FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1996
Commission File Number: 1-11140
OPHTHALMIC IMAGING SYSTEMS
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3035367
(State of Incorporation) (IRS Employer Identification No.)
221 LATHROP WAY, SUITE I, SACRAMENTO, CA 95815
(Address of principal executive offices)
(916) 646-2020
(Issuer's telephone number)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act 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 XX No
As of June 30, 1996, 3,307,164 shares of common stock, at no par value,
were outstanding.
<PAGE>
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
1
<PAGE>
OPHTHALMIC IMAGING SYSTEMS
MAY 31, 1996
(UNAUDITED)
ASSETS
Current assets:
Cash and equivalents $ 1,839,716
Accounts receivable, net 1,683,814
Inventories, net 1,331,431
Prepaid expenses and other current assets 144,492
Total current assets 4,999,453
Furniture and equipment, net of accumulated
depreciation and amortization of $608,974 284,868
Other assets 7,041
$ 5,291,362
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit $ 550,000
Accounts payable 1,047,903
Accrued liabilities 1,019,201
Deferred extended warranty revenue 63,557
Customer deposits 43,110
Current portion of notes payable 7,911
Total current liabilities 2,731,682
Notes payable, less current portion 7,894
Commitments
Stockholders' equity:
Preferred stock, no par value, 20,000,000 shares
authorized; none issued or outstanding --
Common stock, no par value, 20,000,000 shares
authorized; 3,307,164 issued and outstanding 8,943,900
Accumulated deficit (6,392,114)
Total stockholders' equity 2,551,786
$ 5,291,362
SEE ACCOMPANYING NOTES.
2
<PAGE>
<TABLE>
<CAPTION>
OPHTHALMIC IMAGING SYSTEMS
Ophthalmic Imaging Systems
Condensed Statements of Operations
(Unaudited)
Three months ended May 31, Nine months ended May 31,
1996 1995 1996 1995
<S> <S> <S> <S> <S>
Net revenues $ 1,808,632 $ 1,838,806 $ 5,888,311 $ 5,210,022
Cost of sales 1,190,646 1,197,707 3,913,858 3,364,981
Gross Profit 617,986 641,099 1,974,453 1,845,041
Operating expenses:
Sales and marketing 403,742 353,206 1,257,492 1,167,082
General and
administrative 179,490 112,748 542,351 322,274
Research and
development 217,899 165,562 585,747 524,273
Total operating
expenses 801,131 631,516 2,385,590 2,013,629
(Loss) income from
operations (183,145) 9,583 (411,137) (168,588)
Other (expense) income,
net (166,321) (5,798) (234,762) 8,797
Net (loss) income $ (349,466) $ 3,785 $ (645,899) $ (159,791)
Shares used in the calculation
of net (loss) income
per share 2,243,533 930,862 1,836,953 875,112
Net (loss) income per share (0.16) $ 0.00 $ (0.35) $ (0.18)
See accompanying notes.
3
</TABLE>
<PAGE>
OPHTHALMIC IMAGING SYSTEMS
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(UNAUDITED)
NINE MONTHS ENDED MAY 31,
1996 1995
OPERATING ACTIVITIES:
Net loss $ (645,899) $ (159,791)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 74,327 77,339
Net increase in current assets other
than cash and equivalents (613,160) (733,218)
Net increase in current liabilities
other than short-term borrowings 397,686 94,411
Net cash used in operating activities (787,046) (721,259)
INVESTING ACTIVITIES:
Purchases of furniture and equipment (102,257) (70,272)
Net (decrease) increase in other assets (2,152) 4,720
Net cash used in investing activities (104,409) (65,552)
FINANCING ACTIVITIES:
Principal payments on notes payable (5,295) (6,948)
Proceeds from line-of-credit borrowings 150,000 300,000
Net proceeds from sale of common stock 2,269,261 -
Net cash provided by financing activities 2,413,966 293,052
Net increase (decrease) in cash and equivalents 1,522,511 (493,759)
Cash and equivalents at beginning of period 317,205 810,743
Cash and equivalents at end of period $ 1,839,716 $ 316,984
SEE ACCOMPANYING NOTES.
4
<PAGE>
Ophthalmic Imaging Systems
Notes to Condensed Financial Statements
Three and Nine Month Periods ended May 31, 1996 and 1995
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited condensed balance sheet as
of May 31, 1996, condensed statements of operations for
the three and nine month periods ended May 31, 1996 and
1995 and the condensed statements of cash flows for the
nine month periods ended May 31, 1996 and 1995 have
been prepared in accordance with generally accepted
accounting principles for interim financial information
and with the instructions to Form 10-QSB and Item
310(b) of Regulation S-B. Accordingly, they do not
include all of the information and footnote disclosures
required by generally accepted accounting principles
for complete financial statements. It is suggested
that these condensed financial statements be read in
conjunction with the audited financial statements and
notes thereto included in the registrant's (the
Company's) Annual Report for the Fiscal Year Ended
August 31, 1995 on Form 10-KSB. In the opinion of
management, the accompanying condensed financial
statements include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair
presentation of the Company's financial position and
results of operations for the periods presented. The
results of operations for the period ended May 31, 1996
are not necessarily indicative of the operating results
for the full year.
Certain amounts in the fiscal 1995 financial statements
have been reclassified to conform with the presentation
in the fiscal 1996 financial statements.
Note 2. Net Income (Loss) Per Share
Net income per share is computed using the weighted
average number of common and common equivalent shares
of common stock outstanding, which common equivalent
shares include the dilutive effect from stock options
and warrants. Net loss per share is computed using the
weighted average number of shares of common stock
outstanding. Common equivalent shares from stock
options and warrants are excluded from the computation
of net loss per share because their effect is
antidilutive.
5
Note 3. Line of Credit
In April 1995, the Company entered into a revolving
line of credit agreement (the "Credit Agreement") with
a bank (the "Bank"). The maximum amount available
under the terms of the Credit Agreement is $750,000 and
is based upon eligible outstanding accounts receivable
balances. Borrowings under the Credit Agreement bear
interest at the Bank's prime lending rate plus two and
one-half percent and are secured by virtually all
assets of the Company.
The Credit Agreement contains certain restrictive
covenants which provide for, among other things,
certain working capital and net worth balances and
ratios, and limitations on the amount of net loss the
Company may incur in a quarter.
In connection with the Credit Agreement, the Company
also modified a warrant previously issued to the Bank.
The modifications included increasing the number of
common shares for which the warrant is exercisable to
25,000, changing the per share exercise price to $2.39
and extending the expiration date to April 2000.
In November 1995, the Company amended the Credit
Agreement. The amendments included extending the
maturity date to April 1996, and increasing the amount
of the loss the Company may incur in a quarter. As a
condition to amending the Credit Agreement, the Company
modified the warrant issued to the Bank. The
modifications include increasing the number of common
shares under the warrant for which the warrant is
exercisable to 67,500, reducing the per share exercise
price to $1.73 and extending the expiration date to
November 2000. The number of shares for which the
warrant is exercisable may be reduced to 50,000 upon
the occurrence of certain events.
In April 1996, the Company again amended the Credit
Agreement. The amendments included extending the
maturity date to July 1996 and limiting the amount of
the net loss the Company may incur in a quarter.
In May 1996, the Bank exercised an alternative stock
appreciation right available under the warrant. In
conjunction with said exercise, the Company has accrued
a liability of approximately $220,000 as of May 31,
1996, said amount being the entire amount of the
obligation under the warrant. The Company recognized
additional interest expense of approximately $151,000
during the quarter ended May 31, 1996 in connection
with said exercise. The Company had previously accrued
as interest expense approximately $69,000 in connection
with a put right under the warrant, which right is
foregone in lieu of the Bank exercising its alternative
stock appreciation right. The parties have agreed in
principal to revise the form of consideration and
timing of payment under the alternative stock
appreciation right, and are currently negotiating the
terms of that agreement.
6
Note 4. Reverse Stock Split
On November 30, 1994, the Company's shareholders
approved an amendment to the Company's Restated
Articles of Incorporation to effect a 1-for-3 reverse
stock split of the Company's issued and outstanding
common stock. Therefore all common stock share and per
share amounts in the accompanying statements have been
appropriately adjusted to reflect the reverse stock
split.
Note 5. Private Placement
On November 21, 1995, the Company completed a private
placement of 1,368,421 shares of its common stock with
detachable warrants. The proceeds from this offering
were approximately $1,075,000 (net of issuance costs of
approximately $225,000). Along with each share of
common stock issued, the purchasers were given an "A
Warrant" and a "B Warrant" to purchase shares of the
Company's common stock. The A and B Warrants per share
exercise prices are $1.25 and $1.75, respectively. The
number of shares exercisable as well as the per share
exercise prices of the A and B Warrants are subject to
adjustment upon the occurrence of certain events. The
A and B Warrants expire on November 21, 1996 and
November 21, 1997, respectively.
In addition, the A and B Warrants are subject to
redemption by the Company at $.10 per warrant
commencing May 21, 1996 and May 21, 1997 (the
"Redemption Dates"), respectively. The A and B Warrant
redemption provisions are only available if the
Company's common stock price exceeds $2.25 and $2.50,
respectively, for the twenty trading days immediately
preceding the corresponding Redemption Dates.
The placement agent was issued a warrant to purchase
250,000 shares of the Company's common stock at $.95
per share. The number of shares exercisable as well as
the per share exercise price are subject to adjustment
upon the occurrence of certain events. This warrant
expires in November 1999. In addition, the placement
agent will receive as a commission, 10% of the proceeds
received by the Company upon the exercise of the A and
B Warrants described above.
In May 1996, 1,052,631 of the A Warrants were
exercised. The proceeds from this exercise were
approximately $1,184,000 (net of issuance costs of
approximately $132,000).
7
Note 6. Subsequent Events
In July 1996, the Company amended its Credit Agreement
with a bank. The amendments included extending the
maturity date to October 1996 and limiting the amount
of the net loss the Company may incur in the fourth
quarter of fiscal 1996.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
To date, the Company has designed, developed, manufactured and
marketed ophthalmic digital imaging systems and has derived
substantially all of its revenues from the sale of such
products.
The Company believes that as the U.S. healthcare system moves
toward managed care, however, the needs of the managed care
providers are changing the nature and demand for medical
imaging equipment and services. New opportunities in
telemedicine are emerging that may allow managed care
organizations to reduce costs while maintaining their quality
of patient care. OIS is currently a market leader in the
ophthalmic imaging field and plans to leverage its digital
imaging technology and established customer base to develop
product features and services targeting telemedicine/managed
care applications for the ocular health care industry.
Since its inception, the Company's products have addressed
primarily the needs of the ophthalmic flourescein angiography
market, and more recently the indocyanine green ("ICG") market.
The Company believes that the overall angiography market
remains limited, however, and that sustaining growth in its
traditional angiography equipment business will become
increasingly difficult. In recognition of this, the Company is
expanding its product capabilities to address the emerging
telemedicine market, including remote consultation. While the
Company will continue to support its entire line of digital
angiography products, it will focus its future efforts on
developing product enhancements and pursuing viable
opportunities in this market, particularly as they relate to
telemedicine/managed care applications.
The Company's objective is to become a leading provider of
telemedicine products and services in the ocular health care
industry, while maintaining its position as a market leader in
its existing digital imaging products.
In this regard, the Company is also developing a Reading
Center, through which it intends to provide descriptive
interpretation services of electronically transmitted digital
images acquired at remote locations. The Company has secured
an agreement to conduct a pilot program with a major managed
care provider to evaluate remote image interpretation for
diabetic retinopathy screening. At the conclusion of the pilot
program, the Company anticipates entering into negotiations
with the provider for contracting the Reading Center services.
9
The Company continues to assess potential market opportunities
in anticipation of results from clinical validation studies of
its Glaucoma-Scope<reg-trade-mark> product, an instrument
specifically designed for the early diagnosis of glaucoma, a
commonly occurring eye disease regularly screened for by eye
care practitioners.
The Company's results of operations have historically
fluctuated from quarter to quarter due to a number of factors
and are not necessarily indicative of the results to be
expected for any future period or expected for the fiscal year
ending August 31, 1996. There can be no assurance that revenue
growth or profitability can be achieved or sustained in the
future.
The following discussion should be read in conjunction with the
unaudited interim financial statements and the notes thereto
which are set forth elsewhere in this Report on Form 10-QSB.
In the opinion of management, the unaudited interim period
financial statements include all adjustments, all of which are
of a normal recurring nature, that are necessary for a fair
presentation of the results of the periods.
RESULTS OF OPERATIONS
The Company had revenues of $1,808,632 for the third quarter of
fiscal 1996 compared to revenues of $1,838,806 for the third
quarter of the previous fiscal year. Revenues for the first
nine months of fiscal 1996 were $5,888,311 versus $5,210,022
for the comparable period of fiscal 1995. The primary factor
contributing to the reduced 1996 third quarter revenue level
was a reallocation of the Company's resources to address
emerging opportunities in the telemedicine/managed care market.
The increased revenue levels for the 1996 nine-month period are
principally attributable to strong sales during the first half
of the fiscal year of the Company's digital angiography systems
incorporating both the ICG interfaces and a family of
Windows<trademark> based products introduced over the past two
years. The Company will continue to allocate resources to
address the telemedicine/managed care market, as sustaining
growth in its traditional angiography equipment business
becomes increasingly difficult. As a result, the Company may
experience reduced revenue levels from sales of its digital
imaging equipment products in the near-term. As anticipated,
revenues from sales of Glaucoma-Scope<reg-trade-mark> units
were below the 1995 levels for both the third quarter and nine-
month period as the Company continues to direct the majority of
its resources to support the increased demand for its digital
angiography products and, more recently, to pursue
opportunities in the telemedicine/managed care market.
Contributions to revenues from sales of Glaucoma-
Scope<reg-trade-mark> units have been negligible and management
does not anticipate significant near-term sales improvement for
the Glaucoma-Scope<reg-trade-mark>, recognizing that longer-
term sales growth remains dependent upon market acceptance of
the system and resolution of healthcare reform and
reimbursement issues.
10
Gross margins were approximately 34% during both the third
quarter and nine-month period ended May 31, 1996 versus
approximately 35% for both the comparable quarter and nine-
month period of 1995. These decreases in gross margin
percentage were attributable primarily to higher labor and
manufacturing support costs. The Company continues to evaluate
its expenses in this area consistent with current and
anticipated business conditions and management does not
anticipate significant, if any, near-term margin improvement.
Sales and marketing and general and administrative expenses
accounted for approximately 32% of total revenues during the
third quarter of fiscal 1996 as compared with approximately 25%
during the third quarter of fiscal 1995. For the first nine
months of fiscal 1996 such expenses accounted for approximately
31% versus approximately 29% in fiscal 1995. Expense levels
also increased to $583,232 during the third quarter of 1996
versus $465,954 during the third quarter of 1995. For the
first nine months of 1996, expense levels increased to
$1,799,843 from $1,489,356 during the comparable period of
1995. The primary factors contributing to the increase in both
the third quarter and the nine-month period were costs
associated with hiring additional support personnel, the impact
of increased reserves for potential credit losses and
marketing, sales and related research and development costs
associated with developing the telemedicine/managed care
applications and the start-up marketing efforts associated
therewith. The Company anticipates expenses in this area will
continue to run above historical levels.
Research and development expenses, as a percentage of revenues,
was approximately 12% in the third quarter of 1996 versus
approximately 9% during the same period of 1995. For the first
nine months of both fiscal 1996 and 1995, such expenses
accounted for approximately 10% of total revenues. Expense
levels increased in actual dollar terms to $217,899 during the
third quarter of 1996 from $165,562 in 1995. During the first
nine months of fiscal 1996, expense levels also increased in
actual dollar terms to $585,747 versus $524,273 in 1995. The
Company anticipates that it will incur increased expense levels
in near-term as it dedicates more resources to the research and
development of telemedicine/managed care applications, while
continuing to incur expenses with respect to its current
products. In this regard, the Company intends to continue
research and development efforts on product enhancements and
reducing cost configurations for its current products,
particularly as they impact telemedicine/managed care
applications.
11
Other expense was $166,321 during the third quarter of fiscal
1996 versus $5,798 during the same period of 1995. Other
expense during the first nine months of fiscal 1996 was
$234,762 as compared to other income of $8,797 during the
comparable period of 1995. The primary contributing factor to
these changes was a significant increase in interest expense
during 1996 versus 1995 associated with additional borrowings
under an existing credit line, which was not in place until the
third quarter of fiscal 1995, in particular conjunction with an
alternative stock appreciation right pursuant to a warrant
previously issued to the Company's Bank. In May 1996, the Bank
exercised an alternative stock appreciation right available
under the warrant. In conjunction with said exercise, the
Company recognized additional interest expense of approximately
$151,000 during the quarter ended May 31, 1996. The Company had
previously recognized as interest expense of approximately
$69,000 in connection with a put right under the warrant, which
right is foregone in lieu of the Bank exercising its
alternative stock appreciation right. During the 1996 nine-
month period, the Company recognized as interest expense
approximately $208,000 in connection with both the put right
and the alternative stock appreciation right. The parties have
agreed in principal to revise the form of consideration and
timing of payment under the alternative stock appreciation
right, and are currently negotiating the terms of that
agreement.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities used cash of $787,046 and
$721,259 in the first nine months of fiscal 1996 and 1995,
respectively. The cash used by operations in the first nine
months of both 1996 and 1995 resulted primarily from the net
loss during the period and increases in accounts receivable and
inventory, which amounts were partially offset by increases in
accounts payable and other current liabilities, excluding
borrowings under the Credit Agreement.
Cash used in investing activities was $104,409 during the first
nine months of 1996 as compared to $65,552 during the same
period for 1995. The Company's primary investing activities
consist of equipment and other capital asset acquisitions. The
Company does not currently have any pending material
commitments regarding capital expenditures. The Company is,
however, evaluating the need to upgrade its existing management
information systems, which may result in increased near-term
capital expenditures. In addition, the Company anticipates
certain capital expenditures to support efforts to expand its
technology to telemedicine/managed care applications. The
Company anticipates that related expenditures, if any, will be
financed from one or more of the following sources: (i)
working capital; (ii) borrowings under an existing credit
agreement, if available; or (iii) debt, equity or other
financing arrangements, if any, available to the Company.
12
The Company generated cash of $2,413,966 from financing
activities during the first nine months of fiscal 1996 as
compared to $293,052 during the first nine months of fiscal
1995. The sources of cash from financing activities during the
1996 period were principally the net proceeds from a private
placement of the Company's common stock in November 1995, the
net proceeds from the exercise of certain A Warrants issued
pursuant to said private placement in May 1996 and, to a lesser
extent, borrowings under the Credit Agreement. Cash generated
in 1995 was solely from borrowings under the Credit Agreement.
Cash generated from financing activities during both 1996 and
1995 was offset slightly by principal repayments on notes
payable.
As indicated above, the Company intends to allocate significant
resources to the development and marketing of
telemedicine/managed care products and services. During this
development period, the Company could experience a decrease in
revenues and earnings while incurring additional expenses in
connection with such activities. Accordingly, the Company
anticipates that it could continue to experience negative cash
flow from operations in the near-term. In addition, the Credit
Agreement, which has been extended, will come due in October
1996, and there can be no assurance that the Company will be
able to negotiate further extensions. As also indicated above,
although the Company and the Bank have agreed in principal to
revise the form of consideration and timing of payment under
the alternative stock appreciation right and the Company
believes that it will be able to enter into a final agreement
with the Bank with regard to such matters, there can be no
assurance that it will be able to do so, in which case the
entire amount of the obligation would be due. Although the
Company believes that it will be able to raise the funds
necessary to satisfy its liquidity and capital requirements
from alternative sources including extending or refinancing its
Credit Agreement, other debt financing, issuing equity
securities or entering into other financing arrangements, there
can be no assurance that such financing will be available and,
if available, that it will be obtained in terms favorable to
the Company. Additional capital could also be made available
to the Company pursuant to the exercise of additional warrants
issued in connection with the November 1995 private placement.
However, there can be no assurance that any such warrants will
be exercised in the near-term, if at all.
13
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
In November 1995, the Company amended a Credit
Agreement with a Bank, pursuant to which the Company
modified a warrant previously issued to the Bank,
including: (i) increasing the aggregate number of
common shares issuable upon exercise of such warrant
to 67,500, which number may be reduced to 50,000 upon
the occurrence of certain events; (ii) reducing the
per share exercise price to $1.73; and (iii) extending
the expiration date to November 2000.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The exhibits listed on the accompanying
Index to Exhibits below are filed as a part
hereof and are incorporated by reference.
(b) No reports on Form 8-K were filed during the
quarter for which this report was filed.
14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the undersigned has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
OPHTHALMIC IMAGING SYSTEMS
(Registrant)
By: STEVEN R. VERDOONER
Steven R. Verdooner,
President and Chief Financial Officer
(principal executive officer and
principal financial and accounting
officer)
Dated: July 15, 1996
15
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
3.1* Articles of Incorporation of the Registrant,
as amended.
3.2* Amended Bylaws of the Registrant.
4.1 See Exhibits 3.1 and 3.2 for provisions of the
Articles of Incorporation, as amended, and the
amended Bylaws of the Registrant defining the
rights of holders of Common Stock of the
Registrant.
4.2* Specimen of Stock Certificate.
10.1* Lease Agreement, dated as of July 10, 1987,
between the Registrant (as tenant) and
Transamerica/Emkay Income Properties I, as
amended on July 23, 1990 and June 11, 1991.
10.1(a)(4) Sixth Amendment to lease effective as of
July 1, 1995.
10.2* Employment Agreement, dated March 27, 1992,
between the Registrant and Dennis J. Makes.
10.2(a)(1) Amendment dated June 30, 1993 to the
Employment Agreement between the Registrant
and Dennis J. Makes dated March 27, 1992.
10.3* Confidentiality Agreement, dated March 27,
1992 between the Registrant and Dennis J.
Makes.
10.4* Confidentiality Agreement, dated March 27,
1992 between the Registrant and Steven R.
Verdooner.
10.5* Confidentiality Agreement, dated March 27,
1992 between the Registrant and Richard
Wullaert.
10.6* Consulting Agreement, dated January 23, 1992,
between the Registrant and G. Peter Halberg,
M.D.
10.7* Assignment dated October 23, 1990 of U.S.
Patent Application for Apparatus and Method
for Topographical Analysis of the Retina to
the Registrant by Steven R. Verdooner,
Patricia C. Meade, and Dennis J. Makes (as
recorded on Reel 5490, Frame 423 in the
Assignment Branch of the U.S. Patent and
Trademark Office).
16
10.8* Form of International Distribution Agreement
used by the Registrant and sample form of End
User Software License Agreement.
10.9* Original Equipment Manufacturer Agreement,
dated April 1, 1991, between the Registrant
and SONY Medical Electronics, a division of
SONY Corporation of America.
10.10* Original Equipment Manufacturer/Value Added
Reseller Agreement, dated May 7, 1991, between
the Registrant and Eastman Kodak Company.
10.11* The Registrant's 1992 Nonstatutory Stock
Option Plan and sample form of Nonstatutory
Stock Option Agreement.
10.12* Common Stock and Warrant Purchase Agreement
("Stock Purchase Agreement"), dated as of
February 8, 1992, among the Registrant, Jonnie
R. Williams, Kathleen M. O'Donnell, as Trustee
of Irrevocable Trust No. 6, FBO F.E.
O'Donnell, Jr., M.D., Steven R. Verdooner and
Dennis J. Makes.
10.12(a)* Amendment No. 1 to Stock Purchase Agreement,
dated March 25, 1992, among the Registrant,
Jonnie R. Williams, individually, Jonnie R.
Williams, as Trustee of Irrevocable Trust No.
1, Rambert Summons, and Kathleen M. O'Donnell,
as Trustee of Irrevocable Trust No. 6, FBO
F.E. O'Donnell, Jr., M.D.
10.13* Cross-Indemnification Agreement, dated
February 14, 1991, among Dennis Makes, Steven
Verdooner, and Richard Wullaert.
10.14* Key Man Life Insurance Policies in the amount
of $1,000,000 for each of Dennis J. Makes and
Steven R. Verdooner, with the Registrant as
the named beneficiary.
10.15(1) Warrant dated February 12, 1993 issued by the
Registrant to Steven R. Verdooner to purchase
50,000 shares of Common Stock.
10.16(1) Stock Option Plan.
10.17(1) Promissory Note dated January 4, 1993 from the
Registrant to Western Financial Savings Bank
in the amount of $25,209.83 due in full by
January 4, 1998.
10.18(2) Rental Agreement dated May 1, 1994 by and
between the Registrant and Robert J. Rossetti.
17
10.19(3) Security and Loan Agreement (with Credit Terms
and Conditions) dated April 12, 1995 by and
between the Registrant and Imperial Bank.
10.19(a)(3) General Security Agreement dated April 12,
1995 by and between the Registrant and
Imperial Bank.
10.19(b)(4) Warrant dated November 1, 1995 issued by the
Registrant to Imperial Bank to purchase 67,500
shares of Common Stock.
10.19(c)(4) Amended Loan and Security Agreement (with
Credit Terms and Conditions) dated November 1,
1995.
10.19(d)(4) Registration Rights Agreement dated November
1, 1995 between the Registrant and Imperial
Bank.
10.19(e) Amended Loan and Security Agreement (with
Credit Terms and Conditions) dated April 4,
1996.
10.20(4) Purchase Agreements dated November 21, 1995
between the Registrant, JB Oxford & Company
and certain Investors.
10.20(a)(4) Warrant Agreement dated November 21, 1995
between the Registrant, JB Oxford & Company
and certain Investors.
10.20(b)(4) Registration Rights Agreement dated November
21, 1995 between the Registrant, JB Oxford &
Company and certain Investors.
10.21(4) Employment Agreement dated November 20, 1995
between the Registrant and Steven R.
Verdooner.
10.22(4) Employment Agreement dated November 20, 1995
between the Registrant and R. Michael Clark.
10.25(5) The Registrant's 1995 Nonstatutory Stock
Option Plan and sample form of Nonstatutory
Stock Option Agreement.
* Incorporated by reference to the like-numbered exhibits previously filed
with Registrant's Registration Statement on Form S-18, number 33-46864-LA.
(1) Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the fiscal year ended August 31, 1993 filed on November 26, 1993.
18
(2) Incorporated by reference to the Registrant's Annual Report
on Form 10-KSB for the fiscal year ended August 31, 1994
filed on November 29, 1994.
(3) Incorporated by reference to the Registrant's Quarterly
Report on Form 10-QSB for the quarterly period ended May 31,
1995.
(4) Incorporated by reference to the Registrant's Annual Report
on Form 10-KSB for the fiscal year ended August 31, 1995
filed on November 29, 1995.
(5) Incorporated by reference to the Registrant's Registration
Statement on Form S-8 filed on May 28, 1996, number 333-0461.
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-QSB FOR THE PERIOD ENDED MAY 31, 1996 AND THE FORM 10-KSB FOR THE PERIOD
ENDED AUGUST 31, 1995 FOR OPHTHALMIC IMAGING SYSTEMS AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000885317
<NAME> OPHTHALMIC IMAGING SYSTEMS
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> AUG-31-1996 AUG-31-1995
<PERIOD-END> MAY-31-1996 AUG-31-1995
<CASH> 1,839,716 317,205
<SECURITIES> 0 0
<RECEIVABLES> 1,683,814 1,418,409
<ALLOWANCES> 0 111,800
<INVENTORY> 1,331,431 1,175,495
<CURRENT-ASSETS> 4,999,453 2,863,782
<PP&E> 893,842 791,585
<DEPRECIATION> 608,974 536,596
<TOTAL-ASSETS> 5,291,362 3,125,609
<CURRENT-LIABILITIES> 2,731,682 2,172,240
<BONDS> 0 0
0 0
0 0
<COMMON> 8,943,900 6,674,639
<OTHER-SE> 0 0
<TOTAL-LIABILITY-AND-EQUITY> 5,291,362 3,125,609
<SALES> 5,888,311 6,724,339
<TOTAL-REVENUES> 5,888,311 6,959,239
<CGS> 3,913,858 4,616,322
<TOTAL-COSTS> 3,913,858 4,616,322
<OTHER-EXPENSES> 2,385,590 2,677,993
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 31,857
<INCOME-PRETAX> (645,899) (356,276)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (645,899) (356,276)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (645,899) (356,276)
<EPS-PRIMARY> (0.35) (0.41)
<EPS-DILUTED> 0 0
</TABLE>
Exhibit 10.19(e)
[IMPERIAL BANK LETTERHEAD]
April 4, 1996
OPHTHALMIC IMAGING SYSTEMS
221 Lathrop Way, Suite I
Sacramento, CA 95815
Attention: Mr. Steven R. Verdooner, President
Mr. Steven C. Lagorio, Director of Finance
Re: Imperial Bank Loan No. 700000559
Gentlemen:
With reference to the Credit Terms and Conditions with Addendum
(collectively referred to as the "Loan Agreement") between Imperial Bank
("Bank") and Ophthalmic Imaging Systems ("Borrower") dated April 12, 1995
in connection with the above-referenced loan ("Loan"), and as amended by
letters dated October 11, 1995 and November 1, 1995, the Bank and Borrower
hereby modify the Loan Agreement as follows:
Paragraph 2 of the Addendum to the Loan Agreement, entitled, "Term and
Repayment", as previously amended, is deleted in its entirety and is
hereby replaced by the following: "The line of credit will require
monthly payments of interest through and including July 5, 1996 at
which time all outstanding principal, accrued but unpaid interest and
other charges thereinafter shall be due and payable in full."
Borrower shall be subject to the following covenant in addition to the
existing covenants: "Loss not to exceed $150,000 in the quarter ending
5-31-96."
Borrower shall pay Bank a $1,100 fee for this modification, which
shall be due and payable upon execution hereof by Borrower.
Except as modified hereby, the Loan Agreement shall remain unaltered and in
full force and effect. Please sign below to show your agreement with the
foregoing and return an original to me.
Sincerely,
(signed) Thomas D. Jorgensen
Thomas D. Jorgensen
Assistant Vice President
Special Markets Group
Accepted and agreed to:
OPHTHALMIC IMAGING SYSTEMS
By: (signed) Steven Verdooner
Title: President
Date: April 11, 1996
