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, 1997
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 January 12, 1998, 3,905,428 shares of common stock, at no par
value, were outstanding.
<PAGE>1
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OPHTHALMIC IMAGING SYSTEMS
CONDENSED BALANCE SHEET
NOVEMBER 30, 1997
(UNAUDITED)
ASSETS
CURRENT ASSETS:
CASH AND EQUIVALENTS $ 227,513
ACCOUNTS RECEIVABLE, NET 1,662,224
INVENTORIES, NET 936,309
PREPAID EXPENSES AND OTHER CURRENT ASSETS 60,073
-----------
TOTAL CURRENT ASSETS 2,886,119
FURNITURE AND EQUIPMENT, NET OF ACCUMULATED
DEPRECIATION AND AMORTIZATION OF $804,290 369,849
OTHER ASSETS 9,216
-----------
$ 3,265,184
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
BORROWINGS UNDER LINE OF CREDIT 397,932
ACCOUNTS PAYABLE 687,326
ACCRUED LIABILITIES 1,185,215
ACCRUED WARRANT APPRECIATION RIGHT 251,497
DEFERRED EXTENDED WARRANTY REVENUE 127,673
CUSTOMER DEPOSITS 315,743
CURRENT PORTION OF NOTES PAYABLE 700
----------
TOTAL CURRENT LIABILITIES 2,966,086
NOTES PAYABLE, LESS CURRENT PORTION --
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; 3,905,428 ISSUED AND OUTSTANDING 10,278,615
DEFERRED COMPENSATION (312,213)
ACCUMULATED DEFICIT (9,667,304)
-----------
TOTAL STOCKHOLDERS' EQUITY 299,098
-----------
3,265,184
===========
SEE ACCOMPANYING NOTES.
<PAGE> 2
OPHTHALMIC IMAGING SYSTEMS
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED NOVEMBER 30,
1997 1996
-------------------------------
NET REVENUES $1,901,877 $ 884,246
COST OF SALES 1,181,996 621,532
------------------------------
GROSS PROFIT 719,881 262,714
OPERATING EXPENSES:
SALES AND MARKETING 572,418 496,978
GENERAL AND ADMINISTRATIVE 323,418 282,768
RESEARCH AND DEVELOPMENT 212,268 264,781
------------------------------
TOTAL OPERATING EXPENSES 1,108,104 1,044,527
------------------------------
LOSS FROM OPERATIONS (388,223) (781,813)
OTHER EXPENSE, NET (9,129) (13,722)
------------------------------
NET LOSS (397,352) (795,535)
==============================
SHARES USED IN THE CALCULATION OF
NET LOSS PER SHARE 3,905,428 3,320,969
==============================
NET LOSS PER SHARE (0.10) (0.24)
==============================
SEE ACCOMPANYING NOTES.
<PAGE>3
OPHTHALMIC IMAGING SYSTEMS
CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND EQUIVALENTS
(UNAUDITED)
THREE MONTHS ENDED NOVEMBER 30,
1997 1996
-------------------------------
OPERATING ACTIVITIES:
NET LOSS $ (397,352) $ (795,535)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 29,459 31,622
STOCK OPTION COMPENSATION EXPENSE 28,681 --
NET (INCREASE) DECREASE IN
CURRENT ASSETS OTHER THAN CASH
AND EQUIVALENTS (126,605) 190,107
NET INCREASE IN CURRENT LIABILITIES
OTHER THAN SHORT-TERM BORROWINGS 485,991 247,986
-------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING
ACTIVITIES 20,174 (325,820)
INVESTING ACTIVITIES:
PURCHASES OF FURNITURE AND EQUIPMENT (18,526) (104,668)
NET (INCREASE) DECREASE IN OTHER ASSETS (1,831) 23,462
-------------------------------
NET CASH USED IN INVESTING ACTIVITIES (20,357) (81,206)
FINANCING ACTIVITIES:
PRINCIPAL PAYMENTS ON NOTES PAYABLE (1,534) (1,386)
NET PROCEEDS FROM (REPAYMENTS OF)
LINE-OF-CREDIT BORROWINGS 86,930 (269,000)
NET PROCEEDS FROM SALE OF COMMON STOCK -- 85,491
------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING
ACTIVITIES 85,396 (184,895)
------------------------------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS 85,213 (591,921)
------------------------------
CASH AND EQUIVALENTS AT BEGINNING OF
PERIOD 142,300 1,051,325
------------------------------
CASH AND EQUIVALENTS AT END OF PERIOD $ 227,513 $ 459,404
==============================
SEE ACCOMPANYING NOTES.
<PAGE>4
Ophthalmic Imaging Systems
Notes to Condensed Financial Statements
Three Month Periods ended November 30, 1997 and 1996
(Unaudited)
Note 1. BASIS OF PRESENTATION
THE ACCOMPANYING UNAUDITED CONDENSED BALANCE SHEET AS OF NOVEMBER 30, 1997,
CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED NOVEMBER
30, 1997 AND 1996 AND THE CONDENSED STATEMENTS OF CASH FLOWS FOR THE THREE
MONTH PERIODS ENDED NOVEMBER 30, 1997 AND 1996 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, 1997 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, 1997 ARE NOT NECESSARILY INDICATIVE OF THE OPERATING
RESULTS FOR THE FULL YEAR.
CERTAIN AMOUNTS IN THE FISCAL 1997 FINANCIAL STATEMENTS HAVE BEEN RECLASSIFIED
TO CONFORM WITH THE PRESENTATION IN THE FISCAL 1998 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") WHICH, AFTER SEVERAL
AMENDMENTS, EXPIRED ON NOVEMBER 7, 1997. THE MAXIMUM AMOUNT AVAILABLE UNDER
THE TERMS OF THE CREDIT AGREEMENT WAS $750,000 AND WAS BASED UPON ELIGIBLE
OUTSTANDING ACCOUNTS RECEIVABLE BALANCES. BORROWINGS UNDER THE CREDIT
AGREEMENT BORE INTEREST AT THE BANK'S PRIME LENDING RATE PLUS THREE PERCENT
AND WERE SECURED BY VIRTUALLY ALL ASSETS OF THE COMPANY. THE CREDIT AGREEMENT
ALSO CONTAINED CERTAIN RESTRICTIVE COVENANTS WHICH PROVIDED FOR, AMONG OTHER
THINGS, CERTAIN WORKING CAPITAL AND NET WORTH BALANCE AND RATIOS. THE CREDIT
AGREEMENT WAS SUBSEQUENTLY CONVERTED TO A FULL RECOURSE ACCOUNTS RECEIVABLE
CREDIT AGREEMENT.
ON NOVEMBER 18, 1997, THE COMPANY ENTERED INTO AN ACCOUNTS RECEIVABLE CREDIT
AGREEMENT (THE "AGREEMENT") WITH THE BANK, AND ALL AMOUNTS OUTSTANDING UNDER
THE CREDIT AGREEMENT WERE CONSIDERED TO BE THE INITIAL ADVANCE UNDER THE
AGREEMENT. THE AGREEMENT ALLOWS FOR UP TO AN 80% ADVANCE RATE ON ELIGIBLE
ACCOUNTS RECEIVABLE BALANCES, AND THE MAXIMUM BORROWING BASE UNDER THE
AGREEMENT IS $1.2 MILLION. THE BANK HAS FULL RECOURSE AGAINST THE COMPANY AND
THE AGREEMENT EXPIRES IN NOVEMBER 1998. BORROWINGS UNDER THE AGREEMENT BEAR
INTEREST AT THE BANK'S PRIME LENDING RATE PLUS 4%. IN ADDITION, THE BANK WILL
CHARGE MONTHLY AN ADMINISTRATIVE FEE EQUAL TO THE GREATER OF 1/2 % OF THE
AVERAGE DAILY BALANCE FOR THE MONTH OR $1,200. UNDER THE TERMS OF THE
AGREEMENT, BORROWINGS ARE SECURED BY SUBSTANTIALLY ALL OF THE COMPANY'S
ASSETS.
NOTE 4. PRIVATE PLACEMENT
IN NOVEMBER 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 WAS APPROXIMATELY $1,075,000. ALONG WITH EACH SHARE OF COMMON
STOCK ISSUED, THE PURCHASERS WERE GIVEN AN "A WARRANT AND "B WARRANT" TO
PURCHASE SHARES OF THE COMPANY'S COMMON STOCK. THE A AND B WARRANTS PER SHARE
EXERCISE PRICES WERE $1.25 AND $1.75, RESPECTIVELY. THE A AND B WARRANTS
EXPIRED ON FEBRUARY 19, 1997 AS AMENDED AND NOVEMBER 21, 1997, RESPECTIVELY.
THE PRIVATE PLACEMENT UNDERWRITER 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 ON NOVEMBER 21,
1999. IN ADDITION, THE UNDERWRITER WILL RECEIVE AS A COMMISSION, 10% OF THE
PROCEEDS RECEIVED BY THE COMPANY UPON EXERCISE OF THE A AND B WARRANTS
DESCRIBED ABOVE.
<PAGE>7
NOTE 5. NONSTATUTORY STOCK OPTION PLAN
IN OCTOBER 1997, THE COMPANY'S BOARD OF DIRECTORS APPROVED THE 1997
NONSTATUTORY STOCK OPTION PLAN (THE "PLAN") UNDER WHICH ALL OFFICERS,
EMPLOYEES DIRECTORS AND CONSULTANTS MAY PARTICIPATE. THE PLAN EXPIRES IN
OCTOBER 2002. OPTIONS GRANTED UNDER THE PLAN ARE NON-QUALIFIED STOCK OPTIONS
AND WILL HAVE A TERM OF NOT LONGER THAN TEN (10) YEARS FROM THE DATE OF GRANT,
UNLESS OTHERWISE SPECIFIED IN THE OPTION AGREEMENT. THE EXERCISE PRICES UNDER
THE PLAN WILL GENERALLY BE AT 100% OF THE FAIR MARKET VALUE OF THE COMPANY'S
COMMON STOCK ON THE DATE OF GRANT. THE MAXIMUM NUMBER OF SHARES OF THE
COMPANY'S COMMON STOCK WHICH MAY BE OPTIONED AND SOLD UNDER THE PLAN IS
1,000,000, OF WHICH 861,500 OPTIONS REMAINED AVAILABLE FOR GRANTING AS OF
NOVEMBER 30, 1997. AS OF NOVEMBER 30, 1997, STOCK OPTIONS TO PURCHASE 138,500
SHARES AT EXERCISE PRICES OF $1.09 WERE GRANTED AND OUTSTANDING UNDER THE PLAN
AND NONE OF THE GRANTED OPTIONS WERE EXERCISED.
<PAGE>8
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
technology and sales of digital ophthalmic imaging systems.
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. OIS 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 fluorescein angiography market, and more recently the
indocyanine green ("ICG") market. While the Company believes that the overall
angiography market has modest growth potential, sustaining growth in its
traditional angiography equipment business may become increasingly difficult
due to increased competition. In recognition of this, the Company is expanding
its product capabilities to address the emerging telemedicine market. The
Company will continue to support and expand its entire line of digital
angiography products, and will focus its future efforts on developing product
enhancements and pursuing viable opportunities in this market, particularly as
they relate to telemedicine applications.
The Company's objective is to become a leading provider of ophthalmic
diagnostic products and services in the ocular health care industry, while
maintaining its position as a market leader in its existing digital imaging
products and telemedicine.
<PAGE>9
In this regard, during fiscal 1996 and 1997, the Company expended significant
resources in developing a Reading and Documentation Center through which it
originally intended to provide documentation services of electronically
transmitted digital images acquired at remote locations. The Company has
recently redefined the scope of the Reading and Documentation Center, however,
to support research and development efforts surrounding its existing products.
The Reading and Documentation Center is presently being utilized in the
validation of diabetic retinopathy screening through electronically transmitted
digital images acquired at remote locations. The Company is currently
conducting a pilot program with a major managed care provider to evaluate
remote image interpretation for diabetic retinopathy screening and intends to
utilize this validation study to help expand the use of the Company's digital
imaging products for such screening.
The Company also recently has refocused its resources on the marketing and
sales of its WinStation digital imaging systems. The Company's products are
currently being utilized in a variety of ophthalmic settings for the
telemedicine application of remote consultation. The Company is currently
focusing its product development efforts on features and enhancements to its
existing products targeting various other telemedicine applications.
Additionally, in the near-term, the Company intends to utilize its Reading and
Documentation Center to develop and assess viable opportunities for the
Company's digital imaging products in screening, remote consultation, distance
learning and other telemedicine applications.
During the recently completed fall meeting of the American Academy of
Ophthalmology ("AAO"), the Company introduced new models of its digital
angiography products incorporating enhanced telemedicine features, with the
Company receiving significantly more purchase commitments for its products as
compared to previous AAO meetings.
The Company no longer actively markets for the sale of its
Glaucoma-Scope<reg-trade-mark> but continues to assess market opportunities for
this product.
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, 1998. 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>10
RESULTS OF OPERATIONS
The Company incurred a net loss of $397,352, or $.10 per share, for the first
quarter of fiscal 1998 as compared to a net loss of $795,535, or $.24 per
share, for the first quarter of fiscal 1997.
The Company's revenues for the first quarter of fiscal 1998 were $1,901,877
representing an increase of approximately 215% from revenues of $884,246 for
the first quarter of fiscal 1997. The primary factor contributing to the
increased 1998 revenue levels was the significantly increased unit sales of the
Company's digital angiography products during the first quarter of 1998,
including lower-priced digital imaging systems targeted to the general
ophthalmology and retinal specialty practice markets introduced at the 1996
fall meeting of the American Academy of Ophthalmology ("AAO"), the initial
deliveries of which were made during the latter half of 1997. The Company also
made initial deliveries during the first quarter of 1998 of new models of its
digital angiography products introduced at the recently completed 1997 fall
meeting of the AAO, at which the Company received significantly more purchase
commitments for its products as compared to previous AAO meetings. In
addition, the reduced 1997 first quarter revenue level reflects the adverse
impact of the reallocation of the Company's resources to pursue sales of its
Reading and Documentation Center services, which selling activities have since
ceased. During 1998, the Company intends to continue to direct the majority of
its resources to both support the demand for its digital imaging products and,
more recently, to pursue opportunities in the telemedicine/managed care market.
Gross margins were approximately 38% during the first quarter ended November
30, 1997 versus approximately 30% for the comparable quarter of 1997. This
increase in gross margin percentage was attributable primarily to the
significantly increased revenue levels during 1998. 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, outsourcing
additional manufacturing and assembly operations and related fixed cost
reduction measures implemented during the latter half of 1997, including
personnel cutbacks, economies of scale from increased unit production and other
manufacturing efficiencies.
Sales and marketing and general and administrative expenses accounted for
approximately 47% of total revenues during the first quarter of fiscal 1997 as
compared with approximately 88% during the first quarter of fiscal 1996.
Expense levels increased, however, to $895,836 during the first quarter of 1998
versus $779,747 during the first quarter of 1997. The primary factors
contributing to the increase were increased commissions and other costs
associated with increase revenue levels during the first quarter of 1998 versus
the comparable period 1998, as well as the costs related to additional senior
management level personnel hired during the fourth quarter of fiscal 1997. The
Company anticipates expenses in this area will continue to run above historical
levels.
<PAGE>11
Research and development expenses, as a percentage of revenues, was
approximately 11% in the first quarter of 1998 versus approximately 30% during
the same period of 1997. Expense levels also decreased in actual dollar terms
to $212,268 during the first quarter of 1998 from $264,781 in 1997. The
Company intends to focus its research and development efforts on current
product enhancements and reducing cost configurations for its current products.
The Company anticipates that research and development expense will be
maintained at current levels in the near term.
Other expense was $9,129 during the first quarter of fiscal 1998 versus $13,722
during the same period of 1997. The primary contributing factor to this change
was a decrease in interest expense during 1998 versus 1997 associated with
reduced average daily borrowings against existing credit lines during the first
quarter of 1998 versus 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities generated cash of $20,174 in the first
quarter of fiscal 1998 and used cash of $325,820 in the first quarter of fiscal
1997. Cash generated from operating activities in the first quarter of 1998
resulted principally from the collection of accounts receivable, significantly
increased revenue levels and increases in customer deposits from orders
generated at the 1997 AAO fall meeting, the aggregate impact of which more than
offset the net loss for the quarter. 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 1996 AAO meeting and other current
liabilities, excluding borrowings under the Credit Agreement.
Cash used in investing activities was $20,357 during the first quarter of 1998
as compared to $81,206 during the same period for 1997. 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 and corporate communications 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.
<PAGE>12
The Company generated cash of $85,396 from financing activities during the
first quarter of fiscal 1998 as compared to using cash in the amount of
$184,895 during the same period of fiscal 1997. The source of cash from
financing activities in 1998 was proceeds from increased borrowings under the
Credit Agreement. The use of cash in 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. Principal repayments on notes payable was
negligible in both 1997 and 1996.
As indicated in Note 3 of the Notes to Condensed Financial Statements, on
November 18, 1997, the Company entered into an accounts receivable credit
agreement (the "Agreement") with the Bank, and all amounts outstanding under
the Credit Agreement were considered to be the initial advance under the
Agreement. The Agreement allows for up to an 80% advance rate on eligible
accounts receivable balances, and the maximum borrowing base under the
Agreement is $1.2 million. The Bank has full recourse against the Company and
the Agreement expires in November 1998. Borrowings under the Agreement bear
interest at the Bank's prime lending rate plus 4%. In addition, the Bank will
charge monthly an administrative fee equal to the greater of 1/2 % of the
average daily balance for the month or $1,200. Under the terms of the
Agreement, borrowings are secured by substantially all of the Company's assets.
The Company believes that its existing cash balances together with ongoing
collections of its accounts receivable and recently increased available
borrowing capacity under the Agreement will be adequate to meet its liquidity
and capital requirements in the near term. The Company does not expect to
experience collection difficulties with respect to its accounts receivable that
would have a material adverse effect on its liquidity. In addition, principal
and interest amounts due under the alternative stock appreciation right with
the Bank, which amounts were approximately $251,000 as of November 30, 1997,
and were originally payable on November 30, 1997, have recently been extended
to April 1, 1998. The Company will, however, continue to evaluate alternative
sources of capital to meet its cash requirements, including other debt
financing, issuing equity securities and entering into other financing
arrangements and/or strategic alliances. There can be no assurance, however,
that additional financing will be available and, if available, can be obtained
on terms favorable to the Company. Additional capital could also be made
available to the Company pursuant to the exercise of Series C Warrants issued
to JB Oxford & Company ("JBO") in connection with a November 1995 private
placement of the Company's common stock, as well as from other outstanding
stock options; however, there can be no assurance any such warrants or options
will be exercised in the near-term, if at all. In this regard, there can be no
assurance that the SEC investigation of JBO discussed immediately below may not
adversely affect JBO's ability to exercise the Series C Warrants.
<PAGE>13
On or about August 17, 1997, the Company was advised that JB Oxford & Company
("JBO"), one of several market makers in the Company's common shares which
trade over the counter on the NASDAQ Small-Cap Market, was being investigated
by the Securities and Exchange Commission ("SEC"). In connection with this
investigation, the Company, and Mr. Verdooner, in his capacity as Chief
Executive Officer of the Company, were served by the SEC with a subpoena on or
about August 18, 1997. These subpoenas require the submission to the SEC of
various documents, predominantly relating to JBO.
The Company has cooperated with the SEC investigation and is making every
effort to produce the documents requested. The Company does not believe, nor
has it any reason to believe, it is a subject of the SEC inquiries.
In addition, the Company faces the possibility of its common stock being
delisted from NASDAQ unless it meets the Minimum Closing Price Requirement as
stipulated by NASDAQ. Under the NASDAQ rules, one prerequisite to continued
listing on NASDAQ, is maintenance by a company of a minimum closing bid price
of $1.00 per share. If a company's closing bid price per share is below $1.00
per share for ten (10) consecutive trading days, the company may be subject to
having its shares delisted from NASDAQ.
In September 1997, the Company's closing bid price per share fell below $1.00
per share for ten (10) consecutive trading days. Accordingly, the Company
received a letter from NASDAQ which indicated that although the Company's
closing bid price per share did not meet the minimum $1.00 requirement, NASDAQ
was not going to commence any delisting action at that time. Instead, NASDAQ
stated that the Company would be in compliance with its minimum listing price
rules, if at any time during the next 90 calendar days from September 23, 1997,
the closing bid price per share of the Company's common stock is at least $1.00
for ten consecutive trading days ("Minimum Closing Price Requirement").
Although the bid price of the Company's shares has closed at or above $1.00 per
share for well in excess of ten (10) consecutive trading days since September
23, 1997, the Company did not meet the Minimum Closing Price Requirement during
the 90 calendar day period from September 23, 1997. While the Company remains
listed and has not been notified that NASDAQ will commence delisting action,
there can be no assurance that the Company may not become subject to delisting
from the NASDAQ Small-Cap Market in the future.
Another prerequisite to continued listing on NASDAQ is maintenance of capital
and surplus of at least $1 million. At August 31, 1997, the Company's capital
and surplus balance was below $1 million and, in December 1997, the Company
received a letter from NASDAQ which indicated that, although the Company's
capital and surplus balance did not meet the $1 million requirement, NASDAQ was
not going to commence any delisting action at that time, pending receipt by
NASDAQ from the Company of proposal(s) for achieving compliance. The Company
is currently in discussion with NASDAQ regarding this issue.
If the Company's common stock is delisted, it may be difficult for the Company
to raise capital through the sale of its common stock.
<PAGE>14
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
In October 1997, the Company's board of directors approved the
1997 Nonstatutory Stock Option Plan (the "Plan") under which all
officers, employees directors and consultants may participate.
The Plan expires in October 2002. Options granted under the
Plan are non-qualified stock options and will generally have a
term of ten (10) years from the date of grant, unless otherwise
specified in the option agreement. The exercise prices under
the Plan will generally be at 100% of the fair market value of
the Company's common stock on the date of grant. The maximum
number of shares of the Company's common stock which may be
optioned and sold under the Plan is 1,000,000, of which 861,500
options remained available for granting as of November 30, 1997.
As of November 30, 1997, stock options to purchase 138,500
shares at exercise prices of $1.09 were granted and outstanding
under the Plan and none of the granted options were exercised.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES
None.
<PAGE>15
ITEM 5. OTHER INFORMATION
The Board of Directors currently is considering the long range
strategic plan for the Company and intends to engage the
services of an investment banker or other financial advisor to
assist it in evaluating and analyzing the strategic alternatives
and potential business prospects available to the Company,
including possible joint venture arrangements, acquisitions,
third party investments, or the sale of the Company. Although
the Company from time to time has considered and evaluated, and
has engaged in informal and formal discussions concerning,
certain business combination transaction or other joint business
arrangements with unaffiliated third parties, the Company has
not entered into any such transactions. The Company, however,
recently has received inquiries from third parties regarding
possible investments in the Company or other business ventures
and opportunities which could involve, among other things, the
sale of the Company or other business combination transactions.
The Company intends to evaluate these opportunities with its
investment banker or financial advisor as part of its long range
strategic planning. Presently, the Company does not have any
current understandings, arrangements, or agreements, whether
written or oral, with respect to any specific transaction and,
to date, has had only preliminary discussions with third parties
relating thereto. Upon completion of the Board of Directors'
determination of the appropriate strategic plan for the Company
and its shareholders, it will attempt to implement the plan.
However, there can be no assurance that the Company will be able
to successfully implement such plan, or if implemented, that
such plan will be successful.
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 as noted.
(b) A Form 8-K was filed on January 2, 1998, to report
under Item 5 thereof the Company's adoption of a
Rights Agreement, dated as of December 31, 1997,
between Ophthalmic Imaginng Systems and American
Securities Transfer, Inc., a copy of which Form 8-K
will be made available upon request to the Company at
its principal offices.
<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,
Chief Executive Officer and Chief
Financial Officer (principal
executive officer and principal
financial and accounting officer)
By: WILLIAM L. MINCE
William L. Mince,
President and Chief Operating
Officer
Dated: January 14, 1998
<PAGE>17
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
NUMBER DESCRIPTION OF EXHIBIT Footnote REFERENCE
<S> <C> <C> <C>
3.1 Articles of Incorporation of the Registrant, as *
amended.
3.1(a) Amendment to Articles of Incorportation (11)
(Certificate of Determination of Preferences of
Series A Junior Participating Preferred Stock of
Ophthalmic Imaging Systems).
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. *
4.3 Rights Agreement, dated as of December 31, 1997, (10)
between Registrant and American Securities
Transfer, Inc., including form of Rights
Certificate attached thereto.
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.
<PAGE>18
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).
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.
<PAGE>19
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 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 (2)
between 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.
10.19(h) Amended Loan and Security Agreement (with Credit (8)
Terms and Conditions) dated June 3, 1997.
<PAGE>20
10.19(i) Amended Loan and Security Agreement (with Credit (9)
Terms and Conditions) dated August 28, 1997.
10.19(j) Amended Loan and Security Agreement (with Credit (9)
Terms and Conditions) dated October 24, 1997.
10.19(k) Amended Loan and Security Agreement (with Credit (9)
Terms and Conditions) dated November 3, 1997.
10.19(l) Amended Loan and Security Agreement (with Credit (9)
Terms and Conditions) dated November 21, 1997.
10.19(m) Agreement of Purchase of Receivable (Full (9)
Recourse) dated November 18, 1997 between
Registrant and Imperial Bank.
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 (4)
between 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.
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.
10.23 Employment Agreement dated July 14, 1997 between (9)
the Registrant and William L. Mince.
10.25 The Registrant's 1995 Nonstatutory Stock Option (5)
Plan and sample form of Nonstatutory Stock
Option Agreement.
10.26 The Registrant's 1997 Nonstatutory Stock Option (12)
Plan and sample form of Nonstatutory Stock
Option Agreement.
<PAGE>21
* 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.
(8) INCORPORATED BY REFERENCE TO THE REGISTRANT'S QUARTERLY REPORT ON FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997 FILED ON JULY 15, 1997.
(9) INCORPORATED BY REFERENCE TO THE REGISTRANT'S ANNUAL REPORT ON FORM 10-KSB FOR
THE FISCAL YEAR ENDED AUGUST 31, 1997 FILED ON DECEMBER 1, 1997.
(10) INCORPORATED BY REFERENCE TO EXHIBIT 1 OF THE REGISTRANT'S FORM 8-K FILED ON
JANUARY 2, 1998.
(11) INCORPORATED BY REFERENCE TO EXHIBIT A OF EXHIBIT 1 OF THE REGISTRANT'S FORM
8-K FILED ON JANUARY 2, 1998.
(12) EXHIBIT FILED HEREWITH.
</TABLE>
OPHTHALMIC IMAGING SYSTEMS, INC.
1997 STOCK OPTION PLAN
1. PURPOSE; DEFINITIONS.
1.1 PURPOSE. The purpose of the Plan is to attract, retain, and
motivate the officers and employees of the Company, as well as the
consultants to and directors of the Company, by giving all of them the
opportunity to acquire Stock ownership in the Company and thereby
instilling in them the same goals as the Company's other equity owners.
1.2 DEFINITIONS. For purposes of the Plan, the following terms shall
have the following meanings:
1.2.1 "ADMINISTRATOR" shall mean the Compensation Committee
referred to in Section 4 in its capacity as
administrator of the Plan in accordance with Section 4.
1.2.2 "BOARD" shall mean the Board of Directors of the
Company.
1.2.3 "COMPANY" shall mean Ophthalmic Imaging Systems, Inc.,
a California corporation.
1.2.4 "DIRECTOR" shall mean a member of the Board.
1.2.5 "EFFECTIVE DATE" shall have the meaning set forth in
Section 2.
1.2.6 "ELIGIBLE PERSON" shall mean any director (including a
director who is also a member of the Compensation
Committee), officer, consultant, or employee of the
Company.
1.2.7 "FAIR MARKET VALUE" shall mean the value established by
the Administrator for purposes of granting Options
under the Plan.
1.2.8 "GRANT DATE" shall mean the date of grant of any
Option.
1.2.9 "OPTION" shall mean an option to purchase common stock
under this Plan. All Options under the Plan shall be
non-qualified stock options.
<PAGE>1
1.2.10 "OPTION AGREEMENT" shall mean the written option
agreement with respect to an Option.
1.2.11 "OPTIONEE" shall mean the holder of an Option.
1.2.12 "PLAN" shall mean this Ophthalmic Imaging Systems, Inc.
1997 Stock Option Plan, as amended from time to time.
1.2.13 "STOCK" shall mean the common stock of the Company, no
par value, and any successor entity to the Company.
1.2.14 "VESTING DATE" shall mean the date on which an Option
becomes wholly or partially exercisable, as determined
by the Administrator in its sole discretion.
2. EFFECTIVE DATE; TERM OF PLAN.
The Effective Date of this Plan shall be upon the date the Board of
Directors approve this Plan. This Plan, but not Options already granted,
shall terminate automatically five (5) years after its adoption by the
Board, unless terminated earlier by the Board under Section 12. No Options
shall be granted after termination of this Plan but all Options granted
prior to termination shall remain in effect in accordance with their terms.
3. NUMBER AND SOURCE OF SHARES OF STOCK SUBJECT TO THE PLAN.
Subject to the provisions of Section 7, the total number of shares of
Stock with respect to which Options may be granted under this Plan is 1
million (1,000,000) shares of Stock. The shares of Stock covered by any
canceled, expired, or terminated Option or the unexercised portion thereof
shall become available again for grant under this Plan. The shares of
Stock to be issued hereunder upon exercise of an Option may consist of
authorized and unissued shares or treasury shares.
4. ADMINISTRATION OF THE PLAN.
This Plan shall be administered by a committee of at least two (2)
non-employee members of the Board to which administration of this Plan is
delegated by the Board (the "Compensation Committee"). The "Administrator"
shall mean the "Compensation Committee" referred to in this Section 4 in
its capacity as administrator of the Plan in accordance with this Section
4. The Administrator may delegate nondiscretionary administrative duties
to such employees of the Company as it deems proper.
Subject to the express provisions of this Plan, the Administrator
shall have the authority to construe and interpret this Plan and any
<PAGE>3
agreements defining the rights and obligations of the Company and Optionees
under this Plan; to further define the terms used in this Plan; to
prescribe, amend, and rescind rules and regulations relating to the
administration of this Plan; to determine the duration and purposes of
leaves of absence which may be granted to Optionees without constituting a
termination of their employment for purposes of this Plan; and to make all
other determinations necessary or advisable for the administration of this
Plan.
Any decision or action of the Administrator in connection with this
Plan or Options granted or shares of Stock purchased under this Plan shall
be final and binding. The Administrator shall not be liable for any
decision, action, or omission respecting this Plan, or any Options granted
or shares of Stock sold under this Plan. The Board at any time may abolish
the Compensation Committee and revest in the Board the administration of
the Plan.
To the extent permitted by applicable law in effect from time to time,
no member of the Compensation Committee or the Board of Directors shall be
liable for any action or omission of any other member of the Compensation
Committee or the Board of Directors, nor for any act or omission on the
member's own part, excepting only the member's own willful misconduct or
gross negligence, arising out of or related to the Plan. The Company shall
pay expenses incurred by, and satisfy a judgment or fine rendered or levied
against, a present or former director or member of the Compensation
Committee or Board in any action against such person (whether or not the
Company is joined as a party defendant) to impose liability or a penalty on
such person for an act alleged to have been committed by such person while
a director or member of the Compensation Committee or Board arising with
respect to the Plan or administration thereof, or out of membership on the
Compensation Committee or Board, or by the Company, or all or any
combination of the preceding; provided, the director or Compensation
Committee member was acting in good faith, within what such director or
Compensation Committee member reasonably believed to have been within the
scope of his or her employment or authority, and for a purpose which he or
she reasonably believed to be in the best interests of the Company or its
shareholders. Payments authorized hereunder include amounts paid and
expenses incurred in settling any such action or threatened action. The
provisions of this section shall apply to the estate, executor,
administrator, heirs, legatees, or devisees of a director or Compensation
Committee member, and the term "person" as used in this section shall
include the estate, executor, administrator, heirs, legatees, or devisees
of such person.
5. GRANT OF OPTIONS; TERMS AND CONDITIONS OF GRANT.
5.1 GRANT OF OPTIONS. One or more Options may be granted to any
Eligible Person. Subject to the express provisions of the Plan, the
Administrator shall determine from the Eligible Persons those individuals
to whom Options under the Plan may be granted. Each Option so granted
shall be a non-qualified stock option.
<PAGE>4
Subject to the express provisions of this Plan, the Administrator
shall specify the Grant Date, the number of shares of Stock covered by the
Option, the exercise price, and the terms and conditions for exercise of
the Option. If the Administrator fails to specify the Grant Date, the
Grant Date shall be the date of the action taken by the Administrator to
grant the Option. As soon as practicable after the Grant Date, the Company
shall provide the Optionee with a written Option Agreement in the form
approved by the Administrator, which sets out the Grant Date, the number of
shares of Stock covered by the Option, the exercise price, and the terms
and conditions for exercise of the Option.
The Administrator may, in its absolute discretion, grant Options under
this Plan to an Eligible Person at any time and from time to time before
the expiration of five (5) years from the Effective Date.
5.2 GENERAL TERMS AND CONDITIONS. Except as otherwise provided
herein, the Options shall be subject to the following terms and conditions
and such other terms and conditions not inconsistent with this Plan as the
Administrator may impose.
5.3 EXERCISE OF OPTION. In order to exercise all or any portion of
any Option granted under this Plan, an Optionee must remain as an officer
or employee, or as a consultant to or director of the Company, until the
Vesting Date. The Vesting period shall not be less than one year from the
Grant Date. The Option shall be exercisable on or after each Vesting Date
in accordance with the terms set forth in the Option Agreement.
5.4 OPTION TERM. Each Option and all rights or obligations
thereunder shall expire on such date as shall be determined by the
Administrator, but not later than ten (10) years after the grant of the
Option, and shall be subject to earlier termination as hereinafter
provided.
5.5 EXERCISE PRICE. Unless otherwise specified by the Administrator,
the exercise price of any option shall be one hundred percent (100%) of the
fair market value of the Company's common stock on the date of option
grant.
5.6 METHOD OF EXERCISE. To the extent the right to purchase shares
of Stock has accrued, Options may be exercised, in whole or in part, from
time to time in accordance with their terms by written notice from the
Optionee to the Company stating the number of shares of Stock with respect
to which the Option is being exercised and accompanied by payment in full
of the exercise price.
5.7 PAYMENT FOR OPTION SHARES.
5.7.1 GENERAL RULE. The entire Exercise Price of Stock
issued upon exercise of Options shall be payable in cash, wire transfer,
certified check, or, at the absolute discretion of the Administrator, by
non-certified check, at the time when such Stock is purchased.
5.7.2 SURRENDER OF STOCK. To the extent that this Section
5.7.2 is applicable, payment for all or any part of the exercise price, but
not the payment of withholding taxes, may be made with Stock which has
already been owned by the Optionee for more than
<PAGE>5
six (6) months. Such Stock shall be valued at its fair market value on the
date of exercise of the new Stock being purchased under the Plan.
5.7.3 EXERCISE/SALE. To the extent that this Section 5.7.3
is applicable, payment may be made by the delivery (on a form prescribed by
the Company) of an irrevocable direction to a securities broker approved by
the Company to sell Stock and to deliver all or part of the sales proceeds
to the Company in payment of all or part of the exercise price and/or any
withholding taxes.
5.7.4 EXERCISE/PLEDGE. To the extent that this Section 5.7.4
is applicable, payment may be made by the delivery (on a form prescribed by
the Company) of an irrevocable direction to pledge Stock to a securities
broker or lender approved by the Company, as security for a loan, and to
deliver all or part of the loan proceeds to the Company in payment of all
or part of the exercise price and/or any withholding taxes.
5.8 RESTRICTIONS ON STOCK; OPTION AGREEMENT. At the time it grants
Options under this Plan, the Company may retain, for itself or others,
rights to repurchase the shares of Stock acquired under the Option or
impose other restrictions on such shares. The terms and conditions of any
such rights or other restrictions shall be set forth in the Option
Agreement evidencing the Option. No Option shall be exercisable until
after execution of the Option Agreement by the Company and the Optionee.
5.9 NON-ASSIGNABILITY OF OPTION RIGHTS. No Option shall be
transferable other than by will or by the laws of descent and distribution.
During the lifetime of an Optionee, only the Optionee may exercise an
Option.
5.10 EXERCISE AFTER CERTAIN EVENTS.
5.10.1 TERMINATION AS AN EMPLOYEE, DIRECTOR, OR CONSULTANT.
If for any reason other than permanent and total disability or death (as
defined below) an Optionee ceases to be employed by or to be a consultant
to or director of the Company, Options held on the date of such termination
(to the extent then exercisable) may be exercised, in whole or in part, at
any time within three (3) months after such date, or such lesser period
specified in the Option Agreement (but in no event after the earlier of (i)
the expiration date of the Option as set forth in the Option Agreement, and
(ii) ten (10) years from the Grant Date).
5.10.2 PERMANENT DISABILITY AND DEATH. If an Optionee becomes
permanently and totally disabled (within the meaning of Section 22(e)(3) of
the Internal Revenue Code), or dies while employed by the Company, or while
acting as an officer, consultant, or director of the Company (or if the
Optionee dies within the period that the Option remains exercisable after
termination of employment or affiliation), Options then held (to the extent
then exercisable) may be exercised by the Optionee, by the Optionee's
personal representative, or by the person to whom the Option is transferred
by will or the laws of descent and distribution, in whole or in part, at
any time within one (1) year after the disability or death or any lesser
period specified in the Option Agreement (but in no event after the earlier
of (i) the expiration date of the Option as set forth in the Option
Agreement, and (ii) ten (10) years from the Grant Date).
<PAGE>6
5.11 COMPLIANCE WITH SECURITIES LAWS. The Company shall not be
obligated to issue any shares of Stock upon exercise of an Option unless
such shares are at that time effectively registered or exempt from
registration under the federal securities laws and the offer and sale of
the shares of Stock are otherwise in compliance with all applicable
securities laws. Upon exercising all or any portion of an Option, an
Optionee may be required to furnish representations or undertakings deemed
appropriate by the Company to enable the offer and sale of the shares of
Stock or subsequent transfers of any interest in such shares to comply with
applicable securities laws. Evidences of ownership of shares of Stock
acquired upon exercise of Options shall bear any legend required by, or
useful for purposes of compliance with, applicable securities laws, this
Plan, or the Option Agreement evidencing the Option.
6. PAYMENT OF TAXES.
Upon the exercise of an Option, the Company shall have the right to
require such Optionee or such other person to pay by cash, or by check
payable to the Company, the amount of any taxes which the Company may be
required to withhold with respect to such transactions. Any such payment
must be made promptly when the amount of such obligation becomes
determinable and may be a condition prior to the delivery of any
certificate for shares or registration of the transfer of such shares.
7. ADJUSTMENT FOR CHANGES IN CAPITALIZATION.
The existence of outstanding Options shall not affect the Company's
right to effect adjustments, recapitalizations, reorganizations, or other
changes in its or any other corporation's capital structure or business,
any merger or consolidation, any issuance of bonds, debentures, preferred
or prior preference stock ahead of or affecting the Stock, the dissolution
or liquidation of the Company's or any other corporation's assets or
business, or any other corporate act, whether similar to the events
described above or otherwise. Subject to Section 8, if the outstanding
shares of the Stock are increased or decreased in number or changed into or
exchanged for a different number or kind of securities of the Company or
any other corporation by reason of a recapitalization, reclassification,
stock split, combination of shares, stock dividend, or other event, an
appropriate adjustment of the number and kind of securities with respect to
which Options may be granted under this Plan, the number and kind of
securities as to which outstanding Options may be exercised, and the
exercise price at which outstanding Options may be exercised, will be made.
<PAGE>7
8. DISSOLUTION, LIQUIDATION, OR MERGER.
8.1 COMPANY NOT THE SURVIVOR. In the event of a dissolution or
liquidation of the Company, a merger, consolidation, combination, or
reorganization in which the Company is not the surviving corporation, or a
sale of substantially all of the assets of the Company, any outstanding
Options shall become fully vested immediately upon the Company's public
announcement of any one of the foregoing. The Board of Directors shall
determine, in its sole and absolute discretion, when the Company shall be
deemed to survive for purposes of this paragraph. If the Optionee does not
exercise the entire Option within ninety (90) days, the Administrator, in
its sole and absolute discretion, may, with respect to the unexercised
portion of the Option:
8.1.1 cancel the Option upon payment to the Optionee of an
amount equal to the difference between the closing price of the stock
underlying the Option quoted the date before such liquidation, dissolution,
merger, consolidation, combination, or reorganization, and the exercise
price of the Option; or
8.2.1 assign the Option and all rights and obligations under
it to the successor entity, with all such rights and obligations being
assumed by the successor entity.
8.2 COMPANY IS THE SURVIVOR. In the event of a merger,
consolidation, combination, or reorganization in which the Company is the
surviving corporation, the Board of Directors shall determine the
appropriate adjustment of the number and kind of securities with respect to
which outstanding Options may be exercised, and the exercise price at which
outstanding Options may be exercised. The Board of Directors shall
determine, in its sole and absolute discretion, when the Company shall be
deemed to survive for purposes of this Plan.
9. CHANGE OF CONTROL.
If there is a "change of control" in the Company, all outstanding
Options shall fully vest immediately upon the Company's public announcement
of such a change. A "change of control" shall mean an event involving one
transaction or a related series of transactions in which any one of the
following occurs: (i) the Company issues securities equal to twenty-five
percent (25%) or more of the Company's issued and outstanding voting
securities, determined as a single class, to any individual, firm,
partnership, limited liability company, or other entity, including a
"group" within the meaning of SEC Exchange Act Rule 13d-3, (ii) the Company
issues voting securities equal to twenty-five percent (25%) or more of the
issued and outstanding voting stock of the Company in connection with a
merger, consolidation, or other business combination, (iii) the Company is
acquired in a merger or other business combination transaction in which the
Company is not the surviving company, or (iv) all or substantially all of
the Company's assets are sold or transferred. SEE Section 8 with respect
to Options vesting upon the occurrence of either of the events described in
(iii) or (iv) of this Section 9 and the result upon the non-exercise of the
Options.
<PAGE>8
10. SUSPENSION AND TERMINATION.
In the event the Board or the Administrator reasonably believes an
Optionee has committed an act of misconduct specified below, the
Administrator may suspend the Optionee's right to exercise any Option
granted hereunder pending final determination by the Board or the
Administrator. If the Administrator determines that an Optionee has
committed an act of embezzlement, fraud, breach of fiduciary duty, or
deliberate disregard of the Company rules resulting in loss, damage or
injury to the Company, or if an Optionee makes an unauthorized disclosure
of any Company trade secret or confidential information, engages in any
conduct constituting unfair competition, is involved in the spreading of
rumors or misinformation about the Company, induces or attempts to induce
an employee to leave the employment of the Company, induces any Company
customer to breach a contract with the Company or induces any principal for
whom the Company acts as agent to terminate such agency relationship,
neither the Optionee nor his estate shall be entitled to exercise any
Option hereunder. In making such determination, the Board or the
Administrator shall act fairly and in good faith and shall give the
Optionee an opportunity to appear and present evidence on the Optionee's
behalf. The determination of the Board or the Administrator shall be final
and conclusive.
11. NO RIGHTS AS SHAREHOLDER OR TO CONTINUED EMPLOYMENT.
An Optionee shall have no rights as a shareholder with respect to any
shares of Stock covered by an Option. An Optionee shall have no right to
vote any shares of Stock, or to receive distributions of dividends or any
assets or proceeds from the sale of Company assets upon liquidation until
such Optionee has effectively exercised the Option and fully paid for such
shares of Stock. Subject to Sections 7 and 8, no adjustment shall be made
for dividends or other rights for which the record date is prior to the
date title to the shares of Stock has been acquired by the Optionee. The
grant of an Option shall in no way be construed so as to confer on any
Optionee the rights to continued employment by the Company.
12. TERMINATION; AMENDMENT.
The Board may amend, suspend, or terminate this Plan at any time and
for any reason, but no amendment, suspension, or termination shall be made
which would impair the right of any person under any outstanding Options
without such person's consent not unreasonably withheld. Further, the
Board may amend this Plan to comply with Federal and State securities laws.
<PAGE>9
13. GOVERNING LAW.
This Plan and the rights of all persons under this Plan shall be
construed in accordance with and under applicable provisions of the laws of
the State of California.
Dated: OCTOBER 23, 1997 OPHTHALMIC IMAGING SYSTEMS, INC.
By the Board of Directors
STEVEN R. VERDOONER
By Steven R. Verdooner, Secretary
<PAGE>
DATE OF GRANT: ___________
OPHTHALMIC IMAGING SYSTEMS, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
THE GRANT OF THIS OPTION SHALL NOT IMPOSE AN OBLIGATION UPON THE OPTIONEE
TO EXERCISE THIS OPTION.
THIS OPTION AGREEMENT (the "Agreement") is made by and between
Ophthalmic Imaging Systems, Inc., a California corporation (the
"Corporation") and _____________________________ ("Optionee"), as of
____________, _____.
In consideration of the mutual covenants contained herein and for
other good and valuable consideration, the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
1.. GRANT OF OPTION. The Company hereby grants to Optionee, in the manner and
subject to the conditions hereinafter provided, the right, privilege, and
option to purchase (the "Option") an aggregate of __________________________ (
) shares of the Company's Common Stock, no par value, (the "Shares"). This
Option is specifically conditioned on compliance with the terms and conditions
set forth herein.
2.. Term of Option. Subject to the terms, conditions, and restrictions set
forth herein, the term of this Option shall be ten (10) years from the date of
grant (the "Expiration Date"). Any portion of this Option not exercised prior
to the Expiration Date shall thereupon become null and void.
3.. Exercise of Option.
4.. Vesting of Option. This Option shall become exercisable as
follows:
NUMBER OF SHARES VESTING DATE
__________________ __/__/__
__________________ __/__/__
__________________ __/__/__
__________________ __/__/__
Each of the foregoing dates shall be referred to as a "Vesting Date" for
that portion of this Option vested on such date ("Vested Portion").
<PAGE>
All or any portion of the shares underlying a Vested Portion of this
Option may be purchased during the term of this Option, but not as to less
than 100 shares (unless the remaining shares then constituting the Vested
Portion of this Option is less than 100 shares) at any time.
5.. MANNER OF EXERCISE. The Vested Portion of this Option may be
exercised from time to time, in whole or in part, by presentation of a
"Request To Exercise Form", substantially in the form attached hereto, to
the Company at its principal office, which Form must be duly executed by
Optionee and accompanied by payment, in cash, to the Company, in the
aggregate amount of the Exercise Price (as defined below), multiplied by
the number of Shares the Optionee is purchasing at such time, subject to
reduction for withholding for tax obligations as provided in Section 13.
Upon receipt and acceptance by the Company of such Form accompanied by
the payment specified, the Optionee shall be deemed to be the record owner
of the Shares purchased, notwithstanding that the stock transfer books of
the Company may then be closed or that certificates representing the Shares
purchased under this Option may not then be actually delivered to the
Optionee.
6.. EXERCISE PRICE. The exercise price (the "Exercise Price")
payable upon exercise of this Option shall be $__.__ per share.
7.. Exercise After Certain Events.
8.. Termination of Relationship. If for any reason other than
permanent and total disability (as defined below) or death an Optionee
ceases to be employed by, a director of, or provide consulting services to,
the Company, Options held at the date of such termination (to the extent
then exercisable) may be exercised, in whole or in part, at any time within
three months after the date of such termination (but in no event after the
expiration date of the Option).
9.. Permanent Disability and Death. If an Optionee becomes
permanently and totally disabled (within the meaning of Section 22(e)(3) of
the Internal Revenue Code of 1986, as amended), or dies while employed by
the Company, or while acting as an officer, director, or consultant of the
Company (or, if the Optionee dies within the period that the Option remains
exercisable after termination of employment or affiliation), Options then
held (to the extent then exercisable) may be exercised by the Optionee, the
Optionee's personal representative, or by the person to whom the Option is
transferred by will or the laws of descent and distribution, in whole or in
part, at any time within one year after the disability or death (but in no
event after the expiration date of the Option).
10.. Restrictions on Transfer of Option. This Option is not transferable
by Optionee other than by will or the laws of descent and distribution and
is exercisable only by the Optionee during his lifetime except as provided
in Section 4.2. above. The Option and the Shares underlying the Option
shall not be available for the debts or obligations of the Optionee, nor
shall it be subject to disposition by transfer, alienation, pledge, or
other means of disposition, whether voluntary or involuntary or by
operation of law through judgment, levy, attachment, garnishment, or other
legal proceeding (including bankruptcy).
<PAGE>
11.. Adjustment for Changes in Capitalization. The existence of this
Option shall not affect the Company's right to effect adjustments,
recapitalizations, reorganizations, or other changes in its or any other
corporation's capital structure or business, any merger or consolidation,
any issuance of bonds, debentures, preferred or prior preference stock
ahead of or affecting the Shares, the dissolution or liquidation of the
Company's or any other corporation's assets or business or any other
corporate act, whether similar to the events described above or otherwise.
If the outstanding shares of the Company's Common Stock are increased or
decreased in number or changed into or exchanged for a different number or
kind of securities of the Company or any other corporation by reason of a
recapitalization, reclassification, stock split, reverse stock split,
combination of shares, stock dividend, or other similar event, an
appropriate adjustment of the number and kind of securities with respect to
which this Option may be exercised and the exercise price at which this
Option may be exercised will be made.
12.. Dissolution, Liquidation, Merger.
13.. Company Not The Survivor. In the event of a dissolution or
liquidation of the Company, a merger, consolidation, combination, or
reorganization in which the Company is not the surviving corporation, or a
sale of substantially all of the assets of the Company (as determined in
the sole discretion of the Board of Directors), and the Optionee does not
exercise the entire option within ninety days, the Administrator, in its
absolute discretion, may (i) cancel each outstanding Option upon payment in
cash to the Optionee of the amount by which any cash and the fair market
value of any other property which the Optionee would have received as
consideration for the shares of Stock covered by the Option if the Option
had been exercised before such liquidation, dissolution, merger,
consolidation, or sale, exceeds the exercise price of the Option or (ii)
assign the Option and all rights and obligations under it to the succession
entity. In addition to the foregoing, in the event of a dissolution or
liquidation of the Company, or a merger, consolidation, combination, or
reorganization in which the Company is not the surviving corporation, any
outstanding Option pursuant to this Agreement shall vest.
14.. Company is the Survivor. In the event of a merger,
consolidation, combination, or reorganization in which the Company is the
surviving corporation, the Board of Directors shall determine the
appropriate adjustment of the number and kind of securities with respect to
which outstanding Options may be exercised, and the exercise price at which
outstanding Options may be exercised. The Board of Directors shall
determine, in its sole and absolute discretion, when the Company shall be
deemed to survive for purposes of this Agreement.
<PAGE>
15.. Reservation of Shares. The Company agrees that prior to the earlier
of the expiration of this Option or the exercise and purchase of the total
number of Shares represented by this Option, there shall be reserved for
issuance and delivery upon exercise of this Option such number of the
Company's authorized and unissued Shares as shall be necessary to satisfy
the terms and conditions of this Agreement.
16.. No Rights as Shareholder. The Optionee shall have no rights as a
shareholder with respect to any Shares covered by this Option unless the
Optionee shall have exercised this Option, and then only with respect to
the shares underlying the portion of the Option exercised. The Optionee
shall have no right to vote any Shares, or to receive distributions of
dividends or any assets or proceeds from the sale of Company assets upon
liquidation, until the Optionee has effectively exercised this Option and
fully paid for such Shares. Subject to Section 6, no adjustment shall be
made for dividends or other rights for which the record date is prior to
the date title to the Shares has been acquired by the Optionee.
17.. No Rights to Employment or Continued Employment. The grant of this
Option shall in no way be construed so as to confer on Optionee the rights
to employment or continued employment by the Company. Nothing hereunder
shall confer upon any Optionee any right to employment or to continue in
the employ of the Company, or to interfere with or restrict in any way the
rights of the Company, which are hereby expressly reserved, to terminate or
discharge any Optionee at any time for any reason whatsoever, with or
without cause.
18.. Suspension and Termination. In the event the Board reasonably
believes that the Optionee has committed an act of misconduct specified
below, the Board may suspend the Optionee's right to exercise any Option
pending final determination by the Board, which final determination shall
be made within five (5) business days of such suspension. If the Board
determines that an Optionee has committed an act of embezzlement, fraud,
breach of_fiduciary duty, or deliberate disregard of the Company rules
resulting in loss, damage, or injury to the Company, or if an Optionee
makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the
Company, or induces any principal for whom the Company acts as agent to
terminate such agency relationship, neither the Optionee nor his estate
shall be entitled to exercise any Option hereunder. In making such
determination, the Board shall act fairly and in good faith and shall give
the Optionee an opportunity to appear and present evidence on the
Optionee's behalf.
19.. Participation in Option Plans. The grant of this Option shall not
prevent Optionee from participating or being granted other options under
any option plans.
20.. Payment of Taxes. Unless the Board permits otherwise, the Optionee
shall pay the Company in cash all local, state, and federal withholding
taxes applicable, in the Board's absolute discretion, to the grant or
exercise of this Option, or the transfer or other disposition of Shares
acquired upon exercise of this Option. Any such payment must be made
promptly when the amount of such obligation becomes determinable. The
Board may, in lieu of such cash payment, withhold that number of Shares
sufficient to satisfy such withholding.
21.
<PAGE>
21. ISSUE AND TRANSFER TAX. The Company will pay all issuance taxes, if
any, attributable to the initial issuance of Shares upon the exercise of
the Option; provided, however, that the Company shall not be required to
pay any tax or taxes which may be payable in respect of any transfer
involved in the issue or delivery of any certificates for Shares in a name
other than that of the Optionee.
22.. Representatives; Restricted Securities. The Optionee represents that
he or she is purchasing the options for his or her own account and not with
a view to or for sale in connection with any distribution of the Option.
Further, the Optionee understands that this Option may not be transferred
except in compliance with Section 5, and that upon the exercise of the
Option the Optionee will receive "restricted securities" subject to a
certain holding period unless such Common Stock is purchased pursuant to a
Registration Statement filed with the Securities and Exchange Commission
and registered or exempt under state law.
23.. Arbitration. Any controversy, dispute, or claim arising out of or
relating to this Option which cannot be amicably settled including, but not
limited to, the suspension or termination of Optionee's right in accordance
with Section 11 above, shall be settled by arbitration. Said arbitration
shall be conducted in accordance with the Commercial Arbitration Rules of
the American Arbitration Association at a time and place as selected by the
arbitrator(s).
24.. Initiation of Arbitration. After seven (7) days prior
written notice to the other, either party hereto may formally initiate
arbitration under this Agreement by filing a written request therefor, and
paying the appropriate filing fees, if any.
25.. Hearing and Determination Dates. The hearing before the
arbitrator shall occur within thirty (30) days from the date the matter is
submitted to arbitration. Further, a determination by the arbitrator shall
be made within forty-five (45) days from the date the matter is submitted
to arbitration. Thereafter, the arbitrator shall have fifteen (15) days to
provide the parties with his or her decision in writing. However, any
failure to meet the deadlines in this section will not affect the validity
of any decision or award.
26.. Binding Nature of Decision. The decision of the arbitrator
shall be binding on the parties. Judgment thereon shall be entered in a
court of competent jurisdiction.
27.. Injunctive Actions. Nothing herein contained shall bar the
right of either party to seek to obtain injunctive relief or other
provisional remedies against threatened or actual conduct that will cause
loss or damages under the usual equity rules including the applicable rules
for obtaining preliminary injunctions and other provisional remedies.
28.. Costs. The cost of arbitration, including the fees of the
arbitrator, shall be borne equally by the parties.
<PAGE>
29.. Notices. All notices to be given by either party to the other shall
be in writing and may be transmitted by personal delivery, facsimile
transmission, overnight courier or mail, registered or certified, postage
prepaid with return receipt requested; PROVIDED, HOWEVER, that notices of
change of address or telex or facsimile number shall be effective only upon
actual receipt by the other party. Notices shall be delivered at the
following addresses, unless changed as provided for herein.
To the Optionee:
_____________________________
_____________________________
_____________________________
To the Company:
Steven R. Verdooner
Secretary
Ophthalmic Imaging Systems, Inc.
221 Lathrop Way, Suite I
Sacramento, California 95815
Telephone: 916-646-2020
Facsimile: 916-___-____
30.. APPLICABLE LAW. This Agreement and the relationship of the parties in
connection with its subject matter shall be governed by, and construed
under, the laws of the state of California.
31.. Binding Effect. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their respective heirs, executors, and
successors.
32.. Tax Effect. The federal tax consequences of stock options are complex
and subject to change. Each person should consult with his or her tax
advisor before exercising any option or disposing of any shares acquired
upon the exercise of an option.
IN WITNESS WHEREOF, this Agreement has been executed as of the ____
day of ____________, _____, at Sacramento, California.
OPHTHALMIC IMAGING SYSTEMS, INC.
Steven R. Verdooner,
Chief Executive Officer
<PAGE>
REQUEST TO EXERCISE FORM
Dated:________________
The undersigned hereby irrevocably elects to exercise all or part, as
specified below, of the Vested Portion of the option ("Option") granted to
him pursuant to a certain stock option agreement ("Agreement") effective
_____________________, between the undersigned and Ophthalmic Imaging
Systems, Inc. (the "Company") to purchase an aggregate of
_____________________ (__________) shares of the Company's Common Stock, no
par value (the "Shares").
The undersigned hereby tenders cash in the amount of $__________ per
share multiplied by _____________________ (_________), the number of Shares
he is purchasing at this time, for a total of $_______________, which
constitutes full payment of the total Exercise Price thereof.
INSTRUCTIONS FOR REGISTRATION OF SHARES
IN COMPANY'S TRANSFER BOOKS
Name: ____________________________________
(Please typewrite or print in block letters)
Address: ____________________________________
____________________________________
Signature: ____________________________________
Accepted by Ophthalmic Imaging Systems, Inc.:
By: ______________________________
______________________________
Name
______________________________
Title
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE 10-QSB FOR THE PERIOD ENDED NOVEMBER 30, 1997 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-END> NOV-30-1997
<CASH> 227,513
<SECURITIES> 0
<RECEIVABLES> 1,662,224
<ALLOWANCES> 0
<INVENTORY> 936,309
<CURRENT-ASSETS> 2,886,119
<PP&E> 1,174,139
<DEPRECIATION> (804,290)
<TOTAL-ASSETS> 3,265,184
<CURRENT-LIABILITIES> 2,966,086
<BONDS> 0
0
0
<COMMON> 10,278,615
<OTHER-SE> (9,979,517)
<TOTAL-LIABILITY-AND-EQUITY> 3,265,184
<SALES> 1,901,877
<TOTAL-REVENUES> 1,901,877
<CGS> 1,181,996
<TOTAL-COSTS> 1,181,996
<OTHER-EXPENSES> 1,108,104
<LOSS-PROVISION> (388,223)
<INTEREST-EXPENSE> 9,129
<INCOME-PRETAX> (397,352)
<INCOME-TAX> 0
<INCOME-CONTINUING> (397,352)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (397,352)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
