UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

|X|  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

                For the Quarterly Period Ended September 30, 2008
                                       or

|_|  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934 Commission file number: 1-12471

                        INTEGRATED SURGICAL SYSTEMS, INC.
                        ---------------------------------
             (Exact name of registrant as specified in its charter)

                 Delaware                             68-0232575
                 --------                             ----------
     (State or Other Jurisdiction of      (IRS Employer Identification No.)
     Incorporation or Organization)

        401 Wilshire Blvd., Suite 401
           Santa Monica, California                     90401
        ------------------------------                 -------
   (Address of Principal Executive Offices)           (Zip Code)

                                 (310) 526-5000
                                 --------------
              (Registrant's Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 |_|

Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

      Large accelerated filer |_|              Accelerated filer         |_|
      Non-accelerated filer   |_|              Smaller reporting company |_|
                  (Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). YES |X| NO|_|

As of November 7, 2008, there were 7,474,894 shares of the registrant's common
stock outstanding.

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                                        Integrated Surgical Systems, Inc.
                                                   Form 10-Q
                                 for the nine months ended September 30, 2008
                                               Table of Contents


                                                                                                           Page
Part I.    Financial Information
           Item 1.   Financial Statements                                                                    2

                     Balance Sheets at September 30, 2008 (unaudited) and December 31, 2007 (audited)        2

                     Statements of Operations (unaudited) for the nine months ended September 30, 2008       3
                     and 2007

                     Statements of Operations (unaudited) for the three months ended September 30, 2008      4
                     and 2007

                     Statement of Stockholders' Equity (unaudited)                                           5

                     Statements of Cash Flows (unaudited) for the nine months ended September 30, 2008       6
                     and 2007

                     Notes to Financial Statements (unaudited)                                               7

           Item 2.   Management's Discussion and Analysis of Financial Condition and Results of              13
                     Operations

           Item 3.   Quantitative and Qualitative Disclosures About Market Risk                              15

           Item 4T.  Controls and Procedures                                                                 15

Part II.   Other Information

           Item 1.   Legal Proceedings                                                                       16

           Item 6.   Exhibits                                                                                16

Signatures                                                                                                   18

Certifications                                                                                               19

                                                       1
<PAGE>

Part I. FINANCIAL INFORMATION

     Item 1. Financial Statements.

                                Integrated Surgical Systems, Inc.
                                          Balance Sheet

Assets                                                              September 30,    December 31,
                                                                        2008            2007
                                                                    (Unaudited)      (Audited)
                                                                    ------------    ------------
Current assets:
    Cash                                                            $  4,449,351    $  3,099,199
    Other current assets                                                  92,633          76,333
                                                                    ------------    ------------
Total current assets                                                   4,541,984       3,150,532
                                                                    ------------    ------------

Total assets                                                        $  4,541,984    $  3,175,532
                                                                    ============    ============


Liabilities and stockholders' equity

Current liabilities:
    Accounts payable                                                $      8,800    $      4,951
    Accrued liabilities                                                      436          10,782
    Accrued stock compensation                                            21,566            --
    Income taxes payable                                                    --            31,482
    Deferred rent - current portion                                       22,125          41,966
                                                                    ------------    ------------
Total current liabilities                                                 52,927          89,181

Rent deposit                                                               8,175            --
Deferred rent - noncurrent                                                28,875         220,824
                                                                    ------------    ------------
Total liabilities                                                         89,977         310,005


Convertible preferred stock, $0.01 par value, 1,000,000 shares
authorized;
    168 shares issued and outstanding ($168,496 aggregate
    liquidation value)                                                   168,496         168,496


Stockholders' equity:
    Common stock, $0.01 par value, 100,000,000 shares authorized;
        7,474,894 and 4,578,500 shares issued and outstanding             74,749          45,785
    Additional paid-in capital                                        64,093,918      62,419,665
    Accumulated deficit                                              (59,885,156)    (59,768,419)
                                                                    ------------    ------------
Total stockholders' equity                                             4,283,511       2,697,031
                                                                    ------------    ------------

Total liabilities and stockholders' equity                          $  4,541,984    $  3,175,532
                                                                    ============    ============

See accompanying notes to financial statements.

                                                2
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                        Integrated Surgical Systems, Inc.
                            Statements of Operations
                                   (Unaudited)


                                                   Nine Months ended September 30,
                                                         2008           2007
                                                     -----------    -----------
Continuing operations
     General and administrative expenses             $   173,655    $   115,394

Interest income, net                                      56,918         26,630
                                                     -----------    -----------
Loss from continuing operations                         (116,737)       (88,764)
                                                     -----------    -----------

Discontinued Operations:
     Loss from operations of discontinued segment           --       (1,219,725)
     Net gain on sale of assets                             --        6,176,137
                                                     -----------    -----------

Gain from discontinued operations                           --        4,956,412
                                                     -----------    -----------

Net income (loss)                                    $  (116,737)   $ 4,867,648
                                                     ===========    ===========

Basic net income (loss) per common share
     Continuing operations                           $     (0.02)   $     (0.02)
     Discontinued operations                         $      --      $      1.08
                                                     -----------    -----------
                                                     $     (0.02)   $      1.06
                                                     ===========    ===========
Diluted net income (loss) per common share
     Continuing operations                           $     (0.02)   $     (0.02)
     Discontinued operations                         $      --      $      0.86
                                                     -----------    -----------
                                                     $     (0.02)   $      0.85
                                                     ===========    ===========

Weighted average number of shares outstanding:

   Basic                                               6,248,683      4,578,500
                                                     ===========    ===========
   Diluted                                             6,248,683      5,744,563
                                                     ===========    ===========


See accompanying notes to financial statements.

                                        3
<PAGE>

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


                                                   Three Months ended September 30,
                                                         2008           2007
                                                     -----------    -----------
Continuing operations
     General and administrative expenses             $   133,912    $   115,394

Interest income, net                                      21,723         26,630
                                                     -----------    -----------

Loss from continuing operations                         (112,189)       (88,764)
                                                     -----------    -----------

Discontinued Operations:
     Gain from discontinued operations                      --           34,000
                                                     -----------    -----------

Net income (loss)                                    $  (112,189)   $   (54,764)
                                                     ===========    ===========

Basic net  income (loss) per common share
     Continuing operations                           $     (0.02)   $     (0.02)
     Discontinued operations                         $      --      $      0.01
                                                     -----------    -----------
                                                     $     (0.02)   $     (0.01)
                                                     ===========    ===========


Diluted net  income (loss) per common share
     Continuing operations                           $     (0.02)   $     (0.02)
     Discontinued operations                         $      --      $      0.01
                                                     -----------    -----------
                                                     $     (0.02)   $     (0.01)
                                                     ===========    ===========


Weighted average number of shares outstanding:

   Basic                                               7,474,894      4,578,500
                                                     ===========    ===========
   Diluted                                             7,474,894      4,578,500
                                                     ===========    ===========


See accompanying notes to financial statements.

                                        4
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                                          Integrated Surgical Systems, Inc.

                                          Statement of Stockholders' Equity



                                                                           Additional                       Total
                                                   Common Stock             Paid-in      Accumulated     Stockholders'
                                               Shares         Amount        Capital        Deficit     (Deficit)/Equity
                                            ------------   ------------   ------------   ------------  ----------------

Balance at December 31, 2007 (audited)         4,578,500   $     45,785   $ 62,419,665   $(59,768,419)   $  2,697,031


  Sale of common stock, net of
    offering cost (unaudited)                  2,896,394         28,964      1,662,778           --         1,691,742
  Stock-based compensation (unaudited)              --             --           11,475           --            11,475

       Net loss (unaudited)                         --             --             --         (116,737)       (116,737)
                                            ------------   ------------   ------------   ------------    ------------


Balance at September 30, 2008 (unaudited)      7,474,894   $     74,749   $ 64,093,918   $(59,885,156)   $  4,283,511
                                            ============   ============   ============   ============    ============







See accompanying notes to financial statements.

                                                          5
<PAGE>

                               Integrated Surgical Systems, Inc.
                                   Statements of Cash Flows
                                          (Unaudited)

                                                                   Nine Months ended September 30,
                                                                         2008           2007
                                                                     -----------    -----------
Continuing operations
Cash flows from continuing operating activities
Loss from continuing operations                                      $  (116,737)   $   (88,764)
Adjustments to reconcile net loss from continuing
operations to cash flow used in continuing operating activities:
          Stock-based compensation                                        11,475         13,215
          Stock  compensation                                             21,566           --
          Changes in assets and liabilities
             Other current assets                                        (16,300)       (79,589)
             Accounts payable                                              3,849         (3,435)
             Accrued liabilities                                         (10,346)        55,322
             Other current liabilities                                      --           (6,642)
             Income taxes payable                                        (31,482)          --
             Rent deposit received                                         8,175           --
             Deferred rent payable                                      (211,790)          --
                                                                     -----------    -----------
Cash used in continuing operating activities                            (341,590)      (109,893)
                                                                     -----------    -----------

Cash flows from continuing financing activities
          Proceeds from sale of common stock                           1,750,000           --
          Offering cost                                                  (58,258)          --
                                                                     -----------    -----------
Cash provided by continuing financing activities                       1,691,742           --


Cash provided by continuing operations                                 1,350,152           --
                                                                     -----------    -----------

Discontinued operations
          Net cash used in discontinued operating activities                --       (2,887,569)
          Net cash provided by (discontinued) investing activities          --        3,961,017
          Net cash provided by (discontinued) financing activities          --        1,000,000
                                                                     -----------    -----------
Net cash provided by discontinued operations                                --        2,073,448
                                                                     -----------    -----------

Net increase in cash                                                   1,350,152      1,963,555

Cash at beginning of period                                            3,099,199      1,327,268
                                                                     -----------    -----------

Cash at end of period                                                $ 4,449,351    $ 3,290,823
                                                                     ===========    ===========

                                               6
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                        Integrated Surgical Systems, Inc.
                    Notes to Financial Statements (unaudited)

1. Organization and Operations

Integrated Surgical Systems, Inc. (the "Company") was incorporated in Delaware
in 1990 to design, manufacture, sell and service image-directed,
computer-controlled robotic software and hardware products for use in orthopedic
surgical procedures. The Company's products are authorized to be sold through
international distributors to hospitals and clinics in European Union member
countries and Australia, Canada, India, Israel, Japan, Korea, New Zealand,
Switzerland and South Africa.

On June 28, 2007, upon the sale of substantially all of its assets, the Company
became inactive. As a result, all the Company's operations from January 1, 2007
through June 28, 2007 have been classified as discontinued operations.

On June 28, 2007, the stockholders approved the future liquidation of the
Company if the Company is unable to complete an acquisition or similar
transaction within one year of the sale of its assets. At the same time, our
stockholders granted the Board of Directors authority to abandon any decision to
liquidate without further stockholder action if it determines the liquidation is
not in the best interests of the Company or our stockholders.

2. Significant Accounting Policies

Basis of presentation

The accompanying unaudited financial statements and related notes have been
prepared in accordance with accounting principles generally accepted in the
United States of America for interim financial statements and with the rules and
regulations under Regulation S-X of the Securities and Exchange Commission for
Form 10-Q. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States of
America for complete financial statements presentation. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary to present fairly the financial position as of September 30, 2008 and
results of operations and cash flows for the three and nine months then ended
have been included. These financial statements should be read in conjunction
with the financial statements of the Company together with the Company's
management discussion and analysis in the Company's Form 10-KSB for the year
ended December 31, 2007. Interim results are not necessarily indicative of the
results for a full year.

Certain amounts for prior years have been reclassified to conform to 2008
financial statement presentations.

The financial statements include all the accounts of the Company.

Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.

                                        7
<PAGE>

New Accounting Pronouncements

In December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141(R), "Business Combinations" ("SFAS 141R"), which replaces SFAS No. 141,
"Business Combinations." SFAS 141R establishes principles and requirements for
determining how an enterprise recognizes and measures the fair value of certain
assets and liabilities acquired in a business combination, including
non-controlling interests, contingent consideration, and certain acquired
contingencies. SFAS 141R also requires acquisition-related transaction expenses
and restructuring costs be expensed as incurred rather than capitalized as a
component of the business combination. SFAS 141R will be applicable
prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after
December 15, 2008. SFAS 141R would have an impact on accounting for any
businesses acquired after the effective date of this pronouncement.

Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value
Measurements", ("SFAS 157") defines fair value, establishes a framework for
measuring fair value, and expands disclosures about fair value measurements.
SFAS 157 applies to other accounting pronouncements that require the use of fair
value measurements. A fair value measurement assumes that the transaction to
sell an asset or transfer a liability occurs in the principal market for the
asset or liability, or, in the absence of a principal market, the most
advantageous market for the asset or liability.

SFAS No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities - Including an amendment of FASB Statement 115", ("SFAS 159")
permits an entity to elect to measure various financial instruments and certain
other items at fair value that are not currently required to be measured at fair
value. Unrealized gains and losses on items for which the fair value option has
been elected should be reported in earnings at each subsequent reporting date.

Effective January 1, 2008, the Company adopted both SFAS 157 and SFAS 159
without any effect.

In December 2007, the FASB issued SFAS No. 160, "Non-controlling Interests in
Consolidated Financial Statements - An Amendment of ARB No. 51" ("SFAS 160").
SFAS 160 establishes accounting and reporting standards for the non-controlling
interest in a subsidiary (previously referred to as minority interests). SFAS
160 also requires that a retained non-controlling interest upon the
deconsolidation of a subsidiary be initially measured at its fair value. Upon
adoption of SFAS 160, the Company would be required to report any
non-controlling interests as a separate component of stockholders' equity. The
Company would also be required to present any net income allocable to
non-controlling interests and net income attributable to stockholders of the
Company separately in its consolidated statements of income. SFAS 160 is
effective for fiscal years, and interim periods within those fiscal years,
beginning on or after December 15, 2008. SFAS 160 requires retroactive adoption
of the presentation and disclosure requirements for existing minority interests.
All other requirements of SFAS 160 shall be applied prospectively. SFAS 160
would have an impact on the presentation and disclosure of the non-controlling
interests of any non wholly-owned businesses acquired in the future.

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles" ("SFAS 162"). SFAS 162 identifies the sources of
accounting principles and the framework for selecting the principles used in the
preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (the GAAP
hierarchy). SFAS 162 will become effective 60 days following the SEC's approval
of the Public Company Oversight Board amendments to AU Section 411, "The Meaning
of Present Fairly in Conformity With Generally Accepted Accounting Principles."
The Company does not currently expect the adoption of SFAS 162 to have a
material effect on its results of operations and financial condition.

                                       8
<PAGE>

Management does not believe that any other recently issued, but not yet
effective accounting pronouncements, if adopted, would have a material effect on
the accompanying financial statements.

3. Income (Loss) Per Share

Basic income (loss) per share is computed by dividing net income (loss) by the
weighted average number of shares of common stock outstanding during the period.
Diluted net income (loss) per share is computed by dividing net income (loss) by
the weighted average number of shares of common stock outstanding during the
period plus dilutive common stock equivalents, using the treasury stock method.

For the nine months ended September 30, 2007 dilutive common stock equivalents
were convertible preferred stock of 1,166,062 shares. A warrant for 30,000
shares and stock options of 63,050 shares were excluded from the dilutive common
stock equivalents for the nine months ended September 30, 2007 because the
exercise price was greater than the weighted average share price for the period.
A warrant for 30,000 shares, convertible preferred stock of 1,166,062 shares and
stock options of 63,050 shares were excluded from the dilutive common stock
equivalents for the three months ended September 30, 2007 because they were
anti-dilutive.

A warrant for 30,000 shares of common stock, convertible preferred stock of
639,454 and stock options for 162,950 were excluded from the dilutive common
stock equivalents for the nine and three months ended September 30, 2008 because
they were anti-dilutive.

4. Common Stock

On April 25, 2008, the Company sold an aggregate of 2,896,394 shares of common
stock at $0.6042 per share, for an aggregate purchase price of $1,750,000. The
Company incurred $58,258 of expenses in connection with the offering. Certain of
the investors are affiliated with the Company's advisory services firm that is
currently providing investment banking services.

5. Convertible Preferred Stock

The Company's Certificates of Incorporation authorized 1,000,000 shares of
undesignated, serial preferred stock. Preferred stock may be issued from time to
time in one or more series. The Board of Directors is authorized to determine
the rights, preferences, privileges, and restrictions granted to and imposed
upon any wholly unissued series of preferred stock and designation of any such
series without any further vote or action by the Company's stockholders.

As of September 30, 2008 and December 31, 2007, the Company's only outstanding
series of convertible preferred stock is the Series G Convertible Preferred
Stock ("Series G").

The Series G stock has a stated value of $1,000 per share, and is convertible
into common stock at conversion price equal to 85% of the lowest sale price of
the common stock on its listed market over the five trading days preceding the
date of conversion ("Beneficial Conversion Feature"), subject to a maximum
conversion price. The number of shares of common stock that may be converted is
determined by dividing the stated value of the number of shares of convertible
preferred stock to be converted by the conversion price. The Company may elect
to pay the Series G holder in cash at the current market price multiplied by the
number of shares issuable upon conversion.

The value that had been assigned to the Beneficial Conversion feature of the
Series G was based on the difference between the maximum conversion price and
quoted market price of the common stock on the date that the Series G was sold
(the "Discount"). The Discount was accreted using the straight-line method over
the conversion period. The Series G does not entitle holders to dividends or
voting rights, unless required by law.

For the nine months ended September 30, 2008 and the year ended December 31,
2007, no shares of Series G were converted into shares of common stock. At
September 30, 2008 and December 31, 2007, the outstanding Series G shares could
have been converted into a minimum of 639,454 and 660,769 shares of common
stock, respectively.

                                       9
<PAGE>

Upon a change in control, sale of or similar transaction, as defined, each
holder of the Series G has the option to deem such transaction as a liquidation
and may redeem their shares at the liquidation value of $1,000, per share, for
an aggregate amount of $168,496. As such redemption is not in control of the
Company, the Series G preferred stock has been accounted for as if they were
redeemable preferred stock and are classified on the balance sheet between
liabilities and stockholders' equity.

6. Stock-based compensation

The Company has two stock option plans to attract, motivate and retain selected
officers, employees, directors and consultants under which incentive or
non-incentive options may be granted, generally for a term of ten years from the
date of grant. Exercise prices of incentive stock options may not be less than
100% and exercise prices of non-statutory stock options may not be less than 85%
of the fair market value of the common stock on the date of the grant. For
persons owning 10% or greater of the voting power of all classes of the
Company's stock, the exercise price of the incentive or the non-qualified stock
options may not be less than 110% of the fair market value of the common stock
on the date of the grant. Both plans are administered by the Company's board of
directors.

The 1998 Stock Option Plan (1998 Plan) was established to grant up to 85,000
non-qualified options through May 12, 2008 to employees and other individuals
providing services to the Company. Options under the 1998 Plan vest variably
from one year to four years from the date grant and must be exercised within 30
days of employee termination. As of September 30, 2008 the plan had expired
therefore, no options were available for future grant. At December 31, 2007, the
1998 plan had 22,857 options available for future grant.

The 2000 Stock Award Plan (2000 Plan) was established to grant up to 100,000
incentive options through December 11, 2010 to employees, excluding officers and
directors, and other individuals providing services to the Company. Options
under the 2000 Plan vest variably from one year to four years from the date
grant and must be exercised within three months of employee termination. As of
September 30, 2008 and December 31, 2007, the 2000 plan had 98,046 options
available for future grant.

Under both plans, exercised, forfeited/expired or cancelled shares may be
reissued.

Options outstanding or options forfeited/expired may be from expired plans.





                                       10
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For the nine months ended September 30, 2008, option activity was as follows:

                                                   Nine Months Ended
                                                   September 30, 2008
                                             Number of        Weighted-Average
                                              Shares         Exercise Price per
                                                                   Share
Outstanding at beginning of period             63,050             $  3.04
Granted                                       100,000             $  0.38
Expired and forfeited                             100             $ 23.13
Exercised                                       -                 $   --
                                             --------             -------
Outstanding at end of period                  162,950             $  1.41
                                             ========


Exercisable at end of period                   62,950             $  3.01
                                             ========


For the nine months ended September 30, 2008, there were options for 100,000
shares of common stock granted outside of either of the Company's stock option
plans.

The Company's stock options have no intrinsic value as of September 30, 2008.

For the nine and three months ended September 30, 2008, the Company recorded
stock-based compensation expense, related to its stock options, of $ 11,475 and
$ 4,866 respectively, which is included in general and administrative expenses.

As of September 30, 2008, a summary of options outstanding under the plans was
as follows:

   Range of          Weighted-Average          Number        Weighted-Average        Number       Weighted-Average
   Exercise       Remaining Contractual    Outstanding at        Exercise        Exercisable at       Exercise
    Price             Life (Years)             9/30/08             Price             9/30/08            Price
--------------    ---------------------    --------------    ----------------    --------------   ----------------
0.00-9.99                  4.5                 158,000             $0.36             58,000             $0.34
10.00-30.99                1.3                   1,500             29.17              1,500             29.17
31.00-37.00                0.3                   3,450             36.52              3,450             36.52
                           ---                   -----             -----              -----             -----
                           4.3                 162,950             $1.39             62,950             $3.01
                           ===                 =======             =====             ======             =====

During the three months ended September 30, 2008, the Company granted
non-qualified stock options to each of its directors to purchase an aggregate of
100,000 shares of common stock at an exercise price of $0.38. During the same
period, the Company finalized its plan to compensate two of its directors with
common stock in lieu of cash compensation. The number of shares to be issued as
compensation will be based upon the equivalent cash compensation accrued divided
by the closing stock price on March 31, 2009. The Company recorded stock
compensation related to this compensation for the nine and three months ended
September 30, 2008 of $21,566.

                                       11
<PAGE>

7. Income Taxes

Effective January 1, 2007, the Company adopted the provisions of Financial
Accounting Standards Board (FASB) Interpretation No. 48, "Accounting for
Uncertainty in Income Taxes, an interpretation of FASB Statement No.109" (FIN
48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
in the Company's financial statements in accordance with FASB Statement 109,
"Accounting for Income Taxes," and prescribes a recognition threshold and
measurement process for financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides
guidance under recognition, classification, interest and penalties, accounting
in interim periods, disclosure and transition.

Federal and state income tax returns for the years ended December 31, 2007, 2006
and 2005 are subject to review by the taxing authorities.

The Company's policy is to classify assessments, if any, for tax related
interest as interest expenses and penalties as general and administrative
expenses.

8. Fair Value Measurement

The Company has recorded a deferred rent liability in accordance with SFAS No.
146, "Accounting for Costs Associated with Exit or Disposal Activities", ("SFAS
146") and SFAS No. 157, "Fair Value Measurements", ("SFAS 157"). The change in
fair value of the deferred rent liability during the nine months ended September
30, 2008, was $211,790 resulting in a liability of $51,000. The amount of the
liability was calculated based on the net present value technique using an
interest rate of 4.58%. The interest rate is based upon the three-year
Treasury-Bill rate as of July 2007. The change was due to a new sublease
agreement with a company to rent office space from the Company.

9. Commitments and Contingencies

Lease

As of September 30, 2008, the Company was committed for future minimum rent
under the lease for their former manufacturing, warehouse and administrative
space, net of sublease income, plus subsidy payments by the Company to the
sublessor, through December 31, 2010. The present value of the future minimum
rent under the lease, net of sublease income, was charged to general and
administrative expenses in connection with the Company's continuing operations.
The minimum payments are as follows:

                                                          Sublease
                                                      net of sublease
                                            Lease     subsidy payments       Net
                                          ---------- ------------------ -----------
   October 1 through December 31, 2008     $ 23,175          $  17,175    $  6,000
   2009                                      95,175             71,175      24,000
   2010                                      97,875             73,875      24,000
                                          ---------- ------------------ -----------
                                           $216,225          $  162,225   $ 54,000
                                          ========== ================== ===========

                                       12
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Other

The Company is subject to claims arising in the ordinary course of business.
There are no current proceedings or litigation involving us that we believe if
judgment were rendered against us would have a material adverse impact on our
financial position, results of operations or cash flows.

10. Subsequent Event

On September 12, 2008, the Company extended its November 28, 2007 agreement with
an advisory services firm to provide investment banking services. The agreement
as modified will terminate on December 31, 2008.

Item 2. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations

Forward-Looking Statements

The discussion in this Quarterly Report on Form 10-Q contains forward-looking
statements that have been made pursuant to the provisions of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
based on current expectations, estimates and projections about the software
industry and certain assumptions made by the Company's management. Words such as
"anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates,"
"could," "would," "may," "on target," "envisions," and variations of such words
and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict; therefore, actual results may differ materially from those expressed or
forecasted in any such forward-looking statements. Unless required by law, the
Company undertakes no obligation to update publicly any forward-looking
statements, whether as a result of new information, future events or otherwise.
However, readers should carefully review the risk factors set forth in other
reports or documents the Company files from time to time with the SEC,
particularly the Company's Annual Report on Form 10-KSB, Quarterly Reports on
Form 10-Q and any Current Reports on Form 8-K.

The following discussion should be read in conjunction with the unaudited
financial statements and notes thereto in Part I, Item 1 of this Quarterly
Report on Form 10-Q and with the audited Financial Statements and Notes thereto,
together with Management's Discussion and Analysis of Financial Condition and
Results of Operations, which are included in the Company's Annual Report on Form
10-KSB for the fiscal year ended December 31, 2007 as filed with the SEC.

Overview

We were incorporated in Delaware in 1990 to design, manufacture, sell and
service image-directed, computer-controlled robotic software and hardware
products for use in orthopedic surgical procedures. Although we had not received
clearance to market the ROBODOC(R) System (ROBODOC) in the U.S., we were
permitted to export the system provided certain requirements were met. Products
approved for use by European Union member countries and Australia, Canada,
India, Israel, Japan, Korea, New Zealand, Switzerland and South Africa, do not
require U.S. FDA export approval. We had sold our robotic systems to
international distributors, who in turn resold the product in their territories.
Our international distributors were KTEC in Japan, ROCOM Frontier in Korea and
Paramount Impex in India.

After the sale of substantially all of our assets on June 28, 2007, the Company
became inactive. The Company has no employees and all services are provided by
contracted personnel.

Our operations are limited to raising additional funds to be used to maintain
our public company status and for a business combination if a suitable candidate
is located. Raising additional funds includes the sale of 2,896,394 shares of
common stock at $0.6042 per share for an aggregate purchase price of $1,750,000

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in April, 2008. Our stockholders have approved the future liquidation of the
Company if we are unable to complete an acquisition or similar transaction by
June 28, 2008. At the same time, our stockholders granted the Board of Directors
authority to abandon any decision to liquidate without further stockholder
action if it determines the liquidation is not in the best interests of the
Company or our stockholders. As at the date of this filing, the Company has not
begun its liquidation.

Operations for the nine months ended September 30, 2008 are not comparative to
the corresponding period ended September 30, 2007 as 2008 included only our
limited continuing activity, while 2007 included the operations of our
historical discontinued business until the sale of substantially all of our
assets on June 28, 2007 and our limited continuing activity thereafter.

For the nine months ended September 30, 2008, our general and administrative
expenses consisted of our continuing expenses to maintain our public company
status offset by the effect of a reduction in deferred rent from a new sublease
agreement with a company to lease office space from us. We retained the lease
obligation as part of the sale of substantially of our assets. The sublease
agreement provides for the sublessee to pay our lessor each month for the rent
owed by us under our lease through December 31, 2010, the duration of the lease
term. As an incentive to agree to the sublease, we have agreed to pay the
sublessor $2,000 each month our rent is paid. For the three months ended
September 30, 2008, and September 30, 2007, our general and administrative
expenses consisted of our continuing expenses to maintain our public company
status. Discontinued operations for the nine ended September 30, 2007 consisted
primarily of revenues and the amortization and settlement of existing agreements
of $1,016,000, net of costs of those revenues general and administrative
expenses. For the same period, net gain on sale of assets was related to the
sale of substantially all of our assets on June 28, 2007 and consisted of the
following:

Proceeds
         Cash                                $ 4,000,000
         Cancellation of indebtedness          3,934,462
                                             -----------
              Total proceeds                   7,934,462

Net book value of assets sold                 (1,001,007)
Employee retention incentives                   (486,385)
Present value of net future lease payments      (250,376)
Legal expenses                                   (20,557)
                                             -----------

           Gain on sale of assets            $ 6,176,137
                                             ===========


Liquidity and Capital Resources

On April 18, 2008, we entered into stock purchase agreements with five
accredited investors pursuant to which the investors agreed to purchase from us
an aggregate of 2,896,394 shares of our common stock at a purchase price per
share equal to $0.6042, for an aggregate purchase price of $1,750,000. In
connection with the transaction, we provided demand and piggy-back registration
rights to each investor pursuant to a registration rights agreement. The
transaction was completed on April 25, 2008.

We believe our current cash position is adequate to carry out our plan.

At September 30, 2008, our "quick ratio" (cash divided by current liabilities),
a conservative liquidity measure designed to predict our ability to pay bills,
was 84.1.

We anticipate that we will incur operating losses from continuing operations in
the next twelve months, until we enter into a business combination or until our
liquidation.

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Cash used in continuing operating activities of $342,000 for the nine months
ended September 30, 2008 was due primarily to our net loss from continuing
operations of $117,000 and a decrease in deferred rent of $212,000.

We do not have any material commitments for capital expenditures.

We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, liquidity or capital resources that
are material to our investors.

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 unaudited financial statements included
elsewhere in this Form 10-Q and has been prepared in accordance with accounting
principles generally accepted in the United States of America as disclosed in
our annual financial statements in our Form 10-KSB for the year ended December
31, 2007. Interim results are not necessarily indicative of the results for a
full year.

Estimates

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date
of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from those estimates.

Item 3. Quantitative And Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact our financial position,
operating results or cash flows due to changes in U.S. interest rates. Our
exposure to market risk is confined to our cash and short-term investments that
have maturities or interest reset dates of less than one year. The goals of our
cash investment policy are the security of the principal invested and
fulfillment of liquidity needs. We currently do not hedge interest rate
exposure. Because of the short-term nature of our investments, we do not believe
that an increase in market rates would have any material negative impact on the
value of our investment portfolio.

As of September 30, 2008, we held approximately $4.45 million in a money market,
savings and checking accounts account at major banks.

Item 4T. Controls And Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our management has established and maintains a system of disclosure controls and
procedures (as defined in Rule 13(a)-15(e) under the Securities Exchange Act of
1934) designed to provide reasonable assurance that information required to be
disclosed by us in the reports filed or submitted by us under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms, and includes controls and procedures designed to provide reasonable
assurance that information required to be disclosed by us in those reports is
accumulated and communicated to our management, including our Chief Executive
Officer and our Chief Financial Officer (our principal executive officer and
principal financial officer, respectively), as appropriate to allow timely

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decisions regarding required disclosure. As of September 30, 2008, our
management, including our Chief Executive Officer and our Chief Financial
Officer, had conducted an evaluation of our disclosure controls and procedures.
Based on this evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are effective to
provide reasonable assurance that the information required to be disclosed by us
in the reports we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms.

All disclosure control systems, no matter how well designed, have inherent
limitations. Therefore, even those systems determined to be effective can
provide only reasonable assurance with respect to financial statement
preparation and presentation.

(b) Changes in Internal Controls

Our management, including our Chief Executive Officer and our Chief Financial
Officer, also conducted an evaluation of any changes in internal control over
financial reporting (as defined under Rule 13(a)-15(e) under the Securities
Exchange Act of 1934) that occurred during the last fiscal quarter covered by
this Quarterly Report. That evaluation did not identify any significant changes
to the Company's internal control over financial reporting that have materially
affected, or are reasonably likely to materially affect, the Company's internal
control over financial reporting.


Part II. OTHER INFORMATION

Item 1. Legal Proceedings

The Company is subject to various legal proceedings and claims arising in the
ordinary course of business. There are no current proceedings or litigation
involving us that we believe if judgment were rendered against us would have a
material adverse impact on our financial position, results of operation or cash
flows.

Item 6. Exhibits

Pursuant to the rules and regulations of the SEC, we have filed certain
agreements as exhibits to this Quarterly Report on Form 10-Q. These agreements
may contain representations and warranties by the parties. These representations
and warranties have been made solely for the benefit of the other party or
parties to such agreements and (i) may have been qualified by such disclosures
made to such other party or parties, (ii) were made only as of the date of such
agreements or such other date(s) as may be specified in such agreements and are
subject to more recent developments, which may not be fully reflected in our
public disclosure, (iii) may reflect the allocation risk among the parties to
such agreements and (iv) may apply materiality standards different from what may
be viewed as material to investors. Accordingly, these representations and
warranties may not describe our actual state of affairs at the date hereof and
should not be relied upon.

Exhibit No.       Description
-----------       -----------

3.1               Articles of Incorporation (1)
3.2               By-laws (1)
31.1              Certification Pursuant to Exchange Act Rule 13a-14(a) of
                  Christopher A. Marlett *
31.2              Certification Pursuant to Exchange Act Rule 13a-14(a) of
                  Michael J. Tomczak *
32.1              Certification Pursuant to Section 1350 of the Sarbanes-Oxley
                  Act of 2002 of Christopher A. Marlett *

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32.2              Certification Pursuant to Section 1350 of the Sarbanes-Oxley
                  Act of 2002 of Michael J. Tomczak *

     (1) Incorporated by reference to Form SB-2 filed on July 30, 1996

     * Filed herewith




















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                                   SIGNATURES

Pursuant to the requirements of the Exchange Act, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly
authorized.


                        INTEGRATED SURGICAL SYSTEMS, INC.


                           By: /s/ Michael J. Tomczak
                           -------------------------------
                           Michael J. Tomczak, Chief Financial Officer


Dated:  November 7, 2008




















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