Intelligent Medical Imaging Systems Announces Second Quarter Results.

PALM BEACH GARDENS, Fla.--(BUSINESS WIRE)--Aug. 4, 1997-- Intelligent Medical Imaging, Inc., (Nasdaq:IMII) announced today results of operations for the second quarter ended June 30, 1997. Revenues for the second quarter of 1997 were $1,570,338 compared with $889,879 for the same period last year. To date, the Company's newly expanded sales force has sold or placed on an evaluation basis an aggregate of 48 MICRO21 systems.

Commenting on second quarter results, Tyce Fitzmorris, Intelligent Medical Imaging, Inc. CEO and President said, "IMI's second quarter revenue levels, which were 18% ahead of analyst expectations, are a further affirmation of the progress that is being made by our newly formed sales and marketing team. We have taken an aggressive approach to placing the MICRO21 system on a direct basis and are pleased with our results to date. We believe the solid momentum gained during the 1997 second quarter in the domestic marketplace positions IMI to take full advantage of the opportunities ahead."

The net loss for the 1997 second quarter ended June 30, 1997 was $2,124,681, or $0.19 per common share primary, compared with a net loss of $584,404, or $0.05 per common share primary for the same period last year. The increase in net loss, which was higher than analyst expectations, was related to legal fees associated with the successful settlements in March 1997 of the Coulter Corporation arbitration as well as the patent infringement dispute with International Remote Imaging Systems. The Company noted that build-up of operating expenses was also related to the Company's investment in staff and materials required to develop the Company's expanded product line presented at the AACC (American Association for Clinical Chemistry) conference in Atlanta, GA on July 22 - 24, 1997. The Company introduced the MICRO21 Microscopic Workstation System, a complete microscopic solution that integrates into a single system all parts of the microscopic process: slide preparation (for certain procedures), slide review and data collection.

Additionally, the Company made significant investments during the 1997 second quarter in both sales and marketing related to the staffing of sales and service functions.

Mr. Fitzmorris added, "Compared to the prior year's quarter, IMI has more than doubled its investment in sales and marketing reflecting our strategy of building a direct sales force to accelerate the placement of the MICRO21 domestically. To date, we are very pleased with our internal sales efforts which have resulted in 48 placements of the MICRO21 in nine months. In comparison, during the twelve months that Coulter was the exclusive worldwide distributor for IMI, Coulter achieved approximately half of the unit installations IMI's internal staff has achieved. We firmly believe that the termination of the Coulter agreement will in the long-term result in greater success for IMI. This will result from higher gross margins we achieve selling the MICRO21 direct, coupled with the greater success we have demonstrated placing the MICRO21.

"While our infrastructure build-up will result in higher operating expenses in 1997 than originally anticipated, we believe our recent strategic efforts to expand our product line and increase our sales and service organization will significantly strengthen Intelligent Medical's position as an industry leader in 1998 and beyond," Mr. Fitzmorris concluded.

For the six months ended June 30, 1997 revenues were $2,412,043 as compared to $3,066,082 for the comparable six-month period of 1996. The Company's net loss for the 1997 six-month period was $3,593,186, or $0.33 per common share primary, compared to a net loss of $440,287, or $0.05 per common share primary, for the six months ended June 30, 1996.

Second Quarter 1997 Highlights

Building on the solid foundation it established in 1996 and the 1997 first quarter, Intelligent Medical Imaging further strengthened its competitive position in the second quarter of 1997 with the following accomplishment of strategic initiatives:

-- Group Purchasing Agreement with MAGNET: IMI signed on

July 31, 1997 a three-year Group Purchasing Agreement with

Mid-Atlantic Group Network of Shared Services, Inc. (MAGNET),

one of the largest and oldest shared service organizations in

the United States. Under the terms of the agreement, Intelligent

Medical is granted rights to distribute and market the

MICRO21 automated microscopic system to MAGNET's network of over

900 acute care hospitals.

-- Group Purchasing Agreement with AmeriNet: IMI signed on

June 25, 1997 a three-year Group Purchasing Agreement with

AmeriNet, Inc., one of the largest hospital group purchasing

organizations in the United States. Under the terms of the

agreement, Intelligent Medical is granted rights to distribute

and market the MICRO21 automated microscopic system to AmeriNet's

network of over 1,900 hospitals and 43 independent laboratories.

Within the 1,900 hospitals there exist 24 integrated delivery

networks.

-- Immuno Concepts Marketing Agreement: IMI signed a marketing

agreement with Immuno Concepts, N.A. LTD, on April 15, 1997.

Under the terms of the agreement, Immuno Concepts patented

Colorzyme(r) immunoenzyme technology, when used on automated

systems, can only be used on IMI's MICRO21 system. Immuno

Concepts' slide test-kit will be used in conjunction with the

MICRO21's Anti-Nuclear antibody analysis (ANA analysis) and nDNA

analysis procedures. As part of the agreement, IMI will receive a

royalty fee from Immuno Concepts on each slide test kit processed

on MICRO21 systems.

-- Expanded Product Line Offering -- "Complete Microscopic

Solution": IMI continues to expand the focus of its R&D efforts

to create a "complete microscopic solution." Anticipated for

release in the latter-half of 1997, IMI's "complete microscopic

solution" product will be called the MICRO21 Microscopic

Workstation System. This system will integrate all parts of the

microscopic process for certain procedures: slide preparation,

automatic slide loading, slide review and data collection. This

system will expand upon IMI's current product, the MICRO21, which

currently automates the slide review process.

For More Information on Intelligent Medical Imaging, at no cost via facsimile, please dial 1-800-PRO-INFO, and enter Code No. 259, or Stock Ticker Symbol - IMII.

The foregoing press release includes "forward-looking statements" within the meaning of and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties, and other factors which may cause the actual results, performance or achievements of the Company or events, or timing of events, relating to the Company to differ materially from any future results, performance or achievements of the Company or events, or timing of events, relating to the Company expressed or implied by such forward looking statements. Such factors include, among others: the potential delays in the Company's achievement of substantial market penetration and widespread acceptance of the MICRO21 system; delays and impediments associated with the industry and market perception of the dispute, even though now settled, between the Company and Coulter; the inability of the Company to enter into an alternative exclusive distribution agreement due to certain rights granted to Coulter under the Settlement Agreement; potential delays and technical problems in the development and commercial release of new products and procedures such as the proposed MICRO21 Microscopic Workstation System; the expense, delays and potential setbacks in development of competent and capable sales and marketing teams and service teams for penetration and support of the market for the MICRO21 system; the potential failure of the Company's sales team, and IMI's distributor's to sell MICRO21 systems in amounts sufficient to help the Company achieve its sales goals; the uncertainty of capital for future capital needs, especially in the event of further delays in anticipated widespread market acceptance of the MICRO21 system. The Company cannot assume that it will be able to anticipate or respond timely to any of the factors listed above, which could adversely affect operating results. -0-

                 Intelligent Medical Imaging, Inc.
                     Statement of Operations


                          Three Months Ended     Six Months Ended
                                June 30              June 30

                            1997      1996        1997     1996

Product sales:          $1,570,338  $889,879   $2,412,043 $3,066,082

Cost of sales              888,978   485,205    1,295,221  1,709,411
Gross margin               681,360   404,674    1,116,822  1,356,671

Operating expenses:
 Selling, general and
   administrative        2,077,318   712,118    3,571,957  1,256,457
 Research and
   development           1,086,827   645,012    1,803,011    897,689
Total operating
  expenses               3,164,145 1,357,130    5,374,968  2,154,146
Loss from operations    (2,482,785) (952,456)  (4,258,146)  (797,475)
Other income (expense):
  Other                         --        --           --     76,475
  Investment and interest
    income                 358,105   393,650      664,962    410,682
  Interest expense              --   (25,598)         --    (129,969)

Other income (expense)     358,105   368,052      664,962    357,187

Net loss              $(2,124,681) $(584,404) $(3,593,186) $(440,287)

Loss per common
  share               $     (0.19) $   (0.05) $     (0.33) $   (0.05)

Weighted average
  common shares
  outstanding          10,906,323  10,687,173   10,916,474 9,000,278


                Intelligent Medical Imaging, Inc.
                     Condensed Balance Sheet

                                     June 30,     December 31,
                                       1997            1996
                                  (unaudited)
Assets

Current assets:
Cash                              $   525,332      $   288,001
Investments available for sale     15,013,938       24,793,872
Accounts receivable                 1,604,999          177,096
Accrued interest receivable           161,021          159,427
Inventory                           5,409,464        3,541,993
Prepaid expenses                      367,174           52,425
Total current assets              $23,081,928      $29,012,814

Property and equipment:
Furniture, fixtures and
  office equipment                  1,474,609          461,690
Development and prototype systems   2,392,094        1,835,539
                                    3,866,703        2,297,229

Less accumulated depreciation        (932,260)        (630,272)
                                    2,934,442        1,666,957

Other assets                          280,834           52,252
                                  $26,297,205      $30,732,023

Liabilities and stockholders' equity
Current liabilities:
Accounts payable                 $  1,055,500       $1,062,979
Accrued salaries and benefits         573,614          319,217
Other accrued liabilities           1,296,220        1,640,868
Total current liabilities           2,925,334        3,865,328

Stockholders' equity
Preferred stock, $0.01
  par value-authorized 2,000,000 shares;
  no shares issued or outstanding           0                0
Common Stock, $0.01
  par value-authorized 35,000,000
  shares: issued and outstanding
  10,921,155 shares                   109,212          108,981
Additional paid-in capital         42,457,475       42,425,306
Deferred compensation                (274,878)        (321,504)
Net realized investment gains
  and (losses)                         77,362           58,027
Accumulated deficit               (18,997,299)     (15,404,115)
Total stockholders' equity         23,371,871       26,866,695
                                  $26,297,205      $30,732,023

CONTACT: Intelligent Medical Imaging Inc.

Tyce M. Fitzmorris, Chairman, CEO & President

561/627-0344

or

Gene Cochran, Chief Financial Officer

561/627-0344

or

Financial Relations Board

Joe Calabrese, 212/661-8030

or

Brian Gill, (Analyst)

212/661-8030