<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549

                                  FORM 10-K/A
                               (AMENDMENT NO. 1)

        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1995           Commission File No. 1-9767

                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.

                Delaware                                    94-2579751
   (State or other jurisdiction of                      (I.R.S. Employer
   incorporation or organization)                      Identification No.)

                9162 Eton Avenue, Chatsworth, California  91311
              (Address of principal executive offices)  (Zip Code)
                       Telephone Number:  (818) 709-1244

   Securities registered pursuant to Section 12(b) of the Act:  Common Stock
       Securities registered pursuant to Section 12(g) of the Act:  None

         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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K._____

         The aggregate market value of shares of Common Stock held by
non-affiliates of the Registrant on March 25, 1996 was $39,766,990 based upon
the closing price of the Common Stock on such date, as reported on the American
Stock Exchange.  Solely for the purpose of counting "non-affiliates", in this
context shares of Common Stock held by each officer and director and by each
person who owns 5% or more of the outstanding Common Stock have been excluded.
This determination of affiliate status is not necessarily a determination for
other purposes.

         The number of shares of Common Stock of the Registrant outstanding as
of March 25, 1996 was 6,308,578.

         Part III incorporates information by reference from the Proxy
Statement for the Registrant's 1996 Annual Meeting of Stockholders.
<PAGE>   2
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.

                            FORM 10-K/A ANNUAL REPORT

                      FISCAL YEAR ENDED DECEMBER 31, 1995





   Caption                                                              Page
   -------                                                              ----

   PART I
              Item 1.   Business                                         *

              Item 2.   Properties                                       *

              Item 3.   Legal Proceedings                                *

              Item 4.   Submission of Matters to a Vote of
                        Security Holders                                 *

   PART II
              Item 5.   Market for the Registrant's Common Stock
                        and Related Stockholder Matters                  *

              Item 6.   Selected Financial Data                          4

              Item 7.   Management's Discussion and Analysis of
                        Financial Condition and Results of Operations    5

              Item 8.   Financial Statements and Supplementary Data     11

              Item 9.   Changes in and Disagreements with Accountants
                        on Accounting and Financial Disclosure           *

   PART III
              Item 10.  Directors and Executive Officers of
                        the Registrant                                   *

              Item 11.  Executive Compensation                           *

              Item 12.  Security Ownership of Certain Beneficial
                        Owners and Management                            *

              Item 13.  Certain Relationships and Related
                        Transactions                                     *



                                       2


<PAGE>   3


   PART IV                                                              11
              Item 14.  Exhibits, Financial Statements,
                        Schedules, and Reports on Form 8-K

____________________
*  Previously filed.



                                       3


<PAGE>   4





EXPLANATORY NOTE

     The Company completed a review during the fourth quarter of 1996 of its
revenue recognition policy and procedures.  As a result of the review, the
Company has restated its 1995 results of operations and related balance sheet
accounts as described below to appropriately reflect the Company's revenue in
accordance with its revenue recognition policy.  Such restatements pertain to
the amount and timing of revenues recognized under an introductory sales program
or under contingent sales terms.  The Company has established procedures to
assure appropriate revenue recognition in the future.  Only those items which
have been affected have been restated, and such items have been restated to
include the entire text of such items in accordance with Rule 12b-15 of the
Securities Exchange Act of 1934.

     The table below sets forth selected operating data and accumulated deficit
as of December 31, 1995 and for the year then ended on both a restated basis
and as previously reported.  (The previously reported operating data in the
table below has been restated to retroactively reflect the pooling-of-interests
transaction described below under "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Recent Acquisitions.")

<TABLE>
<CAPTION>
                                                    YEAR ENDED
                                                    ----------
                                                DECEMBER 31, 1995
                                                -----------------
                                         AS REPORTED          AS RESTATED
                                         -----------          -----------
                                    (in thousands, except per share amounts)
 <S>                                        <C>                  <C>
 Net sales                                  $15,022              $14,392
 Cost of sales                                7,361                7,127
                                            -------              -------
   Gross margin                               7,661                7,265
 Operating expenses                           9,210                9,163
                                            -------              -------
   Operating loss                            (1,549)              (1,898)
 Other income                                   378                  378
   Loss before taxes                         (1,171)              (1,520)
 Tax benefit                                 (3,528)              (3,646)
                                            -------              -------
   Net income                               $ 2,357              $ 2,126
                                            =======              =======
   Net income per share                     $  0.37              $  0.33
 Accumulated deficit                        $14,496              $14,726
</TABLE>


                                    PART II

ITEM 6.  SELECTED FINANCIAL DATA.

              This information is derived from, and should be read in
conjunction with, the Company's Financial Statements, including the Notes
thereto.



                                       4

<PAGE>   5

<TABLE>
<CAPTION>
                                                       Year Ended December 31,                          
                                     -------------------------------------------------------------
                                            1991      1992          1993        1994        1995
                                     -------------------------------------------------------------
                                                        (in thousands, except per share data)
<S>                                         <C>       <C>          <C>         <C>         <C>
Net revenues  . . . . . . . . . . . .       $7,606    $10,823      $12,393     $12,469     $14,392
Interest and other income, net. . . .          157        129           68         206         378
Net income (loss) . . . . . . . . . .        (132)        929        1,323       1,622       2,126
Net income (loss) per share . . . . .        (.03)        .18          .25         .28         .33
Working capital . . . . . . . . . . .        4,943      5,339        6,812       7,779      11,234
Total assets  . . . . . . . . . . . .        7,416      9,290       11,181      13,282      22,203
Total liabilities . . . . . . . . . .        2,368      2,981        3,415       3,122       3,261
Shareholders' equity  . . . . . . . .        5,048      6,310        7,766      10,160      18,942
Net tangible book value per share . .         1.05       1.20         1.43        1.76        1.78
Cash dividends per share. . . . . . .          .00        .00          .00         .00         .00
</TABLE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

OVERVIEW

              The Company generates revenues from the initial sales of in vitro
diagnostic ("IVD") imaging systems based on its patented and proprietary
"Automated Intelligent Microscopy" technology, which in turn generate follow-on
sales of supplies and service necessary for their operation.  The Company also
generates revenues from sales of ancillary lines of small laboratory
instruments and supplies.

              The Company invests in research and product development for new
products and enhancements to existing products.  The following table summarizes
total product technology expenditures for the periods indicated:



<TABLE>
<CAPTION>
                                                 Year Ended December 31,
                                       ------------------------------------------
                                          1993            1994            1995
                                       ----------      ----------     -----------
                                                         (in thousands)
 <S>                                       <C>             <C>             <C>
 Research and development              
   expense, net  . . . . . . . . .         $  879          $  663          $1,220
 Capitalized software                          
   development costs . . . . . . .             81              25             299
 Reimbursed costs under research
   and development contracts . . .            539           1,111             843
                                       ----------      ----------     -----------
        Total product technology
          expenditures . . . . .           $1,499          $1,799          $2,362
                                       ==========      ==========     ===========
</TABLE>



                                       5

<PAGE>   6
              The Company has in the past partially funded its research and
development programs through (i) grants from the National Institutes of Health
obtained through the federal government's Small Business Innovative Research
program, (ii) joint development programs with strategic partners and (iii)
Company-sponsored research and development entities.

              In recent years, the Company has, in addition to its
internally-funded projects, entered into four significant externally-funded
projects, two joint development projects with strategic partners and two
projects with Company-sponsored research and development entities.  From 1994
to 1995, the Company collaborated with Boehringer Mannheim Corporation ("BMC"),
an Indianapolis-based manufacturer of diagnostic products, and Boehringer
Mannheim GmbH ("BMG"), BMC's German affiliate and a world leader in clinical
chemistry, in the development of (i) the CHEMSTRIP(R)/IRIStrip(TM) urine test
strips and a related urine test strip reader for The Yellow IRIS(R) and (ii)
the Model 900UDx(R), the latest model in The Yellow IRIS(R) family.  The
Company entered into a project in October 1992 with LDA, a Company-sponsored
research and development entity, for development of The White IRIS(R) leukocyte
differential analyzer.  Corange International Limited ("Corange"), an affiliate
of BMC and BMG, provided substantial funding to LDA.  In June 1995, the Company
acquired LDA for approximately 498,000 shares of Common Stock.  As a result of
the LDA acquisition, the Company incurred a non-recurring, non-cash charge of
$2.9 million against earnings for 1995 for the acquisition of in-process
research and development since The White IRIS(R) had not yet received FDA
clearance.  The Company entered into a similar project in September 1995 with
Poly U/A Systems, Inc. ("Poly"), another Company-sponsored research and
development entity, for development of several new products to enhance
automated urinalysis ("the Poly Products").  The program with Poly is currently
ongoing.  See "-- Liquidity and Capital Resources."

RESULTS OF OPERATIONS

              The consolidated financial statements of the Company contained in
this report have been retroactively restated for all periods presented to
include the financial position, results of operations and cash flows of
StatSpin, Inc. (formerly known as StatSpin Technologies) ("StatSpin") in
accordance with the pooling-of-interests method of accounting.

Comparison of Fiscal 1995 to Fiscal 1994

              Net sales increased to $14.4 million for 1995 from $12.5 million
for 1994, an increase of $1.9 million or 15%.  Sales of IVD imaging systems
decreased to $4.2 million in 1995 from $4.6 million in 1994, a decrease of
$318,000 or 7% from the prior year due to the sale of fewer systems in 1995.
Sales of IVD imaging system supplies and service increased to $6.7 million from
$5.0 million, an increase of $1.7 million or 34% over the prior year, due to
the larger installed base of IVD imaging systems and the introduction of the
new CHEMSTRIP(R)/IRIStrip(TM) urine test strips in late 1994.  Sales of small
instruments and supplies increased to $3.4 million from $2.9 million, an
increase of $528,000 or 18%.  The increase reflects generally higher sales of
the StatSpin product line and the addition of the Biovation product line in
March 1995.

              Cost of goods for IVD imaging systems as a percentage of sales of
IVD imaging systems totaled 48% for 1995, the same as for 1994.  Cost of goods
for IVD imaging system supplies and service decreased as a percentage of sales
of IVD imaging system supplies and service to 47% for 1995 from 50% for 1994
due to a decrease in service costs, offset to some extent by lower gross
margins on the CHEMSTRIP(R)/IRIStrip(TM) urine test strips.  Cost of goods for
small instruments and supplies decreased as a percentage of sales of small
instruments and supplies to 57% for 1995 from 63% for 1994 due to higher gross
margins on the recently added Biovation product line as well as improved gross
margins on the StatSpin product lines due to increased sales volume.  The net
result



                                       6

<PAGE>   7
of these changes and the overall change in product mix was an increase in gross
margin to 50% for 1995 from 48% for 1994.

              Marketing and selling expenses increased to $2.9 million for 1995
from $2.1 million for 1994, an increase of $789,000 or 38%, due to increased
spending on direct sales and after-sales support, and increased as a percentage
of net sales to 20% from 17%.

              General and administrative expenses increased to $2.2 million for
1995 from $1.7 million for 1994, an increase of $442,000 or 26%, and increased
as a percentage of net sales from 14% in 1994 to 15% in 1995.

              Net research and development expenses increased to $1.2 million
for 1995 from $663,000 for 1994, an increase of $557,000 or 84%, and also
increased as a percentage of net sales to 8% from 5%.  The increase in net
research and development expenses was due principally to a decrease in
reimbursements under research and development contracts and increased spending
by the Company on the continued development of The White IRIS(R).
Reimbursements under research and development contracts and joint development
programs decreased to $843,000 from $1.1 million, a decrease of $268,000 or
24%, due to the acquisition of LDA.  Total product technology expenditures
increased to $2.4 million from $1.8 million, an increase of $563,000 or 31%,
reflecting the addition of two new research projects, a modest increase in
general research and development activity and continuing expenditures by the
Company on The White IRIS(R) to complete its development and pursue FDA
clearance.

              Interest income increased to $310,000 for 1995 from $168,000 for
the prior year, primarily the result of increased amounts of invested cash
during 1995 as a result of the exercise of outstanding warrants issued in
connection with the formation of LDA and stock sales to employees under the
Company's stock option and purchase plans.

              Interest expense consisted of interest incurred on notes issued
by StatSpin and decreased to $43,000 for 1995 from $73,000 for the prior year
due to a reduction in the outstanding principal balances.

              Other income consisted principally of royalties for sales of
licensed products and remained constant at $111,000 for 1995 and 1994.

              Acquisition of in-process research and development in 1995
reflects the acquisition of LDA which resulted in a non-recurring, non-cash
charge of $2.9 million against earnings in 1995 for the acquisition of
in-process research and development.

              The income tax benefit for 1995 was $3.6 million as compared to a
$79,000 provision in 1994.  The Company recognized a deferred tax benefit of
$3.6 million in 1995 due to a significant reduction in the Company's deferred
tax asset valuation allowance.  This reduction in the valuation allowance
resulted principally from the Company's assessment of the realizability of its
net operating loss carryforwards based on recent operating history as well as
an assessment that operations will continue to generate taxable income.
However, the amount of the deferred tax assets considered realizable could be
reduced if the future taxable income during the carryforward periods is
reduced.

              Net income increased to $2.1 million, or $0.33 per share, for
1995 as compared to net income of $1.6 million, or $0.28 per share, for 1994.
Excluding the effects of the non-recurring charge against earnings for the
acquisition of in-process research and development and the



                                       7

<PAGE>   8
recognition of the tax benefit due to the reduction in the deferred tax asset
valuation allowance, the Company would have had net income of approximately
$1.4 million, or $0.22 per share, for 1995.

Comparison of Fiscal 1994 to Fiscal 1993

              Net sales increased to $12.5 million for 1994 from $12.4 million
for 1993, an increase of $77,000 or 1%.  Sales of IVD imaging systems decreased
to $4.6 million from $5.0 million, a decrease of $470,000 or 9% from 1993.
Improved sales of IVD imaging systems in the last three quarters of 1994 were
more than offset by unusually slow sales during the first quarter of 1994
caused by the combined effect of the introduction of a major healthcare reform
initiative at the federal level and the Northridge earthquake which affected
operations at the Company's Chatsworth facility.  Sales of IVD imaging system
supplies and service increased to $5.0 million from $4.0 million, an increase
of $1.0 million or 26% over the prior year, due to the larger installed base of
IVD imaging systems.  Sales of small instruments and supplies decreased to $2.9
million from $3.4 million, a decrease of $483,000 or 14%.  The decrease
reflects lower sales levels of the StatSpin product lines due to a decline in
sales to one customer.

              Cost of goods for IVD imaging systems increased slightly as a
percentage of sales of IVD imaging systems to 48% for 1994 from 47% for 1993.
Cost of goods for IVD imaging system supplies and service also increased
slightly to 50% for 1994 from 49% for 1993.  Cost of goods for small
instruments and supplies increased as a percentage of sales of small
instruments and supplies to 63% for 1994 from 61% for the prior year.  The net
result of these changes and the overall change in product mix was a slight
decrease in gross margin to 48% for 1994 from 49% for 1993.

              Marketing and selling expenses remained constant at $2.1 million
in 1994 and 1993 and also remained constant as a percentage of net sales at
17%.

              General and administrative expenses remained constant at  $1.7
million in 1994 and 1993, and remained constant as a percentage of net sales at
14%.

              Net research and development expenses decreased to $663,000 for
1994 from  $879,000 for 1993, a decrease of $216,000 or 25%, and also decreased
as a percentage of net sales to 5% from 7% due principally to a reduction in
research and development spending at StatSpin.  Reimbursements under research
and development contracts increased to $1.1 million from $539,000, an increase
of  $572,000 or 106%, due to increased funding from LDA for The White IRIS(R)
project.  Total product technology expenditures increased to $1.8 million from
$1.5 million, an increase of $300,000 or 20%, primarily as a result of
increased expenditures for development of The White IRIS(R).

              Interest income increased to $168,000 for 1994 from $110,000 for
the prior year.  This was the result of increased amounts of invested cash,
generally higher interest rates and a greater emphasis on long-term
investments.

              Interest expense consisted of interest incurred on notes issued
by StatSpin and decreased to $73,000 for 1994 from $82,000 for the prior year
due to paydown of outstanding principal balances on the notes.

              Other income consisted principally of royalties for sales of
licensed products and increased to $111,000 for 1994 from $39,000 for the prior
year due to higher reported sales of licensed products.



                                       8

<PAGE>   9
              The income tax provision for 1994 was $79,000 as compared to
$58,000 for 1993.  The effective tax rate remained relatively constant at 5% in
1994 as compared to 4% in 1993 due to a full valuation allowance being provided
for the deferred tax assets in both years as a result of the uncertainty about
the recoverability of the related tax benefits.  The tax provisions consisted
primarily of federal alternative minimum tax due to the utilization of net
operating loss carryforwards.

              The above factors contributed to net income of $1.6 million, or
$0.28 per share, for 1994 as compared to net income of $1.3 million, or $0.25
per share, for 1993.


LIQUIDITY AND CAPITAL RESOURCES

              Cash, cash equivalents and short-term investments increased to
$6.2 million at December 31, 1995 from $4.8 million at December 31, 1994.  The
increase is primarily attributable to net cash generated by operations and cash
generated from the sale of stock to employees and the exercise of warrants
issued in connection with the LDA offering.  Inventory levels during 1995
increased to $2.9 million from $2.2 million.  This increase was primarily due to
the addition of several new products, including the CHEMSTRIP(R)/IRIStrip(TM).
Total accounts receivable increased to $3.8 million at December 31, 1995 from
$3.3 million at December 31, 1994.  This increase was the result of increased
sales, the timing of IVD imaging system sales, and slower collections.

              In 1995, the Company expended $821,000 for capital equipment,
primarily for manufacturing and office equipment, and $299,000 in capitalized
software development.  The Company expended $266,000 and $439,000 for capital
equipment and $25,000 and $81,000 in capitalized software development in 1994
and 1993, respectively.

              The Company generated cash of $1.7 million, $356,000 and $206,000
in 1995, 1994 and 1993, respectively, from exercises of outstanding warrants
issued in connection with the formation of LDA and stock sales to employees
under the Company's stock option and purchase plans.

              In September 1995, the Company and Poly entered into a research
and development agreement to develop the Poly Products using the Company's
technology.  These products are intended to have dual potential as both
stand-alone products and enhancements to The Yellow IRIS(R) family of urinalysis
workstations.  Under the terms of this agreement, Poly will have the right to
use Company technology and any newly-developed technology for developing,
manufacturing and marketing the Poly Products as stand-alone devices, and the
Company will have the right to use the newly-developed technology for any other
purpose and to incorporate the Poly Products into The Yellow IRIS(R) family of
products.  Poly has retained the Company to conduct research, development,
clinical evaluation and premarket testing of the Poly Products.  The Company is
funding the first $15,000 per month (up to a maximum of $500,000) of the cost of
the project, and Poly is reimbursing the Company for the excess.  Poly was
organized by the Company in June 1995 and subsequently raised net proceeds of
approximately $2.0 million in a private offering.  The Company has an option
until 121 days after termination of the agreement with Poly to acquire all of
the common stock of Poly for an aggregate price increasing on August 1, 1997
from $4.4 million to $5.1 million payable in cash or shares of Common Stock of
the Company.  If the Company elects to exercise its option, the portion of the
net cost of the acquisition allocated to completed products would be capitalized
and its subsequent amortization would impact future earnings.  For the portion
of the net cost of the acquisition allocated to in-process research and
development, the Company would record a nonrecurring, noncash (if purchased with
Common Stock), charge against then current earnings.



                                       9

<PAGE>   10
RECENT ACQUISITIONS

              In 1995, the Company began implementing a strategy to achieve
global IVD imaging leadership by expanding its product line of IVD imaging
systems and adding complementary lines of small instruments and supplies.

       In March 1996, the Company purchased the Cen-Slide(R) 1500 System for
centrifugal urine sedimentation and manual microscopic examination and certain
other products for $788,000.

       In February 1996, the Company merged with StatSpin for approximately
340,000 shares of Common Stock and the assumption of warrants to purchase an
additional 126,000 shares of Common Stock in a pooling-of-interests transaction
for accounting purposes.  Accordingly, the financial statements of the Company
have been retroactively restated for all periods presented to include the
financial position, results of operations and cash flows of StatSpin.  StatSpin
manufactures special-purpose centrifuges, application-specific consumable items
and other small laboratory instruments.  Through this acquisition, the Company
acquired sample preparation technologies useful for future IVD imaging
applications, as well as access to key distributors for its small instruments
and supplies.

              In June 1995, the Company purchased LDA for approximately 498,000
shares of Common Stock.  LDA was a Company-sponsored research and development
entity which provided funding for The White IRIS(R) leukocyte differential
analyzer under a research and development agreement with the Company.  See "--
Overview."

              In March 1995, the Company purchased its digital refractometer
product line from Biovation for $850,000 and warrants to purchase 75,000 shares
of Common Stock at $8.125 per share.  The Company generated revenues from this
product line of approximately $314,000 for 1995.

HEALTHCARE REFORM POLICIES

              In recent years, an increasing number of legislative proposals
have been introduced or proposed in Congress and in some state legislatures
that would effect major changes in the healthcare system, nationally, at the
state level or both.  Future legislation, regulation or payment policies of
Medicare, Medicaid, private health insurance plans, health maintenance
organizations and other third-party payors could adversely affect the demand
for the Company's current or future products and its ability to sell its
products on a profitable basis.  Moreover, healthcare legislation is an area of
extensive and dynamic change, and the Company cannot predict future legislative
changes in the healthcare field or their impact on its business.

INFLATION

              The Company does not foresee any material impact on its
operations from inflation.

RECENTLY-ISSUED ACCOUNTING STANDARDS

              In December 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123 ("SFAS No.  123"),
"Accounting for Stock Based Compensation."  The Company will adopt the
disclosure method as provided for in SFAS No. 123.

              In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-



                                       10

<PAGE>   11
Lived Assets To Be Disposed Of ("Statement 121").  Statement 121 requires the
Company to review the carrying amounts of its long-lived assets and certain
identifiable intangible assets for impairment.  If it is determined the carrying
amount of the asset is not recoverable, the Company is required to recognize an
impairment loss.  The accounting standard was implemented during the first
quarter of 1996 and did not have a material impact on the financial statements.

FORWARD-LOOKING STATEMENTS

              Except for historical information, the matters discussed above are
forward-looking statements that are subject to certain risks and uncertainties
that could cause actual results to differ materially from those set forth in
such forward-looking statements.  In addition to those described above, such
risks and uncertainties include, among other things, the difficulties of
continuing penetration of the capital- intensive worldwide laboratory instrument
market, rapid technological change in the microelectronics and software
industries, increasing competition from imaging and non-imaging based IVD
products, unanticipated technological difficulties in gaining synergies, and
potential patent and other litigation with third parties.  The Company's most
recent Annual Report on Form 10-K, as amended, and other SEC filings describe
these and other additional factors that could cause actual results to differ
materially from those described in the forward-looking statements.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

              The financial statements included herein are listed in the Index
to Financial Statements in Part IV, Item 14(a)1.

                                    PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K.

(a)  The following documents are filed as a part of this report:


                                                  


  1.   Index to Financial Statements                                       Page
                                                                           ----

       Report of Independent Accountants                                    F1
       Independent Auditors Report                                          F2
       Consolidated Balance Sheets at December 31, 1995 and 1994.           F3
       Consolidated Statements of Operations for the Years ended            
       December 31, 1995, 1994, and 1993.                                   F4
       Consolidated Statements of Shareholders' Equity for the Years    
       ended December 31, 1995, 1994, and 1993.                             F5
       Consolidated Statements of Cash Flows for the Years ended
       December 31, 1995, 1994 and 1993.                                    F8
       Notes to Consolidated Financial Statements.                          F9

  2.   Financial Statement Schedules

       The financial statement schedules have been omitted since they
       are not required, are not applicable, or the required
       information is shown in the Financial Statements or Related Notes.



                                       11
<PAGE>   12



3.   Exhibits

        No.                                     Description
        ---                                     -----------

        3.1           --       Certificate of Incorporation, as amended (1)

        3.2           --       Restated Bylaws (2)

        4.1           --       Specimen of Common Stock Certificate (3)      

        10.1          --       Lease of the Company's headquarters facility (4)

        10.2(a)       --       1982 Stock Option Plans and form of Stock Option
                               Agreement (5)

        10.2(b)       --       1983 and 1986 Stock Option Plans, and forms
                               of Stock Option Agreements for each Plan (6)

        10.2(c)       --       Amended and Restated 1986 Stock Option Plan (7)

        10.2(d)       --       1994 Stock Option Plan and forms of Stock Option
                               Agreements (8)

        10.3          --       Various Agreements with TOA Medical 
                               Electronics (9)

        10.4(a)       --       Agreement for a Strategic Alliance in
                               Urinalysis dated January 7, 1994 between IRIS
                               and Boehringer Mannheim Corporation (10)

        10.4(b)       --       Research and Development and Distribution
                               Agreement dated February 6, 1995 by and among
                               IRIS, LDA Systems, Inc. and Corange
                               International Limited (10)

        10.5          --       Warrant Certificate dated March 20, 1995 issued
                               to Biovation, Inc. (10)

        10.6(a)       --       Technology License Agreement dated as of
                               September 29, 1995 between IRIS and Poly U/A
                               Systems, Inc. (11)

        10.6(b)       --       Research and Development Agreement dated as of
                               September 29, 1995 between IRIS and Poly U/A
                               Systems, Inc. (11)

        10.6(c)       --       $100 Class "A" Note dated September 29, 1995
                               issued by Poly U/A Systems, Inc. in favor of
                               IRIS (11)

        10.6(d)       --       Certificate of Incorporation of Poly U/A
                               Systems, Inc. (See Article FOUR regarding the
                               IRIS Option) (11)



                                       12
<PAGE>   13


        10.7(a)       --       Agreement and Plan of Merger dated January 31,
                               1996 between IRIS and StatSpin, Inc. *

        10.7(b)       --       Registration Rights Agreement dated January 31,
                               1996 between IRIS and StatSpin Stockholders *

        11            --       Statement re: restated Computation of Per Share
                               Earnings

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

*  Previously Filed.

 (1)     Incorporated by reference to the Company's Current Report on Form 8-K
         dated August 13, 1987 and its Quarterly Report on Form 10-Q for the
         quarter ended September 30, 1993.

 (2)     Incorporated by reference to the Company's Quarterly Report on Form
         10-Q for the quarter ended September 30, 1994.

 (3)     Incorporated by reference to the Company's Registration Statement on
         Form S-3, as filed with the Securities and Exchange Commission on
         March 27, 1986 (File No. 333-002001).

 (4)     The original lease and all prior amendments are incorporated by
         reference to the Company's Annual Report on Form 10-K for the year
         ended December 31, 1989, its quarterly report on Form 10-Q for the
         quarter ended September 30, 1993 and its Annual Report on Form 10-K
         for the year ended December 31, 1994.

 (5)     Incorporated by reference to the Company's Registration Statement on
         Form S-2, as filed with the Securities and Exchange Commission on
         September 4, 1985 (File No. 2-99240).

 (6)     Incorporated by reference to the Company's Registration Statement on
         Form S-8, as filed with the Securities and Exchange Commission on May
         10, 1982 (File No. 2-77496).

 (7)     Incorporated by reference to the Company's Annual Report on Form 10-K
         for the year ended December 31, 1992.

 (8)     Incorporated by reference to the Company's Registration Statement on
         Form S-8, as filed with the Securities and Exchange Commission on
         August 8, 1994 (File No. 33-82560).

 (9)     Incorporated by reference to the Company's Current Report on Form 8-K 
         dated July 15, 1988 and its quarterly report on Form 10-Q for the
         quarter ended June 30, 1995.



                                       13

<PAGE>   14
(10)     Incorporated by reference to the Company's Annual Report on Form 10-K
         for the year ended December 31, 1994.

(11)     Incorporated by reference to the Company's Quarterly Report on Form
         10-Q for the quarter ended September 30, 1995.



                                       14
<PAGE>   15
                       REPORT OF INDEPENDENT ACCOUNTANTS



To the Board of Directors and Shareholders of International Remote Imaging
Systems, Inc.

         We have audited the consolidated financial statements of International
Remote Imaging Systems, Inc. and subsidiary, as listed in the index on page 11
of this Form 10-K/A (Amendment No. 1).  These consolidated financial statements
are the responsibility of the Company's management.  Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.  We did not audit the financial statements of StatSpin, Inc. a wholly
owned subsidiary, for the years ended March 31, 1995 and 1994.  The financial
statements of StatSpin, Inc. reflect total assets constituting 9% in 1994 and
total revenues of 22% and 27% in 1994 and 1993, respectively, of the related
consolidated totals.  The financial statements of StatSpin, Inc. for the years
ended March 31, 1995 and 1994 were audited by other auditors whose reports were
furnished to us, and our opinion, insofar as it relates to the amounts included
for StatSpin, Inc. as of December 31, 1994 and for the years ended December 31,
1994 and 1993, is based solely on the reports of the other auditors.

         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.

         The consolidated financial statements give retroactive effect to the
merger of International Remote Imaging Systems, Inc. and StatSpin, Inc. on
February 1, 1996, which has been accounted for as a pooling-of-interests as
described in Note 1 to the consolidated financial statements.

         In our opinion, based on our audits and the reports of other auditors,
the financial statements referred to above present fairly, in all material
respects, the consolidated financial position of International Remote Imaging
Systems, Inc. and subsidiary at December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.

         As discussed in Note 19 to the consolidated financial statements, the
Company's 1995 net income previously reported as $2,356,615, or $.37 per share,
should have been $2,126,412, or $.33 per share.  This discovery was made
subsequent to the issuance of the financial statements.  The consolidated
financial statements have been restated to reflect the correction.

/s/ COOPERS & LYBRAND L.L.P.



Los Angeles, California
March 20, 1996, except as to Note
1 which date is April 24, 1996 and
Note 19 which date is November 13, 1996.



                                      F-1

<PAGE>   16
                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors
StatSpin, Inc.:

We have audited the balance sheet of StatSpin Inc. as of March 31, 1995, and
the related statements of income and accumulated deficit, and cash flows for
each of the two years in the period ended March 31, 1995. These financial
statements, which are not presented separately herein, 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 StatSpin, Inc. at March 31,
1995, and the results of its operations and its cash flows for each of the two
years in the period ended March 31, 1995, in conformity with generally accepted
accounting principles.

                                        /s/ KPMG Peat Marwick LLP


May 26, 1995
Boston, Massachusetts






                                      F-2
<PAGE>   17

                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS
<TABLE>
<CAPTION>
                                                                             At December 31,
                                                         -----------------------------------
                                                                 1994                  1995
                                                         ------------          ------------
<S>                                                      <C>                   <C>         
Current assets:
  Cash and cash equivalents                              $  2,573,384          $  1,511,395
  Short-term investments                                    2,256,062             4,736,727
  Accounts receivable-trade, net of allowance
    for doubtful accounts of $89,685 in 1994
    and $87,759 in 1995                                     2,431,638             2,897,507
  Accounts receivable  -  service contracts                   313,144               481,367
  Accounts receivable-other                                   575,657               407,245
  Inventories                                               2,179,663             2,941,021
  Prepaid expenses and other current assets                   190,293               285,683
  Deferred tax asset                                              -                 919,489
                                                         ------------          ------------
   Total current assets                                    10,519,841            14,180,434

  Property and equipment, at cost, net of
    accumulated depreciation                                  598,891               995,044
  Software development costs, net of accumulated
    amortization of $625,816 in 1994 and
    $667,425 in 1995                                           40,623               298,030
  Long-term investments                                     1,200,000               100,000
  Deferred warrant costs                                      503,145             1,574,780
  Deferred tax asset                                             --               3,594,100
  Other assets                                                419,687             1,460,157
                                                         ------------          ------------
   Total assets                                          $ 13,282,187          $ 22,202,545
                                                         ============          ============


                      LIABILITIES AND SHAREHOLDERS' EQUITY


Current liabilities:
  Notes payable                                          $    105,877          $    185,633
  Accounts payable                                            921,478               810,819
  Accrued expenses                                          1,030,472             1,238,599
  Deferred income - service contracts                         683,402               710,907
                                                         ------------          ------------
   Total current liabilities                                2,741,229             2,945,958
Deferred income - service contracts                           119,913               190,045
Notes payable, long-term portion                              261,107               125,000
                                                         ------------          ------------
   Total liabilities                                        3,122,249             3,261,003
                                                         ------------          ------------

Commitments and contingencies

Shareholders' equity:
  Preferred stock, $.01 par value
    Authorized:  3,000,000 shares
    None issued and outstanding
  Common stock, $.01 par value
    Authorized:  15,600,000 shares
    Shares issued and outstanding:
    1994 - 5,330,327, 1995 - 6,292,408                         53,304                62,924
  Additional paid-in capital                               27,418,271            34,154,116
  Treasury stock, at cost (96,473 shares
      in 1994 and 1995)                                      (453,386)             (453,386)
  Unearned compensation                                       (93,130)              (95,884)
  Accumulated deficit                                     (16,765,121)          (14,726,228)
                                                         ------------          ------------
   Total shareholders' equity                              10,159,938            18,941,542
                                                         ------------          ------------
   Total liabilities and shareholders' equity            $ 13,282,187          $ 22,202,545
                                                         ============          ============
</TABLE>



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




                                      F-3
<PAGE>   18
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                       For the Year Ended December 31,
                                                     -------------------------------------------------
                                                             1993              1994              1995
                                                     ------------      ------------      ------------
<S>                                                  <C>               <C>               <C>         
Sales of IVD imaging systems ...................     $  5,029,398      $  4,559,044      $  4,240,627
Sales of IVD imaging system supplies and service        3,994,896         5,024,521         6,737,444
Sales of small instruments and supplies ........        3,368,480         2,885,712         3,414,087
                                                     ------------      ------------      ------------

Net sales ......................................       12,392,774        12,469,277        14,392,158
                                                     ------------      ------------      ------------

Cost of goods- IVD imaging systems .............        2,365,907         2,178,318         2,014,873
Cost of goods - IVD imaging system
  supplies and service .........................        1,937,489         2,495,797         3,174,290
Cost of goods - small instruments and supplies .        2,038,342         1,824,913         1,937,653
                                                     ------------      ------------      ------------
Cost of goods sold .............................        6,341,738         6,499,028         7,126,816
                                                     ------------      ------------      ------------

Gross margin ...................................        6,051,036         5,970,249         7,265,342

Marketing and selling ..........................        2,115,435         2,085,022         2,874,442
General and administrative .....................        1,742,813         1,726,902         2,168,423
Research and development, net ..................          879,360           663,231         1,220,028
Acquisition of in-process research
  and development ..............................              -                 -           2,900,430
                                                     ------------      ------------      ------------

Operating income (loss) ........................        1,313,428         1,495,094        (1,897,981)

Other income (expense):
   Interest income .............................          110,456           167,924           309,929
   Interest expense ............................          (81,899)          (73,238)          (42,699)
   Other income ................................           38,558           111,240           110,530
                                                     ------------      ------------      ------------

Income (loss) before provision (benefit)
  for income taxes .............................        1,380,543         1,701,020        (1,520,221)
Provision (benefit)
  for income taxes .............................           57,906            79,456        (3,646,633)
                                                     ------------      ------------      ------------

Net income .....................................     $  1,322,637      $  1,621,564      $  2,126,412
                                                     ============      ============      ============

Net income per share ...........................     $        .25      $        .28      $        .33
                                                     ============      ============      ============

Weighted average number of
  common shares and common
  share equivalents outstanding
  for the period ...............................        5,355,297         5,698,620         6,418,518
                                                     ============      ============      ============
</TABLE>

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




                                      F-4
<PAGE>   19
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                  Common Stock   Additional            Shareholders'  Unearned
                           -------------------      Paid-In   Treasury        Notes    Compen-    Accumulated
                              Shares    Amount      Capital      Stock   Receivable     sation        Deficit         Total
                              ------    ------      -------      -----   ----------     ------        -------         -----
<S>                        <C>         <C>      <C>           <C>         <C>        <C>        <C>              <C>
Balance,
December 31, 1992, as
previously reported.       4,740,011   $47,400  $25,255,612        $--    $(28,306)  $(57,816)  $(19,177,497)    $6,039,393
                           
Adjustment for
StatSpin, Inc.       
pooling of interest..        340,260     3,403      798,579         --          --         --       (531,825)       270,157
                           ---------   -------  -----------   --------     --------   --------   ------------    ----------
Balance, December 31,
1992, as restated....      5,080,271    50,803   26,054,191                 (28,306)   (57,816)  (19,709,322)     6,309,550

Repurchase of
common stock........        (26,200)     (262)          262   (142,016)          --         --             --      (142,016)

Common stock issued
on exercise of stock
options.............          46,533       465      101,282         --           --         --             --       101,747

Common stock issued
under Employee Stock
Purchase Plan:
for Cash............          13,971       140       67,336         --           --         --             --        67,476
for Services........          13,971       140       67,336         --           --   (67,476)             --            --
                                    
Common stock issued
for cash on exercise
of warrants.........           9,800        98       36,652         --           --         --             --        36,750

Principal payments
received on
shareholders' notes
receivable..........              --        --           --         --       21,639         --             --        21,639

Amortization of
unearned             
compensation........              --        --           --         --          --     48,489              --        48,489  
                                                                                                    
Net income..........              --        --           --         --          --         --       1,322,637     1,322,637
                           ---------   -------  -----------   --------     --------   --------   ------------    ----------
Balance,
December 31, 1993...       5,138,346    51,384   26,327,059   (142,016)      (6,667)   (76,803)   (18,386,685)    7,766,272
</TABLE>





                                      F-5
<PAGE>   20
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                Common Stock     Additional            Shareholders'    Unearned
                              ----------------      Paid-In   Treasury        Notes      Compen-    Accumulated
                              Shares    Amount      Capital      Stock   Receivable       sation        Deficit     Total
                              ------    ------      -------      -----   ----------       ------        -------     -----
<S>                        <C>          <C>      <C>         <C>              <C>       <C>       <C>           <C>
Common stock issued
on exercise of stock
options.............         200,832     2,008      445,015         --           --           --           --      447,023

Common stock issued
under Employee Stock
Purchase Plan:
for Cash............          22,811       228      100,559         --           --           --           --      100,787
for Services........          22,811       228      100,559         --           --    (100,787)           --           --

Common stock issued
for cash on exercise
of warrants.........          15,800       158       59,092         --           --           --           --       59,250

Issuance of warrants              --        --      385,285         --           --           --           --      385,285

Principal payments
received on share-
holders' notes      
receivable..........              --        --           --         --        6,667           --           --        6,667

Amortization of
unearned            
compensation........              --        --           --         --           --       84,460           --       84,460

Repurchase of common
stock...............        (70,273)     (702)          702   (311,370)          --           --           --     (311,370)

Net income..........              --        --           --         --           --           --    1,621,564    1,621,564
                           ---------    ------   ----------   --------        -----      -------  -----------   ----------
Balance,
  December 31, 1994.       5,330,327    53,304   27,418,271   (453,386)          --      (93,130) (16,765,121)  10,159,938
</TABLE>





                                      F-6
<PAGE>   21
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY



<TABLE>
<CAPTION>
                                Common Stock     Additional            Shareholders'    Unearned
                              ----------------      Paid-In   Treasury        Notes      Compen-    Accumulated
                              Shares    Amount      Capital      Stock   Receivable       sation        Deficit     Total
                              ------    ------      -------      -----   ----------       ------        -------     -----
<S>                        <C>         <C>      <C>         <C>                 <C>    <C>       <C>            <C>
Common stock issued
on exercise of stock          21,900       219       44,231                      --           --           --        44,450
options..................                                           --

Common stock issued
under Employee Stock
Purchase Plan:
for Cash.................      9,997       100       67,141         --           --           --           --        67,241
for Services.............     16,976       170      112,219         --           --     (89,915)           --        22,474

Common stock issued
for cash on exercise
of warrants..............    414,749     4,147    1,551,161         --           --           --           --     1,555,308

Issuance of warrants.....         --        --    1,774,733         --           --           --           --     1,774,733

Common stock issued
in exchange for LDA
Systems, Inc.        
callable common stock        498,459     4,984    2,972,360         --           --           --           --     2,977,344

Amortization of
unearned             
compensation ............         --        --           --         --           --       87,161           --        87,161

Income tax benefit                                                                                                  214,000
related to exercise
of nonqualified stock
options..................         --        --      214,000         --           --           --           --

Adjustment to reflect
change in StatSpin, Inc.
fiscal year..............         --        --           --         --           --           --     (87,519)       (87,519)

Net income...............         --        --           --         --           --           --    2,126,412     2,126,412
                           ---------   -------  ----------- ---------           ---    --------- ------------   -----------
Balance 
  December 31, 1995.       6,292,408   $62,924  $34,154,116 $(453,386)                 $(95,884) $(14,726,228)  $18,941,542
                           =========   =======  =========== ==========          ===    ========= ============   ===========
</TABLE>


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



                                      F-7
<PAGE>   22
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                                  For the Year Ended December 31,
                                                                                   ---------------------------------------------
                                                                                          1993             1994             1995
                                                                                   -----------      -----------      -----------
<S>                                                                                <C>              <C>              <C>        
Cash flows from operating activities:
     Net income ..............................................................     $ 1,322,637      $ 1,621,564      $ 2,126,412
   Adjustments to reconcile net income to net
   cash provided by operations:
     Deferred tax benefit ....................................................            --               --         (3,705,589)
     Acquisition of in-process research and development ......................            --               --          2,882,858
     Depreciation and amortization ...........................................         533,187          548,420          635,048
     Common stock compensation ...............................................          48,489           84,460          109,635
     Other ...................................................................          (4,500)            --               --
   Changes in assets and liabilities:
     Accounts receivable - trade .............................................        (189,507)        (569,317)        (525,151)
     Account receivable - other ..............................................            --               --            168,412
     Notes receivable - trade ................................................          36,000           13,731             --
     Service contracts .......................................................          68,991           23,715          (95,586)
     Inventories .............................................................         (69,694)         390,479         (875,295)
     Prepaid expenses and other current assets ...............................          89,299          (79,561)         (80,230)
     Other assets ............................................................        (138,152)        (106,270)          47,239
     Accounts payable ........................................................         240,014          266,325          (87,673)
     Accrued expenses ........................................................          69,868         (151,224)         199,735
                                                                                   -----------      -----------      -----------
   Net cash provided by operating activities .................................       2,006,632        2,042,322          799,815
                                                                                   -----------      -----------      -----------

Cash flows from investing activities:
     Acquisition of property and equipment ...................................        (438,684)        (266,360)        (820,838)
     Acquisition of product line .............................................            --               --           (886,800)
     Software development costs ..............................................         (81,034)         (25,411)        (299,016)
     Maturities of certificates of deposit ...................................         625,000          210,000          215,000
     Purchases of certificates of deposit ....................................        (625,000)        (100,000)            --
     Maturities of held-to-maturity debt securities ..........................            --          1,000,000        2,700,000
     Purchases of held-to-maturity debt securities ...........................            --         (3,441,062)      (4,295,664)
                                                                                   -----------      -----------      -----------
   Net cash used by investing activities .....................................        (519,718)      (2,622,833)      (3,387,318)
                                                                                   -----------      -----------      -----------

Cash flows from financing activities:
     Issuance of common stock for cash .......................................         138,497          254,823        1,599,758
     Repurchase of common stock ..............................................        (142,016)         (59,920)            --
     Principal payments received on shareholders' notes receivable ...........          (1,439)           4,569             --
     Increase (decrease) in line of credit borrowings ........................          65,046         (160,000)            --
     Repayments of notes payable .............................................         (76,395)        (373,605)        (256,351)
     Proceeds from notes payable .............................................            --            166,660             --
     Issuance of common stock for cash under Employee Stock
       Purchase Plan .........................................................          67,476          100,787           67,241
                                                                                   -----------      -----------      -----------
   Net cash provided (used)  by financing activities .........................          51,169          (66,686)       1,410,648
                                                                                   -----------      -----------      -----------

     Net increase (decrease) in cash and cash equivalents ....................       1,538,083         (647,197)      (1,176,855)
     Cash and cash equivalents at beginning of year ..........................       1,682,498        3,220,581        2,573,384
     Adjustment to cash to reflect change in StatSpin Technologies fiscal year            --               --            114,866
                                                                                   -----------      -----------      -----------
     Cash and cash equivalents at end of period..                                   $3,220,581      $ 2,573,384      $ 1,511,395
                                                                                   ===========      ===========      ===========

   Supplemental schedule of non-cash financing activities:
     Issuance of common stock in exchange for services .......................     $    67,476      $   100,787      $   109,635
     Issuance of common stock under a stock for
     stock exercise ..........................................................            --            251,450             --
     Issuance of warrants ....................................................            --            385,285        1,774,733
     Issuance of common stock to acquire shares of LDA .......................            --               --          2,977,344
     Tax benefit related to exercise of nonqualified stock options ...........            --               --            214,000
   Supplemental disclosure of cash flow information:
     Cash paid for income taxes ..............................................          54,490          112,921           21,456
     Cash paid for interest ..................................................          76,384          118,379           42,698
</TABLE>

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


                                      F-8
<PAGE>   23
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  FORMATION AND BUSINESS OF THE COMPANY.

    International Remote Imaging Systems, Inc. (IRIS) was incorporated in
California in 1979 and reincorporated during 1987 in Delaware. IRIS engages in
the business of developing, manufacturing and selling in vitro diagnostic (IVD)
imaging systems and other laboratory instruments based on proprietary
technology.

    On February 1, 1996, a newly formed subsidiary of IRIS completed its merger
with StatSpin, Inc., (StatSpin) which became a wholly owned subsidiary of IRIS.
StatSpin manufactures special purpose centrifuges and other small instruments
widely used in clinical, veterinary, physicians' offices and research
laboratories. StatSpin sells its products primarily through leading distributors
to the physician office and veterinary laboratory markets. IRIS issued
approximately 340,000 shares of common stock for all of the outstanding common
stock and appreciation rights of StatSpin and assumed options and warrants to
purchase an additional 126,000 shares of IRIS common stock. This represented an
exchange ratio of 4.095 shares of IRIS common stock for each common share and
stock appreciation right of StatSpin. This transaction was accounted for as a
pooling-of-interests. Accordingly, the consolidated financial statements have
been retroactively restated for all periods presented to include the financial
position, results of operations and cash flows of StatSpin.

    StatSpin previously used the fiscal year ended March 31 for its financial
reporting. To conform to the Company's December 31 fiscal year end, StatSpin's
operating results for the period January 1, 1995 through March 31, 1995 have
been included in the operating results of the Company for the fiscal years ended
December 31, 1995 and 1994. The resulting duplication of revenue and net income
of StatSpin for the period from January 1, 1995 through March 31, 1995 amounted
to $710,000 and $87,519, respectively, which has been adjusted by a $87,519
charge to accumulated deficit during the year ended December 31, 1995.

    Combined and separate results of IRIS and StatSpin are as follows:

<TABLE>
<CAPTION>
                                                            IRIS            StatSpin          Combined
                                                        -------------------------------------------------
<S>                                                     <C>                <C>                <C>        
Year ended December 31, 1993 (StatSpin year ended
March 31, 1994)

    Net Sales                                           $ 9,024,294        $ 3,368,480        $12,392,774
    Net Income                                            1,280,562             42,075          1,322,637

Year ended December 31 1994 (StatSpin year ended
March 31, 1995)

    Net Sales                                             9,583,565          2,885,712         12,469,277
    Net Income                                            1,472,886            148,678          1,621,564

Year ended December 31, 1995

    Net Sales                                            11,292,559          3,099,599         14,392,158
    Net Income                                            1,861,228            265,184          2,126,412
</TABLE>







                                      F-9
<PAGE>   24
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

Use of Estimates:

    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect 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 periods. Actual results could differ from those estimates.

Principles of Consolidation:

    The financial statements include the accounts of IRIS and StatSpin, a
wholly-owned subsidiary acquired on February 1, 1996. All significant
intercompany accounts and transactions have been eliminated in the consolidated
financial statements.

Cash Equivalents, Short-Term Investments, and Long-Term Investments:

    Short-Term investments principally include certificates of deposit and debt
instruments of the United States Government with maturities greater than three
months and less than one year. Long-Term investments represent certificates of
deposit and debt instruments of the United States Government with maturities
greater than one year. For purposes of the statement of cash flows, IRIS
considers all highly liquid debt instruments purchased with a remaining maturity
of three months or less when purchased to be cash equivalents. IRIS places its
cash and investments with high credit quality financial institutions. At times,
these deposits may be in excess of the federally insured limit.

Accounts Receivable:

    IRIS sells predominantly to entities in the healthcare industry. IRIS grants
uncollateralized credit to its customers, primarily domestic hospitals,
clinical, and research laboratories. IRIS performs ongoing credit evaluations of
its customers before granting uncollateralized credit and, to date, has not
experienced any material credit related losses.

Property and Equipment and Depreciation:

    Property and equipment are recorded at cost, less accumulated depreciation
and amortization. Depreciation is computed using the straight-line method
generally over three to five years, the estimated useful lives of the assets.
Leasehold improvements are amortized over the lesser of their useful life or the
remaining term of the lease.

    Costs of maintenance and repairs are charged to expense when incurred; costs
of renewals and betterments are capitalized. Upon sale or retirement, the cost
and related accumulated depreciation are eliminated from the respective
accounts, and the resulting gain or loss is included in current income.

Software Development Costs:

    IRIS capitalizes certain software development costs in accordance with
Statement of Financial Accounting Standards No. 86 -- "Accounting for the Costs
of Computer Software to be Sold, Leased, or Otherwise Marketed," for new
products and product enhancements once technological feasibility has been
established. IRIS amortizes capitalized software costs using the greater of the
straight line method over the estimated product life of generally one to three
years, or a percentage of total units sold over the projected unit sales.
Amortization expense of software development costs was approximately $132,000,
$108,000 and $41,600 for 1993, 1994, and 1995, respectively.




                                      F-10
<PAGE>   25
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Deferred Warrant Costs:

    Deferred warrant costs result from the issuance of warrants in conjunction
with various development, distribution and technology license agreements. These
costs are being amortized over the term of the related agreements, or with
respect to perpetual technology license agreements, over the expected life of
the related technology of, generally, ten years.

Revenue Recognition:

    IRIS derives revenue from the sale of IVD imaging systems, sales of supplies
and service for its IVD imaging systems and sales of small laboratory
instruments and related supplies. IRIS generally recognizes product revenues
once all of the following conditions have been met: a) an authorized purchase
order has been received in writing, b) customer credit worthiness has been
established, and c) shipment of the product to the customer designated location
has occurred. Estimated installation expense is recognized as part of the
accrual for warranty expense at the time of shipment.

    IRIS recognizes service revenues ratably over the term of the service
period, which typically ranges from twelve to sixty months. Payments for service
contracts are generally made in advance. Deferred revenue represents the
revenues to be recognized over the remaining term of the service contracts.

Warranties:

    IRIS recognizes the full estimated cost of warranty expense, including
installation costs, at the time of product shipment.

Research and Development Expenditures:

    Except for certain software development costs required to be capitalized as
described above (see Software Development Costs), research and development
expenditures are charged to operations as incurred. Net research and development
expense includes total research and development costs incurred, including costs
incurred under research and development contracts, less costs reimbursed under
research and development contracts (See Note 18).

Income Taxes:

    IRIS accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes," which
requires recognition of deferred tax liabilities and assets for the expected
future tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax liabilities and
assets are determined based on the differences between the financial statement
and the tax bases of assets and liabilities using enacted tax rates in effect
for the year in which the differences are expected to reverse. Valuation
allowances are established when necessary to reduce deferred tax assets to the
amount expected to be realized. Income tax expense represents the tax payable
for the period and the change during the period in deferred tax assets and
liabilities.

Reclassifications:

    Certain reclassifications have been made to the 1993 and 1994 financial
statements to conform with the 1995 presentation.

Recently Issued Accounting Standard:

    In December 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
Stock Based Compensation." In accordance with SFAS No. 123, IRIS will adopt the
disclosure method as provided for in the statement.



                                      F-11
<PAGE>   26
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


    In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets To Be Disposed Of ("SFAS No. 121").
SFAS No. 121 requires the Company to review the carrying amounts of its
long-lived assets and certain identifiable intangible assets for impairment. If
it is determined the carrying amount of the asset is not recoverable, the
company is required to recognize an impairment loss. The accounting standard
will be implemented during the first quarter of 1996; however, the loss, if any,
has not yet been determined.

3.  MARKETABLE DEBT SECURITIES.

    On January 1, 1994, IRIS adopted Statement of Financial Accounting Standards
No. 115, ("SFAS 115") "Accounting for Certain Investments in Debt and Equity
Securities" and determined that all its debt securities should be classified as
"held-to-maturity" based on the Company's intent and ability to hold those
securities to maturity. Under SFAS 115, debt securities classified as
"held-to-maturity" are carried at amortized cost.

    At December 31, 1994 and 1995, the carrying value of marketable debt
securities approximates fair value and is included in short-term and long-term
investments:

<TABLE>
<CAPTION>
        December 31, 1994                       Expected Maturity Value and Date
                                                --------------------------------
                               Amortized Cost     Within One       One to Five
                                                        Year             Years
                               --------------     -----------       ----------
<S>                                <C>             <C>                 <C>
        U.S. Treasury Bills        $1,641,062      $1,700,000
        U.S. Treasury Notes           802,028                          $800,000
</TABLE>


<TABLE>
<CAPTION>
        December 31, 1995                     Expected Maturity Value and Date
                                              --------------------------------
                               Amortized Cost     Within One       One to Five
                                                        Year             Years
                               --------------     -----------       ----------
<S>                                <C>             <C>                     <C> 
        U.S. Treasury Bills        $3,236,725      $3,318,000              $ --
        U.S. Treasury Notes           803,376         800,000                --
</TABLE>

4.  INVENTORIES.

    Inventories are carried at the lower of cost or market on a first-in,
first-out basis and are composed of the following:

<TABLE>
<CAPTION>
                                                         December 31,
                                        ----------------------------
                                            1994               1995
                                        ----------------------------
<S>                                     <C>               <C>       
Finished goods .................        $  520,445        $  422,115
Work-in-process ................           466,182           276,115
Consumables and related hardware           394,070           603,848
Raw materials, parts and
 sub-assemblies ................           798,966         1,638,943
                                        ----------        ----------
                                        $2,179,663        $2,941,021
                                        ==========        ==========
</TABLE>




                                      F-12
<PAGE>   27
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5.  PROPERTY AND EQUIPMENT.

    Property and equipment is composed of the following:

<TABLE>
<CAPTION>
                                                         December 31,
                                     -------------------------------
                                          1994               1995
                                     -------------------------------
<S>                                  <C>                 <C>        
Leasehold improvements ......        $   257,534         $   327,178
Furniture and fixtures ......             88,058             115,544
Machinery and equipment .....          1,935,129           2,422,835
Tooling, dies and molds .....            417,908             532,070
Rental units ................             56,084             166,268
                                     -----------         -----------
                                       2,754,713           3,563,895
Less accumulated depreciation         (2,155,822)         (2,568,851)
                                     -----------         -----------
                                     $   598,891         $   995,044
                                     ===========         ===========
</TABLE>
                                   
    Property and equipment includes $1,270,363 and $1,284,488, respectively, at
December 31, 1994 and 1995 of fully depreciated assets which remain in service.
Depreciation expense was $272,401, $327,293 and $449,653 for 1993, 1994, and
1995, respectively. Maintenance and repairs expense for 1993, 1994 and 1995 was
$41,629, $64,870, and $55,250, respectively.

    Rental units are carried at cost less accumulated depreciation ($136,136 and
$163,952 at December 31, 1994 and 1995). Future minimum rental revenue on
noncancellable leases as of December 31, 1995 is approximately $306,000, due
during 1996.

6.  ACCRUED EXPENSES.

    Accrued expenses are composed of the following:

<TABLE>
<CAPTION>
                                                 December 31,
                                 ----------------------------
                                     1994               1995
                                 ----------------------------
<S>                              <C>               <C>       
Accrued bonuses .........        $  206,451        $  366,372
Accrued commissions .....            55,133            76,079
Accrued payroll .........            87,298            88,228
Accrued vacation ........           109,999           135,832
Accrued taxes and other .            22,773            70,642
Accrued professional fees           117,388           155,552
Accrued warranty expense            344,822           269,823
Accrued - other .........            86,608            76,071
                                 ----------        ----------
                                 $1,030,472        $1,238,599
                                 ==========        ==========
</TABLE>

7.  NOTES PAYABLE.

   StatSpin had notes payable to shareholders with outstanding balances of
$200,324 and $185,638 at December 31, 1994 and 1995, respectively. The notes
bore interest at 11% - 12% per year and were due in 1996 through 1997.

   In addition, StatSpin had a note payable to the Massachusetts Technology
Development Corporation with outstanding balances of $166,660 and $124,995 at
December 31, 1994 and 1995, respectively. The note bore interest at 9% per year
and was due in 1998.

    Following consummation of the merger with StatSpin, all note obligations
were paid off in full by IRIS.




                                      F-13
<PAGE>   28
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.  INCOME TAXES.

The provision (benefit) for income taxes consisted of the following:

<TABLE>
<CAPTION>
                             1993            1994               1995
                        -----------------------------------------------
<S>                     <C>               <C>               <C>        
Currently payable:
  Federal ........      $    26,000       $    30,000       $    26,000
  State ..........           31,906            49,456            32,956
                        -----------       -----------       -----------
                             57,906            79,456            58,956
                        -----------       -----------       -----------
Deferred:
  Federal ........             --                --          (3,655,589)
  State ..........             --                --             (50,000)
                        -----------       -----------       -----------
                               --                --          (3,705,589)
                        -----------       -----------       -----------
                        $    57,906       $    79,456       $(3,646,633)
                        ===========       ===========       ===========
</TABLE>

The provision (benefit) for income taxes differs from the amount obtained by
applying the federal statutory income tax rate to income before income taxes for
the years ended December 31, 1993, 1994 and 1995 as follows:

<TABLE>
<CAPTION>
                                                 1993            1994               1995
                                           -----------------------------------------------
<S>                                        <C>               <C>               <C>         
Tax provision (benefit) computed at
  Federal statutory rate ............      $   469,385       $   578,347       ($  516,875)
Increase (decrease) in taxes due to:
  Reinstatement of fully reserved
    deferred tax assets .............             --                --          (3,587,000)
  Utilization of net
    operating loss carryforward .....         (521,993)         (583,316)         (662,819)
  Write-off of in-process research
    and development .................             --                --           1,089,962
  State taxes, net of federal benefit           18,643            36,979            26,156
  Nondeductible expenses ............           37,214            21,952           (22,057)
  Other .............................           54,657            25,494            26,000
                                           -----------       -----------       -----------
                                           $    57,906       $    79,456       ($3,646,633)
                                           ===========       ===========       ===========
</TABLE>

    In 1995, IRIS recognized a tax benefit of $3,587,000 through a reduction in
the Company's deferred tax asset valuation allowance. This reduction in the
valuation allowance resulted principally from the Company's assessment of the
realizability of its net operating loss carryforwards based on recent operating
history as well as an assessment that operations will continue to generate
taxable income. Realization of the deferred tax assets are dependent upon
continued generation of sufficient taxable income prior to expiration of the
loss carryforwards. Although realization is not assured, management believes it
is more likely than not that the remaining net deferred tax assets will be
realized. The amount of the deferred tax assets considered realizable, however,
could be reduced in the future if estimates of future taxable income during the
carryforward period are reduced.

At December 31, 1995, the Company had federal net operating loss carryforwards
of approximately $14.2 million and state net operating loss carryforwards of
approximately $740,000 which expire in fiscal years ending in 1999 through 2010.
As of December 31, 1995, IRIS had investment tax and R&D credit carryforwards of
$71,719 expiring in fiscal years through 2003.




                                      F-14
<PAGE>   29
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



    The primary components of temporary differences which give rise to the
Company's net deferred tax asset at December 31, 1993, 1994 and 1995 are as
follows:


<TABLE>
<CAPTION>
                                                                         December 31,
                                       -----------------------------------------------
                                           1993              1994               1995
                                       -----------------------------------------------
<S>                                    <C>               <C>               <C>        
Depreciation and amortization....      $   115,598       $   129,162       $   146,200
Allowance for doubtful accounts .           34,012            32,619            12,900
Accrued liabilities .............          234,718           189,129           213,100
Deferred revenue-service
  contracts .....................          186,582           202,164           145,800
Deferred research and development             --                --             537,000
Net operating loss carryforwards         5,768,479         5,135,843         4,840,000
Other ...........................           74,963            98,281           118,589
Valuation allowance .............       (6,414,352)       (5,787,198)       (1,500,000)
                                       -----------       -----------       -----------
                                       $         0       $         0       $ 4,513,589
                                       ===========       ===========       ===========
</TABLE>

9.  LDA AND WARRANTS.

    In October, 1992 LDA Systems, Inc. ("LDA"), completed an initial public
offering of 107,750 units, each unit consisting of one share of callable LDA
Common Stock and ten IRIS Warrants, each five warrants entitling the holder to
purchase one share of IRIS Common Stock for $3.75, exercisable at any time from
November 16, 1992 through July 31, 1995. LDA received net proceeds of $774,000
from the unit offering. These funds were used throughout 1993 to engage IRIS to
conduct research and development, clinical evaluations and pre-market testing of
The White IRIS(R), a proposed new product, in accordance with a research and
development contract. In addition, IRIS committed to fund $500,000 of the
development costs at a rate of $15,000 per month during this period.

    On April 25, 1994, LDA completed the sale of additional units to Corange
Limited consisting of 85,714 shares of callable LDA common stock and warrants to
purchase an aggregate of 248,571 shares of IRIS common stock at an exercise
price of $3.75 per share. As part of the investment agreement, Corange was
granted the option to participate with LDA in the joint development,
manufacture, and marketing of certain future hematology instruments. This option
expired October 30, 1995.

    IRIS had the option to purchase for cash or shares of IRIS common stock all
of the outstanding shares of LDA common stock at $20 per share. The option
expired 121 days after termination of the research and development agreement,
which was to conclude no later than July 31, 1995. In June 1995, IRIS completed
the acquisition of LDA for approximately 498,000 shares of IRIS Common Stock.
IRIS acquired LDA pursuant to the exercise of its call option under the LDA
Restated Certificate of Incorporation to purchase all the outstanding shares of
LDA Common Stock. Accordingly, IRIS tendered 2.5765 shares of IRIS Common Stock
for each share of LDA Common Stock. As a result of the acquisition, IRIS
incurred a non-recurring charge of approximately $2.9 million against earnings
in 1995 for the acquisition of in-process research and development (i.e. work
in process not yet cleared for interstate commerce by the Food and Drug
Administration).

    The following unaudited pro forma combined financial information gives
effect to the acquisition of LDA by IRIS under the purchase method of accounting
as though the acquisition had occurred on January 1, 1994. Substantially all of
the purchase price for the acquisition of LDA by IRIS has been allocated to
in-process research and development. Under the purchase method of accounting,
the purchased in-process research and development has been written off as of the
purchase date. The one time write-off of in-process research and development of
approximately $2.9 million is excluded from the pro forma information as it
represents a non-recurring item.




                                      F-15
<PAGE>   30
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




<TABLE>
<CAPTION>
                                                     1994             1995
                                                  ----------------------------
<S>                                               <C>              <C>        
Net revenues                                      $12,469,277      $14,392,158
Net income                                        $   480,445      $ 4,846,984
Primary and fully diluted earnings per share      $      0.08      $      0.73
</TABLE>

    The pro forma combined financial information is presented for informational
purposes only and is not necessarily indicative of the operating results that
would have occurred had the merger been consummated as of the above dates. In
addition, the pro forma results are not intended to be a projection of future
results.

10. POLY DEVELOPMENT AGREEMENT.

    On September 29, 1995, Poly U/A Systems, Inc. (Poly) engaged IRIS to develop
several new products based on IRIS and other technology to further enhance
automation in the urinalysis field. Under the terms of the project, POLY will
have the right to use the IRIS technology and any newly developed technology for
developing, manufacturing and marketing the new products as stand-alone devices,
and IRIS will have the right to use any newly developed technology for any other
purpose and to incorporate the new products into The Yellow IRIS(R). POLY has
retained IRIS to conduct the research, development, clinical evaluation and
pre-market testing of the proposed new products. IRIS will fund the first
$15,000 per month (up to a maximum of $500,000) of the cost of the project, and
POLY will reimburse IRIS for the excess. IRIS has an option until 121 days after
termination of the project (which terminates no later than July 31, 1998) to
acquire all of the Common Stock of POLY at prices rising over time from $14 to
$20 per share of POLY Common Stock. IRIS may pay the option exercise price in
cash or with shares of IRIS Common Stock. IRIS is also providing financial and
administrative services to POLY at cost.

    POLY, a privately-held company based in Los Angeles, California, was
organized in June 1995 to undertake the commercial development of several
potential products based on technology developed or licensed by IRIS. In order
to fund its share of the project, POLY, in 1995, raised net proceeds of $2.0
million through the sale of 128 units at a price of $20,000 per unit. Each unit
consists of 2,000 shares of POLY's Callable Common Stock and a warrant to
purchase 4,000 shares of IRIS Common Stock. In the aggregate, investors
purchased 256,000 shares of POLY's callable Common Stock and warrants to
purchase 512,000 shares of IRIS Common Stock. The IRIS warrants are exercisable
at $6.50 per share during the last two years of their three-year duration. In
connection with POLY's sale of units, IRIS also issued warrants to the placement
agent and finder to purchase an aggregate of 150,000 shares of IRIS Common
Stock. These warrants are exercisable at $7.80 per share for a five year period
and include certain registration rights.

11. REFERENCE LAB AGREEMENT.

    During the first quarter of 1995, IRIS and Boehringer Mannheim Corporation
("BMC") and Boehringer Mannheim GmbH ("BMG"), BMC's German affiliate, announced
a joint project to develop a high capacity automated urinalysis system primarily
for reference laboratories based on the proprietary technologies of both
companies. The program is jointly funded by both companies. In addition to
designing specific components of the new system, BMG has agreed to pay IRIS a
fixed amount of $640,000 for its research and development of the project. In
connection with this project and certain distribution considerations, IRIS
issued Corange (an affiliate of BMG) warrants to purchase 250,000 shares of IRIS
Common Stock at an exercise price of $7.375 per share and granted Corange
certain registration rights with respect to the shares of IRIS Common Stock
issuable upon exercise of these warrants.




                                      F-16
<PAGE>   31
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



12. PRODUCT LINE ACQUISITION.

    During the first quarter of 1995, IRIS acquired the digital refractometer
product line of Biovation, Inc. for $850,000 in cash and warrants to purchase
75,000 shares of IRIS Common Stock at an exercise price of $8.125 per share.
IRIS granted Biovation certain registration rights with respect to the shares of
IRIS Common Stock issuable upon exercise of these warrants. The product line
consists of a patented device known as a digital refractometer and the related
consumables used in the operation and maintenance of the refractometer.

    In March 1996, IRIS acquired the CenSlide and FloStar urinalysis devices
product line of UroHealth Sciences, Inc., for $788,000 in cash and the
assumption of certain liabilities.

13. CAPITAL STOCK.

Stock Issuances:

    During 1990, the IRIS Board of Directors adopted an Employee Stock Purchase
Plan designed to allow employees of the Company to buy its shares at 50% of the
then current market price, provided that the employee agrees to hold the shares
purchased for a minimum of 2 years. Payment for the 50% portion may be made at
the option of the employee either by payroll deduction or by lump sum payment,
but in no event may it exceed more than 15% of the employee's salary during any
year. The remaining 50% portion is recorded as deferred compensation and
amortized over the vesting period. The shares purchased pursuant to the Plan may
not be transferred, except following the death of the employee or a change in
control, for a period of 2 years following the date of purchase. During the
period of the limitation on transfer, the Company has the option to repurchase
the shares at the employee's purchase price if the employee terminates
employment with the Company either voluntarily or as a result of termination for
cause. During 1993, 1994 and 1995, IRIS issued 27,942, 45,622, and 26,973 shares
of common stock, respectively, in exchange for $134,952, $201,574, and $179,630
in cash and services, respectively, under the Plan.

Stock Option Plans:

    The following tables set forth information on the Company's five stock
option plans as of December 31, 1995:

<TABLE>
<CAPTION>
                                                                              Options
                                  Options      Options         Options      Available
                Plan          Authorized     Exercised     Outstanding      for Grant
                ---------------------------------------------------------------------
<S>                         <C>              <C>             <C>            <C>
                1980          200,000         174,468              0              0
                1982           84,000          75,034          4,000              0
                1983          100,000          74,035         17,400              0
                1986          360,000         135,932        223,801            267
                1994          700,000               0        368,600        331,400
                              -------         -------        -------        -------
                            1,444,000         459,469        613,801        331,667
                           ==========         =======        =======        =======
</TABLE>

                                      F-17
<PAGE>   32
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                     -----------------------------------------
                                                                                Exercise Price
                                                     -----------------------------------------
                                                      Shares     $ Per Share             Total
<S>                                                  <C>         <C>               <C>        
Balance outstanding at December 31, 1992 ..          443,300     1.10 to 4.25      $ 1,004,478
Options issued ............................           91,000     4.00 to 4.04          364,525
Options canceled ..........................          (15,400)    2.59 to 4.00          (59,814)
Options exercised .........................          (46,533)    1.10 to 3.75         (101,746)
                                                    --------                       -----------

Balance outstanding at December 31, 1993 ..          472,367     1.10 to 4.25        1,207,443
Options issued ............................          192,600     3.72 to 5.42          797,028
Options canceled ..........................          (28,234)    1.55 to 4.25          (67,470)
Options exercised .........................         (200,832)    1.10 to 3.75         (447,022)
                                                    --------                       -----------

Balances outstanding at December 31, 1994 .          435,901     1.10 to 5,42        1,489,979
Options issued ............................          209,500     4.25 to 7.37        1,195,530
Options canceled ..........................           (9,700)    1.57 to 4.00          (26,782)
Options exercised .........................          (21,900)    1.10 to 4.00          (44,450)
                                                    --------                       -----------

Balances outstanding at December 31, 1995 .          613,801     1.10 to 7.37      $ 2,614,277
                                                    ========                       ===========
Options exercisable at December 31, 1995 ..          406,443     1.10 to 7.37      $ 1,428,694
                                                    ========                       ===========
</TABLE>

    In connection with the merger with StatSpin, each outstanding option and
warrant of StatSpin was converted into an option to purchase IRIS common stock
at a ratio of 4.095 shares of IRIS common stock for each share of StatSpin
common stock covered by such option or warrant, resulting in options to purchase
an aggregate of 126,000 shares of IRIS common stock. The exercise price per
share for the StatSpin options and warrants have been adjusted by dividing the
initial exercise price by 4.095.

Warrants:

    At December 31, 1995, there were warrants outstanding and exercisable to
purchase 250,000 shares of common stock at $7.375 per share until February 6,
1998, 75,000 shares at $8.125 per share until March 30, 1998, 512,000 shares at
$6.50 per share until September 29, 1998 and 150,000 shares at $7.80 per share
until September 28, 2000.

Preferred Stock:

    IRIS is authorized to issue 3,000,000 shares of preferred stock in one or
more series with such terms as may be designated by the Board of Directors.
There are no issued and outstanding preferred shares at December 31, 1995.

14. COMMITMENTS.

Leases:

    IRIS leases its business locations at a monthly aggregate rent of $20,700,
subject to increases based on the Consumer Price Index. IRIS has the option to
renew one lease for two additional three-year periods commencing July 31, 1997.

    At December 31, 1995, the minimum lease payments due over the remaining life
of the facilities leases and other operating leases were:

<TABLE>
<CAPTION>
         Year ended December 31,                Amount
         ---------------------------------------------
<S>                                           <C>     
         1996                                 $258,960
         1997                                  186,069
         1998                                   85,932
         1999                                   85,932
         2000                                   21,483
                                              --------
                                              $638,376
                                              ========
</TABLE>




                                      F-18
<PAGE>   33
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               


    Rent expense under all operating leases during 1993, 1994 and 1995 was
$304,208, $290,294, and $453,762, respectively.

Other:

    Effective September 1, 1988, IRIS entered into consulting and licensing
agreements with Cytocolor, Inc. relating to the use of its patented leukocyte
stain in The White IRIS(R). Under the terms of the agreements, IRIS is subject
to the following future minimum royalty payments:

<TABLE>
<CAPTION>
                     Year Ended December 31,            Amount
                     -----------------------------------------
<S>                                                   <C>     
                     1996                             $ 20,000
                     1997                               20,000
                     1998                               20,000
                     1999                               20,000
                     Years thereafter                  280,000
                                                      --------
                                                      $360,000
                                                      ========
</TABLE>

    In connection with the development agreement with Poly, IRIS has agreed to
fund $15,000 per month (up to a maximum of $500,000) of the cost of the
development project for several new products to enhance automation in the
urinalysis field (see Note 10).

15.   EARNINGS PER SHARE.

    The computation of per share amounts for 1993, 1994 and 1995, is based on
the weighted average number of common shares and common share equivalents
outstanding for the period. Fully diluted and primary earnings per share were
$.25, $.28, and $.33 for the years ended December 31, 1993, 1994 and 1995.

16. LICENSE.

    Pursuant to earlier payments and certain agreements with TOA Medical
Electronics Co., Ltd. (TOA), TOA has developed a urine sediment analyzer under
license from IRIS using pre-1989 IRIS technology. IRIS received royalties of
$35,000, $111,000, and $98,000 in 1993, 1994, and 1995, respectively.

17.    EXPORT SALES.

    During 1993, 1994 and 1995, IRIS had export equipment sales of $253,000,
$474,000 and $342,000, respectively.

18.     RESEARCH AND DEVELOPMENT CONTRACTS.

    Reimbursements are recognized under research and development contracts in
amounts equivalent to reimbursable research and development costs incurred on
the related project plus, where contractually provided for, an amount to cover
general and administrative costs of the project.

    Reimbursements and costs connected with the development agreements entered
into with LDA, Poly and BMG were as follows:

<TABLE>
<CAPTION>
                                           Years Ended December 31,
                                   --------------------------------------
                                       1993          1994           1995
                                   --------    ----------     ----------
<S>                                <C>         <C>            <C>       
             Reimbursements        $538,931    $1,110,878     $  842,663
             Costs                  637,552     1,258,405      1,494,873
                                   --------    ----------     ----------
             Net Costs             $ 98,621    $  147,527     $  652,210
                                   ========    ==========     ==========
</TABLE>

Net costs incurred under research and development contracts have been included
in research and development expense in the statements of operations.




                                      F-19
<PAGE>   34
                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



19.    RESTATEMENT OF RESULTS OF OPERATIONS

       The Company completed a review during the fourth quarter of 1996 of its
revenue recognition policy and procedures. As a result of the review, the
Company has restated its 1995 results of operations and related balance sheet
accounts as described below to appropriately reflect the Company's revenue in
accordance with its revenue recognition policy. Such restatements pertain to the
amount and timing of revenues recognized under an introductory sales program or
under contingent sales terms. The Company has established procedures to assure
appropriate revenue recognition in the future.

       The table below sets forth selected operating data and accumulated
deficit as of December 31, 1995 and for the year then ended on both a restated
basis and as previously reported. The previously reported data in the table
below have been restated to retroactively reflect the pooling-of-interests
transaction described in Note 1 under "Formation and Business of the Company".


<TABLE>
<CAPTION>
                                                          Year Ended
                                                   December 31, 1995
                                      ------------------------------
                                       As Reported       As Restated
                                      ------------       ------------
<S>                                   <C>                <C>         
Net sales                             $ 15,021,658       $ 14,392,158
Cost of sales                            7,360,524          7,126,816
                                      ------------       ------------

       Gross margin                      7,661,134          7,265,342
Operating expenses                       9,210,323          9,163,323
                                      ------------       ------------

       Operating loss                   (1,549,189)        (1,897,981)
Other income and expenses, net             377,760            377,760
                                      ------------       ------------

       Loss before taxes                (1,171,429)        (1,520,221)
Tax benefit                             (3,528,044)        (3,646,633)
                                      ------------       ------------

       Net income                     $  2,356,615       $  2,126,412
                                      ============       ============

Net income per share                  $       0.37       $      0.33

Accumulated deficit                   $ 14,496,025       $ 14,726,228
</TABLE>

20.    SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

    The following table summarizes certain financial information by quarter for
1994 and 1995:

<TABLE>
<CAPTION>
                                                                                          1994
                                    ----------------------------------------------------------
                                      March 31         June 30    September 30     December 31
                                    ----------------------------------------------------------
<S>                                 <C>             <C>             <C>             <C>       
Net revenues                        $2,485,373      $3,134,915      $3,338,746      $3,510,243
Gross margin on net revenues         1,090,176       1,423,514       1,570,411       1,886,148
Interest and other income, net          72,648          34,426          54,318          44,534
Net income                              85,943         375,702         491,993         667,926
Net income per share                      0.02            0.07            0.09            0.12
</TABLE>


<TABLE>
<CAPTION>
                                                                                               1995
                                    ---------------------------------------------------------------
                                       March 31          June 30      September 30      December 31
                                    ---------------------------------------------------------------
                                                                                      (as restated)
<S>                                 <C>              <C>               <C>              <C>        
Net revenues                        $ 3,167,277      $ 3,715,883       $ 3,743,641      $ 3,765,357
Gross margin on net revenues          1,535,808        1,908,864         1,931,560        1,889,110
Interest and other income, net          118,137           87,207            65,597          106,819
Net income (loss)                       397,494       (2,916,490)          563,818        4,081,590
Net income (loss) per share                0.07            (0.53)             0.09             0.61
</TABLE>




                                      F-20

<PAGE>   35

                                   SIGNATURES

         Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this 10-K/A (Amendment No. 1) to be
signed on its behalf by the undersigned, thereunto duly authorized, in
Chatsworth, California, on December 31, 1996.

                                   INTERNATIONAL REMOTE IMAGING SYSTEMS, INC.

                                   By: /s/  Fred H. Deindoerfer
                                      --------------------------------------
                                      Fred H. Deindoerfer
                                      Chairman of the Board of Directors,
                                      President, and Chief Executive Officer

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.




Signature                   Title                                          Date
---------                   -----                                          ----


/s/  Fred H. Deindoerfer    Chairman of the Board of
------------------------    Directors, President,            December 31, 1996
Fred H. Deindoerfer         and Chief Executive Officer



/s/  Martin S. McDermut     Vice President,
------------------------    Finance and Administration       December 31, 1996
Martin S. McDermut          and Chief Financial Officer



/s/  E. Eduardo Benmaor
------------------------    Secretary, Controller, and       December 31, 1996
E. Eduardo Benmaor          Principal Accounting Officer


/s/  John A. O'Malley       Director                         December 31, 1996
------------------------
John A. O'Malley


                            Director                         December 31, 1996
/s/  Steven M. Besbeck
------------------------
Steven M. Besbeck


/s/  Thomas F. Kelley       Director and Vice President      December 31, 1996
------------------------
Thomas F. Kelley






<PAGE>   36
                                 EXHIBIT INDEX


<TABLE>
<CAPTION>
                                                                                           Sequentially
 Exhibit                                                                                   Numbered
 Number                                        Description                                 Page        
 ------                                        -----------                                 ------------
 <S>                 <C>       <C>

        3.1           --       Certificate of Incorporation, as amended (1)

        3.2           --       Restated Bylaws (2)

        4.1           --       Specimen of Common Stock Certificate (3)      

        10.1          --       Lease of the Company's headquarters facility (4)

        10.2(a)       --       1982 Stock Option Plans and form of Stock Option
                               Agreement (5)

        10.2(b)       --       1983 and 1986 Stock Option Plans, and forms
                               of Stock Option Agreements for each Plan (6)

        10.2(c)       --       Amended and Restated 1986 Stock Option Plan (7)

        10.2(d)       --       1994 Stock Option Plan and forms of Stock Option
                               Agreements (8)

        10.3          --       Various Agreements with TOA Medical 
                               Electronics (9)

        10.4(a)       --       Agreement for a Strategic Alliance in
                               Urinalysis dated January 7, 1994 between IRIS
                               and Boehringer Mannheim Corporation (10)

        10.4(b)       --       Research and Development and Distribution
                               Agreement dated February 6, 1995 by and among
                               IRIS, LDA Systems, Inc. and Corange
                               International Limited (10)

        10.5          --       Warrant Certificate dated March 20, 1995 issued
                               to Biovation, Inc. (10)

        10.6(a)       --       Technology License Agreement dated as of
                               September 29, 1995 between IRIS and Poly U/A
                               Systems, Inc. (11)

        10.6(b)       --       Research and Development Agreement dated as of
                               September 29, 1995 between IRIS and Poly U/A
                               Systems, Inc. (11)

        10.6(c)       --       $100 Class "A" Note dated September 29, 1995
                               issued by Poly U/A Systems, Inc. in favor of
                               IRIS (11)

        10.6(d)       --       Certificate of Incorporation of Poly U/A
                               Systems, Inc. (See Article FOUR regarding the
                               IRIS Option) (11)






</TABLE>





<PAGE>   37
<TABLE>
<CAPTION>
                                                                                           Sequentially
 Exhibit                                                                                   Numbered
 Number                                        Description                                 Page        
 ------                                        -----------                                 ------------
 <S>                 <C>       <C>


        10.7(a)       --       Agreement and Plan of Merger dated January 31,
                               1996 between IRIS and StatSpin, Inc. *

        10.7(b)       --       Registration Rights Agreement dated January 31,
                               1996 between IRIS and StatSpin Stockholders *

        11            --       Statement re: restated Computation of Per Share
                               Earnings

        24.1          --       Consent of Coopers & Lybrand L.L.P.

        24.2          --       Consent of KPMG Peat Marwick LLP

</TABLE>

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

*  Previously filed.

 (1)     Incorporated by reference to the Company's Current Report on Form 8-K
         dated August 13, 1987 and its Quarterly Report on Form 10-Q for the
         quarter ended September 30, 1993.

 (2)     Incorporated by reference to the Company's Quarterly Report on Form
         10-Q for the quarter ended September 30, 1994.

 (3)     Incorporated by reference to the Company's Registration Statement on
         Form S-3, as filed with the Securities and Exchange Commission on
         March 27, 1996 (File No. 333-002001).

 (4)     The original lease and all prior amendments are incorporated by
         reference to the Company's Annual Report on Form 10-K for the year
         ended December 31, 1989, its quarterly report on Form 10-Q for the
         quarter ended September 30, 1993 and its Annual Report on Form 10-K
         for the year ended December 31, 1994.

 (5)     Incorporated by reference to the Company's Registration Statement on
         Form S-2, as filed with the Securities and Exchange Commission on
         September 4, 1985 (File No. 2-99240).

 (6)     Incorporated by reference to the Company's Registration Statement on
         Form S-8, as filed with the Securities and Exchange Commission on May
         10, 1982 (File No. 2-77496).

 (7)     Incorporated by reference to the Company's Annual Report on Form 10-K
         for the year ended December 31, 1992.

 (8)     Incorporated by reference to the Company's Registration Statement on
         Form S-8, as filed with the Securities and Exchange Commission on
         August 8, 1994 (File No. 33-82560).

 (9)     Incorporated by reference to the Company's Current Report on Form 8-K 
         dated July 15, 1988 and its quarterly report on Form 10-Q for the
         quarter ended June 30, 1995.




<PAGE>   38
(10)     Incorporated by reference to the Company's Annual Report on Form 10-K
         for the year ended December 31, 1994.

(11)     Incorporated by reference to the Company's Quarterly Report on Form
         10-Q for the quarter ended September 30, 1995.