of sufficient cash to
assure continuing operations. At June 30, 2003, the Company had a working
capital deficit of $3,698,006. At August 8, 2003, the Company was in violation
of certain covenants contained in financing arrangements with vendors.

The Company is working to address this shortfall by attempting to negotiate cash
advances for undelivered systems, accelerate payment terms of other contracts,
defer additional salary from employees and obtain new equity investment.
However, the Company can offer no assurance that attempts to strengthen cash
flows will be successful. Unless the Company can secure sufficient funds on a
timely basis to satisfy short-term operating requirements, the Company may have
to cease operations or seek bankruptcy protection.

The reports of our independent auditors on the Company's 2002 and 2001
consolidated financial statements included explanatory paragraphs stating that
there is substantial doubt with respect to the Company's ability to continue
operating as a going concern. The Company's plan to address this issue -
increasing sales of the Company's products in existing markets, increasing sales
of system upgrades and reducing operating expenses - can only be realized to the
extent that the Company can generate sufficient cash to meet obligations. In the
event that the Company is unsuccessful, it is possible that the Company will
cease operations or seek bankruptcy protection. The consolidated financial
statements do not include any adjustments to reflect the uncertainties related
to the recoverability and classification of assets or the amounts and
classification of liabilities that may result from an inability on the Company's
part to continue as a going concern.

At June 30, 2003 the Company's "quick ratio" (cash and accounts receivable
divided by current liabilities), a conservative liquidity measure designed to
predict the Company's ability to pay bills, was only .17. It has been difficult
for the Company to meet obligations, including payroll, as they come due, and
the Company expects this situation to continue through 2003.

Net cash provided by operating activities was approximately $113,000 for the six
months ended June 30, 2003. This primarily resulted from a decrease in accounts
receivable of $783,000, a decrease in inventory of $426,000 an increase of
$397,000 in accounts payable and accrued payroll and related expenses offset
primarily by the net loss for this period and a decrease in unearned income of
$1,549,000. The increase in accounts payable and accrued payroll is directly
related to delayed vendor payments and deferred payments to employees. The
Company expects to derive most of the cash required to support operations
through continued production and sales of the ROBODOC and NeuroMate Systems.
Continued conversion of the inventory balance into cash, as well as collection
of the account receivables, is critical to the Company's survival in 2003.

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<PAGE>


At June 30, 2003, the Company had amounts due to the executive officers of the
Company of approximately $582,000, in the aggregate, in the form of an interest
bearing advance, deferred salaries and unreimbursed travel expenses. Of such
amounts, $170,000, $259,000 and $54,000 are included in accrued payroll and
related expense, accounts payable and accrued liabilities, respectively, due to
Ramesh C. Trivedi, president and chief executive officer of the Company; $39,000
and $17,000 are included in accrued payroll and related expense and accounts
payable, respectively, due to Leland Witherspoon, vice president of engineering
of the Company; $25,000, $3,000 and $15,000 are included in accrued payroll and
related expense, accounts payable and accrued liabilities, respectively, due to
Charles J. Novak, chief financial officer of the Company.

As of June 30, 2003, the financial statements of our wholly-owned French
subsidiary, ISS, S.A., reflects that it's net assets are less than 50% of its
stated capitalization. The Company has been advised that this equity deficit is
considered to be an indication of insolvency under French law and that, unless
this situation is remedied, a third party or the French courts could petition
for the dissolution of the subsidiary. In previous years, the Company has issued
a statement to the subsidiary's French auditors stating that the Company is
fully informed of the financial condition of the subsidiary and that the Company
was willing to provide the financial resources necessary to enable the
subsidiary to continue operations during the ensuing year. In June 2003, the
Company did not issue such a statement due to the financial instability of the
Company. Although the consequences are unknown at this time, if a liquidation of
the subsidiary is required, it could have a material adverse impact on the
Company's financial position, results of operations, or cash flows.

On August 8, 2003 there were 43.5 million shares of common stock outstanding,
trading in the over-the-counter market at $0.038 per share, giving the Company a
market capitalization of $1.7 million. It is not likely, therefore, that the
Company will be able to raise significant funds in the equity markets.

The Company has the following contractual obligations and commercial commitments
at June 30, 2003:

                                    Total          < 1 year        1-3 years
                                    -----          --------        ---------

Facility operating leases          $ 880,000        $509,000       $371,000
Equipment operating leases         $  23,000        $ 23,000       $   -
Research grant                     $ 113,000        $113,000       $   -

The Company has an interest free loan from a grant organization for the
development of a new neurological system with an outstanding balance of $113,000
at June 30, 2003. The Company is currently in the process of working with the
grant organization in determining whether the grant balance will be forgiven or
due to the organization in full.

For further information, readers are referred to the Management's Discussion and
Analysis section included in the Company's Annual Report on Form 10-KSB for the
year ending December 31, 2002.

     Item 3. Controls and Procedures

Within the 90 days prior to the filing of this report, the Company's management,
including the Company's Chief Executive Officer and Chief Financial Officer,
evaluated the effectiveness of the design of the Company's disclosure controls
and procedures, as defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934. Based on that evaluation, the Chief Executive Officer and
the Chief Financial Officer concluded that the Company's disclosure controls and
procedures were effective, in all material respects, to ensure that the
information required to be disclosed in the reports the Company files and
submits under the Exchange Act is recorded, processed, summarized and reported
as and when required.

There have been no significant changes (including corrective actions with
regards to significant deficiencies and material weaknesses) in the Company's

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internal controls or in other factors subsequent to the date the Company carried
out its evaluation that could significantly affect these controls.
Part II. Other Information

     Item 2. Changes in Securities

During the second quarter of 2003, the Company issued a total of 1,500,000
shares of common stock to an accredited investor upon conversion of preferred
stock. The issuance and sale of these shares were exempt from the registration
requirements of the Securities Act under Sections 3(a)(9) and 4 (2).

     Item 6. Exhibits and Reports on Form 8-K

(a)Exhibits

31.1     Certification of Ramesh C. Trivedi, pursuant to Rule 13(a)-14(a).
31.2     Certification of Charles J. Novak, pursuant to Rule 13(a)-14(a).
32.1     Certification of Ramesh C. Trivedi, pursuant to Rule 13(a)-14(b).
32.2     Certification of Charles J. Novak, pursuant to Rule 13(a)-14(b).

(b)Reports on Form 8-K.

None.

                                      -15-
<PAGE>



                                    SIGNATURE
In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                              INTEGRATED SURGICAL SYSTEMS, INC.


                               By: /s/ CHARLES J. NOVAK
                                   ---------------------------------------------
                                   Charles J. Novak
                                  (Principal Financial and Accounting Officer)
Dated: August 8, 2003             (Duly Authorized Officer)


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