<PAGE>   1
 
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 12, 1998.
 
                                                 REGISTRATION NO. 333-
================================================================================
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                            ------------------------
 
                                    FORM S-1
                             REGISTRATION STATEMENT
                                     UNDER
                           THE SECURITIES ACT OF 1933
                            ------------------------
 
                               OPTIVA CORPORATION
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
 
<TABLE>
<S>                                       <C>                                       <C>
               WASHINGTON                                   3845                                   91-1405470
      (STATE OR OTHER JURISDICTION              (PRIMARY STANDARD INDUSTRIAL                    (I.R.S. EMPLOYER
   OF INCORPORATION OR ORGANIZATION)            CLASSIFICATION CODE NUMBER)                  IDENTIFICATION NUMBER)
</TABLE>
 
                             13222 S.E. 30TH STREET
                           BELLEVUE, WASHINGTON 98005
                                 (425) 957-0970
  (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
                   REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
 
                                MICHAEL D. STULL
        VICE PRESIDENT OF FINANCE, TREASURER AND CHIEF FINANCIAL OFFICER
                               OPTIVA CORPORATION
                             13222 S.E. 30TH STREET
                           BELLEVUE, WASHINGTON 98005
                                 (425) 957-0970
 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
                             OF AGENT FOR SERVICE)
                            ------------------------
 
                                   COPIES TO:
 
<TABLE>
<S>                                                           <C>
                    CHARLES J. KATZ, JR.                                            CARLA S. NEWELL
                      DAVID C. CLARKE                                               CRAIG M. SCHMITZ
                      MICHAEL T. PRIOR                                              RICHARD R. HESP
                      PERKINS COIE LLP                                    GUNDERSON DETTMER STOUGH VILLENEUVE
               1201 THIRD AVENUE, 40TH FLOOR                                   FRANKLIN & HACHIGIAN, LLP
               SEATTLE, WASHINGTON 98101-3099                                    155 CONSTITUTION DRIVE
                       (206) 583-8888                                         MENLO PARK, CALIFORNIA 94025
                                                                                     (650) 321-2400
</TABLE>
 
                            ------------------------
 
        Approximate date of commencement of proposed sale to the public:
  AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
 
     If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box.  [ ]
 
     If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.  [ ]
---------------------
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering.  [ ]
---------------------
 
     If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier registration
statement for the same offering.  [ ]
---------------------
 
     If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box.  [ ]
                            ------------------------
 
                        CALCULATION OF REGISTRATION FEE
 
<TABLE>
<CAPTION>
==============================================================================================================================
                                                           PROPOSED MAXIMUM        PROPOSED MAXIMUM
     TITLE OF EACH CLASS             AMOUNT TO BE           OFFERING PRICE        AGGREGATE OFFERING          AMOUNT OF
OF SECURITIES TO BE REGISTERED      REGISTERED(1)            PER SHARE(2)              PRICE(2)            REGISTRATION FEE
------------------------------------------------------------------------------------------------------------------------------
<S>                             <C>                     <C>                     <C>                     <C>
Common Stock, $0.01 par value
  per share................        5,060,000 shares             $17.00               $86,020,000               $25,376
==============================================================================================================================
</TABLE>
 
(1) Includes 660,000 shares that the Underwriters have the option to purchase to
    cover over-allotments, if any.
 
(2) Estimated solely for the purpose of calculating the registration fee in
    accordance with Rule 457(o) under the Securities Act of 1933.
                            ------------------------
 
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE>   2
 
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE
BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION
OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH STATE.
 
                   SUBJECT TO COMPLETION, DATED MAY 12, 1998
PROSPECTUS
 
                                4,400,000 SHARES
 
                                     [LOGO]
 
                               OPTIVA CORPORATION
                                  Common Stock
 
     Of the 4,400,000 shares of Common Stock offered hereby, 2,000,000 shares
are being sold by the Company and 2,400,000 shares are being sold by the Selling
Shareholders. The Company will not receive any of the proceeds from the sale of
shares by the Selling Shareholders. See "Principal and Selling Shareholders."
 
     Prior to this offering, there has been no public market for the Company's
Common Stock. It is currently estimated that the initial public offering price
will be between $15.00 and $17.00 per share. See "Underwriting" for a discussion
of the factors to be considered in determining the initial public offering
price. Application will be made to have the Common Stock listed on the New York
Stock Exchange under the symbol "          ."
 
                               ------------------
 
            THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
                    SEE "RISK FACTORS" COMMENCING ON PAGE 5.
 
                               ------------------
 
  THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
 EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
   AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
                               CRIMINAL OFFENSE.
 
<TABLE>
<CAPTION>
 
================================================================================================================
                                                                                                  PROCEEDS TO
                                          PRICE TO         UNDERWRITING        PROCEEDS TO          SELLING
                                           PUBLIC           DISCOUNT(1)        COMPANY(2)        SHAREHOLDERS
<S>                                   <C>                <C>                <C>                <C>
----------------------------------------------------------------------------------------------------------------
Per Share...........................          $                  $                  $                  $
----------------------------------------------------------------------------------------------------------------
Total(3)............................          $                  $                  $                  $
================================================================================================================
</TABLE>
 
(1) See "Underwriting" for indemnification arrangements with the several
    Underwriters.
 
(2) Before deducting expenses payable by the Company estimated at $1,150,000.
 
(3) The Company and certain Selling Shareholders have granted to the
    Underwriters a 30-day option to purchase up to 300,000 and 360,000
    additional shares of Common Stock, respectively, solely to cover
    over-allotments, if any. If all such shares are purchased, the total Price
    to Public, Underwriting Discount, Proceeds to Company and Proceeds to
    Selling Shareholders will be $          , $          , $          and
    $          , respectively. See "Underwriting."
 
                               ------------------
 
     The shares of Common Stock are offered by the several Underwriters subject
to prior sale, receipt and acceptance by them and subject to the right of the
Underwriters to reject any order in whole or in part and certain other
conditions. It is expected that certificates for such shares will be available
for delivery on or about             , 1998, at the office of the agent of
Hambrecht & Quist LLC in New York, New York.
 
HAMBRECHT & QUIST                                       PAINEWEBBER INCORPORATED
 
            , 1998
<PAGE>   3
 
  [Artwork to be inserted here and on inside back cover consisting of SONICARE
product photographs, with no copy other than SONICARE logo and "A better kind of
                                 clean" slogan]
 
     CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING BY ENTERING STABILIZING BIDS, EFFECTING SYNDICATE COVERING
TRANSACTIONS OR IMPOSING PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES,
SEE "UNDERWRITING."
 
     "SONICARE," "quadpacer," "Works Beyond the Bristles," "Beyond-the-Bristles"
and "Beyond the Reach of the Bristles" are registered trademarks of the Company.
Additionally, the Company has applied for registration of the marks "Optiva,"
"smartimer" and "A Better Kind of Clean." This Prospectus also contains other
trademarks and trade names, which are the property of their respective holders.
                                        2
<PAGE>   4
 
                               PROSPECTUS SUMMARY
 
     The following summary is qualified in its entirety by the more detailed
information and the Consolidated Financial Statements and Notes thereto
appearing elsewhere in this Prospectus. The Common Stock offered hereby involves
a high degree of risk. See "Risk Factors." This Prospectus contains, in addition
to historical information, forward-looking statements that involve risks and
uncertainties. The Company's actual results or experience could differ
significantly from those discussed in the forward-looking statements. Factors
that could cause or contribute to such differences include, but are not limited
to, those discussed in "Risk Factors," as well as those discussed elsewhere in
this Prospectus.
 
                                  THE COMPANY
 
     Optiva Corporation (the "Company" or "Optiva") develops, manufactures and
markets premium consumer oral care products offered under the SONICARE brand.
The SONICARE power toothbrush is designed to utilize patented sonic technology
to provide significant oral care benefits. Optiva has commissioned 38 clinical
and laboratory studies at major universities and research centers to document
the health benefits and safety of its products. This body of scientific
information has formed the foundation for Optiva's strategy of gaining the
support of dental professionals. Building on the brand awareness created through
recommendations by dental professionals, the Company conducted a phased
expansion into a variety of retail channels, including specialty retailers,
department stores, chain drug stores, warehouse clubs and mass merchandisers. To
continue to build brand awareness, Optiva pursues marketing and brand management
programs targeted at consumers, dental professionals and retailers. The
Company's net sales increased from $48.7 million in 1995 to $103.0 million in
1997.
 
     Optiva's goal is to be a leading provider of premium-brand consumer oral
care products recognized for technological superiority, efficacy and value. To
achieve this goal, the Company intends to leverage its brand to increase retail
sales, expand support among dental professionals, develop complementary
products, and develop international opportunities. The Company was incorporated
in Washington in March 1988. The Company's executive offices are located at
13222 S.E. 30th Street, Bellevue, Washington 98005, and its telephone number is
(425) 957-0970.
 
                                  THE OFFERING
 
<TABLE>
<S>                                                                  <C>
Common Stock offered by the Company................................  2,000,000 shares
Common Stock offered by the Selling Shareholders...................  2,400,000 shares
Common Stock to be outstanding after this offering.................  18,674,440 shares (1)
Use of proceeds....................................................  Repayment of certain indebtedness, certain
                                                                     capital expenditures, working capital and
                                                                     other general corporate purposes, including
                                                                     expenditures in connection with the Company's
                                                                     planned relocation of its office,
                                                                     manufacturing and research facilities. See
                                                                     "Use of Proceeds."
Proposed New York Stock Exchange symbol............................  "          "
</TABLE>
 
---------------
(1) Excludes, as of March 31, 1998, 4,880,000 shares of Common Stock reserved
    for issuance pursuant to the Company's benefit plans, of which options to
    purchase 2,482,916 shares were outstanding at a weighted average exercise
    price of $1.49 per share. Also excludes 239,812 shares of Common Stock
    issuable upon exercise of warrants outstanding as of March 31, 1998 at a
    weighted average exercise price of $2.71 per share. See
    "Management -- Benefit Plans" and "Description of Capital
    Stock -- Warrants."
 
                                        3
<PAGE>   5
 
                   SUMMARY CONSOLIDATED FINANCIAL INFORMATION
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                                      THREE MONTHS
                                                                                          ENDED
                                             YEAR ENDED DECEMBER 31,                    MARCH 31,
                                 ------------------------------------------------   -----------------
                                  1993      1994      1995      1996       1997      1997      1998
                                 -------   -------   -------   -------   --------   -------   -------
                                                                                       (UNAUDITED)
<S>                              <C>       <C>       <C>       <C>       <C>        <C>       <C>
CONSOLIDATED STATEMENT OF
  INCOME DATA:
     Net sales.................  $ 3,755   $16,558   $48,701   $72,695   $102,968   $19,009   $30,609
     Income (loss) from
       operations..............   (1,161)    1,176     5,409     8,902     17,789     2,118     3,921
     Net income (loss).........  $(1,144)  $ 1,048   $ 3,028   $ 5,868   $ 11,348   $ 1,314   $ 2,583
     Diluted net income (loss)
       per share (1)...........  $ (0.10)  $  0.07   $  0.19   $  0.35   $   0.64   $  0.08   $  0.14
     Shares used in computation
       of diluted net income
       (loss) per share (1)....   11,120    14,227    15,765    16,830     17,749    17,330    18,060
</TABLE>
 
<TABLE>
<CAPTION>
                                                                   MARCH 31, 1998
                                                              ------------------------
                                                              ACTUAL    AS ADJUSTED(2)
                                                              -------   --------------
                                                                    (UNAUDITED)
<S>                                                           <C>       <C>
CONSOLIDATED BALANCE SHEET DATA:
     Cash and cash equivalents..............................  $15,073      $40,826
     Working capital........................................   26,431       53,510
     Total assets...........................................   50,760       76,513
     Shareholders' equity...................................   31,248       59,858
</TABLE>
 
------------------------------
(1) For an explanation of diluted net income (loss) per share and the number of
    shares used to compute diluted net income (loss) per share, see Note 1 of
    Notes to Consolidated Financial Statements.
 
(2) Adjusted to give effect to the sale by the Company of the 2,000,000 shares
    of Common Stock offered hereby at an assumed initial public offering price
    of $16.00 per share and the application of a portion of the estimated net
    proceeds therefrom to repay certain indebtedness. See "Use of Proceeds" and
    "Capitalization."
 
                            -----------------------------
 
     Except as otherwise indicated, all information contained in this Prospectus
(i) assumes no exercise of the Underwriters' over-allotment option, (ii)
reflects a four-for-one forward split of the Common Stock to be effected prior
to this offering and (iii) assumes the amendment of the Company's Articles of
Incorporation to increase the Company's authorized capital to 25,000,000 shares
of Preferred Stock and 100,000,000 shares of Common Stock. See "Underwriting."
 
                                        4
<PAGE>   6
 
                                  RISK FACTORS
 
     This Prospectus contains forward-looking statements that involve
significant risks and uncertainties. The Company's actual results and the timing
of certain events could differ materially from those discussed in the
forward-looking statements as a result of certain factors, including the factors
set forth below and elsewhere in this Prospectus. The following risk factors
should be considered carefully in addition to the other information contained in
this Prospectus before purchasing the shares of Common Stock offered hereby.
 
     Intense Competition. The consumer oral care market is highly competitive
and is characterized by intense price competition. The Company competes directly
with manufacturers of mechanical oral care devices such as power toothbrushes
and oral irrigators, as well as manual toothbrushes. The Company also competes
indirectly, and may in the future compete directly, with sellers of consumables
such as toothpaste, mouthwash and dental floss. See "-- Potential New Markets."
 
     The Company's SONICARE product line competes with products offered by a
number of larger companies, including The Gillette Company ("Gillette"),
manufacturer of the Braun Oral-B product line; Teledyne Industries, Inc.
("Teledyne"), manufacturer of the SenSonic sonic toothbrush; and Conair
Corporation ("Conair"), manufacturer of the Interplak power toothbrush product
line. The Company's principal competitors have substantially greater financial,
manufacturing, marketing and technical resources, and greater brand recognition
than the Company. These advantages may afford the Company's competitors greater
ability to manufacture large volumes of their products and achieve pricing
advantages as a result of greater economies of scale, develop product
innovations, expand distribution, compete for shelf space, reduce product prices
and influence consumer buying decisions. In addition, the Company's competitors
may be able to use their greater market standing and resources to exclude the
Company's products from certain retailers' shelves. Most power toothbrush
products currently are offered at prices substantially lower than the SONICARE
products. Price reductions by competitors could result in downward pressure on
the prices of the Company's products. There can be no assurance that the Company
would be able to increase its sales volume or reduce its per unit costs under
such circumstances while maintaining profitability. Competitive pressures also
may lead to an increase in other sales-related expenses, including advertising
and marketing costs. Furthermore, competitive price pressures may impair the
Company's ability to raise prices in line with any increase in its distribution,
promotional and manufacturing costs. The failure of the Company to respond to
competitive pressures, particularly price competition, in a timely or effective
manner would have a material adverse effect on the Company's business, operating
results and financial condition.
 
     The Company and certain other power toothbrush manufacturers have in the
past made allegations or complaints to broadcasters, publishers of periodicals
and the National Advertising Division of the Better Business Bureau regarding
unfair or misleading product claims by competitors. While the Company has not to
date been materially adversely affected by any such allegations or complaints
concerning its product claims, there can be no assurance that in the future such
allegations or complaints would not have a material adverse effect on the
Company's business, operating results or financial condition.
 
     The Company believes that certain of its key competitors have invested, and
will continue to invest, substantially greater funds in developing new products
and technologies. Accordingly, there can be no assurance that the Company's
competitors do not have, or will not develop or introduce, new products and
technologies that could render the Company's products less competitive or
obsolete. Any failure by the Company to compete effectively with regard to new
product offerings, product innovations and technological changes and to offer
products that provide performance that is at least comparable to competing
products would have a material adverse effect on the Company's business,
operating results and financial condition.
 
     Gillette has recently announced, and the Company believes will imminently
launch, a new Braun Oral-B power toothbrush model, the "3-D," that may be
positioned at a price point comparable to that of the Company's SONICARE models.
The Company believes that this new Braun model may offer
                                        5
<PAGE>   7
 
improvements over existing Braun models and expects that Gillette will devote
substantial marketing resources to the launch of this new product. As a result,
the introduction of this new product could force the Company to increase its
marketing expenditures, redirect marketing or product development resources or
reduce prices on its products, and therefore could negatively affect the
Company's operating results. In addition, the introduction could result in
decreased sales of the Company's products because of market confusion or a shift
in consumer preferences, or could lead to a significant reduction in the shelf
space allocated to the SONICARE product line. See "Business -- Competition."
 
     Fluctuating Quarterly Operating Results; Seasonality. The Company's
historical operating results have fluctuated significantly from quarter to
quarter and are likely to fluctuate significantly in the future based on a
number of factors, including (i) pricing changes by the Company or its
competitors; (ii) seasonality; (iii) the loss or addition of a major customer;
(iv) the time and expense involved in maintaining and expanding existing
distribution channels and establishing new distribution channels; (v)
discretionary marketing and promotional expenditures; (vi) timing of new product
introductions by the Company and its competitors; (vii) inventory shortages or
other factors affecting production volumes; (viii) timing of regulatory
approvals; (ix) market acceptance of new or enhanced products; (x) product
defects, recalls and other product quality problems; (xi) changes in the level
of operating expenses, including expenses related to the Company's planned
relocation to new office, research and manufacturing facilities; (xii)
significant litigation, regulatory action or complaints about the Company's
product claims; and (xiii) changes in the Company's product mix and in the
percentage of products sold through different distribution channels.
 
     The Company's customers generally do not have long-term commitments to
purchase products. The Company's products are generally shipped as orders are
received, and as a result the Company generally does not have a significant
backlog. Consequently, quarterly sales and operating results depend primarily on
the volume and timing of orders received during the quarter, which are difficult
to predict. Furthermore, a significant portion of the Company's operating
expenses are relatively fixed, and planned expenditures are based on sales
forecasts. If sales levels fall below expectations, operating results are likely
to be materially adversely affected. There can be no assurance that the Company
will be profitable on a quarterly basis in the future.
 
     The Company's business is seasonal in nature, with net sales and net income
generally highest in the fourth quarter and generally lower in the first quarter
than in the prior quarter. The Company believes that the historical increase in
sales of its products in the fourth quarter has been primarily due to higher
customer order volume in anticipation of holiday spending. Marketing and sales
expenses also have been historically higher in the fourth quarter. As a result,
the Company's quarterly results have fluctuated significantly, with net sales
and net income in the fourth quarter historically accounting for a
disproportionate percentage of annual net sales and net income. Any decreases in
net sales or net income in the fourth quarter due to competitive, operating,
economic and other business conditions are therefore likely to have a
disproportionate effect on the Company's annual operating results as compared to
other quarters. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Selected Quarterly Results of Operations."
 
     The Company believes that quarter-to-quarter comparisons of its sales and
operating results are not necessarily meaningful, and that such comparisons may
not be accurate indicators of future performance. As a result of the foregoing
factors, in some future quarter or quarters the Company's operating results may
be below the expectations of market analysts and investors. In such event, the
trading price of the Company's Common Stock would be materially adversely
affected.
 
     Dependence on Limited Product Line. All of the Company's revenue to date
has been attributable to the sale of its SONICARE product line, and the Company
currently anticipates that this product line will account for the vast majority
of its revenue for the foreseeable future. As a result, the Company's future
operating results depend upon continued market acceptance of its SONICARE
product line and future enhancements thereto. Consequently, a decline in the
demand for, market acceptance of, or the prices for, the Company's SONICARE
product line as a result of competition, technological change, developments in
oral care treatment, adverse clinical research findings or other factors would
have a
 
                                        6
<PAGE>   8
 
material adverse effect on the Company's business, operating results and
financial condition. The Company believes that its continued growth is highly
dependent on the growth of the overall market for power toothbrushes and related
products. If this market does not continue to grow or grows more slowly than
expected, the Company's business, operating results and financial condition
would be materially adversely affected. See "Business -- Products."
 
     Risks of Product Defects and Product Recalls. The Company's business
exposes the Company to potential product liability and product recall risks that
are inherent in the design, development, manufacture and marketing of consumer
oral care products. There can be no assurance that the Company's product
liability insurance, with coverage limits of $26 million per occurrence and in
the aggregate, will be adequate to protect the Company against any future
product liability claims or that such insurance coverage will continue to be
available on commercially reasonable terms, if at all. From time to time, the
Company has received customer complaints concerning problems with the Company's
products. In addition, in 1996, the Company voluntarily recalled approximately
180,000 units of its SONICARE product line due to the discovery of a defective
charger shipped without electrical insulation. Of the approximately 150,000
chargers returned, five were found to contain this defect. Because not all
affected chargers were returned, defective units may still be in the field. The
recall had a material adverse effect on the Company's operating results for
1996, primarily due to lost sales and approximately $3 million in recall-related
expenses. A product liability or other judgment against the Company in excess of
the Company's insurance coverage, or another significant product recall, would
have a material adverse effect on the Company's brand image and business,
operating results and financial condition. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and
"Business -- Products" and "-- Manufacturing and Quality Assurance."
 
     Risk of Adverse Findings or Reports. The Company relies heavily on clinical
and laboratory studies commissioned by the Company to demonstrate the safety and
efficacy of its products. The results of these studies are the primary basis of
the Company's product claims and, as a result, are critical to the Company's
marketing efforts. The Company is aware of a number of studies that negatively
reflect on certain of its product claims. Any significant adverse or conflicting
clinical results arising from studies commissioned by competitors, the Company
or others could significantly undermine the credibility and competitive position
of the Company's SONICARE product line in the market, and could have a material
adverse effect on the Company's business, operating results and financial
condition. Since the Company's inception, a substantial portion of the Company's
sales of its SONICARE product line have been the result of dental professional
recommendations. The Company believes that the results of its clinical and
laboratory studies have been critical in persuading dental professionals of the
benefits of the SONICARE product line and in generating sales. If as a result of
the introduction of competitive products, the publication of adverse scientific
findings or otherwise, recommendations by dental professionals were to
materially decline, the credibility of the SONICARE product line, and the
Company's business, operating results and financial condition, would be
materially adversely affected. In addition, adverse reviews of the Company's
products in consumer or professional publications or other adverse product
publicity could materially adversely affect the Company's brand image and its
sales. See "Business -- Clinical and Laboratory Research."
 
     Dependence on Retail Channels; Customer Concentration. A key element of the
Company's growth strategy is continued sales growth in the retail channel. As a
result, the Company must continue to increase consumer interest in the SONICARE
product line and increase its retail shelf presence. Competition for shelf space
in the consumer oral care market is intense, and the sales and marketing costs
required to compete effectively for consumer attention in the retail channel are
substantial. The Company's principal competitors have substantially greater
sales and marketing budgets, personnel, experience and other resources than the
Company. There can be no assurance that the Company will be able to increase its
sales volume through retail channels, and the failure to do so could have a
material adverse effect on the Company's business, operating results and
financial condition. See "-- Intense Competition."
 
                                        7
<PAGE>   9
 
     A significant portion of the Company's sales in any particular period has
been attributable to a limited number of customers. Sales to Costco Companies,
Inc. ("Costco"), the Company's largest retail customer, accounted for
approximately 25% and 16% of the Company's net sales in 1997 and 1996,
respectively, and sales to the Company's four largest retail customers accounted
for approximately 39% and 31% of net sales in 1997 and 1996, respectively. The
Company expects that it will continue to depend upon a limited number of
customers for a significant portion of its sales in future periods. As a result
of this concentration of sales, the Company's business, operating results or
financial condition could be materially adversely affected by the failure of
anticipated orders from significant customers to materialize or by deferrals or
cancellations of orders by significant customers. In addition, significant
customers could demand price reductions from the Company which could reduce the
Company's margins and also lead to higher customer concentration due to
increased sales volume through such customers. There can be no assurance that
sales to Costco, or other major retail customers, will not decrease
significantly or that one or more of these retail chains will not choose to
replace the Company's products with those of its competitors. The loss of Costco
or any other major retail customer, or any significant decrease in the volume of
products sold through these retail distribution channels, would have a material
adverse effect on the Company's business, operating results and financial
condition. Furthermore, any disruption in the business of a major retail
customer as a result of bankruptcy or otherwise could materially increase the
Company's bad debt exposure. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Business -- Marketing and
Sales."
 
     Management of Growth; Information Systems. The Company has experienced
substantial growth in recent years in all aspects of its business, which has
placed significant strains on its management resources, systems and operations.
The Company's future profitability depends on its ability to manage potential
future growth effectively and to upgrade its management information systems and
other infrastructure. The Company has purchased and intends to install an ERP
(enterprise resource planning) system later in 1998. Although the Company is in
the process of making information systems improvements, there can be no
assurance that these systems upgrades will be implemented successfully or in a
timely manner or that they will be adequate to manage any potential future
growth that may occur. If the Company's sales and operations were to continue to
grow, there would likely be increasing strain on the Company's management,
financial, manufacturing, marketing, distribution and other resources. As a
result, the Company could experience serious operating difficulties, including
difficulties in hiring, training and managing an increasing number of employees,
difficulties in obtaining sufficient materials and components and manufacturing
capacity to produce its products, problems in upgrading management information
and other systems, internal controls and procedures problems, and delays in
production and shipment of products. Projects such as the expansion of or
enhancements to product lines, and efforts to address broader markets and to
expand distribution channels, will place a further strain on the Company's
resources and personnel. If the Company's management is unable to effectively
manage any future growth that may occur, the Company's business, competitive
position, operating results and financial condition would be materially
adversely affected. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
 
     Product Development Risks. The Company is dependent on its ability to
design and develop new products and enhancements to its current SONICARE product
line that will achieve market acceptance. The consumer oral care market in which
the Company competes is characterized by frequent introductions of new products
and changes in customer demands. The introduction of products embodying new
technologies can render existing products obsolete and unmarketable. The
development of new products and enhancements is subject to many creative,
technical, financial, legal and logistical challenges, and there can be no
assurance that the Company will be able to design and develop products and
enhancements economically, in a timely manner and with the features desired by
consumers, or that it will be able to successfully manufacture such new or
enhanced products cost effectively and in significant volumes. If any future new
products or enhancements are delayed, or if these products or enhancements fail
to achieve market acceptance when launched, the Company's
                                        8
<PAGE>   10
 
business, operating results and financial condition could be materially
adversely affected. See "Business -- Products."
 
     Potential New Markets. As part of the Company's product development
efforts, it is seeking to develop consumables that are complementary to the
SONICARE product line, such as toothpaste and mouthwash. The Company has no
experience in these markets and would be required to make substantial
expenditures to launch and promote any such product. The markets for these
consumable products are intensely competitive and are currently dominated by
large companies, including Colgate-Palmolive and Procter & Gamble, which have
substantially greater financial, marketing and manufacturing resources and
experience than the Company. These advantages may enable the Company's
competitors to more effectively compete for retail customers and shelf space,
reduce product prices and influence consumer buying decisions, and may require
the Company to make substantial marketing expenditures. In addition, the sale of
these types of products may subject the Company to additional review and
regulation by various governmental agencies for the countries, states and
localities in which the Company's products are manufactured or sold, including
the U.S. Food and Drug Administration (the "FDA"), which review and regulation
could significantly delay any product introduction and require the Company to
incur significant costs obtaining or maintaining regulatory approvals. See
"Business -- Products" and "-- Regulation."
 
     Dependence on Key Personnel. The Company currently is, and expects to
continue to be, dependent on the efforts and abilities of its senior management,
particularly David Giuliani, its President, Chief Executive Officer and Chairman
of the Board, and other key personnel. The Company also depends on its ability
to identify, attract, train, retain and motivate other highly skilled technical,
managerial, sales, marketing and other personnel. Competition for qualified
personnel in the industry and in the Pacific Northwest is intense, and there can
be no assurance that the Company will be able to successfully attract,
assimilate or retain such personnel. In addition, each of the Company's
executive officers and key employees is employed on an at-will basis. The rate
at which the Company can attract and retain the highly trained personnel that
are integral to its direct sales, consulting and product development teams may
limit the ability of the Company to achieve its objectives. The Company has
obtained a $1 million term life insurance policy on the life of Mr. Giuliani.
The failure to retain and attract any of its key executive officers,
particularly Mr. Giuliani, or other key personnel could have a material adverse
effect on its business, operating results and financial condition. See
"-- Management of Growth; Information Systems," "Business -- Employees" and
"Management."
 
     Risks Associated With Relocation; Risk of Interruption of Business. The
Company is planning to relocate its current operations and offices to new
corporate office, manufacturing, research and development and warehouse
facilities located on an 11-acre site approximately 15 miles east of its current
location. The Company expects that this move will occur in mid-1999. The Company
recently exercised an option to purchase the new facilities and intends to
finance this purchase and hold the property through a tax retention operating
lease arrangement with certain financial institutions. The Company expects to
incur significant costs in constructing the new facility, which has already
begun, and in relocating its operations once construction is completed. The
Company also could experience increased employee turnover and associated costs
in connection with the planned relocation, as well as costs related to
terminating its existing real property leases and to restoring the facilities
that are covered by these leases. There can be no assurance that the costs
associated with this planned move will not substantially exceed the Company's
expectations. In addition, the Company's development of a new facility will
result in new fixed and operating expenses, including substantial increases in
depreciation expense that will increase the Company's cost of sales. If revenue
levels do not increase sufficiently to offset these new expenses, the Company's
operating results could be materially adversely affected.
 
     In addition, the development and construction of a new manufacturing
facility is subject to significant risks and uncertainties, including
construction delays, weather problems, equipment delays or shortages, production
start-up problems and other factors. As many of such factors are beyond the
Company's control, the Company cannot predict the length of any such delays,
which could be
                                        9
<PAGE>   11
 
substantial. In addition, the Company may experience significant delays in
moving its operations, installing its manufacturing equipment, and building and
testing its systems and infrastructure, any of which could have a material
adverse effect on its ability to fill customer orders and on its overall
business, operating results and financial condition. There can be no assurance
that the Company will not encounter these or other unforeseen difficulties,
costs or delays in constructing and equipping the new manufacturing facility, in
relocating operations to the new facility or in commencing production at the new
facility. Any such difficulties or delays could limit the Company's production
volume and, accordingly, could have a material adverse effect on the Company's
business, operating results and financial condition. The Company may also
experience significant distribution problems and incur significant costs in
establishing its planned new distribution center, which could have a material
adverse effect on the Company's business, operating results and financial
condition. See "Business -- Manufacturing and Quality Assurance."
 
     Since the Company currently relies, and for the foreseeable future expects
to rely, on a single manufacturing facility, any prolonged disruption in the
operations of the Company's facilities for any other reason, including technical
or labor difficulties, regulatory action, inaccessability due to inclement
weather, destruction of or damage to the facility or other reasons, would have a
material adverse effect on the Company's business, operating results and
financial condition.
 
     Manufacturing Capacity Constraints; Dependence on Key Suppliers. If demand
for the Company's products increases, the Company will be dependent on its
ability to increase its production volume on a timely and cost-effective basis
while maintaining product quality. If the Company attempts to significantly
increase production volumes, it may encounter difficulties, including problems
involving delays, quality control, shortages of qualified personnel, and
shortages of materials and components, particularly those with long lead times.
A significant increase in production volume may also require the Company to
increase its overall manufacturing capacity. In light of long lead times on
certain equipment required to increase capacity, the Company would have only a
limited ability to increase capacity on short notice in response to sudden
increases in demand. As a result, the Company may in the future experience
delays in its ability to fill customer orders if it does not increase capacity
on a timely basis. Significant delays in filling orders over an extended period
could damage customer relations and materially adversely affect the Company's
competitive position, which would materially adversely affect the Company's
business, operating results and financial condition. The production schedules
for the Company's products are based on forecasts of customer demand, and the
Company has only a limited ability to modify short-term production schedules.
The Company's ability to estimate demand may be less precise during periods of
rapid growth or with respect to new products. The Company's failure to forecast
its requirements accurately could lead to inventory shortages or surpluses that
could materially adversely affect its operating results and lead to fluctuations
in quarterly operating results. In addition, the Company's margins and
profitability could be materially adversely affected by the costs associated
with excess capacity if orders do not meet expectations.
 
     The Company's products are composed of a number of components that are
provided by sole source suppliers. While the Company has identified alternative
sources for certain of these components, the qualification of additional or
replacement vendors is a lengthy process, and there can be no assurance that any
such additional or replacement vendors will be qualified or available, if
needed. This dependence on sole source suppliers involves significant risks,
including reduced control over production schedules, quality assurance,
manufacturing yields and costs and supply availability. Any significant supply
interruption would have a material adverse effect on the Company's ability to
manufacture its products and, therefore, on its business, operating results and
financial condition. In addition, any price increases by sole source or other
suppliers would increase the Company's operating costs and negatively impact
margins and profitability. See "Business -- Manufacturing and Quality
Assurance."
 
     Risks Associated With International Sales and Operations. Although
international sales revenue to date has only accounted for a small percentage of
the Company's net sales, the Company believes that its continued growth depends
in part on the growth of its international sales. International expansion
                                       10
<PAGE>   12
 
will require penetration into markets in which the Company has little or no
experience, and there can be no assurance that the Company will be successful in
penetrating these markets or maintaining or expanding international sales.
International sales are subject to inherent risks, including changes in
regulatory requirements and tariffs, difficulties in staffing and managing
foreign operations, increased distribution and shipping challenges, longer
payment cycles, greater difficulty in accounts receivable collection,
potentially adverse tax consequences, the difficulties of dealing with
litigation or regulatory actions in foreign countries, price controls or other
restrictions on foreign currency and difficulties in obtaining export and import
licenses. To the extent the Company's dependence on international sales revenue
increases, factors adversely affecting the Company's international operations
could materially adversely affect the Company's business, operating results and
financial condition as a whole. Although the Company has not experienced any
material adverse impact to date from fluctuations in foreign currencies, to the
extent that international sales become a greater percentage of net sales, there
can be no assurance that currency fluctuations will not have a material adverse
effect on the Company's business, operating results and financial condition. In
addition, the Company currently sells its products outside the United States
primarily through international distributors. There can be no assurance that the
Company will be successful in maintaining relationships with these distributors
or establishing relationships with additional distributors. The loss of one or
more major international distributors could have a material adverse effect on
the Company's business, operating results and financial condition. See
"Business -- International Operations."
 
     Potential Health Risks. Concerns have been expressed that electromagnetic
emissions from electronic devices may pose potential health risks to the users
of those devices. The actual or perceived risk of frequent use of electronic
devices, or press reports thereon, could adversely affect sales of the Company's
products and have a material adverse effect on the Company's business, operating
results and financial condition.
 
     Risks Related to Acquisitions. The Company has evaluated, and expects to
continue to evaluate, strategic opportunities available to it and may pursue
acquisitions of additional products, technologies or businesses. Although no
material acquisitions are currently being negotiated or planned, the Company's
future performance following an acquisition will depend on the Company's ability
to integrate or manage any organizations acquired, which, even if successful,
may take a significant period of time, will place a significant strain on the
Company's resources, and could subject the Company to additional expenses
following the acquisition. There can be no assurance that the Company would be
able to integrate or manage acquired businesses, if any, successfully or in a
timely manner. If the Company is unable to manage acquisition-based growth
effectively, its business, operating results and financial condition would be
materially adversely affected. Moreover, any new acquisition, depending on its
size, could result in the use of a significant amount of the Company's available
cash or the acquisition of additional debt or, if such acquisition is made
utilizing the Company's equity securities, could result in significant dilution
to the Company's shareholders. See "Use of Proceeds."
 
     Limited Protection of Intellectual Property and Proprietary Rights. The
Company is dependent in large part on its proprietary rights and technology.
Optiva relies on a combination of patent, copyright, trademark and trade secret
laws, employee and third-party nondisclosure agreements and other methods to
protect its proprietary rights. The Company currently has seven issued U.S.
patents and five pending U.S. patent applications as well as a number of foreign
patents and pending patent applications. There can be no assurance that the
Company's pending or any future patent applications will be issued with the
scope of the claims sought by the Company, if at all, or that the Company's
patent claims will not be successfully challenged or circumvented by
competitors. Despite the precautions taken by the Company to protect its
intellectual property, it may be possible for unauthorized third parties to copy
certain portions of the Company's products or reverse engineer or obtain and use
information that the Company regards as proprietary. In addition, the laws and
practices of some foreign countries do not protect proprietary rights to the
same extent as do the laws and practices of the United States. In some
countries, the Company has decided not to file for patent or
 
                                       11
<PAGE>   13
 
trademark protection of its proprietary rights because it has determined that
the costs of doing so are not warranted.
There can be no assurance that the measures taken by the Company to protect its
rights, and the Company's means of protecting its proprietary rights in the
United States or abroad, will be adequate, that competing companies will not
independently develop similar technology or that the time, diversion of
management attention and expense of defending the Company's proprietary rights
will not have a material adverse effect on the Company's business, operating
results and financial condition. In 1996, the Company and Teledyne settled
litigation between them that in part concerned a critical sonic technology
patent held by the Company. As part of the settlement the Company granted
Teledyne a nonexclusive, royalty-bearing license to that patent, under which
Teledyne is currently manufacturing and selling its SenSonic toothbrush.
 
     The Company has received a limited number of claims of patent and trademark
infringement and likely will receive additional claims in the future. While none
of these claims has had a material adverse effect on the Company's business or
operations to date, the Company has incurred in the past, and could incur in the
future, substantial costs in defending itself and its customers against
infringement claims. In addition, because patent applications in the United
States are not publicly disclosed until the patent is issued, applications that
relate to the Company's products may have been filed of which the Company is
unaware. Litigation may be necessary to protect proprietary information and
rights of the Company or to determine the enforceability, scope and validity of
the proprietary rights of others. Any litigation or administrative proceedings
will likely result in substantial expense to the Company and significant
diversion of effort by the Company's technical and management personnel. The
prosecution and defense of intellectual property rights, as with any lawsuit,
are inherently uncertain and carry no assurance of success. An adverse
determination in litigation or administrative proceedings could subject the
Company to significant liabilities to third parties, require the Company to seek
licenses from third parties, prevent the Company from selling or making its
products or require the Company to modify its products. Furthermore, there can
be no assurance that any necessary licenses would be available to the Company on
satisfactory terms, if at all. See "Business -- Proprietary Rights and
Technology."
 
     Governmental Regulation. The Company's consumer oral care products and
manufacturing facilities are regulated by the FDA and by various other
governmental agencies for the states, localities and foreign countries in which
the Company's products are manufactured and sold. The FDA requires pre-market
approval of new medical devices through submission of a Section 510(k)
Pre-Market Notification, a Pre-Market Approval Application or an available
exemption from the FDA's pre-market clearance requirements. The oral care
products currently marketed by the Company are exempt from FDA pre-market
clearance requirements, although products under development by the Company may
be subject to such requirements or other regulations. The Company's
manufacturing facilities are subject to the FDA's current Good Manufacturing
Practices. See "-- Potential New Markets."
 
     Failure to comply with applicable FDA or other regulatory requirements can
result in, among other things, fines, suspensions or withdrawals of regulatory
clearances or approvals, product recalls, operating restrictions (including
suspension of production and distribution), product seizures and criminal
prosecution. In addition, governmental regulations may be established that could
prevent or delay regulatory clearances or approval of the Company's products.
Furthermore, changes in existing regulations or adoption of new regulations or
policies could prevent the Company from obtaining, or affect the timing of,
future regulatory clearances or approvals. There can be no assurance that the
Company will be able to achieve or maintain compliance with necessary U.S. or
foreign regulatory requirements, that it will be able to produce its products
profitably and in a timely manner while complying with such regulatory
requirements or that it will not be required to incur significant costs
obtaining or maintaining such regulatory approvals. Delays in receiving
necessary U.S. or foreign regulatory clearances or approvals, failure to receive
clearances or approvals, or the loss of previously received clearances or
approvals could have a material adverse effect on the Company's business,
operating results and financial condition. In addition, the long-term course of
regulatory policy cannot
 
                                       12
<PAGE>   14
 
be predicted, and there can be no assurance that new laws or regulations will
not be introduced, or existing laws and regulations will not be applied in a
manner, that materially adversely affect the Company.
 
     The Company's use of rechargeable batteries in its SONICARE models subjects
the Company to a variety of local, state, federal and international governmental
regulations relating to the recyclability and disposal of such batteries. The
failure to comply with current or future regulations could result in the
imposition of substantial fines on the Company, suspension of production,
alteration of its recycling and disposal processes or cessation of operations.
In addition, compliance with such regulations could require the Company to incur
substantial expenses. See "Business -- Regulation."
 
     Changes in Economic Conditions and Consumer Spending. Purchases of premium
consumer oral care products, including the Company's SONICARE product line, are
discretionary and, therefore, such purchases may decline during periods of
national or regional economic recession or reduced consumer confidence. The
Company's success depends in part upon a number of economic factors affecting
discretionary consumer spending, including employment rates, business
conditions, future economic prospects, interest rates and tax rates. Shifts in
consumer discretionary spending away from premium consumer oral care products,
as well as general declines in consumer spending, could have a material adverse
effect on the Company's business, operating results and financial condition.
 
     Year 2000 Compliance. Many currently installed computer systems and
software products are coded to accept only two-digit entries in the date code
field. Beginning in the Year 2000, these date code fields will need to accept
four-digit entries to distinguish 21st century dates from 20th century dates. As
a result, in less than two years, computer systems and software used by many
companies may need to be upgraded to comply with such "Year 2000" requirements.
In 1997, the Company purchased, and intends to install in 1998, an ERP
(enterprise resource planning) system that the vendor warrants is Year 2000
compliant. In addition, the Company is in the process of identifying and
assessing its mission-critical systems that may be affected by the Year 2000,
both internally and externally (with respect to the Company's suppliers and
customers). Although the Company plans to address Year 2000 issues with respect
to its mission-critical internal systems in sufficient time prior to the century
rollover, there can be no assurance that there will not be interruption of
operations or other limitations of system functionality, or that the Company
will not incur substantial costs to avoid such occurrences. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
 
     Absence of Prior Market for Common Stock; Price Volatility. Prior to this
offering, there has been no public market for the Company's Common Stock, and
there can be no assurance that an active trading market will develop or, if
developed, will be sustained following this offering. The initial public
offering price of the Common Stock will be determined by negotiations between
the Company and the Underwriters, and may not be indicative of the market price
of the Common Stock after this offering. For a discussion of the factors to be
considered in determining the initial public offering price, see "Underwriting."
The market price of the Company's Common Stock is likely to be highly volatile
and could be subject to wide fluctuations in response to certain factors,
including fluctuations in operating results of the Company or its competitors,
sales of Common Stock into the market by existing shareholders, announcements of
new products by the Company or its competitors, announcements of clinical or
laboratory results, legal or regulatory actions against the Company, the
Company's failure to meet or exceed published earnings estimates, changes in
earnings estimates or recommendations by securities analysts, announcements of
technological innovations by the Company or its competitors, developments with
respect to patents, market conditions generally for equity securities of similar
companies and market conditions generally for publicly traded companies. In
addition, the market prices of many securities have been highly volatile in
recent years, often as a result of factors unrelated to a company's operations.
Accordingly, the market price of the Common Stock may decline even if the
Company's operating results or prospects have not changed. In the past,
securities class action litigation has often been instituted against a company
following periods of volatility in the market price of such company's
securities. If brought, such litigation could result in substantial costs and a
diversion
                                       13
<PAGE>   15
 
of management's attention and resources, which could have a material adverse
effect on the Company's business, operating results and financial condition.
 
     Shares Eligible for Future Sale. Sales of a substantial number of shares of
Common Stock in the public market following this offering could materially
adversely affect the market price of the Common Stock. In addition to the
4,400,000 shares of Common Stock offered hereby, as of the date of this
Prospectus (the "Effective Date") there will be 14,274,440 shares of Common
Stock outstanding (assuming no exercise of options or warrants after March 31,
1998), all of which are "restricted" shares (the "Restricted Shares") under the
Securities Act of 1933, as amended (the "Securities Act"). Approximately
               Restricted Shares will become eligible for sale immediately after
the Effective Date pursuant to Rule 144(k) under the Securities Act,
approximately                Restricted Shares will become eligible for sale
prior to 90 days after the Effective Date pursuant to Rule 144(k) under the
Securities Act, approximately                Restricted Shares will become
eligible for sale 90 days after the Effective Date pursuant to Rule 144 and Rule
701 under the Securities Act, approximately                Restricted Shares
will become eligible for sale 120 days after the Effective Date, and
approximately                Restricted Shares will become eligible for sale
approximately 180 days after the Effective Date, upon the expiration of certain
lockup agreements with the Representatives of the Underwriters, subject in some
cases to compliance with the volume and other limitations under Rule 144. The
remaining approximately                Restricted Shares held by existing
shareholders, or issuable pursuant to outstanding warrants, will become eligible
for sale from time to time in the future under Rule 144. Additionally, an
aggregate of approximately                shares issuable upon the exercise of
stock options that were vested as of May 1, 1998 will become eligible for sale
in the public market 90 days after the Effective Date upon the filing with the
Securities and Exchange Commission (the "Commission") of a registration
statement on Form S-8 with respect to the shares subject to such options. As
described above, the number of shares of Common Stock available for sale in the
public market is limited by restrictions under the Securities Act and lockup
agreements under which the holders of such shares have agreed not to sell or
otherwise dispose of a portion of their shares for periods ranging from 120 to
180 days after the Effective Date without the prior written consent of Hambrecht
& Quist LLC, except that each of such holders may, without the consent of the
Representatives of the Underwriters, sell up to 1,000 shares of Common Stock.
See "Management -- Employee Benefit Plans," "Shares Eligible for Future Sale"
and "Underwriting."
 
     Control by Directors and Executive Officers. Immediately upon completion of
this offering, the Company's directors and executive officers will beneficially
own approximately      % of the outstanding shares of Common Stock
(approximately      % if the Underwriters' over-allotment option is exercised in
full). As a result, the Company's directors and executive officers, acting
together, would be able to significantly influence or control many matters
requiring approval by the shareholders of the Company, including the election of
directors and approval of significant corporate transactions. In addition, this
concentration of ownership and voting power may have the effect of accelerating,
delaying or preventing a change in control of the Company or otherwise affect
the ability of any shareholder to influence the policies of the Company, which
in turn could have an adverse effect on the market price of the Common Stock.
See "Management" and "Principal and Selling Shareholders."
 
     Antitakeover Considerations. Certain provisions of Washington law, the
Company's Amended and Restated Articles of Incorporation (the "Articles") and
Amended and Restated Bylaws (the "Bylaws") could discourage potential
acquisition proposals and could delay, defer or prevent a change in control of
the Company that may be in the best interests of the Company's shareholders. See
"Description of Capital Stock."
 
     Dilution. The initial public offering price is substantially higher than
the book value per share of Common Stock. Investors purchasing shares of Common
Stock in this offering will incur immediate and substantial dilution of $12.80
in net tangible book value per share of Common Stock from the initial public
offering price and will incur additional dilution upon the exercise of
outstanding stock options. See "Dilution."
                                       14
<PAGE>   16
 
     Cautionary Language Regarding Forward-Looking Statements. This Prospectus
contains certain forward-looking statements, including, without limitation,
statements concerning the Company's operations, economic performance and
financial condition, particularly statements relating to the Company's growth
strategy. The words "believe," "intend," "plan," "expect" and "anticipate" and
other similar expressions generally identify forward-looking statements.
Investors are cautioned not to place undue reliance on these forward-looking
statements. These forward-looking statements are based largely on the Company's
current expectations and are subject to a number of risks and uncertainties,
including, without limitation, those identified under in this "Risk Factors"
section and elsewhere in this Prospectus. Other important factors to consider in
evaluating such forward-looking statements include changes in external market
factors, changes in the Company's business or growth strategy or an inability to
execute its strategy due to changes in its industry or the economy generally,
the emergence of new or growing competitors and various competitive factors. In
light of these risks and uncertainties, there can be no assurance that the
matters referred to in the forward-looking statements contained in this
Prospectus will in fact occur according to the Company's plans, if at all.
 
                                       15
<PAGE>   17
 
                                USE OF PROCEEDS
 
     The net proceeds to be received by the Company from the sale of the
2,000,000 shares of Common Stock offered by the Company hereby at an assumed
initial public offering price of $16.00 per share, after deducting the
underwriting discount and estimated offering expense, are estimated to be
approximately $28,610,000 (approximately $33,074,000 if the Underwriters'
over-allotment option is exercised in full).
 
     The Company intends to use (i) approximately $2.9 million of the net
proceeds to repay three term loans with final maturities ranging from November
1998 to February 2001 and bearing interest at rates ranging from the lender's
prime rate (which was 8.5% as of March 31, 1998) to the lender's prime rate plus
1%, and (ii) approximately $7.7 million for various capital expenditures,
including purchases of manufacturing and office equipment. The term loans were
used to finance equipment purchases. The Company intends to use the remainder of
the net proceeds for working capital and other general corporate purposes. While
the Company has not identified any specific amounts required, it may use
portions of the balance of the net proceeds for some or all of the following:
(i) improving and equipping the Company's planned new office, manufacturing and
research facilities, and relocating the Company's operations to such facilities;
(ii) establishing a new distribution center; (iii) expanding international
operations; and (iv) developing new products. In addition, the Company may use
an unspecified portion of the net proceeds, when and if the opportunity arises,
to acquire businesses, products or technologies that it believes will help
fulfill the Company's strategic goals. However, the Company currently has no
understandings, commitments or agreements with respect to any such acquisitions.
Pending such uses, the Company intends to invest the net proceeds in
investment-grade, interest-bearing securities. The Company will not receive any
proceeds from the sale of Common Stock by the Selling Shareholders, other than
the proceeds from the exercise of stock options or warrants by certain Selling
Shareholders at the closing of this offering. See "Principal and Selling
Shareholders."
 
                                DIVIDEND POLICY
 
     The Company has never declared or paid any cash dividends on shares of the
Common Stock. The Company currently intends to retain its earnings for future
growth and, therefore, does not anticipate paying any cash dividends in the
foreseeable future. Certain of the Company's financing agreements contain
limitations on the payment of dividends.
 
                                       16
<PAGE>   18
 
                                 CAPITALIZATION
 
     The following table sets forth the Company's capitalization as of March 31,
1998 (i) on an actual basis and (ii) as adjusted to give effect to the sale by
the Company of the 2,000,000 shares of Common Stock offered hereby at an assumed
initial public offering price of $16.00 per share, and the application of a
portion of the estimated net proceeds therefrom to repay certain indebtedness.
See "Use of Proceeds." This table should be read in conjunction with the
Consolidated Financial Statements of the Company and the Notes thereto included
elsewhere in this Prospectus.
 
<TABLE>
<CAPTION>
                                                                  MARCH 31, 1998
                                                              ----------------------
                                                              ACTUAL     AS ADJUSTED
                                                              -------    -----------
                                                                  (IN THOUSANDS)
<S>                                                           <C>        <C>
Long-term debt and capital lease obligations, less current
  installments(1)...........................................  $ 1,583      $    52
Shareholders' equity:
     Preferred stock, $0.01 par value per share: 25,000,000
      shares authorized; no shares issued and outstanding...       --           --
     Common stock, $0.01 par value per share: 100,000,000
      shares authorized; 16,674,440 shares issued and
      outstanding, actual; 18,674,440 shares issued and
      outstanding, as adjusted(2)...........................      167          187
     Additional paid-in capital.............................    9,650       38,240
     Unearned stock compensation............................      (43)         (43)
     Retained earnings......................................   21,474       21,474
                                                              -------      -------
          Total shareholders' equity........................   31,248       59,858
                                                              -------      -------
            Total capitalization............................  $32,831      $59,910
                                                              =======      =======
</TABLE>
 
------------------------------
(1) See Notes 4 and 10 of Notes to Consolidated Financial Statements.
 
(2) Excludes, as of March 31, 1998, 4,880,000 shares of Common Stock reserved
    for issuance pursuant to the Company's benefit plans, of which options to
    purchase 2,482,916 shares were outstanding at a weighted average exercise
    price of $1.49 per share. Also excludes 239,812 shares of Common Stock
    issuable upon exercise of warrants outstanding as of March 31, 1998 at a
    weighted average exercise price of $2.71 per share. See
    "Management -- Benefit Plans" and "Description of Capital
    Stock -- Warrants."
 
                                       17
<PAGE>   19
 
                                    DILUTION
 
     As of March 31, 1998, the Company had a net tangible book value of
approximately $31.2 million, or $1.87 per share of Common Stock. Net tangible
book value per share represents the amount of total tangible assets less total
liabilities divided by the number of shares of Common Stock outstanding. Without
taking into account any other changes in net tangible book value after March 31,
1998, other than to give effect to the receipt by the Company of the net
proceeds from the sale of 2,000,000 shares of Common Stock offered by the
Company hereby at an assumed initial public offering price of $16.00 per share,
the pro forma net tangible book value of the Company as of March 31, 1998 would
have been approximately $59.8 million, or $3.20 per share. This represents an
immediate increase in net tangible book value of $1.33 per share to existing
shareholders and an immediate dilution in net tangible book value of $12.80 per
share to new investors purchasing shares of Common Stock in this offering. The
following table illustrates this per share dilution:
 
<TABLE>
<S>                                                           <C>      <C>
Assumed initial public offering price per share.............             $16.00
     Net tangible book value per share as of March 31,
       1998.................................................  $1.87
     Increase in net tangible book value per share
       attributable to new investors in this offering.......   1.33
                                                              -----
Pro forma net tangible book value per share after this
  offering..................................................               3.20
                                                                         ------
Dilution per share to new investors.........................             $12.80
                                                                         ======
</TABLE>
 
     The following table summarizes, on a pro forma basis as of March 31, 1998,
the differences between existing shareholders and new investors with respect to
the number of shares of Common Stock purchased from the Company, the total
consideration paid and the average price per share paid:
 
<TABLE>
<CAPTION>
                                 SHARES
                             PURCHASED(1)(2)        TOTAL CONSIDERATION       AVERAGE
                          ---------------------    ----------------------      PRICE
                            NUMBER      PERCENT      AMOUNT       PERCENT    PER SHARE
                          ----------    -------    -----------    -------    ---------
<S>                       <C>           <C>        <C>            <C>        <C>
Existing shareholders...  16,674,440      89.3%    $ 8,765,299      21.5%     $ 0.53
New investors...........   2,000,000      10.7      32,000,000      78.5       16.00
                          ----------     -----     -----------     -----
          Total.........  18,674,440     100.0%    $40,765,299     100.0%
                          ==========     =====     ===========     =====
</TABLE>
 
------------------------------
(1) Excludes, as of March 31, 1998, 4,880,000 shares of Common Stock reserved
    for issuance pursuant to the Company's benefit plans, of which options to
    purchase 2,482,916 shares were outstanding at a weighted average exercise
    price of $1.49 per share. Also excludes 239,812 shares of Common Stock
    issuable upon exercise of warrants outstanding as of March 31, 1998 at a
    weighted average exercise price of $2.71 per share. See
    "Management -- Benefit Plans" and "Description of Capital
    Stock -- Warrants."
 
(2) Sales by the Selling Shareholders in this offering will reduce the number of
    shares held by existing shareholders to 14,274,440 shares, or approximately
    76.4% (13,914,440 shares or approximately 73.3% if the Underwriters'
    over-allotment option is exercised in full) of the total number of shares of
    Common Stock outstanding after this offering and will increase the number of
    shares held by new investors to 4,400,000 or approximately 23.6% (5,060,000
    shares or approximately 26.7% if the Underwriter's over-allotment option is
    exercised in full) of the total number of shares of Common Stock outstanding
    after this offering. See "Principal and Selling Shareholders."
 
                                       18
<PAGE>   20
 
                      SELECTED CONSOLIDATED FINANCIAL DATA
 
     The following selected consolidated financial data should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations," the Company's Consolidated Financial Statements and
Notes thereto and other financial information included elsewhere in this
Prospectus. The selected consolidated financial data set forth below for the
five years ended December 31, 1997 have been derived from the consolidated
financial statements of the Company which have been audited by Ernst & Young
LLP, independent auditors. The selected consolidated financial data set forth
below as of and for the three-month periods ended March 31, 1997 and 1998 are
derived from the unaudited consolidated financial statements of the Company
which, in the Company's opinion, include all adjustments, consisting of normal
recurring accruals, necessary for a fair presentation of the financial position
and results of operations of the Company for those periods. Operating results
for the three-month period ended March 31, 1998 are not necessarily indicative
of the results that may be expected for any other interim period or for the
entire year ending December 31, 1998.
 
<TABLE>
<CAPTION>
                                                                                                       THREE MONTHS
                                                                                                           ENDED
                                                              YEAR ENDED DECEMBER 31,                    MARCH 31,
                                                  ------------------------------------------------   -----------------
                                                   1993      1994      1995      1996       1997      1997      1998
                                                  -------   -------   -------   -------   --------   -------   -------
                                                             (IN THOUSANDS, EXCEPT PER SHARE DATA)      (UNAUDITED)
<S>                                               <C>       <C>       <C>       <C>       <C>        <C>       <C>
CONSOLIDATED STATEMENT OF INCOME DATA:
    Net sales...................................  $ 3,755   $16,558   $48,701   $72,695   $102,968   $19,009   $30,609
    Cost of sales...............................    2,268     7,250    16,779    25,440     37,049     6,770    10,770
                                                  -------   -------   -------   -------   --------   -------   -------
    Gross profit................................    1,487     9,308    31,922    47,255     65,919    12,239    19,839
                                                  -------   -------   -------   -------   --------   -------   -------
    Operating expenses:
         Marketing and sales....................    1,281     4,969    18,461    25,208     33,091     6,890    10,107
         General and administrative.............    1,003     2,744     6,745     7,891     10,679     2,301     4,422
         Research and development...............      364       419     1,307     2,295      4,672       930     1,389
         Nonrecurring expenses(1)...............       --        --        --     2,959       (312)       --        --
                                                  -------   -------   -------   -------   --------   -------   -------
             Total operating expenses...........    2,648     8,132    26,513    38,353     48,130    10,121    15,918
                                                  -------   -------   -------   -------   --------   -------   -------
    Income (loss) from operations...............   (1,161)    1,176     5,409     8,902     17,789     2,118     3,921
    Interest income (expense)...................       17        22         2       103        (91)      (26)      116
    Other nonoperating items(2).................       --        --      (461)      462         --        --        --
                                                  -------   -------   -------   -------   --------   -------   -------
    Income (loss) before income taxes...........   (1,144)    1,198     4,950     9,467     17,698     2,092     4,037
    Provision for income taxes..................       --       150     1,922     3,599      6,350       778     1,454
                                                  -------   -------   -------   -------   --------   -------   -------
    Net income (loss)...........................  $(1,144)  $ 1,048   $ 3,028   $ 5,868   $ 11,348   $ 1,314   $ 2,583
                                                  =======   =======   =======   =======   ========   =======   =======
    Diluted net income (loss) per share(3)......  $ (0.10)  $  0.07   $  0.19   $  0.35   $   0.64   $  0.08   $  0.14
    Shares used in computation of diluted net
      income (loss) per share(3)................   11,120    14,227    15,765    16,830     17,749    17,330    18,060
</TABLE>
 
<TABLE>
<CAPTION>
                                                                                                     AS OF
                                                             AS OF DECEMBER 31,                    MARCH 31,
                                                ---------------------------------------------   ----------------
                                                 1993     1994     1995      1996      1997      1997     1998
                                                ------   ------   -------   -------   -------   ------   -------
                                                                            (IN THOUSANDS)        (UNAUDITED)
<S>                                             <C>      <C>      <C>       <C>       <C>       <C>      <C>
CONSOLIDATED BALANCE SHEET DATA:
    Cash and cash equivalents.................  $  802   $1,509   $ 1,760   $ 2,774   $10,667   $  226   $15,073
    Working capital...........................   1,079    3,751     8,084    13,395    24,009   14,648    26,431
    Total assets..............................   2,041    7,051    16,723    31,385    46,575   28,921    50,760
    Long term debt and capital lease
      obligations, net of current
      installments............................       7       98       281       830     1,210    1,198     1,583
    Shareholders' equity......................   1,339    4,473    10,190    16,617    28,610   17,979    31,248
</TABLE>
 
------------------------------
(1) Represents costs directly related to a voluntary precautionary recall of the
    SONICARE charger that commenced in November 1996. As a result of the recall,
    the Company incurred significant direct costs, including advertising, public
    relations, legal and professional fees, the cost of the units recalled
    (including labor and freight involved in the recall process), and other
 
                                       19
<PAGE>   21
 
    costs. The direct and incremental recall costs of $2,958,618 were recorded
    in 1996. These costs included the accrual of approximately $978,000 of
    estimated remaining direct costs expected to be incurred in 1997. In 1997,
    the Company incurred $666,419 of direct costs associated with the recall.
    The remaining balance of the accrual of $311,581 was reversed in 1997. See
    Note 9 of Notes to Consolidated Financial Statements.
 
(2) Reflects the gain on settlement, less related legal and other costs, of
    litigation between the Company and Teledyne Industries, Inc. See Note 11 of
    Notes to Consolidated Financial Statements.
 
(3) For an explanation of diluted net income (loss) per share and the number of
    shares used to compute diluted net income (loss) per share, see Note 1 of
    Notes to Consolidated Financial Statements.
 
                                       21
<PAGE>   22
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
     The following discussion and analysis should be read in conjunction with
"Selected Consolidated Financial Data" and the Company's Consolidated Financial
Statements and Notes thereto included elsewhere in this Prospectus. In addition
to historical information, the following "Management's Discussion and Analysis
of Financial Condition and Results of Operations" contains certain
forward-looking statements that involve known and unknown risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The Company's actual results and the timing of
certain events could differ materially from those anticipated in such
forward-looking statements. Factors that could cause or contribute to such
differences include, but are not limited to, those discussed below and in the
section entitled "Risk Factors," as well as those discussed elsewhere in this
Prospectus.
 
OVERVIEW
 
     Optiva develops, manufactures and markets premium consumer oral care
products offered under the SONICARE brand. The Company was founded in 1988 to
develop consumer products based on sonic technology and began shipping its
SONICARE power toothbrush product in the fourth quarter of 1992. All of the
Company's revenue to date has been attributable to the sale of the SONICARE
power toothbrush and accessories. The Company's net sales grew from $48.7
million in 1995 to $103.0 million in 1997. See "Risk Factors -- Dependence on
Limited Product Line."
 
     The Company initially sold its products primarily through dental
professionals. Building on the brand awareness created through this channel, the
Company has conducted a phased expansion into a variety of retail channels,
including specialty retailers, department stores, chain drug stores, warehouse
clubs and mass merchandisers. The Company's top four retail customers together
accounted for approximately 39% and 31% of net sales in 1997 and 1996,
respectively, with a single customer, Costco, accounting for approximately 25%
and 16% of 1997 and 1996 net sales, respectively. No customer accounted for more
than 10% of net sales in 1995. See "Risk Factors -- Dependence on Retail
Channels; Customer Concentration." The Company generally recognizes revenue from
product sales on shipment to customers, with a provision made for products
returned based on historical trends.
 
     International sales accounted for approximately 6% of the Company's net
sales in 1997. A key element of the Company's strategy is to expand
international sales, although there can be no assurance that this strategy will
be successful. To the extent the Company continues to rely on distributors to
sell its products outside of the United States, an increase in the percentage of
net sales generated outside the United States could adversely affect the
Company's gross margins. See "Risk Factors -- Risks Associated With
International Sales and Operations."
 
     The Company's business is seasonal in nature, with net sales generally
highest in the fourth quarter and generally lower in the first quarter than in
the prior quarter. The Company believes that the historical increase in sales of
its products in the fourth quarter has been primarily due to higher customer
order volume in anticipation of holiday spending. In addition, marketing and
sales expenses have been historically higher in the fourth quarter. As a result,
the Company's quarterly results have fluctuated significantly, with net sales
and net income in the fourth quarter historically accounting for a
disproportionate percentage of annual net sales and net income. Any decreases in
net sales or net income in the fourth quarter due to competitive, operating,
economic and other business conditions are therefore likely to have a
disproportionate effect on the Company's annual operating results as compared to
other quarters. See "-- Selected Quarterly Results of Operations" and "Risk
Factors -- Fluctuating Quarterly Operating Results; Seasonality."
 
     The Company manufactures the SONICARE toothbrush at its facilities in
Bellevue, Washington. The Company intends to relocate its office, research and
manufacturing facilities to new facilities under construction in Snoqualmie,
Washington. The Company is also planning to move its distribution operations to
a separate facility in conjunction with this move. The Company has already
incurred, and expects to continue to incur, significant expenditures in
connection with this relocation, including
 
                                       21
<PAGE>   23
 
costs associated with the construction of and improvements to the facilities,
direct moving costs, costs of new equipment, lease termination costs, costs of
restoring the Company's existing facilities and other costs. In addition, the
move to new facilities may result in substantial unplanned expenses, such as
moving and facility improvement cost overruns, and may materially adversely
affect net sales during the period in which the move takes place due to possible
disruptions to production and distractions of senior management and other
employees. See "Risk Factors -- Risks Associated With Relocation; Risk of
Interruption of Business" and "Business -- Properties."
 
     In November 1996, Optiva announced a precautionary recall (the "Recall") of
all SONICARE chargers manufactured between September 3 and October 30, 1996. The
Company voluntarily issued the recall notice after it learned that a charger was
shipped without electrical insulation. The Recall was conducted in accordance
with FDA guidelines, with the Company delivering quality-assured chargers as
replacements for chargers submitted during the Recall. The Company recorded
approximately $3.0 million in direct costs of the Recall in 1996 and recorded a
credit of approximately $0.3 million in 1997 that reflected the partial reversal
of a provision made in 1996. In addition, the Recall had a material adverse
effect on the Company's sales, primarily in the fourth quarter of 1996, as the
Company suspended production and certain marketing campaigns. The Company
launched a special advertising and marketing campaign in the first quarter of
1997 to increase sales following the Recall. See "Risk Factors -- Risks of
Product Defects and Product Recalls" and Note 9 of Notes to Consolidated
Financial Statements.
 
RESULTS OF OPERATIONS
 
     The following table sets forth, for the periods indicated, the percentage
relationship of certain items from the Company's consolidated statements of
income to net sales. Any trends reflected by the following table may not be
indicative of future results.
 
<TABLE>
<CAPTION>
                                                        PERCENTAGE OF NET SALES
                                          ----------------------------------------------------
                                                                               THREE MONTHS
                                                   YEAR ENDED                      ENDED
                                                  DECEMBER 31,                   MARCH 31,
                                          -----------------------------      -----------------
                                          1995        1996        1997       1997        1998
                                          -----       ----        ----       ----        ----
<S>                                       <C>         <C>         <C>        <C>         <C>
Net sales...............................  100.0%      100.0%      100.0%     100.0%      100.0%
Cost of sales...........................   34.5        35.0        36.0       35.6        35.2
                                          -----       -----       -----      -----       -----
Gross profit............................   65.5        65.0        64.0       64.4        64.8
                                          -----       -----       -----      -----       -----
Operating expenses:
  Marketing and sales...................   37.9        34.7        32.1       36.2        33.0
  General and administrative............   13.9        10.9        10.4       12.1        14.5
  Research and development..............    2.7         3.2         4.5        4.9         4.5
  Nonrecurring expenses.................    0.0         4.0        (0.3)        --          --
                                          -----       -----       -----      -----       -----
          Total operating expenses......   54.5        52.8        46.7       53.2        52.0
                                          -----       -----       -----      -----       -----
Income from operations..................   11.1        12.2        17.3       11.2        12.8
Interest income (expense)...............    0.0         0.1        (0.1)      (0.2)        0.4
                                          -----       -----       -----      -----       -----
Other nonoperating items................   (0.9)        0.7         0.0        0.0         0.0
Income before income taxes..............   10.1        13.0        17.2       11.0        13.2
Provision for income taxes..............    3.9         4.9         6.2        4.1         4.8
                                          -----       -----       -----      -----       -----
Net income..............................    6.2%        8.1%       11.0%       6.9%        8.4%
                                          =====       =====       =====      =====       =====
</TABLE>
 
                                       22
<PAGE>   24
 
COMPARISON OF THREE MONTHS ENDED MARCH 31, 1998 AND 1997
 
     Net sales. Net sales increased 61% to $30.6 million in the three months
ended March 31, 1998 from $19.0 million in the three months ended March 31,
1997. The increase in net sales primarily reflects increased sales through
retail distribution channels. The Company believes that the significant
publicity that it received in connection with a television talkshow in the
fourth quarter of 1997 may have contributed to higher sales in the first quarter
of 1998. Sales through other distribution channels also increased but at a
slower rate than retail sales. Retail sales accounted for a majority of net
sales in 1997 and the three months ended March 31, 1998.
 
     Gross profit. Gross profit consists of net sales less cost of sales, which
is comprised primarily of material, production overhead and labor costs. Gross
profit increased 62% to $19.8 million in the three months ended March 31, 1998
from $12.2 million in the three months ended March 31, 1997. As a percentage of
net sales, gross profit increased slightly to 64.8% in the three months ended
March 31, 1998 from 64.4% in the three months ended March 31, 1997. The slight
increase in gross margin reflects increased economies of scale due to higher
production volume.
 
     Marketing and sales expenses. Marketing and sales expenses consist
primarily of advertising and promotional expenses, salaries and incentive
compensation. Marketing and sales expenses increased 47% to $10.1 million in the
three months ended March 31, 1998 from $6.9 million in the three months ended
March 31, 1997. The increase in marketing and sales expenses was primarily due
to increased marketing costs. Marketing expenses increased primarily as a result
of increased advertising expenses and the cost of promotional activities
directed at dental professionals. The increase also reflects an increase in
commissions and salaries paid, resulting from higher sales volumes and the
addition of more sales representatives. As a percentage of net sales, however,
marketing and sales expenses decreased to 33.0% in the three months ended March
31, 1998 from 36.2% in the three months ended March 31, 1997, largely reflecting
the added expense in the 1997 period of a special advertising campaign following
the Recall. The Company expects marketing and sales expenses to increase in
absolute terms as a result of a number of factors, including expansion to new
markets and potential product launches.
 
     General and administrative expenses. General and administrative expenses
consist primarily of salaries and incentive compensation, infrastructure costs
and professional fees. General and administrative expenses increased 92% to $4.4
million in the three months ended March 31, 1998 from $2.3 million in the three
months ended March 31, 1997, primarily resulting from higher payroll costs
(reflecting an increase in headcount plus accrued bonuses), an increase in the
allowance for doubtful accounts and fees and expenses related to the Company's
expected move to new facilities in 1999. As a percentage of net sales, general
and administrative expenses increased to 14.5% in the three months ended March
31, 1998 from 12.1% in the three months ended March 31, 1997. The Company
expects its general and administrative expenses to increase in absolute terms as
the Company expands its operations and incurs the expenses associated with being
a public company.
 
     Research and development expenses. Research and development expenses
include the cost of product development, as well as similar costs associated
with the Company's internal clinical and laboratory research efforts and fees
paid to universities and research centers conducting clinical and laboratory
studies. Research and development expenses increased 49% to $1.4 million in the
three months ended March 31, 1998 from $0.9 million in the three months ended
March 31, 1997 due to an increase in overall research and development
activities. As a percentage of net sales, however, research and development
expenses decreased to 4.5% in the three months ended March 31, 1998 from 4.9% in
the three months ended March 31, 1997. The Company expects to increase its
research and development expenditures as it continues to expand its research and
development activities.
 
     Provision for income taxes. Provision for income taxes increased 87% to
$1.5 million in the three months ended March 31, 1998 from $0.8 million in the
three months ended March 31, 1997, reflecting an increase in taxable income. The
Company's effective income tax rate decreased to 36.0% in the three months ended
March 31, 1998 from 37.2% in the three months ended March 31, 1997.
 
                                       24
<PAGE>   25
 
COMPARISON OF YEARS ENDED DECEMBER 31, 1997 AND DECEMBER 31, 1996
 
     Net sales. Net sales increased 42% to $103.0 million in the year ended
December 31, 1997 from $72.7 million in the year ended December 31, 1996. Sales
increased significantly through both of the Company's main distribution
channels, retail and dental professional, although retail sales grew at a faster
rate than sales through dental professionals.
 
     Gross profit. Gross profit increased 39% to $66.0 million in 1997 from
$47.3 million in 1996. As a percentage of net sales, gross profit declined to
64.0% in 1997 from 65.0% in 1996. The slight decline in gross margin is due
primarily to higher production overhead costs associated with process
modifications, as well as increased occupancy expenses as the Company expanded
its facilities.
 
     Marketing and sales expenses. Marketing and sales expenses increased 31% to
$33.1 million in 1997 from $25.2 million in 1996, primarily due to an increase
in marketing costs. Marketing costs were higher in 1997 due to an increase in
marketing activities aimed at consumers, such as television and print
advertising campaigns, an increase in marketing activities aimed at dental
professionals and unusually low marketing costs in the fourth quarter of 1996 as
the Company suspended or cancelled certain marketing campaigns during the
Recall. Sales expenses were also higher in 1997 as a portion of these expenses
generally increase as net sales increase, reflecting increased commissions and
sales bonuses. As a percentage of net sales, marketing and sales expenses
declined to 32.1% in 1997 from 34.7% in 1996, partly because of the negative
effect of the Recall on 1996 net sales.
 
     General and administrative expenses. General and administrative expenses
increased 35% to $10.7 million in 1997 from $7.9 million in 1996, reflecting
higher overhead costs associated with the Company's growth. As a percentage of
net sales, general and administrative expenses decreased to 10.4% in 1997 from
10.9% in 1996.
 
     Research and development expenses. Research and development expenses
increased 104% to $4.7 million in 1997 from $2.3 million in 1996. As a
percentage of net sales, research and development expenses increased to 4.5% of
net sales in 1997 from 3.2% of net sales in 1996. These increases were due to
both increased product development expenditures, such as the expansion of
facilities and staff, and increased clinical and laboratory research
expenditures, such as the expansion of research staff and increased expenditures
on clinical and laboratory studies conducted by outside institutions.
 
     Nonrecurring expenses. Nonrecurring expenses reflect the direct costs
associated with the Recall, including advertising and public relations expenses,
legal and professional fees, the cost of the product recalled (including labor
and freight involved in the recall process), and other costs. In 1996 the
Company recorded $3.0 million in expenses directly related to the Recall,
including an accrual of $1.0 million for expenses expected to be incurred in
1997. In 1997 the Company incurred only $0.7 million in costs directly
attributable to the Recall, and therefore recorded a reversal of $0.3 million of
the reserve taken in 1996. See "-- Overview" and Note 9 of Notes to Consolidated
Financial Statements.
 
     Other nonoperating items. In September 1996, the Company and Teledyne
settled litigation between them that related in part to one of the Company's
patents. In 1996, the Company recorded the lump sum paid to it by Teledyne as
part of the settlement, less legal and other related expenses incurred by the
Company during 1996. See Note 11 of Notes to Consolidated Financial Statements
and "Business -- Proprietary Rights and Technology."
 
     Provision for income taxes. Provision for income taxes increased 76% to
$6.4 million in 1997 from $3.6 million in 1996, reflecting the Company's higher
taxable income in 1997. The Company's effective income tax rate decreased to
35.9% in 1997 from 38.0% in 1996 primarily due to a decrease in the blended
state income tax rate.
 
                                       24
<PAGE>   26
 
COMPARISON OF YEARS ENDED DECEMBER 31, 1996 AND DECEMBER 31, 1995
 
     Net sales. Net sales increased 49% to $72.7 million in the year ended
December 31, 1996 from $48.7 million in the year ended December 31, 1995. The
increase resulted from higher sales to both the retail and dental professional
channels, with sales to the retail channel increasing at a greater rate, offset
by lower than expected sales in the fourth quarter of 1996 due to the Recall.
 
     Gross profit. Gross profit increased 48% to $47.3 million in 1996 from
$31.9 million in 1995. As a percentage of net sales, gross profit declined
slightly to 65.0% in 1996 from 65.5% in 1995 as reductions in direct production
costs per unit were largely offset by increased fixed costs and infrastructure
related to the growth of the Company's operations.
 
     Marketing and sales expenses. Marketing and sales expenses increased 37% to
$25.2 million in 1996 from $18.5 million in 1995. The increase primarily
reflects higher expenses associated with marketing to dental professionals, as
well as higher sales commissions and bonuses due to higher sales volume. These
factors were partly offset by lower advertising costs in 1996 because of the
suspension of marketing campaigns during the Recall and the Company's less
frequent airing of the SONICARE infomercial in 1996. As a percentage of net
sales, marketing and sales expenses declined to 34.7% in 1996 from 37.9% in
1995, primarily due to a shift in the Company's marketing mix, including lower
advertising expenses as a percentage of net sales.
 
     General and administrative expenses. General and administrative expenses
increased 17% to $7.9 million in 1996 from $6.7 million in 1995, reflecting
higher overhead associated with the Company's growth, partly offset by lower
provisions made for doubtful accounts. As a percentage of net sales, general and
administrative expenses declined to 10.9% in 1996 from 13.9% in 1995, as net
sales increased at a faster rate than general and administrative expenses.
 
     Research and development expenses. Research and development expenses
increased 76% to $2.3 million in 1996 from $1.3 million in 1995, as management
decided to increase product development and clinical research spending as the
Company's sales growth continued. As a percentage of net sales, research and
development expenses increased to 3.2% of net sales in 1996 from 2.7% in 1995.
 
     Other nonoperating items. In 1996 the Company recorded a net gain of $0.5
million related to the Teledyne litigation, compared with costs of $0.5 million
in 1995.
 
     Provision for income taxes. Provision for income taxes increased 87% to
$3.6 million in 1996 from $1.9 million in 1995. The effective income tax rate
decreased to 38.0% in 1996 from 38.8% in 1995.
 
                                       26
<PAGE>   27
 
SELECTED QUARTERLY RESULTS OF OPERATIONS
 
     The following table sets forth certain unaudited consolidated statements of
income data for the five quarters ended March 31, 1998, as well as such data
expressed as a percentage of the Company's total net sales for the periods
indicated. This data has been derived from unaudited consolidated financial
statements that, in the Company's opinion, include all adjustments, consisting
of normal recurring accruals, necessary for a fair presentation of such
information when read in conjunction with the Company's audited Consolidated
Financial Statements and the Notes thereto appearing elsewhere in this
Prospectus. The operating results for any quarter are not necessarily indicative
of the operating results for any future period.
 
<TABLE>
<CAPTION>
                                                                 QUARTER ENDED
                                            -------------------------------------------------------
                                            MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,
                                              1997        1997       1997        1997       1998
                                            ---------   --------   ---------   --------   ---------
                                                                (IN THOUSANDS)
<S>                                         <C>         <C>        <C>         <C>        <C>
Net sales.................................   $19,009    $19,937     $23,422    $40,600     $30,609
Cost of sales.............................     6,770      7,232       8,692     14,355      10,770
                                             -------    -------     -------    -------     -------
Gross profit..............................    12,239     12,705      14,730     26,245      19,839
                                             -------    -------     -------    -------     -------
Operating expenses:
  Marketing and sales.....................     6,890      6,175       5,673     14,353      10,107
  General and administrative..............     2,301      2,648       2,657      3,073       4,422
  Research and development................       930      1,014       1,208      1,520       1,389
  Nonrecurring expenses (benefit).........        --       (100)         --       (212)         --
                                             -------    -------     -------    -------     -------
       Total operating expenses...........    10,121      9,737       9,538     18,734      15,918
                                             -------    -------     -------    -------     -------
Income from operations....................     2,118      2,968       5,192      7,511       3,921
Interest income (expense).................       (26)       (50)        (19)         4         116
                                             -------    -------     -------    -------     -------
Income before income taxes................     2,092      2,918       5,173      7,515       4,037
Provision for income taxes................       778      1,085       1,830      2,657       1,454
                                             -------    -------     -------    -------     -------
Net income................................   $ 1,314    $ 1,833     $ 3,343    $ 4,858     $ 2,583
                                             =======    =======     =======    =======     =======
</TABLE>
 
<TABLE>
<CAPTION>
                                                            PERCENTAGE OF NET SALES
                                            -------------------------------------------------------
<S>                                         <C>         <C>        <C>         <C>        <C>
Net sales.................................     100.0%     100.0%      100.0%     100.0%      100.0%
Cost of sales.............................      35.6       36.3        37.1       35.4        35.2
                                             -------    -------     -------    -------     -------
Gross profit..............................      64.4       63.7        62.9       64.6        64.8
Operating expenses:
  Marketing and sales.....................      36.2       31.0        24.2       35.3        33.0
  General and administrative..............      12.1       13.3        11.3        7.6        14.5
  Research and development................       4.9        5.0         5.2        3.7         4.5
  Nonrecurring expenses(benefit)..........       0.0       (0.5)        0.0       (0.5)        0.0
                                             -------    -------     -------    -------     -------
       Total operating expenses...........      53.2       48.8        40.7       46.1        52.0
                                             -------    -------     -------    -------     -------
Income from operations....................      11.2       14.9        22.2       18.5        12.8
Interest income (expense).................      (0.2)      (0.3)       (0.1)         0         0.4
                                             -------    -------     -------    -------     -------
Income before income taxes................      11.0       14.6        22.1       18.5        13.2
Provision for income taxes................       4.1        5.4         7.8        6.5         4.8
                                             -------    -------     -------    -------     -------
Net income................................       6.9%       9.2%       14.3%      12.0%        8.4%
                                             =======    =======     =======    =======     =======
</TABLE>
 
     The Company's business is seasonal in nature, with net sales and net income
generally highest in the fourth quarter and generally lower in the first quarter
than in the prior quarter. The Company
 
                                       26
<PAGE>   28
 
believes that the historical increase in sales of its products in the fourth
quarter has been primarily due to higher customer order volume in anticipation
of holiday spending. Marketing and sales expenses also have been historically
higher in the fourth quarter. As a result, the Company's quarterly results have
fluctuated significantly, with net sales and net income in the fourth quarter
accounting for a disproportionate percentage of annual net sales and net income.
Any decreases in net sales or net income in the fourth quarter due to
competitive, operating, economic and other business conditions are therefore
likely to have a disproportionate effect on the Company's annual operating
results as compared to other quarters.
 
     The Company's historical operating results have fluctuated significantly
from quarter to quarter and are likely to fluctuate significantly in the future
based on a number of factors, including (i) pricing changes by the Company or
its competitors; (ii) seasonality; (iii) the loss or addition of a major
customer; (iv) the time and expense involved in maintaining and expanding
existing distribution channels and establishing new distribution channels; (v)
discretionary marketing and promotional expenditures; (vi) timing of new product
introductions by the Company and its competitors; (vii) inventory shortages or
other factors affecting production volumes; (viii) timing of regulatory
approvals; (ix) market acceptance of new or enhanced products; (x) product
defects, recalls and other product quality problems; (xi) changes in the level
of operating expenses, including expenses related to the Company's planned
relocation to new office, research and manufacturing facilities; (xii) the
advent of significant litigation, regulatory action or complaints about the
Company's product claims; and (xiii) changes in the Company's product mix and in
the percentage of products sold through different distribution channels. See
"Risk Factors -- Fluctuating Quarterly Operating Results; Seasonality."
 
     The Company's customers generally do not have long-term commitments to
purchase products. The Company's products are generally shipped as orders are
received, and as a result the Company generally does not have a significant
backlog. Consequently, quarterly sales and operating results depend primarily on
the volume and timing of orders received during the quarter, which are difficult
to predict. Furthermore, a significant portion of the Company's operating
expenses are relatively fixed, and planned expenditures are based on sales
forecasts. If sales levels fall below expectations, operating results are likely
to be materially adversely affected. There can be no assurance that the Company
will be profitable on a quarterly basis in the future.
 
LIQUIDITY AND CAPITAL RESOURCES
 
     Since its inception, the Company has met its operating and cash
requirements largely through funds generated from operations, private sales of
equity securities and, to a lesser extent, through bank borrowings and equipment
lease financings. As of March 31, 1998, the Company had cash and cash
equivalents of $15.1 million, compared to $10.7 million as of December 31, 1997.
 
     Net cash provided by operating activities in 1997 was $10.4 million,
consisting primarily of net income adjusted for noncash charges related to
depreciation and amortization and increases in income taxes payable, offset in
part by increases in inventory, accounts receivables and decreases in accounts
payable. Net cash provided by operating activities in the year ended December
31, 1996 was $2.7 million, consisting primarily of net income adjusted for
noncash charges related to depreciation and amortization and increases in
accounts payable and accrued expenses, offset in part by increases in accounts
receivable and inventory. Net cash used by operating activities in 1995 was $0.4
million, consisting primarily of increases in receivables and inventory, offset
in part by net income and an increase in accrued expenses. Net cash provided by
operating activities in the first quarter of 1998 was $5.1 million, consisting
primarily of net income adjusted for noncash charges related to depreciation and
amortization and increases in accounts payable and accrued expenses, offset in
part by decreases in income taxes payable.
 
     Cash used for the purchase of furniture and equipment increased to $3.4
million in 1997 from $3.1 million in 1996 and from $2.0 million in 1995. In the
first quarter of 1998, cash used for the
 
                                       27
<PAGE>   29
 
purchase of furniture and equipment totaled $1.4 million. The Company expects to
continue to expend significant amounts on the purchase of equipment as necessary
to expand capacity and replace existing equipment. The Company expects to expend
significant amounts on furniture and equipment for its planned new office,
manufacturing and research facility.
 
     The Company is planning to move into its new facility in mid-1999. The
Company recently exercised an option to purchase this facility for approximately
$21 million and intends to finance the purchase price, together with related
expenditures of up to $8 million on facility improvements, through a tax
retention operating lease arrangement with certain financial institutions. There
can be no assurance that the Company will be able to obtain this tax retention
operating lease on terms favorable to the Company, if at all. Under this
arrangement, the Company will not retain title to the property. The Company
intends to move its distribution operations to a separate facility in connection
with the general facilities relocation, but has not budgeted expenditures for
this planned move, and there can be no assurance that the Company will find
facilities in a timely manner and on terms that are acceptable to it. See "Risk
Factors -- Risks Associated With Relocation; Risk of Interruption of Business"
and "Business -- Properties."
 
     In the first quarter of 1998, and in 1997 and 1996, net cash provided by
financing activities of $0.7 million, $1.0 million and $1.4 million,
respectively, consisted primarily of net proceeds from capital leases and bank
term loans related to equipment financing. Net cash provided by financing
activities of $2.7 million in 1995 consisted primarily of $2.6 million in net
proceeds from the issuance of Common Stock. As of March 31, 1998, the aggregate
principal amount outstanding under these term loans was $2.9 million. The
Company intends to repay these loans with a portion of the net proceeds from the
offering of shares of Common Stock hereby. These loans have final maturities
ranging from November 1998 through February 2001 and bear interest at rates
ranging from the lender's prime rate (8.5% as of March 31, 1998) to the lender's
prime rate plus 1%. As of March 31, 1998, the Company had a secured $20.0
million revolving line of credit, all of which was available. The Company
intends to replace this line of credit with a line of credit with the financial
institution with which it is negotiating the tax retention operating lease
arrangement referred to above. See "Use of Proceeds."
 
     The Company believes that its cash on hand, together with cash generated by
operations and the net proceeds of this offering, will be sufficient to meet its
capital requirements through 1999. The amount and timing of the Company's future
capital requirements, however, depend on numerous factors, including, without
limitation, the costs and timing of new product introduction and development and
the success of the Company's marketing, sales and distribution efforts. There
can be no assurance that additional funds, if required, will be available to the
Company on favorable terms, if at all. The Company has budgeted capital
expenditures of approximately $7.5 million for the last three quarters of 1998,
but numerous factors, including an acceleration of its purchases of furniture
and equipment for its planned new facility, may cause actual capital
expenditures for the period to be significantly higher.
 
INFLATION
 
     The Company does not believe that inflation, which has been limited for the
Company's entire operating history, has had a material adverse effect to date on
net sales or results of operations.
 
YEAR 2000 COMPLIANCE
 
     Many currently installed computer systems and software products are coded
to accept only two-digit entries in the date code field. Beginning in the Year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, in less
than two years, computer systems and software used by many companies may need to
be upgraded to comply with such "Year 2000" requirements. In 1997, the Company
purchased, and intends to install in 1998, an ERP (enterprise resource planning)
system that the vendor warrants is Year 2000 compliant. In addition, the Company
is in the process of identifying and assessing its mission-critical systems that
 
                                       28
<PAGE>   30
 
may be affected by the Year 2000, both internally and externally (with respect
to the Company's suppliers and customers). Although the Company plans to address
Year 2000 issues with respect to the Company's mission-critical internal systems
in sufficient time prior to the century rollover, there can be no assurance that
there will not be interruption of operations or other limitations of system
functionality, or that the Company will not incur substantial costs to avoid
such occurrences. However, based on currently available information, management
does not believe that the cost of the Year 2000 initiatives will have a material
adverse effect on the Company's operating results or financial condition.
 
RECENT ACCOUNTING PRONOUNCEMENTS
 
     In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 130, Reporting
Comprehensive Income ("Statement 130"). Statement 130 establishes standards for
reporting and disclosure of comprehensive income and its components (revenues,
expenses, gains and losses) in a full set of general-purpose financial
statements. Statement 130, which is effective for the Company in 1998, requires
reclassification of financial statements for earlier periods to be provided for
comparative purposes. The Company anticipates that implementing the provisions
of Statement 130 will not have a significant impact on its existing disclosures.
The Company has not yet determined the manner in which it will present the
information required by Statement 130.
 
     In June 1997, the FASB issued SFAS No. 131, Disclosure About Segments of an
Enterprise and Related Information ("Statement 131"). Statement 131 establishes
standards for the way that public business enterprises report information about
operating segments. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. Statement 131 is
effective for the Company in 1998. In the initial year of application,
comparative information for earlier years must be restated. The Company has not
yet determined the manner in which it will present the information required by
Statement 131.
 
                                       29
<PAGE>   31
 
                                    BUSINESS
 
OVERVIEW
 
     Optiva develops, manufactures and markets premium consumer oral care
products offered under the SONICARE brand. The SONICARE power toothbrush is
designed to utilize patented sonic technology to decrease plaque bacteria Beyond
the Reach of the Bristles and reduce some symptoms of periodontal disease with
minimal abrasion. Optiva has commissioned 38 clinical and laboratory studies at
major universities and research centers to document the health benefits and
safety of its products. This body of information has formed the foundation for
Optiva's strategy of gaining the support of dental professionals. Building on
the brand awareness created through recommendations by dental professionals, the
Company conducted a phased expansion into a variety of retail channels,
including specialty retailers, department stores, chain drug stores, warehouse
clubs and mass merchandisers. To continue to build brand awareness, Optiva
pursues marketing and brand management programs targeted at consumers, dental
professionals and retailers. The Company's net sales increased from $48.7
million in 1995 to $103.0 million in 1997.
 
INDUSTRY BACKGROUND
 
     Since the middle of the twentieth century, a series of technological
advancements have dramatically improved oral care standards. In the 1950s, the
fluoridation of water and the introduction of commercial fluoride products, both
of which were significant milestones for preventative care, helped to prevent
tooth decay. The late 1950s witnessed the introduction of the air turbine dental
drill, a major improvement in the delivery of dental treatment. More recent
innovations, such as the development of the soft-bristle toothbrush,
improvements in restorative dentistry, filling materials and cements, and
advances in orthodontics, periodontics and implantology, have also improved the
quality of oral care. As standards in oral care have evolved, the focus of
dental professionals has shifted from treating specific problems -- such as
repairing cavities and removing diseased teeth -- to promoting general oral
health, especially through preventative care. In 1996, U.S. retail sales of oral
hygiene products were approximately $3.6 billion, according to Packaged Facts, a
consumer research organization.
 
     As consumers have become accustomed to high standards of professional
dental care, many of them have also become more health conscious in general and
more aware of the importance of preventative care in the home. Millions of
Americans, the "Baby Boom" generation, are entering the age range during which
many will begin to suffer from the effects of deteriorating oral health. The
American Academy of Periodontology estimates that gum disease, ranging from mild
gingivitis to advanced periodontal disease, will afflict a majority of Americans
at some time during their adulthood. The Company believes that these demographic
and market factors have stimulated demand for more effective consumer oral care
products, including products targeted specifically at plaque removal and
prevention of gum diseases. According to Packaged Facts, U.S. retail sales of
electric dental appliances (including power toothbrushes, oral irrigators and
accessories) were approximately $260 million in 1996.
 
OPTIVA'S OPPORTUNITY
 
     Optiva believes that its intense focus on the following defining attributes
has been critical to its growth and is the foundation of its positioning in the
market for consumer oral care products:
 
     Technological Leadership. The Company's products are based on proprietary
technology in the areas of sonic action, fluid dynamics and electro-mechanical
design for the removal of disease-causing plaque bacteria. Utilizing this
technology, Optiva has created a line of products that overcomes the physical
reach limits of manual toothbrushes and conventional power toothbrushes. By
surpassing a critical bristle tip velocity based on frequency and amplitude,
Optiva has created a fluid action that
 
                                       33
<PAGE>   32
 
works Beyond-the-Bristles to remove plaque bacteria. To leverage this
technological expertise and to continue to develop new applications, Optiva has
dedicated significant resources to product research and development, with a
focus on the efficacy and reliability of its products.
 
     Superior Clinical and Laboratory Results. Optiva's product line has been
the subject of 38 separate scientific studies commissioned by the Company at
major universities and research centers, which have provided information
regarding the health and safety benefits of the SONICARE product line. Key
findings include reduction in disease-causing plaque bacteria and some symptoms
of periodontal disease, with minimal gingival and tooth abrasion. The Company
believes that this extensive research has been influential in establishing its
credibility in the dental professional community.
 
     Dental Professional Support and Distribution. From the Company's inception,
its philosophy has been that oral care products are most credible when they
receive the endorsement of individual dental professionals. The Company believes
dental professional recommendations have been an important factor in driving
sales in retail channels. In addition, the Company generates significant sales
directly through dental professionals.
 
     Premium-Brand Positioning. The Company has positioned the SONICARE product
line as a premium brand supported by extensive clinical results and dental
professional recommendations. To enhance its premium-brand image, the Company
pursues focused marketing and brand management strategies targeted at consumers,
dental professionals and retailers.
 
GROWTH STRATEGY
 
     Optiva's goal is to be a leading provider of premium-branded consumer oral
care products recognized for technical superiority, efficacy and value. To
achieve its goal, the Company is pursuing the following strategies:
 
     Leverage Brand to Increase Retail Sales. The Company intends to expand
retail sales by broadening consumer brand awareness through national print and
television advertising campaigns while working with retail customers to increase
promotional activities and the shelf space allocated to the Company's products.
The Company plans to build on its existing significant retail distribution,
which includes major accounts in the warehouse club, chain drug, mass
merchandise, department store and specialty retail channels.
 
     Expand Support Among Dental Professionals. The Company intends to expand
its marketing efforts directed at the dental community in order to gain new
professional recommenders while maintaining existing relationships. The Company
intends to expand its dental professional sales force, while continuing to
advertise in professional journals. The Company also intends to continue to
invest in clinical and laboratory research in order to expand its extensive base
of clinical findings, explore new applications for the Company's sonic
technology and evaluate new products.
 
     Develop Complementary Products. Optiva intends to continue to develop new
and enhanced products for consumer oral care based on or complementary to its
core technology. These new products may include extensions to the SONICARE
product line and consumable products such as toothpaste and mouthwash.
 
     Develop International Opportunities. The Company intends to pursue what it
believes are significant opportunities to increase its international sales. To
take advantage of these opportunities, the Company intends to focus initially on
selected markets that it believes have significant potential over the next few
years and to adapt its marketing and distribution strategies to address
differing local conditions. Recent initiatives include expansion of the
Company's efforts in the United Kingdom and Japan.
 
                                       34
<PAGE>   33
 
PRODUCTS
 
     Core Technology. Optiva focuses on developing innovative products that use
its patented technology to achieve demonstrable advances in consumer oral care.
In particular, the Company's SONICARE product line is designed to provide oral
care benefits through the fluid dynamic effects generated by surpassing a
critical velocity of bristle tip movement. The Company has successfully patented
the use of this critical velocity with specific ranges of frequency and
amplitude which have particular cleansing effects for removing plaque bacteria
Beyond the Reach of the Bristles. The Company believes that this patented sonic
technology sets SONICARE apart from conventional power toothbrushes.
 
     The SONICARE Product Line. Optiva introduced its first SONICARE model in
1992 and launched its most recent model in the third quarter of 1997. The
Company currently markets several SONICARE models, each at a price point that
the Company believes is appropriate for the channel through which the model is
primarily sold. Optiva also sells different styles of replacement brush heads,
which are designed to work with any SONICARE model. Optiva recommends that
SONICARE users replace their brush heads at least every six months.
 
     A complete SONICARE toothbrush set includes a charger, a water-tight power
handle and one or two interchangeable brush heads. The brush head, which is
composed of individual tufts of soft end-rounded nylon bristles, utilizes a
patented, deeply scalloped bristle configuration designed to optimize sonic
frequency brushing. Each replacement brush head contains a new resonator arm,
thereby renewing the only moving part of the system. The SONICARE handle
contains an electromagnetic motor that generates 31,000 brush strokes per
minute. Its two rechargeable NiCad batteries deliver 20 to 30 uses between
recharging, and estimated battery life is about five years. Because many
dentists and hygienists recommend two minutes of brushing, all SONICARE models
have a built-in two-minute electronic timer (smartimer) that shuts the
toothbrush off automatically after two minutes. Some SONICARE models also
feature an electronic interval timer pacer (quadpacer) that emits a signal every
30 seconds reminding the user to shift to the next brushing quadrant in the
mouth.
 
     Product Development. The Company's product development efforts are
concentrated on two main areas: appliance development and consumables
development. The appliance development team is working on several possible
additions and improvements to the SONICARE product line. The consumables
development efforts are focused both on developing products that are
complementary to Optiva's current product line, such as toothpaste and
mouthwash.
 
     After initial testing at Optiva's facilities, all potential new products
are then tested at external research institutions, and, in some cases, undergo
an extensive regulatory review process. Accordingly, the Company cannot predict
when, or if, any such products will come to market. The development of new
products and enhancements is subject to many creative, technical, financial and
logistical challenges, and there can be no assurance that the Company will be
able to design and develop products and enhancements successfully, economically
or in a timely manner and with the features desired by consumers, or that it
will be able to successfully manufacture such new or enhanced products in
significant volumes. If any future new products or enhancements are delayed, or
if these products or enhancements fail to achieve market acceptance when
launched, the Company's business, operating results and financial condition
could be materially adversely affected. See "-- Regulation" and "Risk
Factors -- Product Development Risks," "-- Potential New Markets" and
"-- Governmental Regulation."
 
     The Company's research and development team has experience in the fields of
electrical engineering, mechanical engineering, fluid dynamics and biological
sciences. Optiva utilizes computer aided design systems that interface with the
systems of tooling vendors for faster and more cost-effective design
implementation. New development projects are coordinated closely with the
Clinical Research Department, the Marketing Department and Operations to ensure
the achievement of product performance expectations and to meet launch
schedules.
 
                                       35
<PAGE>   34
 
     The Company spent approximately $1.3 million and $2.3 million on research
and development, including expenditures on clinical and laboratory research, in
1995 and 1996, respectively. Research and development spending more than doubled
in 1997 to approximately $4.7 million. To aid in financing research and
development, the Company has on several occasions applied for, and received,
funds from the National Institutes of Health under the Small Business Innovative
Research Program. The amount of these funds was not material in any year.
 
MARKETING AND SALES
 
     Optiva's core marketing and sales strategy is to drive sales and support
premium pricing through a combination of professional recommendations and
consumer branding. The Company's products are sold primarily through dental
professionals and retailers and, to a lesser extent, through direct sales.
 
     Dental Professionals. Since the launch of its SONICARE product line, the
Company has sought to gain the support of dentists and hygienists, primarily by
commissioning clinical and laboratory research and disseminating the findings.
The Company advertises extensively in professional journals, exhibits its
products at trade shows, and employs direct mail campaigns aimed at dental
professionals.
 
     Retail Channels. Following its initial focus on sales to dental
professionals, Optiva began a phased expansion into retail channels. A majority
of the Company's sales in 1997 were made through retail channels. The Company
distributes its products through a variety of retailers, including warehouse
clubs (such as Costco and Sam's Club), chain drug stores (such as Walgreen and
Eckerd), mass merchandisers (such as WalMart and Target), specialty retailers
(such as The Sharper Image) and department stores (such as Sears). Sales to
Costco alone accounted for 25% of net sales in 1997. The Company uses
manufacturer representative organizations to assist in managing its retail
business. Marketing efforts focused on increasing sales through retail channels
include television advertisements, print advertisements in mainstream,
high-circulation magazines, and retailer cooperative advertising programs. See
"Risk Factors -- Dependence on Retail Channels; Customer Concentration."
 
     Other Sales. The Company also sells its products through television home
shopping, "SONICARE Direct" (a program that facilitates sales directly to dental
patients), and has recently begun to offer products through an online retail
site that can be accessed through a hyperlink on the Company's Web site.
 
INTERNATIONAL OPERATIONS
 
     Optiva believes that there are significant opportunities for the sale of
its products in international markets. To take advantage of these opportunities,
the Company's strategy is to focus initially on selected markets that the
Company believes have significant potential over the next few years and to adapt
its marketing and distribution strategies to address differing local markets.
 
     The Company's international sales efforts are concentrated in a limited
number of countries. Recent initiatives include expansion of the Company's
efforts in the United Kingdom and Japan. The Company recently formed a U.K.
subsidiary and hired a manager of U.K. operations. The Company has employed a
sales and marketing strategy in the United Kingdom that closely follows that
utilized in the United States. In Japan, the Company is expanding its sales
primarily through retail channels. Optiva recently entered into a letter of
intent with Mitsui & Co., Ltd., a Japanese conglomerate with large retail
holdings, regarding the marketing and sale of the SONICARE product line by
Mitsui in Japan through its established retail network.
 
     In 1997, approximately 6% of the Company's net sales were generated outside
the United States, compared to 5% of 1996 net sales. Further expansion of
international sales will require significant management attention and financial
resources, and could result in a significant portion of the Company's revenue
being subject to the risks associated with international sales. See "Risk
Factors -- Risks Associated With International Sales and Operations."
 
                                       36
<PAGE>   35
 
PRODUCT SUPPORT
 
     The Company's service and support staff is focused on reinforcing the
strength of the SONICARE brand by providing a high level of customer service and
support. Representatives who staff the Company's call center are trained to
respond directly to consumers' problems, including billing, replacement parts
and product malfunction. The Company employs an answering service for after-
hours support. The Company has a 30-day money-back guarantee on its SONICARE
models, as well as a 90-day better check-up guarantee. The Company provides a
limited warranty of up to two years on SONICARE models.
 
CLINICAL AND LABORATORY RESEARCH
 
     Beginning with the first SONICARE toothbrush prototypes, Optiva has pursued
a strategy of establishing a strong scientific record of the efficacy and health
benefits of its products and technologies. Optiva has commissioned major
universities and research centers in the United States and Europe to perform
studies of its products in order to gain acceptance and approval among dental
professionals. In addition, the Company has invested in an internal clinical
science capability to support product development efforts and to continually
reexamine potential benefits of or uses for its existing technology and product
line. In some cases, universities and research centers are commissioned to
further investigate preliminary findings of studies that have been conducted
internally by the Company.
 
     The Company selects investigators based on their reputations as leaders in
their fields and by their special skills, depending on the particular needs of
the area under study. The Company believes that the extensive scientific
findings have been critical in establishing the credibility of Optiva's products
among dental professionals. Optiva encourages publication of its commissioned
studies in peer-reviewed professional journals to further enhance the
credibility and dissemination of the findings.
 
     A number of clinical and laboratory studies commissioned by the Company
have focused on examining the possible health benefits of SONICARE use. Findings
include the following:
 
                    REDUCING SYMPTOMS OF PERIODONTAL DISEASE
 
<TABLE>
<CAPTION>
 
--------------------------------------------------------------------------------
<S>                                                             <C>
     FINDINGS                                                   STUDY
--------------------------------------------------------------------------------
  - SONICARE use over several months reduced gingival           (1), (2)
    bleeding in periodontitis patients.
--------------------------------------------------------------------------------
  - SONICARE use over several months reduced periodontal        (1), (2)
    pocket depth (a common indicator of periodontal disease)
    in periodontitis patients.
--------------------------------------------------------------------------------
</TABLE>
 
(1) Northwestern University Dental School, Chicago, IL 1997. A six-month
    clinical comparison of the efficacy of the SONICARE and the Braun Oral-B
    electric toothbrushes on improving periodontal health in adult periodontitis
    patients. J. Clin. Dent., 8:4-9.
 
(2) University of Washington, Seattle, WA 1996. Efficacy of a sonic toothbrush
    on inflammation and probing depth in adult periodontitis. J. Periodontol.
    67:900-9080 (Dr. Michael D. Spektor, a co-author of this publication, is and
    was at the time this paper was published a shareholder of Optiva
    Corporation.)
 
                                       34
<PAGE>   36
 
                              BACTERIAL REDUCTION
 
<TABLE>
<S>                                                                                             <C>
---------------------------------------------------------------------------------------------------------------
     FINDINGS                                                                                   STUDY
---------------------------------------------------------------------------------------------------------------
  - Substantial reductions in a cavity-causing interdental bacteria after using SONICARE for    (1), (2)
    approximately one month.
---------------------------------------------------------------------------------------------------------------
  - SONICARE caused damage to, and removal of, plaque bacteria in laboratory studies.           (3), (4)
---------------------------------------------------------------------------------------------------------------
</TABLE>
 
(1) University of Milan, Italy 1998. Reduction of interdental cariogenic
    microflora by a sonic toothbrush. J. Dent. Res., In Press (abstract).
 
(2) University of Milan, Italy 1998. Effects of two powered toothbrushes on
    cariogenic microflora in vivo. J. Dent. Res., 77:287 (abstract).
 
(3) University of Washington, Seattle, WA 1993. Fimbria damage and removal of
    adherent bacteria after exposure to acoustic energy. Oral Microbiol.
    Immunol., 8:277-282. (Dr. L. David Engel and Dr. Roy Martin, co-authors of
    this publication, were founders and directors of Optiva Corporation prior to
    publication of this paper, and were and are shareholders of Optiva
    Corporation.)
 
(4) University of Iowa, Iowa City, IA 1997. Efficacy of the SONICARE toothbrush
    fluid dynamic action on removal of human supragingival plaque. J. Clin.
    Dent., 8:10-14.
 
                                  LOW ABRASION
 
<TABLE>
<S>                                                                                             <C>
---------------------------------------------------------------------------------------------------------------
     FINDINGS                                                                                   STUDY
---------------------------------------------------------------------------------------------------------------
  - SONICARE was less abrasive than a soft manual toothbrush and certain conventional power     (1), (2)
    toothbrushes on gingival tissues.
---------------------------------------------------------------------------------------------------------------
  - Gingival recession was not aggravated by SONICARE use.                                      (3),(4)
---------------------------------------------------------------------------------------------------------------
</TABLE>
 
(1) University of Zurich, Switzerland 1998. In vitro evaluation of effects of
    electric toothbrushes on gingiva. J. Dent. Res., In Press (abstract). (A
    co-author of this publication was serving on the Scientific Advisory Board
    (see below) at the time this paper was published.)
 
(2) University of Zurich, Switzerland 1998. Relative effects of powered
    toothbrushes on dentin and gingiva. J. Dent. Res., 77:717 (abstract). (A
    co-author of this publication was serving on the Scientific Advisory Board
    (see below) at the time this paper was published.)
 
(3) University of Munster, Germany 1998. Biological and mechanical effects of
    powered toothbrushes on human gingiva. J. Dent. Res., 77:211 (abstract).
 
(4) University of Washington, Seattle, WA 1994. Clinical evaluation of the
    efficacy and safety of a new sonic toothbrush. J. Periodontol. 65:692-697.
    (Dr. Christopher McInnes, a co-author of this publication, is and was at the
    time this paper was published an employee of Optiva Corporation.)
 
     The Company is aware of a number of studies that negatively reflect on the
Company's products. For instance, some studies conclude that competitors'
products are superior to SONICARE in plaque or stain removal. Optiva believes
that the findings of some of these studies are contradicted by findings from its
studies or are not clinically meaningful. However, negative or conflicting
clinical results arising from studies commissioned by competitors, the Company
or others could significantly undermine the credibility and competitive position
of the Company's SONICARE product line and could have a material adverse effect
on the Company's business, operating results and financial condition. See "Risk
Factors -- Risk of Adverse Findings or Reports."
 
     In addition to commissioning external studies, Optiva has an on-site
clinical research facility with three dental operatories which provides the
physical resources necessary to conduct in-house studies. These studies are
predominantly pilot clinical studies in new areas of interest and alpha-testing
of new Optiva products.
 
     Optiva has established a 15-person Scientific Advisory Board to assist in
planning and reviewing clinical research and product development. The Scientific
Advisory Board is comprised of scientists and dental professionals, including
general dentists, periodontists, orthodontists, geriatric dentists and dental
hygienists. Members are located throughout the United States, as well as in the
Pacific Rim and Europe. The Scientific Advisory Board generally meets twice a
year, and members serve one- or two-year terms. Members receive a fee of $1,000
per meeting, plus expenses.
 
                                       35
<PAGE>   37
 
MANUFACTURING AND QUALITY ASSURANCE
 
     The Company's SONICARE products are manufactured at a manufacturing and
test facility at the Company's headquarters in Bellevue, Washington. The Company
believes its in-house final manufacturing and assembly operations enable it to
be flexible and responsive to changing market conditions and customer needs. The
Company's manufacturing operations are currently based on two shifts and a
five-day work week. The Company believes that control over its final
manufacturing and assembly allows it to more quickly introduce new products and
manufacturing technology. The majority of the components used in the Company's
manufacturing process are obtained from outside sources, which in some cases are
sole source suppliers. The Company is therefore dependent on manufacturers and
vendors of certain critical components. See "Risk Factors -- Manufacturing
Capacity Constraints; Dependence on Key Suppliers."
 
     The Company expects to increase capacity when it moves to its new location
in Snoqualmie, Washington (approximately 15 miles east of its current location),
currently scheduled for mid-1999. The development and construction of a new
manufacturing facility is subject to significant risks and uncertainties. The
Company may experience significant delays in moving its operations, installing
its manufacturing equipment, and building and testing its systems and
infrastructure, any of which could have a material adverse effect on its ability
to fill customer orders and on its overall business, operating results and
financial condition. There can be no assurance that the Company will not
encounter these or other unforeseen difficulties, costs or delays in
constructing and equipping the new manufacturing facility, in relocating
operations to the new facility or in commencing production at the new facility.
See "Risk Factors -- Risks Associated With Relocation; Risk of Interruption of
Business."
 
     The Company's quality assurance system involves product and process
sampling, cooperative interaction among the manufacturing and product
development teams, vendor inspections and product failure analysis. The Company
believes it is in substantial compliance with FDA current Good Manufacturing
Practices.
 
COMPETITION
 
     The consumer oral care market is highly competitive and is characterized by
intense price competition. The Company competes directly with manufacturers of
mechanical oral care devices such as power toothbrushes and oral irrigators, as
well as manual toothbrushes. The Company also competes indirectly, and may in
the future compete directly, with sellers of consumables such as toothpaste,
mouthwash and dental floss. See "Risk Factors -- Potential New Markets."
 
     The Company's SONICARE product line competes with products offered by a
number of larger companies, including Gillette, manufacturer of the Braun Oral-B
product line; Teledyne, manufacturer of the SenSonic sonic toothbrush; and
Conair, manufacturer of the Interplak power toothbrush product line. The
Company's principal competitors have substantially greater financial,
manufacturing, marketing and technical resources, greater brand recognition, and
larger manufacturing capacities than the Company. These advantages may afford
the Company's competitors greater ability to manufacture large volumes of their
products and achieve pricing advantages as a result of greater economies of
scale, develop product innovations, expand distribution, compete for shelf
space, reduce product prices and influence consumer buying decisions. In
addition, the Company's competitors may be able to use their greater market
standing and resources to exclude the Company's products from certain retailers'
shelves. Most power toothbrush products currently are offered at prices
substantially lower than the SONICARE products. Price reductions by competitors
could result in downward pressure on the prices of the Company's products. There
can be no assurance that the Company would be able to increase its sales volume
or reduce its per unit costs under such circumstances while maintaining
profitability. Competitive pressures also may lead to an increase in other
sales-related expenses, including advertising and marketing costs. Furthermore,
competitive price pressures may impair the Company's ability to raise prices in
line with any increase in its distribution, promotional and manufacturing costs.
The failure of the Company to respond to competitive pressures, particularly
 
                                       40
<PAGE>   38
 
price competition, in a timely or effective manner would have a material adverse
effect on the Company's business, operating results and financial condition.
 
     The Company and certain of its key competitors have in the past made
allegations or complaints to broadcasters, publishers of periodicals and the
National Advertising Division of the Better Business Bureau regarding unfair or
misleading product claims. While the Company has not to date been materially
adversely affected by any such allegations or complaints concerning its
products, there can be no assurance that in the future such allegations or
complaints would not have a material adverse effect on the Company's business,
operating results or financial condition.
 
     The Company believes that certain of its key competitors have invested, and
will continue to invest, substantially greater funds in developing new products
and technologies. Accordingly, there can be no assurance that the Company's
competitors do not have, or will not develop or introduce, new products and
technologies that could render the Company's products less competitive or
obsolete. Any failure by the Company to compete effectively with regard to new
product offerings, product innovations and technological changes and to offer
products that provide performance that is at least comparable to competing
products would have a material adverse effect on the Company's business,
operating results and financial condition.
 
     Gillette has recently announced, and the Company believes will imminently
launch, a new Braun Oral-B power toothbrush model, the "3-D," that may be
positioned at a price point comparable to that of the Company's SONICARE models.
The Company believes that this new Braun model may offer improvements over
existing Braun models and expects that Gillette will devote substantial
marketing resources to the launch of this new product. As a result, the
introduction of this new product could force the Company to increase its
marketing expenditures, redirect marketing or product development resources or
reduce prices on its products, and therefore could negatively affect the
Company's operating results. In addition, the introduction could result in
decreased sales of the Company's products because of market confusion or a shift
in consumer preferences, or could lead to a significant reduction in the shelf
space allocated to the SONICARE product line.
 
PROPRIETARY RIGHTS AND TECHNOLOGY
 
     The Company relies on a combination of patents, trademarks, copyrights,
trade secret laws and confidentiality procedures to protect its intellectual
property. As of December 31, 1997, the Company had seven issued United States
patents and five pending U.S. patent applications. Issued U.S. patents are
described in the following table:
 
<TABLE>
<CAPTION>
 
------------------------------------------------------------------------------------------------------
<S>           <C>        <C>                                   <C>                                 <C>
   U.S.         DATE
  PATENT       ISSUED               PATENT TITLE                         PATENT CONTENT
------------------------------------------------------------------------------------------------------
 5,189,751     3/2/93       Vibrating Toothbrush Using a          Electromagnetic Driver Design
                                   Magnetic Driver
------------------------------------------------------------------------------------------------------
 5,263,218    11/23/93      Vibrating Toothbrush Using a          Electromagnetic Driver Design
                                   Magnetic Driver
------------------------------------------------------------------------------------------------------
 5,305,492    4/26/94       Brush Element for an Acoustic       Optimized Brush Design for Sonic
                                     Toothbrush                             Brushing
------------------------------------------------------------------------------------------------------
 5,309,590    5/10/94     Dentifrice/Medication Dispensing          Dispenser for Delivering
                                     Toothbrush                    Toothpaste to the Brushhead
------------------------------------------------------------------------------------------------------
 5,378,153     1/3/95        High Performance Acoustical       Critical Ranges for, and Cleansing
                            Cleaning Apparatus for Teeth        Effects of, Achieving Sonic Brush
                                                                           Performance
------------------------------------------------------------------------------------------------------
 5,476,384    12/19/95    Dentifrice/Medication Dispensing          Dispenser for Delivering
                                     Toothbrush                    Toothpaste to the Brushhead
------------------------------------------------------------------------------------------------------
 5,544,382    8/13/96             Pacing Toothbrush                  Timing Control Feature
------------------------------------------------------------------------------------------------------
</TABLE>
 
                                       37
<PAGE>   39
 
     The Company has also filed for corresponding patent protection in certain
international jurisdictions. The Company intends to seek further U.S. and
international patents on these and other elements of its proprietary technology
when and where the Company believes such protection is worthwhile. In some
countries, the Company has decided not to file for patent or trademark
protection of its proprietary rights because it has determined that the costs of
doing so are not warranted.
 
     There can be no assurance that the Company's pending or any future patent
applications will be issued with the scope of the claims sought by the Company,
if at all, or that the Company's patent claims will not be successfully
challenged or circumvented by competitors. Despite the precautions taken by the
Company to protect its intellectual property, it may be possible for
unauthorized third parties to copy certain portions of the Company's products or
reverse engineer or obtain and use information that the Company regards as
proprietary. In addition, the laws and practices of some foreign countries do
not protect proprietary rights to the same extent as do the laws and practices
of the United States. In some countries, the Company has decided not to file for
patent or trademark protection of its proprietary rights because it believes
that the costs outweigh the benefits. There can be no assurance that the
measures taken by the Company to protect its rights, and the Company's means of
protecting its proprietary rights in the United States or abroad, will be
adequate, that competing companies will not independently develop similar
technology or that the time, diversion of management attention and expense of
defending the Company's proprietary rights will not have a material adverse
effect on the Company's business, operating results and financial condition. In
1996, the Company and Teledyne settled litigation between them that in part
concerned a critical sonic technology patent held by the Company. As part of the
settlement the Company granted Teledyne a nonexclusive, royalty-bearing license
to that patent, under which Teledyne is currently manufacturing and selling its
SenSonic toothbrush.
 
     The Company has received a limited number of claims of patent and trademark
infringement and likely will receive additional claims in the future. While none
of these claims have had a material adverse effect on the Company's business or
operations to date, the Company has incurred in the past, and could incur in the
future, substantial costs in defending itself and its customers against
infringement claims. In addition, because patent applications in the United
States are not publicly disclosed until the patent is issued, applications that
relate to the Company's products may have been filed of which the Company is
unaware. Litigation may be necessary to protect proprietary information and
rights of the Company or to determine the enforceability, scope and validity of
the proprietary rights of others. Any litigation or administrative proceedings
will likely result in substantial expense to the Company and significant
diversion of effort by the Company's technical and management personnel. The
prosecution and defense of intellectual property rights, as with any lawsuit,
are inherently uncertain and carry no assurance of success. An adverse
determination in litigation or administrative proceedings could subject the
Company to significant liabilities to third parties, require the Company to seek
licenses from third parties, prevent the Company from selling or making its
products or require the Company to modify its products. Furthermore, there can
be no assurance that any necessary licenses would be available to the Company on
satisfactory terms, if at all.
 
REGULATION
 
     The Company's consumer oral care products and manufacturing facilities are
regulated by the FDA and by various other governmental agencies for the states,
localities and foreign countries in which the Company's products are
manufactured and sold. The FDA requires pre-market approval of new medical
devices through submission of a Section 510(k) Pre-Market Notification, a
Pre-Market Approval Application or an available exemption from the FDA's
pre-market clearance requirements. The oral care products currently marketed by
the Company are exempt from FDA pre-market clearance requirements, although
products under development by the Company may be subject to such requirements or
other regulations. The Company's manufacturing facilities are subject to the
FDA's current Good Manufacturing Practices.
 
     Failure to comply with applicable FDA or other regulatory requirements can
result in, among other things, fines, suspensions or withdrawals of regulatory
clearances or approvals, product recalls,
 
                                       38
<PAGE>   40
 
operating restrictions (including suspension of production and distribution),
product seizures and criminal prosecution. In addition, governmental regulations
may be established that could prevent or delay regulatory clearances or approval
of the Company's products. Furthermore, changes in existing regulations or
adoption of new regulations or policies could prevent the Company from
obtaining, or affect the timing of, future regulatory clearances or approvals.
There can be no assurance that the Company will be able to achieve or maintain
compliance with necessary U.S. or foreign regulatory requirements, that it will
be able to produce its products profitably and in a timely manner while
complying with such regulatory requirements or that it will not be required to
incur significant costs obtaining or maintaining such regulatory approvals.
Delays in receiving necessary U.S. or foreign regulatory clearances or
approvals, failure to receive clearances or approvals, or the loss of previously
received clearances or approvals could have a material adverse effect on the
Company's business, operating results and financial condition. In addition, the
long-term course of regulatory policy cannot be predicted, and there can be no
assurance that new laws or regulations will not be introduced, or existing laws
and regulations will not be applied in a manner, that materially adversely
affect the Company.
 
     The Company's use of rechargeable batteries in its SONICARE models subjects
the Company to a variety of local, state, federal and international governmental
regulations relating to the recyclability and disposal of such batteries. The
failure to comply with current or future regulations could result in the
imposition of substantial fines on the Company, suspension of production,
alteration of its recycling and disposal processes or cessation of operations.
In addition, compliance with such regulations could require the Company to incur
substantial expenses.
 
EMPLOYEES
 
     As of March 31, 1998, the Company had approximately 468 full-time and
part-time employees. The Company believes that its employees are an important
resource and emphasizes personal growth for all employees. In furtherance of
this general policy, the Company offers on-site English language classes and
provides tuition assistance to eligible employees pursuing relevant vocational
education. None of the Company's employees are covered by a collective
bargaining arrangement, and the Company believes that relations with its
employees are good.
 
PROPERTIES
 
     The Company's corporate headquarters are located in Bellevue, Washington.
The Company leases four primary buildings at this site with a total of
approximately 130,000 square feet of office, research, production and warehouse
space. The Company is planning to relocate its current operations and offices to
a new approximately 175,000-square-foot facility under construction in
Snoqualmie, Washington on an 11-acre site. This facility will include corporate
office, manufacturing, research and development and warehouse facilities.
Construction of the facility recently commenced, and occupancy is currently
scheduled for mid-1999. The Company recently exercised an option to purchase the
new facilities and intends to finance this purchase and hold the property
through a tax retention operating lease arrangement with certain financial
institutions. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Liquidity and Capital Resources." Additionally,
Optiva has an option to lease one or more buildings that are to be built on a
10-acre adjacent parcel, or to purchase this additional parcel of land. This
option expires on January 1, 1999, but may be extended for six months. The
Company also intends to lease or purchase in 1998 or 1999 additional facilities
in the Puget Sound region for use as a separate distribution center.
 
LEGAL PROCEEDINGS
 
     The Company is not a party to any material litigation and is not aware of
any pending or threatened litigation that could have a material adverse effect
on its business, operating results or financial condition.
 
                                       39
<PAGE>   41
 
                                   MANAGEMENT
 
EXECUTIVE OFFICERS AND DIRECTORS
 
     The executive officers and directors of the Company and their ages and
positions as of May 11, 1998 are as follows:
 
<TABLE>
<CAPTION>
               NAME                   AGE                           POSITION
               ----                   ---                           --------
<S>                                   <C>    <C>
David Giuliani(1)(2)..............    51     President, Chief Executive Officer and Chairman of the
                                               Board
Ronald B. Ahlegian................    50     Vice President of Sales
Karl F. Forsgaard.................    43     Vice President of Legal Affairs, Corporate Counsel and
                                               Secretary
Judy M. Loucks....................    43     Vice President of Human Resources
Eric P. Meyer.....................    41     Vice President of Marketing
Michael D. Stull..................    37     Vice President of Finance, Treasurer and Chief
                                             Financial Officer
John D. Tubbs.....................    48     Vice President of Operations
Vincent F. Coviello, Jr.(2).......    58     Director
L. David Engel(1).................    54     Director
Louis G. Yaseen(1)................    53     Director
</TABLE>
 
------------------------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
 
     David Giuliani has served as President, Chief Executive Officer and
Chairman of the Board of Optiva since co-founding the Company in March 1988. In
1983, Mr. Giuliani co-founded, and from such date to 1987 he served as the
Executive Vice President of, International Biomedics, Inc., a biotechnology
company whose major assets were acquired by Abbott Laboratories in 1987. From
1987 to 1989, Mr. Giuliani oversaw the operations of the resulting Abbott
Research division, where he served as General Manager. Mr. Giuliani has authored
14 U.S. patents. He received his B.S. summa cum laude in Electrical Engineering
from the University of California, Santa Barbara, and studied graduate-level
electrical engineering and business at Stanford University.
 
     Ronald B. Ahlegian has served as Vice President of Sales of Optiva since
September 1995. From October 1994 to September 1995, Mr. Ahlegian served as the
Company's Director of Sales. From September 1990 to September 1994, Mr. Ahlegian
was National Sales Manager for Thermoscan, Inc., a manufacturer and distributor
of tympanic ear thermometers. Mr. Ahlegian served as National Professional Sales
Manager for Dental Research Corporation, a marketer of Interplak, from April
1987 to September 1990 and as District Manager and National Program Manager of
Kerr Manufacturing/Division of Sybron Corporation from November 1981 to April
1987.
 
     Karl F. Forsgaard has served as Vice President of Legal Affairs and
Corporate Counsel of Optiva since December 1996 and as the Company's Secretary
since May 1997. From September 1995 to November 1996, Mr. Forsgaard served as
the Company's Manager of Regulatory Affairs. Mr. Forsgaard was an attorney at
Bogle & Gates in Seattle, Washington from June 1989 to June 1995 and at
Pillsbury, Madison & Sutro in San Francisco, California from June 1983 to April
1989. Mr. Forsgaard received his B.A. in Biology cum laude from Harvard College
and his J.D. from the University of Washington School of Law.
 
     Judy M. Loucks has served as Vice President of Human Resources of Optiva
since April 1998. From December 1996 to March 1998, Ms. Loucks served as the
Company's Director of Human Resources and from January 1996 to November 1996, as
its Human Resources Manager. From February 1994 to January 1996, Ms. Loucks
served as Director of Human Resources of Nichirei Foods America Inc., where she
established the Human Resources Department. From May 1992 to October 1993, Ms.
Loucks was Director of Human Resources for Security Properties Investment, Inc.,
a real estate investment
                                       40
<PAGE>   42
 
and property management company. Ms. Loucks received her B.A. in Political
Science from the University of Montana and took graduate-level courses in Public
Administration at San Diego State University.
 
     Eric P. Meyer has served as Vice President of Marketing of Optiva since
September 1995. From October 1994 to September 1995, Mr. Meyer served as the
Company's Director of Marketing and from November 1992 to September 1994 as
Director of Marketing and Sales. From 1985 to 1992, Mr. Meyer served in various
senior marketing and sales positions at LifeScan, Inc., a Johnson & Johnson
company. Mr. Meyer received his B.S. in Industrial and Operations Engineering
and his Bachelor of General Studies degree from the University of Michigan and
his M.B.A. from Stanford University.
 
     Michael D. Stull has served as Vice President of Finance and Chief
Financial Officer of Optiva since September 1995 and as Treasurer since May
1998. From December 1993 to September 1995, Mr. Stull served as the Company's
Director of Finance. From January 1992 to June 1993, Mr. Stull was the Chief
Financial Officer of Meteor Communications Corp. ("Meteor"), a manufacturer of
high-technology communications and data acquisition systems, and from June 1989
to January 1992, he was Meteor's Controller. Mr. Stull received his B.A. in
Business Administration from the University of Washington.
 
     John D. Tubbs has served as Vice President of Operations of Optiva since
September 1995. From April 1993 to October 1995, Mr. Tubbs served as the
Company's Director of Operations. From July 1992 to April 1993, Mr. Tubbs was
self-employed as an independent consultant. From June 1990 to June 1992, he was
a Principal with Pittiglio Rabin Todd & McGrath, an operations management
consulting company. From June 1984 to July 1989, Mr. Tubbs was Vice President of
Operations of Integrated Measurement Systems, Inc., a manufacturer of
semiconductor test and development equipment. Mr. Tubbs received his B.S. in
Chemical Engineering from Bucknell University and his M.B.A. from Drexel
University. Mr. Tubbs is a Certified Fellow in Production and Inventory
Management through the American Production and Inventory Control Society.
 
     Vincent F. Coviello, Jr., has served as a Director of the Company since
December 1994. Since April 1993, Mr. Coviello has served as Chairman and
President of Turnberry Capital Corporation and Turnberry Financial Services,
companies engaged in venture capital investment and registered investment
advisory services. From 1980 to 1993, Mr. Coviello was the founder, Chairman and
Chief Executive Officer of the GNA group of companies, which are engaged in the
sale of mutual funds and annuities through banks and savings institutions. Mr.
Coviello currently serves as a director of Griffin Funds, the mutual fund family
of Home Savings of America. Mr. Coviello received his B.S. in Economics from the
Wharton School of Finance at the University of Pennsylvania and his L.L.B. from
the University of Pittsburgh Law School. Mr. Coviello is a Chartered Financial
Analyst.
 
     L. David Engel was a co-founder of Optiva and has served as a Director
since inception. Since July 1997, Dr. Engel has provided consulting services to
the Company and, from March 1988 to April 1998, he was the Company's Treasurer.
From September 1995 to June 1997, Dr. Engel served as Optiva's Vice President of
Clinical Research and Regulatory Affairs and, from July 1994 to September 1995,
as its Director of Clinical Research and Regulatory Affairs. Prior to joining
Optiva, Dr. Engel was a scientist and faculty member at the University of
Washington from 1974 to 1994. Dr. Engel is presently a part-time faculty member
at the University of Southern California and is a member of a scientific
advisory panel for the University of Washington. Dr. Engel received his B.S. in
Biology and his D.D.S. from the University of Minnesota. Dr. Engel received his
M.S. in Microbiology and his Ph.D. in Experimental Pathology from the University
of Washington.
 
     Louis G. Yaseen has served as a Director of and consultant to the Company
since December 1992. From October 1992 to the present, Mr. Yaseen has served as
President of The Winbrook Group, Ltd., a consulting firm. From December 1994 to
June 1995, Mr. Yaseen was President, and, from December 1994 to February 1996,
he was a director, of Circle Fine Art Corporation, a retailer of fine art
products. Mr. Yaseen was President of DoveBar International from its inception
in 1984 to 1986 when it was sold to Mars, Inc., and continued to work in a
management capacity there until 1989. Mr. Yaseen received
                                       41
<PAGE>   43
 
his B.A. in Economics from Roosevelt University and his M.B.A. from the Graduate
School of Business of the University of Chicago.
 
KEY EMPLOYEES
 
     Thomas Hassell, D.D.S., Dr.med.dent., Ph.D., joined Optiva in May 1996 as
Director of Clinical Research. Prior to joining Optiva, Dr. Hassell was
Professor and Chair of Periodontology at the University of Florida, Associate
Professor of Anatomy and Periodontics at the University of Maryland, and
Assistant Professor of Periodontics at the University of North Carolina. He
previously was head of the Experimental Bioelectronics Laboratory at the
University of Zurich, and maintained a private dental practice on Guam. Dr.
Hassell received his B.S. in Biology and his D.D.S. from Indiana University. He
trained in periodontology and received his research doctorate from the
University of Zurich, Switzerland, and his Ph.D. in Experimental Pathology from
the University of Washington.
 
     Nathan M. Iyer, Ph.D., joined Optiva in December 1994 with more than 20
years of product development experience in consumables, formulations, hematology
and medical devices and is currently the Director of Consumables Development of
Optiva. From May 1985 to December 1994, Dr. Iyer worked at Abbott Laboratories
in various capacities, most recently as Manager of Technical Product
Development. Dr. Iyer was also a Research Associate at the University of
Washington and a Staff Scientist for Unilever Research. Dr. Iyer is the author
of seven patents. Dr. Iyer received his Ph.D. in Chemistry from the University
of Victoria, British Columbia.
 
     Kenneth A. Pilcher has served as Director of Appliance Research and
Development of Optiva since November 1997. From December 1995 to June 1997, Mr.
Pilcher was President of Modelwerks Inc., an engineering services and rapid
prototyping firm. From January 1989 to November 1995, Mr. Pilcher was Director
of Product Development at Ioline Corporation, a computer peripherals
manufacturer. From 1980 to 1989, Mr. Pilcher held various research and
development positions at Eldec Corporation, a manufacturer of aerospace
electronics. Mr. Pilcher received his B.S. in Electrical Engineering from the
University of Washington.
 
BOARD OF DIRECTORS
 
     The Company's Bylaws provide that the Board of Directors (the "Board")
shall be composed of not less than two or more than seven directors, with the
specific number to be set by Board resolution. The Company currently has four
directors but intends to recruit and add at least one additional nonemployee
director after this offering.
 
     At the first election of directors following this offering, the Board will
be divided into three classes, with the number of directors comprising each
class to be as equal in number as possible. At the first election of directors
to the Board following this offering, each Class I director will be elected to
serve until the next annual shareholders meeting, each Class II director will be
elected to serve until the second annual shareholders meeting and each Class III
director will be elected to serve until the third annual shareholders meeting.
Thereafter each newly elected director will serve for a three-year term. All
directors will hold office until the annual shareholders meeting at which their
terms expire and their successors are duly elected and qualified. Directors may
be removed by shareholders only for cause. See "Risk Factors -- Antitakeover
Considerations."
 
     The Board of Directors currently has an Audit Committee and a Compensation
Committee. The Audit Committee consists of Messrs. Giuliani and Coviello. The
Audit Committee reviews the functions of the Company's management and
independent auditors pertaining to the Company's financial statements and
performs such other related duties and functions as are deemed appropriate by
the Audit Committee and the Board. The Compensation Committee, which consists of
Messrs. Giuliani and Yaseen and Dr. Engel, determines officer and director
compensation. As soon as practicable after completion of this offering, the
Company intends to recruit and add at least one additional nonemployee director
to the Board and to reconstitute the Compensation and Audit Committees to
consist solely of nonemployee directors.
                                       42
<PAGE>   44
 
DIRECTOR COMPENSATION
 
     Currently, the Company reimburses directors for their expenses incurred in
attending Board and Committee meetings, but does not pay any other cash
compensation to directors serving in such capacity. During 1997, in
consideration of service on the Board, Mr. Coviello received a warrant to
purchase 4,000 shares of Common Stock at an exercise price of $3.00 per share,
Dr. Engel received an option to purchase 40,000 shares of Common Stock at an
exercise price of $3.00 per share and a warrant to purchase 2,000 shares of
Common Stock at an exercise price of $3.00 per share, and Mr. Yaseen received a
warrant to purchase 4,000 shares of Common Stock at an exercise price of $3.00
per share. On March 22, 1998, Messrs. Coviello and Yaseen and Dr. Engel each
received warrants to purchase 16,000 shares of Common Stock at an exercise price
of $8.00 per share. Two directors of the Company, Dr. Engel and Mr. Yaseen,
receive consulting fees from the Company for services outside their duties as
directors. See "Certain Transactions."
 
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
 
     Mr. Giuliani, the Company's President and Chief Executive Officer, serves
as a member of the Compensation Committee of the Board. Dr. Engel and Mr.
Yaseen, directors of the Company, are parties to consulting agreements with the
Company. See "Certain Transactions." Following this offering, the Company
intends to appoint an additional nonemployee director to both the Compensation
and Audit Committees. No interlocking relationship exists between members of the
Company's Board or Compensation Committee and members of the board of directors
or compensation committee of any other company.
 
EXECUTIVE COMPENSATION
 
     The following table sets forth certain information regarding compensation
paid by the Company during the fiscal year ended December 31, 1997 to its Chief
Executive Officer and to the other four most highly compensated executive
officers of the Company whose salary and bonus exceeded $100,000 during 1997
(collectively, the "Named Executive Officers").
 
                           SUMMARY COMPENSATION TABLE
 
<TABLE>
<CAPTION>
                                                                          LONG-TERM
                                                                         COMPENSATION
                                                                            AWARDS
                                                                         ------------
                                                  ANNUAL COMPENSATION     SECURITIES     ALL OTHER
                                                  --------------------    UNDERLYING    COMPENSATION
          NAME AND PRINCIPAL POSITION             SALARY($)   BONUS($)    OPTIONS(#)       ($)(1)
          ---------------------------             ---------   --------   ------------   ------------
<S>                                               <C>         <C>        <C>            <C>
David Giuliani
  President and Chief Executive Officer.........   262,500    156,750      80,000           5,586
Eric P. Meyer
  Vice President of Marketing...................   146,346     85,000      48,000           4,447
John D. Tubbs
  Vice President of Operations..................   128,462     90,000      20,000           4,546
Ronald B. Ahlegian
  Vice President of Sales.......................   136,538     65,000      12,000             518
Michael D. Stull
  Vice President of Finance, Treasurer and Chief
  Financial Officer.............................   100,000     50,000           0           4,299
</TABLE>
 
---------------
(1) Represents (a) $4,233 in matching 401(k) plan contributions by the Company
    for each of Messrs. Giuliani, Meyer, Tubbs and Stull and (b) $1,353, $214,
    $313, $518 and $66 for term life insurance premiums for each of Messrs.
    Giuliani, Meyer, Tubbs, Ahlegian and Stull, respectively.
 
                                       43
<PAGE>   45
 
     The following table sets forth certain information regarding stock options
granted to the Named Executive Officers during the fiscal year ended December
31, 1997.
 
                             OPTION GRANTS IN 1997
 
<TABLE>
<CAPTION>
                                                  INDIVIDUAL GRANTS                      POTENTIAL REALIZABLE
                                ------------------------------------------------------     VALUE AT ASSUMED
                                                 PERCENT OF                                  ANNUAL RATES
                                  NUMBER OF     TOTAL OPTIONS                               OF STOCK PRICE
                                 SECURITIES      GRANTED TO                                  APPRECIATION
                                 UNDERLYING       EMPLOYEES     EXERCISE                  FOR OPTION TERM(4)
                                   OPTIONS        IN FISCAL       PRICE     EXPIRATION   --------------------
             NAME               GRANTED(#)(1)      YEAR(2)      ($/SH)(3)      DATE       5%($)       10%($)
             ----               -------------   -------------   ---------   ----------   --------    --------
<S>                             <C>             <C>             <C>         <C>          <C>         <C>
David Giuliani(5).............     80,000          11.76%         $3.00     4/01/07      150,935     382,498
Eric P. Meyer(5)..............     48,000           7.06%          3.00     4/01/07       90,561     229,499
John D. Tubbs(5)..............     20,000           2.94%          3.00     4/01/07       37,734      95,625
Ronald B. Ahlegian(5).........     12,000           1.76%          3.00     4/01/07       22,640      57,375
Michael D. Stull(5)...........          0              --            --        --             --          --
</TABLE>
 
------------------------------
(1) All options granted to the Named Executive Officers in 1997 were
    nonqualified stock options with 10-year terms from the date of grant.
    Options become exercisable in equal annual installments over a period of
    four years, commencing one year after the date of grant.
(2) Based on a total of 680,100 shares subject to options granted to employees
    and consultants in 1997.
(3) All options to Named Executive Officers were granted at fair market value on
    the grant date. The exercise price of the options is payable in cash or
    check, in shares of Common Stock, by promissory note or through a cashless
    exercise procedure with a broker.
(4) The assumed rates of growth are prescribed by the Commission for
    illustrative purposes only and are not intended to forecast or predict
    future stock prices.
(5) On April 24, 1998, the Named Executive Officers were granted options to
    purchase shares of Common Stock at an exercise price of $12.50 per share, as
    follows: Mr. Giuliani -- 60,000 shares; Mr. Meyer -- 20,000 shares; Mr.
    Tubbs -- 20,000 shares; Mr. Ahlegian -- 20,000 shares; and Mr.
    Stull -- 40,000 shares. Each of the options becomes exercisable in equal
    annual installments over a period of four years, commencing one year after
    the date of grant.
 
     The following table sets forth certain information regarding unexercised
stock options held by the Named Executive Officers as of December 31, 1997. No
options were exercised by the Named Executive Officers during the fiscal year
ended December 31, 1997.
 
                             YEAR-END OPTION VALUES
 
<TABLE>
<CAPTION>
                                    NUMBER OF SECURITIES
                                   UNDERLYING UNEXERCISED           VALUE OF UNEXERCISED
                                      OPTIONS AT FISCAL        IN-THE-MONEY OPTIONS AT FISCAL
                                         YEAR-END(#)                   YEAR-END ($)(1)
                                 ---------------------------   -------------------------------
             NAME                EXERCISABLE   UNEXERCISABLE    EXERCISABLE     UNEXERCISABLE
             ----                -----------   -------------    -----------     -------------
<S>                              <C>           <C>             <C>             <C>
David Giuliani.................    200,000        80,000         3,037,500        1,040,000
Eric P. Meyer..................     52,754        90,262           785,636        1,239,158
John D. Tubbs..................    138,500        51,500         2,138,644          718,532
Ronald B. Ahlegian.............    160,000        52,000         2,390,000          753,500
Michael D. Stull...............     87,500        22,500         1,319,532          328,594
</TABLE>
 
------------------------------
(1) Calculated based on the difference between the exercise price and the
    assumed initial public offering price of $16.00 per share.
 
                                       44
<PAGE>   46
 
BENEFIT PLANS
 
     1998 Stock Incentive Compensation Plan
 
     The purpose of the Company's 1998 Stock Incentive Compensation Plan (the
"1998 Plan") is to enhance the long-term shareholder value of the Company by
offering employees, directors, officers, consultants, agents, advisors and
independent contractors of the Company and its subsidiaries an opportunity to
participate in the Company's potential growth and success, and to encourage them
to remain in the service of the Company and its subsidiaries and acquire and
maintain stock ownership in the Company. The 1998 Plan includes both stock
options and stock awards, including restricted stock. A maximum of 1,600,000
shares of Common Stock will be available for issuance under the 1998 Plan. As of
the closing of this offering, approximately 475 persons will be eligible to
receive stock options or awards under the 1998 Plan.
 
     Stock Option Grants. The Plan Administrator of the 1998 Plan will be the
Board of Directors (the "Plan Administrator") which will have the authority to
select individuals to receive options under the 1998 Plan and to specify the
terms and conditions of each option granted (incentive or nonqualified), the
exercise price (which must be at least equal to the fair market value of the
Common Stock on the date of grant for incentive stock options and at least equal
to 85% of the fair market value of the Common Stock on the date of grant for
nonqualified stock options), the vesting provisions and the option term. For
purposes of the 1998 Plan, fair market value means the average of the high and
low per share sales price as reported by the New York Stock Exchange or any
other applicable trading market on the date of grant. Unless otherwise provided
by the Plan Administrator and to the extent required by the Internal Revenue
Code of 1986, as amended (the "Code"), for incentive stock options, an option
granted under the 1998 Plan will expire 10 years from the date of grant, or if
earlier, three months after the optionee's termination of service with the
Company or its subsidiaries, other than termination for cause, or one year after
the optionee's death or disability.
 
     Stock Awards. The Plan Administrator is authorized under the 1998 Plan to
issue shares of Common Stock to eligible participants on such terms and
conditions and subject to such restrictions, if any, as the Plan Administrator
may determine in its sole discretion. Such restrictions may be based on
continuous service with the Company or its subsidiaries or the achievement of
such performance goals as the Plan Administrator may determine. Holders of
restricted stock are recorded as shareholders of the Company and have, subject
to certain restrictions, all the rights of shareholders with respect to such
shares.
 
     Adjustments. Proportional adjustments to the aggregate number of shares
issuable under the 1998 Plan and to outstanding awards will be made for stock
dividends, stock splits and other capital adjustments.
 
     Corporate Transactions. In the event of certain Corporate Transactions (as
defined in the 1998 Plan), each outstanding option and restricted stock award
under the 1998 Plan will automatically accelerate so that it will become 100%
vested immediately before the Corporate Transaction, except that acceleration
will not occur if such option or restricted stock award is, in connection with
the Corporate Transaction, to be assumed by the successor corporation or parent
thereof. Any option or restricted stock award that is assumed or replaced in the
Corporate Transaction and does not otherwise accelerate at that time shall
accelerate in the event the holder, for Good Reason (as defined in the 1998
Plan), or the successor corporation, without Cause (as defined in the 1998
Plan), terminates the holder's employment or services within one year following
the Corporate Transaction.
 
     1998 Employee Stock Purchase Plan
 
     The Company's 1998 Employee Stock Purchase Plan (the "Purchase Plan"),
which is intended to qualify as an employee stock purchase plan under Section
423 of the Code, authorizes 400,000 shares of Common Stock for issuance upon
exercise of purchase rights granted thereunder, subject to adjustment for stock
dividends, stock splits and similar changes in the Company's capitalization. The
 
                                       50
<PAGE>   47
 
Purchase Plan is designed to encourage stock ownership by employees of the
Company and will be administered by the Board (the "Plan Administrator").
 
     All employees who have been employed by the Company for at least three
months and whose customary employment is for more than 20 hours per week or five
months in any calendar year will be eligible to participate in the Purchase
Plan. Owners of 5% or more of the Common Stock are not permitted to participate
in the Purchase Plan by statute.
 
     Under the Purchase Plan, an eligible employee will be entitled to purchase
shares of Common Stock from the Company through payroll deductions ranging from
1% to 15% of cash compensation, at a price equal to the lesser of 85% of the
fair market value of the Company's Common Stock on the first or the last day of
each six-month offering period under the Purchase Plan, provided that the
purchase price for the first offering period will be equal to the lesser of 100%
of the offering price or 85% of the fair market value of the Common Stock on the
last day of the applicable offering period. Unless the Plan Administrator
determines otherwise, the offering periods will commence on July 1 and January 1
of each year, with the first offering period commencing on the Effective Date.
The Code limits purchases under the Purchase Plan to $25,000 worth of Common
Stock in any one calendar year, valued as of the first day of an offering
period.
 
     Upon a Corporate Transaction (as defined in the Purchase Plan), the
purchase date will be the business day immediately preceding the effective date
of the Corporate Transaction, unless the Plan Administrator provides for the
assumption or substitution of the outstanding purchase rights.
 
     Amended and Restated 1995 California Stock Option Plan
 
     The Company's Amended and Restated 1995 California Stock Option Plan (the
"1995 Plan") provides for the grant of incentive and nonqualified stock options
to employees, officers, directors, agents, consultants, advisors and independent
contractors of the Company. An aggregate of 80,000 shares of Common Stock have
been authorized for issuance under the 1995 Plan. As of March 31, 1998, options
to purchase 46,400 shares of Common Stock were outstanding under the 1995 Plan,
with exercise prices ranging from $1.06 to $2.00 per share. As of March 31,
1998, no options had been exercised under the 1995 Plan. As of the Effective
Date, no additional options will be granted under the 1995 Plan. After such
time, options will be granted under the 1998 Plan, but the 1995 Plan will
continue to govern outstanding options granted under the 1995 Plan.
 
     The 1995 Plan is administered by the Board which has the authority to
select individuals who are to receive options under the 1995 Plan and to specify
the terms and conditions of each option granted (incentive or nonqualified), the
exercise price (which, for incentive stock options, must at least equal the fair
market value of the Common Stock on the date of grant and for nonqualified stock
options, must at least equal 85% of the fair market value of the Common Stock on
the date of grant), the vesting provisions and the option term.
 
     Upon a Corporate Transaction (as defined in the 1995 Plan), the outstanding
options will terminate unless such options are exchanged for those of another
corporation.
 
     Amended and Restated 1990 Stock Option Plan
 
     The Company's Amended and Restated 1990 Stock Option Plan (the "1990 Plan")
provides for the grant of incentive and nonqualified stock options to employees,
officers, directors, agents, consultants, advisors and independent contractors
of the Company. An aggregate of 4,800,000 shares of Common Stock have been
authorized for issuance under the 1990 Plan but, as of the Effective Date, this
number will be reduced to the minimum number of shares required for issuance
pursuant to the exercise of any options that remain outstanding under the 1990
Plan. As of March 31, 1998, options to purchase 2,436,516 shares of Common Stock
were outstanding under the 1990 Plan, with exercise prices ranging from $0.0025
to $8.00 per share and options to purchase 602,920 shares had been exercised. As
of the Effective Date no additional options will be granted under the 1990 Plan.
All future option grants will
 
                                       51
<PAGE>   48
 
be made under the 1998 Plan, but options outstanding under the 1990 Plan will
continue to be governed by the terms thereof.
 
     The 1990 Plan is administered by the Board which has the authority to
select individuals who are to receive options under the 1990 Plan and to specify
the terms and conditions of each option granted (incentive or nonqualified), the
exercise price (which, for incentive stock options, must at least equal the fair
market value of the Common Stock on the date of grant and for nonqualified stock
options, must at least equal 85% of the fair market value of the Common Stock on
the date of grant), the vesting provisions and the option term. In the event of
certain Corporate Transactions (as defined in the 1990 Plan), the vesting of
each outstanding option will accelerate so that it will become 100% vested
immediately prior to the Corporate Transaction. Vesting of options will also
fully accelerate in the event the options are exchanged for those of another
corporation.
 
CHANGE-IN-CONTROL ARRANGEMENTS
 
     The vesting of outstanding stock options and restricted stock awards under
the Company's stock option plans will accelerate upon the occurrence of certain
Corporate Transactions involving the Company, to the extent provided in each of
such plans. See "-- Benefit Plans."
 
                                       52
<PAGE>   49
 
                              CERTAIN TRANSACTIONS
 
     The Company has consulting arrangements with Dr. Engel and Mr. Yaseen
pursuant to which they are compensated for assisting the Company in certain
matters outside their duties as directors. Dr. Engel's agreement, effective as
of September 1, 1997, requires him to advise and provide technical assistance to
the Company. Mr. Yaseen's agreement, formally entered into as of May 1, 1998,
obligates him to assist the Company with marketing, financial and real estate
matters. As compensation for consulting services during 1997, Dr. Engel received
$29,850 and Mr. Yaseen received $133,302 from the Company. For the fiscal
quarter ended March 31, 1998, Dr. Engel and Mr. Yaseen received $17,700 and
$35,998, respectively, for consulting fees.
 
     During 1996 and 1995, Mr. Yaseen received $70,040 and $21,292,
respectively, in consulting fees.
 
                                       53
<PAGE>   50
 
                       PRINCIPAL AND SELLING SHAREHOLDERS
 
     The following table sets forth as of April 30, 1998, certain information
with respect to the beneficial ownership of the Common Stock by (i) each person
known by the Company to beneficially own more than 5% of the Common Stock, (ii)
each director of the Company, (iii) each of the Named Executive Officers, (iv)
each of the Selling Shareholders and (v) all of the Company's directors and
executive officers as a group.
 
<TABLE>
<CAPTION>
                                       BENEFICIAL OWNERSHIP                             BENEFICIAL OWNERSHIP
                                        PRIOR TO OFFERING            NUMBER OF             AFTER OFFERING
                                   ----------------------------        SHARES        ---------------------------
        NAME AND ADDRESS            SHARES     PERCENTAGE(1)(2)    OFFERED HEREBY     SHARES    PERCENTAGE(1)(2)
        ----------------           ---------   ----------------   ----------------   --------   ----------------
<S>                                <C>         <C>                <C>                <C>        <C>
David Giuliani(3)................  2,755,332          16.8%                                                %
  13222 S.E. 30th St.
  Bellevue, WA 98005
L. David Engel(4)................  1,147,000           6.8%
  4451 Huggins St.
  San Diego, CA 92122
Vincent F. Coviello, Jr.(5)......    746,000           4.5%
Louis G. Yaseen(6)...............    249,780           1.5%
Ronald B. Ahlegian(7)............    231,000           1.4%
Eric P. Meyer(8).................    251,508           1.5%
John D. Tubbs(9).................    251,500           1.5%
Michael D. Stull(10).............    124,500             *
All directors and executive
  officers as a group (10
  persons)(11)...................  5,786,620          32.8%
Other Selling Shareholders(12)...
</TABLE>
 
------------------------------
  *  Less than 1%.
 
 (1) Assumes no exercise of the Underwriters' over-allotment option.
 
 (2) Beneficial ownership is determined in accordance with the rules of the
     Commission and generally includes voting or investment power with respect
     to securities. Common Stock subject to options currently exercisable or
     exercisable within 60 days of April 30, 1998, are deemed outstanding for
     purposes of computing the percentage ownership of any other person. Except
     where indicated, and subject to community property laws where applicable,
     the persons in the table above have sole voting and investment power with
     respect to all shares of Common Stock shown as beneficially owned by them.
 
 (3) Includes 220,000 shares issuable upon exercise of stock options that are
     exercisable within 60 days of April 30, 1998, 120,000 shares held by Diane
     Silven, Trustee for Nicole Roven Giuliani under Agreement Dated September
     23, 1996 and 120,000 shares held by Diane Silven, Trustee for Daniel Roven
     Giuliani under Agreement Dated September 23, 1996. Mr. Giuliani disclaims
     beneficial ownership of the shares held by the two trusts established for
     the benefit of his children.
 
 (4) Includes 113,000 shares issuable upon exercise of stock options that are
     exercisable within 60 days of April 30, 1998 and 18,000 shares that are
     issuable upon exercise of immediately exercisable warrants. Also includes
     1,016,000 shares held by the Engel Family Trust for the benefit of Dr.
     Engel's family, of which Dr. Engel is a trustee.
 
 (5) Includes 16,000 shares issuable upon exercise of immediately exercisable
     warrants. Also includes 110,000 shares held by the Coviello Family Ltd.
     Partnership, of which Mr. Coviello is a general partner.
 
 (6) Includes 71,100 shares issuable upon exercise of stock options that are
     exercisable within 60 days of April 30, 1998, 26,000 shares issuable upon
     exercise of immediately exercisable warrants and 152,680 shares held by Mr.
     Yaseen's spouse.
 
                                       49
<PAGE>   51
 
 (7) Includes 163,000 shares issuable upon exercise of stock options that are
     exercisable within 60 days of April 30, 1998.
 
 (8) Includes 75,508 shares issuable upon exercise of stock options that are
     exercisable within 60 days of April 30, 1998.
 
 (9) Includes 151,500 shares issuable upon exercise of stock options that are
     exercisable within 60 days of April 30, 1998.
 
(10) Includes 92,500 shares issuable upon exercise of stock options that are
     exercisable within 60 days of April 30, 1998.
 
(11) See footnotes (3) - (10) above.
 
(12) Such group includes Selling Shareholders who individually beneficially own
     less than 1% of the Common Stock.
 
                                       55
<PAGE>   52
 
                          DESCRIPTION OF CAPITAL STOCK
 
     The following summary description of the Company's capital stock is
qualified in its entirety by reference to the Articles and Bylaws, copies of
which are filed as exhibits to the Registration Statement of which this
Prospectus forms a part. The Company's authorized capital stock consists of
100,000,000 shares of Common Stock, $0.01 par value per share, and 25,000,000
shares of Preferred Stock, $0.01 par value per share.
 
COMMON STOCK
 
     As of March 31, 1998, the Common Stock was held of record by 257 persons
and 16,674,440 shares were outstanding or committed for issuance. After the sale
of the shares of Common Stock offered hereby, there will be 18,674,440 shares of
Common Stock outstanding.
 
     The holders of Common Stock are entitled to one vote per share on all
matters to be voted upon by the shareholders. Subject to preferences that may be
applicable to any Preferred Stock outstanding at the time, holders of Common
Stock are entitled to receive ratably such dividends, if any, as may be declared
from time to time by the Board out of funds legally available therefor. In the
event of a liquidation, dissolution or winding up of the Company, holders of
Common Stock are entitled to share ratably in all assets remaining after payment
of the Company's liabilities and the liquidation preference, if any, of any
outstanding shares of Preferred Stock. Holders of Common Stock have no
preemptive or conversion rights or other subscription rights. There are no
redemption or sinking fund provisions applicable to the Common Stock. All the
outstanding shares of Common Stock are fully paid and nonassessable, and the
shares of Common Stock to be issued upon completion of this offering will be
fully paid and nonassessable. The rights, preferences and privileges of holders
of Common Stock are subject to, and may be adversely affected by, the rights of
holders of shares of any series of Preferred Stock that the Company may
designate and issue in the future.
 
PREFERRED STOCK
 
     The Board of Directors has the authority to issue up to 25,000,000 shares
of Preferred Stock in one or more series and to fix the powers, designations,
preferences and relative, participating, optional or other rights thereof,
including dividend rights, conversion rights, voting rights, redemption terms,
liquidation preferences and the number of shares constituting each such series,
without any further vote or action by the Company's shareholders. No shares of
Preferred Stock have been issued. The issuance of Preferred Stock could have one
or more of the following effects: (i) restrict Common Stock dividends if
Preferred Stock dividends have not been paid, (ii) dilute the voting power and
equity interest of holders of Common Stock to the extent that any series of
Preferred Stock has voting rights or is convertible into Common Stock or (iii)
prevent current holders of Common Stock from participating in the Company's
assets upon liquidation until any liquidation preferences granted to holders of
Preferred Stock are satisfied. In addition, the issuance of Preferred Stock may,
under certain circumstances, have the effect of delaying, deferring or
preventing a change in control of the Company by, for example, granting voting
rights to holders of Preferred Stock that require approval by the separate vote
of the holders of Preferred Stock for any amendment to the Articles or any
reorganization, consolidation or merger (or other similar transaction involving
the Company). As a result, the issuance of such Preferred Stock may discourage
bids for the Company's Common Stock at a premium over the market price therefor
and could have a material adverse effect on the market value of the Common
Stock. The Board does not presently intend to issue any shares of Preferred
Stock. See "Risk Factors -- Antitakeover Considerations."
 
WARRANTS
 
     As of March 31, 1998, the Company had outstanding warrants to purchase
239,812 shares of Common Stock at a weighted average exercise price of $2.71 per
share. No fractional shares of Common Stock will be issued in connection with
the exercise of the warrants. In the event a warrant
 
                                       51
<PAGE>   53
 
holder fails to exercise the warrants prior to their expiration, the warrants
will expire and the holder will have no further rights with respect to such
warrants. A warrant holder will not have any rights, privileges or liabilities
as a shareholder of the Company prior to the exercise of the warrants. The
Company is required to keep available a sufficient number of authorized shares
of Common Stock to permit exercise of the warrants.
 
WASHINGTON ANTITAKEOVER STATUTE
 
     Washington law imposes restrictions on certain transactions between a
corporation and certain significant shareholders. Chapter 23B.19 of the
Washington Business Corporation Act (the "WBCA"), which applies to Washington
corporations that have a class of voting stock registered under the Securities
Exchange Act of 1934, as amended, prohibits a "target corporation," with certain
exceptions, from engaging in certain "significant business transactions" with a
person or group of persons which beneficially owns 10% or more of the voting
securities of the target corporation (an "Acquiring Person") for a period of
five years after such acquisition, unless the transaction or acquisition of
shares is approved by a majority of the members of the target corporation's
board of directors prior to the time of acquisition. Such prohibited
transactions include, among other things, a merger or consolidation with,
disposition of assets to, or issuance or redemption of stock to or from, the
Acquiring Person, termination of 5% or more of the employees of the target
corporation as a result of the Acquiring Person's acquisition of 10% or more of
the shares or allowing the Acquiring Person to receive any disproportionate
benefit as a shareholder. After the five-year period, a "significant business
transaction" may take place as long as it complies with certain "fair price"
provisions of the statute. A corporation may not "opt out" of this statute. This
provision may have the effect of delaying, deferring or preventing a change in
control of the Company.
 
ANTITAKEOVER EFFECT OF CERTAIN PROVISIONS OF THE ARTICLES AND BYLAWS
 
     Election and Removal of Directors. Effective with the first election of
directors following this offering, the Articles provide for the division of the
Company's Board of Directors into three classes, with the number of directors
comprising each class to be as nearly equal in number as possible, each for a
three-year term, with one class being elected each year by the Company's
shareholders. See "Management -- Board of Directors." Directors may be removed
only for cause. Such Board composition may tend to discourage a third party from
making a tender offer or otherwise attempting to obtain control of the Company
and may maintain the incumbency of the Board, as it generally makes it more
difficult for shareholders to replace a majority of directors.
 
     Approval for Certain Business Combinations. The Articles require that
certain business combinations (including a merger, share exchange and the sale,
lease, exchange, mortgage, pledge, transfer or other disposition or encumbrance
of a substantial part of the Company's assets other than in the usual and
regular course of business) be approved by the holders of not less than
two-thirds of the outstanding shares, unless such business combination has been
approved by a majority of Continuing Directors (defined as those individuals who
were members of the Board on July 1, 1998 or were elected thereafter on the
recommendation of a majority of Continuing Directors), in which case the
affirmative vote required shall be a majority of the outstanding shares.
 
     Shareholder Meetings. Under the Articles and Bylaws, the shareholders may
call a special meeting only upon the request of holders of at least 25% of the
outstanding shares. Additionally, the Board, the Chairman of the Board and the
President may call special meetings of shareholders.
 
     Vote Required to Amend or Repeal Certain Provisions of the Articles or
Bylaws. The Articles also provide that changes to certain provisions of the
Articles, including those regarding amendment of certain provisions of the
Bylaws or Articles, the classified Board of Directors, special voting provisions
 
                                       57
<PAGE>   54
 
for business combinations and special meetings of shareholders, must be approved
by the holders of not less than two-thirds of the outstanding shares.
 
     Requirements for Advance Notification of Shareholder Nominations and
Proposals. The Company's Bylaws establish advance notice procedures with respect
to shareholder proposals and the nomination of candidates for election as
directors, other than nominations made by or at the direction of the Board of
Directors or a committee thereof.
 
     These provisions may have the effect of delaying, deterring or preventing a
change in control of the Company. See "Risk Factors -- Antitakeover
Considerations."
 
DIRECTOR AND OFFICER INDEMNIFICATION AND LIABILITY
 
     The Articles include a provision that limits the liability of the Company's
directors to the fullest extent permitted by the WBCA as it currently exists or
as it may be amended in the future. Consequently, subject to the WBCA, no person
shall be liable to the Company or its shareholders for monetary damages
resulting from such person's conduct as a director of the Company. Amendments to
the Articles may not adversely affect any right of a director of the Company
with respect to acts or omissions occurring prior to such amendment. Section
23B.08.320 of the WBCA provides that the Articles may not limit a director's
liability for acts or omissions involving intentional misconduct or knowing
violations of law, unlawful distributions or transactions from which the
director personally receives benefits in money, property or services to which
the director is not legally entitled. In addition, Washington law provides for
broad indemnification by the Company of its officers and directors. The Bylaws
implement this indemnification to the fullest extent permitted by law. Insofar
as the indemnity for liabilities arising under the Securities Act may be
permitted to directors or officers of the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
 
TRANSFER AGENT AND REGISTRAR
 
     The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C.
 
                                       58
<PAGE>   55
 
                        SHARES ELIGIBLE FOR FUTURE SALE
 
     Prior to this offering, there has been no public market for the Company's
securities. No prediction can be made as to the effect, if any, that market
sales of shares of the Common Stock or the availability of shares for sale will
have on the market price of the Common Stock prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock in the public market
after the lapse of the restrictions described below could adversely affect the
prevailing market price and the ability of the Company to raise equity capital
in the future. See "Risk Factors -- Shares Eligible for Future Sale."
 
     Upon completion of this offering, the Company will have 18,674,440 shares
of Common Stock outstanding, assuming no exercise of outstanding options or
warrants after April 30, 1998. Of this amount, the 4,400,000 shares offered
hereby will be available for immediate sale in the public market as of the
Effective Date. In addition, approximately                Restricted Shares will
become eligible for sale in the public market immediately after the Effective
Date pursuant to Rule 144(k) under the Securities Act, approximately
               Restricted Shares will become eligible for sale prior to 90 days
after the Effective Date pursuant to Rule 144(k), approximately
Restricted Shares will become eligible for sale 90 days after the Effective Date
pursuant to Rule 144 and Rule 701, approximately                Restricted
Shares will become eligible for sale in the public market approximately 120 days
after the Effective Date, and approximately                Restricted Shares
will become eligible for sale in the public market approximately 180 days after
the Effective Date, subject, in some cases, to compliance with the volume and
other resale limitations of Rule 144. The remaining approximately
               Restricted Shares held by existing shareholders will become
eligible for sale from time to time in the future under Rule 144.
 
<TABLE>
<CAPTION>
                                      SHARES ELIGIBLE
     DAYS AFTER EFFECTIVE DATE           FOR SALE                      COMMENT
     -------------------------        ---------------                  -------
<S>                                   <C>                <C>
Upon effectiveness..................                     Shares sold in offering
Upon effectiveness..................                     Freely tradeable shares saleable
                                                         under Rule 144(k) that are not
                                                         subject to lockup agreements
0-90 days...........................                     Freely tradeable shares that become
                                                         saleable under Rule 144(k) that are
                                                         not subject to lockup agreements
90 days.............................                     Shares saleable under Rules 144 and
                                                         701 that are not subject to lockup
                                                         agreements
120 days............................                     120-day lockup released; shares
                                                         saleable under Rules 144 and 701
180 days............................                     180-day lockup released; shares
                                                         saleable under Rules 144 and 701
Thereafter..........................                     Restricted securities held for one
                                                         year or less
</TABLE>
 
     In general, under Rule 144 a person (or persons whose shares are
aggregated) who has beneficially owned shares for at least one year is entitled
to sell within any three-month period commencing 90 days after the Effective
Date that number of shares that does not exceed the greater of (i) 1% of the
then-outstanding shares of Common Stock (approximately 186,744 shares
immediately after this offering) and (ii) the average weekly trading volume
during the four calendar weeks preceding such sale, subject to the filing of a
Form 144 with respect to such sale. A person (or persons whose shares are
aggregated) who is not deemed to have been an affiliate of the Company at any
time during the 90 days immediately preceding the sale who has beneficially
owned his or her shares for at least two years is entitled to sell such shares
pursuant to Rule 144(k) without regard to the limitations
 
                                       54
<PAGE>   56
 
described above. Persons deemed to be affiliates must always sell pursuant to
Rule 144, even after the applicable holding periods have been satisfied.
 
     The Company is unable to estimate the number of shares that will be sold
under Rule 144, which depends on the market price of the Common Stock, the
personal circumstances of the sellers and other factors. Prior to this offering,
there has been no public market for the Common Stock, and there can be no
assurance that a significant public market for the Common Stock will develop or
be sustained after this offering. Any future sale of substantial amounts of the
Common Stock in the open market may adversely affect the market price of the
Common Stock offered hereby.
 
     The Company and certain shareholders of the Company, including executive
officers, directors and certain employees, who will own in the aggregate
               shares of Common Stock after this offering, have agreed pursuant
to the Underwriting Agreement and lockup agreements that they will not, without
the prior written consent of Hambrecht & Quist LLC, directly or indirectly sell,
offer or contract to sell, transfer the economic risk of ownership in, make any
short sale, pledge or otherwise dispose of any shares of Common Stock, options
or warrants to acquire Common Stock or securities exchangeable for or
convertible into shares of Common Stock owned by them during the 180-day period
after the Effective Date, except that each of such shareholders may, without the
consent of the Representatives, sell up to 1,000 shares of Common Stock.
 
     Certain other shareholders of the Company who will own in the aggregate
               shares of Common Stock after this offering have agreed pursuant
to lockup agreements that they will not, without the prior written consent of
Hambrecht & Quist LLC, for a period of 120 and 180 days after the Effective
Date, directly or indirectly sell, offer or contract to sell, transfer the
economic risk of ownership in, make any short sale, pledge or otherwise dispose
of 100% and 50%, respectively, of any shares of Common Stock, options or
warrants to acquire Common Stock or securities exchangeable for or convertible
into shares of Common Stock owned by them, except that each of such shareholders
may, without the consent of the Representatives, sell up to 1,000 shares of
Common Stock.
 
     The Company intends to file a registration statement on Form S-8 under the
Securities Act to register approximately 4,850,000 shares of Common Stock
subject to options outstanding or reserved for issuance under the Company's
stock option plans within 90 days after the Effective Date, thus permitting the
resale of such shares by nonaffiliates in the public market without restriction
under the Securities Act. See "Management -- Employee Benefit Plans."
 
     Any employee of or consultant to the Company who purchased his or her
shares pursuant to a written compensatory plan or contract is entitled to rely
on the resale provisions of Rule 701, which permits nonaffiliates to sell their
Rule 701 shares without having to comply with the public information, holding
period, volume limitation or notice provisions of Rule 144 and permits
affiliates to sell their Rule 701 shares without having to comply with the Rule
144 holding period restrictions, in each case commencing 90 days after the
Effective Date.
 
                                       55
<PAGE>   57
 
                                  UNDERWRITING
 
     Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), for whom Hambrecht & Quist LLC
and PaineWebber Incorporated are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Company and the
Selling Shareholders the following respective numbers of shares of Common Stock:
 
<TABLE>
<CAPTION>
                                                              NUMBER OF
                          NAME                                  SHARES
                          ----                                ---------
<S>                                                        <C>
Hambrecht & Quist LLC....................................
PaineWebber Incorporated.................................
                                                              ---------
Total....................................................     4,400,000
                                                              =========
</TABLE>
 
     The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent, including the absence
of any material adverse change in the Company's business and the receipt of
certain certificates, opinions and letters from the Company, its counsel and
independent auditors. The nature of the Underwriters' obligation is such that
they are committed to purchase all shares of Common Stock offered hereby if any
of such shares are purchased.
 
     The Underwriters propose to offer the shares of Common Stock directly to
the public at the initial public offering price set forth on the cover page of
this Prospectus and to certain dealers at such price less a concession not in
excess of $     per share. The Underwriters may allow, and such dealers may
re-allow, a concession not in excess of $     per share to certain other
dealers. After the initial public offering of the shares, the offering price and
other selling terms may be changed by the Representatives. The Representatives
have advised the Company that the Underwriters do not intend to confirm
discretionary sales in excess of 5% of the shares of Common Stock offered
hereby.
 
     The Company and certain of the Selling Shareholders have granted to the
Underwriters an option, exercisable no later than 30 days after the date of this
Prospectus, to purchase up to 660,000 additional shares of Common Stock at the
initial public offering price, less the underwriting discount, set forth on the
cover page of this Prospectus. To the extent that the Underwriters exercise this
option, each of the Underwriters will have a firm commitment to purchase
approximately the same percentage thereof which the number of shares of Common
Stock to be purchased by it shown in the above table bears to the total number
of shares of Common Stock offered hereby. The Company and certain of the Selling
Shareholders will be obligated, pursuant to the option, to sell shares to the
Underwriters to the extent the option is exercised. The Underwriters may
exercise such option only to cover over-allotments made in connection with the
sale of shares of Common Stock offered hereby.
 
     The offering of the shares is made for delivery when, as and if accepted by
the Underwriters and subject to prior sale and to withdrawal, cancellation or
modification of the offering without notice. The Underwriters reserve the right
to reject an order for the purchase of shares in whole or in part.
 
     The Company and the Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, and to contribute to payments the Underwriters may be required
to make in respect thereof.
 
     Certain shareholders of the Company, including executive officers,
directors and certain employees, who will own in the aggregate
shares of Common Stock after this offering, have agreed that they will not,
without the prior written consent of Hambrecht & Quist LLC, directly or
indirectly sell, offer or contract to sell, transfer the economic risk of
ownership in, make any short sale, pledge or otherwise dispose of any shares of
Common Stock, options or warrants to acquire shares of Common Stock or
securities exchangeable for or convertible into shares of Common Stock owned by
them during the 180-day period following the date of this Prospectus, except
that each of such
 
                                       61
<PAGE>   58
 
shareholders may, without the consent of the Representatives, sell up to 1,000
shares of Common Stock. In addition, certain other shareholders of the Company
who will own in the aggregate                shares of Common Stock after this
offering, have agreed that they will not, without the prior written consent of
Hambrecht & Quist LLC, for a period of 120 and 180 days following the date of
this Prospectus, directly or indirectly sell, offer or contract to sell,
transfer the economic risk of ownership in, make any short sale, pledge or
otherwise dispose of 100% and 50%, respectively, of any shares of Common Stock,
options or warrants to acquire shares of Common Stock or securities exchangeable
for or convertible into shares of Common Stock owned by them, except that each
of such shareholders may, without the consent of the Representatives, sell up to
1,000 shares of Common Stock. The Company has agreed that it will not, without
the prior written consent of Hambrecht & Quist LLC, directly or indirectly sell
offer or otherwise dispose of any shares of Common Stock, options or warrants to
acquire shares of Common Stock or securities exchangeable for or convertible
into shares of Common Stock during the 180-day period following the date of this
Prospectus, except that the Company may issue shares upon the exercise of
options granted prior to the date hereof, and may grant additional options under
its stock option plans, provided that, without the prior written consent of
Hambrecht & Quist LLC, such additional options shall not be exercisable during
such period.
 
     Prior to this offering, there has been no public market for the Common
Stock. The initial public offering price for the Common Stock will be determined
by negotiation among the Company and the Representatives. Among the factors to
be considered in determining the initial public offering price are prevailing
market and economic conditions, sales and earnings of the Company, market
valuations of other companies engaged in activities similar to the Company,
estimates of the business potential and prospects of the Company, the present
state of the Company's business operations, the Company's management and other
factors deemed relevant. The estimated initial public offering price range set
forth on the cover of this preliminary Prospectus is subject to change as a
result of market conditions and other factors.
 
     Certain persons participating in this offering may over-allot or effect
transactions which stabilize, maintain or otherwise affect the market price of
the Common Stock at levels above those which might otherwise prevail in the open
market, including by entering stabilizing bids, effecting syndicate covering
transactions or imposing penalty bids. A stabilizing bid means the placing of
any bid or effecting of any purchase, for the purpose of pegging, fixing or
maintaining the price of the Common Stock. A syndicate covering transaction
means the placing of any bid on behalf of the underwriting syndicate or the
effecting of any purchase to reduce a short position created in connection with
this offering. A penalty bid means an arrangement that permits the Underwriters
to reclaim a selling concession from a syndicate member in connection with this
offering when shares of Common Stock sold by the syndicate member are purchased
in syndicate covering transactions. Such transactions may be effected on the New
York Stock Exchange, in the over-the-counter market, or otherwise. Such
stabilizing, if commenced, may be discontinued at any time.
 
     At the request of the Company, the Underwriters have reserved for sale at
the initial public offering price to persons designated by the Company a number
of shares of Common Stock not to exceed 5% of the total number of shares of
Common Stock in this offering. The number of shares available for sale to the
general public will be reduced to the extent such persons purchase such shares.
Any such shares not so purchased will be offered by the Representatives to the
general public on the same basis as other shares offered hereby.
 
     In December 1995, H&Q Optiva Investors, L.P. purchased 320,000 shares of
the Company's Common Stock for approximately $500,000, as part of an equity
financing on the same terms pursuant to which all other participants in the
financing purchased their shares. Certain of the limited partnership interests
of H&Q Optiva Investors, L.P. are beneficially owned by persons affiliated with
Hambrecht & Quist LLC.
 
                                       62
<PAGE>   59
 
                                 LEGAL MATTERS
 
     Certain legal matters will be passed on for the Company by Perkins Coie
LLP, Seattle, Washington. Certain legal matters will be passed on for the
Underwriters by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP,
Menlo Park, California. Certain legal matters will be passed on for the Selling
Shareholders by Summit Law Group, P.L.L.C., Seattle, Washington.
 
                                    EXPERTS
 
     The consolidated financial statements and related financial statement
schedule of the Company as of December 31, 1997 and December 31, 1996, and for
each of the three years in the period ended December 31, 1997 appearing in this
Prospectus and the Registration Statement of which this Prospectus forms a part
have been audited by Ernst & Young LLP, independent auditors, as set forth in
their reports thereon appearing elsewhere herein, and are included in reliance
upon such reports given upon the authority of such firm as experts in accounting
and auditing.
 
                             ADDITIONAL INFORMATION
 
     The Company has filed with the Commission a Registration Statement on Form
S-1 under the Securities Act with respect to the Common Stock offered hereby
(the "Registration Statement"). This Prospectus, which constitutes part of the
Registration Statement, omits certain information contained in the Registration
Statement and the exhibits and schedule thereto on file with the Commission
pursuant to the Securities Act and the rules and regulations of the Commission
thereunder. The Registration Statement, including the exhibits and schedule
thereto, may be inspected and copied at the public reference facilities
maintained by the Commission at 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and at the Commission's Regional Offices at 7 World Trade Center,
Suite 1300, New York, New York 10048, and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661, and copies may be obtained at the prescribed rates from
the Public Reference Section of the Commission at its principal office in
Washington, D.C. The Commission also maintains a Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically, including the Company, with the Commission at
http://www.sec.gov.
 
     Statements contained in this Prospectus as to the contents of any contract,
agreement or other document referred to are not necessarily complete, and in
each instance reference is made to the copy of such contract, agreement or other
document filed as an exhibit to the Registration Statement, each such statement
being qualified in all respects by such reference.
 
     The Company intends to distribute to its shareholders annual reports
containing consolidated financial statements audited by its independent public
accountants and will make available copies of quarterly reports for the first
three quarters of each year containing unaudited consolidated financial
information.
 
                                       63
<PAGE>   60
 
                               OPTIVA CORPORATION
 
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Report of Ernst & Young LLP, Independent Auditors...........  F-2
Consolidated Balance Sheets as of December 31, 1996 and 1997
  and March 31, 1998 (Unaudited)............................  F-3
Consolidated Statements of Income for the Years Ended
  December 31, 1995, 1996, and 1997 and the Quarters Ended
  March 31, 1997 and 1998 (Unaudited).......................  F-4
Consolidated Statements of Shareholders' Equity for the
  Years Ended December 31, 1995, 1996, and 1997 and the
  Quarter Ended March 31, 1998 (Unaudited)..................  F-5
Consolidated Statements of Cash Flows for the Years Ended
  December 31, 1995, 1996, and 1997 and the Quarters Ended
  March 31, 1997 and 1998 (Unaudited).......................  F-6
Notes to Consolidated Financial Statements..................  F-7
</TABLE>
 
                                       F-1
<PAGE>   61
 
               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
The Board of Directors
Optiva Corporation
 
     We have audited the accompanying consolidated balance sheets of Optiva
Corporation (the Company) as of December 31, 1996 and 1997, and the related
consolidated statements of income, shareholders' equity, and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. 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 financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Optiva
Corporation at December 31, 1996 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
 
                                                               ERNST & YOUNG LLP
 
Seattle, Washington
February 6, 1998, except Note 14,
  as to which the date is May   , 1998
 
--------------------------------------------------------------------------------
 
     The foregoing report is in the form that will be signed upon the approval
of the stock dividend and the increase in the number of authorized shares by the
shareholders described in Note 14 to the Consolidated Financial Statements.
 
                                                               ERNST & YOUNG LLP
 
Seattle, Washington
May 11, 1998
 
                                       F-2
<PAGE>   62
 
                               OPTIVA CORPORATION
 
                          CONSOLIDATED BALANCE SHEETS
                 (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                 DECEMBER 31,
                                                              ------------------     MARCH 31,
                                                               1996       1997         1998
                                                              -------    -------    -----------
                                                                                    (UNAUDITED)
<S>                                                           <C>        <C>        <C>
Current assets:
  Cash and cash equivalents.................................  $ 2,774    $10,667      $15,073
  Accounts receivable, net of allowance for doubtful
     accounts of $460, $810, and $1,172 in 1996, 1997, and
     1998, respectively.....................................   13,194     16,694       16,109
  Receivable from Teledyne (Note 11)........................    1,600         --           --
  Inventories...............................................    7,825     10,105       10,144
  Prepaid advertising.......................................      520        862            3
  Deferred tax asset........................................      785      1,449        1,595
  Other current assets......................................      496        917        1,098
                                                              -------    -------      -------
          Total current assets..............................   27,194     40,694       44,022
Furniture and equipment, net................................    4,181      5,803        6,648
Other noncurrent assets.....................................       10         78           90
                                                              -------    -------      -------
          Total assets......................................  $31,385    $46,575      $50,760
                                                              =======    =======      =======
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
  Accounts payable..........................................  $ 4,807    $ 3,164      $ 3,864
  Accrued expenses..........................................    7,097      8,821       10,222
  Income taxes payable......................................    1,318      3,640        2,119
  Current installments of capital lease obligation..........      137         71           60
  Current installments of long-term debt....................      440        989        1,326
                                                              -------    -------      -------
          Total current liabilities.........................   13,799     16,685       17,591
Capital lease obligations, less current installments........       91         56           52
Long-term debt..............................................      739      1,154        1,531
Deferred tax liability......................................      139         70          338
Commitments and contingencies
Shareholders' equity:
  Preferred stock, $0.01 par value:
     Authorized shares - 25,000,000
     Issued and outstanding shares - none...................       --         --           --
  Common stock, $0.01 par value:
     Authorized shares - 100,000,000
     Issued and outstanding shares - 16,109,060, 16,641,940,
       and 16,674,440 in 1996, 1997, and 1998,
       respectively.........................................      160        166          167
  Additional paid-in capital................................    8,946      9,579        9,650
  Unearned stock compensation...............................      (32)       (26)         (43)
  Retained earnings.........................................    7,543     18,891       21,474
                                                              -------    -------      -------
          Total shareholders' equity........................   16,617     28,610       31,248
                                                              -------    -------      -------
          Total liabilities and shareholders' equity........  $31,385    $46,575      $50,760
                                                              =======    =======      =======
</TABLE>
 
                            See accompanying notes.
                                       F-3
<PAGE>   63
 
                               OPTIVA CORPORATION
 
                       CONSOLIDATED STATEMENTS OF INCOME
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
 
<TABLE>
<CAPTION>
                                        YEAR ENDED DECEMBER 31,         QUARTER ENDED MARCH 31,
                                     ------------------------------    --------------------------
                                      1995       1996        1997         1997           1998
                                     -------    -------    --------    -----------    -----------
                                                                       (UNAUDITED)    (UNAUDITED)
<S>                                  <C>        <C>        <C>         <C>            <C>
Net sales..........................  $48,701    $72,695    $102,968      $19,009        $30,609
Cost of sales......................   16,779     25,440      37,049        6,770         10,770
                                     -------    -------    --------      -------        -------
                                      31,922     47,255      65,919       12,239         19,839
Operating expenses:
  Marketing and sales..............   18,461     25,208      33,091        6,890         10,107
  General and administrative.......    6,745      7,891      10,679        2,301          4,422
  Research and development.........    1,307      2,295       4,672          930          1,389
  Nonrecurring expenses (Note 9)...       --      2,959        (312)          --             --
                                     -------    -------    --------      -------        -------
                                      26,513     38,353      48,130       10,121         15,918
                                     -------    -------    --------      -------        -------
Income from operations.............    5,409      8,902      17,789        2,118          3,921
Interest income (expense)..........        2        103         (91)         (26)           116
Other nonoperating items (Note
  11)..............................     (461)       462          --           --             --
                                     -------    -------    --------      -------        -------
Income before income taxes.........    4,950      9,467      17,698        2,092          4,037
Provision for income taxes.........    1,922      3,599       6,350          778          1,454
                                     -------    -------    --------      -------        -------
Net income.........................  $ 3,028    $ 5,868    $ 11,348      $ 1,314        $ 2,583
                                     =======    =======    ========      =======        =======
Net income per share:
  Basic............................  $  0.20    $  0.37    $   0.69      $  0.08        $  0.16
                                     =======    =======    ========      =======        =======
  Diluted..........................  $  0.19    $  0.35    $   0.64      $  0.08        $  0.14
                                     =======    =======    ========      =======        =======
Weighted average common and common
  equivalent shares for net income
  per share computations:
  Basic............................   14,807     16,004      16,544       16,172         16,664
                                     =======    =======    ========      =======        =======
  Diluted..........................   15,765     16,830      17,749       17,330         18,060
                                     =======    =======    ========      =======        =======
</TABLE>
 
                            See accompanying notes.
                                       F-4
<PAGE>   64
 
                               OPTIVA CORPORATION
 
                CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
                   (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
 
<TABLE>
<CAPTION>
                                                                       UNEARNED
                                      NUMBER              ADDITIONAL    STOCK     RETAINED        TOTAL
                                        OF       COMMON    PAID-IN     COMPEN-    EARNINGS    SHAREHOLDERS'
                                      SHARES     STOCK     CAPITAL      SATION    (DEFICIT)      EQUITY
                                    ----------   ------   ----------   --------   ---------   -------------
<S>                                 <C>          <C>      <C>          <C>        <C>         <C>
Balance at January 1, 1995........  13,511,456    $135      $5,758       $(67)     $(1,353)      $ 4,473
  Sale of common stock............   1,587,820      16       2,465          -            -         2,481
  Exercise of common stock options
    and warrants..................     528,856       5         140          -            -           145
  Tax benefit of exercised
    options.......................           -       -           4          -            -             4
  Compensation related to stock
    options and warrants..........           -       -          60        (60)           -             0
  Amortization of unearned stock
    compensation..................           -       -           -         59            -            59
  Net income......................           -       -           -          -        3,028         3,028
                                    ----------    ----      ------       ----      -------       -------
Balance at December 31, 1995......  15,628,132     156       8,427        (68)       1,675        10,190
  Sale of common stock............     160,000       2         248          -            -           250
  Exercise of common stock options
    and warrants..................     320,928       3         221          -            -           224
  Tax benefit of exercised
    options.......................           -       -          49          -            -            49
  Amortization of unearned stock
    compensation..................           -       -           -         36            -            36
  Net income......................           -       -           -          -        5,868         5,868
                                    ----------    ----      ------       ----      -------       -------
Balance at December 31, 1996......  16,109,060     161       8,945        (32)       7,543        16,617
  Exercise of common stock options
    and warrants..................     532,880       5         139          -            -           144
  Tax benefit of exercised
    options.......................           -       -         472          -            -           472
  Compensation related to stock
    options and warrants..........           -       -          23        (23)           -             0
  Amortization of unearned stock
    compensation..................           -       -           -         29            -            29
  Net income......................           -       -           -          -       11,348        11,348
                                    ----------    ----      ------       ----      -------       -------
Balance at December 31, 1997......  16,641,940     166       9,579        (26)      18,891        28,610
  Exercise of common stock options
    and warrants -- (unaudited)...      32,500       1          20          -            -            21
  Tax benefit of exercised
    options -- (unaudited)........           -       -          28          -            -            28
  Compensation related to stock
    options and warrants --
    (unaudited)...................           -       -          23        (23)           -             0
  Amortization of unearned stock
    compensation -- (unaudited)...           -       -           -          6            -             6
  Net income -- (unaudited).......           -       -           -          -        2,583         2,583
                                    ----------    ----      ------       ----      -------       -------
Balance at March 31, 1998 --
  (unaudited).....................  16,674,440    $167      $9,650       $(43)     $21,474       $31,248
                                    ==========    ====      ======       ====      =======       =======
</TABLE>
 
                            See accompanying notes.
                                       F-5
<PAGE>   65
 
                               OPTIVA CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)
 
<TABLE>
<CAPTION>
                                                YEAR ENDED DECEMBER 31,      QUARTER ENDED MARCH 31,
                                              ---------------------------   -------------------------
                                               1995      1996      1997        1997          1998
                                              -------   -------   -------   -----------   -----------
                                                                                   (UNAUDITED)
<S>                                           <C>       <C>       <C>       <C>           <C>
OPERATING ACTIVITIES
Net income..................................  $ 3,028   $ 5,868   $11,348     $ 1,314       $ 2,583
Adjustments to reconcile net income to net
  cash provided by (used in) operating
  activities:
     Depreciation and amortization..........      588     1,429     1,856         439           526
     Amortization of unearned stock
       compensation.........................       59        36        29           7             6
     Deferred tax provision (benefit).......     (362)       17      (733)         40           122
     Changes in operating accounts:
       Decrease (increase) in receivables...   (5,100)   (6,364)   (1,900)      3,259           585
       Increase in inventories..............   (1,972)   (4,818)   (2,279)     (3,411)          (39)
       Decrease (increase) in prepaid
          advertising.......................     (309)     (211)     (341)        361           859
       Increase in other current assets.....      (91)     (406)     (421)        (22)         (181)
       Decrease (increase) in other
          noncurrent assets.................       17         3       (69)          1           (12)
       Increase (decrease) in accounts
          payable...........................    1,000     3,058    (1,643)     (1,828)          700
       Increase (decrease) in accrued
          expenses..........................    2,469     3,324     1,724      (2,154)        1,401
       Increase (decrease) in income taxes
          payable...........................      236       778     2,794         (23)       (1,493)
                                              -------   -------   -------     -------       -------
Net cash provided by (used in) operating
  activities................................     (437)    2,714    10,365      (2,017)        5,057
INVESTING ACTIVITY -- cash used for purchase
  of furniture and equipment................   (2,003)   (3,115)   (3,432)       (779)       (1,364)
FINANCING ACTIVITIES
Payments on capitalized lease obligations...      (59)     (106)     (148)        (36)          (22)
Proceeds from long-term debt................      124     1,089     1,304         287           875
Payments on long-term debt..................        -       (42)     (340)        (15)         (161)
Proceeds from sale of common stock..........    2,626       474       144          12            21
                                              -------   -------   -------     -------       -------
Net cash provided by financing activities...    2,691     1,415       960         248           713
                                              -------   -------   -------     -------       -------
Net increase (decrease) in cash and
  cash equivalents..........................      251     1,014     7,893      (2,548)        4,406
Cash and cash equivalents at beginning of
  period....................................    1,509     1,760     2,774       2,774        10,667
                                              -------   -------   -------     -------       -------
Cash and cash equivalents at end of
  period....................................  $ 1,760   $ 2,774   $10,667     $   226       $15,073
                                              =======   =======   =======     =======       =======
SUPPLEMENTAL DISCLOSURES
Interest paid...............................  $    25   $    55   $   178     $    36       $    54
Income taxes paid...........................    2,052     2,880     4,361       1,773         2,825
Capital lease obligations to acquire
  furniture and equipment...................      178        83        78           -             7
</TABLE>
 
                            See accompanying notes.
                                       F-6
<PAGE>   66
 
                               OPTIVA CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
             (INFORMATION AS OF MARCH 31, 1998 AND FOR THE QUARTERS
                  ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
NATURE OF BUSINESS
 
     Optiva Corporation (the Company), incorporated in the state of Washington,
commenced operations on March 25, 1988 and has two wholly owned subsidiaries,
Optiva International Sales, Inc. and Optiva Nevada Corp. The Company
manufactures and markets an oral hygiene device. In August 1992, the Company
obtained permission from the U.S. Food and Drug Administration to market its
product. The Company sells its product in the United States and overseas through
a network of various retailers, distributors, dental professionals, and direct
to consumers.
 
UNAUDITED INTERIM FINANCIAL INFORMATION
 
     The financial information as of March 31, 1998 and for the quarters ended
March 31, 1997 and 1998 is unaudited, but includes all adjustments (consisting
only of normal recurring adjustments) that the Company considers necessary for a
fair presentation of the financial position at such dates and the operations and
cash flows for the periods then ended. Operating results for the quarter ended
March 31, 1998 are not necessarily indicative of results that may be expected
for the entire year.
 
BASIS OF PRESENTATION
 
     All significant intercompany balances and transactions have been eliminated
in consolidation.
 
USE OF ESTIMATES
 
     The preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
 
CASH EQUIVALENTS
 
     Investments with an original maturity of three months or less are
considered to be cash equivalents. The book value of cash equivalents
approximates fair value.
 
CONCENTRATION OF CREDIT RISK
 
     The Company's exposure to credit risk is measured on an individual customer
basis, as well as by groups of customers that share similar attributes. To
reduce the potential for risk concentration, credit limits are established and
continually monitored in light of changing customer and market conditions. The
Company further reduces a majority of its credit risk through the purchase of
credit insurance. During 1996, 1997 and the quarters ended March 31, 1997 and
1998, approximately 16%, 25%, 24%, and 23% of net sales, respectively, were made
to one customer. No customer represented more than 10% of net sales in 1995.
 
INVENTORIES
 
     Inventories are stated at the lower of cost, determined by the first-in,
first-out method, or market value.
 
                                       F-7
<PAGE>   67
                               OPTIVA CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             (INFORMATION AS OF MARCH 31, 1998 AND FOR THE QUARTERS
                  ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
FIXED ASSETS
 
     Fixed assets are stated at cost. Depreciation is calculated on the
straight-line method over the estimated useful lives of the assets, ranging from
three to seven years. Leasehold improvements are capitalized and amortized over
the lesser of the term of the remaining lease or its estimated useful life.
 
RESEARCH AND DEVELOPMENT COSTS
 
     Research and development costs are charged to expense as incurred. The
Company has been awarded grants from the National Institutes of Health, an
agency of the United States government. Funding from such grants is recognized
as the related research and development costs are incurred. The Company
recognized research funding of $180,000 and $70,000 in 1996 and 1997,
respectively, as a reduction of research and development expenses.
 
REVENUE RECOGNITION
 
     Generally, revenue from product sales is recorded when products are shipped
to customers. Provision for sales returns is recorded for estimated products
returned by customers.
 
ADVERTISING COSTS
 
     Advertising costs, including promotional materials, infomercial and other
media production costs, are charged to expense as incurred. Costs for placement
of advertisements and air time are prepaid and charged to expense once
broadcast. Advertising expense aggregated $9,080,000, $7,915,000, and $9,471,000
in 1995, 1996, and 1997, respectively.
 
OTHER FINANCIAL INSTRUMENTS
 
     At December 31, 1997 and March 31, 1998, the carrying value of financial
instruments, such as receivables and payables, approximated their fair values
based on the short-term nature of these instruments.
 
STOCK COMPENSATION
 
     In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" (SFAS No. 123), which became effective in 1996. The Company has
implemented SFAS No. 123 using the intrinsic value method; accordingly, the
accompanying footnotes include disclosure of the pro forma impact of the fair
value method on net income for 1995, 1996, and 1997. The adoption of SFAS No.
123 had no effect on the Company's financial position or results of operations.
 
NET INCOME PER SHARE
 
     Basic net income per share is computed based on the weighted average number
of common shares outstanding during each period. Diluted net income per share is
computed based on the weighted
 
                                       F-8
<PAGE>   68
                               OPTIVA CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             (INFORMATION AS OF MARCH 31, 1998 AND FOR THE QUARTERS
                  ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
average number of common and common equivalent shares outstanding during each
period. Common equivalent shares include outstanding warrants and stock options.
Common equivalent shares are not included in the per share calculations where
the effect of their inclusion would be antidilutive. All net income per share
amounts for all periods have been presented in conformity with Statement of
Financial Accounting Standards No. 128, "Earnings per Share."
 
 2. INVENTORIES
 
     Inventories consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                                  -----------------    MARCH 31,
                                                   1996      1997        1998
                                                  ------    -------    ---------
<S>                                               <C>       <C>        <C>
Parts and supplies..............................  $4,591    $ 6,871     $ 6,024
Assemblies and work in progress.................     392        480         636
Finished goods..................................   2,842      2,754       3,484
                                                  ------    -------     -------
                                                  $7,825    $10,105     $10,144
                                                  ======    =======     =======
</TABLE>
 
 3. FURNITURE AND EQUIPMENT
 
     Furniture and equipment, net, consist of the following (in thousands):
 
<TABLE>
<CAPTION>
                                                    DECEMBER 31,
                                                 ------------------    MARCH 31,
                                                  1996       1997        1998
                                                 -------    -------    ---------
<S>                                              <C>        <C>        <C>
Machinery and equipment........................  $ 3,970    $ 7,431     $ 7,782
Furniture and fixtures.........................      473        917       1,278
Leasehold improvements.........................    1,092      1,336       1,505
Assets under construction......................      858        188         627
                                                 -------    -------     -------
                                                   6,393      9,872      11,192
Less accumulated depreciation and
  amortization.................................   (2,212)    (4,069)     (4,544)
                                                 -------    -------     -------
                                                 $ 4,181    $ 5,803     $ 6,648
                                                 =======    =======     =======
</TABLE>
 
 4. BANK AGREEMENTS
 
     The Company has a revolving line of credit agreement with a bank expiring
on August 31, 1998. Borrowings are limited to $20,000,000, subject to certain
conditions. The line of credit is secured by substantially all of the Company's
assets. The agreement bears interest at the bank's prime rate (8.5% as of
December 31, 1997), payable monthly. The agreement requires the Company to
maintain certain financial ratios, including minimum net worth and debt to net
worth, and restricts the Company's ability to declare dividends.
 
     The Company was in compliance with these covenants at December 31, 1997. No
amounts were outstanding on the line at December 31, 1997.
 
     The Company also has $7 million in notes with a bank for equipment
financing. The notes are secured by the underlying equipment and require monthly
principal and interest payments through February 28, 2001. The notes bear
interest at rates ranging from the bank's prime rate (8.5% as of December 31,
1997) to the bank's prime rate plus 1%. The balance owed at December 31, 1997
was $2,143,479 and approximates fair value.
 
                                       F-9
<PAGE>   69
                               OPTIVA CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             (INFORMATION AS OF MARCH 31, 1998 AND FOR THE QUARTERS
                  ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
 4. BANK AGREEMENTS (CONTINUED)
     Maturities of consolidated long-term debt are as follows (in thousands):
 
<TABLE>
<CAPTION>
                  YEAR ENDED DECEMBER 31,
                  -----------------------
<S>                                                           <C>
       1998.................................................  $  989
       1999.................................................     727
       2000.................................................     371
       2001.................................................      56
                                                              ------
                                                              $2,143
                                                              ======
</TABLE>
 
     Interest expense, including imputed interest on capital leases, for 1995,
1996 and 1997 was $24,533, $54,894, $178,109, respectively.
 
 5. INCOME TAXES
 
     The provision for income taxes is comprised of the following (in
thousands):
 
<TABLE>
<CAPTION>
                                                    YEAR ENDED DECEMBER 31,
                                                   --------------------------
                                                    1995      1996      1997
                                                   ------    ------    ------
<S>                                                <C>       <C>       <C>
Current federal income taxes.....................  $2,086    $3,310    $6,887
Deferred federal tax provision (benefit), net....    (362)       17      (733)
State income taxes...............................     198       272       196
                                                   ------    ------    ------
                                                   $1,922    $3,599    $6,350
                                                   ======    ======    ======
</TABLE>
 
     Differences between income taxes, computed by applying the U.S. federal
income tax rate of 34% in 1995 and 1996 and 35% in 1997 to income before federal
income taxes, and the provision for income taxes are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                          -----------------------------------------------------
                                           1995     RATE      1996     RATE      1997     RATE
                                          ------    -----    ------    -----    ------    -----
<S>                                       <C>       <C>      <C>       <C>      <C>       <C>
Federal income tax provision at
  statutory rate........................  $1,683    34.00%   $3,219    34.00%   $6,194    35.00%
Nondeductible expenses..................      78     1.58        40      .42        64      .36
State income taxes, net of federal
  benefits..............................     132     2.67       181     1.91       128      .72
Other...................................      29      .59       159     1.68       (36)    (.20)
                                          ------    -----    ------    -----    ------    -----
Provision for income taxes..............  $1,922    38.84%   $3,599    38.01%   $6,350    35.88%
                                          ======    =====    ======    =====    ======    =====
</TABLE>
 
                                      F-10
<PAGE>   70
                               OPTIVA CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             (INFORMATION AS OF MARCH 31, 1998 AND FOR THE QUARTERS
                  ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
 5. INCOME TAXES (CONTINUED):
     The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,
                                                             ---------------
                                                             1996      1997
                                                             -----    ------
<S>                                                          <C>      <C>
Deferred tax assets:
  Stock compensation.......................................  $  26    $    1
  Warranty reserve.........................................    171       194
  Bad debt reserve.........................................    156       284
  Return reserve...........................................     85       193
  Co-op advertising........................................    138        89
  Accrued compensation.....................................    143       198
  Furniture and equipment basis differences................     --       297
  Other....................................................     66       193
                                                             -----    ------
          Total deferred tax assets........................    785     1,449
Deferred tax liabilities:
  Furniture and equipment basis difference.................    (50)       --
  Other....................................................    (89)      (70)
                                                             -----    ------
          Total deferred tax liabilities...................   (139)      (70)
Net deferred tax assets....................................  $ 646    $1,379
                                                             =====    ======
</TABLE>
 
6. STOCK OPTIONS AND WARRANTS
 
     The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" (APB No. 25), and related
interpretations in accounting for its employee stock options rather than the
alternative fair value accounting allowed by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123). APB
No. 25 provides that compensation expense relative to the Company's employee
stock options is measured based on the intrinsic value of the stock option. SFAS
No. 123 requires companies that continue to follow APB No. 25 to provide a pro
forma disclosure of the impact of applying the fair value method of SFAS No.
123.
 
     At December 31, 1997, the Company had stock-based option plans, which are
described below. The Company applies APB No. 25 and related interpretations in
accounting for the plans. Accordingly, stock compensation has been recognized
for the amortized intrinsic value of stock option grants. Had the stock
compensation expense for the Company's stock option plans been determined based
on the fair value at the grant dates for options and warrants granted in 1995,
1996, and 1997, consistent with
 
                                      F-11
<PAGE>   71
                               OPTIVA CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             (INFORMATION AS OF MARCH 31, 1998 AND FOR THE QUARTERS
                  ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
6. STOCK OPTIONS AND WARRANTS (CONTINUED)
the method of SFAS No. 123, the Company's net income would have been reduced to
these pro forma amounts (in thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                   1995      1996      1997
                                                  ------    ------    -------
<S>                                               <C>       <C>       <C>
Net income:
  As reported...................................  $3,028    $5,868    $11,348
  Pro forma.....................................   3,016     5,838     11,243
Diluted net income per share:
  As reported...................................  $ 0.19    $ 0.35    $  0.64
  Pro forma.....................................    0.19      0.35       0.63
</TABLE>
 
     Compensation expense recognized in providing pro forma disclosures may not
be representative of the effects on pro forma net income for future years
because the amounts above include only the amortization for the fair value of
1995, 1996, and 1997 grants.
 
     The fair value of each option grant is estimated on the date of grant,
based on the minimum value method using the following weighted-average
assumptions: dividend yield of 0%; risk-free interest rates ranging from 5.37%
to 7.52%, 5.24% to 6.69%, and 5.66% to 6.74% for 1995, 1996, and 1997,
respectively; and expected lives of five years.
 
EMPLOYEE STOCK OPTIONS PLANS
 
     The Company's stock option plans, as amended, authorize issuance of
4,880,000 shares of its common stock. Generally, stock compensation, if any, is
measured as the difference between the exercise price of a stock option and the
fair market value of the Company's stock at the date of grant, which is then
amortized over the related service period. Generally, options vest 25% per year
over a four-year period and expire ten years from the date of grant.
 
     A summary of the status of the Company's stock option plans at December 31,
1995, 1996, and 1997, and changes during the years then ended are presented
below (in thousands, except weighted average exercise price):
 
<TABLE>
<CAPTION>
                                                   1995                 1996                 1997
                                            ------------------   ------------------   ------------------
                                                      WEIGHTED             WEIGHTED             WEIGHTED
                                                      AVERAGE              AVERAGE              AVERAGE
                                                      EXERCISE             EXERCISE             EXERCISE
                                            OPTIONS    PRICE     OPTIONS    PRICE     OPTIONS    PRICE
                                            -------   --------   -------   --------   -------   --------
<S>                                         <C>       <C>        <C>       <C>        <C>       <C>
Outstanding at beginning of year..........   1,585     $0.72      1,784     $0.84      1,988     $1.02
Granted...................................     305      1.20        409      1.58        688      2.72
Exercised.................................     (14)     0.32       (168)     0.59        (90)     0.75
Canceled..................................     (92)     0.25        (37)     0.72        (85)     1.56
                                             -----                -----               ------
Outstanding at end of year................   1,784     $0.84      1,988     $1.02      2,501     $1.48
                                             =====                =====               ======
Weighted average fair value of options
  granted during the year.................   $0.30                $0.37               $ 0.75
                                             =====                =====               ======
</TABLE>
 
                                      F-12
<PAGE>   72
                               OPTIVA CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             (INFORMATION AS OF MARCH 31, 1998 AND FOR THE QUARTERS
                  ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
6. STOCK OPTIONS AND WARRANTS (CONTINUED)
     The following summarizes information about stock options outstanding at
December 31, 1997:
 
<TABLE>
<CAPTION>
                                     WEIGHTED
                                     AVERAGE
                      NUMBER        REMAINING
   RANGE OF        OUTSTANDING     CONTRACTUAL
EXERCISE PRICES   (IN THOUSANDS)   LIFE (YEARS)
---------------   --------------   ------------
<S>               <C>              <C>
$0.0025 - $1.00          680           4.95
  $1.01 - $2.00        1,362           7.58
  $2.01 - $3.00          429           9.38
  $3.01 - $5.00           30           9.91
                      ------
                       2,501
                      ======
</TABLE>
 
     In connection with the stock option plans, 2,689,880 shares of common stock
have been reserved for future issuance. At December 31, 1997, 1,273,004 options
were exercisable with a weighted average exercise price of $0.88 per option
share.
 
STOCK WARRANTS
 
     The Company issues stock warrants to consultants as compensation for
services performed or to be performed. The warrants are exercisable for a period
extending up to ten years.
 
     The fair value of each warrant grant is estimated on the date of grant,
based on the minimum value method using the following weighted-average
assumptions: dividend yield of 0%; risk-free interest rates ranging from 6.00%
to 7.00%, 5.70% to 6.21%, and 5.86% to 6.36% for 1995, 1996, and 1997,
respectively; and expected lives of five years.
 
     A summary of the status of the Company's warrants at December 31, 1995,
1996, and 1997, and changes during the years ending on those dates are presented
below (in thousands, except weighted average exercise price):
 
<TABLE>
<CAPTION>
                                                1995                  1996                  1997
                                         -------------------   -------------------   -------------------
                                                    WEIGHTED              WEIGHTED              WEIGHTED
                                                    AVERAGE               AVERAGE               AVERAGE
                                                    EXERCISE              EXERCISE              EXERCISE
                                         WARRANTS    PRICE     WARRANTS    PRICE     WARRANTS    PRICE
                                         --------   --------   --------   --------   --------   --------
<S>                                      <C>        <C>        <C>        <C>        <C>        <C>
Outstanding at beginning of year.......    1,219     $0.29        729      $0.35        616      $0.33
Granted................................       25      1.51         40       1.81         43       3.38
Exercised..............................     (515)     0.27       (153)      0.81       (447)      0.19
                                          ------                -----                 -----
Outstanding at end of year.............      729     $0.35        616      $0.33        212      $1.24
                                          ======                =====                 =====
Weighted average fair value of warrants
  granted during the year..............   $ 0.03                $0.05                 $1.02
                                          ======                =====                 =====
</TABLE>
 
                                      F-13
<PAGE>   73
                               OPTIVA CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             (INFORMATION AS OF MARCH 31, 1998 AND FOR THE QUARTERS
                  ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
6. STOCK OPTIONS AND WARRANTS (CONTINUED)
     The following summarizes information about warrants outstanding at December
31, 1997:
 
<TABLE>
<CAPTION>
                                    WEIGHTED
                                    AVERAGE
   RANGE OF                        REMAINING
   EXERCISE          NUMBER       CONTRACTUAL
    PRICES        OUTSTANDING     LIFE (YEARS)
   --------      --------------   ------------
                 (IN THOUSANDS)
<S>              <C>              <C>
$0.0025 - $1.00       101             3.11
  $1.01 - $2.00        89             8.00
  $2.01 - $3.00         6             9.25
  $3.01 - $5.00        16             9.92
                      212
                      ===
</TABLE>
 
     A total of 211,808 shares of common stock have been reserved for exercise
of warrants. At December 31, 1997, 198,268 warrants were exercisable with a
weighted average exercise price of $0.95 per warrant share.
 
     The intrinsic value of stock options issued with exercise prices less than
the estimated fair value of the underlying common stock at the date of grant is
recorded as unearned stock compensation. Upon issuance, the estimated fair value
of warrants is also recorded as unearned stock compensation. Unearned stock
compensation is being amortized over the related service periods.
 
 7. NET INCOME PER SHARE
 
     The following table sets forth the computation of basic and diluted net
income per share (in thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                                               QUARTER ENDED
                                                 YEAR ENDED DECEMBER 31,         MARCH 31,
                                               ---------------------------   -----------------
                                                1995      1996      1997      1997      1998
                                               -------   -------   -------   -------   -------
<S>                                            <C>       <C>       <C>       <C>       <C>
Numerator:
  Net income.................................  $ 3,028   $ 5,868   $11,348   $ 1,314   $ 2,583
                                               =======   =======   =======   =======   =======
Denominator:
  Denominator for basic net income per
     share -- weighted average shares........   14,807    16,004    16,544    16,172    16,664
  Effect of dilutive securities:
     Warrants and stock options..............      959       857     1,205     1,158     1,511
                                               -------   -------   -------   -------   -------
  Denominator for diluted net income per
     share -- adjusted weighted average
     shares and assumed conversion of
     warrants and stock options..............   15,765    16,861    17,749    17,330    18,193
                                               =======   =======   =======   =======   =======
Basic net income per share...................  $  0.20   $  0.37   $  0.69   $  0.08   $  0.16
                                               =======   =======   =======   =======   =======
Diluted net income per share.................  $  0.19   $  0.35   $  0.64   $  0.08   $  0.14
                                               =======   =======   =======   =======   =======
</TABLE>
 
 8. EMPLOYEE BENEFIT PLAN
 
     The Company sponsors a defined contribution 401(k) plan, which covers all
full-time employees with over one month of service. Contributions by the Company
to the plan are made at the discretion of the Board of Directors and totaled
approximately $156,000 and $265,811 for the years ended
 
                                      F-14
<PAGE>   74
                               OPTIVA CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             (INFORMATION AS OF MARCH 31, 1998 AND FOR THE QUARTERS
                  ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
 8. EMPLOYEE BENEFIT PLAN
December 31, 1996 and 1997, respectively. Effective January 1, 1998, the Company
amended the 401(k) plan and provided a Company match for employee contributions
at the rate of 50% of the first 5% of salary contributed.
 
 9. PRODUCT RECALL
 
     On November 6, 1996, the Company implemented a voluntary precautionary
recall (the Recall) of its charger base. Beginning in late November 1996, the
Company reintroduced all its quality assured products, including the charger, to
the market. As a result of the Recall, the Company incurred significant direct
Recall costs, including advertising, public relations, legal and professional
fees, the cost of the product recalled (including labor and freight involved in
the Recall process), and other costs. The direct and incremental Recall costs of
$2,958,618 were recorded in 1996. These costs included the accrual of
approximately $978,000 of estimated remaining direct costs expected to be
incurred in 1997.
 
     In 1997, the Company incurred $666,419 of costs associated with the Recall.
The remaining balance of the accrual of $311,581 was reversed in 1997.
 
10. COMMITMENTS
 
LEASES
 
     The Company rents its office and production facility under an operating
lease. Rent expense for 1995, 1996, and 1997 amounted to $481,985, $773,910, and
$1,094,199, respectively.
 
     In November 1997, the Company entered into a lease agreement for new
production and office facilities. The lease, commencing April 1999, is for a
period of 12 years.
 
     Minimum future rental commitments under existing capital leases and
noncancelable operating leases are as follows (in thousands):
 
<TABLE>
<CAPTION>
                                                           CAPITAL    OPERATING
                                                           LEASES      LEASES
                                                           -------    ---------
<S>                                                        <C>        <C>
1998.....................................................    $79       $ 1,370
1999.....................................................     43         2,769
2000.....................................................     16         2,776
2001.....................................................     --         2,328
2002.....................................................     --         2,231
Thereafter...............................................     --        17,134
                                                             ---       -------
          Total minimum lease payments...................    138       $28,608
                                                                       =======
Less amount representing interest at rates ranging from
  2.76% to 14.11%........................................     11
                                                             ---
Present value of net minimum capital lease obligations...    127
Less current installments................................     71
                                                             ---
Capital lease obligations, less current installments.....    $56
                                                             ===
</TABLE>
 
     Assets recorded under capital leases, net of accumulated depreciation,
amounted to approximately $198,271 at December 31, 1997 and are included in
machinery and equipment.
 
                                      F-15
<PAGE>   75
                               OPTIVA CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             (INFORMATION AS OF MARCH 31, 1998 AND FOR THE QUARTERS
                  ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
11. LEGAL MATTERS AND UNCERTAINTIES
 
     In February 1995, the Company filed a lawsuit against Teledyne Industries,
Inc. (Teledyne) claiming patent infringement and violation of a confidentiality
and nondisclosure agreement. Subsequently, Teledyne filed a counterclaim against
the Company for declaratory judgment of patent invalidity and various other
claims for injunctive and monetary relief.
 
     On September 23, 1996, all ongoing litigation between the Company and
Teledyne was resolved by a stipulation of settlement, effectively eliminating
all claims against the Company and Teledyne.
 
     In accordance with the settlement agreement dated September 23, 1996,
Teledyne paid the Company $1,600,000. In addition, Teledyne was granted a
nonexclusive royalty-bearing license for the remaining 15 years of the patent.
Legal and other costs incurred to pursue the claim were $1,137,413 in 1996 and
$460,598 in 1995. The gain on settlement and related legal and other costs are
included in the accompanying statements of income as other nonoperating items.
 
     In addition to the above, the Company is involved in various legal
proceedings arising from the normal course of business. In the opinion of
management, any pending or threatened litigation involving the Company will not
likely have a material adverse effect on the Company's financial condition or
results of operation.
 
12. RELATED-PARTY TRANSACTION
 
     For services rendered during 1995, 1996 and 1997, the Company paid $21,000,
$70,000 and $163,000, respectively, to directors for consulting fees.
 
13. QUARTERLY FINANCIAL DATA (UNAUDITED)
 
     The following is a summary of the Company's unaudited quarterly results of
operations for the past two fiscal years and the quarter ended March 31, 1998
(in thousands, except per share data):
 
<TABLE>
<CAPTION>
                                                                                          DILUTED
                                                                                            NET
                                               GROSS      NET       TOTAL      TOTAL      INCOME
                                 NET SALES    PROFIT     INCOME    ASSETS     EQUITY     PER SHARE
                                 ---------    -------    ------    -------    -------    ---------
<S>                              <C>          <C>        <C>       <C>        <C>        <C>
FISCAL 1998
First quarter..................   $30,609     $19,839    $2,583    $50,760    $31,248      $0.14
FISCAL 1997
Fourth quarter.................   $40,601     $26,246    $4,858    $46,575    $28,610      $0.27
Third quarter..................    23,422      14,729     3,343     37,807     23,550       0.19
Second quarter.................    19,936      12,705     1,833     31,596     19,879       0.11
First quarter..................    19,009      12,239     1,314     28,993     18,027       0.08
FISCAL 1996
Fourth quarter.................   $20,605     $12,797    $  388    $31,320    $16,552      $0.02
Third quarter..................    23,766      15,943     3,753     31,110     16,108       0.23
Second quarter.................    12,431       8,044       568     19,279     12,227       0.03
First quarter..................    15,893      10,471     1,159     18,166     11,683       0.07
</TABLE>
 
                                      F-16
<PAGE>   76
                               OPTIVA CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             (INFORMATION AS OF MARCH 31, 1998 AND FOR THE QUARTERS
                  ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
14. SUBSEQUENT EVENTS
 
INITIAL PUBLIC OFFERING
 
     On May 2, 1998, the Company's Board of Directors authorized the Company to
file a Registration Statement under the Securities Act of 1933, as amended (the
1933 Act) with the Securities and Exchange Commission (the Commission) to permit
the Company to proceed with an initial public offering of its common stock (the
Offering). In connection with the Offering, the Company's Board of Directors
amended and restated the Company's Articles of Incorporation to increase the
amount of authorized common shares to 100,000,000, and to increase the amount of
authorized preferred shares to 25,000,000 and the Company's Board of Directors
approved a stock dividend in the amount of three shares for every one share of
common stock, thereby giving effect to a four-to-one stock split. The stock
dividend and the increase in authorized shares are subject to shareholder
approval at a special meeting to be held in June 1998. All outstanding common
and common equivalent shares and per-share amounts in the accompanying
consolidated financial statements and related notes to consolidated financial
statements have been retroactively adjusted to give effect to the stock
dividend.
 
1990 STOCK OPTION PLAN
 
     Effective May 2, 1998, the Company amended and restated the 1990 Stock
Option Plan (the 1990 Option Plan). The amendment increased the number of shares
authorized by 1,600,000 shares to 4,800,000.
 
1998 EMPLOYEE STOCK PURCHASE PLAN
 
     On May 2, 1998, the Board of Directors adopted the 1998 Employee Stock
Purchase Plan (the Purchase Plan), subject to shareholder approval. A total of
400,000 shares of common stock are reserved for issuance under the Purchase
Plan. The Purchase Plan permits eligible employees to purchase common stock
through payroll deductions at a price equal to 85% of the fair market value of
the Company's common stock on the first day or the last day of the applicable
six-month offering period, whichever is lower. Unless the Plan Administrator
determines otherwise, the offering period will commence July 1 and January 1 of
each year, with the first offering period commencing on the initial public
offering date. Eligible employees may purchase up to a maximum of $25,000 of
common stock in any one calendar year. The Purchase Plan will begin on the
effective date of the Company's initial public offering.
 
     The Board of Directors is authorized to amend or terminate the Purchase
Plan as long as such action does not adversely affect any outstanding rights to
purchase stock thereunder. The Purchase Plan has no fixed termination date.
 
1998 STOCK INCENTIVE COMPENSATION PLAN
 
     Subject to shareholder approval, the 1998 Stock Incentive Compensation Plan
(the 1998 Plan) was adopted by the Board of Directors on May 2, 1998. A total of
1,600,000 shares of common stock has been reserved for issuance under the 1998
Plan. The 1998 Plan provides for the grant of nonqualified stock options (NSOs)
and incentive stock options (ISOs) to eligible participants. Options granted
under the 1998 Plan expire 10 years from the date of grant. The 1998 Plan will
have no fixed expiration date; provided, however, that no incentive stock
options may be granted more than 10 years after the earlier of the 1998 Plan's
adoption by the Board and shareholder approval.
 
                                      F-17
<PAGE>   77
                               OPTIVA CORPORATION
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
             (INFORMATION AS OF MARCH 31, 1998 AND FOR THE QUARTERS
                  ENDED MARCH 31, 1997 AND 1998 IS UNAUDITED)
 
14. SUBSEQUENT EVENTS (CONTINUED)
  Stock Option Grant Program for Nonemployee Directors
 
     Subject to adoption by the Board of Directors, the Company intends to
implement a stock option grant program for nonemployee directors under the Plan
whereby each director of the Company elected or appointed who is not otherwise
an employee of the Company or any subsidiary (an Eligible Director) shall be
granted NSOs to purchase shares of common stock (the Initial Grant) upon such
Eligible Director's initial election or appointment to the Board. Initial grants
shall become fully vested and exercisable one year after the date of grant,
assuming continued service on the Board for such period. Thereafter, on the date
of each annual meeting of the Company's shareholders, commencing in 1999, each
Eligible Director shall be automatically granted an additional option to
purchase shares of common stock (an Annual Grant). Any Eligible Director who
received an Initial Grant within three months of an Annual Meeting shall not
receive an Annual Grant until immediately following the second Annual Meeting
after the date of such Initial Grant. Annual Grants shall become fully vested
and exercisable upon the next Annual Meeting after the date of grant, assuming
continued service on the Board for such period. The exercise price of such
options shall be equal to the fair market value of the Company's common stock on
the date of grant of the option.
 
SUSPENSION OF 1990 PLAN AND 1995 CALIFORNIA STOCK OPTION PLAN
 
     Effective May 2, 1998, the Board of Directors resolved that both the 1990
Plan and the 1995 California Stock Option Plan (the 1995 Plan) shall be
suspended effective as of the effective date of the Company's Registration
Statement and, as of such date, no further grants of rights to acquire stock of
the Company shall be made pursuant to either the 1990 Plan or the 1995 Plan.
 
     In addition, upon the suspension of the 1990 Plan and the 1995 Plan, the
total number of shares of the Company's common stock that is reserved for
issuance pursuant to each of the 1990 Plan and the 1995 Plan shall be reduced to
the minimum number of shares that may be required, at any one time and from time
to time, for issuance pursuant to the exercise of any options that remain
outstanding under each of the 1990 Plan and the 1995 Plan, and if any option
granted under the 1990 Plan or the 1995 Plan expires or is surrendered,
canceled, or terminated for any reason without having been exercised in full,
then the unpurchased shares subject thereto shall thereupon no longer be
available or reserved for issuance pursuant to the 1990 Plan or the 1995 Plan,
as the case may be, and such shares shall be deemed to be authorized but
unissued shares of the Company.
 
                                      F-18
<PAGE>   78
 
============================================================
 
     NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, ANY SELLING
SHAREHOLDER, OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE
MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION
CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
 
                               ------------------
 
                               TABLE OF CONTENTS
 
<TABLE>
<CAPTION>
                                          PAGE
                                          ----
<S>                                       <C>
Prospectus Summary......................    3
Risk Factors............................    5
Use of Proceeds.........................   16
Dividend Policy.........................   16
Capitalization..........................   17
Dilution................................   18
Selected Consolidated Financial Data....   19
Management's Discussion and Analysis of
  Financial Condition and Results of
     Operations.........................   21
Business................................   30
Management..............................   40
Certain Transactions....................   48
Principal and Selling Shareholders......   49
Description of Capital Stock............   51
Shares Eligible for Future Sale.........   54
Underwriting............................   56
Legal Matters...........................   58
Experts.................................   58
Additional Information..................   58
Index to Consolidated Financial
  Statements............................  F-1
</TABLE>
 
                               ------------------
 
     UNTIL           , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
 
============================================================
============================================================
                                4,400,000 SHARES
                                     [LOGO]
 
                               OPTIVA CORPORATION
                                  COMMON STOCK
                              --------------------
                                   PROSPECTUS
                              --------------------
                               HAMBRECHT & QUIST
 
                            PAINEWEBBER INCORPORATED
                                          , 1998
 
============================================================
<PAGE>   79
 
                                    PART II
 
                     INFORMATION NOT REQUIRED IN PROSPECTUS
 
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
 
     The following table sets forth the costs and expenses, other than the
underwriting discount payable by the registrant and the selling shareholders in
connection with the sale of the Common Stock being registered hereby. All
amounts shown are estimates, except the Securities and Exchange Commission
registration fee, the NASD filing fee and the New York Stock Exchange listing
fee.
 
<TABLE>
<S>                                                           <C>
Securities and Exchange Commission registration fee.........  $   25,376
NASD filing fee.............................................       9,102
New York Stock Exchange listing fee.........................     144,100
Blue sky filing and counsel fees and expenses...............      10,000
Printing and engraving expenses.............................     225,000
Legal fees and expenses.....................................     300,000
Accountants' fees and expenses..............................     200,000
Increased coverage under directors' and officers' liability
  insurance.................................................     150,000
Transfer Agent and Registrar fees...........................      10,000
Miscellaneous expenses......................................      76,422
                                                              ----------
          Total.............................................  $1,150,000
                                                              ==========
</TABLE>
 
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
 
     Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Section 10 of the registrant's Amended and Restated Bylaws
(Exhibit 3.2 hereto) provides for indemnification of the registrant's directors,
officers, employees and agents to the maximum extent permitted by Washington
law. The directors and officers of the registrant may also be indemnified
against liability they may incur for serving in that capacity pursuant to a
liability insurance policy maintained by the registrant for that purpose.
 
     Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, knowing violations of law or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. Article 8 of the registrant's Amended and Restated Articles of
Incorporation (Exhibit 3.1 hereto) contains provisions implementing, to the
fullest extent permitted by Washington law, such limitations on a director's
liability to the registrant and its shareholders.
 
     Reference is also made to the Form of Underwriting Agreement (Exhibit 1.1
hereto) for indemnification by the Underwriters of the registrant and its
executive officers and directors, and by the registrant of the Underwriters, for
certain liabilities, including liabilities arising under the Securities Act, in
connection with matters specifically provided in writing by the Underwriters for
inclusion in this Registration Statement.
 
                                      II-1
<PAGE>   80
 
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
 
     Since May 1, 1995, the Company has issued and sold the following
unregistered securities (the following information assumes effectiveness of a
4-for-1 stock split to be effected in connection with the effectiveness of this
Registration Statement):
 
     From September 18, 1995 through September 1, 1996, the Company issued
1,544,620 shares of Common Stock for an aggregate price of $2,413,468.75 or
$1.5625 per share, of which 116,800 shares were subsequently redeemed by the
Company for an aggregate redemption price of $182,500 or $1.5625 per share.
 
     On December 22, 1995, the Company issued 320,000 shares of Common Stock for
an aggregate purchase price of $500,000 or $1.5625 per share.
 
     From May 1, 1995 through April 30, 1998, the Company issued 309,600 shares
of Common Stock upon exercise of stock options pursuant to the Company's 1990
Stock Option Plan, as amended and restated, at exercise prices ranging from
$0.075 to $2.00 per share, or an aggregate cash consideration of $200,800.
 
     From May 15, 1995 through December 31, 1997, the Company issued an
aggregate of 373,956 shares of Common Stock upon exercise of warrants for an
aggregate purchase price of $303,839.25 or $0.8125 per share.
 
     From December 23, 1995 through January 27, 1998, the Company issued an
aggregate of 715,896 shares of Common Stock upon exercise of warrants for an
aggregate purchase price of $1,789.74 or $0.0025 per share.
 
     On September 30, 1997, the Company issued 6,000 shares of Common Stock upon
exercise of a warrant for an aggregate purchase price of $9,000 or $1.50 per
share.
 
     On September 30, 1997, the Company issued 4,000 shares of Common Stock upon
exercise of a warrant for an aggregate purchase price of $12,000 or $3.00 per
share.
 
     On September 30, 1997, the Company issued 16,000 shares of Common Stock
upon exercise of a warrant for an aggregate purchase price of $17,000 or $1.0625
per share.
 
     On November 7, 1997, the Company issued 20,000 shares of Common Stock upon
exercise of a warrant for an aggregate purchase price of $3,250 or $0.1625 per
share.
 
     The sales and issuances of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act principally
by virtue of Sections 3(b) and 4(2) thereof as transactions not involving any
public offering.
 
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
     (a) EXHIBITS
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
     1.1  Form of Underwriting Agreement*
     3.1  Amended and Restated Articles of Incorporation*
     3.2  Amended and Restated Bylaws
     4.1  Specimen Stock Certificate*
     5.1  Opinion of Perkins Coie LLP*
    10.1  Optiva Corporation Amended and Restated 1990 Stock Option
          Plan
    10.2  Optiva Corporation Amended and Restated 1995 California
          Stock Option Plan
    10.3  Optiva Corporation 1998 Stock Incentive Compensation Plan*
    10.4  Optiva Corporation 1998 Employee Stock Purchase Plan*
    10.5  Consulting Agreement dated September 1, 1997 between Dr.
          David Engel and the registrant
    10.6  Consulting Agreement dated as of May 1, 1998 between Louis
          Yaseen and the registrant
    10.7  Option and Real Estate Purchase and Sale Agreement dated as
          of November 26, 1997 between The Quadrant Corporation and
          the registrant
    10.8  Expansion Agreement dated November 26, 1997 between The
          Quadrant Corporation and the registrant
    10.9  Lease Agreement dated July 22, 1997 between I. Bitners and
          the registrant
</TABLE>
 
                                      II-2
<PAGE>   81
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
    10.10 Lease Agreement dated April 29, 1996 between The Evans
          Company and the registrant for 13222 SE 30th Street, A-1
    10.11 Lease Agreement dated April 29, 1996 between The Evans
          Company and the registrant for 13228 S.E. 30th Street, C-3
    10.12 Lease Agreement dated September 6, 1995 between The Evans
          Company and the registrant for 13226 S.E. 30th Street, B-1
    10.13 Lease Agreement dated September 6, 1995 between The Evans
          Company and the registrant for 13228 S.E. 30th Street, C-1
    10.14 Amended and Restated Lease dated May 19, 1995 between Kamber
          Park & Associates and the registrant
    10.15 Lease Agreement dated July 29, 1995 between S.E. 30th
          Company and the registrant
    10.16 Lease Agreement dated August 19, 1996 between Stead Building
          Partnership and the registrant
    10.17 Agreement dated November 18, 1997 between Team Technologies,
          Inc. and the registrant
    23.1  Consent of Ernst & Young LLP, Independent Auditors
    23.2  Consent of Perkins Coie LLP (contained in the opinion to be
          filed as Exhibit 5.1 hereto)*
    24.1  Power of Attorney (contained on signature page)
    27.1  Financial Data Schedule
</TABLE>
 
---------------
* To be filed by amendment.
 
     (b)FINANCIAL STATEMENT SCHEDULE
        Schedule II -- Valuation and Qualifying Accounts
 
     All other schedules are omitted because they are inapplicable or the
requested information is shown in the consolidated financial statements of the
registrant or related notes thereto.
 
ITEM 17. UNDERTAKINGS
     Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by the
final adjudication of such issue.
 
     The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
 
     The undersigned registrant hereby undertakes that:
 
          (1) For purposes of determining any liability under the Securities
     Act, the information omitted from the form of prospectus filed as part of
     this Registration Statement in reliance upon Rule 430A and contained in a
     form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
     (4) or 497(h) under the Securities Act shall be deemed to be part of this
     Registration Statement as of the time it was declared effective.
 
          (2) For the purpose of determining any liability under the Securities
     Act, each post-effective amendment that contains a form of prospectus shall
     be deemed to be a new registration statement relating to the securities
     offered therein, and the offering of such securities at that time shall be
     deemed to be the initial bona fide offering thereof.
 
                                      II-3
<PAGE>   82
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
State of Washington, on the 11th day of May, 1998.
 
                                          OPTIVA CORPORATION
 
                                          By:      /s/ DAVID GIULIANI
                                            ------------------------------------
                                            David Giuliani
                                            President and Chief Executive
                                              Officer
 
                               POWER OF ATTORNEY
 
     Each person whose individual signature appears below hereby authorizes and
appoints David Giuliani and Michael D. Stull, and each of them, with full power
of substitution and resubstitution and full power to act without the other, as
his true and lawful attorney-in-fact and agent to act in his name, place and
stead and to execute in the name and on behalf of each person, individually and
in each capacity stated below, and to file, any and all amendments to this
Registration Statement, including any and all post-effective amendments and
amendments thereto and any registration statement relating to the same offering
as this Registration Statement that is to be effective upon filing pursuant to
Rule 462(b) under the Securities Act of 1933, as amended, and to file the same,
with all exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing, ratifying and confirming all that said attorneys-in-fact
and agents or any of them or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
 
     Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated below on the 11th day of May, 1998.
 
<TABLE>
<CAPTION>
                       SIGNATURE                                             TITLE
                       ---------                                             -----
<C>                                                       <S>
 
                   /s/ DAVID GIULIANI                     President, Chief Executive Officer and
--------------------------------------------------------  Chairman of the Board (Principal Executive
                     David Giuliani                       Officer)
 
                  /s/ MICHAEL D. STULL                    Vice President of Finance, Treasurer and
--------------------------------------------------------  Chief Financial Officer (Principal Financial
                    Michael D. Stull                      Officer and Principal Accounting Officer)
 
               /s/ VINCENT COVIELLO, JR.                  Director
--------------------------------------------------------
                 Vincent Coviello, Jr.
 
                    /s/ DAVID ENGEL                       Director
--------------------------------------------------------
                      David Engel
 
                    /s/ LOUIS YASEEN                      Director
--------------------------------------------------------
                      Louis Yaseen
</TABLE>
 
                                      II-4
<PAGE>   83
 
               REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
 
     We have audited the consolidated financial statements of Optiva Corporation
as of December 31, 1996 and 1997, and for each of the three years in the period
ended December 31, 1997, and have issued our report thereon dated February 6,
1998 (except Note 14, as to which the date is May   , 1998) (included elsewhere
in this Registration Statement). Our audits also included the financial
statement schedule listed in Item 16(b) of this Registration Statement. This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits.
 
     In our opinion, the financial statement schedule referred to above, 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.
 
                                                               ERNST & YOUNG LLP
 
Seattle, Washington
May   , 1998
 
--------------------------------------------------------------------------------
 
     The foregoing report is in the form that will be signed upon the approval
of the stock dividend and the increase in the number of authorized shares by the
shareholders described in Note 14 to the Consolidated Financial Statements.
 
                                                               ERNST & YOUNG LLP
 
Seattle, Washington
May 11, 1998
 
                                       S-1
<PAGE>   84
 
                SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
 
                               OPTIVA CORPORATION
                               DECEMBER 31, 1997
 
<TABLE>
<CAPTION>
                  COL. A                       COL. B         COL. C          COL. D         COL. E
-------------------------------------------  ----------    ------------    -------------    ---------
                                                            ADDITIONS
                                                           ------------
                                             BALANCE AT     CHARGED TO                       BALANCE
                                             BEGINNING      COSTS AND      DEDUCTIONS --    AT END OF
                DESCRIPTION                  OF PERIOD       EXPENSES        DESCRIBE        PERIOD
                -----------                  ----------    ------------    -------------    ---------
<S>                                          <C>           <C>             <C>              <C>
Year Ended December 31, 1997:
  Deducted from asset accounts:
     Allowance for doubtful accounts.......    $  460         $  513           $163(1)       $  810
  Sales return reserve.....................       250            300              0             550
                                               ------         ------           ----          ------
                                               $  710         $  813           $163          $1,360
                                               ======         ======           ====          ======
Year Ended December 31, 1996:
  Deducted from asset accounts:
     Allowance for doubtful accounts.......    $  819         $   27           $386(1)       $  460
  Sales return reserve.....................       200             50              0             250
                                               ------         ------           ----          ------
                                               $1,019         $  477           $386          $  710
                                               ======         ======           ====          ======
Year Ended December 31, 1995:
  Deducted from asset accounts:
     Allowance for doubtful accounts.......    $  122         $  697           $ --          $  819
  Sales return reserve.....................       195              5             --             200
                                               ------         ------           ----          ------
                                               $  317         $  702           $  0          $1,019
                                               ======         ======           ====          ======
</TABLE>
 
---------------
(1) Write-off of uncollectible accounts, net of recoveries.
 
                                       S-2
<PAGE>   85
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
EXHIBIT
NUMBER                            DESCRIPTION
-------                           -----------
<C>       <S>
     1.1  Form of Underwriting Agreement*
     3.1  Amended and Restated Articles of Incorporation*
     3.2  Amended and Restated Bylaws
     4.1  Specimen Stock Certificate*
     5.1  Opinion of Perkins Coie LLP*
    10.1  Optiva Corporation Amended and Restated 1990 Stock Option
          Plan
    10.2  Optiva Corporation Amended and Restated 1995 California
          Stock Option Plan
    10.3  Optiva Corporation 1998 Stock Incentive Compensation Plan*
    10.4  Optiva Corporation 1998 Employee Stock Purchase Plan*
    10.5  Consulting Agreement dated September 1, 1997 between Dr.
          David Engel and the registrant
    10.6  Consulting Agreement dated as of May 1, 1998 between Louis
          Yaseen and the registrant
    10.7  Option and Real Estate Purchase and Sale Agreement dated as
          of November 26, 1997 between The Quadrant Corporation and
          the registrant
    10.8  Expansion Agreement dated November 26, 1997 between The
          Quadrant Corporation and the registrant
    10.9  Lease Agreement dated July 22, 1997 between I. Bitners and
          the registrant
    10.10 Lease Agreement dated April 29, 1996 between The Evans
          Company and the registrant for 13222 SE 30th Street, A-1
    10.11 Lease Agreement dated April 29, 1996 between The Evans
          Company and the registrant for 13228 S.E. 30th Street, C-3
    10.12 Lease Agreement dated September 6, 1995 between The Evans
          Company and the registrant for 13226 S.E. 30th Street, B-1
    10.13 Lease Agreement dated September 6, 1995 between The Evans
          Company and the registrant for 13228 S.E. 30th Street, C-1
    10.14 Amended and Restated Lease dated May 19, 1995 between Kamber
          Park & Associates and the registrant
    10.15 Lease Agreement dated July 29, 1995 between S.E. 30th
          Company and the registrant
    10.16 Lease Agreement dated August 19, 1996 between Stead Building
          Partnership and the registrant
    10.17 Agreement dated November 18, 1997 between Team Technologies,
          Inc. and the registrant
    23.1  Consent of Ernst & Young LLP, Independent Auditors
    23.2  Consent of Perkins Coie LLP (contained in the opinion to be
          filed as Exhibit 5.1 hereto)*
    24.1  Power of Attorney (contained on signature page)
    27.1  Financial Data Schedule
</TABLE>
 
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* To be filed by amendment.