<PAGE>   1
                                                                      EXHIBIT 13



PRICE RANGE OF COMMON STOCK

Shares of OIS Common Stock are traded in the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") over-the-counter market under the
symbol OVON.  The following table sets forth the reported high and low bid
quotations of OIS Common Stock for the fiscal periods indicated:


<TABLE>
<CAPTION>
                                                              Prices
                                                         ------------------
                        Period                             Low      High
                        ------                             ---      ----
<S>                                                      <C>      <C>
Year ended June 30, 1996
  First Quarter . . . . . . . . . . . . . . . . . . .    $4.1250   $5.6250
  Second Quarter. . . . . . . . . . . . . . . . . . .     3.0000    5.2500
  Third Quarter . . . . . . . . . . . . . . . . . . .     3.7500    5.6250
  Fourth Quarter. . . . . . . . . . . . . . . . . . .     3.0625    3.7500

Year ended June 30, 1997
  First Quarter . . . . . . . . . . . . . . . . . . .    $2.6250   $3.6250
  Second Quarter. . . . . . . . . . . . . . . . . . .     1.5625    3.1875
  Third Quarter . . . . . . . . . . . . . . . . . . .     2.1250    3.1250
  Fourth Quarter. . . . . . . . . . . . . . . . . . .     2.1875    3.1250

Year ended June 30, 1998
  First Quarter . . . . . . . . . . . . . . . . . . .
    through September 18                                 $1.8125  $2.46875
</TABLE>

------------------------

     The quotations listed may include inter-dealer prices that may not
necessarily represent actual transactions.  No dividend or distribution on OIS
Common Stock has been paid and none is presently being considered.

     The approximate number of stockholders of record on September 18, 1997,
was 1,628.


                             Page 1 of Exhibit 13

<PAGE>   2

                            SELECTED FINANCIAL DATA


Set forth below is certain financial information taken from OIS' audited
financial statements.



<TABLE>
<CAPTION>
                                                                      Year ended June 30,
                                            -------------------------------------------------------------------------
                                                1997           1996           1995           1994          1993
                                                ----           ----           ----           ----          ----
<S>                                         <C>            <C>            <C>            <C>           <C>
Total Revenues                              $ 13,600,488    $ 10,595,207   $  8,423,041   $11,700,389   $  7,162,035

Cost of Sales                                 41,093,260      26,106,953     17,810,224    13,078,919      9,262,815
Internal Research and Development              2,037,583       1,971,513      1,306,843       688,094        372,242
Selling, General, Administrative and other     8,735,028       6,644,735      3,935,699     3,789,061      2,834,330
Income Tax Benefit                             9,755,490        ----           ----           ----          ----
Net Loss                                    $(28,509,893)   $(24,127,994)  $(14,629,725)  $(5,855,685)  $ (5,307,352)
Net Loss Available to Common Shareholders   $(33,020,009)   $(26,097,584)  $(14,840,683)  $(5,855,685)  $ (5,307,352)
Net Loss per Common Share                          $(.34)          $(.27)         $(.21)        $(.19)         $(.20)

At year end:
 Total Assets                               $ 77,172,789    $ 70,513,934   $ 57,263,779   $38,146,868   $  7,088,883

 Long-Term Debt, Net                        $ 42,000,000    $ 48,000,000   $ 40,125,454   $12,000,000   $     77,355

 Convertible Notes                                --            ----           ----          ----       $  7,221,412
 Working Capital (Deficit)                  $  2,904,085    $  3,432,241   $  5,211,233   $ 2,616,215   $ (1,173,195)

 Stockholders' Equity                       $ 14,967,499    $  7,163,704   $  7,820,724   $ 9,633,880   $  3,501,018
</TABLE>




                             Page 2 of Exhibit 13
<PAGE>   3
                    Report of Independent Public Accountants


To OIS Optical Imaging Systems, Inc.:

We have audited the accompanying Balance Sheets of OIS Optical Imaging Systems,
Inc. (a Delaware corporation) as of June 30, 1997 and 1996, and the related
statements of operations, stockholders' equity and cash flows for each of the
three years ended June 30, 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 financial position of OIS Optical Imaging Systems,
Inc. as of June 30, 1997 and 1996, and the results of its operations and its
cash flows for each of the three years ended June 30, 1997, in conformity with
generally accepted accounting principles.



\s\ Arthur Anderson LLP

Detroit, Michigan,
August 29, 1997.





                             Page 3 of Exhibit 13
<PAGE>   4

                       OIS OPTICAL IMAGING SYSTEMS, INC.
                                 BALANCE SHEETS

                                     ASSETS


<TABLE>
<CAPTION>
                                                               June 30,
                                                     --------------------------
                                                           1997          1996
                                                     ------------   -----------
<S>                                                  <C>           <C>
CURRENT ASSETS
 Cash and cash equivalents                           $    960,042  $        516
 Accounts receivable (net of reserve for doubtful
 accounts of $60,000)                                   4,222,508     3,232,486
 Inventories                                            9,525,136     5,847,250
 Income tax receivable from affiliate                   4,755,490       --
 Prepaid expenses and other current assets                746,199       485,251
 Insurance receivable                                     --          6,085,263
 Receivable from U.S. Government                          --            131,705

 TOTAL CURRENT ASSETS                                  20,209,375    15,782,471
                                                     ------------  ------------
PROPERTY AND EQUIPMENT
 Land                                                   3,000,000     3,000,000
 Building                                              32,891,009    32,232,265
 Machinery and other equipment                         31,371,764    28,670,855
 Construction in process                                   60,192       129,074
                                                     ------------  ------------

 TOTAL PROPERTY AND EQUIPMENT                          67,322,965    64,032,194
 Less accumulated depreciation                        (10,359,551)   (9,300,731)
                                                     ------------  ------------
 NET TOTAL PROPERTY AND EQUIPMENT                      56,963,414    54,731,463
 TOTAL ASSETS                                        $ 77,172,789  $ 70,513,934
                                                     ============  ============
</TABLE>


See notes to financial statements.





                             Page 4 of Exhibit 13
<PAGE>   5

                       OIS OPTICAL IMAGING SYSTEMS, INC.
                                 BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                               June 30,
                                                                ---------------------------------
                                                                        1997             1996
                                                                ----------------   --------------
<S>                                                             <C>                <C>
CURRENT LIABILITIES
 Current installments on capital lease obligation                 $      --        $    125,454
 Subordinated note payable to affiliate                               3,000,000       2,000,000
 Current installment on long-term debt                               10,500,000       3,000,000
 Accounts payable                                                     2,817,068       5,599,266
 Accrued interest                                                       578,166         951,103
 Deferred revenue                                                       112,204         236,845
 Other accrued liabilities                                              297,852         437,562
                                                                ---------------    ------------
  TOTAL CURRENT LIABILITIES                                          17,305,290      12,350,230

LONG TERM DEBT                                                       42,000,000      48,000,000
LOCAL GOVERNMENT SUBSIDY                                              2,900,000       3,000,000

  TOTAL LIABILITIES                                                  62,205,290      63,350,230

STOCKHOLDERS' EQUITY
     Preferred stock, par value $0.01 per share:

Series A, 8% cumulative, non-convertible and non-voting
 Authorized - 50,000 shares
 Issued and outstanding - -0- shares at June 30, 1997 and
 35,000 shares at June 30, 1996                                                             350
Series B, 8% cumulative, non-convertible and voting
 Authorized - 100,000 shares
 Issued and outstanding - 73,637 shares at June 30, 1997 and
 -0- shares at June 30, 1996                                                736
Common stock, par value $0.01 per share:
 Authorized - 125,000,000 shares
 Issued and outstanding - 97,467,920 shares at June 30, 1997
 and 97,103,790 shares at June 30, 1996                                 974,679         971,038
Additional paid-in capital                                          141,375,527     105,457,517
Accumulated deficit                                                (126,565,319)    (98,055,426)
Deferred compensation                                                  (818,124)     (1,209,775)
                                                                ---------------    ------------
TOTAL STOCKHOLDERS' EQUITY                                           14,967,499       7,163,704

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                        $  77,172,789    $ 70,513,934
                                                                ===============    ============
</TABLE>




See notes to financial statements.



                             Page 5 of Exhibit 13
<PAGE>   6
                       OIS OPTICAL IMAGING SYSTEMS, INC.

                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                               YEARS ENDED JUNE 30,
                                                 -------------------------------------------------
                                                     1997               1996              1995
                                                     ----               ----              ----
<S>                                              <C>               <C>               <C>      
REVENUES
Display revenue                                  $ 10,502,747      $  6,488,975      $  2,290,242
Engineering revenue                                 2,106,843         4,001,414         5,799,519
Sensor revenue                                        990,898           104,818           333,280
                                                 ------------      ------------      ------------
  TOTAL REVENUES                                   13,600,488        10,595,207         8,423,041

COST OF SALES
Display                                            31,818,764        12,658,272         6,257,458
Engineering                                         6,315,576        13,102,241         9,680,064
Sensors                                             2,958,920           346,440         1,872,702
                                                 ------------      ------------      ------------
  TOTAL COST OF SALES                              41,093,260        26,106,953        17,810,224
                                                 ------------      ------------      ------------


GROSS LOSS                                        (27,492,772)      (15,511,746)       (9,387,183)

OPERATING EXPENSES
Internal research and development                   2,037,583         1,971,513         1,306,843
Selling, general and administrative                 5,509,868         5,360,752         4,237,253
                                                 ------------      ------------      ------------

TOTAL OPERATING EXPENSES                            7,547,451         7,332,265         5,544,096
                                                 ------------      ------------      ------------

OPERATING LOSS                                    (35,040,223)      (22,844,011)      (14,931,279)

OTHER INCOME (EXPENSE)
Interest expense                                   (4,112,596)       (2,233,735)          (10,808)
Other income                                          406,898            41,954           200,236
Licensing and royalties                               480,538           104,174           112,126
Insurance proceeds                                     --               803,624          --
                                                 ------------      ------------      ------------

TOTAL OTHER INCOME (EXPENSE)                       (3,225,160)       (1,283,983)          301,554

LOSS BEFORE INCOME TAX BENEFIT                    (38,265,383)      (24,127,994)      (14,629,725)

Income tax benefit                                  9,755,490          --                 --

NET LOSS                                         $(28,509,893)     $(24,127,994)     $(14,629,725)
                                                 ------------      ------------      ------------

Preferred stock dividends                           4,510,116         1,969,590           210,958
                                                 ------------      ------------      ------------

NET LOSS AVAILABLE TO COMMON SHAREHOLDERS        $(33,020,009)     $(26,097,584)     $(14,840,683)
                                                 ------------      ------------      ------------
NET LOSS PER COMMON SHARE                               $(.34)            $(.27)            $(.21)
                                                        =====             =====             =====
</TABLE>

See notes to financial statements.





                             Page 6 of Exhibit 13
<PAGE>   7
                      OIS OPTICAL IMAGING SYSTEMS, INC.

                           STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                             YEARS ENDED JUNE 30,
                                                  -----------------------------------------------
                                                      1997           1996           1995
                                                  -----------    ------------     ---------------
<S>                                               <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss                                          $(28,509,893)  $(24,127,994)   $(14,629,725)
 Adjustments to reconcile net loss to net cash
  used in operating activities:
  Depreciation and amortization                       6,168,473      3,396,279       1,356,533
  Deferred compensation expense                         498,834        492,886         233,982
 Impact on cash flows from changes in assets
  and liabilities:
  Receivables                                           471,456     (2,490,928)      1,042,155
  Inventories                                        (3,677,886)    (2,487,188)     (1,276,461)
  Prepaid expenses and other assets                    (260,948)      (105,086)     (2,248,196)
  Accounts payable and accrued liabilities           (3,294,845)     1,329,875      (3,613,687)
  Deferred revenue                                     (124,641)       (90,109)       (407,824)
                                                   ------------   ------------    ------------
   NET CASH USED IN OPERATING
    ACTIVITIES                                      (28,729,450)   (24,082,265)    (19,543,223)

CASH FLOWS FROM INVESTING
 ACTIVITIES:
 Capital expenditures                                (8,500,423)   (12,392,797)    (24,708,813)
                                                   ------------   ------------    ------------
   NET CASH USED IN INVESTING                        (8,500,423)   
    ACTIVITIES                                                     (12,392,797)    (24,708,813)

CASH FLOWS FROM FINANCING
 ACTIVITIES:
 Payments on capital lease obligation                  (125,454)      (121,633)       (158,497)
 Proceeds from issuance of debt and notes             2,500,000     13,000,000      28,000,000
 Net proceeds from issuance of common stock             298,853        267,130         293,545
 Net proceeds from issuance of preferred stock       35,516,000     22,500,000      12,500,000
                                                   ------------   
  NET CASH PROVIDED BY FINANCING
    ACTIVITIES                                       38,189,399     35,645,497      40,635,048
                                                   ------------   ------------    ------------
 INCREASE (DECREASE) IN CASH AND
    CASH EQUIVALENTS                                    959,526       (829,565)     (3,616,988)
 CASH, CASH EQUIVALENTS  AT
  BEGINNING OF PERIOD                                       516        830,081       4,447,069
                                                   ------------   ------------    ------------
 CASH, CASH EQUIVALENTS AT
  END OF PERIOD                                    $    960,042   $        516    $    830,081
                                                   ============   ============    ============
</TABLE>




See notes to financial statements.


                             Page 7 of Exhibit 13
<PAGE>   8

                       OIS OPTICAL IMAGING SYSTEMS, INC.

                      STATEMENTS OF CASH FLOWS (continued)

                 SUPPLEMENTAL SCHEDULE OF NONCASH TRANSACTIONS
                          FOR THE YEARS ENDED JUNE 30,


<TABLE>
<CAPTION>
                                                      1997        1996              1995
                                                  ----------   ----------      -------------
<S>                                               <C>          <C>             <C>
Common Stock Issued in Exchange for Deferred
 Compensation, Net of Terminations                $  675,935   $1,369,409      $    287,014
Adjust Deferred Compensation                         568,752
Capitalization of Equipment Pursuant to Capital
Lease Obligation                                                                    365,000
Conversion of Guardian Equity to Common Stock                                    10,500,000
Conversion of Series A Preferred Stock to
 Series B Preferred Stock                         35,000,000
Payment of Dividends on Series A Preferred
Stock by Issuance of Series B Preferred Stock      3,128,129
</TABLE>



See Statements of Cash Flows.






                             Page 8 of Exhibit 13

<PAGE>   9


                      OIS OPTICAL IMAGING SYSTEMS, INC.

                        NOTES TO FINANCIAL STATEMENTS


NOTE A - ORGANIZATION

     OIS Optical Imaging Systems, Inc. ("OIS" or the "Company")  was organized
to complete the development of and thereafter to manufacture and market flat
panel displays and electronic image processing products, employing amorphous
and related materials and information technology.  OIS is currently providing
these products and services mainly to avionics and military customers.


NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES

Cash and Cash Equivalents

     Cash equivalents consist of investments in short-term, highly-liquid
securities having a maturity of three months or less when acquired.  Cash
equivalents of $960,042 and $516 are included in Cash and Cash Equivalents in
the accompanying Balance Sheets for the years ended June 30, 1997 and 1996,
respectively.  These are stated at cost which approximates market.

     Cash paid for interest for the fiscal years ended June 30, 1997, 1996 and
1995 was $4,485,533, $1,549,826 and $10,808, respectively.

Property and Equipment

     All properties are recorded at cost and are depreciated on the
straight-line method over the estimated useful lives of the individual assets.
The estimated lives of the principal classes of assets are as follows:


<TABLE>
<CAPTION>
                                                   Years
                                                   -----
                    <S>                            <C>
                    Machinery and other equipment  3 to 10
                    Buildings and cleanrooms       20 to 30
</TABLE>


     Machinery and other equipment acquired for a particular research and
development project which have no alternative future use (in other research and
development projects or otherwise) are charged to the expense of the specific
project to which they were dedicated.  Machinery and other equipment which have
alternative future uses are capitalized at cost.

     Expenditures for maintenance and repairs are charged to operating
expenses.  Expenditures for improvements or major renewals are capitalized and
are depreciated over their estimated useful lives.

     Capitalized lease equipment is depreciated over the term of the lease.

     Certain equipment installed at the new manufacturing facility is owned by
the government and is therefore not recorded in the accompanying Balance Sheets
(See Note K).

Local Government Subsidy

     The Local Government Subsidy is being amortized over 30 years on a
straight-line basis.  Amortization began July 1, 1996 (See Note K).





                             Page 9 of Exhibit 13
<PAGE>   10


Inventories

     Inventories are stated at the lower of cost, determined on a first-in
first-out basis, or market, and represent spare equipment parts, manufacturing
supplies, raw material used in display development and displays in process.
The components of inventories as of June 30, are as follows:


<TABLE>
<CAPTION>
                                   1997           1996
                                ----------     ----------
<S>                             <C>            <C>
        Spare equipment parts   $  601,585          --
        Manufacturing supplies     108,582     $   76,392
        Raw materials            6,787,877      5,048,022
        Displays in process      2,027,092        722,836
                                ----------     ----------
        Total                   $9,525,136     $5,847,250
                                ==========     ==========
</TABLE>


Insurance Receivable

     This amount represents costs incurred by the Company to repair and
clean-up damage caused by a fire at the Northville facility.  This amount was
reimbursed by the insurance company during fiscal 1997.


Research and Development

     Research and development costs are charged to operating expenses as
incurred.

Patents

     Patent expenditures are charged directly to expense, and are included in
Selling, General and Administrative expenses.

Customer Agreements

     Certain long-term customer engineering agreements are accounted for on a
percentage of completion basis.  Amounts billed but not yet earned and/or
amounts received as advance payments net of revenues recognized in advance of
billings are recorded as deferred revenue.  Projected losses on customer
agreements are recorded as cost in excess of anticipated billings at the time
such losses become apparent.  Revenue on the Company's display contracts is
recognized when displays are shipped to the customer.

     In fiscal 1997, 1996 and 1995, the Company derived approximately 61%, 76%
and 68% of revenue respectively from three customers operating in the U.S.
Aerospace industry.  As of June 30, 1997, 1996 and 1995, $2,366,421, $2,825,252
and $1,215,814 is due from these three customers and is included in Accounts
Receivable in the accompanying Balance Sheets.

Reclassifications

     Certain amounts in the prior year financial statements have been
reclassified to conform with the current financial presentation.

Management Estimates

     The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period.  Actual results could differ from those estimates.




                            Page 10 of Exhibit 13
<PAGE>   11


New Accounting Standards

     During fiscal 1999, the Company must adopt Statement of Financial
Accounting Standards (SFAS) No. 130, "Comprehensive Income" and SFAS No. 131,
"Segment Disclosures".  SFAS No. 130 requires that the Company include a
reconciliation of Net Loss to Comprehensive Income.  Comprehensive income
includes certain gains and losses which are currently required to be included
as components of stockholders' equity.  SFAS No. 131 requires the Company to
disclose certain financial information regarding the Company's internally
identified business segments.  The effect on the financial statements of
adopting these statements has not been determined.

NOTE C - CAPITAL STOCK

     Holders of OIS Common Stock are entitled to one vote per share.

     The holders of OIS Common Stock are entitled to dividends when and if
declared by the Board of Directors of OIS out of any funds legally available
therefore.  OIS has not declared or paid any dividends on Common Stock.  The
Company is restricted by its credit agreement from declaring or paying cash
dividends (See Note I).

     During fiscal 1995, the Company issued 12,500 shares of Series A Preferred
Stock to its affiliate Guardian Industries Corp. ("Guardian").  During fiscal
1996, the Company issued an additional 22,500 shares of Series A Preferred
Stock to Guardian.  The Company is restricted from paying dividends on its
Preferred Stock by its credit agreement.  Certain of these restrictions lapsed
on September 30, 1996 (See Note I).  The Series A Preferred Stock  had a
dividend rate of 8% for the first five years.

     On October 29, 1996, the Company's Board of Directors created and
authorized for issuance 100,000  shares of Series B Cumulative Preferred Stock,
par value $.01, with an original issuance price of $1,000 per share.  The
Series B Preferred Stock bears a cumulative dividend rate of 8% for the first
three years and a floating rate, subject to a 16.5% cap, thereafter.  Each
share of Series B Preferred Stock entitles the holder to 350 votes on each and
every matter submitted to a vote of the Company's shareholders.  The Series B
Preferred Stock is non-convertible.

     On October 30, 1996, the Company exchanged the 35,000 shares of Series A
Preferred Stock held by Guardian and all dividends in arrears for 38,137 shares
of Series B Preferred Stock.  Guardian and William Davidson contributed common
stock of the Company and other property to GD Investments Corp. ("GDIC"), a
Guardian affiliate.  On October 31, 1996, the Company sold 21,000 shares of
Series B Preferred Stock to GDIC at a price of $1,000 per share.  OIS used the
proceeds to retire its subordinated note payable (Bridge Loan) and all accrued
interest to Guardian, which amounted to approximately $18.9 million.

     During fiscal 1997, the Company sold an additional 14,500 shares of Series
B Preferred Stock to GDIC for a total of $14.5 million.  OIS used the proceeds
to fund ongoing operations.

     The Company's dividend policy  on both the Series A and Series B Preferred
Stock is to accrue only those  dividends that are declared, or expected to be
declared, in the current year by the  Board of Directors.  During fiscal 1997,
the Company satisfied all dividends in arrears on the Series A Preferred Stock,
totaling $3,128,219, by issuing an additional 3,137 shares of Series B
Preferred Stock.  Management has determined that the fiscal 1997 dividends on
the Series B Preferred Stock will not be declared.  Cumulative dividends in
arrears as of June 30, 1997 and 1996 total $3,562,445 and $2,180,548,
respectively.

NOTE D - STOCK OPTION PLANS

     OIS has in effect two stock incentive plans, the 1994 Significant Employee
Stock Incentive Plan (the "1994 Plan") and the Amended and Restated 1988 Stock
Option and Incentive Plan (the "1988 Plan").  The plans are administered by the
Stock Option Committee of the Board of Directors of OIS (the "Committee").
These plans authorize the award of restricted stock or stock options covering
3,000,000 shares of OIS Common Stock to employees, consultants and such other
persons as the Committee may determine.  Currently, the Committee is making
awards under the 1994 Plan only.




                            Page 11 of Exhibit 13
<PAGE>   12


     The Company has elected to provide the pro forma disclosures, as permitted
under the provisions of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation".  Accordingly, no compensation cost
has been recognized for the 1994 Plan and the 1988 Plan within the accompanying
Statements of Operations.  Had compensation expense for the Plan been
determined based on the fair value at the grant date for awards in 1997 and
1996 consistent with the provisions of SFAS No. 123, the Company's pro forma
net loss available to common shareholders and pro forma net loss per common
share would have been increased to the amounts indicated below:


<TABLE>
<CAPTION>
                                                                                                          1997           1996
<S>                                                                                                  <C>            <C>
     Pro forma net loss available to common shareholders
       As reported  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .      $(33,020,009)   $(26,097,584)
       SFAS No. 123 pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       (33,333,298)    (26,334,147)
     Pro forma net loss per common share -
       As reported  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (.34)            (.27)
       SFAS No. 123 pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         (.34)            (.27)
</TABLE>

     The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions
were used for the 1997 and 1996 grants:  risk-free rate of interest of 6.45%
for 1997 and 5.66% and 6.99% for 1996; dividend yield of 0%; and expected lives
of 10 years and 4.56 years.

     Awards of restricted stock are non-transferable and subject to forfeiture
during the restriction period established by the Committee.  The awards of
restricted stock during fiscal 1997, 1996 and 1995 are summarized in the
following table:


<TABLE>
<CAPTION>
             Number of       Per Share  Aggregate     Restriction
Fiscal Year  Shares Granted  Price      Value         Lapse Date
----------   --------------  -----      -----         ----------
<S>          <C>             <C>        <C>          <C>
     1997     254,300        $3.00      $762,900      October 13, 1999 
     1996     312,420        $4.50      $1,405,890    October 13, 1998
     1995      49,920        $6.50      $324,480      October 13, 1997
</TABLE>

     There are currently 339,200 outstanding stock options that were granted
under the 1994 Plan.  These options become exercisable in accordance with the
schedule established by the Stock Option Committee at the time of grant.  These
options expire ten years after the date of grant.  The option price is set at
market on date of grant.

     There are currently outstanding 10,000 stock options that were granted
under the 1988 Plan.  These options generally become exercisable in five
stages, beginning one year after the date of grant with respect to 20% of the
shares and continuing with an additional 20% of the shares becoming exercisable
annually thereafter.  These options generally expire six years after the date
of grant.  The option price is set at market on date of grant.

     The stock options granted by the Company are non-transferable and are
subject to forfeiture if not exercised within a time specified by the Committee
(but not more than three months) after the termination of employment with, or
provision of services to, the Company, unless the termination was a result of
death, disability or retirement, in which case the option may be exercised
until six months after the termination.






                            Page 12 of Exhibit 13
<PAGE>   13
     A summary of the transactions during the three years ended June 30, 1997
with respect to OIS' stock option plans follows:


<TABLE>
<CAPTION>
                                            1997                      1996                    1995
                                 ------------------------  ----------------------   ------------------------
                                                  Average                Average                     Average
                                                  Option                 Option                      Option
                                    Shares        Price     Shares        Price       Shares         Price
                                 -----------    ---------  ---------   ----------   ----------     ---------
<S>                              <C>             <C>      <C>            <C>       <C>            <C>  
Outstanding at the beginning
 of fiscal year                     397,608       $3.77     341,104       $3.15       313,419        $2.26
Granted                              94,000        2.81     174,950        4.58       108,000         5.13
Cancelled                            19,330        2.47      37,800        4.93         9,350         2.25
Exercised                           123,078        2.25      80,646        2.25        70,965         2.25
                                                  -----   ---------      ------     ---------       ------
Outstanding June 30,                349,200       $4.12     397,608       $3.77       341,104        $3.15
                                  =========       =====   =========      ======     =========       ======

Exercisable June 30,                110,000       $4.64     220,158       $3.05       143,731        $2.21
                                  =========       =====   =========      ======     =========       ======

Available for grant June 30,      2,126,630         N/A   2,430,990         N/A     2,868,860          N/A
                                  =========       =====   =========      ======     =========       ======
</TABLE>

NOTE E - RELATED PARTY TRANSACTIONS

     In April 1992, OIS and the Company's affiliate, Guardian entered into a
Services Agreement, which was amended in July 1992.  Under that agreement,
Guardian provided the services of Rex Tapp, who was an employee of Guardian, as
President of OIS, for $130,000 per year; provides certain administrative,
accounting, technical, travel arrangement, management and tax services for
$50,000 per year, and provides legal services at an hourly rate of $100.  In
July 1995, Mr. Tapp became an employee of OIS with the result that his services
to OIS are no longer subject to the Services Agreement.  During fiscal years
1997 and 1996, OIS incurred expenses for these services of approximately
$110,000 per year.  In 1995, this expense was approximately $190,000.  During
1995, OIS also purchased approximately $17,000 worth of architectural glass
from Guardian for installation at the new manufacturing facility.  In May 1993,
OIS and Guardian entered into a Services Agreement in which employees at
Guardian provided engineering services in connection with construction of the
new facility.  The aggregate amount paid by OIS will not exceed $250,000
without approval of the Independent Directors of OIS.  The Company incurred
approximately $118,000 for the year ended June 30, 1995, for these engineering
services (see Note K).

NOTE F - NET LOSS PER COMMON SHARE

     Net loss per common share, which equals fully diluted loss per share, is
based on the weighted average number of shares of OIS Common Stock outstanding
during the year.  The number of shares used in the computation for the years
ended June 30, 1997, 1996 and 1995 were 97,286,539, 96,889,823, and 69,241,640,
respectively.

     Under the terms of the two Stock Purchase Agreements, the Guardian Option
(see Note I) and William Davidson's right pursuant to a May 14, 1993 agreement
(see Note I), the Company issued 65,791,720 shares of Common Stock on November
26, 1994.  Pursuant to a fiscal 1994 agreement, the shares of Common Stock were
paid for, but not issued,  prior to June 30, 1994.  If these shares of Common
Stock had been issued and outstanding as of June 30, 1994, net loss per share
would have been $.15 for the year ended June 30, 1995, based upon 96,654,669
weighted average shares.

     For the year ended June 30, 1998, the Company will be required to adopt
Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per
Share".  SFAS No. 128 will require primary net loss per common share to be
replaced with basic net loss per common share, which is computed by dividing
reported net loss available to common shareholders by the weighted average
common shares outstanding.  No dilution for potentially dilutive securities is
included.  Fully diluted net loss per common share, now called diluted net loss
per common share, is still required.  This statement is not expected to have a
material effect on the Company's financial statements.






                            Page 13 of Exhibit 13
<PAGE>   14



NOTE G - FEDERAL TAXES ON INCOME

     As a result of certain Capital Stock transactions (See Note C),  the
Company is eligible to be a member of Guardian's affiliated tax group
("Affiliated Group").  This allows the Company's tax losses, credits and/or
income generated after October 31, 1996 to be included in the single
consolidated federal income tax return filed by the Affiliated Group.  Guardian
and the Company entered into a Tax Sharing Agreement dated November 1, 1996,
pursuant to which the Company will receive or make tax sharing payments based
on the amount by which the federal income tax liability of the Affiliated Group
is reduced, or increased, by inclusion of the Company in the Affiliated Group.
As of June 30, 1997, the Company had received $5 million and recorded an
estimated receivable from Guardian of $4,755,490 in accordance with the Tax
Sharing Agreement.

     The differences between the United States Federal statutory income tax
benefit and the income tax benefit as calculated under the provisions of SFAS
No. 109  for the years ended June 30, are summarized as follows:


<TABLE>
<CAPTION>
                                              1997                  1996                        1995
                                          ------------           ----------                 -----------
<S>                                      <C>                    <C>                        <C>               
        Federal statutory benefit        $(13,393,490)          $(8,204,000)                $(4,974,000)
        Benefit due to change in
         effective tax rate                  (944,000)
        Net increase in valuation
        reserve due  to losses
         without tax benefit                4,570,000             8,195,000                   4,971,000
        Other                                  12,000                 9,000                       3,000
                                         ------------           -----------                 -----------
        Actual income tax benefit        $ (9,755,490)          $     -0-                   $     -0-
</TABLE>
The components of the income tax benefit for the years ended June 30, are 
summarized as follows:

<TABLE>
<CAPTION> 
                                             1997                   1996                       1995
<S>                                      <C>                    <C>                         <C>
        Federal
         Currently refundable            $(12,743,490)          $(9,860,000)                $(5,217,000)
         Deferred                          (1,582,000)            1,665,000                     246,000
         Net increase in valuation
          Reserve                           4,570,000             8,195,000                   4,971,000
                                         ------------           -----------                 -----------
        Actual income tax benefit        $ (9,755,490)          $     -0-                   $     -0-
                                         ============           ===========                 ===========
</TABLE>

     Deferred income taxes represent temporary differences in the recognition
of certain items for income tax and financial reporting purposes.  The
components of net deferred income taxes are summarized as follows:


<TABLE>
<CAPTION>
                                           June 30, 1997  June 30, 1996
                                           -------------  -------------
<S>                                        <C>            <C>
        Deferred income tax liability:
          Depreciation and amortization    $  1,041,000   $  1,729,000
                                           ------------   ------------
                                              1,041,000      1,729,000
        Deferred income tax assets:
          Net operating loss credits        (35,769,000)   (32,781,000)
          Other                              (1,930,000)    (1,036,000)
                                           ------------   ------------
                                            (37,699,000)   (33,817,000)
        Valuation allowance                  36,658,000     32,088,000
                                             (1,041,000)    (1,729,000)
        Net deferred income taxes          $     -0-      $    -0-
                                           ============   ============
</TABLE>




                            Page 14 of Exhhibit 13
<PAGE>   15

     Tax loss carryforwards and other tax attributes are subject to limitations
provided by Internal Revenue Code Sec. 382, which may substantially reduce the
amounts available for utilization as a result of changes in control.  There was
a change of ownership on December 12, 1990 for purposes of Internal Revenue
Code Sec. 382.

     At June 30, 1997, remaining net operating loss and tax credit
carryforwards expire as follows:


<TABLE>
<CAPTION>
                         Net Operating         Other      
                              Loss           Tax Credit    
                          Carryforward      Carryforwards  
                         --------------    ---------------
<S>                      <C>                  <C>
        1999             $  3,965,000
        2000                6,560,000         $351,500
        2001                3,255,000           90,200
        2002                3,242,000
        2003                7,391,000
        2004                3,352,000
        2005                  633,000
        2006                6,009,000
        2007                6,476,000
        2008                5,213,000            1,000
        2009                5,886,000            2,030
        2010               15,434,000
        2011               23,723,000            7,700
        2012               11,059,000          
                         $102,198,000         $452,430
                         ============         ========
</TABLE>

NOTE H - LEASE AGREEMENTS

     In the year ended June 30, 1995, OIS entered into a three-year
non-collateralized lease agreement covering certain machinery and equipment.

     OIS's Troy  facilities are leased under a lease that  expired in September
1996, at a monthly rate of $15,460.  This lease was renewed on a month-to-month
basis.  All OIS leases are with unrelated parties.

     Obligations under noncancellable operating leases subsequent to June 30,
1997 are as follows:


<TABLE>
<CAPTION>
                            Operating
                             Leases
<S>                         <C>
        1998                $  32,644
        1999                   26,946
        2000                   26,292
        2001                   19,719
                            ---------
                            $ 105,601
</TABLE>

     Operating lease expense for the fiscal years ended June 30, 1997, 1996 and
1995 was $241,953, $250,344, and $251,632, respectively.

NOTE I - FINANCING TRANSACTIONS

     On November 26, 1991, Guardian paid OIS $10,500,000 for 7,000,000 shares
of OIS Common Stock, which then represented approximately 28 percent of all
issued and outstanding shares.  OIS also granted and issued to Guardian a
three-year option (the "Guardian Option") to purchase additional shares of the
Common Stock for a price of $10,500,000.  Effective November 26, 1994, Guardian
exercised its option to purchase additional shares of OIS Common Stock.  In
that transaction, OIS issued to Guardian 41,828,768 shares of Common Stock.
The option shares issued to Guardian, together with the shares issued to
Guardian in November 1991, amounts to approximately 51 percent of the issued
and outstanding shares of the Common Stock




                            Page 15 of Exhibit 13
<PAGE>   16

on a fully diluted basis.

     On May 14, 1993, the Company, William Davidson and Guardian entered into a
transaction to increase the stockholders' equity of the Company.  In this
transaction, William Davidson converted $5,785,109 of 10% convertible
subordinated securities  into 2,804,901 shares of Common Stock and the right to
receive additional Common Stock upon Guardian's exercise of the option
described above.  Concurrent with the exercise of the Guardian Option, William
Davidson received 23,962,502 shares of Common Stock pursuant to this right.

     On December 14, 1993, the Company entered into a credit agreement (the
"Agreement"), which has been amended, with a consortium of banks.  Under the
terms of the Agreement, the Company obtained a credit facility that provides
$26.25 million in term loans and a $26.25 million revolving credit facility.
Under the terms of the Agreement, the term loans and borrowings under the
revolving credit facility bear interest, payable quarterly, at LIBOR plus
 .875%, or at elected fixed rates with interest periods ranging from 30 days to
180 days.   The term loans are payable in quarterly principal installments of
$5,500,000 on December 31, 1997, $2,500,000 commencing March 31, 1998 through
June 30, 1998, $2,750,000 on September 30, 1998 through December 31, 1998,
$3,375,000 on March 31, 1999 through June 30, 1999, $3,875,000 on September 30,
1999 and $25,875,000 on December 31, 1999. The Company also pays a commitment
fee of .375% of the unused portion of the credit facility.  The revolving
credit facility matures in December 1999.

     Under the terms of the Credit Agreement, OIS is restricted from making
capital expenditures in excess of certain amounts, from incurring additional
debt (as defined) and paying cash dividends (as defined).  Furthermore, OIS
must maintain a level of minimum tangible capital funds and leverage ratio as
defined in the Credit Agreement.  As of June 30, 1997, the Company is not in
compliance with the capital spending covenant.  The Company has received a
waiver from the consortium of banks.

     The Company has entered into an interest rate swap agreement to reduce the
impact of changes in interest rates on its floating rate long-term debt.  At
June 30, 1997, the Company had an outstanding interest rate swap agreement with
a commercial bank, having a total notional principal amount of $15 million.
This agreement effectively changes the Company's interest rate exposure on its
floating rate notes due in 1999 to a fixed LIBOR rate of 5.933%.  The interest
rate swap agreement matures at the time the related notes mature.  The Company
is exposed to credit loss in the event of non-performance by the other parties
to the interest rate swap agreement.  However, the Company does not anticipate
non-performance by the counterparties.  The fair value of the Company's
long-term debt is estimated based on market rates of interest for the same or
similar issues and current rates offered to the Company for debt of the same
remaining maturities.  The fair value of the Company's long-term debt
approximates its carrying value.

     During fiscal 1997, the Company signed a $20 million Promissory Note (the
"Note") with GDIC.  The Note bears interest at a rate of 6% per annum.  The
Note is subordinated to all amounts outstanding under the agreement described
above.  At June 30, 1997, $3 million is outstanding under the Note.   The
principal balance of the Note and all accrued and unpaid interest is due upon
demand of the holder.

     Due to the level of current and anticipated losses, management expects
additional capital resources will be needed to support the Company's
operations.  Management expects that Guardian, directly or through an
affiliate, will provide funding to support the Company's operations through
fiscal 1998.  At this time, Guardian has not indicated any intention to
discontinue funding the Company.

NOTE J - EMPLOYEE BENEFIT PLAN

     The Company has a 401(k) plan for substantially all employees.  Employer
contributions are 50% of the employee's contribution, up to a maximum of 5% of
the employee's wages.  Employer contributions to this plan were approximately
$198,000, $176,000 and $135,000 for the years ended June 30, 1997, 1996 and
1995, respectively.

NOTE K - NEW MANUFACTURING FACILITY

     During fiscal 1994, the Company started construction on a new
manufacturing facility in Northville, Michigan.  In connection with the
construction, the Company purchased land valued at approximately $3 million
from Wayne County for $10.00.  The Company is using the land for their
manufacturing facility and have met certain employment criteria. The facility
cost approximately $107 million.  Pursuant to this construction, the Company
has capitalized approximately $1.10 million and $2.38 million of interest
incurred during construction during the years ended June 30, 1996 and 1995.
The capitalized interest




                            Page 16 of Exhibit 13
<PAGE>   17

is included in Building in the accompanying Balance Sheets.

     During  fiscal 1994, the Company negotiated an agreement under the DARPA,
AMLCD Manufacturing Technology Program.  Under the terms of the agreement, the
Company received $48 million (the "Proceeds") over two years.  The Company used
the proceeds to purchase equipment for installation in the new manufacturing
facility.  The equipment purchased remains the property of the United States
Government and is not reflected in the accompanying Balance Sheets.  The
Company is entitled to use this equipment without charge until August 1998.  At
that time, the Company has the option to purchase the Government owned
equipment at its then Fair Market Value.  Cash received prior to payment for
the equipment is reflected in Cash and Cash Equivalents in the accompanying
Balance Sheets.  Amounts billed to DARPA, but not received, are reflected as
Receivable from the U.S. Government  in the accompanying Balance Sheets. The
liability is relieved as equipment is purchased.  As of June 30, 1997, $48
million has been billed, all of which has been received.  As of June 30, 1997,
the Company has spent approximately $132,000 for equipment that has not been
billed to DARPA and is included in Receivable from U.S. Government in the
accompanying Balance Sheets.











                            Page 17 of Exhibit 13
<PAGE>   18


          MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                           AND RESULTS OF OPERATIONS

                             RESULTS OF OPERATIONS

SUMMARY

The operating results for fiscal 1997 continue to reflect substantial operating
losses.  As a result of increased production volumes, fiscal 1997 revenue was
28% higher than fiscal 1996 revenue.  However, the Company's cost of sales
continued to exceed revenue due to the relatively high cost of sales driven by
the Company's overhead, scrap rates and depreciation expense for the period.

During fiscal 1997, the Company worked to resolve a number of production
issues, including equipment down-time, that were limiting production volumes.
The Company also identified and corrected several process problems which were
causing product defects and lower production yields.  Although production
volumes and yields  improved significantly during the fiscal year, the majority
of these improvements were not realized until the fourth quarter of the current
year.  In fact, nearly 81% of  the total unit volume of production for the year
occurred during the last six months of fiscal 1997.

While the Company works to improve production yields and volumes, the Company
will also need to expand the markets for its products by increasing its sales
of displays, primarily to the avionics markets, and developing  its x-ray
sensor business.  Management is optimistic about the Company's ability to
produce and sell  more products in fiscal 1998.  Although significant losses
will continue, management anticipates that the Company's operating results will
improve somewhat during fiscal 1998. The Company's ability to further improve
its financial performance and achieve profitability will depend on whether the
Company is able to achieve significantly higher volumes of production and sales
and reduce its incremental cost of sales in future fiscal periods.

YEAR ENDED JUNE 30, 1997 COMPARED TO YEAR ENDED JUNE 30, 1996

REVENUE

Total revenue for fiscal 1997 of $13,600,488 was 28% higher than total revenue
for fiscal 1996 of  $10,595,207.  This increase is attributable to a
substantial increase in revenue from the sale of displays and sensors, which
was partly offset by a decrease in revenue from customer-funded engineering.

Revenue from the sale of displays and sensors for fiscal 1997 of approximately
$11,500,000 was 74% higher than revenues from the sale of displays and sensors
for fiscal 1996.  This increase, which continues a trend started during fiscal
1996, is the result of more displays being manufactured and shipped during
fiscal 1997.  Although display revenue increased during fiscal 1997, the rate
of growth was constrained by low production volumes during the first three
quarters of the year.  Significant additional display and sensor revenue will
be necessary if the Company is to substantially improve its financial results.
Management expects that revenues from the sale of displays and  sensors will
continue to increase during fiscal 1998 as existing orders for the Company's
products are satisfied.  However,  the sales volume required to achieve
profitability exceeds the existing market for the Company's products.
Therefore, the Company is working aggressively to expand the markets for its
displays, x-ray sensors and other products.





                            Page 18 of Exhibit 13
<PAGE>   19


Revenue from customer-funded engineering for fiscal 1997 of approximately
$2,100,000 was 47% lower than revenue from customer-funded engineering for
fiscal 1996 of approximately $4,000,000. This decrease is the result of the
Company's strategic decision to reduce customer-funded engineering activity as
the Company concentrates on manufacturing operations.

COST OF SALES

Cost of sales for fiscal 1997 of $41,093,260 was 57% higher than cost of sales
for fiscal 1996 of $26,106,953.  The cost of sales as a percentage of revenue
increased to 302% in fiscal 1997 from 246% in fiscal 1996.  Cost of sales
consists of direct labor, direct material and overhead costs to support the
manufacturing process.  Overhead costs include, among other things, the costs
of utilities, maintenance and repairs, insurance, depreciation, engineering,
supervisory and quality control personnel and other costs needed to facilitate
the manufacturing process.

Direct labor and material for fiscal 1997 increased by approximately $8.7
million when compared to fiscal 1996.   Most of this increase is attributable
to the increased  amounts of raw materials used to verify process controls and
increase production volumes.  Although yields improved significantly throughout
the fiscal year, higher production volumes resulted in higher overall scrap
costs in fiscal 1997 compared to fiscal 1996. Management is encouraged by the
significant increase in production volumes and improved yields experienced
during the fourth quarter of the current fiscal year.  To the extent that the
Company can continue to improve yields and increase production volumes,
management expects that direct labor and material will decrease on a per unit
basis and as a percentage of revenue during fiscal 1998.

Overhead for fiscal 1997 increased by approximately $6.3 million when compared
to fiscal 1996. The increase is attributable in large part to an increase of
approximately $2.7 million in depreciation expense due to the facility and
related process equipment being depreciated for a full year during fiscal 1997.
During 1997, the Company also incurred approximately  $3.6 million in
increased costs in the areas of repair and maintenance, utilities,
manufacturing supplies and tooling.

A substantial part of the Company's overhead costs are largely fixed and, as a
result, management does not expect significant changes in the total overhead
costs as production volume increases.  However, until the Company is able to
produce more saleable product, overhead costs will continue to be a major
component of cost of sales on both a per unit and percentage of revenue basis.

OTHER COSTS

The Company's internal research and development costs of  $2,037,583 in fiscal
1997 were 3% higher than the internal research and development costs of
$1,971,513 incurred in fiscal year 1996.  The Company continues to invest
resources in order to increase and improve its line of products and to protect
its technology and intellectual property rights.  This area is an important
part of OIS's business. Management expects internal research and development
spending for fiscal 1998 will be consistent with fiscal 1997.
The Company's Selling, General and Administrative costs of $5,509,868 in fiscal
1997 were 3% higher than Selling, General and Administrative costs of
$5,360,752 in fiscal 1996.  Management does not expect its Selling, General and
Administrative costs to increase significantly in fiscal 1998.

Interest expense during fiscal 1997 increased by approximately  $1,900,000
compared to fiscal 1996. During fiscal 1996 the new plant was placed in
service.  Therefore, a proportionate amount of interest incurred on the debt to
finance construction of the Northville facility is no longer being capitalized
as part of the cost




                            Page 19 of Exhibit 13
<PAGE>   20

of the Northville facility.  The Company also incurred additional interest on
higher debt levels to finance ongoing operations when compared to fiscal 1996.
Interest expense is expected to continue to increase until operations generate
enough profits to begin retiring the outstanding debt.

Other income, licensing and royalty income and insurance proceeds in fiscal
1997 decreased by $62,316 compared to fiscal 1996.  This decrease is
attributable in large part to a one-time insurance payment of $803,624 received
during fiscal 1996 in connection with the interruption of business caused by
the fire at the Northville facility in March 1995. Royalty income increased by
$376,364 compared to fiscal 1996.  The Company also realized $276,481 from the
sale of equipment formerly utilized at the Troy facility.

Other differences between fiscal 1997 and 1996 are not discussed because they
result principally from differences in timing of revenue and expenses and not
from any known trends.

YEAR ENDED JUNE 30, 1996 COMPARED TO YEAR ENDED JUNE 30, 1995

REVENUE

Total revenue for fiscal year 1996 of $10,595,207 was 26% higher than total
revenue for fiscal 1995 of $8,423,041.  This increase is attributable to a
substantial increase in revenue from the sale of displays which was partly
offset by a decrease in revenue from customer-funded engineering.

Revenue from the sale of displays for fiscal 1996 of approximately $6,489,000
was 183% higher than revenues from the sale of displays for fiscal 1995 of
approximately $2,290,000.  This increase is the result of more displays, both
standard and contract specific, being manufactured and shipped during fiscal
1996.  Deliveries of various size displays, which were developed in prior
fiscal years, to Kaiser Electronics under the F-22 and F-18 programs generated
approximately $3,000,000 or 46% of the revenue from the sale of displays during
fiscal 1996.

Revenue from customer-funded engineering for fiscal year 1996 of approximately
$4,000,000 was 31% lower than revenue from customer-funded engineering for
fiscal 1995 of approximately $5,800,000.  This decrease is the result of the
Company's strategic decision to reduce customer-funded engineering activity as
the Company concentrates on manufacturing operations.  Management expects
revenue from customer-funded engineering to continue to decline in the future.

Although revenue from the sale of displays increased during fiscal 1996, the
rate of increase was constrained by manufacturing difficulties at the Troy
facility which are discussed below under Cost of Sales.  The Company continued
operations at the Troy facility longer than expected as a result of the
extensive effort to repair and clean-up damage caused by the fire experienced
in March 1995 at the Northville facility.  Approximately $3,200,000 of displays
that had been expected to be delivered in fiscal 1996 were not delivered.  The
Company has worked closely with its customers, and no orders for the Company's
products have yet been canceled as a result of delivery delays.  If the ramp-up
of the Northville facility proceeds as anticipated, management expects that the
delayed shipments will be delivered during fiscal 1997.

COST OF SALES

Cost of sales for fiscal 1996 of $26,106,953 was 47% higher than cost of sales
for fiscal 1995 of $17,810,224.  The cost of sales as a percentage of revenue
increased to 246% in fiscal 1996 from 211% in fiscal 1995.  Cost of sales
consists of  direct labor, direct material and overhead costs to support the




                            Page 20 of Exhibit 13
<PAGE>   21

manufacturing process.  Overhead costs include, among other things,  the costs
of utilities, maintenance and repairs, insurance, depreciation, engineering,
supervisory, quality control and other costs needed to facilitate the
manufacturing process.  While the Company's direct labor and material costs in
fiscal 1996 declined slightly as a percentage of revenue compared to fiscal
1995, the Company's overhead costs for fiscal 1996 increased significantly both
in absolute dollars and as a percentage of revenue compared to fiscal 1995.

The increase in overhead costs for fiscal 1996 is attributable in large part to
the increased costs of wages and benefits for factory support personnel,
increased depreciation expense and the expense of maintaining the Troy facility
for continuing production operations.  In anticipation of increasing production
activity in Northville, the Company hired and trained additional production
supervisors and quality control personnel during fiscal 1995.  Although no
significant personnel in these areas were added during fiscal 1996, the costs
for these additional personnel were incurred for a full year during fiscal
1996.  Depreciation expense for fiscal 1996 increased by approximately
$1,900,000 compared to fiscal 1995 due to the Northville facility and process
equipment being placed in service during fiscal 1996.  The Company spent
approximately $500,000 in fiscal 1996 to repair and modify equipment necessary
to continue production operations at the Troy facility before it was closed.
The Company also recorded a charge of $300,000 as an estimate of cost to
restore the Troy facility as required by the terms of the Company's lease.

Reducing the Company's cost of sales to an acceptable level depends on
improving yields and increasing production volumes.  If the Company becomes
more efficient in its manufacturing process, direct labor and material costs
will decrease on a per unit basis.  Because most of the Company's indirect
costs are fixed and the Company has already assembled a workforce sufficient to
support the anticipated increases in manufacturing activity at Northville,
management does not expect a significant increase in indirect costs as
production volumes increase.  However, until the Company is able to produce and
sell more product to absorb its overhead costs, overhead costs will continue to
result in high cost of sales on both a per unit and percentage of revenue
basis.

OTHER COSTS

The Company's internal research and development costs of $1,971,513 in fiscal
1996 was 51% higher than the internal research and development costs of
$1,306,843 incurred in fiscal 1995.  The Company's research and development
efforts are focused on improving current products, increasing its standard
product line and protecting the Company's technology and intellectual property
rights. Management considers it imperative to maintain a strong research and
development program.  Research and development spending for fiscal 1997 is
expected to increase slightly from fiscal 1996.

The Company's Selling, General and Administrative costs of $5,360,752 in fiscal
1996 were 27% higher than the Selling, General and Administrative costs of
$4,237,253 in fiscal 1995.  This increase is due to the Company expanding its
marketing and administrative organization to manage the current and anticipated
increases in marketing and general business activity.  Management does not
expect its Selling, General and Administrative costs to increase significantly
during fiscal 1997.

Interest expense during fiscal 1996 increased by approximately $2,200,000
compared to fiscal 1995.  During fiscal 1996, most of the Northville facility
was placed into service with the consequence that a proportionate amount of
interest incurred on the debt to finance construction of the Northville
facility is no longer being capitalized as part of the cost of the Northville
facility.  The Company also incurred additional interest on higher debt levels
to finance ongoing operations during fiscal 1996.  Interest expense is expected
to continue to increase until operations generate enough profits to begin
retiring the outstanding debt.




                            Page 21 of Exhibit 13
<PAGE>   22

During fiscal 1996, the Company received $803,624 of insurance proceeds
resulting from the interruption of business caused by the fire at the
Northville facility in March 1995.  This amount is separate from the
reimbursable expenses incurred by the Company to repair damage from the fire,
which is discussed under Liquidity and Capital Resources.

Other differences between fiscal 1996 and 1995 are not discussed because they
resulted principally from differences in timing of revenue and expenses and not
from any known trends.

LIQUIDITY AND CAPITAL RESOURCES

LIQUIDITY

The Company's Cash and Cash Equivalents at June 30,1997 was $960,042.  The
Company is attempting to manage its cash to minimize borrowings under its
various debt instruments.

OPERATING ACTIVITIES

During fiscal 1997, the Company incurred a net loss of  $28,509,893.  Inventory
increased approximately $3.7 million as the Company increased levels of raw
materials and spare equipment parts to sustain the increase in manufacturing
activity.  Accounts payable and other accrued expenses decreased approximately
$3.3 million due to the timing of payment of invoices.  Furthermore, the
Company incurred approximately  $6.2 million in depreciation costs, which
contributed to net loss but had no effect on cash.

INVESTING ACTIVITIES

During fiscal 1997, the Company spent approximately $3.4 million on equipment
related to the development and production of x-ray sensors.  The Company also
spent approximately $2.2 million on substrate carriers, test equipment and
display fixtures to handle the increase in production volume.   Furthermore,
the Company spent an additional  $2.9 million for computer hardware and
software as well as improving existing equipment, building and cleanrooms in an
effort to improve efficiency and productivity.

FINANCING ACTIVITIES

During fiscal 1997, the Company received $35.5 million from the sale of
preferred stock to GD Investments Corp. ("GDIC"), a Guardian affiliate. (See
Capital Resources.)

During fiscal 1997, the Company signed a $20 million Promissory Note in favor
of GDIC to the Company to provide the Company with working capital. The
Promissory Note accrues interest at a rate of 6% per annum, and all principal
and interest is payable on demand of GDIC. As of June 30, 1997, the Company had
borrowed $3 million under the Promissory Note.  As of September 18, 1997, the
Company has borrowed $9 million under the promissory note.

During fiscal 1997, the Company borrowed $16.4 million under an existing $20
million bridge loan from Guardian to provide the Company with working capital
requirements.   In October of 1997, the Company repaid the entire $18.9 million
principal balance of the bridge loan together with  all accrued interest. (See
Capital Resources).

During fiscal 1997, the Company borrowed $1.5 million under its $52.5 million
commercial credit facility




                            Page 22 of Exhibit 13
<PAGE>   23

with NBD Bank N.A. and Bank of America NT&SA. As of June 30, 1997, the
Company's aggregate borrowings under its commercial credit facility were $52.5
million.  The repayment of principal, which was originally scheduled to begin
on June 30, 1997, has been deferred to December 31, 1997 under agreement with
the banks.  The first payment on this date is $5.5 million with various
quarterly payments due through December 31, 1999.

The Company's cash is decreasing, and management anticipates a need for
additional cash during fiscal 1998 (see Capital Resources).

CAPITAL RESOURCES

The Company has financed the completion of the Northville plant and related
ramp-up and provided working capital for continuing operations through fiscal
1997.

On October 29, 1996, the Company's Board of Directors created and authorized
for issuance 100,000 shares of Series B Preferred Stock, par value $.01, with
an original issuance price of $1,000 per share.  The Series B Preferred Stock
bears a dividend rate of 8% for the first three years and a floating rate,
subject to a 16.5% cap, thereafter.  Each share of Series B Preferred Stock
entitles the holder to 350 votes per share on each and every matter submitted
to a vote of the Company's shareholders.  The Series B Preferred Stock is
non-convertible.

On October 30, 1996, the Company exchanged the 35,000 shares of Series A
Preferred Stock held by Guardian and all dividends in arrears for 38,137 shares
of Series B Preferred Stock. Guardian and William Davidson contributed common
stock of the Company and other property to GDIC.  On October 31, 1996, the
Company sold 21,000 shares of Series B Preferred Stock to GDIC at a price of
$1,000 per share.  OIS used the proceeds to repay all principal and all accrued
interest under its bridge loan from Guardian, which amounted to approximately
$18.9 million.  During the remainder of fiscal 1997, the Company sold an
additional 14,500 shares of Series B Preferred Stock to GDIC at a price of
$1,000 per share.

As a result of the above transaction, the Company is eligible to be a member of
Guardian's affiliated tax group ("Affiliated Group").  This allows the
Company's tax losses, credits and/or income generated after October 31, 1996,
to be included in the single consolidated federal tax return by the Affiliated
Group.

Guardian and the Company entered into a Tax Sharing Agreement dated November 1,
1996, pursuant to which the Company will receive or make tax sharing payments
based on the amount by which the federal income tax liability of the Affiliated
Group is reduced or increased by inclusion of the Company in the Affiliated
Group.  As of June 30, 1997, the Company had received $5 million and recorded
an estimated receivable from Guardian of $4,755,490 in accordance with the Tax
Sharing Agreement.

The Company had entered into an agreement with Wayne County for the purchase of
approximately 80 acres of land adjacent to the Company's existing facility for
a conditional purchase price of $800,000 (the "Purchase Agreement").  Due to
the time involved in having the site rezoned to allow for the Company's
intended use, the Purchase Agreement expired.  Management of the Company
determined that the Company should not appropriate the financial resources to
revive the Purchase Agreement in order to acquire and develop the site in
accordance with the Purchase Agreement.   However, Guardian acquired the site
from Wayne County on substantially the same terms as the Purchase Agreement.
In addition, Guardian has indicated that if  within five years the Company
presents an acceptable plan to develop a new manufacturing facility on that
site, and is capable of financing such a plan, Guardian would be willing to
sell the site to the




                            Page 23 of Exhibit 13
<PAGE>   24

Company on substantially the same terms as the Purchase Agreement.

Due to the level of current and anticipated losses, management expects
additional capital resources will be needed to support the Company's
operations.   Management expects that Guardian, directly or through an
affiliate, will provide funding to support the Company's operations through
fiscal 1998.  At this time, Guardian has not indicated any intention to
discontinue funding the Company.  If Guardian were to discontinue funding the
Company or offer funding to the Company on terms that were not satisfactory to
the Company's disinterested directors, then the Company would have to seek
alternative sources of funding.  There is no assurance that such alternative
sources of funding would be available.  In such case, the Company would be
unable to meet its obligations and would be materially adversely affected.



















                            Page 24 of Exhibit 13