<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                    FORM 10-Q


[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES 
      EXCHANGE ACT OF 1934

      FOR QUARTERLY PERIOD ENDED MARCH 31, 1999

[ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES 
      EXCHANGE ACT OF 1934 

      FOR THE TRANSITION PERIOD FROM _____________ TO ___________


                        Commission File Number 000-23119


                           KOFAX IMAGE PRODUCTS, INC.
-------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           DELAWARE                                           33-0114967
-------------------------------                           -------------------
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                           Identification No.)

16245 Laguna Canyon Rd, Irvine, California                       92618
------------------------------------------                -------------------
 (Address of principal executive offices)                      (Zip Code)

                                 (949) 727-1733
-------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                    3 Jenner Street, Irvine, California 92618
-------------------------------------------------------------------------------
                     (Former name, former address and former
                   fiscal year, if changed since last report)


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

         Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practical date.

          Class                                  Outstanding at April 30, 1999
-----------------------------                    -----------------------------
Common Stock, $.001 par value                            5,303,701 shares



<PAGE>   2

                    KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY

                                      INDEX

<TABLE>
<CAPTION>

 ITEM                                                                                 PAGE  
NUMBER                                                                               NUMBER 
------                                                                               ------ 
<S>             <S>                                                                  <C>    
PART I.         FINANCIAL INFORMATION                                                       
                                                                                            
ITEM 1.         Condensed Consolidated Financial Statements                                 
                                                                                            
                Condensed Consolidated Balance Sheets - March 31, 1999                      
                    (unaudited) and June 30, 1998................................       3   
                                                                                            
                Condensed Consolidated Statements of Operations (unaudited) -               
                    Three Months Ended March 31, 1999 and 1998                              
                    and Nine Months Ended March 31, 1999 and 1998................       4   
                                                                                            
                Condensed Consolidated Statements of Cash Flows (unaudited) -               
                    Nine Months Ended March 31, 1999 and 1998....................       5   
                                                                                            
                Notes to Condensed Consolidated Financial                                   
                    Statements (unaudited).......................................       6   
                                                                                            
ITEM 2.         Management's Discussion and Analysis of Financial                           
                    Condition and Results of Operations..........................       8   
                                                                                            
                                                                                            
PART II.        OTHER INFORMATION                                                           
                                                                                            
ITEM 3.         Legal Proceedings................................................      15   
                                                                                            
ITEM 6.         Exhibits and Reports on Form 8-K.................................      15   
                                                                                            
                Signatures.......................................................      16   

</TABLE>


                                       2


<PAGE>   3

                         PART I - FINANCIAL INFORMATION

ITEM 1.  CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                    KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
                      Condensed Consolidated Balance Sheets
                        (in thousands, except share data)

<TABLE>
<CAPTION>
                                                                                  March 31,      June 30,
                                                                                    1999           1998
                                                                                  ---------      --------
                                                                                 (unaudited)
                                ASSETS
<S>                                                                               <C>           <C>     
Current assets
       Cash and cash equivalents                                                  $ 19,851      $ 16,522
       Short-term investments                                                        5,467         4,343
       Accounts receivable, net                                                      5,106         5,261
       Inventory (Note 2)                                                            1,769         1,565
       Prepaid expenses and other current assets                                     1,519           948
                                                                                  --------      --------
Total current assets                                                                33,712        28,639
Property and equipment, net                                                          1,485         1,740
Deferred income taxes                                                                1,343         1,343
Other assets                                                                           104           393
                                                                                  --------      --------
Total assets                                                                      $ 36,644      $ 32,115
                                                                                  ========      ========

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities
       Accounts payable                                                           $  1,254      $  1,207
       Accrued liabilities:
           Compensation                                                              1,623         1,237
           Deferred revenue                                                            880           588
           Other                                                                     2,246         1,458
                                                                                  --------      --------
Total current liabilities                                                            6,003         4,490

Stockholders' equity
       Common stock, $.001 par value, 40,000,000 shares authorized; 
         5,332,876 and 5,307,416 shares issued and outstanding at 
         March 31, 1999 and June 30, 1998                                           17,156        17,125
       Retained earnings                                                            14,040        11,136
       Treasury stock, 87,865 and 100,000 shares at cost at 
         March 31, 1999 and June 30, 1998                                             (555)         (636)
                                                                                  --------      --------
Total stockholders' equity                                                          30,641        27,625
                                                                                  --------      --------
Total liabilities and stockholders' equity                                        $ 36,644      $ 32,115
                                                                                  ========      ========
</TABLE>



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



                                       3

<PAGE>   4

                    KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
                 Condensed Consolidated Statement of Operations
                      (in thousands, except per share data)

<TABLE>
<CAPTION>
                                             Three Months Ended       Nine Months Ended
                                                  March 31,                March 31,
                                             -------------------     -------------------
                                              1999        1998        1999        1998
                                             -------     -------     -------     -------
                                           (unaudited) (unaudited) (unaudited) (unaudited)
<S>                                        <C>         <C>         <C>         <C>
Net sales                                    $ 9,824     $ 8,509     $28,091     $24,434
Cost of sales                                  2,173       1,945       6,384       5,781
                                             -------     -------     -------     -------
Gross profit                                   7,651       6,564      21,707      18,653
Operating expenses:
    Sales and marketing                        3,030       2,667       8,572       7,785
    Research and development                   2,175       2,052       6,461       5,742
    General and administrative                   786         721       2,315       1,943
                                             -------     -------     -------     -------
        Total operating expenses               5,991       5,440      17,348      15,470
                                             -------     -------     -------     -------

Income from operations                         1,660       1,124       4,359       3,183
Other income, net                                247         232         809         477
                                             -------     -------     -------     -------
Income before provision for income taxes       1,907       1,356       5,168       3,660
Provision for income taxes                       648         522       1,821       1,409
                                             -------     -------     -------     -------
Net income                                   $ 1,259     $   834     $ 3,347     $ 2,251
                                             =======     =======     =======     =======

Basic net income per share (Note 3)
                                             $  0.24     $  0.16     $  0.63     $  0.59
                                             =======     =======     =======     =======

Basic weighted average common shares
  (Note 3)                                     5,306       5,367       5,282       3,830
                                             =======     =======     =======     =======

Diluted net income per share (Note 3)        $  0.23     $  0.15     $  0.62     $  0.45
                                             =======     =======     =======     =======

Diluted weighted average common shares
  (Note 3)                                     5,474       5,486       5,412       4,957
                                             =======     =======     =======     =======

</TABLE>




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




                                       4


<PAGE>   5

                    KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
                 Condensed Consolidated Statements of Cash Flows
                                 (in thousands)

<TABLE>
<CAPTION>
                                                                      Nine Months Ended 
                                                                           March 31,
                                                                   ------------------------- 
                                                                      1999          1998
                                                                   ----------     ----------
                                                                   (unaudited)   (unaudited)
<S>                                                                <C>           <C>
Cash flows from operating activities:
    Net income                                                      $  3,347      $  2,251
    Adjustments to reconcile net income to net cash provided by
       operating activities:
          Depreciation and amortization                                1,018         1,153
          Changes in operating assets and liabilities:
              Accounts receivable                                        155        (1,046)
              Inventory                                                 (204)          149
              Other current assets                                      (571)         (135)
              Accounts payable                                            47            59
              Other current liabilities                                1,466         1,196
                                                                    --------      --------
                 Net cash provided by operating activities             5,258         3,627
                                                                    --------      --------


Cash flows from investing activities:
    Purchases of property and equipment                                 (649)         (899)
    Decrease in other assets                                             175            99
    Purchase of short-term investments                                (1,124)         (294)
                                                                    --------      --------
                 Net cash used in investing activities                (1,598)       (1,094)
                                                                    --------      --------


Cash flows from financing activities:
    Principal payments on notes payable                                   --          (821)
    Net proceeds from issuance of common stock                           644        12,643
    Repurchase of common stock                                          (975)           --
                                                                    --------      --------
                 Net cash provided by (used in) financing
                   activities                                           (331)       11,822
                                                                    --------      --------


Net increase in cash and cash equivalents                              3,329        14,355
Cash and cash equivalents, beginning of period                        16,522           801
                                                                    --------      --------
Cash and cash equivalents, end of period                            $ 19,851      $ 15,156
                                                                    ========      ========

Supplemental disclosure of cash flow information:
    Interest paid                                                   $      0      $     27
                                                                    ========      ========
    Income taxes paid                                               $  1,146      $    865
                                                                    ========      ========
</TABLE>


Noncash Activity - During the nine months ended March 31, 1998, the Company
converted 2,667,002 shares of outstanding convertible redeemable preferred stock
into common stock which resulted in a $4,090 increase in common stock and the
reversal of $3,140 of previously accreted cumulative dividends in arrears.

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


                                       5

<PAGE>   6

                    KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

1.    BASIS OF PRESENTATION

The condensed consolidated financial statements of Kofax Image Products, Inc.
and subsidiary (the "Company") presented herein have been prepared pursuant to
the rules of the Securities and Exchange Commission for quarterly reports on
Form 10-Q and do not include all of the information and note disclosures
required by generally accepted accounting principles. These statements should be
read in conjunction with the audited consolidated financial statements and notes
thereto for the year ended June 30, 1998, included in the Company's Annual
Report on Form 10-K for the year ended June 30, 1998.

The condensed consolidated financial statements and notes herein are unaudited,
but in the opinion of management, include all the adjustments (consisting only
of normal, recurring adjustments) necessary to present fairly the consolidated
financial position, results of operations and cash flows of the Company and its
subsidiary. The results of operations for the interim periods shown herein are
not necessarily indicative of the results to be expected for any future interim
period or for the entire year.

2.  INVENTORIES

Inventories, which include material, labor and manufacturing overhead, are
stated at the lower of cost (first-in, first-out) or market and consist of the
following:

<TABLE>
<CAPTION>
                           MARCH 31, 1999     JUNE 30, 1998
                           --------------     -------------
<S>                        <C>                <C>
Raw materials                 $  648              $  827
Work-in-process                  791                 511
Finished goods                   330                 227
                              ------              ------
                              $1,769              $1,565
                              ======              ======
</TABLE>

3.  NET INCOME PER SHARE AND DILUTED NET INCOME PER SHARE

Effective December 27, 1997, the Company adopted SFAS No. 128, "Earnings per
Share," which changes the method used to calculate earnings per share. The new
requirements include a calculation of basic earnings per share, from which the
dilutive effect of stock options is excluded, and a calculation of diluted
earnings per share. Prior period quarterly earnings per share have been restated
in accordance with SFAS No. 128.

The Company believes that diluted net income per share provides the most
meaningful comparison between periods.

4.  CHANGES IN ACCOUNTING PRINCIPLES

Effective July 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income". This statement requires
that all items recognized under accounting standards as components of
comprehensive earnings be reported in an annual financial statement that is
displayed with the same prominence as other annual financial statements. This
statement also requires that an entity classify items of other comprehensive
earnings by their nature in an annual financial statement. Annual financial
statements for prior periods will be restated, as required. There is no




                                       6


<PAGE>   7

                    KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)



difference between net income and comprehensive income for the third quarter and
nine months ended March 31, 1999.

Effective July 1, 1998, the Company adopted Statement of Position 97-2,
"Software Revenue Recognition". In prior periods the Company recognized software
revenue in accordance with AICPA Statement of Position 91-1. Statement of
Position 97-2 has not had a material effect on the Company's revenue recognition
policies.

5.  RECENT ACCOUNTING PRONOUNCEMENTS

For the years beginning after July 1, 1998, the Company will adopt SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information." SFAS No.
131 established standards for the manner in which public companies report
information about operating segments in annual financial statements issued to
shareholders. The Company does not currently have separate operating segments,
and has not yet determined the manner in which it will present the information
required by SFAS No. 131.

In June 1998, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which is effective for all fiscal years
beginning after June 15, 1999. SFAS 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts and for hedging activities. Under SFAS 133, certain
contracts that were not formerly considered derivatives may now meet the
definition of a derivative. The Company intends to adopt SFAS 133 July 1, 1999.
Management does not expect the adoption of SFAS 133 to have a significant impact
on the financial position or results of operations of the Company because the
Company does not have any current derivative activity.



                                       7


<PAGE>   8

                    KOFAX IMAGE PRODUCTS, INC. AND SUBSIDIARY

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS

The discussion in this Form 10-Q contains trend analysis and other
forward-looking statements regarding the Company, its business, prospects and
results of operations that are subject to certain risks and uncertainties posed
by many factors and events that could cause the Company's actual business,
prospects and results of operations to differ materially from those that may be
anticipated by such forward-looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, (i) uncertainty
of future operating results, (ii) fluctuations in quarterly operating results,
(iii) dependence on a limited number of products for current and future
operating results, (iv) dependence on imaging, workflow and document management
market and component software strategy, (v) rapid technological change, (vi) the
impact of competition, (vii) dependence on intellectual property and proprietary
rights, (viii) risks associated with international sales, (ix) dependence on
scanner manufacturers, (x) risks associated with acquisitions, and (xi) the
ability to recruit and retain qualified personnel, as well as those discussed
under the caption "Factors That May Affect Future Operating Results" in the
Company's Annual Report on Form 10-K for the year ended June 30, 1998. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of the date of this report. Readers are urged to carefully
review and consider the various disclosures made by the Company in this report
and in the Company's other reports filed with the Securities and Exchange
Commission that attempt to advise interested parties of the risks and factors
that may affect the Company's business.

OVERVIEW

Kofax Image Products was founded in 1985 to develop image processing accelerator
boards for personal computers to facilitate high-speed scanning, compression,
manipulation and printing of document images. The products were targeted at the
emerging market of document image processing.

Today Kofax develops, markets and supports three product lines for imaging,
workflow and document management applications. The fastest growing products are
the Ascent software applications which manage the capture and long-term storage
of documents for production level workflow and document management systems.
Substantially all of the Company's revenue growth in fiscal years 1998 and 1997
was generated from the Company's Ascent software business. The original image
processing hardware and development tools business, which is in its fourth
generation, currently generates gross margins of approximately 70% and continues
to generate a significant portion of the Company's profits. Revenue from the
Company's family of image processing boards and development tools has grown
modestly over the past two years, and the Company expects that to continue for
the foreseeable future. The Company believes that the accelerator board and
development tools business will continue to account for a majority of the
Company's net sales for the next two to three years. The Company also expects
that its Ascent software products will contribute an increasing share of the
Company's net sales in the future.

The Company sells its products primarily through a two-tier channel of stocking
distributors and solution providers, such as system integrators and value-added
resellers (VARs). The Company typically ships its products within 



                                       8




<PAGE>   9

a short period after acceptance of purchase orders from distributors and other
customers. Accordingly, the Company typically does not have a material backlog
of unfilled orders at the end of any quarter. Revenues from hardware and
software sales are currently recognized at the time of shipment in accordance
with AICPA Statement of Position 97-2, Software Revenue Recognition.
Distributors have certain rights of return and exchange privileges. The
Company's distributors generally do not stock significant amounts of inventory
of the Company's products, as these products are typically incorporated by
resellers into complete imaging and document management systems which are
configured shortly before scheduled delivery to end-user customers. The Company
records estimates for such rights of return and exchange privileges based on
historical experience. The Company provides a warranty for its products against
defects in materials and workmanship. A provision for estimated warranty costs
is recorded at the time of sale. Payments under maintenance contracts are due at
the beginning of the contract; however, revenue is recognized ratably over the
term of the contract which is typically twelve months.



                                       9



<PAGE>   10

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998, AND
THE NINE MONTHS ENDED MARCH 31, 1999 AND 1998

The following table sets forth certain income and expense items as a percentage
of net sales for the periods indicated.

<TABLE>
<CAPTION>
                                              Three Months Ended    Nine Months Ended
                                                   March 31,            March 31,
                                              ------------------    ------------------
                                               1999       1998       1999       1998
                                               ----       -----      -----      -----
<S>                                            <C>        <C>        <C>        <C>
Net sales                                      100.0%     100.0%     100.0%     100.0%
Cost of sales                                   22.1       22.9       22.7       23.7
                                               -----      -----      -----      -----
Gross profit                                    77.9       77.1       77.3       76.3
Operating expenses:
    Sales and marketing                         30.9       31.3       30.6       31.9
    Research and development                    22.1       24.1       23.0       23.5
    General and administrative                   8.0        8.5        8.2        7.9
                                               -----      -----      -----      -----
        Total operating expenses                61.0       63.9       61.8       63.3
                                               -----      -----      -----      -----
Income from operations                          16.9       13.2       15.5       13.0
Other income, net                                2.5        2.7        2.9        2.0
                                               -----      -----      -----      -----
Income before provision for income taxes        19.4       15.9       18.4       15.0
Provision for income taxes                       6.6        6.1        6.5        5.8
                                               -----      -----      -----      -----
Net income                                      12.8%       9.8%      11.9%       9.2%
                                               =====      =====      =====      =====
</TABLE>


         Net Sales. Net sales represent gross sales less discounts, returns and
adjustments. Net sales were $9.8 million and $8.5 million in the quarters ended
March 31, 1999 and 1998, respectively, an increase of 15.5%. This revenue
increase was primarily attributable to increased sales of the Company's Ascent
application software products, increased sales of the SCSI versions of the
Company's Adrenaline family of image processing accelerator boards and initial
sales of our new OEM VirtualReScan product. Revenues from Ascent software
increased 30% in the March quarter over the same period last year. However,
software revenue associated with our image processing products declined 32%
compared to the same period last year. As a result, total software revenue in
the third quarter increased 16% in absolute dollars, and total software
represented 35% of total revenues for both periods. For the nine months ended
March 31, 1999 and 1998, net sales were $28.1 million and $24.4 million,
respectively, representing an increase of 15.0%. The year-to-date revenue
increase was also attributable to increased sales of the Company's Ascent
application software products and increased sales of the SCSI versions of the
Company's Adrenaline image processing boards.

         International sales (primarily to Western European countries) accounted
for 30.7% and 34.4% of net sales in the quarters ended March 31, 1999 and 1998,
respectively, and 31.9% and 34.1% in the nine months ended March 31, 1999 and
1998, respectively. International sales increased 3.0% and 7.5%, in absolute
dollars, over the same quarter and nine-month periods last year, respectively.
Management expects that the Company's international operations will continue to
provide a significant portion of total net sales; however, international sales
could be adversely affected if the U.S. dollar continues to strengthen against
international currencies. To date the Company has not had any exposure to
foreign currency fluctuations. The adoption of the "Euro" by the European
community in January 1999 may lead the Company to transact its European sales in
Euros, which may result in the realization of foreign exchange gains or losses
in the future.


                                       10


<PAGE>   11

         Gross Profit. Cost of sales primarily consist of the costs of
components and subassemblies, labor and manufacturing overhead and, with respect
to the Company's software products, software duplication and royalty expenses.
The Company believes that its relatively high gross margins reflect the
increasing percentage of total software revenue in the Company's product mix as
well as the high content of proprietary firmware in the Company's hardware
accelerator boards. Gross profit was 77.9% and 77.1% of net sales in the
quarters ended March 31, 1999 and 1998, respectively, and 77.3% and 76.3% of net
sales in the nine months ended March 31, 1999 and 1998, respectively.
Substantially all of the increase in gross profit percentage in the March
quarter was attributable to a combination of reduction in manufacturing costs
and increased sales volumes allowing fixed manufacturing costs to be spread over
a higher level of production. For the nine months ended March 31, 1999, the
increase in gross profit percentage was attributable to increased sales of the
Company's Ascent software products, the declining costs of components used in
the Company's accelerator boards, and increased overhead absorption as a result
of the improved manufacturing efficiencies mentioned above.

         Sales and Marketing. Sales and marketing expenses, which consist
primarily of salaries and commissions, customer support, trade shows,
advertising and other promotional expenses, were $3.0 million and $2.7 million,
and 30.9% and 31.3% of net sales, in the quarters ended March 31, 1999 and 1998,
respectively. Sales and marketing expenses were $8.6 million and $7.8 million,
and 30.6%, and 31.9% of net sales, in the nine months ended March 31, 1999 and
1998, respectively. The increases in absolute dollar amounts in fiscal 1999 were
primarily attributable to increased marketing personnel, and increased marketing
expenses related to the launch of the Version 4 release of Ascent Storage, and
the launch of the Version 3 release of Ascent Capture. The Company expects that
sales and marketing expenses will continue to increase in absolute dollar
amounts and will fluctuate as a percentage of net sales.

         Research and Development. Research and development expenses, which
consist primarily of personnel costs and related occupancy expenses, were $2.2
million and $2.0 million, and 22.1% and 24.1% of net sales, in the quarters
ended March 31, 1999 and 1998, respectively. Research and development expenses
were $6.5 million and $5.7 million, and 23.0% and 23.5% of net sales, in the
nine months ended March 31, 1999 and 1998, respectively. The increase in
absolute dollars in both periods of fiscal 1999 was primarily attributable to
increased engineering staffing, and related compensation expense. The Company
expects that research and development expenses will continue to increase in
absolute dollar amounts and will fluctuate as a percentage of net sales,
depending upon the timing of material research and product development projects.

         General and Administrative. General and administrative expenses consist
of personnel costs for administration, finance, information systems, human
resources and general management, as well as professional services. General and
administrative expenses were $0.8 million and $0.7 million, and 8.0% and 8.5% of
net sales, in the quarters ended March 31, 1999 and 1998, respectively. General
and administrative expenses were $2.3 million and $1.9 million, and 8.2% and
7.9% of net sales, in the nine months ended March 31, 1999 and 1998,
respectively. The increases in both periods of fiscal 1999 were primarily
attributable to increased staffing and related compensation expenses and the
increased expenses related to the administrative requirements of being a public
company. The Company anticipates that it will continue to incur 



                                       11


<PAGE>   12

increased general and administrative costs in the future related to the
additional insurance and administrative requirements of a public company.

         Other Income, net. Other Income, net consists primarily of interest
income earned on the Company's cash and cash equivalents and short-term
investments less interest expense on the Company's note payable. As a result of
the initial public offering of the Company's stock in the December 1997 quarter,
interest expense on bank borrowing was eliminated due to repayment of the
previously outstanding bank term loan. Interest income increased compared to the
same periods last year, as a result of investing the net proceeds from the
offering and investing the net cash flows generated from the Company's
operations.

         Provision for Income Taxes. The Company's effective tax rate was 34%
for the quarter ended March 31, 1999 compared to 38.5% for the same quarter in
1998. The decline in the effective tax rate results from the recent extension of
the federal R&D tax credit through June 30, 1999. The Company expects the
effective tax rate to approximate 35% for the fiscal year June 30, 1999. The
Company also expects the effective tax rate to return to historical levels of
approximately 38% in fiscal year 2000, unless the current R&D tax credit is
extended in its current form.

         Year 2000 Issues. It is possible that the currently installed computer
systems, software products or other business systems of the Company's
distributors, resellers, suppliers, manufacturers or customers, working either
alone or in conjunction with other software systems, will not accept input of,
store, manipulate and output dates in the Year 2000 or thereafter without error
or interruption (the "Year 2000 Problem"). The Company has tested its software
products and is unaware of any material Year 2000 Problems. In addition, the
Company has completed a review of its business systems, including its computer
systems, and based on information gathered to date, believes that such systems
are also not subject to any material Year 2000 Problems. The Company is querying
its distributors, resellers, suppliers, manufacturers and customers as to their
progress in identifying and addressing Year 2000 Problems. The Company's primary
distributors, resellers, suppliers, manufacturers, and customers have indicated
that they are Year 2000 compliant. Based on the Company's review of its products
and business systems and responses from its significant third party vendors, the
Company believes that total costs due to the Year 2000 Problem will not exceed
$100,000. The failure of the Company or its distributors, resellers, suppliers,
manufacturers and customers to complete the conversions or upgrades necessary to
fully address the Year 2000 Problem in a timely manner could have material
adverse effect on the Company's business, results of operations, cash flows and
financial condition.

The Company's past operating results have been, and its future operating results
will be, subject to fluctuations due to a number of factors, including the
timing of orders from, and shipments to, major customers; the timing of new
product introductions by the Company or its competitors; variations in the mix
of products sold by the Company; changes in pricing policies by the Company, its
competitors or suppliers, including possible decreases in average selling prices
of the Company's products in response to competitive pressures; product returns
or price protection charges from customers; market acceptance of new and
enhanced versions of the Company's products; the availability and cost of key
components; the availability of manufacturing capacity; delays in the
introduction of new products or product enhancements by the Company, the
Company's competitors or other providers of hardware, software and components




                                       12


<PAGE>   13

for the imaging, workflow and document management market; dependence upon
capital spending budgets; and fluctuations in general economic conditions. As a
result, the Company believes that period-to-period comparisons of its results of
operations should not be relied upon as indications of future performance.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 1999, combined cash, cash equivalents, and short-term
investments totaled $25.3 million, an increase of $4.5 million from June 30,
1998. Net cash provided by operating activities was $5.3 million, and was
generated primarily from net income, depreciation and amortization, and an
increase in other current liabilities. Net cash used in investing activities was
$1.6 million for capital expenditures and additions to short term investments.
Net cash used in financing activities was $0.3 million, primarily as a result of
the repurchase of 150,000 shares of the Company's common stock.

The Company financed its operations and capital requirements from 1986 through
1989 from the sale of approximately $4.0 million of preferred stock and,
thereafter, through cash flow from operations. In October 1997, the Company
completed its initial public offering selling 1,300,000 shares of its common
stock, and received net proceeds, after subtracting expenses incurred in the
offering, of approximately $12.6 million, $0.7 million of which was used to
repay outstanding indebtedness.

The Company has an unsecured $2.0 million revolving credit line with Silicon
Valley Bank (the "Bank") and as of March 31, 1999 had no outstanding balance
under the revolving line of credit. In January, 1999, the Company entered into
an agreement with the Bank to extend the line of credit through January, 2000.
The line of credit agreement requires the Company to maintain its primary
banking relationship with the Bank while any obligations to the Bank remain
outstanding, prohibits the incurrence of additional debt from sources other than
the Bank, except for purchases or leases of equipment up to $700,000, requires
the Company to maintain certain tangible net worth levels, and profitability
levels, and restricts the payment of dividends without the Bank's prior
approval.

On April 24, 1998, the Company's board of directors authorized a program for
repurchase of up to 500,000 shares, or approximately 9.5%, of Kofax's
outstanding common stock, to be used to fund stock option exercises, employer
equity compensation plans, and an employee stock purchase plan. As of March 31,
1999, the Company has repurchased 250,000 shares of its common stock to date,
for approximately $1.6 million. Aside from this program, the Company currently
has no significant capital spending or purchase commitments other than normal
purchase commitments and commitments under facilities leases.

The Company believes that its existing cash balances, its available bank
financing and the cash flows generated from operations, if any, will be
sufficient to meet its anticipated cash needs for working capital and capital
expenditures for at least the next 12 months. A portion of the Company's cash
could be used to acquire or invest in complementary businesses or products or
obtain the right to use complementary technologies. The Company is currently
evaluating, in the ordinary course of business, potential investments such as
businesses, products or technologies.




                                       13


<PAGE>   14

Quantitative and Qualitative Disclosures about Market Risk

At March 31, 1999, the Company had an investment portfolio of fixed income
securities, including those classified as cash equivalents, of approximately
$24.5 million. These securities are subject to interest rate fluctuations. An
increase in interest rates could adversely affect the market value of the
Company's fixed income securities.

As of March 31, 1999, the weighted average maturity of the Company's portfolio
was 139 days. The market value changes for increases in short-term treasury
security yields are not material due to the overall short-term maturity of the
Company's portfolio.

The Company limits its exposure to interest rate and credit risk by establishing
and strictly monitoring clear policies and guidelines for its fixed income
portfolios. At the present time, the maximum average maturity of the Company's
overall investment portfolio is limited by policy to 36 months. The guidelines
also establish credit quality standards, limits on exposure to one issue,
quality standards for issuers, as well as the type of instrument. Due to the
limited duration and credit risk criteria established in the Company's
guidelines, the exposure to market and credit risk is not expected to be
material. The Company does not use derivative financial instruments in its
investment portfolio to manage interest rate risk.






                                       14


<PAGE>   15

                           PART II - OTHER INFORMATION

ITEM 3. LEGAL PROCEEDINGS

On September 26, 1997, VisionShape, Inc. ("VisionShape") filed suit against the
Company in the Superior Court of Orange County, California. VisionShape claims
that the Company's Adrenaline accelerator boards prevent the use of software
other than the Company's software, which, the complaint alleges, creates a
monopoly or otherwise constitutes a tying arrangement in violation of state and
federal antitrust laws. VisionShape seeks unspecified monetary damages and costs
as well as equitable remedies, including an order enjoining the Company from
selling its Adrenaline accelerator boards. VisionShape also seeks treble damages
and attorneys' fees. On May 27, 1998, the Superior Court held that VisionShape
failed to state a cause of action against the Company and ordered the suit
dismissed on July 15, 1998. VisionShape filed an appeal on March 31, 1999. Based
upon information currently available to the Company, the Company believes
VisionShape's claims are without merit and intends to contest vigorously any
action against the Company. However, it is too early to determine the outcome of
such appeal and there can be no assurance as to the eventual outcome of such
actions. Any determination against the Company in the litigation or the
settlement of such claims could have a material adverse effect on the Company's
business, results of operation, cash flows and financial condition. The Company
is not a party to any other material legal proceedings.


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

    10.32   Silicon Valley Bank Amendment to Loan and Security Agreement dated
            January 6, 1999.

    10.33   OEM Purchase Agreement, dated January 27, 1999, between the
            Company and Fujitsu Computer Products of America, Inc.

    11.1    Computation of diluted net income per share

    27.1    Financial Data Schedule

(b) Reports on Form 8-K

    None.

Items 1, 2, 4, and 5 are not applicable and have been omitted.


                                       15

<PAGE>   16

                                   SIGNATURES

         Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.


                                                    KOFAX IMAGE PRODUCTS, INC.


Dated:   May 14, 1999                               /s/ Ronald J. Fikert
                                                    ----------------------------
                                                    Ronald J. Fikert
                                                    Chief Financial Officer
                                                    (principal financial and 
                                                    accounting officer and
                                                    duly authorized officer)





                                       16


<PAGE>   17


                                 EXHIBIT INDEX
                                 -------------


EXHIBIT
INDEX           DESCRIPTION
-------         -----------

10.32           Silicon Valley Bank Amendment to Loan and Security Agreement 
                dated January 6, 1999.

10.33           OEM Purchase Agreement, dated January 27, 1999, between the
                Company and Fujitsu Computer Products of America, Inc.

11.1            Computation of diluted net income per share

27.1            Financial Data Schedule