-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AdEBufwjYuAPprkYE1w9nzNIJS++J4j0aLNo993pK/2gHnPPucLhlx77d8rp5ZTm uci0kAk71ABPrUwwhG7LGg== 0000910680-03-000453.txt : 20030513 0000910680-03-000453.hdr.sgml : 20030513 20030513140447 ACCESSION NUMBER: 0000910680-03-000453 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OPHTHALMIC IMAGING SYSTEMS INC CENTRAL INDEX KEY: 0000885317 STANDARD INDUSTRIAL CLASSIFICATION: SURGICAL & MEDICAL INSTRUMENTS & APPARATUS [3841] IRS NUMBER: 943035367 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-11140 FILM NUMBER: 03694977 BUSINESS ADDRESS: STREET 1: 221 LATHROP WAY STE 1 CITY: SACRAMENTO STATE: CA ZIP: 95815 BUSINESS PHONE: 9166462020 MAIL ADDRESS: STREET 1: 221 LATHROP WAY STREET 2: SUITE 1 CITY: SACRAMENTO STATE: CA ZIP: 95815 10QSB 1 f905473.txt 03/31/2003 U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-QSB QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2003 Commission File Number: 1-11140 OPHTHALMIC IMAGING SYSTEMS (Exact name of registrant as specified in its charter) CALIFORNIA 94-3035367 (State of Incorporation) (IRS Employer Identification No.) 221 LATHROP WAY, SUITE I, SACRAMENTO, CA 95815 (Address of principal executive offices) (916) 646-2020 (Issuer's telephone number, including area code) Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes XX No ------------- ------------- As of May 13, 2003, 8,138,305 shares of common stock, no par value, were outstanding. Transitional Small Business Disclosure Format: Yes No XX ------------- ------------- OPHTHALMIC IMAGING SYSTEMS FORM 10-QSB FOR THE QUARTER ENDED March 31, 2003 PART I. FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements Condensed Balance Sheet as of March 31, 2003 2 Condensed Statements of Operations for the Three Months ended March 31, 2003 and March 31, 2002 3 Condensed Statements of Cash Flows for the Three Months ended March 31, 2003 and March 31, 2002 4 Notes to Financial Statements 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 Item 3. Controls and Procedures 14 PART II. OTHER INFORMATION Item 1. Legal Proceedings 15 Item 2. Changes in Securities and Use of Proceeds 15 Item 3. Defaults upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 PART I FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS Ophthalmic Imaging Systems Condensed Balance Sheet March 31, 2003 (Unaudited) ASSETS Current assets: Cash and equivalents $ 527,908 Accounts receivable, net 971,829 Inventories, net 457,690 Prepaid expenses and other current assets 93,537 Deferred tax asset 51,000 -------------- Total current assets 2,101,964 Furniture and equipment, net of accumulated depreciation and amortization of $1,340,205 173,531 Other assets 19,401 -------------- $ 2,294,896 ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Notes payable to related party $ 1,715,245 Accounts payable 540,472 Accrued liabilities 1,693,380 Deferred extended warranty revenue 349,083 Customer deposits 290,537 Income taxes payable 28,000 Capitalized lease obligation and other notes payable 2,758 -------------- Total current liabilities 4,619,475 -------------- Stockholders' deficit: Preferred stock, no par value, 20,000,000 shares authorized; none issued or outstanding - Common stock, no par value, 20,000,000 shares authorized; 8,138,305 issued and outstanding 12,630,604 Deferred compensation - Accumulated deficit (14,955,183) -------------- Total stockholders' deficit (2,324,579) -------------- $ 2,294,896 ============== The accompanying notes are an integral part of these condensed financial statements. 2 Ophthalmic Imaging Systems Condensed Statements of Operations (Unaudited)
Three months ended March 31, 2003 2002 ------------ ------------ Net revenues $ 2,385,713 $ 1,888,092 Cost of sales 959,659 833,563 ------------ ------------ Gross profit 1,426,054 1,054,529 Operating expenses: Sales and marketing 632,856 515,088 General and administrative 376,574 364,154 Research and development 80,908 97,270 ------------ ------------ Total operating expenses 1,090,338 976,512 ------------ ------------ Income from operations 335,716 78,017 Other expense, net (43,046) (74,460) ------------ ------------ Net income $ 292,670 $ 3,557 ============ ============ Shares used in the calculation of basic and diluted net income per share 8,138,305 8,138,305 ============ ============ Basic and diluted net income per share $ 0.04 $ 0.00 ============ ============
The accompanying notes are an integral part of these condensed financial statements. 3 Ophthalmic Imaging Systems Condensed Statements of Cash Flows (Unaudited)
Three months ended March 31, 2003 2002 ---------------- --------------- OPERATING ACTIVITIES: Net income $ 292,670 $ 3,557 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 9,661 18,679 Net increase in current assets other than cash and equivalents (104,933) (389,561) Net increase in current liabilities other than short-term borrowings 159,836 372,529 ---------------- --------------- Net cash provided by operating activities 357,234 5,204 INVESTING ACTIVITIES: Purchases of furniture and equipment (4,640) (8,034) Net (increase) decrease in other assets (6,511) 1,015 ---------------- --------------- Net cash used in investing activities (11,151) (7,019) FINANCING ACTIVITIES: Principal payments on notes payable (1,409) (1,905) Repayments of borrowings under notes payable to significant shareholders, net (200,000) (12,200) ---------------- --------------- Net cash used in financing activities (201,409) (14,105) ---------------- --------------- Net increase (decrease) in cash and equivalents 144,674 (15,920) Cash and equivalents at beginning of period 383,234 71,926 ---------------- --------------- Cash and equivalents at end of period $ 527,908 $ 56,006 ================ =============== SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES: Addition to (reduction in) aggregate debt payable to significant shareholders in exchange for inventory and other noncash transactions, net $ 1,915 $ (58,236) ================ ===============
The accompanying notes are an integral part of these condensed financial statements. 4 Ophthalmic Imaging Systems Notes to Condensed Financial Statements Three Month Periods ended March 31, 2003 and 2002 (Unaudited) Note 1. Basis of Presentation The accompanying unaudited condensed balance sheet as of March 31, 2003, condensed statements of operations and statements of cash flows for the three month periods ended March 31, 2003 and 2002 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnote disclosures required by generally accepted accounting principles for complete financial statements. It is suggested that these condensed financial statements be read in conjunction with the audited financial statements and notes thereto included in Ophthalmic Imaging Systems' (the "Company's") Annual Report for the year Ended December 31, 2002 on Form 10-KSB. In the opinion of management, the accompanying condensed financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company's financial position and results of operations for the periods presented. The results of operations for the period ended March 31, 2003 are not necessarily indicative of the operating results for the full year. Certain amounts in the fiscal 2002 financial statements have been reclassified to conform to the presentation in the fiscal 2003 financial statements. Note 2. Net Income Per Share Basic earnings per share ("EPS"), which excludes dilution, is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, result in the issuance of common stock which shares in the earnings of the Company. The treasury stock method is applied to determine the dilutive effect of stock options in computing diluted EPS. 5 Unaudited Three Months Ended March 31, 2003 2002 --------------- ------------- Numerator for basic and diluted net income per share $ 292,670 $ 3,557 ========= ========== Denominator for basic net income per share: Weighted average shares 8,138,305 8,138,305 Effect of dilutive securities: Employee/director stock options -- -- Warrants and other -- -- --------- ---------- Dilutive potential common shares -- -- --------- ---------- Denominator for diluted net income per share 8,138,305 8,138,305 ========= ========== Basic net income per share $ 0.04 $ 0.00 ========= ========== Diluted net income per share $ 0.04 $ 0.00 ========= ========== Options and warrants whose exercise price exceeds the average market price of the stock have been excluded from this computation. Note 3. Notes Payable to Related Parties In July 2000, the Company, Premier Laser Systems, Inc. ("Premier"), a California corporation and the Company's then majority shareholder, and MediVision Medical Imaging Ltd. ("MediVision"), an Israeli corporation, entered into a series of definitive agreements relating to the transfer of Premier's ownership interests in the Company to MediVision, including, among other things, converting in favor of Premier the Company's entire debt owed to Premier, calculated at an approximate book value of $2.1 million, into shares of the Company's common stock at a conversion price of $.55 per share. This occurred in August 2000 in connection with the closing of the transactions contemplated by the definitive agreements (the "Closing"). In addition, at the Closing, Premier and the Company executed a mutual waiver and release of claims, thereby releasing each other from any and all claims, whether known or unknown between them. As a result of the foregoing transactions, MediVision currently owns approximately 73% of the Company's outstanding common stock. Also in connection with this transaction, the Company executed a promissory note in favor of MediVision (the "Short-Term Note"). The Company has borrowed the maximum principal amount of $260,000 available under the Short-Term Note, which principal amount outstanding, together with any and all interest is payable as stipulated in the Short-Term Note. Under the terms of the Short-Term Note, borrowings bear interest at the rate of 9.3% per annum and are secured by certain of the Company's assets. At March 31, 2003, the 6 Company had recorded $260,000 in principal and approximately $66,000 in accrued interest outstanding under the Short-Term Note. MediVision and the Company are in discussions with regard to reclassifying amounts currently owed under the Short-Term Note to amounts owed under the Working Capital Note (as defined below). In further connection with the Closing in August 2000, the Company executed a second promissory note in favor of MediVision (the "Working Capital Note"). The Company has borrowed the maximum principal amount of $1.5 million available under the Working Capital Note, which principal amount outstanding, together with any and all accrued interest, is payable by August 31, 2003, or as otherwise stipulated in the Working Capital Note, except that MediVision may, at its option, at any time convert any amount of principal and accrued but unpaid interest then outstanding into shares of the Company's common stock at a conversion price of $.80 per share, which price is subject to adjustment upon the occurrence of certain events set forth in the Working Capital Note. Under the terms of the Working Capital Note, borrowings bear interest at the rate of 9.3% per annum and are secured by all of the Company's assets. The Company and MediVision entered into Amendment No. 1 to the Working Capital Funding Agreement (the "Amendment") dated as of July 1, 2002 whereby, among other things, the maximum principal amount of allowable borrowings pursuant to the Working Capital Funding Agreement entered into in connection with the Closing was increased by $1 million to $2.5 million. In connection with the Amendment, the Company executed in favor of MediVision a promissory note in the aggregate amount of $1 million (the "Amendment Note"). Under the terms of the Amendment Note, all principal amounts outstanding, together with any and all accrued interest, is payable by August 31, 2003 or as otherwise stipulated in the Amendment Note, except that MediVision may, at its option, at any time convert any amount of principal and accrued but unpaid interest then outstanding into shares of the Company's common stock at a conversion price of $0.185 per share, which price is subject to adjustment upon the occurrence of certain events set forth in the Amendment Note. Under the terms of the Amendment Note, borrowings bear interest at the rate of 9.3% per annum and are secured by all of the Company's assets. The Company and MediVision are currently in negotiations to restructure the repayment terms on both the Short-Term Note and the Working Capital Fund Agreement. At March 31, 2003, the Company had recorded, in aggregate, approximately $2,393,000 in principal and interest outstanding under the Working Capital Note and Amendment Note. 7 At March 31, 2003, the Company had recorded approximately $1,715,000 in aggregate debt owed to MediVision, which amount is net of approximately $1,004,000 in accounts receivable recorded in connection with sales of the Company's products to MediVision. In August 2002, the Company's Board of Directors, at MediVision's request, authorized the Company to guarantee and/or provide security interests in its assets for certain of MediVision's loans with financial institutions, in the maximum aggregate amount of approximately $1.9 million. In August 2002, MediVision subordinated to the financial institutions its security position in the Company's assets, which had been granted in consideration of loans to the Company from MediVision. In December 2002, the Company's Board of Directors approved that the Company enter into and issue a debenture in favor of the bank to act as security for the debt of MediVision, such debenture shall be secured by a first lien on all of the Company's assets. Such debenture and lien were signed in December 2002. 8 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains forward-looking statements within the meaning of the federal securities laws. The Company intends such forward-looking statements to be covered by the safe harbor provisions contained in Section 27A of the Securities Act of 1933, as amended, and in Section 21E of the Exchange Act of 1934, as amended. Forward-looking statements, which are based on certain assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words "believe," "expect," "intend," "anticipate," "estimate," "project," or similar expressions. The Company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on its operations and future prospects include, but are not limited to, changes in: economic conditions generally and the medical instruments market specifically, legislative or regulatory changes affecting the Company, including changes in healthcare regulation, the availability of working capital, the introduction of competing products, and other risk factors described herein. These risks and uncertainties, together with the other risks described from time to time in reports and documents filed by the Company with the Securities and Exchange Commission should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. Indeed, it is likely that some of the Company's assumptions will prove to be incorrect. The Company's actual results and financial position will vary from those projected or implied in the forward-looking statements, and the variances may be material. Overview - -------- To date, the Company has designed, developed, manufactured and marketed ophthalmic digital imaging systems and has derived substantially all of its revenues from the sale of such products. The primary target market for the Company's digital angiography systems and related products has traditionally been retinal specialists. In October 2001, MediVision, the Company's parent, signed an agreement for the acquisition of a minority interest by Agfa Gevaert N.V. creating an alliance for joint development and marketing of an integrated, digital Ophthalmology PACS solution. The marketing efforts under this agreement are anticipated to be implemented beginning in the US market, and are to include efforts by the Company. The extent and focus of future research and development efforts will depend, in large measure, on direction from MediVision, including potential collaborative projects between MediVision and the Company. At March 31, 2003, the Company had an accumulated deficit of approximately $15 million and its current liabilities exceeded its current assets by approximately $2.5 million. A significant portion of the current debt is amounts owing to MediVision under the arrangement discussed above. The Company continues to experience cash flow pressures and there can be no assurance that the Company will be able to achieve or sustain significant positive cash flows, revenues or profitability in the future. 9 The following discussion should be read in conjunction with the unaudited interim financial statements and the notes thereto which are set forth elsewhere in this Report on Form 10-QSB. In the opinion of management, the unaudited interim period financial statements include all adjustments, all of which are of a normal recurring nature, that are necessary for a fair presentation of the results of the periods. Critical Accounting Policies - ---------------------------- The Company's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The financial information contained within its statements is, to a significant extent, financial information that is based on measures of the financial effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value that is obtained either when earning income, recognizing an expense, recovering an asset or relieving a liability. The Company recognizes revenue when products are shipped. Estimates are used relative to the expected useful lives of depreciable assets. In addition, GAAP itself may change from one previously acceptable method to another method. Although the economics of the Company's transactions would be the same, the timing of events that would impact transactions could change. New Accounting Pronouncement FAS 149 - ------------------------------------ On April 30, 2003, the Financial Accounting Standards Board issued Statement No. 149, "Amendment of Statement on Derivative Instruments and Hedging Activities." This Statement amends and clarifies the accounting for derivative instruments by providing guidance related to circumstances under which a contract with a net investment meets the characteristics of a derivative as discussed in Statement 133. The Statement also clarifies when a derivative contains a financing component. The Statement is intended to result in more consistent reporting for derivative contracts and must be applied prospectively for contracts entered into or modified after June 30, 2003, except for hedging relationships designated after June 30, 2003. In management's opinion, adoption of this statement is not expected to have a material effect on the Company's financial position or results of operations. Results of Operations - --------------------- Revenues The Company's revenues for the first quarter ended March 31, 2003 were $2,385,713, representing an increase of approximately 26% from revenues of $1,888,092 for the first quarter ended March 31, 2002. Digital angiography systems sales accounted for 89% and 85% of the Company's revenue for the quarters ended March 31, 2003 and March 31, 2002 respectively. Service revenues accounted for approximately 6% and 8% of first quarter revenues during 2003 and 2002, respectively, while peripherals accounted for 5% and 7% of the comparable quarter during 2003 and 2002, respectively. Revenues from sales of the Company's products to MediVision were approximately $53,000 and $150,000 during the 3-month periods ended March 31, 2003 and March 31, 2002, respectively. 10 Gross Margins Gross margins were approximately 60% during the first quarter ended March 31, 2003 versus approximately 56% for the comparable quarter of 2002. The Company has undertaken certain gross margin enhancement efforts and continues to monitor its expenses in this area in contemplation of current and anticipated business conditions. Sales, Marketing, General and Administrative Expenses Sales and marketing and general and administrative expenses accounted for approximately 42% of total revenues during the first quarter of fiscal 2003 as compared with approximately 47% during the first quarter of fiscal 2002. Actual expense levels increased to $1,009,430 during the first quarter of 2003 versus $879,242 during the first quarter of 2002. Primary contributing factors to the increased expenses, while decreasing the percentage of expenses relative to revenue, were salaries and support costs related to direct sales and other support personnel added during and subsequent to the first quarter of 2002, as well as other costs in connection with the Company's selling efforts in 2003. Research and Development Expenses Research and development expenses were $80,908 in the first quarter of fiscal 2003 and $97,270 in the first quarter of fiscal 2002. Such expenses accounted for approximately 3% and 5% of revenues during the first quarter of 2003 and 2002, respectively. The Company has focused its recent research and development efforts on new digital image capture products and reducing cost configurations for its current products. The company is planning to increase R & D expenditures during the remainder of the year. Other Expense Other expense was $43,046 during the first quarter of fiscal 2003 versus $74,460 during the same period of 2002. These amounts were comprised principally of interest expense, mainly associated with net borrowings from MediVision and with financing arrangements provided to certain of the Company's customers in connection with sales of its products. Net Income The Company recorded net income of $292,670, or $0.04 per share, for the first quarter ended March 31, 2003 as compared to net income of $3,557 or $0.00 per share, for the first quarter ended March 31, 2002. 11 The results of operations do not include any amounts with respect to a potential contingent liability in connection with the collection of taxes from the Company's customers, which amount has been estimated on the basis of numerous factors and assumptions that might, in the least favorable combination, reach $680,000. Management believes that the probability of such an assessment is remote and accordingly, has not recorded a liability in its financial statements. However, there can be no assurance that the amount that might ultimately be assessed for prior periods would not materially affect the Company's results of operations or cash flows in any given reporting period. Liquidity and Capital Resources - ------------------------------- The Company's operating activities generated cash of $357,234 during the three months ended March 31, 2003 as compared to cash generated of $5,204 in the three months ended March 31, 2002. The cash generated from operations during the first three months of 2003 was principally from net income for the period and increases in current liabilities which amounts were partially offset by inventory procurements and certain other expenditures in connection with anticipated near-term sales demand for the Company's products. The cash generated by operations during the first quarter of 2002 was principally from increases in accrued liabilities and increases in customer deposits from orders generated pursuant the recently completed 2001 Annual Meeting of the AAO, which amounts were substantially offset by increased accounts receivable levels associated with deliveries made toward the end of the quarter and, to a lesser extent, increased inventory levels. Cash used in investing activities was $11,151 during the first three months of 2003 as compared to $7,019 during the same period for 2002. The Company's primary investing activities consist of equipment and other capital asset acquisitions. The Company anticipates continued certain near-term capital expenditures in connection with increasing its pool of demonstration equipment, as well as its ongoing efforts to upgrade its existing management information and corporate communication systems. The Company anticipates that related expenditures, if any, will be financed from cash flow from operations, borrowings under existing arrangements with MediVision, if available, or other financing arrangements available to the Company, if any. The Company used cash in financing activities of $201,409 during the first three months of fiscal 2003 as compared to $14,105 during the comparable period of fiscal 2002. The cash used in financing activities during both periods was principally from repayments of borrowings under existing arrangements with MediVision. Principal payments on notes payable other than to MediVision in both years were minimal. As discussed further above and in Note 3 of the Notes to Condensed Financial Statements included in Item 1 of this Form 10-QSB, on July 21, 2000, the Company executed the Short-Term Note and the Company has borrowed the maximum principal amount of $260,000 available under the Short-Term Note. At March 31, 2003, the Company had recorded $260,000, in principal and approximately $66,000 in accrued interest outstanding under the Short-Term Note and the Company is currently in discussions with MediVision with regard to reclassifying amounts currently owing under the Short-Term Note to amounts owing under the Working Capital Note. 12 In addition, in connection with the Closing in August 2000 of the transactions contemplated by the MediVision investments, the Company executed the Working Capital Note. The Company has borrowed the maximum principal amount available under the Working Capital Note of $1,500,000, which principal amount outstanding, together with any and all accrued interest, is payable by August 31, 2003, except that any principal and accrued but unpaid interest amount outstanding is convertible at any time at MediVision's option into shares of the Company's common stock at a conversion price of $0.80 per share. Under the terms of the Working Capital Note, borrowings bear interest at the rate of 9.3% per annum and are secured by substantially all of the Company's assets. In July 2001, the Company and MediVision entered into the Amendment whereby, among other things, the maximum principal amount of allowable borrowings pursuant to the Working Capital Funding Agreement entered into in connection with the Closing was increased by $1 million to $2.5 million. In connection with the Amendment, the Company executed the Amendment Note. Under the terms of the Amendment Note, all principal amounts outstanding, together with any and all accrued interest, is payable by August 31, 2003, or as otherwise stipulated in the Amendment Note, except that MediVision may, at its option, at any time convert any amount of principal and accrued but unpaid interest then outstanding into shares of the Company's common stock at a conversion price of $0.185 per share, which price is subject to adjustment upon the occurrence of certain events set forth in the Amendment Note. Under the terms of the Amendment Note, borrowings bear interest at the rate of 9.3% per annum and are secured by all of the Company's assets. The Company and MediVision are currently in negotiations to restructure the repayment terms on both the Short-Term Note and the Working Capital Fund Agreement. At March 31, 2003, the Company had recorded, in aggregate, approximately $2,393,000 in principal and interest outstanding under the Working Capital Note and the Amendment Note. At March 31, 2003, the Company had recorded approximately $1,715,000 in aggregate debt owed to MediVision, which amount is net of approximately $1,004,000 in accounts receivable recorded in connection with sales of the Company's products to MediVision. In August 2002, the Company's Board of Directors, at MediVision's request, authorized the Company to guarantee and/or provide security interests in its assets for certain of MediVision's loans with financial institutions, in the maximum aggregate amount of approximately $1.9 million. In August 2002, MediVision subordinated to the financial institutions its security position in the Company's assets, which had been granted in consideration of loans to the Company from MediVision. In December 2002, the Company's Board of Directors approved that the company enter into and issue a debenture in favor of the bank to act as security for the debt of MediVision, such debenture shall be secured by a first lien on all of the Company's assets. Such debenture and lien were signed in December 2002. 13 On March 31, 2003 the Company's cash and cash equivalents were $527,908. Management anticipates that additional sources of capital beyond those currently available to the Company may be required to continue operations and procure inventory necessary to meet current and anticipated demand for the Company's products. Substantial delays in the delivery of the Company's products would result in reduced cash flow from sales of such products as well as potential increased costs. Notwithstanding the foregoing, the Company's relationship with MediVision, will, in management's opinion, significantly improve the Company's financial condition and enhance management's ability to achieve sustained profitable operations, particularly in light of the agreement between MediVision and Agfa-Gevaert N.V. entered into during the fourth quarter of 2001. Pursuant to the agreement, Agfa acquired a minority interest in MediVision and is to invest in MediVision up to $3.5 million, $1 million of which was provided in connection with the closing in October 2001, $1 million of which was paid in April 2002 and an additional $500,000 of which was paid in October 2002. Under the terms of this agreement, among other things, Agfa and MediVision will jointly develop, promote and market a combined, Integrated Digital Ophthalmology Picture Archive & Communication System. The Company anticipates actively supporting MediVision in these efforts.The Company's relationship with MediVision provides the Company access to resources in addition to working capital. As a direct consequence of the MediVision transactions, the Company has implemented certain gross margin enhancement efforts, including improved production cost control and sustaining engineering programs. In addition, the Company and MediVision are continuing collaborative efforts with respect to design and implementation of certain product development programs. Furthermore, the relationship with MediVision could assist the Company in reducing selling, general and administrative expenses, particularly in connection with co-marketing and co-selling arrangements currently contemplated with respect to certain international markets. Irrespective of the foregoing, the Company will continue to evaluate alternative sources of capital to meet its cash requirements, including other asset or debt financing, issuing equity securities and entering into other financing arrangements and is hopeful that it will be successful in this regard. There can be no assurance, however, that any of the contemplated financing arrangements described herein will be available and, if available, can be obtained on terms favorable to the Company. ITEM 3. CONTROLS AND PROCEDURES The Company's Chief Executive Officer and Chief Financial Officer, based on their evaluation within 90 days prior to the date of this report of the Company's disclosure controls and procedures (as defined in Exchange Act Rule 13a--14(c)), have concluded that the Company's disclosure controls and procedures are adequate and effective for purposes of Rule 13a--14(c) in timely alerting them to material information relating to the Company required to be included in the Company's filings with the SEC under the Securities Exchange Act of 1934. There were no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation. 14 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) 99.1 - Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) None. 15 SIGNATURES Pursuant to the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OPHTHALMIC IMAGING SYSTEMS (Company) By: /s/ Gil Allon ------------------------ Gil Allon, Chief Executive Officer /s/ Ariel Shenhar ------------------------ Ariel Shenhar, Chief Financial Officer Dated: May 13, 2003 16 302 CERTIFICATION FOR QUARTERLY REPORTS ON FORM 10-QSB I, Gil Allon, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Ophthalmic Imaging Systems; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures 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 quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 13, 2003 /s/ Gil Allon ----------------------------------- Gil Allon Chief Executive Officer 302 CERTIFICATION FOR QUARTERLY REPORTS ON FORM 10-QSB I, Ariel Shenhar, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Ophthalmic Imaging Systems; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures 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 quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: May 13, 2003 /s/ Ariel Shenhar --------------------------------- Ariel Shenhar Chief Financial Officer EX-28 3 ex99-1_form10qsb03312003.txt 99.1 906 CERTIFICATE (ALLON AND SHENHAR) EXHIBIT 99.1 ------------ CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the filing of the financial statements of Ophthalmic Imaging Systems ("Registrant") for the quarter ended March 31, 2003 (the "Report"), each of the undersigned hereby certifies, to such officer's knowledge, that: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Registrant. /s/ Gil Allon ------------------------- Gil Allon Chief Executive Officer /s/ Ariel Shenhar ------------------------ Ariel Shenhar Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----