STOCKREPORTS

Cornerstone Imaging, Inc.

NASDAQ Symbol CRNR

Recent Price 6.00 52 Wk Range 9.88 - 5.63

Yield Nil 12-Mo. P/E 16.7

Quantitative Evaluation: Outlook (1 Lowest - 5 Highest) NA Fair Value NA Risk HIGH Earn/Div Rank NR
Technical Evaluation: BEARISH since 04/97 Rel. Strength Rank (1 Lowest - 99 Highest) 5 Insider Activity UnFavorable

Business Profile 23-FEB-97

The company is experiencing strong unit demand for its display products, aided by aggressive pricing, led by price reductions in March 1996 and again in February 1997. The continued increase in unit demand in all product lines, combined with efforts to control costs, resulted in a return to profitability in the last two quarters of 1996. However, results in 1996 were hurt by intense competition and by a $1.4 million restructuring charge, related to the cancellation of a product line. In November 1996, CRNR introduced ImageAccel 3, which offers improved functionality and imaging performance at a lower price point. For 1997, the company intends to focus more on software development, and has announced plans to divest its Pegasus Storage products in the first quarter.

Operation Review 23-FEB-97

Based on a preliminary report, revenues in 1996 advanced 6.2%, reflecting continued growth in the document imaging market and sharply higher software sales. Gross margins narrowed, reflecting price competition and a less favorable product mix. After a 23% increase in R&D spending, 37% higher SG&A costs, and a $1.4 million restructuring charge, an operating loss contrasted with an operating profit. Despite a 49% reduction in interest income and a $484,000 tax credit, versus taxes at 23.3%, a net loss of $1,163,000 ($0.15 a share) contrasted with net income of $6,158,000 ($0.81).

Stock Performance 18-JUL-97n

In the past 30 trading days, CRNR's shares have declined 30%, compared to a 7% rise in the S&P 500. Average trading volume for the past five days was 57,960 shares, compared with the 40-day moving average of 59,192 shares.

Key Stock Statistics

Fiscal Year Ending Dec. 31

Dividend Data: No cash dividends have been paid on the common stock. The company does not anticipate paying dividends on the common stock for the foreseeable future.

Business Summary 23-FEB-97

Cornerstone Imaging, Inc. develops, markets and services hardware and software products for document image processing (DIP) applications. These DIP systems enable multiple users to capture, file and retrieve images of documents electronically. The company is the leading U.S. supplier of DIP display subsystems consisting of a color or gray scale monitor and controller. Substantially all revenues in recent years have been attributable to sales of DIP display subsystems, based on CRNR's ImageAccel technology, a software product designed to automate the conversion of documents into electronic images. The ImageAccel family of products are used in conjunction with personal computers and are designed to enhance user productivity by providing high document legibility and fast image display speeds. The majority of customers comprise a diverse group of domestic and foreign distributors, who in turn resell the company's products to value-added resellers, system integrators and end users.

DIP systems combine many of the advantages of paper and microfilm without their associated disadvantages and are often used together with traditional data processing systems. The systems allow multiple users quick access to the actual image of a paper document, require little physical storage space and reduce the risk of misfiling, theft and accidental loss or destruction of documents. Unlike typical data processing applications, DIP systems can store any document image, including handwriting, photographs, diagrams, letterhead and other graphic formats.

The company offers a range of color and grayscale display subsystems and controllers designed specifically for document image processing. A Cornerstone subsystem consists of a controller that includes a Cornerstone-designed, DIP-specific integrated circuit, proprietary software and a large screen, high resolution monitor. All subsystems offer high resolution (up to 3,000,000 displayable pixels), image enhancement using scale-to-gray, document image decompression using hardware and software, acceleration for Windows and OS/2 Presentation Manager operating environments, driver software that optimizes performance, high screen refresh rates, and full page or larger monitors.

In the U.S., CRNR sells a majority of its display products through distributors of computer products, who resell them to value added resellers, system integrators and end users. Cornerstone has international distributors in all major countries in Europe, Asia and Latin America. International sales provided 29% of revenues in 1995, and the company plans to continue to expand its operations overseas.

Important Developments

Feb. '97 Directors authorized a $5 million common stock repurchase program, to fund obligations under stock plans and for other corporate purposes.

Capitalization

Long Term Debt: None (12/96).

Curr. Ratio	3.2	3.6	4.7	NA	NA	NA	NA	NA	NA	NA
% LT Debt of Cap.	Nil	Nil	Nil	1.2	6.8	0.3	NA	NA	NA	NA
% Net Inc.of Revs.	NM	6.8	6.9	8.7	3.7	2.1	NA	NA	NA	NA
% Ret. on Assets	NM	13.8	14.6	NA	NA	NA	NA	NA	NA	NA
% Ret. on Equity	NM	17.9	14.0	48.7	NA	NA	NA	NA	NA	NA

Data as orig. reptd.; bef. results of disc. opers. and/or spec. items. Per share data adj. for stk. divs. as of ex-div. date. E-Estimated. NA-Not Available. NM-Not Meaningful. NR-Not Ranked.

Office--1710 Fortune Dr., San Jose, CA 95131. Tel--(408) 435-8900. Fax--(408) 435-8998. Website--http://www.corimage.com Pres & CEO--T. T. van Overbeck. Chrmn--E. D. Crockett. CFO & Secy--J. Finegan. Dirs--E. D. Crockett, J. E. Crawford III, M. G. Fisher, T. T. van Overbeck, S. J. Sheafor, B. Silver, D. D. Tompkins. Transfer Agent & Registrar--Boston EquiServe, L.P. Incorporated--in Delaware in 1993. Empl-- 0. S&P Analyst: Ted Groesbeck

This report is for information purposes and should not be considered a solicitation to buy or sell any security. Neither S&P nor any other party guarantee its accuracy or make warranties regarding results from its usage. Redistribution is prohibited without written permission. Copyright © 1997