10-K

Use these links to rapidly review the document
TABLE OF CONTENTS
FISCHER IMAGING CORPORATION CONSOLIDATED FINANCIAL STATEMENTS INDEX

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                             to                              .

Commission file number 0-19386

FISCHER IMAGING CORPORATION
(Exact name of registrant as specified in its charter)

DELAWARE (State of incorporation)	36-2756787 (I.R.S. Employer Identification No.)
12300 North Grant Street Denver, Colorado (Address of principal executive offices)	80241 (Zip Code)

Registrant's telephone number, including area code: (303) 452-6800

Securities Registered Pursuant to Section 12(b) of the Act: None

Securities Registered Pursuant to Section 12(g) of the Act:

Common Stock, Par Value $0.01 Per Share

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        Indicate by check mark if the disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). o

        The aggregate market value of the Common stock held by non-affiliates of the registrant as of June 29, 2003 was approximately $41.3 million.

        The number of shares of registrant's Common stock outstanding as of March 29, 2004 was 9,348,484.

DOCUMENTS INCORPORATED BY REFERENCE

        Portions of the Registrant's definitive Proxy Statement for the 2004 Annual Meeting of Stockholders to be filed within 120 days after the end of the Registrant's fiscal year ended December 31, 2003 are incorporated by reference into Part III of this report on Form 10-K to the extent stated therein.

        Certain exhibits filed with the Registrant's Registration Statement on Form S-1 (File No. 333-95439), Annual Report on Form 10-K for fiscal year ended December 31, 2000, Annual Report on Form 10-K for fiscal year ended December 31, 2001, Annual Report on Form 10-K for the fiscal year ended December 31, 2002, and Registration Statements on Forms S-8 (Nos. 333-38696, 333-60430 and 333-76804) are incorporated by reference into Part IV of this report on Form 10-K.

TABLE OF CONTENTS

		Page
PART I		2
ITEM 1.	BUSINESS	2
ITEM 2.	PROPERTIES	28
ITEM 3.	LEGAL PROCEEDINGS	29
ITEM 4.	SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	29
PART II		30
ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS	30
ITEM 6.	SELECTED CONSOLIDATED FINANCIAL DATA	30
ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	32
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	41
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	42
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	42
ITEM 9A.	CONTROLS AND PROCEDURES	42
PART III		43
ITEM 10.	DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT	43
ITEM 11.	EXECUTIVE COMPENSATION	43
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	43
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	43
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	43
PART IV		44
ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K	44
SIGNATURES AND CERTIFICATIONS		47

1

PART I

Forward-looking Statements

        This Form 10-K contains or incorporates by reference "forward-looking statements," as that term is used in federal securities laws, about our financial condition, results of operations and business. These statements include, among others:

•

statements concerning the benefits that we expect will result from our business activities, such as increased revenues, decreased expenses and avoided expenses and expenditures; and



•

statements of our expectations, beliefs, future plans and strategies, anticipated developments and other matters that are not historical facts.

        These statements may be made expressly in this document or may be incorporated by reference to other documents we will file with the SEC. You can find many of these statements by looking for words such as "believes," "expects," "anticipates," "estimates," or similar expressions used or incorporated by reference in this report.

        These forward-looking statements are subject to numerous assumptions, risks and uncertainties that may cause our actual results to be materially different from any future results expressed or implied by us in those statements. Some of these risks are described herein under "Risk Factors." These risk factors should be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue. We do not undertake any obligation to review or confirm analysts' expectations or estimates or to release publicly any revisions to any forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events. Further, the information contained in this document is a statement of our intention as of the date of this filing and is based upon, among other things, the existing regulatory environment, industry conditions, market conditions and prices, the economy in general and our assumptions as of such date. We may change our intentions, at any time and without notice, based upon any changes in such factors, in our assumptions or otherwise.

        The reader is cautioned that we are filing our quarterly reports for the quarters ended on March 30, 2003, June 29, 2003, and September 28, 2003 and annual report for the year ended December 31, 2002 on Form 10-K with the Securities and Exchange Commission, or SEC, as of the date of the filing of this Form 10-K. It is recommended that the above referenced quarterly reports and annual report be read together with this document to better understand our business, results of operations and financial condition as reported in this document.

        Fischer®, Fischer Imaging®, MammoTest®, SenoScan®, MammoPlus®, MammoVision®, MammoSound®, TRAUMEX®, VersaRad®, SenoScan TrueView™, MammoTest Plus "S"™, MammoTest All-Angles™, MammoVision Plus™, Target on Scout™, EPACE™, and EP/Stim™, EP/X™, EP/X²™ and SPX™ are trademarks of ours. This Annual Report on Form 10-K may also include trademarks and trade names owned by other parties, and all other trademarks and trade names mentioned in this Annual Report on Form 10-K are the property of their respective owners.

        Unless the context otherwise requires, references in this report to "Fischer Imaging," "Fischer," "we," "us," "our" and the "Company" refer to Fischer Imaging Corporation and its consolidated subsidiaries.

ITEM 1. BUSINESS

Business Overview

        We design, manufacture and sell innovative mammography and digital imaging products used to diagnose breast cancer and other diseases. Our primary focus is on using our digital imaging technology

2

in screening and diagnostic mammograms and minimally invasive breast biopsy to aid in the early identification of breast cancer. We offer high-resolution digital mammography products, enabling radiologists, surgeons and other healthcare treatment professionals to diagnose or rule out disease early and treat patients with less-invasive procedures. We have also refocused our efforts to market and sell products that meet selected needs of the broader radiology and electrophysiology markets.

        Our SenoScan digital mammography system is used for both screening and diagnostic mammography. SenoScan's advantages over conventional x-ray film mammography systems stem from the ability to acquire high-resolution images at a reduced radiation dose, to manipulate the resultant digital image, to transmit the images to remote locations to facilitate diagnosis, and to store the images in a cost-effective digital archive.

        Our MammoTest stereotactic breast biopsy system is used for minimally invasive breast biopsy. The MammoTest system permits a procedure that is less-invasive and less expensive than surgical biopsy, and can be performed under local anesthesia on an outpatient basis. We believe that our MammoTest product line represents the premier offering for stereotactic minimally-invasive breast biopsy.

        Our RE&S (Radiology, Electrophysiology and Surgery) division produces a line of film and digital general radiology systems, an electrophysiology stimulation system, electrophysiology x-ray imaging systems and a specialized surgical C-arm system.

        We also actively service our products, and are focused on developing new products to address the needs of our target markets as well as enhancing our existing product offerings.

        The Company was re-incorporated in Delaware in 1991.

Significant Events in 2003

        During 2003 there were a number of key events that affected our business operations, financial performance, and business prospects that required significant financial resources and time from our senior management.

        Internal Review.    During the first quarter of 2003, we conducted an internal review of our historical accounting policies, practices and controls in preparation for our 2002 year-end closing and financial statement preparation. As a result of our internal review, we announced in April 2003 that we had identified certain suspected accounting inaccuracies and errors that significantly affected our financial results including previously reported financial information for for 2002, 2001 and prior years. We conducted a full internal investigation under the direction of our Board of Directors and with the advice and assistance of our outside counsel and independent auditors to determine the scope and magnitude of these errors and to complete the restatement of our financial statements. As a result, we did not file our 2002 annual report on Form 10-K or our 2003 quarterly reports on a timely basis. We are filing these reports concurrently with our filing of this 2003 annual report on Form 10-K.

        Restatements of Financials.    In July 2002, we engaged Ernst and Young LLP as our new independent accounting firm to audit our 2002 historical consolidated annual financial statements and to review our historical consolidated unaudited interim financial statements. Based on the results of our internal review, we also engaged Ernst & Young to re-audit our consolidated financial statements for fiscal years ended December 31, 2001 and 2000 after we discovered several accounting issues that required restatement of the consolidated financial statements for those years. As a result of this audit and our internal review, we have made various restatement adjustments to our historical financial statements as disclosed in our 2002 annual report on Form 10-K.

        SEC Proceedings.    In April 2003 we voluntarily disclosed to the Securities and Exchange Commission (SEC) that we would restate our financial results for the periods beginning January 1, 2000 and ending September 30, 2002. We made this disclosure following the formation of an

3

independent board committee, assisted by the law firm of Hogan & Hartson, to review the facts and circumstances underlying our decision to restate our financial results. In June 2003, we received notice of a formal order of investigation and subpoena from the SEC. This investigation is ongoing.

        Legal Proceedings.    Following our announcement regarding our voluntary disclosure to the SEC, we, together with certain former officers and former board members, became parties to various shareholder class-action lawsuits, to determine whether we have violated any federal securities laws. For a further description of the nature and status of these legal proceedings see "Item 3—Legal Proceedings."

        Product Performance and Reliability—Following the initial commercial launch of our newly developed SenoScan product line in late 2001, we identified product reliability and performance issues for that product. These issues continued into 2003. We also received a formal notice from the FDA regarding deficiencies in the way our quality system was meeting regulatory requirements. We implemented remedial steps to address the reliability, performance and compliance problems and to meet the needs of our customers, including hiring additional service personnel to replace defective parts and components in our systems, extending our limited warranty and focusing our research and development efforts on resolving these issues. We invested significant time and resources during 2003 in manufacturing and acquiring parts to re-work our existing SenoScan finished goods inventory, incorporating new product enhancements. Similarly we've invested to improve the quality of our products and reduce manufacturing inefficiencies. We also significantly increased the size of our service organization to better serve our customers and to ensure our existing installed SenoScan products were upgraded to incorporate our new product enhancements and exchange defective parts and components.

        Board of Director Changes—We also made significant changes to the composition of our board of directors, in which four of our directors resigned during 2003, including our Chief Technology Officer and founder and former president and Chief Executive Officer. We added four new board members including a new Chair of the Board, a new Chair of the Audit Committee and a new Chair of our Compensation Committee.

        European Operations—In 2002 we made the strategic decision to begin selling our SenoScan systems directly to customers and to provide full service support for all of our products in Europe. We also decided to continue our strategic partnership with Ethicon Endo-Surgery (EES) Europe, a subsidiary of Johnson & Johnson, Inc. for selling our MammoTest system. In 2003 we moved our European operations to Switzerland and began developing an operational infrastructure that includes service, marketing, direct sales and administrative functions to support the development of a direct sales channel for our SenoScan products. As a result of this decision, we invested significant resources in 2003 to establish our European operations and begin developing the market for our products.

        As a result of these events and other strategic decisions discussed below, during 2003 and early 2004 we implemented several key initiatives to improve our business operations, enhance product performance and reliability and improve financial reporting capabilities.

        Management Changes—During 2003 we made significant changes to our senior management team including hiring a new Chief Executive Officer in May. The changes to our new management team involved hiring a Senior Vice President of Research and Development, Vice President of Operations, Vice President of Service, Vice President of Quality and Regulatory Affairs, and created the new position of Senior Vice President of Global Strategy for our RE&S division. In early 2004 we hired a new Senior Vice President/Chief Financial Officer and Vice President/Controller and promoted an employee to the Vice President of Marketing position. We also made several changes in our middle management team to assist senior management in implementing its new strategic and operational plans.

4

        Quality Assurance Program—We received a warning letter from the Federal Drug Administration (FDA) in late 2002 regarding certain compliance issues. In response to this letter and to enhance our product performance and reliability, our new management team has focused on implementing a more rigorous quality assurance program to analyze our regulatory compliance process, assessing the need to re-design certain older products, and evaluating technologies on which our current products are built. We undertook an assessment of our product supply chain and evaluated the performance of key vendors for our system components and parts, and, as a result, began establishing alternative sources for our critical components. We have initiated a number of changes during 2003 to our product supply chain that we believe will result in more consistently higher quality and reliable parts and components for our products. These changes are also intended to significantly improve product performance and reliability, reduce our reliance on sole suppliers of key components, and improve our gross margins on all product lines over time while assuring compliance with regulatory requirements.

        Enhanced Financial Disclosure Controls—The investigation and review process resulted in our undertaking to begin modifying our internal controls, accounting policies and procedures, disclosure controls and procedures and corporate governance policies and procedures in order to, among other things, improve the quality, consistency and timeliness of our financial information and reporting. We've invested significant financial resources in upgrading our financial reporting process and capabilities including hiring additional personnel, utilizing outside consultants and implementing a new Enterprise Resource Planning software system. We are planning to continue investing significant resources on this initiative as we prepare for reporting on internal controls as required by Section 404 of the Sarbanes-Oxley Act.

        We believe these key initiatives are critical to building a strong foundation which to execute upon our business strategy.

Our Business Strategy

        Our business strategy is to maintain our leadership position in designing, manufacturing and selling innovative mammography and digital imaging products used to diagnose breast cancer and other diseases. Elements of our business strategy include:

•

Improve our Financial Performance and Operating Efficiency—During 2003 we began implementing a number of key initiatives to improve our operating efficiencies including reducing costs through manufacturing improvements and process improvements, improving our supply chain management and reducing our reliance on key vendors. Our strategy is to continue to evaluate our quality programs, improve and streamline our business processes, redesign our products and develop software improvements, and enhance our supply chain management in an effort improve product quality, performance and reliability of our products. Over time we believe these changes will have a positive and sustainable effect on gross margins for our service and products and reduce our operating expenses resulting in improved financial performance.



•

Continue to Advance our Technology—We will continue investing research and development resources towards developing leading digital imaging products. We plan to leverage our existing products by developing enhancements that incorporate new technologies, developing system and application software improvements that allow easier integration of feature enhancements, and integrating customer workflow improvements such as Picture, Archive and Communications Systems (PACS) to store x-ray images electronically. We believe that by focusing our research and development efforts on technologies that help improve productivity and efficiency of the end users of digital mammography will enhance the marketability of our products.



•

Re-Introduce our RE&S Product Line—We plan to continue our focus on more aggressively marketing and selling our Electrophysiology and VersaRad products through our recently established RE&S division. We have created a dedicated sales, marketing research and

5

development efforts. In January 2004 we entered into an agreement with terms under Kodak in which we will sell our VersaRad products to them to integrate with their detector and workstations. We will continue selling our Bloom Stimulator product through GE and we will seek other strategic partners for these and other RE&S products.

•

Explore Corporate Relationships to Augment our Direct Sales Force—We intend to seek additional corporate relationships to broaden our products' reach and increase our revenues. We also intend to acquire complementary products to that will be integrated with our existing products and offerings to sell through our existing sales channel and to our customer base.



•

International Operations—We believe that international markets represent a growing market for our digital mammography systems. Our strategy is to continue investing resources to develop our European operations as well as to expand into additional international markets, including Mexico and Latin America, and to provide service and support for all of our products in all of those markets. We also intend to continue seeking regulatory approvals for our digital imaging products in additional international markets.

Our Market

        We are focused on providing x-ray and digital imaging products associated with the diagnosis and treatment of disease, particularly breast cancer and cardiac arrhythmia. We market and sell our products to public and private hospitals, as well as private care centers.

        Breast cancer is the leading cause of death from cancer among women between the ages of 15 and 54 and the second-leading cause of death from cancer among all women. According to the American Cancer Society, over 1.3 million cases of invasive breast cancer were diagnosed in the US in 2003 and one in eight women in North America will develop breast cancer at some point in her life. International health organizations estimate that, globally, more than one million women are diagnosed with breast cancer every year. In addition, another 55,700 cases of in-situ breast cancer (called DCIS) were diagnosed.

        Mammography has been recommended as an effective tool for the early detection of breast cancer. We estimate that there were more than 50 million screening and diagnostic mammograms performed in the United States in 2002. Age has proven to be the largest risk factor for breast cancer. Data from the National Cancer Institute show a woman's risk of breast cancer at age 40 is 145 per 10,000 women, rising to 431 per 10,000 women by age 65. This fact has resulted in women being recommended for a baseline mammogram at a younger age. In 2002, the U.S. Department of Health & Human Services renewed its recommendation that women over 40 receive an annual mammogram, with a baseline mammogram recommended for women between the ages of 34 and 40.

        The mammography segment of the overall radiology market was estimated to be approximately $250 million in revenues worldwide, including approximately $200 million in North America and $50 million in the rest of the world in 2002. It is further estimated that full-field digital mammography represented only 7% of total units sold into the market in 2002. The overall mammography market is predicted to grow to over $500 million worldwide by 2009, with the majority of the growth coming in the full-field digital mammography market at nearly $400 million. Full-field digital mammography is expected to represent 70% of estimated revenues in the mammography market, as published by Frost and Sullivan. This market segment has very specialized requirements and is serviced in large part by diagnostic physicians who specialize in breast cancer only. From a technical standpoint, the Mammography Quality Standards Act (MQSA), passed in 1992, and recently amended in 2002, has established increasingly stringent quality requirements for equipment used in breast cancer screening. Screening mammography is increasingly accepted as an effective method of detecting breast cancer at its earliest, most treatable stage.

6

Screening Mammography

        According to the Centers for Disease Control and Prevention, over 75% of women over age 50 received a mammogram in 2002. Based on FDA survey data, we estimate that in 2002 there were about 40 million screening mammograms performed in the United States. The sensitivity of modern mammography is estimated to be around 75%; that is, if a cancer is present there is a 75% chance that screening mammography will detect it. However, the specificity of screening mammography is not very high in that an average of 13% of screened women are called back for further tests while only about 0.5% of the women screened will actually have breast cancer. These false positives create anxiety for women while adding significant expense to screening mammography programs.

Diagnostic Mammography

        If an abnormality is detected in a screening mammogram, or a woman or clinician discovers a palpable lump, diagnostic mammography is performed. Call back rates range from 4% to 20% of women screened and average about 13% across the United States. While the total number of diagnostic mammograms performed per year is not known, we estimate that about 20% of all mammograms are diagnostic exams.

Diagnostic Ultrasound

        For lumps or masses discovered by palpation or mammography, diagnostic ultrasound is performed in addition to diagnostic mammography. Improvements in diagnostic ultrasound image quality as well as increased training for radiologists and surgeons who perform ultrasound exams have resulted in a large increase in diagnostic ultrasound exams. In certain cases radiologists are able to make a definitive diagnosis of benignity through the use of mammography and ultrasound for palpable and nonpalpable breast masses.

Breast Biopsy

        Following diagnostic mammography and ultrasound, about 20% to 30% of patients called back from a screened mammogram require a tissue biopsy. A biopsy may either be performed surgically or through a percutaneous (through the skin) procedure under ultrasound or stereotactic imaging guidance.

Needle Biopsy Contrasted with Surgical Tissue Biopsy

        A traditional surgical tissue biopsy involves the removal of a golf-ball sized piece of tissue from the breast. This procedure has several disadvantages:

•

The surgery is typically performed in an operating room under anesthesia;



•

The surgery takes about an hour and requires one to two days of home recuperation;



•

The incision can be disfiguring and scarring normally occurs; and



•

Internal scar tissue can interfere with the ability to detect suspicious lesions during subsequent mammograms.

        A less-invasive form of breast biopsy can be performed using a small needle and imaging guidance to direct the needle into the lesion detected by the mammogram. Approximately 40% of breast biopsies are performed with a needle under image guidance. We pioneered the clinical development of prone, stereotactic core needle biopsy together with several radiologists in the late 1980's. These clinical studies resulted in the development of the MammoTest system. Stereotactic core needle biopsies are less expensive than surgical biopsies because surgical biopsies are most often performed in a hospital or surgery center. A significant portion of the cost savings for core needle biopsy results from the lower

7

overhead associated with physician offices and imaging centers, while maintaining the same efficacy as the surgical procedure.

        In September 2001, the American College of Surgeons published a consensus statement in the Journal of the American College of Surgeons that endorsed needle biopsies as preferable to surgical biopsy in most patients. The statement also indicated that percutaneous biopsy would often allow breast cancer to be treated with only one trip to the operating room, providing substantial cost savings for the healthcare system.

Our Products

        Our products address two markets: mammography and conventional radiology. Our breast cancer diagnostic product line includes the SenoScan TrueView digital mammography system and the MammoTest All-Angles prone stereotactic breast biopsy system. Our RE&S product line includes offerings for radiology, electrophysiology and surgery.

SenoScan TrueView Digital Mammography System

        We are a leader in the development of full field-of-view digital mammography systems. Our SenoScan TrueView Digital Mammography System was developed for screening and diagnostic mammography. SenoScan received FDA marketing clearance in September 2001 and European Community marking in November 2001. We installed our first SenoScan at a customer in the fall of 2001. Sales of our SenoScan product constituted 24% and 12% of total revenue for 2003 and 2002, respectively. The FDA has cleared SenoScan under a premarket approval (PMA) application. In addition to being approved by the FDA as equivalent to screening and diagnostic film mammography, a specific claim of up to a 40% to 60% reduction in patient x-ray dosage was approved. Key product features of the SenoScan include:

•

An ability to image almost all women with fewer exposures due to a large field-of-view; and



•

High resolution for improved visibility of subtle microcalcifications that can be strong indicators of early breast cancer.

        A SenoScan system is comprised of a gantry, an acquisition station, a local data storage repository and one or more review workstations. The acquisition station is installed in a shielded room where the patient is positioned for the mammogram. The patient has the breast compressed, which is then exposed to x-ray with the image recorded in digital format. The image is stored locally but is immediately available to one or more review stations for diagnosis. The image may also be transmitted to a local or remote data archive facility. The SenoScan system is frequently sold with peripheral equipment and software provided to us by others.

        SenoScan is a patented, slot-scanning system that operates with a detector directly coupled to the x-ray tube. The x-ray detector is a charged-coupled device, which is scanned underneath the breast, providing a very high-resolution digital image of the breast. Because the system does not require the use of a "scatter grid" to control scatter radiation, the radiation required to form an image is lower, resulting in a lower radiation dose to the patient. The SenoScan system covers a 21cm by 29cm field of view and thus is compatible with the great majority of breast sizes in screening mammography. The native resolution of the detector is 25 microns per pixel, which is used for diagnostic mammograms in an 11cm × 15cm field of view. In the screening mode the resolution is 50 microns per pixel with a field of view of 21cm by 29cm.

        Diagnostic radiologists have reported that digital mammography provides a number of advantages over conventional x-ray film mammography. Images acquired utilizing digital mammography may be displayed on a computer monitor, which allows image brightness and contrast to be varied. Diagnostic radiologists have the opportunity to manipulate a digital mammogram in order to improve their

8

diagnosis, in some cases eliminating the need for a second mammogram. Because younger women typically have more dense breast tissue, which may not be visualized adequately with x-ray film mammography, this feature may be particularly useful in screening women under age 50. SenoScan is unique in its ability to provide mammographic images while exposing the patient to 40% to 60% less radiation than traditional x-ray film mammography. Other benefits include: real time acquisition (film processing is not necessary); digital archival media storage of the mammogram; an ability to implement computer-aided detection algorithms; and telemammography (digital transmission of mammograms for remote display and diagnosis).

        We participated in a $27 million study sponsored by the National Cancer Institute to measure the performance of digital mammography systems against conventional x-ray film systems. This trial, known as the Digital Mammographic Imaging Screening Trial, or DMIST, began in 2001 and involved four manufacturers and 20 institutions. At the conclusion of the study in late 2003, a total of approximately 50,000 women had been screened with both digital mammography and conventional film systems. The digital mammography diagnosis is now being compared to the x-ray film mammography diagnosis to evaluate the performance of the two imaging techniques. The results of the study are expected to be available in late-2004.

        Because digital mammography systems are substantially more expensive than x-ray film mammography systems, a major challenge affecting our sales will be the ability of health care providers to obtain increased payments by private insurance carriers and the Medicare program to make it cost effective for health care providers to acquire and use digital mammography systems. Medicare is estimated to provide coverage to about forty percent of the women who receive an annual mammogram. The Centers for Medicare and Medicare Services, or CMS, finalized Medicare reimbursement for digital mammography effective January 1, 2004. Digital screening mammography is reimbursed at $134.41 per exam and digital diagnostic mammography at $141.88 per exam. Film screen reimbursement rates also were increased to $84.76 for screening and $96.33 for diagnostic mammography. The average FDA-approved MQSA center performed 21 exams per day, according to an FDA-sponsored survey in August 2001. While CMS provides for higher reimbursements for digital mammography compared to x-ray mammography, as indicated by these reimbursement rates, the difference between digital mammography reimbursement rates and film screen reimbursement rates may not, in and of itself, make it economically compelling for healthcare providers to change to digital mammography systems.

        However, while digital mammography systems are substantially more expensive than x-ray film mammography systems, we believe the potential benefits of digital mammography, including significant operating cost reductions related to film and processing costs, cost of image storage, and improving workflow efficiencies, as well as improved imaging leading to earlier detection, and increased volume of patient screenings will be compelling reasons for health care providers to purchase digital mammography systems.

MammoTest/MammoVision Systems

        We have produced our MammoTest stereotactic breast biopsy system since 1988, and sales of this product constituted 35%, 47% and 61% of total revenues for 2003, 2002 and 2001, respectively. MammoTest enables core needle biopsy of the breast for the minimally-invasive removal of suspicious tissue. The MammoTest system consists of an elevating prone-position table, a mammographic x-ray imaging system and a stereotactic needle guidance system used during the target localization process, biopsy procedures and placement of a breast applicator set during interstitial therapy procedures. Stereotactic refers to the technique of locating a lesion in a three-dimensional field using x-ray imaging, and directing the tip of a core needle to the site of the lesion for tissue removal. With the MammoTest system, the patient lies prone on the table with the breast hanging pendulant through an opening in the table. The digital x-ray imaging camera is located beneath the table where the breast is compressed and

9

two digital x-ray images are acquired at separate angles. MammoTest is a mature product and competes with one other prone table biopsy systems. In 1992, we introduced MammoVision, the first charge-coupled device imaging system cleared by the FDA that produces breast tissue images on a nearly real-time basis. With the aid of proprietary software, the coordinates of a breast lesion are automatically calculated. These coordinates are then transmitted to the Autoguide, a motor-driven needle holder assembly that precisely positions the biopsy needle at the lesion.

        We have introduced additional enhanced versions of MammoTest. In 1995 we introduced MammoTest Plus and MammoVision Plus. The MammoTest Plus system permits 360-degree access to the breast. It also incorporates the features of Target on Scout that provides additional imaging capability important to assuring accuracy of the biopsy and Lateral Arm, and provides 360-degree access to the breast allowing small breasts (less than 2.5cm when compressed) and breast lesions in difficult locations to be biopsied more easily. In 1998, we introduced the MammoTest Plus "S" surgical system. The MammoTest Plus "S" is based on the MammoTest Plus prone biopsy system, with enhancements designed to support the more advanced techniques performed in the surgical market segment. During 2001, the Elite Camera was introduced for more advanced, high resolution imaging capability. In 2002, we released the latest version of our Mammotest product, the Mammotest Select. In 2003 we offered three product configurations, the MammoTest Basic, MammoTest Advantage and MammoTest Select, which each have different product functionality and performance features to meet customer requirements. We continue to invest in product development efforts focused on further enhancements to MammoTest.

General Radiology Products

        Prior to our introduction of the MammoTest system in 1988, our business was focused primarily on manufacture and sale of x-ray products directed to the general radiology market. Beginning in the third quarter of 2002, we reinitiated efforts to more aggressively market and sell our Electrophysiology and VersaRad products by establishing our RE&S division to focus on these product offerings. We are also investing product development efforts on redesigning and enhancing these products.

        Electrophysiology Products.    The treatment of cardiac arrhythmia patients typically involves a diagnostic study of the electrical functioning of the heart with an electrophysiology, or EP, study. We estimate that approximately 200,000 EP studies are performed each year by electrophysiologists. When an EP study indicates that the patient requires a surgical procedure, the electrophysiologist will map the electrical activity in the patient's heart in an effort to locate the precise area of the heart that is causing the arrhythmia. We manufacture the EP x-ray imaging systems, tilt-tables and our Bloom Stimulator, which are used by electrophysiologists to evaluate the best course of treatment. In 1995, we introduced the EP/X™ x-ray system, an economical, state-of-the-art single plane system designed to meet the unique requirements of the electrophysiologist. In 1997, we introduced the EP/X²™ bi-plane x-ray system. In addition, we manufacture the Bloom Stimulator that is used by electrophysiologists in the treatment of patients with cardiac arrhythmia, as well as when patients receive pacemakers and implantable defibulators. We introduced a significant upgrade to the EP/X System in 2003 that includes a new high-resolution digital imaging system along with a generator upgrade providing a 300% increase in power output, thus enabling the clinician to better image larger patients.

        VersaRad.    The VersaRad system is an enhancement of our Traumex general x-ray system. VersaRad capitalizes on unique positioning capabilities requiring minimal patient movement, making it well suited for emergency room applications. It is also a versatile general radiographic system, allowing x-ray of every bone and joint in the body. The VersaRad is available for use with a traditional x-ray film cassette as well as a digital array.

10

Backlog

        As of December 31, 2003, we had backlog of approximately $19.8 million, including $8.4 million related to a large order from an international customer which we shipped in December 2003 but revenue was not recorded at December 31, 2003 because our criteria for revenue recognition was not met. The customer has paid the entire invoice amount in 2004. Our backlog generally includes only product orders which we believe to be firm orders where delivery is requested within the upcoming twelve months. However, as our customers may delay or cancel orders at any time prior to delivery, backlog as of any particular date should not be relied upon as being indicative of our revenues for any future period. As of December 31, 2002, we had backlog of approximately $2.5 million.

Research and Development

        We employ 24 development engineers who are dedicated to the enhancement of our existing products and the development of next-generation products for the diagnosis and treatment of breast cancer and the general radiology market. The product development efforts of our internal engineering staff are currently focused on engineering, system design and software development to enhance our SenoScan digital imaging system and MammoTest products. One current product development focus is collaboration with two companies related to qualifying their cancer detection software to operate in association with SenoScan. This has enabled us to offer our customers an option package that includes computer-aided detection (CAD) software for use with SenoScan. We believe radiologists will prefer to use CAD programs that are integrated with the digital mammography system, since it is much less labor intensive to operate the software as part of a digital mammography system. With regard to MammoTest we may create development partnerships with surgical instrument companies that desire to qualify their instruments on MammoTest to create a complete solution for minimally-invasive surgery outside the mammography market.

        We are also actively engaged in a collaboration with Philips Electronics supported by $468,000 Phase I SBIR grant from the National Cancer Institute directed at integrating Philips Electronics ultrasound imaging technology with our digital mammography capability. We entered into a separate collaboration with IBM supported by a four year, $1.2 million fast track SBIR grant from the National Cancer Institute to evaluate the performance and clinical efficacy of the advanced IBM T221 flat panel display as part of the SenoScan mammography review workstation. We will begin receiving proceeds from this grant in 2004.

        Our research and product development expenses were approximately $4.7 million, $4.6 million and $3.3 million in 2003, 2002 and 2001, respectively.

Sales and Marketing

        Our SenoScan digital imaging system was introduced in the third quarter of 2001 and our marketing plan for the product is currently being deployed. This marketing plan is primarily directed towards the physician/user and, to a lesser extent, healthcare administrators. Our marketing to the physician/user is focused on over 1,000 current MammoTest customers that are mammography centers, whether engaged in screening and diagnostics, teaching or research. Our physician marketing for SenoScan focuses on demonstrating the technical, clinical and financial benefits of digital imaging as compared to x-ray film diagnosis. In addition, we provide the consumer/patient with brochures outlining the digital mammography process and its potential benefits compared to x-ray film.

        The market for our MammoTest product is mature, as the use of stereotactic breast biopsy is a well-established diagnostic procedure. Furthermore, customer requirements and the competitive landscape are much better known in the physician community for breast biopsy than for digital imaging. Our marketing effort for MammoTest focuses on existing customers as well as the emerging corporate healthcare buyers, such as Health Trust Purchasing, AmeriNet and Broadlane.

11

        We market our RE&S products through several channels including direct sales personnel, partnering and other marketing efforts. We have two direct sales personnel who call on hospitals with our EPX, SPX and VersaRad product lines. During 2003 we sold our VersaRad product to Analogic, who integrated a digital imaging system and then resold the product to Kodak. Beginning in 2004 we began selling our VersaRad product directly to Kodak. We also sell our Bloom Stimulator directly to end user physicians as well as to General Electric (GE) for resale. We previously had an Original Equipment Manufacturer (OEM) agreement with International Surgical Systems (ISS) to resell our SPX products. ISS filed for bankruptcy and is no longer in operation. We are focusing our marketing efforts for our SPX products and SPX upgrades on customers who purchased our surgical imaging product from ISS while our OEM agreement was in place.

        The market for each of our product lines is characterized by an aggregation of buyers due to healthcare industry consolidations as well as emerging corporate healthcare buyers used by hospitals to improve cost containment. Therefore, fewer decision-makers are making more substantial purchasing decisions. In this environment, ensuring high customer satisfaction is a key strategy for maintaining marketing and sales momentum. Our marketing activities include trade shows, advertising in professional journals, conferences and physician training programs. The marketing group develops sales leads and assesses customer satisfaction with our products, as well as with direct and dealer service performance.

        We sell our products worldwide primarily through our direct sales force and dealers. As of December 31, 2003, we had 21 direct sales people whose territories cover primarily large metropolitan areas. In addition, we have a limited number of dealers in the United States. All our international sales and service operations are now headquartered at Fischer Imaging International, Geneva, Switzerland. In 1998, we entered into an agreement with Ethicon Endo-Surgery (EES) Europe, a subsidiary of Johnson & Johnson, Inc., for the distribution of the MammoTest system in Europe. Under this agreement, we provide installation, applications and service support, while EES Europe is responsible for sales of the MammoTest system. EES Europe's sales force provides sales coverage in the major European countries. During 2003, 2002 and 2001, the Company's total foreign revenues were $9.3 million, $6.0 million and $7.2 million, respectively.

Service

        Our service organization is responsible for installing our products and providing warranty and repair services. Products sold by our direct sales force typically carry limited warranties covering parts and labor for twelve months. Products sold through dealers carry more limited warranties, with terms ranging from six to twelve months and typically covering only parts or components. Service personnel offer maintenance service either under contracts or at hourly rates. In many foreign countries outside of Europe, we use dealers and third parties to provide maintenance service for our products. As of December 31, 2003, we employed 57 field and technical support engineers, 10 applications training personnel, and 18 customer service, administrative and management personnel in our service organization.

Manufacturing

        Our products are manufactured in our production facility in Denver, Colorado. The manufacturing process is primarily assembly, integration, testing, and quality control of out-sourced components and assemblies. This represents a significant change in our manufacturing strategy from the period prior to 2001, when we manufactured a substantial number of these components ourselves. For the most part we now purchase all of our parts, peripheral components and sub-components for our systems.

        Many parts and components for our systems are generally readily available from several supply sources. However, for several critical components including detectors, transformers, cameras, autoguides and x-ray tubes used in each of our product lines, we rely on one supplier for each of these

12

key components. The manufacture of these components is highly complex and requires a precise high quality manufacturing processes from our suppliers. Our sole supplier for our detectors has experienced sub-component supply difficulties from their vendors and we have experienced product failures on these detectors during our pre-assembly quality testing process. We have also experienced performance issues with several of these suppliers in meeting our supply chain needs and quality requirements. As a result, we have experienced unanticipated production problems that have caused us to miss customer shipment request dates, delay production and incur additional costs related to manufacturing, shipping and installation. Changes in design for our products, including our mammography detectors and our RE&S product line, could result in unanticipated production problems in the future. We are seeking to qualify a second supplier for each of our key components and subsystems to ensure more consistently higher quality and reliable parts and components and to increase our manufacturing capacity, but cannot assure that we will be successful. Obtaining alternative sources of supply of components or systems that are available from only one or a limited number of suppliers could involve significant delays and other costs, and these supplies may not be available to us on reasonable terms, if at all.

        Our quality assurance program meets the requirements of both the U.S. FDA Quality System Regulation (QSR) and ISO 13485, the international quality system standard for medical devices. It includes various quality assurance and quality control measures from inspection of incoming materials and assemblies through in-line inspection, final configuration testing, and monitoring of complaints. Based on data gathered from these activities, we undertake actions to correct and prevent problems that may occur both during production and during product use. As of December 31, 2003, we employed 53 employees in our manufacturing organization, including 48 in production and five in quality and regulatory affairs.

Intellectual Property

        We seek to protect our proprietary rights through a combination of technical experience, patent, trade secret and trademark protection and nondisclosure agreements. Our future success will depend in part on our ability to obtain and enforce patent protection for our products and processes, preserve our trade secrets and operate without infringing on the patent or proprietary rights of others. Our issued patents cover, among other things, certain features of our MammoTest stereotactic breast biopsy system, our SenoScan digital mammography system and related technologies and processes.

        We have a significant number of U.S. and foreign patents and pending patent applications covering various aspects of our products. A number of our patents issued between 1985 and 1990 will be expiring during the next five years. We also rely on trade secrets and proprietary knowledge that we seek to protect, in part, through appropriate confidentiality and proprietary information agreements. These agreements generally provide that all confidential information developed or made known to an individual during the course of his or her relationship with us is not to be disclosed to third parties, except in specific circumstances. They also generally provide that all inventions conceived by the individual in the course of his or her services to us are our exclusive property.

        From time to time, we have entered into technology license agreements under which we pay nominal royalties in connection with the sale of products using a third party's technology. As discussed in more detail below in "Management's Discussion and Analysis of Financial Condition and Results of Operations," we are receiving an annual royalty of $900,000 in connection with our license of certain technology to ThermoElectron/Hologic.

        Our registered trademarks include Fischer®, Fischer Imaging®, MammoTest®, SenoScan®, MammoVision®, TRAUMEX®, VersaRad-A® and VersaRad-D®. Our other trademarks include MammoTest Plus™, MammoTest Plus "S"™, MammoVision Plus™, MammoSound®, Target on Scout™, EPACE™, and EP/Stim™, EP/X™, EP/X²™ and SPX™-Surgical Imaging System.

13

Competition

        The medical device industry is intensely competitive. Many companies are actively engaged in research and development of medical devices for mammography and breast biopsy. There is significant interest in the development of digital imaging systems and other competing technological approaches for mammography (for example, ultrasound, CT scan, MRI) by many current and prospective competitors. Most of these companies have substantially greater financial and other resources, larger research and development staffs, and more extensive marketing and manufacturing organizations than we do. Additionally, some of them have considerably more experience in regulatory approval procedures.

        We face significant competition in digital imaging from large companies that are pursuing the same digital mammography market. In 2000 the FDA cleared the Senographe 2000D from General Electric, and in 2002 the FDA cleared a digital mammography system from Hologic. Additional companies have announced plans to develop digital mammography systems, including Siemens, Fuji and Kodak. We also have significant competition in our RE&S products from many companies that are pursuing the same market. EPMed manufacturers a product similar to our Bloom Stimulator product. GE, Siemens, Phillips Electronics and Omega Medical Systems each manufacture and sell products similar to our EPX product. SwissRay is a primary competitor for our VersaRad product line.

        We believe that current customer interest in our SenoScan Digital Imaging System results from its high image resolution, which is currently unique in the market. However, developments by others in digital imaging or in other screening technologies that may be able to identify breast abnormality earlier or more accurately may render our digital mammography system or other technologies obsolete or noncompetitive. We will continue to face intense competition from other companies for collaborative arrangements and for securing licenses to additional technologies. These competitors, either alone or with their collaborative partners, may succeed in developing technologies or products that are more effective than ours, or they may be more effective at marketing and selling their products. In the smaller, breast biopsy market, similar dynamics apply but to a lesser degree.

Third-Party Reimbursement

        In general we cannot predict what effect the policies of government agencies and other third party payers will have on future sales of our products, and such policies may have a material, adverse impact on our business. Third-party reimbursement from Medicare or private payers has been a major inhibitor to the adoption rate of our digital imaging products and sales of our stereotactic breast biopsy systems and RE&S products. We believe that focusing on cost reduction and increasing the number of procedures that can be performed in a given time period may be the optimal means of addressing the challenges posed by limitations on reimbursement.

        Medicare reimbursement for hospitals represents about 40% of all hospital revenues. Since 1983, Medicare has limited reimbursement for Medicare inpatients to a fixed amount, based on specified categories of diagnosis known as Diagnosis Related Groups or DRG's. Hospital profit margins have been reduced significantly since the introduction of fixed reimbursement amounts based on DRG's. Therefore, hospitals have a financial incentive to use less-costly treatment methods. If a new technology is considered to be more cost effective, hospitals will often make capital investments to provide cost savings. Frequently, but with a significant time lag, Medicare reimbursement rates are reduced to reflect the adoption of a new procedure or technique and, as a result, hospitals are generally willing to implement new cost saving technologies before these downward adjustments in rates become effective.

        Medicare is estimated to provide coverage to about forty percent of the women who receive an annual mammogram. The Centers for Medicare and Medicaid Services, or CMS, finalized Medicare reimbursement for digital mammography effective January 1, 2004. Digital screening mammography is reimbursed at $134.41 per exam and digital diagnostic mammography at $141.88 per exam. Film screen

14

reimbursement rates also were increased to $84.76 for screening and $96.33 for diagnostic mammography. The average FDA-approved MQSA center performed 21 exams per day, according to an FDA-sponsored survey in August 2001.

        In August 2000 Medicare implemented a prospective payment system for all outpatient procedures performed on behalf of Medicare beneficiaries. The new payment system uses Ambulatory Payment and Classification, or APC's, to group similar procedures and make fixed payments to hospitals for the technical expenses associated with outpatient procedures. This prospective payment system is similar to the DRG inpatient payment system and early experience indicates difficulty in properly determining the APC groups to which certain procedures belong. Technical payment amounts for some procedures such as diagnostic mammography are well below the cost of performing the procedure and this low reimbursement may dissuade hospitals from expanding diagnostic mammography services. In addition, while technical payments increased for open surgical biopsies beginning in January 2002, the technical fees related to core needle biopsy performed in a hospital outpatient setting actually decreased. These payment changes may adversely impact our sales of mammography systems and stereotactic breast biopsy systems.

        Reimbursement for physician services provided to Medicare beneficiaries is made under a physician fee schedule administered by CMS and the American Medical Association, or AMA. Procedures are assigned specific Common Procedural Codes. The valuation of these codes is accomplished by determining the relative value of work required to perform the procedure as well as the practice expenses associated with the procedure. The total number of relative value units, or RVU's, are multiplied by an annual conversion factor for Medicare payments to physicians. This conversion factor is determined annually by CMS. The conversion factor translates into dollars, and equals the total amount that physicians will receive for a particular procedure. For 2002, Medicare reduced the conversion factor for Medicare Part B payments by 4.7%, essentially reducing physician remuneration by the same amount for all Medicare procedures. Percutaneous breast biopsy procedures however were generally increased as the number of RVU's allocated to the procedure were increased. In addition, rates for both diagnostic and screening mammography were increased over the rates in 2001 by about 17% and permanent reimbursement amounts were set for both screening and diagnostic digital mammography. The rates for digital mammography were set about $40 higher than the film screen mammography rates.

        Normally private insurance carriers follow Medicare's lead in determining whether to provide coverage for medical procedures and frequently base payment from the Medicare physician fee schedule. Historically private insurance carriers have paid up to 40% more than Medicare rates but there is no assurance that private carriers will continue this practice. For high volume procedures such as mammography screening, private insurance carriers negotiate fee schedules with providers that may in fact be lower than the Medicare fee schedule. While Medicare reimbursement rates for digital mammography procedures is sufficient to allow most MQSA centers to amortize the cost of systems such as our SenoScan digital mammography system, failure of a majority of private carriers to adopt Medicare rates for digital mammography could adversely impact our sales of its SenoScan system. In at least one instance, Blue Cross and Blue Shield of Illinois has indicated that full field digital mammography is considered "investigational" and therefore is not eligible for coverage.

Regulation

        The medical devices manufactured and marketed by us are subject to regulation by the U.S. FDA and, in many instances, by foreign governments. Under the Federal Food, Drug and Cosmetic Act, known as the FD&C Act, manufacturers of medical devices must comply with certain regulations governing the design, testing, manufacturing, packaging and marketing of medical devices. The majority of our products are also subject to the Radiation Control for Health and Safety Act, administered by

15

the FDA, which imposes performance standards and record keeping, reporting, product testing and product labeling requirements for devices that emit radiation, such as x-rays.

        The FDA must approve all our medical devices for marketing before commercial distribution can take place. This approval is based on their evaluation of either 510(k) or PMA (Pre Market Approval) filings. A 510(k) filing is pursuant to Section 510(k) of the FD&C Act that provides for FDA approval of certain devices that are substantially equivalent to devices that have been continuously marketed since May 28, 1976. Most of our products are subject to this type of filing, including our MammoTest stereotactic breast biopsy system, our electrophysiology programmable stimulator, and other general radiology equipment.

        The PMA filing and approval process is a more complex and lengthy testing and review process than the 510(k) process. A company must first obtain an investigational device exemption, known as an IDE, for the manufacturer to conduct extensive clinical testing of the device to obtain the required clinical data for the filing. The FDA will thereafter only grant approval if it finds that the safety and efficacy of the product has been sufficiently demonstrated through the clinical testing as well as the manufacturer's laboratory testing and third party product safety agency testing. Then, after the FDA approves the product for distribution, annual reports must be submitted to update the FDA on the product's status. The manufacturer must obtain further approval if changes to the product affect the safety and efficacy claims under which the original approval was given. One product that we manufacture is subject to this process, the SenoScan TrueView Digital Mammography System. We received pre-market approval from the FDA on the SenoScan in September 2001. This pre-market approval permitted us to begin marketing efforts in the United States and launch it commercially.

        Our systems are also subject to approval by certain foreign regulatory and safety agencies, including the European Union, where we market our products under the Medical Device Directive. During an annual surveillance audit in December 2003, the European Notified Body, which is the authorizing agency of the CE Mark, cited us for failing to satisfactorily comply with some Medical Device Directive documentation requirements, failing to meet some quality system requirements, and for failing to properly certify the MammoTest product line to international performance standards. As a result, we may not ship the MammoTest product line to EU countries until the deficiencies are resolved. The CE mark is a symbol, which reflects that products meet relevant international performance and safety standards, and is required for sales into the countries that are members of the European Union. We expect these to be resolved in the second quarter of 2004.

        We cannot assure that the FDA or foreign regulatory agencies will give the requisite clearances for any of our medical devices under development on a timely basis, if at all. Moreover, after clearance is given, these agencies can later withdraw the clearance or require us to change the device or its manufacturing process or labeling, to supply additional proof of its safety and effectiveness, or to recall, repair, replace or refund the cost of the medical device, if it is shown to be hazardous or defective. The process of obtaining clearance to market products is costly and time-consuming and can delay the marketing and sale of our products.

        As a manufacturer of medical devices, we are subject to additional FDA regulations, including the Radiation Control for Health and Safety Act of 1968, which specifically regulates radiation-emitting products. In addition, our manufacturing processes and facilities are subject to continuing review by the FDA. Most states and many other foreign countries monitor and require licensing of X-ray devices. Federal, state and foreign regulations regarding the manufacture and sale of medical devices are subject to future change. We cannot predict what impact, if any, such changes might have on our business.

        FDA regulations require manufacturers of medical devices to adhere to "The Quality System Regulation, (QSR) found in 21 CFR part 820", which includes testing, quality control, quality assurance, corrective action, preventive action, and documentation procedures for design,

16

manufacturing, installation and servicing. Our manufacturing facilities are subject to periodic inspections by the FDA.

        In December 2002, following an earlier periodic inspection that resulted in the FDA issuing a Form 483 containing inspectional observations, the FDA issued a Warning Letter, or formal notice, regarding deficiencies in the way our quality system satisfies the QSR requirements. We responded to the Warning Letter findings and observations and instituted corrective actions. We expect the FDA to conduct an inspection to verify the effectiveness of our corrective actions during the next few months. While we believe the corrections we implemented will effectively resolve the deficiencies cited, there is no assurance the next FDA inspection will identify no further deficiencies.

        Failure to satisfy FDA requirements can result in an inability to receive awards of federal government contracts, to receive new marketing or export clearance for products, or FDA enforcement actions including, among other things, product seizure, injunction, and/or criminal or civil proceedings being initiated without further notice.

        We are also subject to other federal, state, local and international laws and regulations related to worker health and safety, environmental protection and export controls. Some of our technology is governed by the International Traffic in Arms Regulations of the United States Department of State. As a result, the export of some of our systems to some countries may be limited or prohibited. We believe Fischer is in compliance, in all material respects, with these other laws and regulations and that maintaining such compliance will not have a material financial impact on future capital expenditures or results of operations.

Employees

        As of December 31, 2003, we had 232 employees, including 207 in our U.S. operations and 25 in our international operations. We employ 85 people in service, 53 in manufacturing, 31 in engineering, 38 in sales and marketing and 25 in administration. None of our employees are parties to a collective bargaining agreement. We consider relations with our employees to be satisfactory. On an as-needed basis we sub-contract for personnel to augment our needs.

Website Access

        Our website address is www.fischerimaging.com. You may obtain free electronic copies of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and all amendments to those reports at our website under the heading "Investor Relations" or at the SEC's website address, which is www.sec.gov. The SEC website also contains proxy and information statements and other Company information. These reports are available on our website as soon as reasonably practicable after we electronically file them with the SEC. However, we do not intend to amend our prior filings based on the restatement. The reference to our website does not constitute incorporation by reference of the information contained on the website, and the information contained on the website is not part of this document.

Other Sources

        The public may read and copy any materials the Company files with the SEC at the SEC's Public Reference Room, located at 450 Fifth Street NW, Washington, DC 20549, and may obtain information about the operation of the Public Reference Room by contacting the SEC at 1-800-SEC-0330.

Risk Factors

        The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our operations and financial results. The occurrence of any of the following risks could harm our business.

17

In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

We have a recent history of operating losses that have substantially reduced our cash reserves and may threaten our continuing operations.

        We have sustained operating losses during our last six quarters ending December 31, 2003 of $22.2 million in the aggregate, of which $7.7 million occurred during the fourth quarter of 2003. During 2003 our operating losses were primarily the result of increased operating costs in our service department, additional inventory write-off, increased operating losses related to the first full year of operations for our European operations, and costs associated with our financial restatement and compliance with corporate governance and FDA requirements.

        Our future product and services revenue growth depends substantially on increased customer acceptance of our new SenoScan Digital Imaging System, our ability to develop valuable enhancements to SenoScan and MammoTest and on our ability to increase sales of our RE&S products. If the SenoScan product is not accepted, or if product sales overall do not increase, or if margins on the sales of all of our products do not improve, our cash reserves could be exhausted. If this occurs, we will be required to raise additional operating capital through equity or debt financings. We can provide no assurance that we can raise additional funds if necessary, or that these funds can be raised in a timely fashion or on acceptable terms. Current stockholders could experience substantial capital dilution or subordination of their investment to the rights of new investors. If we were unable to raise additional funds it would be necessary for us to further reduce personnel or curtail operations, which would adversely affect our ability to market, sell and support our products.

We face risks relating to our liquidity.

        Over the past six quarters we have incurred significant costs related to, among other things, legal, accounting and other professional fees associated with our internal review of various accounting and other matters, the ongoing investigation of the Company by the SEC, the shareholder class-action lawsuit and other legal proceedings described below. In addition we are making significant investments in product development and redesign, and in the development and implementation of sound internal controls, corporate governance policies and procedures designed to enhance the accuracy, quality and consistency of our financial information and reporting and other significant corrective activities. We will continue to incur significant related expenses in the future. If we are not able to significantly reduce our operating expenses, improve our operating margins, or we become subject to other significant judgments or settlements in connection with the legal proceedings described in Item 3 of this Annual Report on Form 10-K, we may require additional financing. Additional equity or debt financing may not be available on acceptable terms, or at all, in part because our common stock was delisted from The NASDAQ Stock Market. If we are unable to obtain additional capital, we may be required to reduce our sales and marketing activities, reduce the scope of, or eliminate, our research and development programs, or relinquish rights to technologies or products that we might otherwise seek to develop or commercialize.

        For a further description of the nature of the risks relating to our liquidity see, "Item 7—Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources."

18

We depend on skilled personnel to operate our business effectively, and if we are unable to retain existing, or hire additional, personnel, our ability to develop and sell our products could be harmed.

        Our success largely depends upon the continued service of our sales and technical personnel, many of whom could be difficult to replace. Competition for qualified technology and market-experienced employees is intense, and our business could be adversely affected by the loss of core competencies in engineering, manufacturing, marketing and sales. We cannot assure you that we will continue to be successful in hiring and retaining qualified and properly trained personnel. The illiquidity of our common stock may also affect the attractiveness of equity incentives that are part of our compensation program used to attract and retain key personnel. The failure to attract, retain, motivate and train qualified new personnel could have a material, adverse effect on our business.

Our market is unpredictable and characterized by rapid technological changes, competitive technologies and evolving standards, and, if we fail to keep up with such changes, our business could be negatively affected.

        The market for our products is characterized by rapid and significant changes in competitive technologies, evolving medical industry standards, the frequent introduction of new products and alternative surgical procedures. Products based on new technologies could replace or reduce the importance of current procedures that use our products and render these products noncompetitive or obsolete. Therefore, our success will depend in part on our ability to respond quickly to new product introductions, marketing campaigns and medical and technological changes through the development of new products. We may not be able to develop new products in a timely or cost-effective manner, if at all, and demand for our current products could be significantly diminished. Because we compete in a high technology environment, competitive product instructions occur on a frequent basis. New, breakthrough technology in the areas of computer tomography (CT) and position emission tomography (PET) scanning, magnetic resonance and ultrasound imaging may trigger a sharp drop in interest in our products. In addition, this convergence of multiple imaging modalities may cause our products to be outdated.

The success of our new products depends on successful product design efforts, receipt of FDA clearances, and market acceptance.

        Current research and development efforts are focused on the development of the next generation of SenoScan, our full field digital mammography system. In addition, significant efforts are being expended on the integration of ultrasound with the MammoTest system. These products involve technological innovation and require significant planning, design, development and testing at the technological, product and manufacturing process levels. Significant investments in research and development, equipment, inventory, manufacturing and marketing are also required. Lengthy and expensive clinical trials could also be required prior to submission to the FDA for marketing approval. All of these expenses occur well in advance of any potential product revenue from that generation of the product. We may not be able to successfully design, manufacture and market new generations of products and the new products may not receive FDA clearance, or FDA clearance may be delayed. In addition, our newest products may be used with minimally invasive surgical procedures and we believe that we must demonstrate to physicians and managed healthcare organizations the clinical benefits, safety, efficacy and cost-effectiveness of our products for such procedures. In particular, we must demonstrate that our products are an attractive alternative to other products and methods that are widely known and accepted. Radiologists may not embrace such techniques as replacements for conventional x-ray imaging in the case of SenoScan or surgeons may not embrace such techniques for open surgical procedures in the case of MammoTest, and hospitals may not be willing to invest in, and use, our products. Lack of widespread acceptance of these products could have a material, adverse effect on our future revenues and earnings.

19

We compete with companies that have substantially greater financial, engineering, marketing and sales capabilities.

        Our market is intensely competitive. Our competitors include large, multinational corporations, including GE Medical Systems, Siemens, Philips, Toshiba, and Hitachi, as well as a number of smaller, more focused companies such as Hologic Corporation. Many of these companies supply a broad range of medical products and equipment to their customers, and have a substantial pre-existing presence resulting therefrom.

        Most of our product revenue during the past five years has been derived from our MammoTest system, which was introduced in 1988. The market for MammoTest is mature and our product principally competes with the Hologic prone-positioning breast biopsy system, which is aggressively priced and marketed. Many larger companies, including GE Medical Systems, Philip and Siemens, also offer a form of stereotactic add-on systems. Due to the maturity of this market, we expect prices and margins for MammoTest to decrease over time, which could adversely affect operating revenues and margins. Our SenoScan digital mammography product received FDA clearance in September 2001 and currently competes with digital offerings from GE Medical Systems and Hologic. In 2000, the FDA cleared the Senographe 2000D from General Electric for marketing in the U.S. In 2002, the FDA cleared a digital mammography system from Hologic, which Hologic is able to market to its existing analog system customers. Additional companies that have announced plans to develop digital mammography systems include Siemens, Fuji, Kodak, and Planmed. To date none of these companies has made public any submission to the FDA for PMA approval.

        We also compete with companies that are using competitive technologies to address the challenge of early, more accurate screening for breast cancer. These technologies include CT scanning, magnetic resonance imaging (MRI) and Ultrasound. One or more of those competing technologies may enable physicians to detect or rule out breast cancer more accurately, or earlier in its development, which would adversely affect the market for SenoScan.

        Many of our competitors have larger installed bases and far greater financial, management, manufacturing, sales and marketing and other resources than we do. As a result, they are able to more quickly adapt to new or emerging technologies and changes in customer requirements, and devote greater resources to the development, manufacture, promotion and sale of their products. We also face competition from sellers of used x-ray imaging equipment, particularly general radiology systems, at prices substantially below the prices of our new products. If we are unsuccessful relative to our competitors, our operating revenue may be adversely affected.

SenoScan, our digital imaging system, is a relatively new product and may need enhancements. Its success is subject to the development of the market for digital imaging.

        We introduced our SenoScan digital imaging product in the third quarter of 2001. We encountered a significant number of product and systems challenges in the initial commercial deployments of the SenoScan product that forced us to expend scarce engineering resources on software bug fixes and retrofits, and which delayed our ability to attain customer acceptance of these products. We believe that SenoScan will require additional engineering and software development resources to be directed to enhancements or improvements to the SenoScan design, implementation or integration with customer work flow improvements such as PACS. We may not be able to do so on a timely basis, if at all, and may only be able to do so at considerable expense. We may encounter problems with design, implementation and integration of our SenoScan product, including delays or malfunctions of the operating software. Any significant reliability problems we experience with SenoScan could result in adverse customer reaction and negative publicity and could harm our business and sales prospects. In addition, the market for SenoScan is not yet clearly defined or developed. The use of SenoScan in many cases would require these potential customers to either modify or replace their existing x-ray

20

imaging equipment. Moreover, we believe that a major factor in the market's acceptance of digital imaging technology is the transition by the healthcare industry from conventional film archiving systems to storage of x-ray images electronically. Because the benefits of our direct-to-digital technology may not be fully realized by customers until they install an electronic storage platform, a large potential market for these products may not develop until electronic storage is more widely used. Because of the early stage of the markets for these products, it is likely that our evaluation of the potential markets for these products will vary with time. A significant market for SenoScan and digital imaging products for the diagnosis of breast cancer may not develop.

Our management members have spent considerable time and effort dealing with internal and external investigations, the restatement of historical financial statements and the development and implementation of improved accounting and disclosure controls and procedures.

        In addition to the challenges of the SEC investigation, the shareholder class-action lawsuit and other legal proceedings described below, our new management members have spent considerable time and effort dealing with internal and external investigations involving our previous internal controls, and in developing and implementing accounting policies and procedures, disclosure controls and procedures and corporate governance policies and procedures. The significant time and effort spent may have adversely affected our operations and may continue to do so in the future.

We face risks related to the investigation by the SEC and related to other legal proceedings.

        In April 2003, we reported to the Securities and Exchange Commission that we would restate our financial results for the reporting periods beginning January 1, 2000 and ending September 30, 2002. On June 9, 2003, we received notice of a formal order of investigation and subpoena from the Securities and Exchange Commission. The investigation relates to the preparation of our financial statements for the years 2000, 2001 and portions of 2002. This request follows the voluntary disclosures that we made to the SEC beginning in April 2003. Those disclosures follow the previously announced formation of an independent board committee, assisted by the law firm of Hogan & Hartson, to review the facts and circumstances underlying the decision to restate financial results. We have since provided documents and other information related to its investigation to the SEC. While we intend to continue our full cooperation with the SEC investigation, we cannot predict the outcome of the investigation. If the SEC finds wrongdoing on our part, a financial or administrative penalty may be imposed which could jeopardize our financial viability. In addition, such findings could provide grounds for additional stockholder lawsuits against us.

        In addition, we and certain former officers have been named defendants in a class-action lawsuit. The findings and outcome of the investigations described above may affect the class-action lawsuit that is pending. We are generally obliged, to the extent permitted by law, to indemnify our directors and officers who are named defendants in some of these lawsuits. We are unable to estimate what our liability in these matters may be, and we may be required to pay judgments or settlements and incur expenses in aggregate amounts that could have a material, adverse effect on our business, financial condition, results of operations and cash flows.

        We currently have director and officer liability insurance that may pay a portion or all of the fees incurred in defending against claims and the damages of an award. However, if the plaintiffs are successful, we may not have enough insurance to cover the judgment, or our insurers may seek to deny coverage. If we lose this lawsuit it may create uncertainty in the marketplace for our products. If the judgment is severe, the financial burden may be so great as to jeopardize our financial viability.

        For a further description of the nature and status of these legal proceedings see, "Item 3—Legal Proceedings."

21

Our investors, customers, vendors, suppliers, employees and prospective employees may react adversely to the restatement of our historical financial statements and our inability to file in a timely manner all of our SEC filings.

        Our future success depends in large part on the support of our investors, customers, vendors, suppliers, employees and prospective employees. The restatement of our historical financial statements and our inability to file on a timely basis all of our SEC filings has resulted in negative publicity about us, has resulted in the de-listing of our common stock from The NASDAQ Stock Market, and has, and may continue to have, a negative impact on the market price of our common stock. The restatement of our historical financial statements and our inability to file all of our SEC filings in a timely manner also could cause some of our customers or potential customers to refrain from purchasing or to defer or cancel purchases of our products. Additionally, our current and potential vendors and suppliers may re-examine their willingness to do business with us, to develop critical interfaces for us or to supply products and services if they lose confidence in our ability to fulfill our commitments. Finally, employees and prospective employees may factor in these considerations relating to our stability and the value of any equity incentives in their decision-making regarding employment opportunities.

The composition of our senior management and board of directors has changed significantly. Such members' attention has been diverted to matters other than our strategic plan and business operations, which may negatively affect our results of operations.

        In the past 22 months, we replaced our chief executive officer twice and our chief financial officer twice, five directors resigned, we added four new members to our board of directors and we replaced nearly all of our senior operating managers. It will take some time for our new management team and board of directors to develop strong working relationships with our operating managers and to execute our strategic plan and annual operating plan. Moreover, new management's ability to complete this process has been and continues to be hindered by its need to spend significant time and effort dealing with internal and external investigations, developing effective corporate governance procedures, strengthening reporting lines and reviewing internal controls. We cannot assure you that this restructuring of our board of directors and senior management team, and the accompanying distractions, will not adversely affect our results of operations.

The RE&S Division, established in mid-2002, may not be successful.

        In late 1999 and early 2000, we de-emphasized our operations in the general radiology area. In mid-2002, we created the RE&S Division to re-focus resources and energy on our non-breast care products such as our EPX-Electrophysiology Single Plane Imaging System, EPX-Electrophysiology Bi-Plane Imaging System, VersaRad-A & D—multi-positioning imaging systems and the Bloom Electrophysiology Stimulator. Because we had not been active in these markets from late 1999 through mid-year 2002, our re-entry with these markets will require additional investment and it is unknown if we will be able to reestablish and grow a position in these markets.

Our ability to sustain growth may be adversely affected by the recent slowdown in the world economy.

        The medical commercial markets, including bio-medical research and development and medical devices manufacturing, have been affected by the recent slowdown in the world economy. If the economic slowdown continues and our customers continue to decrease capital spending for research and development and new products, our business, financial condition and results of operations may be adversely affected. This risk is enhanced given the point of introduction of our SenoScan product at a period of low growth in the economy. Further, a substantial portion of our revenue is derived from sales to public institutions, which face significant budgetary pressure.

22

If we fail to adequately protect our intellectual property, our competitive position could be harmed.

        Development and protection of our intellectual property are critical to our business. If we do not adequately protect our intellectual property, both in the United States and abroad, competitors may be able to practice our technologies. Our success depends in part on our ability to obtain patent protection for our products and processes both in the United States and other countries. We must also protect trade secrets and prevent others from infringing on our proprietary rights.

        We face numerous risks and uncertainties with respect to our patents and other proprietary rights. Currently, most pending patent applications in the United States are maintained in secrecy until issuance, and publication of discoveries in the scientific or patent literature tends to lag behind actual discovery by several months. Thus, we may not have been the first to file patent applications on our inventions. Our patent applications may not result in any patents. Once granted, the claims of any issued patents may not afford meaningful protection for our technologies or products. In addition, patents issued to us or our licensors may not provide competitive advantages for our products or may be challenged by our competitors and subsequently narrowed, invalidated or circumvented. Competitors may also independently develop similar or alternative technologies or duplicate any of our technologies.

        Litigation, interference proceedings, oppositions or other proceedings in which we may become involved with respect to our proprietary technologies could result in substantial cost to us. Patent litigation is widespread in our industry, and any patent litigation could harm our business. Costly litigation might be necessary to protect our proprietary rights, and we may not have the necessary resources to pursue such litigation in order to protect our rights. An adverse outcome in litigation with respect to the validity of any of our patents could subject us to significant liabilities to third parties, divert the attention of management and technical personnel from other business and development concerns, require disputed rights to be licensed to or from third parties or require us to cease using a product or technology or lose our exclusivity rights with respect to such technology.

        We also rely upon trade secrets, proprietary know-how and continuing technological innovation to remain competitive. Additionally, our trade secrets and know-how could otherwise become known or be independently developed by third parties. Confidentiality agreements with our employees, consultants and corporate partners with access to proprietary information could be breached, and we might not have adequate remedies for any such breach.

Potential product defects or related performance or safety issues could result in product recalls, loss of market share and significant legal or insurance costs.

        Our business exposes us to potential product liability claims that are inherent in the manufacture and sale of medical devices and, as such, we may face substantial liability to patients for damages resulting from the faulty design or manufacture of products. We have been a defendant from time to time in product liability actions. We maintain product liability insurance. Product liability claims may exceed coverage limits and product liability insurance may not be available at commercially reasonable rates, if at all. Consequently, a product liability claim or other claim in excess of insured liabilities or with respect to uninsured liabilities could have a material, adverse effect on us.

        Complex medical devices, such as we produce; can experience performance problems in the field that require review and possible corrective action by the manufacturer. We periodically receive reports from users of our products relating to performance difficulties they have encountered. These or future product problems could result in market withdrawals or product recalls, which could have a material, adverse affect on our business, financial condition and results of operations.

23

Failure of third-party payers to provide appropriate levels of reimbursement, if at all, for use of our products could harm our business.

        Sales of medical products have historically been dependent upon the reimbursement of patients' medical expenses by government healthcare programs and private health insurers. The costs of our products are substantial, and market acceptance of our products depends upon our customers' ability to obtain appropriate levels of reimbursement from third-party payers for use of our products. Technical payment amounts for some procedures such as diagnostic mammography are well below the cost to perform the procedure and this low reimbursement may dissuade hospitals from expanding diagnostic mammography services. In at least one instance, Blue Cross and Blue Shield of Illinois has indicated that full field digital mammography is considered "investigational" and therefore is not eligible for coverage. In addition, while technical payments increased for open surgical biopsies beginning in January 2002, the technical fees related to core needle biopsy performed in a hospital outpatient setting decreased. The use of our products outside the United States is similarly affected by reimbursement policies adopted by foreign regulatory and insurance carriers. We cannot predict what effect the policies of government agencies and other third party-payers will have on future sales of our products, and such policies may have a material, adverse effect on our business.

Some studies have questioned the efficacy of mammography to reduce mortality. If mammography proves to be less effective, our business could be seriously harmed.

        From time-to-time analyses are published that question the efficacy of mammography to reduce mortality from breast cancer. If mammography is proven to be ineffective, our business could be seriously harmed. Most recently, researchers in Denmark published a study in the Lancet questioning the justification for screening for breast cancer with mammography. The study performed a re-analysis of several prior studies on the efficacy of mammography, and concluded that there was no benefit to mammography screening as a cancer prevention measure. Many academicians and health policy groups question these findings, but even if the findings are untrue, these claims could influence mammography usage in the United States and undermine adoption of mammography in countries where screening is not widely adopted. In addition, the American Cancer Society and the U.S. Department of Health and Human Services currently recommend annual mammograms for women over the age of 40, with an initial screening at age 34. If other articles or studies question the efficacy of mammography, or if cancer organizations or governmental agencies cease recommending regular mammograms, our business could suffer. Also the results of the DMIST clinical trial to measure the performance of digital mammography systems against conventional x-ray film systems are expected to be announced in mid-2004. If the results of this clinical trial do not demonstrate sufficiently increased performance of digital systems compared to x-ray systems, this could negatively impact the market for our SenoScan product and our business could suffer.

Our success is dependent on complying with the regulatory requirements of the FDA.

        Our business is subject to regulation by the FDA. Failure to comply with applicable regulatory requirements can result in, among other things, civil and criminal fines, orders to repair or replace devices or to refund the device purchase price, suspensions and withdrawals of approvals, product recalls, detentions or seizures, injunctions and criminal prosecutions. FDA regulations require manufacturers of medical devices to adhere to the FDA's Quality Systems Regulation, or QSR, which includes testing, quality control and documentation procedures for design, manufacturing, installation and servicing. Our manufacturing facilities are subject to periodic inspection by the FDA.

        In December 2002, following an earlier periodic inspection that resulted in the FDA issuing a Form 483, the FDA issued a warning letter regarding deficiencies in the way our quality system satisfies the FDA's Quality System Regulation (QSR). We responded to the warning letter findings and observations and instituted corrective actions. We expect the FDA to conduct an inspection to verify

24

the effectiveness of our corrective actions during the next few months. While we believe the corrections we implemented will effectively resolve the deficiencies cited, there is no assurance the next FDA meeting will identify no further deficiencies.

        Failure to satisfy FDA requirements can result in an inability to receive awards of federal government contracts, to receive new marketing or export clearance for products, or FDA enforcement actions including, among other things, product seizure, injunction, and/or criminal or civil proceedings being initiated without further notice. The receipt of both a warning letter and a Form 483 in 2002 increases the possibility that one or more of these sanctions could be imposed in the future.

        The FDA has post-marketing controls that include a requirement to file Medical Device Reports when a company becomes aware of information suggesting that one of its products may have caused or contributed to a death, serious injury or serious illness or has malfunctioned in a way which could lead to that result. The FDA uses Medical Device Reports to determine whether it should exercise enforcement powers, such as mandatory product recalls, temporary suspensions of approvals, or withdrawal of 510(k) marketing clearances or pre-market approvals. The filing of Medical Device Reports indicating unexpected product hazards or the failure to comply with medical device reporting requirements could have a material, adverse effect on us.

        Each of our products is required to receive FDA clearance or approval prior to commercialization. To date, all of our products have been classified by the FDA as Class II medical devices and have been eligible for FDA marketing clearance. In that digital mammography is new technology, the FDA required the SenoScan to be cleared through the pre market authorization (PMA) process. Future upgrades and enhancements to SenoScan must go through a more arduous review process than that applicable to other products and may result in extended delays or increased expense as compared to products covered by a 510(k) clearance.

        We are also regulated by the FDA under the Radiation Control for Health and Safety Act of 1968. This act specifically addresses radiation-emitting products. Under this law, we must submit initial reports on any new x-ray systems that require certification. In addition, we must submit installation reports to the FDA certifying compliance with installation instructions of the manufacturer. Under certain circumstances, we also are required to submit product defect reports concerning our radiation emitting products to the FDA and, sometimes, to the first purchasers of the products. Product defect reports describe any safety related product defects or the failure of a product to conform to an applicable standard of which we have become aware. Additionally, we are required to submit accidental radiation occurrence reports regarding the injurious exposure to any person.

        A failure to comply with these regulations could have a material, adverse effect on us. Furthermore, discovery of unexpected product hazards or of failures to meet required standards through the reporting system could also have a material, adverse effect on us.

Our inability to obtain necessary foreign regulatory clearances or approvals for our products could harm our business and prospects.

        Sales of medical devices outside of the United States are subject to FDA export and approval by certain foreign regulatory and safety agencies, including the European Union, where we market our products under the Medical Device Directive. During an annual surveillance audit in December 2003, the European Notified Body, which is the authorizing agency of the CE Mark, cited us for failing to satisfactorily comply with some Medical Device Directive documentation requirements and for failing to properly certify the MammoTest product line to international performance standards. The CE mark is a symbol which reflects that products meet relevant international performance and safety standards and is required for sales into the countries which are members of the European Union.

25

        As a result, we may not ship the MammoTest product line to EU countries until the deficiencies are resolved. While we expect these to be resolved in the second quarter of 2004, we may not be able to obtain the necessary regulatory approvals and we may incur significant costs in obtaining or maintaining our foreign regulatory approvals. Although we have approval to sell our other products into the European Union, we may not be able to obtain other international regulatory approvals. In addition, significant costs and delays may be encountered in obtaining such approvals. International regulatory agencies may not approve, or may take longer to approve, digital imaging technologies. As a result, the market may develop slower than anticipated, or not at all, which would harm our business.

We may not be successful in our international operations.

        During 2003, 2002 and 2001, the Company's total foreign revenues were $9.3 million, $6.0 million and $7.2 million, respectively. Our international business may be harmed by the expense and difficulty of establishing, expanding, and managing international operations as well as the difficulty of enforcing agreements, collecting receivables, and protecting intellectual property in foreign countries. Until 2002, we sold and serviced our products abroad exclusively through our strategic relationship with the Ethicon Endo-Surgery Division of Johnson & Johnson. Beginning in the fall of 2002, we assumed direct responsibility for product service in Europe. Providing this service directly exposes us to additional organizational complexity and expense that could adversely affect our operating results. In addition, we could be harmed by the imposition by foreign countries of additional withholding taxes, income taxes, tariffs, or other restrictions on trade and be impacted by difficulties in obtaining U.S. export licenses. Political and economic changes and disruptions and changes in various regulatory requirements could also harm our business.

Our success is dependent upon establishing appropriate manufacturing processes, resolving supply issues, obtaining adequate manufacturing resources, and being able to contain manufacturing costs.

        The scope of the product lines we offer and the need for product customization require a number of separate manufacturing processes and components and significant management and engineering time and expertise. As we develop new products, we will be required to refine the prototypes of these products and develop new processes to manufacture these products in commercial quantities. Additionally, there are several critical components including detectors, transformers, cameras, autoguides and x-ray tubes used in each of our product lines for which we rely on one supplier for each of these key components. The manufacture of these components is highly complex and requires precise high quality manufacturing that is difficult to achieve by our suppliers. Our sole supplier for our detectors has experienced sub-component supply difficulties from their vendors and we have experienced product failures on these detectors during our pre-assembly quality testing process. We have also experienced performance issues with several of these suppliers in meeting our supply chain needs and quality requirements. As a result, we have experienced unanticipated production problems that have caused us to not meet our customer shipment request dates, delay production and incur additional costs related to manufacturing, shipping and installation inefficiencies. Changes in design for our products, including for our mammography detectors and our RE&S product line, could result in unanticipated production problems in the future. We are seeking to qualify a second supplier for each of our key components and subsystems to ensure a more consistently higher quality and reliability of parts and components and to increase our manufacturing capacity, but cannot assure that we will be successful. Obtaining alternative sources of supply of components or systems that are available from only one or a limited number of suppliers could involve significant delays and other costs, and these supplies may not be available to us on reasonable terms, if at all.

        We have encountered, and may continue to encounter, difficulties involving inventory supply, length of production cycles and shortages of manufacturing personnel. Due to the shifting demand for

26

our products and the high fixed costs associated with manufacturing these products, we may encounter difficulty managing our operating costs. We may not be able to reliably or efficiently manufacture our existing or new products at commercially reasonable costs on a timely basis, if at all. Failure to effectively manage the development and manufacture of our products could adversely affect us.

Risks Related to Our Common Stock

Our common stock was delisted from The NASDAQ Stock Market and as a result, trading of our common stock has become more difficult.

        Our common stock was delisted from The NASDAQ Stock Market on July 7, 2003. One result of this action is a limited public market for our common stock. Trading is now conducted in the over-the-counter market in the so-called "Pink Sheets." Consequently, selling our common stock is more difficult because smaller quantities of shares can be bought and sold, transactions can be delayed and security analyst and news media coverage of us may be reduced. These factors could result in lower prices and larger spreads in the bid and ask prices for shares of our common stock as well as lower trading volume. As a result of the delisting of our common stock from The NASDAQ Stock Market, our common stock has become subject to the "penny stock" regulations, including Rule 15g-9 under the Securities Exchange Act of 1934. That rule imposes additional sales practice requirements on broker-dealers that sell low-priced securities to persons other than established customers and institutional accredited investors. For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. Consequently, the rule may affect the ability of broker-dealers to sell our common stock and affect the ability of holders to sell their shares of our common stock in the secondary market. To the extent our common stock remains subject to the penny stock regulations, the market liquidity for our shares will be adversely affected. Additionally, although we will seek to have our common stock re-listed on The NASDAQ Small Cap Market once we are in full compliance with our obligations as a reporting company, we can provide no assurance that we will be re-listed.

Our public stock price has fallen substantially and may fall further, negatively impacting its investment desirability.

        For most of 2003 and through 2004, our stock price was near or below $5.00. When the stock price is this low, a major negative fluctuation in price could drive the stock price below the $4.00 per share level, which is a requirement for applying to be re-listed on The NASDAQ Small Cap Market. If we become re-listed on The NASDAQ Small Cap Market and our stock price trades below $1.00 per share for a period of time, we risk being delisted from The NASDAQ Stock Market again. In addition, if we become re-listed, when our stock price is below $5.00 per share, brokerage houses are often prohibited from allowing the stock to be used as collateral in a margin account. If any of our shareholders were then using their Fischer Imaging shares in such a manner, a margin call could be placed by the broker who would sell the shares at whatever price they could be sold for, thus driving the share price even lower. This could reduce the liquidity and the price of our common stock.

If we are unable to meet the financial covenants of our credit facility, our loan availability will be limited.

        Our $8 million line of credit facility with Silicon Valley Bank contains financial and other covenants and is subject to borrowing base restrictions. Our failure to meet any of our covenants under our loan agreement could significantly harm our liquidity and financial position.

27

Significant fluctuations in our quarterly operating performance or in stock market performance generally could cause the price of our common stock to be highly volatile.

        The market price of our common stock could be subject to significant fluctuations in response to variations in quarterly operating results and other factors. In addition, the securities markets have experienced significant price and volume fluctuations from time to time in recent years that have often been unrelated or disproportionate to the operating performance of particular companies. These broad fluctuations may adversely affect the market price of our common stock.

Exercises of a significant number of stock options, or other substantial sales of our common stock could adversely affect the market price of our common stock.

        Although a substantial number of our outstanding stock options have exercise prices above current market prices, sales of a substantial number of shares of common stock, or the perception that such sales could occur, could have a material, adverse effect on the market price of our common stock and could impair our ability to raise capital through the sale of equity securities.

Our policies could be significantly influenced by the voting power of our significant shareholders.

        Four institutional investors and a single individual stockholder, combined, beneficially, own approximately 67.8% of our common stock as of December 31, 2003. As a result, a few shareholders are able to exercise significant influence on the election of our board of directors and could thereby direct our policies.

Anti-takeover provisions in our charter and in other agreements, and the concentration of share ownership, could discourage purchases of, or offers to purchase, us, even if those offers might be favorable to stockholders.

        Our certificate of incorporation and bylaws include provisions that may be deemed to have anti-takeover effects and may delay, defer or prevent a takeover attempt that stockholders might consider in their best interests. These provisions include the ability of the board of directors to issue shares of preferred stock in one or more series with such rights, obligations, and preferences as the board of directors may provide, a "fair price" provision, a provision that requires stockholder action to be taken at meetings and not by written consent, a provision under which only the board of directors may call meetings of stockholders, certain advance notice procedures for nominating candidates for election to the board of directors and staggered terms for our board of directors.

        In November 1994, our board of directors adopted a stockholder rights plan and, pursuant thereto, issued preferred stock purchase rights, or Rights to the holders of our common stock. The Rights have certain anti-takeover effects. If triggered, the Rights would cause substantial dilution to a person or group of persons (other than certain exempt persons), who acquire more than 15% (21.5% in the case of Morgan W. Nields, a former director) of our common stock on terms not approved by the board of directors.

ITEM 2. PROPERTIES

        We maintain a leased office for our headquarters and manufacturing facility in Denver, Colorado. This facility includes approximately 120,000 square feet of office and manufacturing space and is leased from JN Properties. A former employee, as of December 31, 2003, who was previously a director of the Company, Chairman of the Board, Chief Executive Officer and Chief Technology Officer, and a 12.8% shareholder in the Company is a general partner in JN Properties. We also lease office space in Switzerland. We believe our present facilities are adequate for the foreseeable future.

28

ITEM 3. LEGAL PROCEEDINGS

        A complaint was filed with the Equal Employment Opportunity Commission by a group of former employees alleging age discrimination as a result of two employee layoffs during 2001. In November 2002, the EEOC granted a "No Cause" determination as to the merits of the complaint before them and issued "right to sue" letters to all plaintiffs in December 2002. We were a defendant in a lawsuit filed by these same employees in March 2003. The lawsuit was settled in March 2004 and we have accrued estimated costs of $150,000 as of December 31, 2003.

        On June 9, 2003, we received notice of a formal order of investigation and subpoena from the Securities and Exchange Commission. This request followed the voluntary disclosures that we made to the SEC beginning in April 2003 and the creation of an independent board committee to review the facts and circumstances underlying our decision to restate financial results. We currently are cooperating with the SEC in its investigation by providing documents and other information. We intend to continue our full cooperation with the SEC investigation, but we cannot predict the outcome of the investigation. If the SEC finds wrongdoing on our part, a financial penalty or other sanctions may be imposed on us that could jeopardize our financial viability.

        On April 10, 2003 and on June 3, 2003, The Sorkin, LLC and James K. Harbert filed punitive class action lawsuits against us and three of our former officers and directors, Morgan Nields, Gerald Knudson and Louis Rivelli, in the United States District Court for the District of Colorado. The complaints are purportedly brought on behalf of purchasers of shares of our common stock during the period February 14, 2001 to April 1, 2003 and allege that, among other things, during the punitive class period, the Company and the individual defendants made materially false statements in violation of Section 10(b) of the Exchange Act, Rule 10b-5 promulgated under the Exchange Act, and Section 20(a) of the Exchange Act. The complaints seek unspecified compensatory damages and other relief. On August 7, 2003, the company, and Messrs. Nields and Knudson moved to dismiss all claims asserted by The Sorkin, LLC and Harbert. On August 18, 2003, Mr. Rivelli moved to dismiss all claims asserted in those lawsuits. On October 20, 2003, Mr. Harbert moved to dismiss his lawsuit, which the court subsequently granted. On October 21, 2003, The Sorkin, LLC and Mr. Harbert filed an amended class action complaint. The amended complaint contains the same claims for relief against the Company and Messrs. Nields and Rivelli, but does not assert any claims against Mr. Knudson. In addition, the amended complaint seeks to recover unspecified compensatory damages and other relief on behalf of purchasers of shares of our common stock during the period February 14, 2001 to July 17, 2003. The Company, Mr. Nields and Mr. Rivelli have filed motions to dismiss all claims asserted in the amended complaint.

        We are a defendant in various other lawsuits incident to the operations of our business. None of these lawsuits are believed to have a material impact on our results of operations.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

        The information required by this item regarding submission of matters to a vote of security holders is incorporated by reference to the information set forth in the section of the proxy statement entitled "Equity Compensation Plan Information."

29

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

        Our common stock has historically traded on The NASDAQ Stock Market under the symbol "FIMG." From August 14, 2002 to November 14, 2002, our symbol was "FIMGE" which signified that we were delinquent in our quarterly reporting requirements with the Securities and Exchange Commission. On April 1, 2003, we announced that we would be delaying the filing of our 2002 Annual Report on Form 10-K to address accounting matters. On July 7, 2003, simultaneous with the delisting of our common stock from the NASDAQ stock exchange, our symbol changed to "FIMG.PK" and our common stock was available for trading over-the-counter with trades reported by the Pink Sheets LLC. We plan to apply to become re-listed on the NASDAQ Small Cap Market, using our symbol "FIMG" subsequent to the filing of this Annual Report on Form 10-K. The following table sets forth, for each of the periods indicated, the high and low closing sale prices per share of our common stock as reported by The NASDAQ Stock Market or the Pink Sheets LLC, as applicable.

	High		Low
2002
First Quarter	$	13.35	$	8.11
Second Quarter		13.00		8.50
Third Quarter		8.97		3.45
Fourth Quarter		6.34		4.33
2003
First Quarter	$	7.43	$	5.29
Second Quarter		5.39		3.85
Third Quarter		4.94		2.75
Fourth Quarter		5.25		3.45

        As of December 31, 2003, there were approximately 250 holders of record of our common stock. We believe that we actually have in excess of 1,500 beneficial owners.

        The closing sale price of our common stock on December 31, 2003 as reported by Pink Sheets, LLC was $4.80 per share. We can give no assurance as to the nature of recent trading in view of the limited public information available and the limited trading in common stock.

        We have not paid any cash dividends on our common stock and intend to retain future earnings to finance the growth of our business rather than to pay cash dividends.

Securities Authorized for Issuance Under Equity Compensation Plans

        The information required by this Item 201(d) of Regulation S-K regarding securities authorized for issuance under equity compensation plans is incorporated by reference from our definitive Proxy Statement to be filed in connection with the Annual Meeting of Stockholders.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

        Our Selected Financial Data for the years ended December 31, 2001, 2000 and 1999 has been restated to incorporate the restatement adjustments. The 2003, 2002 and 2001 data is derived from our audited financial statements beginning on page F-1. The 2000 and 1999 data is derived from restated unaudited financial information. The restatement adjustments for 2001 and 2000 are described in the 2002 annual report on Form 10-K.

30

        You should read the following Selected Consolidated Financial Data with the consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" appearing elsewhere in this Form 10-K.

				2003			2002			2001			2000			1999
				(In thousands, except per share data)
Consolidated Statement of Operations Data
Revenues:
	Products			$	32,814		$	30,630		$	28,055		$	41,352		$	42,627
	Services				13,348			14,480			13,860			12,683			10,093
	Sale of manufacturing license(1)				—			—			—			—			6,200
		Total revenues			46,162			45,110			41,915			54,035			58,920
Cost of sales:
	Products				25,109			28,180			17,984			26,678			37,072
	Services				13,629			11,887			7,307			9,892			4,744
	Sale of manufacturing license				—			—			—			—			400
		Total			38,738			40,067			25,291			36,570			42,216
			Gross profit		7,424			5,043			16,624			17,465			16,704
Operating expenses:
	Research and development				4,654			4,559			3,257			3,708			5,850
	Selling and marketing				9,376			7,981			7,278			6,801			11,180
	General and administrative				8,754			7,697			5,028			5,282			5,764
	Other(2)				—			—			—			—			750
		Total operating expenses			22,784			20,237			15,563			15,791			23,544
(Loss) income from operations					(15,360	)		(15,194	)		1,061			1,674			(6,840	)
Interest expense					(49	)		(81	)		(138	)		(461	)		(767	)
Interest income					62			119			77			65			91
Patent settlement income(3)					900			24,950			—			—			—
Other (expense) income					34			(74	)		(118	)		(382	)		(350	)
Income (loss) before income taxes					(14,413	)		9,720			882			896			(7,866	)
Provision (benefit) for income taxes					—			—			—			—			—
Net income (loss)				$	(14,413	)	$	9,720		$	882		$	896		$	(7,866	)
Net income (loss) per common share:
	Basic			$	(1.55	)	$	1.06		$	0.10		$	0.13		$	(1.13	)
	Diluted			$	(1.55	)	$	1.00		$	0.09		$	0.12		$	(1.13	)
Shares used to calculate income (loss) per share:
	Basic				9,319			9,204			8,643			7,111			6,982
	Diluted				9,319			9,692			9,352			7,411			6,982
Balance Sheet Data (at end of period):
Working capital				$	9,404		$	23,199		$	14,161		$	11,756		$	4,274
Total assets					32,348			41,079			31,552			29,969			33,786
Total long-term debt (life insurance loans)					454			1,181			1,003			881			1,164
Total stockholders' equity					13,075			27,493			17,669			15,954			10,720

(1)

On March 29, 1999 we announced an agreement with General Electric Company, on behalf of GE Medical Systems, under which 826,666 or 62% of the 1,333,333 shares of Series D Convertible Preferred Stock owned by GE Medical Systems were exchanged for a non-exclusive right to manufacture the Tilt-C system. The sale of the manufacturing rights to the Tilt-C system was recorded at fair value, estimated to be $6.2 million.

(2)

Consists of restructuring provisions in 1999.

(3)

During the second quarter of 2002, we settled a patent infringement lawsuit that it had filed against Thermo-Electron Corporation and Hologic, Inc. Under the $32.2 million settlement, we received $25.0 million in cash and will recognize the remaining $7.2 million when cash is received, in equal annual installments from Thermo-Electron over the remaining eight-year life of the patents.

31

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        You should read the following "Management's Discussion and Analysis" with the consolidated financial statements and related notes and "Selected Consolidated Financial Data" appearing elsewhere in this Form 10-K.

Overview

        We design, manufacture and sell innovative mammography and digital imaging products used in the diagnosis of breast cancer and other diseases. Our two primary breast cancer products are our MammoTest stereotactic breast biopsy system, which we introduced in 1988, and our SenoScan digital mammography system, introduced in late 2001. MammoTest is a mature product, and while we have introduced, and intend to continue to introduce, continued improvements to the system, it is not expected to provide significant growth in revenue going forward. We believe SenoScan has significant potential for growth as digital mammography gains acceptance over traditional x-ray film mammography. Our ability to grow SenoScan sales and capture market share in this emerging digital market is important to our success. SenoScan was approved by the FDA for sale in 2001 and since then we have invested, and will continue to invest, significant resources to enhance performance and features, to make it a more mature product line. We also recently re-initiated our efforts to market and sell our Electrophysiology and VersaRad x-ray products to the general radiology market through our RE&S division. In addition to our product sales we provide services for installation and application training at the time our products are installed at the customer's location. We also sell parts and provide maintenance services under our limited warranties, under long-term contracts, or at hourly rates.

        During 2003, in addition to continuing ongoing initiatives started in 2002, we implemented several significant new operational and strategic initiatives to improve our business processes, enhance product performance and reliability for our SenoScan product and address our financial and disclosure controls. These initiatives included significant changes to our senior management team and board of directors, an audit of our 2002 financial statements and re-audit of prior year financial statements resulting in a restatement of our financial statements for 2001 and prior years, and implementation of certain changes to enhance the quality and consistency of our financial information and reporting. We also invested significant time and resources in our research and development organization as well as our manufacturing and service organizations to address product and system challenges related to the initial commercial deployment of our SenoScan product. As a result of these initiatives, we reduced our focus on marketing our SenoScan product, which we believe resulted in a slower adoption rate for our product. Our product margins were lower than anticipated due to increased competition resulting in lower average selling prices and to manufacturing inefficiencies resulting in increased costs. We invested significant resources in our service department in anticipation of increased product sales growth in the future and to install, train and support customers purchasing our newly developed products as a part of our customer satisfaction program for early adopters of our digital imaging technology. We also began developing our European operations to focus on selling our SenoScan product directly to end user customers and to provide service support for our full line of products sold in Europe. As a result, our overall service costs and operating costs increased significantly in 2003.

        Implementing these strategic and operational initiatives during 2003 resulted in several charges for inventory write-offs as well as increased costs associated with building our European operations, enhancing performance of our products and investments in operations intended to reduce inefficiencies. The primary costs associated with these initiatives included $4.6 million for additional operating costs in our service department related to additional parts usage and increasing our service personnel; $2.6 million related to inventory write-offs at year-end; a $2.3 million operating loss associated with our European operations; and, $0.9 million related to increased corporate governance costs and FDA compliance requirements. We also incurred costs of $1.9 million related to our financial restatement;

32

we do not anticipate incurring substantial financial restatement costs in the future. In addition, we believe we incurred significant costs related to inefficiencies associated with replacing our senior management team, diverting management's time and attention to the financial restatement and improving business and financial controls, and developing necessary product improvements to mature our newly developed products. While we have not quantified these costs, we believe they have contributed substantially to our operating losses during 2003 as well as 2002. However, we believe our investment in these areas is critical to meeting our customer expectations and to improving our financial performance and operational efficiencies. The changes we have implemented are key to our long-term success and returning the company to profitability.

Results of Operations

        The following table sets forth the percentage relationship to revenues represented by certain data included in our statements of operations for the years ended December 31:

			2003		2002		2001
Revenues:
	Products		71.1	%	67.9	%	66.9	%
	Services		28.9		32.1		33.1
		Total revenues	100.0	%	100.0	%	100.0	%
Cost of sales:
	Products		54.4		62.4		42.9
	Services		29.5		26.4		17.4
		Total cost of sales	83.9	%	88.8	%	60.3	%
Gross profit			16.1		11.2		39.7
Operating expenses:
	Research and development		10.1		10.1		7.8
	Selling and marketing		20.3		17.7		17.4
	General and administrative		19.0		17.1		12.0
		Total operating expenses	49.4		44.9		37.2
Income (loss) from operations			(33.3	)	(33.7	)	(2.5	)
Interest expense			(0.1	)	(0.2	)	(0.3	)
Interest income			0.1		0.3		.2
Patent settlement			2.0		55.3		—
Other income (expense), net			0.1		(0.2	)	(0.3	)
Income (loss) before income taxes			(31.2	)	21.5		2.1
Provision for income taxes			—		—		—
Net income (loss)			(31.2	)%	21.5	%	2.1	%

Year Ended December 31, 2003 Compared to Year Ended December 31, 2002

        Revenues.    We generate revenues from sales of our SenoScan systems, MammoTest Systems, and Electrophysiology and VersaRad x-ray products through our RE&S division, along with sales of third-party peripherals and software sold in conjunction with our system sales. Each of our products has several different configurations based on product features, performance requirements, and customer requests. Our MammoTest system is a mature product in a mature market and we don't anticipate significant growth in this product line. We expect an increasing percentage of our revenues will be

33

derived from our SenoScan systems and our x-ray products. We bundle installation services, limited warranty and applications training with our large system sales. We also generate service revenues from long-term service contracts that range from one to five years, services charged at hourly rates and from parts sales not covered under our limited warranty program or long term service contracts. We do not believe that inflation will have a material impact our revenues.

        Revenues increased 2.4% to $46.2 million in 2003 from $45.1 million in 2002. Our product revenues increased $2.2 million, or 7.1%, while our service revenues decreased $1.1 million, or 7.8%, during 2003. The increase in our product revenues resulted from an increase in the number of SenoScan units sold in 2003 compared to 2002, but was partially offset by a lower average selling price caused by increased competition and lowering pricing to increase market adoption rate. Revenue from our SenoScan products totaled $11.0 million in 2003 compared to $5.5 million in 2002. Revenue from our MammoTest products decreased to $16.5 million in 2003 from $21.2 million in 2002. Sales of products from our RE&S division increased in 2003 due to increased unit sales of our Bloom Stimulator, while unit sales of our VersaRad remained level.

        Our service revenues decreased primarily from lower parts sales as we had more SenoScan and MammoTest units under warranty or long-term service contracts in 2003 compared to 2002. We had fewer service contracts on our x-ray products as we discontinued offering long-term service contracts on this older product line. We also extended our warranty to certain customers who purchased our SenoScan products during our initial commercial release thereby delaying new long-term service contracts that generate revenue. Our SenoScan systems primarily remained under warranty throughout 2003 as we extended our warranty to customers due to the product performance and reliabilities problems we experienced. We expect service revenues from long-term contracts on our SenoScan systems to increase as we sell more units and as units come off warranty and our customers begin purchasing service contracts.

        Cost of sales.    Cost of sales for our products consists of fixed and variable costs incurred for purchased components for our products, assembly, integration and testing of our products, expenses associated with quality and regulatory affairs, warranty provision, applications training and testing, excess and obsolete inventory, shrinkage and other inventory carrying costs. Cost of sales for our services consists primarily of parts cost, salaries, commissions and travel costs for personnel in field service, customer service, and service administration and management. Service costs are offset by warranty credits from our limited warranty program.

        Cost of sales for our products decreased 11.0% to $25.1 million in 2003 from $28.2 million in 2002. Our product costs of sales were 76.5% of product sales in 2003 compared to 92.0% of product sales in 2002. The overall decrease in cost of sales for products is due primarily to significant inventory write-offs in 2002 that were not as large in 2003. Our SenoScan systems had lower cost of sales resulting in increased margins in 2003 following the introduction of the product line in 2001. We also began implementing our operations initiatives to increase manufacturing efficiencies and reduce product costs. We expect our product margins will improve, as the SenoScan becomes a more mature product. Cost of sales for our MammoTest systems remained constant in 2003 compared to 2002.    Cost of sales for products from our RE&S division increased in 2003 resulting in slightly lower gross margin as a percent of sales.

        Cost of sales for our services increased 14.7% to $13.6 million in 2003 from $11.9 million in 2002. Our service costs were 102.1% of service revenues in 2003 compared to 82.1% in 2002. The increase is due to additional operating costs of $1.8 million offset by a decrease in parts usage expenses of $0.1 million. Our operating costs increased as we added 20% additional staffing in our field service and applications departments to meet the demands of ramping up our European operations and increased training requirements due to increased product installations. Our parts usage expense and warranty amortization increased as a result of the product performance and reliability problems we encountered

34

with our SenoScan products during 2003. We expect our service margins will significantly improve as our revenues increase more in line with our service support capacity due to products coming off of warranty and customers purchasing long-term service contracts and as a result of the product enhancements we have made to correct performance and reliability problems with our SenoScan products.

        Research and development expenses.    We incur research and development expenses to design and develop new products as well as develop significant enhancements to our existing products. These expenses consist primarily of compensation and overhead costs for staff engaged in research and development activities, software development, consulting costs, and costs for materials and supplies consumed while performing research and development activities. We also offset our research and development costs with income from research grants we receive.

        Research and development expenses increased 2.1% to $4.7 million in 2003 from $4.6 million in 2002. Our compensation costs increased $0.5 million related to increased staffing levels during 2003 compared with 2002 and from severance costs resulting from management changes in 2003. As a part of our quality assurance program, we increased our staffing levels in software development and engineering to focus on redesigning older products and enhancing the features and functionality of our newly developed products. These increased costs were partially offset by a $0.3 million from a SBIR grant from the National Cancer Institute that we began receiving in 2003. We also had fewer product development initiatives in 2003 resulting in cost reductions of $0.3 million from lower consulting and materials and supplies requirements as we focused primarily on enhancing our SenoScan product line. We plan to continue investing resources in developing new enhancements for our products and redesigning our older product line under our RE&S division to incorporate new technologies. We also intend to seek additional research grants and product development collaborations to fund our research and development efforts and to continue advancing our technology.

        Selling and marketing expenses.    Our selling and marketing expenses primarily consist of salaries, commissions, travel and other overhead costs for employees and activities in the areas of sales, marketing, sales support, and sales administration. Expenses associated with advertising, trade shows, conferences, promotional and training costs related to marketing our products are also classified as selling and marketing expenses. We sell our products worldwide primarily through our direct sales force and dealers and we market our products primarily to physicians.

        Selling and marketing expenses increased 17.5% to $9.4 million in 2003 from $8.0 million in 2002. Our compensation costs for our sales organization increased by $1.4 million due to increased revenues and a significantly greater backlog at the end of 2003 resulting in paying partial commissions on sale orders for which there is no commensurate revenue in 2003 as revenue will be recognized at a later date upon completion of the sale. We also had increased costs of ramping up our European sales operations in 2003 as we changed our strategy in Europe by implementing a direct sales business model. Our marketing expenses for trade shows, advertising and promotional costs decreased by $0.3 million, due primarily to less marketing activity in the fourth quarter of 2003, as we focused our internal resources on enhancing our products. We plan to increase our marketing and sales activities in the foreseeable future to increase revenues and broaden our market share.

        General and administrative expenses.    Our general and administrative expenses consist primarily of compensation and overhead costs for employees and activities in the areas of finance, information technology, human resources and administration. Fees for attorneys, independent auditors, other consultants and costs directly related to our financial restatement are also included in general and administrative.

        General and administrative expenses increased 13.7% to $8.8 million in 2003 from $7.7 million in 2002. The increase is due primarily to approximately $1.9 million in legal and accounting fees

35

associated with the audit committee's internal review of various accounting and other matters, auditing expenses and legal costs related to the restatement of our financial statements. We also had increased expenses primarily from additional compensation and travel costs incurred by our European operations to develop administrative infrastructure in support of our new direct sales strategy in Europe. We had significant non-recurring legal costs in connection with our patent lawsuit settlement in 2002 that did not recur in 2003. We expect our general and administrative expenses to decrease as a percentage of revenue now that we have completed our financial restatement; however, we plan to continue making investments in building an organizational infrastructure to support improvements in internal controls, financial reporting and disclosure controls and meeting corporate governance requirements. We also expect to incur significant legal and professional accounting expenses associated with satisfying the listing requirements of The NASDAQ Small Cap Market should our common stock be re-listed and in connection with implementing the requirements of the Sarbanes-Oxley Act of 2002, in particular, Section 404 thereof, which requires management to report on, and our independent auditors to attest to, the effectiveness of our internal controls.

        Other income/expenses.    Other income/expenses consist primarily of patent settlement income of $0.9 million that we receive annually beginning in 2003 for seven years. We received $25.0 million from the patent settlement in 2002.

Year Ended December 31, 2002 Compared to Year Ended December 31, 2001

        Revenues.    Revenues increased 7.6% to $45.1 million in 2002 from $41.9 million in 2001. Our product revenues increased 9.2% while our service revenues increased 4.5%. The increase in product revenues was primarily the result of the rollout of the new SenoScan Digital Imaging system during 2002. The increase in service revenues was the result of a higher level of service contract renewals during 2002 compared to 2001.

        Cost of sales.    Cost of sales for our products increased 56.7% to $28.2 million in 2002 from $18.0 million in 2001. Our product costs were 92.0% of product revenue in 2002 compared to 64.1% in 2001. The increase was primarily due a $9.7 million charge for excess and obsolete inventory associated with our RE&S product line and other inventory shrinkage. There was no similar write-off in 2001. Also, the initial sales of our SenoScan product yielded lower margins in 2002 because of additional warranty provision of $2.4 million.

        Cost of sales for our services increased 63.0% to $11.9 million in 2002 from $7.3 million in 2001. Our service costs were 82.1% of service revenues in 2002 compared to 52.7% in 2001. During 2002 we incurred additional operating expenses of $2.5 million resulting from a 53% increase in staffing levels in our service organization to support the anticipated growth in our mammography product lines in the United States and Europe. Our product and warranty costs increased $2.1 million due to additional costs related to the commercial launch of our SenoScan digital imaging system during 2002.

        Research and development expenses.    Research and development expenses increased 39.4% to $4.6 million in 2002 from $3.3 million in 2001. We increased our staffing levels and incurred additional consulting and outside labor costs in 2002 to support the growth and development of our MammoTest and SenoScan product offerings.

        Selling and marketing expenses.    Selling and marketing expenses increased 9.6% to $8.0 million in 2002 from $7.3 million in 2001. During 2002 we initiated a global marketing program in conjunction with the commercial launch of our SenoScan product and other mammography product lines that resulted in additional marketing costs of $0.8 million. These additional costs were partially offset by lower head-count related costs in our sales organization as we consolidated our sales management staff and restructured our domestic sales force during 2002.

36

        General and administrative expenses.    General and administrative expenses increased 53.1% to $7.7 million in 2002 from $5.0 million in 2001.    We incurred non-recurring expenses of $1.0 million for legal and other costs directly related to our patent lawsuit settlement in 2002. Our overall general and administrative operating expenses increased by an additional $1.7 million in 2002 to support our domestic operations and to expand our European operations which involved building infrastructure to support a direct sales force business model.

        Interest expense/interest income.    Interest expense decreased in 2002 due to lower borrowings against our line of credit and interest income increased in 2002 due to higher average cash balances resulting from the $25.0 million cash received from our patent lawsuit settlement during the second quarter of 2002.

        Patent settlement income.    During 2002 we settled a patent infringement lawsuit against Thermo-Electron Corporation and Hologic, Inc. for $32.2 million. We received $25.0 million during the second quarter of 2002 and we are scheduled to receive the remaining $7.2 million from Thermo-Electron in equal annual installments over the remaining life of the patents for continued sales of the breast-biopsy imaging system now being sold by Hologic, Inc. We recognized other income for the $25.0 million payment, net of certain settlement costs. We will recognize the remaining $7.2 million as cash is received over the scheduled eight-year payment period, which we expect will be $0.9 million each year during quarter two for the remaining patent life.

Income Taxes

        As of December 31, 2003, we had approximately $28.4 million of domestic net operating loss carry-forwards for federal income tax reporting purposes and $2.7 million of foreign net operating loss carry-forwards, that expire at various dates through 2023. We also had available research and development tax credits of approximately $0.2 million expiring at various dates through 2020, and alternative minimum tax credits of $0.6 million. The utilization of these loss carryforwards and research and development credit carryforwards to reduce future income taxes will depend on our ability to generate sufficient taxable income prior to the expiration of the net operating loss carryforwards and research and development credit carryforwards.

        No income tax provisions have been recognized for foreign tax jurisdictions and no income tax benefits have been recognized for subsidiary losses outside the domestic return.

Liquidity and Capital Resources

        We have incurred significant losses and have had negative cash flows from operations during 2003 as well as during 2002, before taking into account the patent settlement income of $25.0 million received in 2002. We funded our loss from operations of $15.4 million in 2003 and $15.2 million in 2002 primarily from the proceeds received from our patent settlement. During 2003 our operating losses were due largely to implementing several strategic and operational initiatives, which resulted in significant expenses including $4.6 million for additional operating costs in our service department related to additional parts usage and increasing our service personnel; $2.6 million related to inventory write-offs at year-end; a $2.3 million operating loss associated with our European operations; and, $0.9 million related to increased corporate governance costs and FDA compliance requirements. We also incurred costs of $1.9 million related to our financial restatement, which we do not anticipate incurring as substantial of costs in the future. In addition, we believe we incurred significant costs related to inefficiencies associated with replacing our senior management team, diverting management's time and attention to the financial restatement and improving business and financial controls, and developing necessary product improvements to mature our newly developed products. While we have not quantified these costs, we believe they have contributed substantially to our operating losses during 2003 as well as 2002. We believe our investment in these areas is critical to meeting our customer

37

expectations and to improving our financial performance and operational efficiencies. The changes we have implemented are key to our long-term success and returning the company to profitability.

        We expect to continue incurring operating losses during much of 2004 as it will take time for our strategic and operating initiatives to have a positive affect on our business operations. We have developed an operating plan intended to return the company to positive cash flow from operations. Key components to this plan include increasing revenues and improving our operating efficiencies to reduce cost of sales thereby improving gross margins, and lowering our overall operating costs as a percentage of revenues. Our future revenue growth and success depends largely upon increasing sales of our SenoScan product and entering into corporate relationships to broaden our products' reach. We have taken a number of steps to improve the performance and reliability of our SenoScan product and to advance our technology for digital imaging, which we believe will result in a significant increase in product revenues. We have begun implementing manufacturing and process improvements and redesigning parts and components to our products that we believe will result in reducing cost of sales and increasing gross margins on our products. We expect our service revenue to increase, as our installation base for our product continues to increase, such that our service revenues become more inline with our service cost infrastructure and we will return to positive gross margins for our service organization. Our operating plan includes reducing our overall operating costs as a percentage of revenue as we expect not to continue incurring costs associated with the restatement of our financial statements or continued initial start up costs to expand our European operations. However, we expect to continue investing resources to build an organizational infrastructure to support our business objectives and continue meeting corporate governance requirements.

        As of December 31, 2003, we had $1.9 million in cash and $9.4 million in working capital compared to $8.4 million in cash and $23.3 million in working capital at December 31, 2002. The decrease in our cash and working capital resulted primarily from cash used to fund our operating losses in 2003 offset by cash provided to operations due to changes in our current assets and current liabilities.

Cash used in operating activities

        We used $5.6 million of cash in our operating activities during 2003, which is the result of our net loss of $14.5 million offset by non-cash charges for depreciation and amortization of $1.1 million and cash provided by changes in our current assets and current liabilities of $7.6 million. Our receivables increased $0.7 million due to increased product sales in late 2003 compared to the same period in late 2002. Our inventory decreased $3.0 million due to inventory write-offs and focused efforts to maintain lower inventory levels. Included in inventory is $3.4 million in inventory related to an order from an international customer. While we shipped the product in December 2003 we retained title to the inventory and did not record revenue in 2003 because the transaction did not meet our criteria for revenue recognition. Our payables and current liabilities increased due to significant payables associated with our financial restatement and vendor payables related to fulfilling the large order from an international customer that we received in December 2003. As a result, our year-end inventory balances and payables balances are significantly higher than normal. We received payment in full for the international order in February 2004. The increase in customer deposits reflects cash received from increased backlog at the end of 2003.

Cash used in investing activities

        We used $1.3 million of cash for investing activities during 2003 primarily for ongoing capital expenditures including our new ERP system.

38

Cash provided by financing activities

        We issued 41,908 shares of common stock through employees exercising stock options and sales of shares under our employee stock purchase plan resulting in cash proceeds of $0.2 million. In September 2003 we entered into a sale/leaseback arrangement on our ERP system resulting in proceeds of $0.5 million. We used $0.1 million of cash as we began repaying our capital lease obligation.

Sources of Cash

        In June 2003, we entered into an $8.0 million credit facility, subject to restrictions based on eligible receivables. The amount available under the credit facility at December 31, 2003 was approximately $8.0 million, which is further limited to $2.4 million until such time as the bank completes its review of our restated financial statements. As amended, this credit agreement expires on December 9, 2004, and is secured by all of our assets. If we do not maintain compliance with the net worth covenant or other covenants in the agreement, the amount available under the credit facility may be further reduced or we may not be permitted to make borrowings against the credit facility. Borrowings under the agreement bear interest at the bank's prime rate, plus 2.75%, with a minimum total interest rate of 7%. As of December 31, 2003, there are no outstanding borrowings under the facility.

        Our future capital requirements will depend on a number of factors, including any judgments or settlements which may result from the ongoing investigation of us by the SEC, the shareholder class-action lawsuit and other legal proceeding described above in "Item 3—Legal Proceedings"; legal, accounting and other professional fees associated with such investigations and legal proceedings, as well as our ongoing efforts to develop and implement internal controls and corporate governance policies and procedures designed to enhance the accuracy, quality and consistency of our financial information and reporting; costs associated with satisfying the listing requirements of The NASDAQ Stock Market should our common stock be re-listed; costs associated with implementing the requirements of the Sarbanes-Oxley Act of 2002, in particular, Section 404 thereof, which requires management to report on, and our independent auditors to attest to the effectiveness of, our internal controls; market acceptance of SenoScan, the resources we devote to developing and supporting our products; continued progress of our research and development of potential products; the need to acquire licenses to technology; and potential future merger and acquisition activity.

        We believe that our balances of cash, cash flows expected to be generated by future operating activities, and amounts available under our credit facility will be sufficient to meet our cash requirements over the next twelve months. We may require additional financing sooner than expected depending on the factors listed in the preceding paragraph. Additionally, we may require additional financing sooner than expected if we identify significant opportunities to invest in our core technology or to accelerate growth in market share and revenues. We expect that to meet our long-term needs we may need to raise additional funds through the sale of equity securities, the incurrence of indebtedness or through funds derived through entering into collaborative agreements with third parties.

        Additional equity or debt financing may not be available on acceptable terms, or at all. Our common stock was delisted from The NASDAQ Stock Market on July 7, 2003. One result of this action is a limited public market for our common stock. Trading is now conducted in the over-the-counter market in the so-called "Pink Sheets." This reduced liquidity will likely make it difficult to raise additional capital. If we are unable to obtain additional capital, we may be required to divest product lines, reduce our sales and marketing activities, reduce the scope of or eliminate our research and development programs, or relinquish rights to technologies or products that we might otherwise seek to develop or commercialize. In the event that we do raise additional equity financing, our stockholders will be further diluted. In the event that we incur additional indebtedness to fund our operations, we may have to grant the lender a secondary security interest in our assets since our assets are currently pledged against our line of credit.

39

Off-Balance Sheet Arrangements

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

Contractual Obligations

        At December 31, 2003 our commitments under contractual obligations were as follows (in thousands):

Payments Due by Period:	Total		Less Than 1 Year		1-3 Years		4-5 Years		After 5 Years
Capital lease obligation	$	454	$	231	$	223	$	—	$	—
Operating leases		8,673		932		1,847		1,871		4,023
Total contractual cash obligations	$	9,350	$	1,163	$	2,070	$	1,871	$	4,023

CRITICAL ACCOUNTING POLICIES

        Critical accounting policies are those that are most important to the portrayal of our financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates on matters that are inherently uncertain. These judgments are based on our historical experience, terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. Actual results may differ from these estimates under different assumptions or conditions.

        As of the date of this filing, our critical accounting policies include:

Revenue Recognition

        We follow the provisions of Staff Accounting Bulletin 101, "Revenue Recognition in Financial Statements" (SAB101) which provides for revenue recognition when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed and determinable and collectibility is probable. We recognize product revenue upon effective delivery for our large, direct-sale medical equipment, although we defer recognition until all conditions are satisfied in cases where other arrangements exist or obligations remain to be performed. Revenue related to dealers and other product sales are recognized upon shipment, provided that title and risk of loss has transferred. We recognize revenue from services when they are performed, and from pre-paid service contracts and extended warranty contracts over the periods for which the contracts are in effect. We bill for service contracts and extended warranties monthly, quarterly and annually in advance, and record deferred revenue, which is then recognized over the service period. We also sell replacement parts to customers, and record revenue at the time of shipment when title transfers. Certain replaced parts may be returned for partial credit, and we make estimates to reduce current revenue to account for the future effect of those returns.

        We carry accounts receivable at original invoice amounts less an estimate for doubtful accounts and sales returns based on a periodic review of outstanding receivables. We provide allowances for known and anticipated credit losses in the course of regularly evaluating individual customer receivables. This evaluation takes into consideration a customer's financial condition and credit history as well as current economic conditions. Accounts receivable are written off when deemed uncollectible. Recovery of accounts receivable previously written off are recorded when received.

40

Inventories

        We value inventory at the lower of cost or market using the first-in, first-out (FIFO) method. Management periodically assesses the recoverability of inventory based on obsolescence or unmarketability equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and changes in market conditions. These assessments require management judgments and estimates, and valuation adjustments for excess and obsolete inventory may be recorded based on these periodic assessments.

Product Warranty

        We accrue for the estimated cost of product warranties into product cost of sales at the time revenue is recognized. Although we engage in extensive product quality programs and processes, our warranty obligation is affected by product failure rates and service delivery costs incurred in correcting a product failure. Should actual product failure rates or service costs differ from our estimates, which are based on historical data, and engineering estimates, where applicable, revisions to the estimated warranty liability would be required. The typical standard warranty term is for 12 months starting from the date of installation. We also sell extended warranties ranging from 12 to 60 months.

Income Taxes

        As part of the process of preparing our financial statements, we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating actual current tax exposure together with assessing temporary differences resulting from different treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within the balance sheet. We must then assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent that recovery is not likely, a valuation allowance must be established. To the extent a valuation allowance is established, we must include an expense within the tax provision in the statement of operations. In the event that actual results differ from these estimates, the provision for income taxes could be materially impacted. We have fully reserved for our deferred tax asset.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

        Market risk represents the risk of loss that may impact the financial position, results of operations or cash flows due to adverse changes in financial and commodity market prices and rates. We are exposed to market risk in the areas of changes in United States interest rates and changes in foreign currency exchange rates as measured against the United States dollar. These exposures are directly related to our normal operating and funding activities. Historically and as of December 31, 2003, we have not used derivative instruments or engaged in hedging activities. There have been no significant changes in our market risk from December 31, 2002.

Foreign Currency Risk

        Over the past several years, we have expanded our international sales and marketing efforts. Our exposure to foreign currency and other international business risks may increase as our international business grows. We attempt to minimize these risks by: (1) generally requiring payments in U.S. dollars; (2) using letters of credit; and (3) requiring advance deposits and through other means. Our international sales and marketing efforts may not be successful and we may not successfully minimize associated risks.

        We are exposed to foreign currency risks through our subsidiary operations in Switzerland and Germany. At December 31, 2003 we had cash, receivables and current liabilities totaling $3.1 million

41

that represent a net asset balance denominated in Euros. We do not employ any risk mitigation or hedging techniques with respect to amounts exposed to fluctuations in foreign currency exchange rates.

Interest Rate Risk

        At December 31, 2003, we had an $8.0 million credit facility, subject to restrictions based on eligible receivables. Borrowings under the credit facility would have reflected interest at the bank's prime rate plus 2.75% and therefore any borrowings under the credit facility would have subjected us to interest rate fluctuations. At December 31, 2003, there are no outstanding borrowings under the facility. Increases in interest rates could, however, increase the interest expense associated with future borrowings, including any under our credit facility. At December 31, 2003 we had a capital lease obligation, including current portion, in the aggregate amount of $0.5 million. The capital lease obligation has a term of two years and will be repaid with monthly principal and interest payments at a fixed interest rate. A change in interest rates would not affect our obligation related to the capital lease as of December 31, 2003, as the interest rate related to the obligation is fixed over the lease term.

        We have short-term investments in low risk and no risk financial instruments, which are readily convertible into cash, which earn interest at variable rates. At times, cash balances with our financial institution exceed FDIC insurance limits.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Our audited financial statements and notes thereto described in Item 15(a) of this report on Form 10-K and appearing on pages F-1 through F-22 of this report are incorporated by reference herein. See also "Quarterly Financial Data (unaudited)" appearing in Note 14 of our audited financial statements, which is incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

        None

ITEM 9A. CONTROLS AND PROCEDURES

        In early 2003, we identified several accounting inaccuracies and errors that significantly affected our previously reported financial results. Under the direction of our Board of Directors, and primarily our Audit Committee, we completed a comprehensive analysis of our accounting policies and practices and a restatement of our previously reported financial results for 2000, 2001 and nine months ended September 29, 2002. Our new auditors, Ernst & Young LLP, completed a re-audit of our consolidated financial statements for 2000 and 2001 and has also performed an audit of our 2002 annual financial statements. See our Annual Report for 2002 on Form 10-K for a detailed description of our internal review and restatement of our historical financial statements.

        As a result of our internal review, our Chief Executive Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Securities Exchange Act of 1934) were not effective during 2003, and, as a result, we were not able to timely file all reports required to be filed by us pursuant to Section 15(d) of the Securities Exchange Act of 1934. Our inability to timely file the required reports is due to, among other things, the fact that management's time and attention have been consumed by the auditing and re-auditing of our financial statements for the years ended December 31, 2002, 2001 and 2000, and the resulting restatements described in our consolidated financial statements.

        However, we implemented actions and modifications to our disclosure controls and procedures in an effort to correct the deficiencies and weaknesses. As a result, we carried out an evaluation, under

42

the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2003. Our disclosure controls and procedures are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective in alerting them to material information required to be included in our periodic SEC reports.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

        The information required by this Item concerning our directors is incorporated by reference to the information set forth in the sections of the Proxy Statement entitled "Proposal 1—Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance." The information required by this Item concerning our executive officers is incorporated by reference to the information set forth in the section of the Proxy Statement entitled "Executive Officers and Key Employees."

ITEM 11. EXECUTIVE COMPENSATION

        The information required by this Item regarding executive compensation is incorporated by reference to the information set forth in the section of the Proxy Statement entitled "Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

        The information required by this Item regarding security ownership of certain beneficial owners and management is incorporated by reference to the information set forth in the section of the Proxy Statement entitled "Security Ownership of Certain Beneficial Owners and Management." The information required by this Item regarding our equity compensations plans is incorporated by reference to the information set forth in the section of the Proxy Statement entitled "Equity Compensation Plan Information."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

        The information required by this Item regarding certain relationships and related transactions is incorporated by reference to the information set forth in the section of the Proxy Statement entitled "Certain Transactions."

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

        The information required by this Item regarding principal accountant fees and services is incorporated by reference to the information set forth in the section of the Proxy Statement entitled "Independent Auditor's Fees."

43

PART IV

ITEM 15.    EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

a)

Documents filed as part of this report:

1.

Financial Statements.

        See pages F-1 through F-22 of this Form 10-K.

2.

Financial Statement Schedules.

        Other than as listed below, there were no other financial statement schedules required because the information is either provided in the financial statements or is not required under the related instructions or is inapplicable.

        Schedule II—Valuation accounts.

Fiscal Year	Description	Balance at beginning of year		Charged to (deducted from) expense		Write-offs charged to allowance		Balance at the end of year
		(in thousands)
2003	Allowance for doubtful accounts	$	528	$	486	$	72	$	942
2002	Allowance for doubtful accounts		878		252		602		528
2001	Allowance for doubtful accounts		1,236		531		889		878

Fiscal Year	Description	Balance at beginning of year		Charged to (deducted from) expense			Write-offs charged to reserve		Balance at the end of year
		(in thousands)
2003	Reserve for excess and obsolete inventories	$	3,637	$	(313	)	$	4	$	3,320
2002	Reserve for excess and obsolete inventories		7,014		9,814			13,190		3,637
2001	Reserve for excess and obsolete inventories		7,959		147			1,092		7,014

3.

Exhibits.

        The following are filed as part of this report:

Exhibit Number	Description of Exhibit
3.1	Certificate of Incorporation of the Company(1)
3.2	Bylaws of the Company(1)
4.1	Amended and Restated Rights Agreement, dated as of November 3, 1994, between the Company and American Securities Transfer, Inc. which includes the Certificate of Designation for the Series C Junior Participating Preferred stock as Exhibit A and the form of Right Certificate as Exhibit B(7)
4.2	Certificate of Designation for the Series D Convertible Preferred Stock(4)
10.1	Agreement, dated October 5, 1990, between the Company and Dornier Medizintechnik GmbH(1)
10.2	Non-employee Director Stock Option Plan, as amended(5)
10.3	Stock Option Plan(1)

44

10.4	Retention Bonus Plan(3)
10.5	Lease Agreement, dated July 31, 1992, between the Company and JN Properties(2)
10.6	Agreement dated October 10, 1997, between the Company and Ethicon Endo-Surgery, Inc. with Addendum dated January 28, 1998(5)
10.7	Addendum, dated February 2, 2002, to Agreement dated October 10, 1997 between the Company and Ethicon Endo-Surgery, Inc.(6)
10.8	Distributor Agreement dated December 9, 1998, between the Company and Ethicon Endo-Surgery, Inc.(9)
10.9	Addendum No. 1, dated December 9, 2000, to Distributor Agreement dated December 9, 1998 between the Company and Ethicon Endo-Surgery, Inc.(9)
10.10	Addendum No. 2, dated February 21, 2003, to Distributor Agreement dated December 9, 1998 between the Company and Ethicon Endo-Surgery, Inc.(9)
10.11	Non-Exclusive Distributorship Agreement dated October 10, 2002, between the Company and Ethicon Endo-Surgery, Inc.(9)
10.12	Form of Indemnification Agreement, dated September 1999, between the Company and Morgan W. Nields.(9)
10.13	Form of Indemnification Agreement, dated January 2003 between the Company and each of Harris S. Ravine, J. Taylor Simonton, Todger Anderson, and Gail S. Schoettler.(9)
10.14	Accounts Receivable Financing Agreement, dated June 11, 2003, by and between Fischer Imaging Corporation and Silicon Valley Bank.(9)
10.15	Amendment No. 1 to Accounts Receivable Financing Agreement, dated November 18, 2003, by and between Fischer Imaging Corporation and Silicon Valley Bank.(9)
10.16	Employee Ethics and Business Conduct Policy(9)
10.17	Separation agreement with Morgan W. Nields dated December 19, 2003.(10)
10.18	Accounts Receivable Financing Modification Agreement, dated April 9, 2004, by and between Fischer Imaging Corporation and Silicon Valley Bank.(10)
21	List of Subsidiaries(10)
23	Consent of Ernst and Young LLP(10)
24.1	Power of Attorney by Todger Anderson.(10)
24.2	Power of Attorney by Gail S. Schoettler.(10)
24.3	Power of Attorney by Taylor Simonton.(10)
31.1	Certification of Harris Ravine, Chief Executive Officer and President, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.(10)
31.2	Certification of David Kirwan, Chief Financial Officer, pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934.(10)
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(10)

45

32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(10)
99.1	Audit Committee Charter(10)

(1)

Incorporated by reference to the Company's Registration Statement on Form S-1, File No. 33-41537, as filed with the Securities and Exchange Commission (the "Commission") on July 3, 1991.

(2)

Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1992, as filed with the Commission.

(3)

Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1994, as filed with the Commission on April 14, 1995.

(4)

Incorporated by reference to the Company's Form 8-K, as filed with the Commission on July 3, 1995.

(5)

Incorporated by reference to the Company's Form 10-K for the year ended December 31, 1997, as filed with the Commission on March 31, 1998.

(6)

Incorporated by reference to the Company's Form 10-K for the year ended December 31, 2001, as filed with the Commission on April 1, 2002.

(7)

Incorporated by reference to the Company's Form 8-K/A, as filed with the Commission on November 9, 2001.

(8)

Incorporated by reference to the Company's Form 10-Q/A Amendment No. 1 for the quarter ended June 30, 2002, as filed with the Commission on September 17, 2002.

(9)

Incorporated by reference to the Company's Form 10-K for the year ended December 31, 2002, as filed with the Commission on April 15, 2004.

(10)

Filed herewith.

b)

Reports on Form 8-K

        We filed a report on Form 8-K dated April 1, 2003 announcing it would delay the filing of the 2002 annual report on Form 10-K.

        We filed a report on Form 8-K dated May 15, 2003 announcing it would delay the filing of the Form 10-Q for the quarter ended March 30, 2003.

        We filed a report on Form 8-K dated June 11, 2003 announcing it would be providing additional information at the request of the SEC.

        We filed a report on Form 8-K dated June 11, 2003 announcing it had entered into an $8.0 million accounts receivable line of credit with Silicon Bank.

        We filed a report on Form 8-K dated July 2, 2003 announcing its shares would to be delisted from the NASDAQ National Market effective July 7, 2003.

        We filed a report on Form 8-K dated July 17, 2003 announcing it had completed its preliminary analysis and restatement of unaudited financial results for 2000 and 2001; and results for fourth quarter and full year 2002 and first quarter 2003.

        We filed a report on Form 8-K dated October 7, 2003 announcing second quarter 2003 results.

c)

Exhibits

        See Item 15(a)(3) of this Form 10-K.

46

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed April 14, 2004 on its behalf by the undersigned, thereunto duly authorized.

FISCHER IMAGING CORPORATION Registrant
By:	/s/  HARRIS RAVINE Harris Ravine President, Chief Executive Officer (Principal Executive Officer)

        Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons on behalf of the Registrant, in the capacities and on the dates indicated.

Signature	Title	Date
/s/  GAIL S. SCHOETTLER * Gail S. Schoettler	Chair of the Board	April 14, 2004
/s/  HARRIS RAVINE Harris Ravine	President, Chief Executive Officer and a Director (Principal Executive Officer)	April 14, 2004
/s/  DAVID KIRWAN David Kirwan	Senior Vice President-Finance, Chief Financial Officer, Secretary (Principal Financial and Accounting Officer)	April 14, 2004
/s/  TODGER ANDERSON * Todger Anderson	Director	April 14, 2004
/s/  J. TAYLOR SIMONTON * J. Taylor Simonton	Director	April 14, 2004

*By:
/s/  HARRIS RAVINE Harris Ravine
(Attorney-in-Fact by Power of
Attorney filed herewith)

47

FISCHER IMAGING CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

INDEX

	Page
Report of Ernst & Young LLP, Independent Auditors	F-2
Consolidated Financial Statements:
Consolidated Balance Sheets—December 31, 2003 and 2002	F-3
Consolidated Statements of Operations—For the Years Ended December 31, 2003, 2002 and 2001	F-4
Consolidated Statements of Stockholders' Equity—For the Years Ended December 31, 2003, 2002 and 2001	F-5
Consolidated Statements of Cash Flows—For the Years Ended December 31, 2003, 2002 and 2001	F-6
Notes to Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT AUDITORS

To the Stockholders and Board of Directors of
Fischer Imaging Corporation:

        We have audited the accompanying consolidated balance sheets of Fischer Imaging Corporation and subsidiaries as of December 31, 2003 and 2002, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 2003. Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

        We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Fischer Imaging Corporation and subsidiaries as of December 31, 2003 and 2002, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2003, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

	/s/ Ernst & Young LLP
Denver, Colorado April 14, 2004

F-2

FISCHER IMAGING CORPORATION

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except share data)

				December 31,
				2003			2002
ASSETS
Current Assets:
	Cash and cash equivalents			$	1,910		$	8,401
	Accounts receivable, net of allowance for doubtful accounts of $942 and $528 at December 31, 2003 and 2002, respectively				9,371			8,685
	Inventories, net				14,918			17,953
	Prepaid expenses and other current assets				1,637			415
		Total current assets			27,836			35,454
Property and equipment:
	Manufacturing equipment				3,263			7,745
	Office equipment and leasehold improvements				5,453			7,421
		Total property and equipment			8,716			15,166
	Less: accumulated depreciation				(5,306	)		(11,949	)
		Property and equipment, net			3,410			3,217
Intangible assets, net					1,077			1,121
Cash value of life insurance policies and other					25			1,287
			Total assets	$	32,348		$	41,079
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
	Accounts payable			$	8,378		$	4,720
	Current maturities under capital lease obligation				231			—
	Accrued salaries and wages				1,630			2,025
	Customer deposits				4,091			1,230
	Accrued warranties				1,987			1,676
	Deferred service revenue				455			443
	Other current liabilities				1,659			2,161
		Total current liabilities			18,431			12,255
Long-term debt					223			1,181
Non-current deferred revenue					619			150
			Total liabilities		19,273			13,586
Commitment and contingencies
Stockholders' Equity:
Preferred Stock, 5,000,000 shares authorized:
		Series C Junior participating preferred stock, $.01 par value, 500,000 shares authorized, no shares issued and outstanding			—			—
		Series D Convertible preferred stock, $.01 par value, 506,667 shares authorized, no shares issued and outstanding			—			—
	Common stock, $.01 par value, 25,000,000 shares authorized; 9,348,484 and 9,306,576 shares issued and outstanding at December 31, 2003 and December 31, 2002, respectively				94			93
	Paid-in capital				49,343			49,131
	Accumulated deficit				(35,712	)		(21,299	)
	Accumulated other comprehensive loss				(650	)		(432	)
			Total stockholders' equity		13,075			27,493
			Total liabilities and stockholders' equity	$	32,348		$	41,079

The accompanying notes are an integral part of these consolidated financial statements.

F-3

FISCHER IMAGING CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(Amounts in thousands except per share data)

			For the Years Ended December 31,
			2003			2002			2001
Revenues:
	Products		$	32,814		$	30,630		$	28,055
	Services			13,348			14,480			13,860
		Total revenues		46,162			45,110			41,915
Cost of sales:
	Products			25,109			28,180			17,984
	Services			13,629			11,887			7,307
		Total cost of sales		38,738			40,067			25,291
Gross profit				7,424			5,043			16,624
Operating expenses:
	Research and development			4,654			4,559			3,257
	Selling and marketing			9,376			7,981			7,278
	General and administrative			8,754			7,697			5,028
		Total operating expenses		22,784			20,237			15,563
(Loss) income from operations				(15,360	)		(15,194	)		1,061
Other income (expense):
	Interest expense			(49	)		(81	)		(138	)
	Interest income			62			119			77
	Patent settlement income			900			24,950			—
	Other			34			(74	)		(118	)
		Total other income (expense)		947			24,914			(179	)
(Loss) income before income taxes				(14,413	)		9,720			882
	Provision for income taxes			—			—			—
Net (loss) income			$	(14,413	)	$	9,720		$	882
Net (loss) income per share:
	Basic		$	(1.55	)	$	1.06		$	0.10
	Diluted		$	(1.55	)	$	1.00		$	0.09
Weighted average shares used to calculate net (loss) income per share:
	Basic			9,319			9,204			8,643
	Diluted			9,319			9,692			9,352

The accompanying notes are an integral part of these consolidated statements.

F-4

FISCHER IMAGING CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Amounts in thousands except share data)

			Common Stock								Accumulated Other Comprehensive Income (Loss)
						Additional Paid-in Capital		Accumulated Deficit						Total Stockholders' Equity
			Shares	Amount
Balances, December 31, 2000			8,587,315	$	86	$	47,377	$	(31,901	)	$	392		$	15,954
Comprehensive income:
	Net income		—		—		—		882			—			882
	Foreign currency translation adjustments		—		—		—		—			(593	)		(593	)
		Total comprehensive income	—		—		—		—			—			289
Shares purchased under Employee Stock Purchase Plan			120,844		1		225		—			—			226
Exercise of stock options			468,770		4		1,196		—			—			1,200
Balances, December 31, 2001			9,176,929		91		48,798		(31,019	)		(201	)		17,669
Comprehensive income:
	Net income		—		—		—		9,720			—			9,720
	Foreign currency translation adjustments		—		—		—		—			(231	)		(231	)
		Total comprehensive income	—		—		—		—			—			9,489
Exercise of stock options			129,647		2		333		—			—			335
Balances, December 31, 2002			9,306,576		93		49,131		(21,299	)		(432	)		27,493
Comprehensive loss:
	Net loss		—		—		—		(14,413	)		—			(14,413	)
	Foreign currency translation adjustments		—		—		—		—			(218	)		(218	)
		Total comprehensive loss	—		—		—		—			—			(14,631	)
Shares purchased under an Employee Stock Purchase Plan			25,408		—		129		—			—			129
Stock options issued below market value			—		—		31		—			—			31
Exercise of stock options			16,500		1		52		—			—			53
Balances, December 31, 2003			9,348,484	$	94	$	49,343	$	(35,712	)	$	(650	)	$	13,075

The accompanying notes are an integral part of these consolidated statements.

F-5

FISCHER IMAGING CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)

					For the Years Ended December 31,
					2003			2002			2001
Cash flows from operating activities:
	Net (loss) income				$	(14,413	)	$	9,720		$	882
	Adjustments to reconcile net income to net cash (used) provided by operating activities:
		Depreciation				1,109			674			806
		Amortization of intangible assets				44			509			746
		Loss on sales and retirements of assets				—			191			11
		Non-cash compensation expense				31			—			—
		Foreign exchange losses (gains)				(33	)		31			70
		Change in current assets and liabilities
			Accounts receivable			(686	)		(1,362	)		1,234
			Inventories			3,035			291			(3,326	)
			Prepaid expenses and other current assets			(1,222	)		(274	)		331
			Accounts payable and accrued liabilities			2,923			(46	)		690
			Customer deposits			2,861			(1,312	)		1
			Deferred service revenue			161			(60	)		(163	)
			Other			549			942			(743	)
				Net cash (used) provided by operating activities		(5,641	)		9,304			539
Cash flows from investing activities:
		Purchases of property and equipment				(1,268	)		(2,197	)		(467	)
		Other				—			(103	)		(514	)
				Net cash used in investing activities		(1,268	)		(2,300	)		(981	)
Cash flows from financing activities:
		Proceeds from sale of common stock				182			335			1,427
		Proceeds from sale/leaseback				514			—			—
		(Repayments) proceeds of long-term debt				(60	)		60			(2	)
				Net cash provided by financing activities		636			395			1,425
Effect of exchange rate changes on cash						(218	)		(231	)		(593	)
Net (decrease) increase in cash and cash equivalents						(6,491	)		7,168			390
Cash and cash equivalents, beginning of year						8,401			1,233			843
Cash and cash equivalents, end of year					$	1,910		$	8,401		$	1,233
Supplemental cash flow disclosures:
		Cash interest payments			$	51		$	81		$	138
		Cash income tax payments				15			32			28
		Non-cash capital expenditures (capital lease financing)				—			—			38

The accompanying notes are an integral part of these consolidated statements.

F-6

FISCHER IMAGING CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three years ended December 31, 2003, 2002 and 2001

(1) BUSINESS OPERATIONS

Organization

        Fischer Imaging Corporation, together with its wholly owned subsidiaries, ("Fischer" or "the Company") designs, manufactures and sells innovative mammography and digital imaging products used to diagnose breast cancer and other diseases. The Company's primary focus is on using our digital imaging technology in screening and diagnostic mammograms and minimally invasive breast biopsy to aid in the early identification of breast cancer. The Company sells high-resolution digital mammography products, enabling radiologists, surgeons and other healthcare treatment professionals to diagnose or rule out disease early and treat patients with less-invasive procedures. The Company has also refocused its efforts to market and sell products that meet selected needs of the broader radiology and electrophysiology markets. The consolidated financial statements include the accounts of Fischer Imaging Corporation and all subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.

Restatement of Financial Statements for 2001 and Prior Years

        During the first quarter of 2003, the Company conducted a review of its historical accounting policies and practices in preparation for its 2002 year-end closing and financial statement preparation. As a result of the review, the Company announced in April 2003 that it had identified several accounting inaccuracies and errors that significantly affected its financial results including previously reported financial information for 2001 and prior years. The Company then conducted a full internal investigation under the direction of the Board of Directors to determine the scope and magnitude of these issues and as a result uncovered various accounting inaccuracies and errors that significantly impacted its financial results and required a restatement of its previously reported financial information for 2001 and prior years. As a result of the internal review, the Company made various restatement adjustments to its historical financial statements as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2002.

Management Plans

        Management has developed an operating plan intended to return the Company to positive cash flow from operations. Key components to this plan include increasing revenues and improving its operating efficiencies to reduce cost of sales thereby improving gross margins, and lowering its overall operating costs as a percentage of revenues. Management has taken a number of steps to improve the performance and reliability of its SenoScan product and to advance the Company's technology for digital imaging, which they believe will result in a significant increase in product revenues. Management has begun implementing manufacturing process improvements and redesigning components and sub-assemblies which they believe will result in reductions to cost of sales and increased product gross margins. Management expects service revenue to increase, as the installation base for products continues to increase, such that service revenues become more inline with service cost infrastructure and return to positive gross margins for the service organization. Management's operating plan also includes reducing overall operating costs as a percentage of revenue as they expect not to continue incurring costs associated with the restatement of the Company's financial statements or start up costs to expand European operations. Management also believes that, if necessary, it can access additional capital resources sufficient to allow the Company to maintain its operations at least through December 31, 2004.

F-7

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates in the Preparation of Financial Statements

        The Company uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and contingent liabilities, and the reported revenue and expenses. Actual results could vary from the estimates that were used.

Revenue Recognition

        The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed and determinable, and collectibility is probable. The Company recognizes product revenue upon effective delivery for its large, direct-sale medical equipment, although it defers recognition until all conditions are satisfied in cases where other arrangements exist or obligations remain to be performed. Revenue related to dealers and other product sales are recognized upon shipment, provided that title and the risks and rewards of ownership have transferred. The Company recognizes revenue from services when they are performed, and from pre-paid service contracts and extended warranty contracts over the periods for which the contracts are in effect. The Company bills for service contracts and extended warranties monthly, quarterly and annually in advance, and records deferred revenue, which is then recognized over the service period. The Company also sells replacement parts to customers, and records revenue at the time of shipment when title transfers. Certain used parts may be returned for partial credit and the Company makes estimates to reduce current revenue to account for the future effect of those returns.

        Accounts receivable are carried at original invoice amounts less an estimate for doubtful accounts and sales returns based on a periodic review of outstanding receivables. Allowances are provided for known and anticipated credit losses as determined by management in the course of regularly evaluating individual customer receivables. This evaluation takes into consideration a customer's financial condition and credit history as well as current economic conditions. Accounts receivable are written off when deemed uncollectible. Recovery of accounts receivable previously written off are recorded when received.

Cash and Cash Equivalents

        Cash and cash equivalents include cash on hand, demand deposits, and short-term investments with an original maturity of three months or less. Cash and cash equivalents include financial instruments that potentially subject the Company to a concentration of credit risk. The Company places its cash and temporary cash investments with high credit quality institutions. At times, cash held in the Company's primary bank may be in excess of the FDIC insurance limits.

Inventories

        The Company values inventory at the lower of cost or market using the first-in, first-out (FIFO) method. The Company assesses the recoverability of inventory based on obsolescence or overstocked inventory equal to the difference between the cost of inventory and the estimated market value based upon historical experience and assumptions about future demand and changes in market conditions. These assessments require judgments and estimates, and valuation adjustments for excess and obsolete inventory may be recorded based on these periodic assessments.

F-8

        Inventories consist of the following components (in thousands):

	2003			2002
Raw materials	$	8,925		$	7,065
Work in process and finished goods		9,313			14,525
Reserve for excess and obsolete inventories		(3,320	)		(3,637	)
Inventories, net	$	14,918		$	17,953

Property and Equipment

        Property and equipment is stated at the lower of depreciated cost or net realizable value. Significant additions and improvements are capitalized at cost, while maintenance and repairs that do not improve or extend the life of the respective assets are charged to expense as incurred.

        Manufacturing and office equipment are depreciated or amortized on a straight-line basis, over the estimated useful lives (ranging from 3 to 8 years) of the respective assets. Leasehold improvements are amortized, on a straight-line basis, over the lesser of the estimated useful life or the remaining term of the related lease.

Intangible Assets

        Intangible assets consists of identifiable intangible assets and goodwill. Identifiable intangible assets consists of a non-compete agreement and a patent license, which are stated at cost. Identifiable assets are amortized on straight line basis over their expected useful lives ranging from 8 to 10 years. Goodwill is the excess of the purchase price over the fair value of net assets acquired related to acquisitions. Goodwill is recorded net of accumulated amortization through December 31, 2001. In accordance with SFAS No. 142, "Goodwill and Other Intangible Assets", effective January 1, 2002, goodwill is no longer amortized, but is subject to an annual impairment analysis.

Long-Lived Assets including Identifiable Intangible Assets Subject to Amortization

        In August 2001, the Financial Accounting Standards Board ("FASB"), issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 applies to all long-lived assets (including discontinued operations) and requires that long-lived assets be evaluated for impairment if indicators of impairment are present and if necessary written down to estimated fair value. SFAS No. 144 also develops an accounting model for long-lived assets that are to be disposed of by sale and requires the measurement to be the lower of book value or fair value, less the cost to sell the assets. Additionally, SFAS No. 144 expands the scope of discontinued operations to include all components of an entity with operations that can be distinguished from the rest of the entity and will be eliminated from the ongoing operations of the entity in a disposal transaction.

        Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, the asset is written down to its estimated fair value. The Company has determined that no long-lived assets were impaired at December 31, 2003.

Financial Instruments

        The fair market value of accounts receivable, accounts payable, debt, and other financial instruments approximates their carrying values in the accompanying consolidated balance sheets. The fair value of debt was determined based upon current interest rates available to Fischer.

F-9

Product Warranty

        The Company provides for the estimated cost of product warranties at the time revenue is recognized. Although the Company engages in extensive product quality programs and processes, its warranty obligation is affected by product failure rates and service delivery costs incurred in correcting a product failure. Should actual product failure rates or service costs differ from the Company's estimates, which are based on historical data, and engineering estimates, where applicable, revisions to the estimated warranty liability would be required. The typical standard warranty term is for 12 months starting from the date of installation. The Company also sells extended warranties ranging from 12 to 60 months.

        Activity in the product warranty accrual for the years ended December 31, 2003 and 2002 follows (in thousands):

	2003			2002
Beginning balance	$	1,676		$	691
Add: Warranty provision		2,557			3,064
Less: Warranty amortization		(2,246	)		(2,079	)
Ending balance	$	1,987		$	1,676

Translation of Foreign Currencies

        The assets and liabilities of the Company's consolidated foreign subsidiaries, whose cash flows are primarily in their local currency, have been translated into U.S. dollars using the current exchange rates at each balance sheet date. The operating results of these foreign subsidiaries have been translated at average exchange rates that prevailed during each reporting period. Adjustments resulting from translation of foreign currency financial statements are reflected as accumulated other comprehensive income in the consolidated balance sheet. Exchange gains and losses resulting from foreign currency transactions (transactions denominated in a currency other than that of the entity's primary cash flow) are included in operations in the period in which they occur.

Research and Development Costs

        Research and product development costs are expensed as incurred and include primarily engineering salaries, overhead and materials used in connection with research and development projects.

Advertising Costs

        The Company expenses advertising costs as incurred. Advertising costs of $320,000, $408,000 and $236,000 were expensed in 2003, 2002 and 2001, respectively.

Stock-Based Compensation Plans:

Non-employee Director Stock Option Plan

        At December 31, 2003, the Company's Non-employee Director Stock Option Plan (the "Director Plan"), adopted in 1993 and amended in June 1998, authorizes the granting of nonqualified options to acquire up to 300,000 shares of common stock. The Director Plan allows for automatic annual grants upon each year of director's service, and for discretionary grants on such terms and conditions as are set by the Board at the time of grant. The stock options issued under the Director Plan may be exercised at any time from date of grant, with a maximum option term of ten years.

F-10

Employee Stock Option Plan and Employee Stock Purchase Plan

        At December 31, 2003, the Company had an employee stock option plan and an employee stock purchase plan, which are described more fully in Note 10. The Company has elected to account for stock-based compensation arrangements using the intrinsic value method under the provisions of Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock Issued to Employees". Under this method, stock compensation is recognized to the extent that the exercise price is less than the market price for the underlying stock on the date of grant.

        The following table illustrates the effect on net income (loss) and net income (loss) per share if the Company had applied the fair value recognition provisions of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation," to stock-based employee compensation (in thousands except share data):

		2003			2002			2001
Net (loss) income:
	As reported	$	(14,413	)	$	9,720		$	882
	Less stock based compensation under the fair value method		(1,412	)		(1,560	)		(857	)
	Pro forma	$	(15,825	)	$	8,160		$	25
Net (loss) income per common share, basic:
	As reported	$	(1.55	)	$	1.06		$	0.10
	Pro forma	$	(1.70	)	$	0.89		$	—
Net (loss) income per common share, diluted:
	As reported	$	(1.55	)	$	1.00		$	0.09
	Pro forma	$	(1.70	)	$	0.84		$	—

        The weighted average fair value of each option grant has been estimated as of the date of grant using the Black-Scholes option-pricing model and the following average assumptions:

	2003		2002		2001
Dividend rate	0.0	%	0.0	%	0.0	%
Expected volatility	94.9	%	104.3	%	83.0	%
Risk-free interest rate	2.5	%	2.5	%	4.3	%
Expected life (in years)	5.0		5.0		4.6

        The weighted average fair value of options granted during the 2003, 2002 and 2001 was $3.96, $5.51 and $5.85, respectively.

Net Earnings or Loss Per Share

        Basic earnings or loss per share is computed by dividing the net earnings or loss by the weighted average number of shares of common stock outstanding at the reporting date. Diluted earnings or loss per share is determined by dividing the net earnings or loss by the sum of the weighted average number of common shares outstanding, and if not anti-dilutive, the effect of outstanding stock options

F-11

determined utilizing the treasury stock method. Dilutive securities consist of the following (in thousands):

	2003	2002	2001
Weighted average common shares	9,319	9,204	8,643
Dilutive effect of stock options	—	488	709
Total	9,319	9,692	9,352

        Common stock equivalents excluded from diluted earnings per share because their effect is anti-dilutive are as follows (in thousands):

	2003	2002	2001
Anti-dilutive effect of stock options	1,340	1,068	815

Comprehensive Income (Loss)

        Components of comprehensive income include net income (loss) and certain transactions that have generally been reported in the consolidated statements of stockholders' equity. Other comprehensive income includes foreign currency translation adjustments.

Recently Issued Accounting Pronouncements

        In November 2002, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 improves the accounting for certain financial instruments that, under previous guidance, issuers could account for as equity and requires that those instruments be classified as liabilities (or assets in certain circumstances) in statements of financial position. SFAS No. 150 also requires disclosures about alternative ways of settling the instruments and the capital structure of entities, all of whose shares are mandatorily redeemable. SFAS No. 150 is generally effective for all financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. The adoption of SFAS No. 150 did not have a material impact on its financial position or results of operations.

        In January 2003, the FASB issued Interpretation No. 46 (FIN 46), "Consolidation of Variable Interest Entities." FIN 46 requires an investor with a majority of the variable interests in a variable interest entity to consolidate the entity and also requires majority and significant variable interest investors to provide certain disclosures. A variable interest entity is an entity in which the equity investors do not have a controlling interest or the equity investment at risk is insufficient to finance the entity's activities without receiving additional subordinated financial support from the other parties. The Company is currently reviewing its investment portfolio to determine whether any of its investee companies are variable interest entities. The Company does not expect to identify any variable interest entities that must be consolidated.

        In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 149 is generally effective for derivative instruments, including derivative instruments embedded in certain contracts, entered into or modified after June 30, 2003, and for hedging relationships designated after June 30, 2003. The adoption of SFAS No. 149 did not have a material impact on its financial position or results of operations.

F-12

(3) PATENT LITIGATION SETTLEMENT

        During the second quarter of 2002, the Company settled a patent infringement lawsuit that it had filed against Thermo-Electron Corporation and Hologic, Inc. Under the $32.2 million settlement, the Company received and recognized as other income $25.0 million in 2002, net of certain settlement costs of $50,000 and the balance of $7.2 million was scheduled for receipt in equal annual installments of $900,000 over the remaining eight-year life of the patents for continued sales of the breast-biopsy imaging system now being sold by Hologic, Inc. During 2003, the Company received and recognized as other income $900,000. The remaining $6.3 million, due to contingencies, will be recognized as cash is received over the remaining seven-year payment period.

(4) INTANGIBLE ASSETS

        Intangible assets consist of the following (in thousands):

		Estimated Lives	2003			2002
Non-compete agreement		10 years	$	3,569		$	3,569
License		8 years		350			350
				3,919			3,919
Less—accumulated amortization				(3,700	)		(3,656	)
	Identifiable intangibles, net			219			263
Goodwill, net		N/A		858			858
Total intangibles, net			$	1,077		$	1,121

        Amortization expense for identifiable intangible assets is projected to be approximately $44,000 per year for the next five years.

(5) OTHER CURRENT LIABILITIES

        Other current liabilities consist of the following at December 31 (in thousands):

		2003		2002
Accrued sales, property, and other state and local taxes		$	288	$	852
Accrued legal			284		398
Other			1,087		911
	Total other current liabilities	$	1,659	$	2,161

F-13

(6) INCOME TAXES

        The provision (benefit) for income taxes includes the following (in thousands):

				2003			2002			2001
Current
	Federal			$	—		$	—		$	—
	State				—			—			—
	Foreign				—			—			—
		Total current provision			—			—			—
Deferred
	Federal				(4,509	)		4,256			323
	State				(429	)		358			31
	Foreign				(417	)		(295	)		42
		Total deferred provision			(5,355	)		4,319			396
Valuation Allowance					5,355			(4,319	)		(396	)
		Total deferred provision			—			—			—
			Total provision	$	—		$	—		$	—

        During 2002, the Company utilized approximately $10.1 million of its net operating loss carry-forward to offset taxable income in that year. A valuation allowance was previously provided against these loss carry-forwards.

        The statutory federal income tax rate was 35% for the years ended December 31, 2003, 2002 and 2001. Reasons for the difference between income tax expense reported in the statements of operations and the amount computed by applying the statutory federal income tax rate to earnings before income taxes are as follows:

			2003		2002		2001
Domestic Operations:
	Statutory tax rate		35.0	%	35.0	%	35.0	%
	Increase (decrease) due to:
		State income taxes	3.0		3.7		3.3
		Non-deductible expenses	(0.3	)	0.7		20.8
		Expiring Tax Credits and Other	(0.3	)	5.0		(0.3	)
		Valuation allowance	(37.4	)	(44.4	)	(58.8	)
	Effective tax rate		—	%	—	%	—	%

        The domestic versus foreign component of the Company's income (loss) before income taxes is as follows (in thousands):

	2003			2002			2001
Domestic	$	(13,109	)	$	10,643		$	752
Foreign		(1,304	)		(923	)		130
Total	$	(14,413	)	$	9,720		$	882

F-14

        Components of net deferred tax assets (liabilities) as of December 31, 2003 and 2002 are as follows (in thousands):

		2003			2002
Current—
	Inventory reserves	$	1,241		$	1,382
	Bad debt reserves		356			201
	Accrued compensation		493			542
	Other accrued liabilities		169			190
	Warranty reserves		656			637
	Less—Valuation allowance		(2,915	)		(2,952	)
Net current deferred tax asset		$	—		$	—
Noncurrent—
	Amortization of investments	$	295		$	295
	Depreciation		324			277
	Net operating loss carryforward		11,722			5,004
	Tax credits		792			792
	Other		154			75
	Less—Valuation allowance		(13,287	)		(6,443	)
Net noncurrent deferred tax asset		$	—		$	—

        The Company has approximately $30.1 million of domestic net operating loss carry-forwards, and $1.3 million of foreign net operating loss carry-forwards that expire at various dates through 2021. The Company also has available research and development tax credits of approximately $221,000 expiring at various dates through 2020, and alternative minimum tax credits of $571,000. Realization is dependent on generating sufficient taxable income prior to the expiration dates of the respective carry-forward periods and tax credits. The Company has provided a full valuation against its deferred tax assets because the uncertainty of realizing such assets. A valuation allowance of approximately $1.7 million relates to operating losses totaling $5.0 million attributable to deductions on stock option exercises that, if reversed, will be additions to additional paid in capital.

(7) LONG TERM DEBT

        Long-term debt at December 31, 2003 consists solely of a two-year capital lease obligation for primarily computer equipment and software. The capital lease is secured by computer equipment.

        Long-term debt at December 31, 2002 consisted solely of loans borrowed on cash values of life insurance policies by a former employee, as of December 31, 2003, who was previously a director of the Company, Chairman of the Board, Chief Executive Officer and Chief Technology Officer. On May 12, 2003, the Company reached agreement with this individual, to affect the transfers of, and responsibility for, the insurance policies. The Company subsequently released its assignments on the related policies in August 2003. This individual has assumed all cash values and borrowings related to the split-dollar arrangements. The Company believes that all liabilities related to these arrangements were recorded as of December 31, 2002.

F-15

        Long-term debt and capital lease obligation as of December 31, 2003 and 2002 consist of the following: (in thousands)

		2003		2002
Long-term debt (life insurance loans)		$	—	$	1,181
Long-term capital lease obligation			454		—
	Total		454		1,181
Less—Current maturities on capital lease obligation			231		—
	Long-term debt	$	223	$	1,181

        In June 2003, the Company entered into an $8.0 million credit facility, subject to restrictions based on eligible receivables. The amount available under the credit facility is limited to $2.4 million until such time as the bank completes its review of the Company's restated financial statements. As amended, this credit agreement expires on December 9, 2004, and is secured by all the assets of the Company. Borrowings under the agreement bear interest at the bank's prime rate, plus 2.75%, with a minimum total interest rate of 7%. There are no outstanding borrowings under the facility.

(8) STOCKHOLDERS' EQUITY

Retention Bonus Plan

        In December 1995, our Board of Directors adopted a Retention Bonus Plan. Under the Plan, all options to purchase shares of our common stock held by certain of our executive officers and other key employees who participate in the Plan shall vest and we will make payments to such participants in the event of a change of control. A "change of control" under the Plan includes an acquisition of 35% or more of our outstanding common stock, certain changes in the composition of our Board of Directors, a consolidation or merger in which we are not the surviving corporation, the sale or other transfer of 50% or more of our assets or earnings power, our adoption of a plan of liquidation or dissolution, or certain other similar events. Payments made to a participant under the Plan will not exceed an amount equal to his or her annual base salary in effect immediately prior to the change of control. There are no participants under the Plan as of December 31, 2003.

Anti-Takeover Contingencies

        In November 1994, the Board of Directors adopted a Stockholders Rights Plan, giving one right to purchase a share of Series C Junior Participating Preferred Stock for each outstanding share of common stock. These rights generally become exercisable when anyone other than certain exempt persons acquires more than a 15% beneficial interest in the Company. The existence of these rights might discourage an attempt to acquire the Company or make such an attempt more difficult. The Rights Plan was amended in 2001 to revise the definition of an "exempt person," among other things.

(9) STOCK-BASED COMPENSATION PLANS

1991 Stock Option Plan

        The Company's 1991 Stock Option Plan (the "1991 Plan") adopted June 1991 and subsequently amended, authorized the granting of incentive and nonqualified stock options to acquire up to 1,750,000 shares of common stock by employees and consultants. Exercise terms for the options granted were determined by the Board of Directors at the time of grant. Incentive stock options may be granted at an exercise price not less than fair market value on the date of grant with a maximum option term of ten years. The 1991 Plan also permitted the granting of stock appreciation rights, although none were granted. The ability to grant options under the 1991 Plan expired in 2001.

F-16

        Certain of the options granted under the 1991 Plan vest upon attainment of performance objectives as well as over time. Outstanding as of December 31, 2003 are 80,000 options granted in December 1995 that vest when the market price of the Company's stock has reached targeted price levels for a period of 45 consecutive trading days or nine years and eleven months from the date of original grant, whichever is earlier. Other options granted under the 1991 Plan vest ratably over time, generally over a four year period.

Non-Plan Grants

        During the period from the expiration of the ability to make grants under the 1991 Plan until September 6, 2003, the Company's Board of Directors authorized grants to various officers and employees of options to purchase a total of 1,076,500 shares of common stock. Outstanding as of December 31, 2003 were 825,750 exercisable options so granted.

1993 Director Plan

        The Company's Non-employee Director Stock Option Plan (the "Director Plan"), adopted in 1993 and amended in June 1998, authorizes the granting of nonqualified options to acquire up to 300,000 shares of common stock. The Director Plan allows for automatic annual grants upon each year of director's service, and for discretionary grants on such terms and conditions as are set by the Board at the time of grant. The stock options issued under the Director Plan may be exercised at any time from date of grant, with a maximum option term of ten years.

        A combined summary of the status of both plans and the non-plan grants follows:

		2003			2002			2001
Outstanding at January 1			1,556,560			1,524,590			1,710,160
Granted			298,500			509,000			614,000
Exercised			(16,500	)		(129,647	)		(468,770	)
Canceled			(355,060	)		(347,383	)		(330,800	)
Outstanding at December 31			1,483,500			1,556,560			1,524,590
Exercisable at December 31			835,125			743,135			554,765
Weighted average exercise prices:
	At beginning of year	$	6.90		$	5.75		$	3.47
	At end of year		6.58			6.90			5.75
	Exercisable at end of year		6.27			6.38			5.67
	Options granted		5.61			7.28			8.59
	Options exercised		3.18			2.59			2.56
	Options canceled		6.10			4.05			3.75

F-17

        Following is information about options outstanding and exercisable under the 1991 and 1993 Plans, as well as the non-plan grants as of December 31, 2003:

Range of exercise prices		Shares	Price
Weighted average exercise price for options outstanding:
	$1.00 - $3.05	169,958	$	2.28
	$3.06 - $4.99	445,042		4.10
	$5.00 - $5.99	238,500		5.63
	$6.00 - $7.99	250,000		7.04
	$8.00 - $11.00	136,250		9.42
	$11.01 - $14.00	243,750		13.71
		1,483,500
Weighted average exercise price for options exercisable:
	$1.00 - $3.05	122,458	$	2.21
	$3.06 - $4.99	256,167		3.90
	$5.00 - $5.99	187,500		5.70
	$6.00 - $7.99	74,500		6.37
	$8.00 - $11.00	54,000		9.67
	$11.01 - $14.00	140,500		13.52
		835,125
			Years
Weighted average remaining contractual life for options outstanding (in years):
	$1.00 - $3.05	169,958		6.1
	$3.06 - $4.99	445,042		6.8
	$5.00 - $5.99	238,500		4.5
	$6.00 - $7.99	250,000		9.0
	$8.00 - $11.00	136,250		8.1
	$11.01 - $14.00	243,750		7.9
		1,483,500

Other

        During 2003, $31,000 was recorded as non-cash compensation expense related to 25,000 options granted to certain directors for their service on the Board of Directors at a $4.00 exercise price, which at the time of issuance was below the quoted market price.

Employee Stock Purchase Plan

        Under the Employee Stock Purchase Plan, or Employee Plan, adopted in December 1991 and as amended in June 1998, the Company is authorized to issue up to 400,000 shares of common stock to its full-time employees, nearly all of whom are eligible to participate. Under terms of the Employee Plan, employees can have from 2% to 5% of their salary withheld to purchase common stock. The purchase price of the stock is 85% of the lower of its beginning-of-year or end-of-year market price. Under the Employee Plan, Fischer issued 25,408 and 120,844 shares for the years ended December 31, 2003 and 2001, respectively, relating to employee withholdings. Shares issued in 2003 were for the year ended December 31, 2002. As of the date of this filing, there are no shares available for purchase under the Employee Plan.

F-18

(10) BENEFIT PLANS

401(k) Plan

        In 1985, Fischer established The Fischer Imaging Employee Capital Accumulation Plan, which is governed by Section 401(k) of the Internal Revenue Code. Employees are eligible to participate in the plan upon completion of one month of service. Investments in the 401(k) plan are primarily made in independently managed mutual funds. The Company matches 25% of employees' contributions up to 6% of their respective annual compensation. In addition, the Plan allows the Company to make discretionary contributions. These match and discretionary contributions ratably vest over a four-year period. The Company made $132,000, $64,000 and $135,000 of match contributions for the years ended December 31, 2003, 2002 and 2001, respectively. The Company did not make a discretionary contribution in the years ended December 31, 2003, 2002 and 2001.

(11) RELATED PARTY TRANSACTIONS

        Long-term debt at December 31, 2002 consisted of loans borrowed on cash values of life insurance policies by a former employee, as of December 31, 2003, who was previously a director of the Company, Chairman of the Board, Chief Executive Officer and Chief Technology Officer. On May 12, 2003, the Company reached agreement with this individual, to effect the transfers of and responsibility for, the insurance policies. The Company subsequently released its assignments on the related policies in August 2003. This individual has assumed all cash values and borrowings related to the split-dollar arrangements. Effective December 31, 2003, this individual resigned as an employee and director of the Company and received deferred compensation totaling $200,000 which is payable in 2004.

        Our Denver headquarters and manufacturing facility is leased from JN Properties under a lease effective August 1, 1992, which expires July 31, 2012. A former employee, as of December 31, 2003, who was also previously a director of the Company, Chairman of the Board, Chief Executive Officer and Chief Technology Officer, and a 12.8% shareholder is a general partner in JN Properties. The lease requires us to pay all taxes, insurance, operating and maintenance expenses for the facility, and provides for an annual base rent which is subject to adjustment at the beginning of the 8^th, 13^th and 18^th lease year based on the then current market rent for similar premises, provided that the base rent may not be increased at any one time by more than 7%. We made total lease payments of $796,000 in 2003, 2002 and 2001.

        On December 1, 2001, we entered into a consulting agreement with a former Chief Executive Officer and director of the Company prior to his appointment to these positions. Under the terms of the consulting agreement, which expired on April 18, 2002, this individual received compensation of $15,000 per month, or a total of $15,000 in 2001, and $60,000 in 2002 for his consulting services. The individual resigned his position of Chief Executive Officer effective April 24, 2003 and resigned from the Board of Directors effective December 26, 2003.

        During 2002, the Company entered into a consulting agreement with another director, which expired on December 31, 2002. For the year ended December 31, 2002, this director received $59,000 in consulting fees. This director resigned from the Board of Directors effective October 29, 2003.

        During 1999, the Company extended a loan in the amount of $252,000 to a former President and Chief Executive Officer and director pursuant to his employment agreement, in consideration for his agreement to relocate to Colorado immediately. At December 31, 2003 and 2002, $100,000 of the loan was outstanding and is to be repaid in full by August 2004.

(12) SEGMENT AND CUSTOMER INFORMATION

        The Company operates in a single industry segment: the design, manufacture and marketing of specialty digital imaging systems and other medical devices primarily for the diagnosis and treatment of

F-19

breast cancer. The Company manufactures its products in the United States and distributes them in the United States, Europe and elsewhere.

        Revenues and identifiable assets for foreign subsidiaries for years ended December 31, 2003, 2002 and 2001 were as follows (in thousands):

	2003		2002		2001
Revenues	$	8,196	$	2,194	$	1,741
Identifiable assets		5,898		2,446		791

        In addition, during 2003, 2002 and 2001, and the Company's export revenues were $1.1 million, $3.8 million and $5.5 million, respectively. The Company's total foreign revenues were $9.3 million, $6.0 million and $7.2 million in 2003, 2002 and 2001, respectively.

        The Company's revenues generally are concentrated among customers in the healthcare industry. The Company establishes an allowance for uncollectible accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information. Accounts receivable are generally unsecured.

        During 2003, 2002 and 2001, the following customers, both of which are dealers, represented greater than 5% of the Company's revenues:

	2003		2002		2001
Ethicon-Endo Surgery, Inc (a division of Johnson & Johnson, Inc.)	10.9	%	11.4	%	11.4	%
Analogic Corporation	4.8	%	5.5	%	7.7	%

(13) COMMITMENTS AND CONTINGENCIES

Litigation

        A complaint was filed with the Equal Employment Opportunity Commission by a group of former employees alleging age discrimination as a result of two employee layoffs during 2001. In November 2002, the EEOC granted a "No Cause" determination as to the merits of the complaint before them and issued "right to sue" letters to all plaintiffs in December 2002. The Company was a defendant in a lawsuit filed by these same employees in March 2003. The lawsuit was settled in March 2004 and we have accrued estimated costs of $150,000 as of December 31, 2003 and December 31, 2002.

        In April 2003, Fischer Imaging Corporation reported to the Securities and Exchange Commission that it would restate its financial results for the reporting periods beginning January 1, 2000 and ending September 30, 2002. On June 9, 2003, the Company received notice of a formal order of investigation and subpoena from the Securities and Exchange Commission. This request followed the voluntary disclosures that the Company made to the SEC beginning in April 2003 and the creation of an independent board committee to review the facts and circumstances underlying the Company's decision to restate financial results. The Company currently is cooperating with the SEC in its investigation by providing documents and other information. The Company intends to continue its full cooperation with the SEC investigation, but the Company cannot predict the outcome of the investigation. If the SEC finds wrongdoing on the part of the Company, a financial penalty or other sanctions may be imposed on the Company that could jeopardize the Company's financial viability.

        On April 10, 2003 and on June 3, 2003, The Sorkin, LLC and James K. Harbert filed punitive class action lawsuits against us and three of our former officers and directors, Morgan Nields, Gerald Knudson and Louis Rivelli, in the United States District Court for the District of Colorado. The complaints are purportedly brought on behalf of purchasers of shares of the Company's common stock during the period February 14, 2001 to April 1, 2003 and allege that, among other things, during the

F-20

punitive class period, the Company and the individual defendants made materially false statements in violation of Section 10(b) of the Exchange Act, Rule 10b-5 promulgated under the Exchange Act, and Section 20(a) of the Exchange Act. The complaints seek unspecified compensatory damages and other relief. On August 7, 2003, the Company, and Messrs. Nields and Knudson moved to dismiss all claims asserted by The Sorkin, LLC and Harbert. On August 18, 2003, Mr. Rivelli moved to dismiss all claims asserted in those lawsuits. On October 20, 2003, Mr. Harbert moved to dismiss his lawsuit, which the court subsequently granted. On October 21, 2003, the Sorkin, LLC and Mr. Harbert filed an amended class action complaint. The amended complaint contains the same claims for relief against us and Messrs. Nields and Rivelli, but does not assert any claims against Mr. Knudson. In addition, the amended complaint seeks to recover unspecified compensatory damages and other relief on behalf of purchasers of shares of our common stock during the period February 14, 2001 to July 17, 2003. The Company, Mr. Nields and Mr. Rivelli have filed motions to dismiss all claims asserted in the amended complaint. The Company is a defendant in various other lawsuits incident to its operations.

        In addition, we have incurred and anticipate that we will continue to incur substantial legal expenses and some diversion of senior management's time in connection with the SEC investigation and the securities lawsuit that could negatively affect our results of operations.

Operating Leases

        Fischer leases buildings and equipment under various operating lease agreements that provide for the following minimum future lease payments: (in thousands)

2004	$	925
2005		922
2006		935
2007		936
2008		852
Thereafter		3,172
Total	$	7,742

        Of the above total lease commitments, $7,342,000 relates to the JN properties building lease (see Note 12—Related Parties). Total rent expense was approximately $936,000, $834,000 and $876,000 in 2003, 2002 and 2001, respectively. The total rent expense includes rent expense for JN properties of $796,000 for each of 2003, 2002 and 2001.

Regulatory Actions

        Fischer is subject to periodic inspections by the Food and Drug Administration ("FDA") whose primary purpose is to audit the Company's compliance with Good Manufacturing Practices. These practices include testing, quality control and documentation of procedures. In December 2002, following an earlier periodic inspection that resulted in the FDA issuing a Form 483, the FDA issued a Warning Letter regarding deficiencies in the way the Company's quality system satisfies the FDA's Quality System Regulation (QSR). The Company responded to the Warning Letter findings and observations and instituted corrective actions. The Company expects the FDA to conduct an inspection to verify the effectiveness of the Company's corrective actions during the next few months.

        The Company's stock was delisted from NASDAQ on July 7, 2003 due to failure to meet the financial reporting filing requirements established by the NASDAQ for annual and quarterly reports.

F-21

(14) QUARTERLY FINANCIAL DATA—UNAUDITED

        (in thousands, except per share data):

	First Quarter 2003			Second Quarter 2003			Third Quarter 2003			Fourth Quarter 2003			Year Ended 2003
Revenues	$	9,492		$	12,057		$	11,649		$	12,964		$	46,162
Gross profit		2,046			2,671			2,984			(277	)		7,424
Net (loss) income		(2,385	)		(2,399	)		(2,045	)		(7,584	)		(14,413	)
Basic (loss) income per share	$	(.26	)	$	(.26	)	$	(.22	)	$	(.81	)	$	(1.55	)
Diluted (loss) income per share	$	(.26	)	$	(.26	)	$	(.22	)	$	(.81	)	$	(1.55	)

	First Quarter 2002			Second Quarter 2002			Third Quarter 2002			Fourth Quarter 2002			Year Ended 2002
Revenues	$	11,568		$	10,054		$	12,946		$	10,542		$	45,110
Gross profit		3,026			(912	)		2,450			479			5,043
Net (loss) income		(887	)		18,532			(2,145	)		(5,780	)		9,720
Basic (loss) income per share	$	(0.10	)	$	2.01		$	(0.23	)	$	(0.62	)	$	1.06
Diluted (loss) income per share	$	(0.10	)	$	1.89		$	(0.23	)	$	(0.62	)	$	1.00

	First Quarter 2001			Second Quarter 2001		Third Quarter 2001		Fourth Quarter 2001		Year Ended 2001
Revenues	$	10,828		$	10,930	$	10,095	$	10,062	$	41,915
Gross profit		3,896			4,605		4,237		3,886		16,624
Net (loss) income		(544	)		275		634		517		882
Basic (loss) income per share	$	(0.06	)	$	0.03	$	0.07	$	0.06	$	0.10
Diluted (loss) income per share	$	(0.06	)	$	0.03	$	0.06	$	0.05	$	0.09

F-22

EX-10.17

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.17

SEPARATION AGREEMENT

        This Separation Agreement (the "Agreement") is entered into among Fischer Imaging Corp. (the "Company"), SenoLase Inc. ("SenoLase") and Morgan Nields ("Employee").

RECITALS

        WHEREAS, Employee is employed by the Company at its offices at 12300 North Grant Street, Denver, Colorado 80241 as a regular full-time employee with the title "Chief Technology Officer" and serves as a member of the Company's Board of Directors;

        WHEREAS, Employee was a founder of the Company and served as its Chief Executive Officer until December 2000 and as its Chairman until May 2003;

        WHEREAS, Employee wishes to terminate his regular full-time employment with the Company and to resign as a member of the Company's Board of Directors, in order to concentrate on development and execution of a plan to spin-out SenoLase, a development stage company with little or no tangible assets which is a majority owned subsidiary of the Company;

        WHEREAS, in consideration therefor, the Company wishes to enter this Separation Agreement, which, among other things, provides for (1) deferred compensation payments, (2) payment of sales commissions with respect to potential sales to certain clients of the Company listed in Exhibit A attached hereto (the "Commission Clients") and (3) Employee's continuation as Chief Executive Officer of SenoLase; and

        WHEREAS, in order to accomplish these ends, the parties hereto are willing to enter into this Agreement.

AGREEMENT

        NOW THEREFORE, in exchange for the consideration and other agreements specified in this Agreement, the sufficiency of which is hereby acknowledged, the parties hereto agree as follows:

        1.     Employee's Resignation and Deferred Compensation Payments. Employee hereby (i) voluntarily resigns as a regular, full-time employee of the Company with the title "Chief Technology Officer" and (ii) voluntarily resigns as a member of the Company's Board of Directors, in each case effective December 31, 2003 (the "Resignation Date") and (iii) agrees to remove all of his personal articles and vacate his office on the Company's premises on or before March 1, 2004. The Company agrees to make twelve (12) payments of $16,666.67 each to Employee, aggregating $200,000, no later than the 15th day of each month in calendar 2004, beginning on January 15, 2004. Employee agrees that the Company shall be entitled to withhold all taxes and other amounts required by law from such payments and pay Employee the net amount after deduction thereof. Employee further agrees that he is not entitled to any other pay or post-employment compensation other than these payments and the other consideration expressly set forth in this Agreement and that he will not make any claim for any such further payments or consideration, under any prior or existing agreement, plan or policy of Company, including but not limited to the Company's executive retention bonus plan.

        2.     SenoLase. The Company, Employee and SenoLase hereby agree that Employee shall continue to serve as Chief Executive Officer and as a director of SenoLase until December 31, 2004, subject to the direction of the SenoLase Board of Directors, a majority of whom shall be named by the Company. Such employment may be terminated by Employee at any time and by SenoLase with or without Cause (as defined in Section 5 below). It is the expectation of the parties that Employee will pursue a plan for spinning out SenoLase from the Company, upon such terms as are acceptable to the third parties who propose to provide financing to SenoLase and to the SenoLase Board of Directors.

        3.     Commission Agreement. While Employee is not required to provide any services to the Company with respect to such Commission Clients or otherwise after the Resignation Date, the Company agrees to pay Employee sales commissions on product sales by the Company after the Resignation Date to the Commission Clients listed on Exhibit A hereto as follows:

        (a)   A-List Client Commissions. As compensation for Employee's material assistance prior to the Resignation Date in facilitating sales to the clients listed under column A of Exhibit A attached hereto ("A-List Clients"), the Company agrees to deliver 3.5% of the net revenues generated from sales to such A-List Clients to Employee, as a commission on such sales, based on booked orders accepted by the Company prior to the expiration of the Commissions Term, subject to the conditions and except as otherwise set forth in this Section 3. "Commissions Term" means the period from June 1, 2003 through December 31, 2004.

        (b)   B&C-List Client Commissions. As compensation for Employee's material assistance prior to the Resignation Date in facilitating sales to the clients listed under column B or column C of Exhibit A attached hereto ("B&C-List Clients"), the Company agrees to deliver 1.5% of the net revenues generated from sales to such B&C-List Clients to Employee, as a commission on such sales, based on booked orders accepted by the Company prior to the expiration of the Commissions Term, subject to the conditions and except as otherwise set forth in this Section 3.

        (c)   Payment Date; No Draw. Commission payments will me be made to Employee based on a pro rata basis as cash is received from the sale and will be paid within 30 days of the Company's receipt of payments. Subject to the foregoing, Commissions shall be payable in respect of orders accepted by the Company prior to the expiration of the Commissions Term, regardless of when payment is made by the Commission Client, or when the product is delivered or services are performed. Employee shall not receive a draw against any unpaid Commissions payable.

        (d)   Health Insurance. Employee may timely elect continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended ("COBRA"), but Employee will be responsible for paying all premiums for Employee and Employee's eligible dependents if and to the extent he elects continuation of coverage under COBRA for himself or for such dependents.

        (e)   No Expense Reimbursement. The Company will not reimburse Employee for any expenses incurred after the Resignation Date but shall reimburse Employee for reasonable expenses incurred prior to that date in accordance with the Company's current expense reimbursement policy.

        (f)    Commission Term. The Company's obligations to pay any Commissions shall immediately terminate if the Company terminates this Agreement for Cause pursuant to Section 5 below but Employee shall be under no obligation to repay any Commissions paid prior to the date of such termination.

        4.     Litigation Defense Costs.

        (a)   Advancement of Expenses. The Company agrees to advance reasonable legal fees and expenses in connection with (i) the pending Securities and Exchange Commission ("SEC") investigation relating to the Company's restatement of its financial statements and related matters, (ii) any related private party litigation (whether pending as of the date hereof or filed hereafter) and (iii) any other investigations or legal proceedings related to the matters which are the subject of (i) and (ii) above (the "Matters"), provided, however, that such advances may be suspended if a Special Committee of the Company's Board of Directors subsequently determines that Employee's conduct with respect to the matters covered by the SEC investigation and related private litigation did not meet the standard set forth in the Delaware General Corporation Law, namely the obligation to act in good faith and with the reasonable belief that his actions were in or not

2

opposed to the best interests of the Company (the "Statutory Standard"). Such advances shall be made within thirty (30) days of Employee's request. As used herein, "Special Committee" means any committee of disinterested directors established by the Company's Board of Directors to assess the entitlement of directors, officers, employees or agents of the Company to indemnification under the Company's Certificate of Incorporation, Bylaws, indemnification agreements or otherwise.

        (b)   Refund. Notwithstanding the foregoing, if the Special Committee subsequently determines in good faith that Employee did not meet the Statutory Standard with respect to the Matters, Employee agrees to reimburse the Company for all sums provided to Employee for the Matters within 30 days of being notified of such determination.

        (c)   Preservation of Indemnification Rights. This Section 4 shall govern the terms under which expenses will be advanced to Employee for the Matters. Nothing in this Section 4 is intended to diminish or affect Employee's right to indemnification under the Company's Certificate of Incorporation, Bylaws, the September 29, 1999 Indemnification Agreement between the Company and Employee or the Delaware General Corporation Law.

        (d)   Formal Undertaking by Employee. Employee agrees that, as a condition to advancement of expenses pursuant to this Agreement, Employee will execute a formal undertaking providing for reimbursement of the Company for advances under the circumstances described in (b) above and requiring Employee's cooperation with the Company in connection with the Company's defense of the Matters.

        5.     Termination. Notwithstanding any other term in this Agreement, the Company may terminate this Agreement immediately for Cause. As used herein, "Cause" shall mean the following: (a) Employee's knowing commission of a fraudulent act that causes material injury to the Company; (b) Employee's material breach of any of his covenants or agreements hereunder, which breach is not cured within 30 days of written notice by the Company; or (c) Employee's conviction of a crime that either results in imprisonment or involves embezzlement, dishonesty, or activities materially injurious to the Company or its reputation, whether in connection with the Company's affairs or otherwise. Whether Cause exists to terminate this Agreement shall be determined in the reasonable discretion of the Company's Board of Directors. In the event of a termination of this Agreement for Cause, the Company will not have any ongoing financial obligations to Employee whatsoever and Employee will not be entitled to any further compensation, payments or benefits set forth in this Agreement; provided, however, that termination of this Agreement shall not affect the Company's obligations under Section 4 hereof.

        6.     Stock Options. Employee currently holds certain options to purchase shares of the Company's common stock (the "Options") which would, under the terms of the plan under which the options were granted, remain exercisable for ninety (90) days after the Resignation Date. The Company agrees to extend the date on which the Options may be exercised until the later of (i) December 31, 2004, or (ii) six months after the Company is listed on the Nasdaq Stock Market or a national securities exchange (but in no event later than June 30, 2005).

        7.     Independent Contractor. After the Resignation Date, Employee will be treated by the Company as an independent contractor and will not be eligible to participate as an employee in any benefit or benefit plan offered by the Company to its employees.

        8.     Taxes. The Commissions and other consideration provided to Employee by the Company under this Agreement shall be treated by the Company as income to Employee from which federal and state withholding and taxes shall be deducted.

        9.     The Company's Confidential Information. Employee acknowledges that, by reason of Employee's past and current positions with the Company, Employee has been given access to

3

Confidential Information with respect to the business affairs of the Company. The Company's "Confidential Information" includes, but is not limited to, any trade secrets, strategic product plans, new product information, customer lists, customer information, financial information, new product introduction plans, product suppliers terms and agreements, supplier agreements, etc. "Confidential Information" does not include information that is publicly disclosed by the Company, is in the public domain, or that Employee obtains from a third party without breach of this agreement. Employee represents and agrees that Employee has not disclosed any material Confidential Information to any third party in violation of his obligations to the Company. Employee further agrees that following the Resignation Date Employee will not, directly or indirectly, use, disclose, or cause to be used or disclosed in any way, any Confidential Information obtained as a result of or in connection with Employee's employment with the Company, without the express prior written consent of the Company.

        10.   Return of Company Property. Employee agrees to return all of the Company's property to the Company by delivering it to Stephen G. Burke, the Company's Executive Vice President and CFO, no later than the Resignation Date. This property includes, but is not limited to, the Company's documents and files (in any recorded media, such as papers, computer disks, copies, transparencies, and microfiche), materials, PDAs, cell phones, keys, credit cards, sports tickets, laptops, computer disks and badges, provided, however, that if and to the extent that Employee continues to utilize his office at the Company's headquarters building after the Resignation Date up to February 29, 2004 (the "Holdover Period") as permitted by this Agreement, Employee may retain a key to the building and to his office and may continue to use the computer and other Company property currently in his office during the Holdover Period. During the Holdover Period, Employee may also utilize the Company's secretarial and other office services as he has done in the past. Employee agrees that, to the extent that Employee possesses any files, data, or information relating in any way to the Company or the Company's business on any personal computer, Employee will delete the data, files, or information (and will retain no copies in any form) on the Resignation Date or before the end of the Holdover Period. Employee may, at his option, assume the lease (and related buyout option) for his vehicle currently leased by the Company. The Company shall be responsible for cancellation charges on any cell phone or PDA used previously used by Employee for Company business which Employee returns to the Company pursuant to this Section 10.

        11.   Employee's ADEA Release of the Company. Employee acknowledges and agrees that, by entering into this Agreement, Employee is waiving any and all rights that he may have arising from the Age Discrimination in Employment Act of 1967 ("ADEA"), as amended, which have arisen on or before the date of execution of this Agreement. Employee further expressly acknowledges and agrees that:

        (a)   Consent. Employee is entering this Agreement voluntarily.

        (b)   Litigation. Employee understands and agrees that, by signing the Agreement, he is giving up any right to file legal proceedings against the Company arising before the date of the Agreement. Employee is not waiving (or giving up) rights or claims that may arise after the date the Agreement is executed.

        (c)   Consideration. In return for this Agreement, Employee will receive compensation due him as a result of this Agreement.

        (d)   Legal Representation. Employee is hereby advised in writing by this Agreement to consult with an attorney before signing this Agreement.

        (e)   Notice. Employee understands that he has had at least twenty-one (21) days in which to consider the terms of this Agreement. In the event that Employee executes this Agreement in less time, it is with the full understanding that he had the full twenty-one (21) days if he so desired and that he was not pressured by the Company or any of its representatives or agents to take less time

4

to consider the Agreement. In such event, Employee expressly intends such execution to be a waiver of any right he had to review the Agreement for a full twenty-one (21) days.

        (f)    Right to Rescind. Employee further understands that he may rescind (that is, cancel) this Agreement for any reason within seven (7) calendar days after signing it. Employee agrees that the rescission must be in writing and hand-delivered or mailed to the Company. If mailed, the rescission must be postmarked within the seven (7) day period, properly addressed to:

Fischer Imaging Corp.
Attn: Stephen G. Burke
Executive Vice President and CFO
12300 North Grant Street
Denver, CO 80241

and sent by certified mail, return receipt requested.

        (g)   Payments. Employee understands that he will not receive any payment or other consideration under this Agreement if he revokes or rescinds it, and in any event, Employee will not receive any payment or consideration until after the seven (7) day revocation period has expired.

        12.   No Other Releases. Employee and the Company agree that, by entering into this Agreement, other than the ADEA claims released by Employee in Section 11 hereof, neither Employee nor the Company have released or waived any claims that either one may have against the other for any reason.

        13.   Confidentiality of Agreement. Employee acknowledges that the Company may be required to disclose the contents of this Agreement to comply with its obligations under applicable securities laws and that, as a result, he has no reasonable expectation that it or its contents will remain confidential.

        14.   No Admission of Liability. The Company and Employee agree that nothing contained in this Agreement, and no action taken by the Company or Employee with regard to this Agreement, shall be construed as an admission of liability or any fact that may give rise to liability for any purpose whatsoever by the Company or Employee.

        15.   Injunctive Relief. In the event of a breach of any of the covenants contained in this Agreement, it is understood that damages will be difficult to ascertain and the Company may petition a court of law or equity for injunctive relief in addition to any other relief which the Company may have under the law or under this Agreement.

        16.   Non-Disparagement. Employee agrees not to make to any person any statement that disparages the Company or reflects negatively upon the Company, including, without limitation, any statement regarding the Company's financial condition, business practices, employment practices, or its officers, directors, employees, or affiliates. Company agrees not to make any statement that disparages Employee.

        17.   Acknowledgments. Employee acknowledges and agrees that up to the Resignation Date, the Company has paid Employee all employment compensation and has provided Employee with all benefits to which Employee is entitled through and including the Resignation Date.

        18.   Severability. If any provision of this Agreement is declared by any court of competent jurisdiction to be invalid for any reason, such invalidity shall not affect the remaining provisions of this Agreement, which shall be fully severable, and given full force and effect. Any claim by Employee against the Company shall not constitute a defense to enforcement by the Company.

        19.   Governing Law and Venue. This Agreement shall be construed in accordance with the laws of Colorado. Venue and jurisdiction will be in Colorado state or federal courts.

5

        20.   Entire Agreement. The parties hereto understand and agree that this Agreement contains all the agreements between the Company and Employee. Except as expressly stated herein, this Agreement supersedes any and all prior oral or written promises or agreements between the Company and Employee. Employee acknowledges that he has not relied upon any promise, representation, or statement other than those set forth in this Agreement. This Agreement cannot be modified except in a writing signed by the Company and Employee.

        21.   Assignment. The Company may assign its rights under this Agreement. No other assignment will be permitted except by written permission of the Company and Employee.

        22.   Counterparts; Facsimile Signature. This Agreement may be executed simultaneously in two or more counterparts, any one of which need not contain the signatures of more than one party, but all of which taken together shall constitute one and the same Agreement. This Agreement may be executed by facsimile signature and a facsimile signature shall constitute an original signature.

        23.   Attorney's Fees. In the event a party hereto commences legal proceedings to enforce the terms of this Agreement, the prevailing party shall be entitled to recover its or his attorneys' fees.

* * * * *

6

        IN WITNESS WHEREOF, the parties hereto have executed this Separation Agreement as of the date first set forth above.

CAUTION; PLEASE READ ENTIRE DOCUMENT BEFORE SIGNING

FISCHER IMAGING CORPORATION		MORGAN NIELDS
By:	/s/  HARRIS RAVINE Harris Ravine, President	/s/  MORGAN W. NIELDS        Morgan Nields, individually
Dated:	12/19/03	Dated:

SENOLASE INC.
By:	/s/  MORGAN W. NIELDS

Typed Name:
Morgan W. Nields

Title:
CEO & President

Dated:

7

EXHIBIT A

Column A	Column B	Column C
UCSF UCSD Tommy Cupples Palmetto Richland Kathy Schilling Martin Yaffe/Sunnybrook Northwestern HUP Pittsburgh McGee Duke Mayo Clinic UCLA Stanford University of New Mexico Emory U Mass Moffit Michigan Brigham and Womens Mt. Sinai Toronto	St Joe's Orange Palmetto Baptist Pittsburgh Allegheny General Sally Jobe Breast Center MD Anderson University of Minnesota Wende Young MD Shaw Cancer Center University of Colorado Len Glassman MD	Kings College St Barts Lattazio Bari Tabar Falun Erlangen Dana/Levy Prof. Wolf Berlin

8

QuickLinks

SEPARATION AGREEMENT
RECITALS
AGREEMENT
EXHIBIT A

EX-10.18

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.18

ACCOUNTS RECEIVABLE FINANCING MODIFICATION AGREEMENT

        This Accounts Receivable Financing Modification Agreement is entered into as of April 9, 2004, by and between Fischer Imaging Corporation (the "Borrower") and Silicon Valley Bank ("Bank").

        1.    DESCRIPTION OF EXISTING INDEBTEDNESS:    Among other indebtedness which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to, among other documents, an Accounts Receivable Financing Agreement, dated June 11, 2003 by and between Borrower and Bank, as may be amended from time to time (the "Accounts Receivable Financing Agreement"). Capitalized terms used without definition herein shall have the meanings assigned to them in the Accounts Receivable Financing Agreement.

        Repayment of the Indebtedness is secured by the Collateral as described in the Loan Agreement and in that certain Intellectual Property Security Agreement (the "IP Agreement").

        Hereinafter, all indebtedness owing by Borrower to Bank shall be referred to as the "Indebtedness" and the Accounts Receivable Financing Agreement and any and all other documents executed by Borrower in favor of Bank shall be referred to as the "Existing Documents."

        2.    DESCRIPTION OF CHANGE IN TERMS.

        A.    Modification(s) to Accounts Receivable Financing Agreement:

        1.     Effective as of January 1, 2004, Item "(L)" under Section 6.2 entitled "Affirmative Covenants" is hereby amended to read as follows:

        Borrower will maintain at all times a Tangible Net Worth of no less than $10,000,000, which such amount may be adjusted from time-to-time by Bank in Bank's sole discretion.

        B.    Waiver of Financial Covenant Default.

        1.     Bank hereby waives Borrower's existing default under the Accounts Receivable Financing Agreement by virtue of Borrower's failure to comply with the Tangible Net Worth financial covenant through December 31, 2003. Bank's waiver of Borrower's compliance of this covenant shall apply only to the foregoing period. Accordingly, beginning with January 1, 2004, Borrower shall be in compliance with this covenant, as amended herein.

        Bank's agreement to waive the above-described default (1) in no way shall be deemed an agreement by the Bank to waive Borrower's compliance with the above-described covenant as of all other dates and (2) shall not limit or impair the Bank's right to demand strict performance of this covenant as of all other dates and (3) shall not limit or impair the Bank's right to demand strict performance of all other covenants as of any date.

        3.    CONSISTENT CHANGES.    The Existing Documents are each hereby amended wherever necessary to reflect the changes described above.

        4.    PAYMENT OF LINE FEE.    Borrower shall pay Bank a fee in the amount of Ten Thousand Dollars ($10,000) ("Line Fee") plus all out-of-pocket expenses.

        5.    NO DEFENSES OF BORROWER.    Borrower agrees that, as of this date, it has no defenses against the obligations to pay any amounts under the Indebtedness.

        6.    CONTINUING VALIDITY.    Borrower understands and agrees that in modifying the existing Indebtedness, Bank is relying upon Borrower's representations, warranties, and agreements, as set forth in the Existing Documents. Except as expressly modified pursuant to this Accounts Receivable Financing Modification Agreement, the terms of the Existing Documents remain unchanged and in full force and effect. Bank's agreement to modifications to the existing Indebtedness pursuant to this Accounts Receivable Financing Modification Agreement in no way shall obligate Bank to make any future modifications to the Indebtedness. Nothing in this Accounts Receivable Financing Modification

Agreement shall constitute a satisfaction of the Indebtedness. It is the intention of Bank and Borrower to retain as liable parties all makers and endorsers of Existing Documents, unless the party is expressly released by Bank in writing. No maker, endorser, or guarantor will be released by virtue of this Accounts Receivable Financing Modification Agreement. The terms of this paragraph apply not only to this Accounts Receivable Financing Modification Agreement, but also to any subsequent Accounts Receivable Financing modification agreements.

        7.    CONDITIONS.    The effectiveness of this Accounts Receivable Financing Modification Agreement is conditioned upon payment of the Line Fee.

        8.    COUNTERSIGNATURE.    This Accounts Receivable Financing Modification Agreement shall become effective only when executed by Borrower and Bank.

        This Accounts Receivable Financing Modification Agreement is executed as of the date first written above.

BORROWER:	BANK:
Fischer Imaging Corporation	Silicon Valley Bank
By:	By:
Name:	Name:
Title:	Title:

2

[Logo]

SILICON VALLEY BANK

PRO FORMA INVOICE FOR LOAN CHARGES

BORROWER:	Fischer Imaging Corporation
LOAN OFFICER:	Bill Nay
DATE:	April 9, 2004
	Line Fee	$	10,000.00
	Documentation Fee		250.00
	TOTAL FEE DUE	$	10,250.00

Please indicate the method of payment:

o

A check for the total amount is attached.



o

Debit DDA #                        for the total amount.



o

Loan proceeds

Borrower	(Date)
Silicon Valley Bank	(Date)
Account Officer's Signature

3

QuickLinks

ACCOUNTS RECEIVABLE FINANCING MODIFICATION AGREEMENT

EX-21

QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 21

Fischer Imaging Corporation Subsidiary List

Europe—

Fischer Imaging Europe SA
16, Chemin Des Coquelicots
CH-1214 Vernier
Switzerland

Fischer Imaging Deutschland GmbH
Im Gewerbepark C25
D-93059 Regensburg
Germany

QuickLinks

EXHIBIT 21

Fischer Imaging Corporation Subsidiary List

EX-23

QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

        We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 33-44012, 33-44599, 33-64032, 333-2676, 333-70057 and 333-57130) pertaining to the Stock Option Plan and the Non-employee Director Stock Option Plan of our report dated April 14, 2004, with respect to the consolidated financial statements and schedule of Fischer Imaging Corp. included in the Annual Report (Form 10-K) for the year ended December 31, 2003.

ERNST & YOUNG LLP

Denver, Colorado
April 14, 2004

QuickLinks

EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

EX-24.1

QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 24.1

POWER OF ATTORNEY

        KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Harris Ravine, David Kirwan and Mary Beth Wallingford the undersigned's true and lawful attorneys-in-fact and agents, each with full power and substitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign Fischer Imaging Corporation's Form 10-K for the fiscal year ended December 31, 2003 (the "Form 10-K") and any or all amendments to the Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that either of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereto.

        IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 13th day of April, 2004.

/s/  TODGER ANDERSON Signature

Todger Anderson Print Name:

QuickLinks

EXHIBIT 24.1

POWER OF ATTORNEY

EX-24.2

QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 24.2

POWER OF ATTORNEY

        KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Harris Ravine, David Kirwan and Mary Beth Wallingford the undersigned's true and lawful attorneys-in-fact and agents, each with full power and substitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign Fischer Imaging Corporation's Form 10-K for the fiscal year ended December 31, 2003 (the "Form 10-K") and any or all amendments to the Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that either of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereto.

        IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 13th day of April, 2004.

/s/  GAIL S. SCHOETTLER Signature

Gail S. Schoettler Print Name:

QuickLinks

EXHIBIT 24.2

POWER OF ATTORNEY

EX-24.3

QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 24.3

POWER OF ATTORNEY

        KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes and appoints Harris Ravine, David Kirwan and Mary Beth Wallingford the undersigned's true and lawful attorneys-in-fact and agents, each with full power and substitution for the undersigned and in the undersigned's name, place and stead, in any and all capacities, to sign Fischer Imaging Corporation's Form 10-K for the fiscal year ended December 31, 2003 (the "Form 10-K") and any or all amendments to the Form 10-K, and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that either of said attorneys-in-fact and agents, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereto.

        IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney to be executed as of this 13th day of April, 2004.

/s/  TAYLOR SIMONTON Signature

Taylor Simonton Print Name:

QuickLinks

EXHIBIT 24.3

POWER OF ATTORNEY

EX-31.1

QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 31.1

CERTIFICATIONS

I, Harris Ravine, certify that:

1.

I have reviewed this annual report on Form 10-K of Fischer Imaging Corporation;



2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;



3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;



4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:



a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and



c.

Disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.



5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors:



a.

All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 14, 2004 /s/ HARRIS RAVINE Harris Ravine
Chief Executive Officer and President

QuickLinks

EXHIBIT 31.1

CERTIFICATIONS

EX-31.2

QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 31.2

CERTIFICATIONS

I, David Kirwan, certify that:

1.

I have reviewed this annual report on Form 10-K of Fischer Imaging Corporation;



2.

Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;



3.

Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;



4.

The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:



a.

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;



b.

Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and



c.

Disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.



5.

The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors:



a.

All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and



b.

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: April 14, 2004 /s/ DAVID KIRWAN /David Kirwan
Chief Financial Officer

QuickLinks

EXHIBIT 31.2

CERTIFICATIONS

EX-32.1

QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report of Fischer Imaging Corporation (the "Company") on Form 10-K for the year ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Harris Ravine, Chief Executive Officer and President of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Harris Ravine
Harris Ravine
Chief Executive Officer and President
April 14, 2004

        A signed original of this written statement required by Section 906 has been provided to Fischer Imaging Corporation and will be retained by Fischer Imaging Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

QuickLinks

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-32.2

QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

        In connection with the Annual Report of Fischer Imaging Corporation (the "Company") on Form 10-K for the year ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, David Kirwan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)

The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ David Kirwan
David Kirwan
Chief Financial Officer
April 14, 2004

        A signed original of this written statement required by Section 906 has been provided to Fischer Imaging Corporation and will be retained by Fischer Imaging Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

QuickLinks

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

EX-99.1

QuickLinks -- Click here to rapidly navigate through this document

Exhibit 99.1

Fischer Imaging Corporation
Audit Committee Charter

Organization

        This Charter governs the operations of the Audit Committee of Fischer Imaging Corporation (the "Company"). The Audit Committee shall review and reassess its Charter at least annually and obtain the approval of the Board of Directors. The Audit Committee shall be members of, and appointed annually by, the Board of Directors. The Board of Directors shall appoint the Chair of the Audit Committee. The Audit Committee shall comprise at least three directors, all of whom are independent of management and the Company. Members of the Audit Committee shall be considered independent so long as each meets the independence requirements of the Securities and Exchange Commission ("SEC") and The Nasdaq Stock Market, Inc. ("Nasdaq") then in effect. All Audit Committee members shall be financially literate and at least one member shall be an "audit committee financial expert" both as defined by the SEC and Nasdaq. The Audit Committee shall meet at least four times per year and at such times and places and by such means as the Chair shall determine. A majority of the members of the Audit Committee shall constitute a quorum. Minutes of all Audit Committee meetings will be prepared and filed with the minutes of the Board of Directors. All members of the Audit Committee shall receive appropriate training and information necessary to fulfill the Audit Committee's responsibilities.

Purpose

        The Audit Committee shall provide assistance to the Board of Directors in fulfilling its oversight responsibility to the shareholders and others relating to the:

a.

integrity of the Company's financial statements;



b.

financial reporting process;



c.

systems of internal accounting and financial controls;



d.

performance of the Company's independent auditors;



e.

independent auditor's qualifications and independence; and



f.

Company's compliance with legal and regulatory requirements that may have an effect on the financial statements and with ethics policies.

        In so doing, it is the responsibility of the Audit Committee to maintain free and open communication between the Audit Committee, independent auditors and management of the Company.

        In discharging its oversight role, the Audit Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company and the authority to engage independent counsel and other advisers as it determines necessary to carry out its duties. The Audit Committee shall determine the appropriate funding by the Company for its activities; however, the Audit Committee will keep management of the Company informed of its needs so that the appropriate budgets may be established.

Duties and Responsibilities

        The primary responsibility of the Audit Committee is to oversee the Company's financial reporting process on behalf of the Board of Directors and report the results of its activities on a regular basis to the Board of Directors. While the Audit Committee has the responsibilities and powers set forth in this Charter, it is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles. Management is responsible for the preparation, presentation and

integrity of the Company's financial statements and for the appropriateness of the accounting principles and reporting policies that are used by the Company. The independent auditors are responsible for auditing the Company's annual financial statements and for reviewing the Company's unaudited interim financial statements.

        The Audit Committee, in carrying out its responsibilities, believes its policies and procedures should remain flexible, in order to best react to changing conditions and circumstances. The Audit Committee should take appropriate actions, together with top management, to set the overall corporate tone for quality financial reporting, sound business risk practices and ethical behavior. The following principal duties and responsibilities of the Audit Committee are set forth as a guide with the understanding that the Audit Committee may supplement them as appropriate.

        The Audit Committee shall:

        1.     Be directly responsible for the appointment (subject to shareholder ratification), retention, termination and compensation of the independent auditors, and the independent auditors must report directly to the Audit Committee. The Audit Committee also shall be directly responsible for the oversight of the work of the independent auditors, including resolution of disagreements between management and the auditor regarding financial reporting. The Audit Committee shall confirm the regular rotation of the lead audit partner and reviewing partner as required by law. The Audit Committee shall pre-approve all audit and non-audit services provided by the independent auditors and shall not engage the independent auditors to perform the specific non-audit services proscribed by law or regulation. The Audit Committee may delegate pre-approval authority to the Chair of the Audit Committee, whose decisions must be presented to the full Audit Committee at its next scheduled meeting. Management of the Company shall discuss in advance with the Audit Committee the rationale for employing audit firms other than the principal auditors.

        2.     Obtain and review, at least annually, a report by the independent auditors describing:

a.

the accounting firm's internal quality control procedures;



b.

any material issues raised by the most recent internal quality control review or peer review of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with any such issues; and



c.

all relationships between the independent auditor and the Company, management and Board members to assess the auditor's independence.

        3.     Establish guidelines to ensure that the independence of the independent auditors from the Company is maintained. In addition, the Audit Committee shall set clear hiring policies for employees or former employees of the independent auditors that meet the SEC regulations and Nasdaq standards.

        4.     Discuss with the independent auditors the overall scope and plans for their audits, including the adequacy of staffing. Also, the Audit Committee shall discuss with management and the independent auditors the adequacy and effectiveness of the accounting and financial controls, including the Company's policies and procedures to assess, monitor and manage business risk, and legal and ethical compliance programs.

        5.     Meet separately with management and the independent auditors periodically, but at least twice a year, to discuss issues and concerns warranting Audit Committee attention. The Audit Committee shall provide sufficient opportunity for the independent auditors to meet privately with the members of the Audit Committee. The Audit Committee shall review with the independent auditor any audit problems or difficulties and management's response.

2

        6.     Receive a report from the independent auditors, prior to the filing of its audit report with the SEC, on all critical accounting policies and practices of the Company, all material alternative treatments of financial information within generally accepted accounting principles that have been discussed with management, including the ramifications of the use of such alternative treatments and disclosures and the treatment preferred by the independent auditor, and other material written communications between the independent auditor and management.

        7.     Review, commencing no later than for the year ending December 31, 2005, management's assertion on its assessment of the effectiveness of internal controls as of the end of the most recent fiscal year and the independent auditors' report on management's assertion. The Audit Committee shall review with management and the independent auditor disclosures by the Company's Chief Executive Officer and Chief Financial Officer in connection with their personal certification of the Company's periodic reports or annual financial statements.

        8.     Review and discuss earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies in advance of their release.

        9.     Review the interim financial statements and disclosures under Management's Discussion and Analysis of Financial Condition and Results of Operations with management and the independent auditors prior to the filing of any Quarterly Report on Form10-Q. Also, the Audit Committee shall discuss the results of the quarterly review and any other matters required to be communicated to the Audit Committee by the independent auditors under generally accepted auditing standards.

        10.   Review with management and the independent auditors the financial statements and disclosures under Management's Discussion and Analysis of Financial Condition and Results of Operations to be included in the Company's Annual Report on Form 10-K (or the annual report to shareholders if distributed prior to the filing of Form 10-K), including their judgment about the quality, not just the acceptability, of accounting principles, the reasonableness of significant judgments and the clarity of the disclosures in the financial statements. Also, the Audit Committee shall discuss the results of the annual audit and any other matters required to be communicated to the Audit Committee by the independent auditors under generally accepted auditing standards. The Audit Committee shall recommend to the Board of Directors whether the financial statements should be included in the Form 10-K.

        11.   Establish procedures for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.

        12.   Review and concur in the appointment, replacement, reassignment or dismissal of the Chief Financial Officer.

        13.   Review and approve in advance all related party transactions as defined by SEC regulations with the Company.

        14.   Review and approve quarterly expense reports of the Chief Executive Officer. This responsibility may be delegated to the Chair of the Audit Committee. This review will not delay the timely reimbursement of expenses as approved by the Chief Financial Officer.

        15.   Receive corporate attorneys' reports of evidence of a material violation of securities laws or breaches of fiduciary duty.

        16.   Evaluate periodically the possible need for an internal audit function at the Company.

3

        17.   Monitor the Company's compliance with the Nasdaq requirement for promptly reporting the receipt of a going concern qualification in an audit opinion from the independent auditors to Nasdaq and by a public announcement.

        18.   Meet annually with the Company's regular outside counsel (and in-house counsel, if applicable) to review legal and regulatory matters relating to matters that may have a material effect on the financial statements.

        19.   Prepare its report to be included in the Company's annual proxy statement, as required by SEC regulations.

        20.   Perform an evaluation of its performance at least annually to determine whether it is functioning effectively.

        In addition to the above responsibilities, the Audit Committee shall undertake such other duties as the Board of Directors delegate to it.

Revised: January 9, 2004

4

QuickLinks

Fischer Imaging Corporation Audit Committee Charter