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 November 30, 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 November 30, 1996, 3,336,264 shares of common stock, at no par
value, were outstanding.
<PAGE>1
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<PAGE>2
OPHTHALMIC IMAGING SYSTEMS
CONDENSED BALANCE SHEET
NOVEMBER 30, 1996
(UNAUDITED)
ASSETS
Current assets:
Cash and equivalents $ 459,404
Accounts receivable, net 876,337
Inventories, net 1,582,766
Prepaid expenses and other current assets 68,277
---------------
Total current assets 2,986,784
Furniture and equipment, net of accumulated
depreciation and amortization of $665,899 434,241
Other assets 63,173
---------------
$ 3,484,198
===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowings under line of credit $ 281,000
Accounts payable 905,577
Accrued liabilities 753,748
Accrued warrant appreciation right 235,160
Deferred extended warranty revenue 79,881
Customer deposits 150,980
Current portion of notes payable 5,002
---------------
Total current liabilities 2,411,348
Notes payable, less current portion 2,096
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; 3,336,264 issued and outstanding 9,025,687
Accumulated deficit (7,954,933)
---------------
Total stockholders' equity 1,070,754
---------------
$ 3,484,198
===============
SEE ACCOMPANYING NOTES.
<PAGE>3
OPHTHALMIC IMAGING SYSTEMS
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NOVEMBER 30,
1996 1995
-------------------------------
NET REVENUES $ 884,246 $ 1,909,926
COST OF SALES 650,173 1,236,194
-------------------------------
GROSS PROFIT 234,073 673,732
OPERATING EXPENSES:
SALES AND MARKETING 468,337 487,861
GENERAL AND ADMINISTRATIVE 282,768 154,213
RESEARCH AND DEVELOPMENT 264,781 197,016
------------------------------
TOTAL OPERATING EXPENSES 1,015,886 839,090
------------------------------
LOSS FROM OPERATIONS (781,813) (165,358)
OTHER EXPENSE, NET (13,722) (33,001)
------------------------------
NET LOSS $ (795,535) $ (198,359)
==============================
SHARES USED IN THE CALCULATION OF
NET LOSS PER SHARE 3,320,969 1,010,450
==============================
NET LOSS PER SHARE $ (0.24) $ (0.20)
==============================
SEE ACCOMPANYING NOTES.
<PAGE>4
OPHTHALMIC IMAGING SYSTEMS
CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(UNAUDITED)
THREE MONTHS ENDED NOVEMBER 30,
1996 1995
-------------------------------
OPERATING ACTIVITIES:
Net loss $ (795,535) $ (198,359)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 31,622 23,224
Net decrease (increase) in current assets
other than cash and equivalents 190,107 (469,989)
Net increase in current liabilities
other than short-term borrowings 247,986 313,373
-----------------------------
Net cash used in operating activities (325,820) (331,751)
INVESTING ACTIVITIES:
Purchases of furniture and equipment (104,668) (39,865)
Net decrease (increase) in other assets 23,462 (6,541)
-----------------------------
Net cash used in investing activities (81,206) (46,406)
FINANCING ACTIVITIES:
Principal payments on notes payable (1,386) (5,826)
Net (repayments of) proceeds from line-of-credit
borrowings (269,000) 50,000
Net proceeds from sale of common stock 85,491 1,068,488
-----------------------------
Net cash (used) provided by financing activities (184,895) 1,112,662
-----------------------------
Net increase (decrease) in cash and equivalents (591,921) 734,505
Cash and equivalents at beginning of period 1,051,325 317,205
-----------------------------
Cash and equivalents at end of period $ 459,404 $ 1,051,710
=============================
SEE ACCOMPANYING NOTES.
<PAGE>5
Ophthalmic Imaging Systems
Notes to Condensed Financial Statements
Three Month Periods ended November 30, 1996 and 1995
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited condensed balance sheet as of November
30, 1996, condensed statements of operations for the three month
periods ended November 30, 1996 and 1995 and the condensed
statements of cash flows for the three month periods ended November
30, 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, 1996 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 November 30, 1996 are not necessarily indicative of
the operating results for the full year.
Certain amounts in the fiscal 1996 financial statements have been
reclassified to conform with the presentation in the fiscal 1997
financial statements.
Note 2. Net Loss Per Share
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.
<PAGE>6
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 (10.75% as of
November 30, 1996).
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 and the Bank 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 included 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 was reduced to 50,000 due to the occurrence of
certain events set forth in the Credit Agreement.
In April 1996, the Company and the Bank 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.
<PAGE>7
Note 3. Line of Credit (continued)
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, but have not as yet agreed to
the definitive terms thereof.
In November 1996, the Company and the Bank again amended the Credit
Agreement. Then amendments included, among other things, extending
the maturity date to March 1997, subject to the occurrence of
certain equity transactions, and limiting the amount of the net loss
the Company may incur in the first and second quarter of fiscal
1997.
As of November 30, 1996, borrowings in the amount of $281,000 were
outstanding against the Credit Agreement. The Company was not in
compliance with certain of the restrictive covenants for the quarter
ending November 30, 1996 and the Company has requested from the Bank
a waiver with respect to such non-compliance. The potential impact
of not receiving a waiver from the Bank is that the Bank could
demand payment of the balance owing against the Credit Agreement.
Note 4. 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
net proceeds from this offering were approximately $1,075,000.
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 February 19, 1997, as
amended, and November 21, 1997, respectively.
<PAGE>8
Note 4. Private Placement (continued)
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 net
proceeds from this exercise were approximately $1,184,000.
Note 5. Subsequent Events
In December 1996, the Company received proceeds of approximately
$225,000 (net of anticipated issuance costs of approximately
$25,000) for the exercise of certain of the B Warrants issued
pursuant to the Private Placement referred to in Note 4 above.
<PAGE>9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE STATEMENTS BELOW INCLUDE STATEMENTS THAT ARE "FORWARD LOOKING
STATEMENTS" WITHIN THE MEANING OF SECTION 21A OF THE SECURITIES ACT OF
1933, AS AMENDED, IN SECTION 21E OF THE SECURITIES ACT OF 1934, AS
AMENDED, AND IS SUBJECT TO THE SAFE HARBOR CREATED THEREBY. FUTURE
OPERATING RESULTS MAY BE ADVERSELY EFFECTED AS A RESULT OF A NUMBER OF
FACTORS ENUMERATED IN THE COMPANY'S PUBLIC REPORTS.
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 has a reputation
within the ophthalmic community for producing high quality, reliable,
easy to use equipment and believes itself to be an acknowledged industry
leader in the sales of digital ophthalmic imaging systems for instant
fluorescein angiography.
The Company believes, however, that as the U.S. healthcare system moves
toward managed care 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. The Company 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, in fiscal 1996 the Company developed a Reading and
Documentation Center, through which it intends to provide documentation
services of electronically transmitted digital images acquired at remote
locations.
<PAGE>10
During fiscal 1996, the Company also 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, if successful, the Company anticipates entering into
negotiations with the provider, and others, for contracting the Reading
Center services. The Company currently has several initial commitments
to purchase its Reading and Documentation Center services. There can be
no assurance, however, that the pilot program will prove a success or
that these negotiations or commitments will result in contracts for these
services.
During the recently completed fall meeting of the American Academy of
Ophthalmology, the Company introduced a lower-priced digital imaging
system incorporating telemedicine features and targeting the general
ophthalmology market. The majority of orders received in conjunction
with this introduction are projected for delivery during the second and
third quarters of fiscal 1997.
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, 1997. 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.
<PAGE>11
RESULTS OF OPERATIONS
The Company's revenues for the first quarter of fiscal 1997 were
$884,246, representing a decrease of approximately 54% from revenues of
$1,909,926 for the first quarter of fiscal 1996. A primary factor
contributing to the reduced 1997 first quarter revenue level was the
reallocation of the Company's resources to address emerging opportunities
in the telemedicine/managed care market. In addition, the 1996 first
quarter revenue levels were largely attributable to strong sales of the
Company's digital angiography systems incorporating ICG and
Windows<trademark> features introduced over the previous 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. Based on
its backlog of current orders, however, the Company believes that its
revenues will improve during the remainder of the year. Nonetheless, in
comparison to previous years, the Company may experience reduced revenue
levels from sales of its digital imaging equipment products in the near-
term.
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.
Gross margins were approximately 26% during the first quarter ended
November 30, 1996 versus approximately 35% for the comparable quarter of
1996. This decrease in gross margin percentage was attributable primarily
to the fixed manufacturing and support costs relative to the
significantly decreased revenue levels during 1997. The Company
continues to evaluate its expenses in this area consistent with current
and anticipated business conditions and management anticipates that near-
term margin improvement, if any, would result principally from reduced
material costs associated with current deliverable system
configurations, economies of scale from increased unit production and
other manufacturing efficiencies.
Sales and marketing and general and administrative expenses accounted for
approximately 85% of total revenues during the first quarter of fiscal
1997 as compared with approximately 34% during the first quarter of
fiscal 1996. Expense levels also increased to $751,105 during the first
quarter of 1997 versus $642,074 during the first quarter of 1996. The
primary factors contributing to the increase were costs associated with
hiring additional support personnel, the impact of increased reserves for
potential credit losses and marketing, sales and related costs associated
with the telemedicine/managed care start-up marketing efforts. The
Company anticipates expenses in this area will continue to run above
historical levels.
<PAGE>12
Research and development expenses, as a percentage of revenues, was
approximately 30% in the first quarter of 1997 versus approximately 10%
during the same period of 1996. Expense levels increased in actual
dollar terms to $264,781 during the first quarter of 1997 from $197,016
in 1996. 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.
Other expense was $13,722 during the first quarter of fiscal 1997 versus
$33,001 during the same period of 1996. The primary contributing factor
to this change was a decrease in interest expense during 1997 versus 1996
associated with an existing credit line, including a reduction in
borrowings against said credit line and in particular conjunction with
interest expense recognized during the 1996 first quarter in connection
with a put right under a warrant previously issued to the Company's Bank,
which right was foregone in lieu of the Bank exercising its alternative
stock appreciation right available under said warrant in May 1996. The
parties have agreed in principal to revise the form of consideration and
timing of payment under the alternative stock appreciation right, but
have not as yet agreed to the definitive terms thereof.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities used cash of $325,820 and $331,751 in
the first quarter of fiscal 1997 and 1996, respectively. The cash used
by operations in the 1997 first quarter resulted primarily from the net
loss during the period and the decrease in accounts receivable associated
with significantly reduced revenue levels during the period, which amount
was partially offset by increases in customer deposits from orders
generated at the AAO meeting and other current liabilities, excluding
borrowings under the Credit Agreement. Cash used by operations in the
first quarter of fiscal 1996 resulted primarily from the net loss during
the quarter and increases in accounts receivable and inventory, offset in
part by increases in accounts payable.
<PAGE>13
Cash used in investing activities was $81,206 during the first quarter of
1997 as compared to $46,406 during the same period for 1996. 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, however, will continue 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.
The Company used cash of $184,895 in financing activities during the
first quarter of fiscal 1997 as compared to generating cash in the amount
of $1,112,662 during the same period of fiscal 1996. The use of cash
from financing activities during the 1997 period was principally
repayments of borrowings under the Credit Agreement, which amount was
partially offset by net proceeds from the exercise of stock options
issued to employees. 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, and, to a
lesser extent, borrowings under the Credit Agreement. Principal
repayments on notes payable was negligible in both 1997 and 1996.
<PAGE>14
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 anticipates
that it could experience a decrease in revenues and an increase in
operating losses as a result of incurring additional expenses in
connection with activities relating to the development and marketing of
telemedicine/ managed care products and services. Accordingly, the
Company anticipates that it could continue to experience negative cash
flow from operations in the near-term. In addition, while the Credit
Agreement has been extended to March 1997, there can be no assurance that
the Company will be able to negotiate further extensions. As indicated
in Note 3 of the Notes to Condensed Financial Statements, the Company was
not in compliance with certain of the restrictive covenants for the
quarter ending November 30, 1996 and the Company has requested from the
Bank a waiver with respect to such non-compliance. While the Bank has
favorably responded to all previous such requests and the Company
believes the Bank will so respond to its current request for a waiver,
there can be no assurance that said waiver will be granted. The
potential impact of not receiving a waiver from the Bank is that the Bank
could demand payment of the balance owing against the Credit Agreement,
which amount was $281,000 as of November 30, 1996. 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, which amount at November
30, 1996, including accrued interest thereon, was approximately $235,000,
would be due.
Although the Company believes that it will be able to raise the funds
necessary to satisfy its liquidity and capital requirements during the
next twelve months 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, as well as from other outstanding options and
warrants. In this regard, the Company has received a commitment to
exercise a significant number of these warrants from certain of the
warrant holders, and while the Company is currently in active discussions
with such warrant holders regarding said exercise, there can be no
assurance that any such warrants will be exercised in the near-term, if
at all.
<PAGE>15
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
In November 1996, the expiration date for the unexercised A
Warrants issued pursuant to the Private Placement of the
Company's Common Stock effective November 21, 1995, were
extended from November 21, 1996 to February 19, 1997.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As indicated in Note 3 of the Notes to Condensed Financial
Statements, the Company was not in compliance with certain of
the restrictive covenants of a Credit Facility with its Bank
for the quarter ending November 30, 1996 and the Company has
requested from the Bank a waiver with respect to such non-
compliance.
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.
<PAGE>16
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: January 14, 1997
<PAGE>17
INDEX TO EXHIBITS
Exhibit
NUMBER Footnote
DESCRIPTION OF EXHIBIT REFERENCE
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) Seventh Amendment to lease effective as of (7)
July 18, 1996.
10.2 Employment Agreement, dated March 27, 1992, *
between the Registrant and Dennis J. Makes.
10.2(a) Amendment dated June 30, 1993 to the Employment (1)
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.
<PAGE>18
10.7 Assignment dated October 23, 1990 of U.S. Patent *
Application for Apparatus and Method for Topo-
graphical 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).
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 Simmons, 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.
<PAGE>19
10.15 Warrant dated February 12, 1993 issued by the (1)
Registrant to Steven R. Verdooner to purchase
50,000 shares of Common Stock.
10.16 Stock Option Plan. (1)
10.17 Promissory Note dated January 4, 1993 from the (1)
Registrant to Western Financial Savings Bank in
the amount of $25,209.83 due in full by
January 4, 1998.
10.18 Rental Agreement dated May 1, 1994 by and between (2)
the Registrant and Robert J. Rossetti.
10.19 Security and Loan Agreement (with Credit Terms (3)
and Conditions) dated April 12, 1995 by and
between the Registrant and Imperial Bank.
10.19(a) General Security Agreement dated April 12, 1995 (3)
by and between the Registrant and Imperial Bank.
10.19(b) Warrant dated November 1, 1995 issued by the (4)
Registrant to Imperial Bank to purchase 67,500
shares of Common Stock.
10.19(c) Amended Loan and Security Agreement (with Credit (4)
Terms and Conditions) dated November 1, 1995.
10.19(d) Registration Rights Agreement dated November 1, (4)
1995 between the Registrant and Imperial Bank.
10.19(e) Amended Loan and Security Agreement (with Credit (6)
Terms and Conditions) dated April 4, 1996).
10.19(f) Amended Loan and Security Agreement (with Credit (7)
Terms and Conditions) dated July 12, 1996).
10.19(g) Amended Loan and Security Agreement (with Credit (7)
Terms and Conditions) dated November 21, 1996).
10.20 Purchase Agreements dated November 21, 1995 (4)
between the Registrant, JB Oxford & Company and
certain Investors.
10.20(a) Warrant Agreement dated November 21, 1995 between (4)
the Registrant, JB Oxford & Company and certain
Investors.
10.20(b) First Amendment Warrant Agreement dated November (7)
21, 1996 between the Registrant, JB Oxford &
Company and certain Holders.
<PAGE>20
10.20(c) Registration Rights Agreement dated November 21, (4)
1995 between the Registrant, JB Oxford & Company
and certain Investors.
10.21 Employment Agreement dated November 20, 1995 (4)
between the Registrant and Steven R. Verdooner.
10.22 Employment Agreement dated November 20, 1995 (4)
between the Registrant and R. Michael Clark.
10.25 The Registrant's 1995 Nonstatutory Stock Option (5)
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.
(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 filed on July 14, 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.
(6) Incorporated by reference to the Registrant's Quarterly Report on Form
10-QSB for the quarterly period ended May 31, 1996 filed on July 15, 1996.
(7) Incorporated by reference to the Registrant's Annual Report on Form 10-
KSB for the fiscal year ended August 31, 1996 filed on November 29, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
10-QSB FOR THE PERIOD ENDED NOVEMBER 30, 1996 FOR OPHTHALMIC IMAGING
SYSTEMS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-START> SEP-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 459,404
<SECURITIES> 0
<RECEIVABLES> 876,337
<ALLOWANCES> 0
<INVENTORY> 1,582,766
<CURRENT-ASSETS> 2,986,784
<PP&E> 1,100,140
<DEPRECIATION> 665,899
<TOTAL-ASSETS> 3,484,198
<CURRENT-LIABILITIES> 2,411,348
<BONDS> 0
0
0
<COMMON> 9,025,687
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,484,198
<SALES> 884,246
<TOTAL-REVENUES> 884,246
<CGS> 650,173
<TOTAL-COSTS> 650,173
<OTHER-EXPENSES> 1,015,886
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,722
<INCOME-PRETAX> (795,535)
<INCOME-TAX> 0
<INCOME-CONTINUING> (795,535)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (795,535)
<EPS-PRIMARY> (.24)
<EPS-DILUTED> (.24)
</TABLE>
