UNITED STATES
                              SECURITIES AND EXCHANGE COMMISSION
                                    Washington, D.C.  20549

                                           FORM 10-Q

(Mark One)
[ X ]          QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                            OF THE SECURITIES EXCHANGE ACT OF 1934

                         For the quarterly period ended March 31, 1999

                                              OR

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

For the transition period from ____________   to _____________ 

                               Commission file number 000-19636

                               HEALTHCARE IMAGING SERVICES, INC.
                    (Exact name of registrant as specified in its charter)

        Delaware                                          22-3119929
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                            Identification No.)

200 Schulz Drive, Red Bank, New Jersey                               07701
(Address of principal executive offices)                         (Zip Code)

                                        (732) 224-9292
                     (Registrant's telephone number, including area code)

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

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

        Class                                Outstanding at May 17, 1999
Common Stock, $.01 par value                      11,356,974 shares

                                              1

<PAGE>



                      HEALTHCARE IMAGING SERVICES, INC. AND SUBSIDIARIES

                                             INDEX

PART I.        FINANCIAL INFORMATION:                             PAGE
-------        ----------------------                             ----

Item 1.        Financial Statements:

    Consolidated Balance Sheet -
        March 31, 1999 and December 31, 1998                         3

    Consolidated Statements of Income -
        Three months ended March 31, 1999 and 1998                   4

    Consolidated Statement of Changes in Stockholders
        Equity - For the three months ended March 31, 1999           5

    Consolidated Statements of Cash Flows -
        Three months ended March 31, 1999 and 1998                   6

    Notes to Consolidated Financial Statements                       7

Item 2.        Management's Discussion and Analysis of              10
               Financial Condition and Results of Operations

Item 3.        Quantitative and Qualitative Disclosures About       15
               Market Risk

PART II.       OTHER INFORMATION
--------       -----------------

Item 5.        Other Information                                    16

Item 6.        Exhibits and Reports on Form 8-K                     16

SIGNATURES                                                          17
----------                                                          


                                              2

<PAGE>


                       HEALTHCARE IMAGING SERVICES, INC. AND SUBSIDIARIES
                                  CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                  March 31,      December 31, 
Assets                                                              1999              1998
------                                                             ------            -----
                                                                 (Unaudited)
<S>                                                                 <C>              <C>
Current Assets:
   Cash and cash equivalents                                         $1,391,047       $1,506,123
   Accounts receivable - net                                         11,162,792        9,869,696
   Accounts receivable acquired in the Beran Acquisition              3,532,343        4,653,831
   Loan receivable                                                    2,599,726        2,550,000
   Prepaid expenses and other                                           336,389          228,758
                                                                        -------      -----------
               Total current assets                                  19,022,297       18,808,408
                                                                     ----------       ----------
Property, Plant and Equipment - Net                                   9,079,602        9,578,807
                                                                      ---------        ---------
Deferred Tax Asset - Net                                                381,025           48,325
                                                                        -------           ------
Other Assets:
   Due from officer                                                     264,125          264,125
   Deferred transaction and financing costs                           1,161,594        1,215,364
   Other                                                                250,862          180,786
   Goodwill - net                                                    12,757,740       12,858,838
                                                                     ----------       ----------
               Total other assets                                    14,434,321       14,519,113
                                                                     ----------       ----------
Total Assets                                                        $42,917,245      $42,954,653
                                                                    ===========      ===========

Liabilities and Stockholders' Equity                                                             
------------------------------------                                                             
Current Liabilities:
   Borrowings under revolving line of credit                         $2,798,767      $ 2,838,275
   Accounts payable and accrued expenses                              2,268,285        2,122,916
   Current portion of capital lease obligations                       1,283,635        1,505,510
   Bridge financing                                                  13,982,184       14,000,000
   Reserve for subleased equipment                                       86,522          294,790
   Income taxes payable                                                  67,528          106,582
                                                                  -------------     ------------
               Total current liabilities                             20,486,921       20,868,073
                                                                     ----------       ----------
Noncurrent Liabilities:
   Capital lease obligations                                          3,250,959        3,440,890
                                                                      ---------        ---------
Minority Interests                                                      984,324          896,404
                                                                        -------    -------------
Commitments and Contingencies

Stockholders' Equity:
     Cumulative accelerating redeemable preferred stock,
     871.743 shares outstanding at March 31, 1999 and
     December 31, 1998 respectively ($10,500 per share
     liquidation preference)                                                 87               87
     Common stock, $.01 par value: 50,000,000 shares
     authorized, 11,356,974 outstanding at March 31, 1999 
     and December 31, 1998, respectively                                113,570          113,570
     Additional paid-in capital                                      23,050,076       23,050,076
     Accumulated  deficit                                            (4,968,692)      (5,414,447)
                                                                     ----------       ---------- 
               Total stockholders' equity                            18,195,041       17,749,286
                                                                     ----------      -----------
Total Liabilities and Stockholders' Equity                          $42,917,245      $42,954,653
                                                                    ===========      ===========
                                                                  

</TABLE>

                  See accompanying notes to consolidated financial statements.

                                              3


<PAGE>




               HEALTHCARE IMAGING SERVICES, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>


                                                      Three Months Ended
                                                          March 31,
                                                         (Unaudited) 
                                                    1999             1998
                                                    ----             ----
<S>                                                   <C>              <C>
Revenues                                            $6,022,502      $3,198,641
                                                    ----------      ----------
OPERATING EXPENSES:
   Salaries                                          1,741,835         771,386
   Other operating expenses                          1,741,477       1,009,956
   Provision for bad debts                             138,992               -
   Consulting and marketing fees                       117,996         250,449
   Professional fees                                   176,738          95,424
   Depreciation and amortization                       802,409         424,871
   Interest                                            846,365         194,599
                                                       -------         -------
                                                     5,565,812       2,746,685
Income Before Minority Interests in Joint Ventures                                   
and Income Taxes                                       456,690         451,956

Minority Interests in Joint Ventures                   (82,920)       (136,130)
                                                       --------     -----------
Income Before Income Taxes                             373,770         315,826

Income Tax (Benefit) Provision                        (300,818)          9,986
                                                     ----------     ----------
Net Income                                             674,588         305,840

Preferred Dividends                                    228,833               -
                                                       -------      ----------
Net Income Available to Common Shareholders           $445,755       $ 305,840
                                                      ========       =========




Net Income per Common Share - Basic              $       .04        $     .03
                                                 ===========        ==========
Weighted Average Common Shares                                                   
   Outstanding - Basic                            11,356,974        9,762,235
                                                  ==========        ==========
Net Income per Common Share- Diluted             $       .03        $     .03
                                                 ===========        ==========
Weighted Average Common Shares 
    Outstanding - Diluted                         20,618,408       11,397,184
                                                  ==========       ==========

</TABLE>


                 See accompanying notes to consolidated financial statements.

                                              4

<PAGE>




               HEALTHCARE IMAGING SERVICES, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                    FOR THE THREE MONTHS ENDED MARCH 31, 1999
                                   (UNAUDITED)

<TABLE>
<CAPTION>


                                                                                                
                                                                           
                                                                                    Accumulated
                                                                       Additional    (Deficit)     Total
                               Preferred Stock       Common Stock        Paid-in     Retained    Stockholders'
                                Shares    Amount   Shares     Amount     Capital     Earnings      Equity
                                ------    ------   ------     ------     -------     --------      ------
<S>                                 <C>      <C>    <C>        <C>        <C>          <C>          <C>    

BALANCE, JANUARY 1, 1999            872      $87  11,356,974  $113,570 $23,050,076 $(5,414,447) $17,749,286

Net income                                                                             674,588      674,588

Preferred dividends                                                                   (228,833)    (228,833)
                                    ---      ---  ----------  -------- ----------    --------      -------- 

BALANCE, MARCH 31, 1999             872      $87  11,356,974  $113,570 $23,050,076 $(4,968,692) $18,195,041
                              ========= ======== =========== ========= ===========  ==========  ============


</TABLE>







                 See accompanying notes to consolidated financial statements.

                                              5

<PAGE>


                HEALTHCARE IMAGING SERVICES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                         Three Months Ended
                                                              March 31,
                                                            (Unaudited) 
                                                         1999                 1998
                                                         ----                 ----
  <S>                                                      <C>               <C>
Cash Flows From Operating Activities:
  Net income available to common shareholders            $445,755         $305,840
  Adjustments to reconcile net income available 
  to common  shareholders to net cash provided by
  operating activities:
     Depreciation and amortization                         802,409         424,871
     Minority interests in joint ventures                   82,920         136,130
     Allowance for doubtful accounts                       190,000         182,000
Changes in Assets and Liabilities:
          Accounts receivable                            (361,608)       (739,050)
          Prepaid expenses and other                     (107,631)        (37,032)
          Deferred taxes                                 (332,700)               -
          Goodwill                                        (44,699)               -
          Other                                           (70,076)          57,582
          Accounts payable and accrued expenses            145,369         376,898
          Income taxes payable                            (39,054)           8,750
          Deferred transaction and financing costs          53,770       (178,343)
                                                            ------      ----------
               Net cash provided by operating activities   764,455        537,646
                                                           -------      ---------

Cash Flows from Investing Activities:                                              
  Loan receivable                                         (49,726)              -
  Purchases of property, plant and equipment             (157,407)         (1,962)
                                                         ---------      ----------
  Net cash used in investing activities                  (207,133)         (1,962)
                                                         ---------      ----------

Cash Flows from Financing Activities:                                              
  (Payments) borrowings against the revolving line of 
  credit                                                 (39,508)         241,359
  Capital contribution by minority investors               5,000               -
  Distributions to limited partners of joint ventures          -          (42,789)
  Payments on capital lease obligations                 (411,806)        (396,375)
  Payments on bridge financing                           (17,816)              -
  Payments on reserve for subleased equipment           (208,268)         (21,780)
                                                         ---------      ----------
          Net cash used in financing activities         (672,398)        (219,585)
                                                         ---------      ----------

  (Decrease) increase in cash and cash equivalents       (115,076)        316,099
  Cash and cash equivalents at beginning of period      1,506,123          70,626
                                                         ---------     ----------
  Cash and cash equivalents at end of period            $1,391,047     $  386,725
                                                        ----------     ----------

Supplemental Cash Flow Information:                                                
  Interest paid during the period                        $ 644,524     $  196,893
                                                         ---------     ----------
  Income taxes paid during the period                  $   70,936      $    1,236
                                                       -----------     ---------- 

Supplemental Schedule of Non-Cash Investing and
Financing Activities:                          
  Capital leases principally for medical equipment     $         -     $  774,226
                                                       ===========     ==========


</TABLE>


                See accompanying notes to consolidated financial statements.

                                              6

<PAGE>



                      HEALTHCARE IMAGING SERVICES, INC. AND SUBSIDIARIES
                          Notes to Consolidated Financial Statements
                               Three Months Ended March 31, 1999

Note 1. - Basis of Presentation

               The  accompanying   unaudited  consolidated  condensed  financial
statements have been prepared in accordance with generally  accepted  accounting
principles for interim  financial  information and with the instructions to Form
10-Q and Rule 10-01 of Regulation  S-X.  Accordingly,  certain  information  and
footnote  disclosures   normally  included  in  annual  consolidated   financial
statements  have  been  omitted  from  the  accompanying   interim  consolidated
financial statements.  In the opinion of management,  the accompanying unaudited
consolidated  financial statements contain all adjustments  necessary to present
fairly the  Company's  financial  position  as of March 31, 1999 and the related
statements  of income and cash flows for the  periods  ended  March 31, 1999 and
1998.  There is no  substantial  income tax provision for the period ended March
31, 1998 due to the  availability of net operating loss  carryforwards.  For the
period ended March 31, 1999 an income tax benefit has been recorded based on the
estimated effective income tax benefit rate for the full year. The income
tax benefit  results  from  management's  judgement  that a valuation  allowance
against deferred tax assets,  which amounted to $2,428,888 at December 31, 1998,
will no longer be  required at December  31, 1999 since the  realization  of the
deferred  tax  assets  is  considered  more  likely  than not as a result of the
Company's achieving profitable operations.

               The results of  operations  for the three  months ended March 31,
1999 are not  necessarily  indicative of the results of operations  expected for
the  year  ending  December  31,  1999 or any  other  period.  The  consolidated
financial  statements  included  herein should be read in  conjunction  with the
consolidated  financial  statements and notes thereto contained in the Company's
Annual Report on Form 10-K for the year ended December 31, 1998 which is on file
with the Securities and Exchange Commission.

Note 2. - Earnings Per Share

               Basic  earnings  per common  share are  computed by dividing  net
income available to common shareholders by the weighted average number of common
shares  outstanding  for the three  months  ended  March 31,  1999 and 1998,  as
applicable.  Diluted  earnings  per common  share are  computed by dividing  net
income available to common shareholders by the weighted average number of common
shares  outstanding  for the three  months  ended  March 31,  1999 and 1998,  as
applicable,  plus the incremental  shares that would have been  outstanding upon
the assumed  exercise of dilutive  stock  option  awards and  conversion  of the
preferred shares.

               The  following  is  a   reconciliation   of  the  numerators  and
denominators of the basic and diluted earnings per share computations:


                                              7

<PAGE>

<TABLE>
<CAPTION>



                                             For the Three Months Ended March 31,
                                        1999                                     1998
                        ------------------------------------    --------------------------------------
                                                     Per-                                              
                           Income        Share       Share         Income       Shares      Per-Share
                        (Numerator) (Denominator)    Amount      (Numerator)  (Denominator)   Amount
                        ----------- ------------     ------      -----------  -------------    ------
<S>                           <C>          <C>          <C>          <C>           <C>          <C>
Basic EPS                                                                                              
Net Income Available to                                                                                
Common Shareholders         $445,755    11,356,974      $.04       $ 305,840     9,762,235      $.03
Add:                                                                                                   
Preferred Dividends          228,833             -                         -             -             

Effect of Dilutive                                                                                     
Securities                                                                                             
Stock Options                      -       537,513                         -       803,544             
Series C Stock                     -             -                         -       831,405             
Series D Stock                     -     8,723,921                         -             -             
                        -------------- -----------              ------------ -------------
Diluted EPS                
Net Income                  $674,588    20,618,408      $.03       $ 305,840    11,397,184      $.03
                        ============== ===========  =========    ============ ============= ===========

</TABLE>

Note 3. - Beran Acquisition
---------------------------

               On October 2, 1998 (effective  October 1, 1998), HIS Imaging Co.,
a wholly-owned subsidiary of the Company, acquired (the "Beran Acquisition") all
of the assets and business of, and assumed certain liabilities  relating to (i.)
a  fixed-site  MRI  facility in  Voorhees,  New Jersey,  (ii.) a  multi-modality
diagnostic  imaging facility in Northfield,  New Jersey and a radiology facility
in Ocean City, New Jersey,  (iii.) a multi-modality  diagnostic imaging facility
in  Bloomfield,  New  Jersey,  and  (iv.) a  multi-modality  diagnostic  imaging
facility in Voorhees and  Williamstown,  New Jersey and a radiology  facility in
Atco and Williamstown,  New Jersey  (collectively,  the "Beran  Entities").  The
consideration  given  by the  Company  in the  Beran  Acquisition  was  (i.) the
assumption of certain  obligations and liabilities of the Beran Entities,  (ii.)
cash in the amount of $11.5 million and (iii.) the issuance of 871.743 shares of
Series D Cumulative  Accelerating Redeemable Preferred Stock of the Company (the
"Series D Stock") having an aggregate  liquidation  preference of  $9,153,301.50
(i.e.,  $10,500 per share  liquidation  preference).  The Company  also  assumed
certain  contractual  obligations of the Beran Entities on a going-forward basis
under the contracts assigned to the Company in the Beran Acquisition  (including
operating leases and equipment maintenance agreements).  The Company also loaned
the Beran Entities an aggregate of $2.5 million, which loan bears interest at 8%
per annum and matures  upon the terms and  conditions  contained  in the related
promissory notes, but in no event later then December 31, 1999. The Company used
the  proceeds of a  short-term  $14.0  million  bridge  loan from DVI  Financial
Services Inc.  ("DFS") to pay the cash portion of the purchase price and to fund
the loan to the Beran  Entities  (the "DFS  Bridge  Loan").  The DFS Bridge Loan
bears interest at 12% per annum with no payment due in month one (i.e., November
1998),  interest  only  payments of $140,000 in each of months two through  four
(i.e.,  December 1998,  January 1999 and February 1999),  principal and interest
payments of approximately  $308,000 in each of months five and six (i.e.,  March
1999 and April 1999),  with a balloon  payment of $13,951,804 due in month seven
(i.e.,  May 1999).  In addition,  options to purchase  400,000  shares of common
stock, par value $.01 per share, of the Company at an exercise price of $1.03125
per share were issued to DFS for

                                              8

<PAGE>



providing the DFS Bridge Loan. The Beran Acquisition is being accounted for as a
purchase. The Company has been notified by DFS that it is prepared to extend the
term of the DFS Bridge Loan until January 1, 2000 subject to the  negotiation of
terms and conditions acceptable to DFS.

Note 4. - Deferred Transaction and Financing Costs
--------------------------------------------------

               Deferred  transaction  and  financing  costs  relate to  expenses
incurred  in  connection  with the  financing  of the Beran  Acquisition  and in
connection  with the Company's  proposed  acquisition  of a management  services
organization  ("MSO").  Deferred  financing  costs are being  expensed  over the
applicable  agreement term. In the event such proposed  acquisition of an MSO is
not consummated, the related deferred transaction costs will be expensed.

Note 5. - Segment Information
-----------------------------

               The    Company    currently     operates    in    two    industry
segments--diagnostic  imaging and physician practice management.  The diagnostic
imaging segment  involves  primarily  operating  fixed-site  diagnostic  imaging
facilities.   The  physician  practice  management   segment,   which  commenced
operations  during the second  quarter of fiscal  1998,  consists  of  providing
management services to independent physician practices.

               The following  table shows net revenues and  operating  income by
industry  segment  for the three  months  ended March 31,  1999.  Assets are not
identified  by industry  segment.  Operating  income  consists of revenues  less
direct operating expenses.  All corporate operating expenses have been allocated
to the diagnostic imaging segment:

             Net revenues:
                  Diagnostic imaging                          $5,754,659
                  Physician practice management                  267,843
                                                              ----------
                  Total                                       $6,022,502
                                                              ==========

             Operating income:
                  Diagnostic imaging                            $326,206
                  Physician practice management                  130,484
                                                                 -------
                  Total                                         $456,690
                                                                ========

Note 6. - Subsequent Event
--------------------------

                  Prior to May 1, 1999,  the Company's  MRI facility  located in
Philadelphia,  Pennsylvania was operated as a joint venture among a wholly-owned
subsidiary  of the  Company (as the general  partner  holding a 60%  partnership
interest) and certain  individual  medical  professionals and others (as limited
partners  holding in the aggregate the  remaining  40%  partnership  interests).
Effective May 1, 1999, the Company's subsidiary  consummated the purchase of the
limited  partners' 40% partnership  interests for $100,000 in cash. At April 30,
1999, the net book value of this 40%  partnership  interest was $0. The $100,000
purchase  price will be recorded by the Company as goodwill and amortized over a
period of ten years.

                                              9

<PAGE>



Item 2.      Management's Discussion and Analysis of Financial Condition and
             Results of Operations

             CAUTIONARY STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995.  Statements in this Quarterly  Report that are not historical facts
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended,  and Section 21E of the Securities  Exchange
Act of  1934,  as  amended.  Any  statements  contained  herein  which  are  not
historical facts or which contain the words "anticipate," "believe," "continue,"
"estimate,"  "expect,"  "intend," "may,"  "should," and similar  expressions are
intended to identify  forward-looking  statements.  Such statements  reflect the
current  view of the Company  with  respect to future  events and are subject to
certain risks, uncertainties and assumptions, including, but not limited to, the
risk that the Company may not be able to  implement  its growth  strategy in the
intended manner including the integration of acquisitions, risks associated with
the  Company's  need to  refinance  certain  near-term  debt  maturities,  risks
regarding currently unforeseen  competitive pressures affecting  participants in
the health care  market and risks  affecting  the  Company's  industry,  such as
increased regulatory compliance and changes in regulatory requirements,  changes
in payor  reimbursement  levels and  technological  changes.  In  addition,  the
Company's  business,  operations  and  financial  conditions  are subject to the
risks,  uncertainties  and  assumptions  which are  described  in the  Company's
reports and statements  filed from time to time with the Securities and Exchange
Commission.

For the Three Months Ended March 31, 1999 vs. March 31, 1998
------------------------------------------------------------

             For the three months ended March 31, 1999, revenues were $6,022,502
as compared to $3,198,641 for the three months ended March 31, 1998, an increase
of  approximately  $2,824,000  or 88%.  This  increase was  primarily due to (i)
revenues  associated  with the  operation  of five New  Jersey-based  diagnostic
imaging facilities (the "Beran Facilities")  acquired effective as of October 1,
1998 (approximately  $2,615,000) and (ii) revenues associated with the Company's
physician practice management operations  (approximately $268,000), all of which
were partially offset by the closure of the Company's fixed-site MRI facility in
Secaucus,  New  Jersey  (the  "Secaucus  Facility")  in May 1998  (approximately
$238,000).

             For the three months ended March 31, 1999,  operating expenses were
$5,565,812 as compared to $2,746,685  for the three months ended March 31, 1998,
an increase of approximately $2,819,000 or 103%. This increase was primarily due
to (i)  expenses  incurred  in  connection  with  the  operation  of  the  Beran
Facilities acquired in October 1998 (approximately  $2,190,000),  (ii) increased
expenses  associated  with facilities that were operated by the Company for both
of the quarters ended March 31, 1999 and 1998 (approximately $533,000) primarily
due to  increased  salary  expenses  relating  to new  personnel  and  increased
depreciation  and  amortization  relating  to  new  equipment,  (iii)  increased
interest expense  (approximately  $240,000) relating to deferred financing costs
incurred in connection with the Beran  Acquisition which are being expensed over
the  applicable  agreement  term and to  higher  borrowings  outstanding  on the
Company's  revolving line of credit and (iv) expenses  relating to the Company's
physician practice management operations (approximately $137,000), all

                                              10

<PAGE>



of which were  partially  offset by  decreased  consulting  and  marketing  fees
(approximately  $167,000)  and the closure of the Secaucus  Facility in May 1998
(approximately $163,000).

             The  operating  results for the Company  continue to be  negatively
impacted by the Company's fixed-site MRI facility located in Brooklyn,  New York
(the "Brooklyn Facility"). The Brooklyn Facility continues to operate at a loss,
even  after the  September  1998  restructuring  of the lease  arrangement  with
respect  to  this  facility   which  reduced  the  monthly  lease   payments  by
approximately  $13,500  per month.  Although  the  Company is in the  process of
implementing  certain revenue  enhancement  measures,  including excess capacity
arrangements,  there can be no assurance  that the  procedures  generated at the
Brooklyn  Facility will be sufficient  to better  support the  operations of the
Brooklyn Facility.

             In  furtherance  of the  Company's  previously  announced  expanded
strategic  focus into the area of  establishing  physician  practice  management
operations in New Jersey, New York and Philadelphia,  Pennsylvania,  the Company
is  assessing   affiliations  with  several  primary  care  and  multi-specialty
physician practices including Pavonia Medical Associates,  P.A. ("PMA"), as well
as the faculty practices of certain hospitals.  Although the Company has entered
into various letters of intent,  the Company has not entered into any definitive
acquisition  agreements (other than a merger agreement with PMA in January 1999,
which  is  subject  to  the  approval  of  PMA's  physician   stockholders)   or
administrative  service  agreements  with  respect  to  its  physician  practice
management   operations.   Given  the  significant  declines  in  the  financial
performance of many of the leading publicly-traded physician practice management
companies during the past year, the availability of financing for these ventures
has been extremely  limited.  This constriction in the financing market has had,
and is likely to continue to have, an adverse impact on the Company's ability to
effect its physician practice management acquisitions.

Liquidity and Capital Resources of the Company
----------------------------------------------

             As of March 31, 1999, the Company had a cash balance of $1,391,047,
current assets of $19,022,297 and a working  capital deficit of $1,464,624.  The
working capital deficiency is a result of a short-term $14.0 million bridge loan
(the "DFS Bridge Loan") from DVI Financial Services Inc. ("DFS"). The DFS Bridge
Loan was funded in October 1998 in  connection  with the Beran  Acquisition  and
bears interest at 12% per annum with no payment due in month one (i.e., November
1998),  interest  only  payments of $140,000 in each of months two through  four
(i.e.,  December 1998,  January 1999 and February 1999),  principal and interest
payments of approximately  $308,000 in each of months five and six (i.e.,  March
1999 and April 1999) with a balloon  payment of  $13,951,804  due in month seven
(i.e.,  May 1999).  The Company has been  notified by DFS that it is prepared to
extend the term of the DFS  Bridge  Loan  until  January 1, 2000  subject to the
negotiation  of terms and  conditions  acceptable to DFS. The DFS Bridge Loan is
expected to be repaid from a longer-term  financing to be obtained in connection
with the proposed acquisition of Jersey Integrated  HealthPractice,  Inc., which
provides  management  services to PMA ("JIHP").  In the event the acquisition of
JIHP is not  consummated  on or prior to January 1,  2000,  management  believes
(based on  discussions  to date with  several  financing  sources)  that the DFS
Bridge Loan can be refinanced on a longer term basis.


                                              11

<PAGE>



             Cash flows provided by operating  activities  were $764,455 for the
quarter  ended March 31, 1999,  which  consisted  primarily of (i) net income of
$445,755,  (ii)  depreciation and amortization of $802,409  primarily related to
equipment  acquired  in the Beran  Acquisition  in October  1998 and certain new
equipment installed in the Company's existing  facilities,  (iii) an increase in
the allowance for doubtful accounts  receivable of $190,000 primarily related to
the aging of accounts  receivables  at certain of the Company's  facilities  and
(iv)  minority  interests  in  joint  ventures  of  $82,920.  Other  significant
components  of cash  flows  provided  by  operating  activities  include  (x) an
increase in accounts receivable,  net of $1,293,096,  (y) an increase in prepaid
expenses  and other of $107,631  and (z) an  increase  in deferred  tax asset of
$332,700,  all of which  were  partially  offset by a decrease  in the  accounts
receivable  acquired in the Beran  Acquisition  of $1,121,488 and an increase in
accounts payable and accrued expenses of $145,369.

             Cash  flows  used in  investing  activities  were  $207,133,  which
related to interest income of $49,726 associated with a $2.5 million loan to the
Beran Entities and purchases of property,  plant and equipment of $157,407.  The
loan to the Beran  Entities  bears interest at 8% per annum and matures upon the
terms and conditions  contained in the related promissory notes, but in no event
later then December 31, 1999.

             Cash  flows  used in  financing  activities  were  $672,398,  which
consisted  primarily  of  payments on capital  lease  obligations  of  $411,806,
payments on obligations  related to subleased equipment of $208,268 and payments
on the Company's $3.0 million revolving line of credit of $39,508.

             In December  1997,  the Company  agreed to guarantee a $1.0 million
loan from DFS to JIHP (the "JIHP Loan").  This loan was funded by DFS to JIHP on
January 8, 1998 and bears  interest  at 12% per annum and is  repayable  over 48
months  commencing  in February  1998 at $26,330 per month.  At March 31,  1999,
approximately  $755,000  of the loan  was  outstanding.  PMA and each  physician
stockholder of PMA have  acknowledged that such extension of credit is for their
benefit and have agreed that to the extent that the Company is or becomes liable
in respect of any indebtedness or other liability or obligation of either PMA or
JIHP,  and the  acquisition  by the Company of 100% of the  outstanding  capital
stock of JIHP is not consummated, then PMA and each physician stockholder of PMA
agree to indemnify  and hold the Company  harmless  from and against any and all
such liabilities and obligations.

             Effective  December 26, 1996,  the Company  entered into a Loan and
Security Agreement with DVI Business Credit Corporation ("DVIBC"),  an affiliate
of DFS, to provide a revolving line of credit to the Company. The maximum amount
available  under such credit facility  initially was $2.0 million,  which amount
increased  to  $3.0  million  in  October  1998 in  connection  with  the  Beran
Acquisition,  with advances limited to 75% of eligible accounts  receivable,  as
determined  by DVIBC.  Borrowings  under the line of credit bear interest at the
rate of 3% over the prime  lending rate and were  repayable on May 1, 1999.  The
Company  has been  notified by DFS that it is prepared to extend the term of the
revolving  line of credit until  January 1, 2000 subject to the  negotiation  of
terms  and  conditions  acceptable  to DFS.  This  revolving  line of  credit is
expected  to  be  repaid  from  the  longer-term  financing  to be  obtained  in
connection  with the  proposed  acquisition  of JIHP.  In the  event  that  this
transaction  is not  consummated  on or prior to  January  1,  2000,  management
believes

                                              12

<PAGE>



(based on discussions to date with several financing sources) that the revolving
line of credit can be  refinanced  on a  longer-term  basis or the repayment due
date can be  further  extended.  The  Company's  obligations  under  the  credit
facility are collateralized  through a grant of a first security interest in all
eligible accounts receivable.  The agreement contains customary  affirmative and
negative covenants including covenants requiring the Company to maintain certain
financial  ratios and minimum levels of working  capital.  Borrowings under this
credit  facility  are used to fund  working  capital  needs as well as acquiring
businesses  which  are  complementary  to the  Company.  At March  31,  1999 and
December 31, 1998,  respectively,  the Company had  $2,798,767  and  $2,838,275,
respectively, of borrowings under this credit facility.

             Prior  to May 1,  1999,  the  Company's  MRI  facility  located  in
Philadelphia,  Pennsylvania was operated as a joint venture among a wholly-owned
subsidiary  of the  Company (as the general  partner  holding a 60%  partnership
interest) and certain  individual  medical  professionals and others (as limited
partners  holding in the aggregate the  remaining  40%  partnership  interests).
Effective May 1, 1999, the Company's subsidiary  consummated the purchase of the
limited  partners' 40% partnership  interests for $100,000 in cash. At April 30,
1999, the net book value of this 40%  partnership  interest was $0. The $100,000
purchase  price will be recorded by the Company as goodwill and amortized over a
period of ten years.

             The nature of the Company's  operations require significant capital
expenditures which generally have been financed through the issuance of debt and
capital  leases  and  proceeds  received  from  the sale of  equity  securities,
including the Company's  initial public  offering of Common Stock and redeemable
warrants in November 1991, the subsequent  exercise of such redeemable  warrants
and the sale of Series C Convertible Preferred Stock in February 1996. Continued
expansion of the Company's  business,  including the  establishment of physician
practice management operations, will require substantial cash resources and will
have an impact on the Company's liquidity.  The Company believes that cash to be
provided  by  the  Company's  operating   activities  together  with  borrowings
available from the Company's revolving line of credit will enable the Company to
meet its anticipated cash  requirements for its present  operations for the next
twelve  months.  Continued  expansion of the Company's  business,  including the
establishment  of  physician  practice  management   operations,   will  require
additional sources of financing. Both the DFS Bridge Loan and the revolving line
of credit had maturity  dates of May 1, 1999.  The Company has been  notified by
DFS  that it is  prepared  to  extend  the term of the DFS  Bridge  Loan and the
revolving  line of credit until  January 1, 2000 subject to the  negotiation  of
terms and  conditions  acceptable to DFS.  These loans are expected to be repaid
from the  longer-term  financing to be obtained in connection  with the proposed
acquisition of JIHP. In the event that this acquisition is not consummated on or
prior to January 1, 2000, management believes (based on discussions to date with
several  financing  sources) that the DFS Bridge Loan and the revolving  line of
credit  can be  refinanced  on a  longer-term  basis  (and  in the  case  of the
revolving line of credit, such repayment due date could be further extended).

Effect of Year 2000 Issue
-------------------------

             The "Year  2000  issue" is a result of  computer  programs  written
using  two  digits  instead  of four  digits  to  refer  to a  particular  year.
Therefore,  these computer  programs may recognize a date using "00" as the year
1900 rather than the year 2000. This could result in a system failure or

                                              13

<PAGE>



miscalculation causing disruptions of operations, including, among other things,
a  temporary  inability  to process  transactions,  send  invoices  or engage in
similar normal business activity.

             The  Company  is  currently  assessing  the impact of the Year 2000
issue  on  its  computer  systems  and  technology,  including  (i)  information
technology  such as  software  and  hardware  relating  to its  medical  billing
systems,  accounting/finance  systems, payroll systems, desktop applications and
servers, and (ii)  non-information  systems or embedded technology such as micro
controllers contained in various medical equipment,  safety systems,  facilities
and utilities (including telephones, facsimile machines, time clocks and postage
meters). The Company is evaluating its state of readiness through surveys of its
sites as well as through  discussions with its significant  vendors to determine
the  readiness of those  vendors whose failure to correct year 2000 issues would
materially  impact the Company.  The Company has completed its site  assessments
and  hopes  to  complete  its  assessment  of  the  state  of  readiness  of its
significant vendors by the end of the third quarter of fiscal 1999.

             The cost to the Company to correct its internal Year 2000 issues is
estimated to be $88,500,  consisting of $30,500  related to the upgrading of its
corporate  server,  $54,500 relating to the upgrading of personal  computers and
$3,500  related to the upgrading of medical  equipment.  The Company has not yet
incurred any costs related to the Year 2000  compliance  issue (other than costs
of, and time associated with, the site assessments and interfacing with vendors,
which costs are not significant and are not separately identifiable) but expects
to expense as incurred all such costs. The Company  anticipates that these costs
will be funded through operating cash flows except as hereinafter described. The
Company  expects to complete  these  upgrades by the end of the third quarter of
fiscal 1999.

             In connection with the Company's strategic expansion into providing
physician practice  management  services,  the Company has identified a state of
the art  information  system that is represented  by the service  provider to be
Year 2000  compliant  which the Company  intends to obtain and utilize in a wide
area network  setting upon  consummation of its acquisition of JIHP. The Company
intends  to obtain  financing  for the new  system  in the form of an  operating
lease.  The costs relating to the integration of such new system are expected to
be funded with the proceeds of the financing to be obtained in  connection  with
the acquisition of JIHP.

             While the  Company  believes  its  efforts  are  adequate to attain
internal Year 2000  compliance,  the Year 2000  readiness of its vendors may lag
behind the Company's  efforts and it has not yet  determined the extent to which
the Company is vulnerable  to the failure of its vendors to remediate  their own
Year 2000  issues.  There can be no  guarantee  that the  systems of these third
parties  will be timely  converted  or that a failure to convert will not have a
material  impact on the Company's  business,  financial  condition or results of
operations.  The  Company  is not yet in a  position  to assess  any such  third
party's  compliance  efforts  or the impact on the  Company if any such  efforts
fail.

             The  Company's  current  estimates  of the amount of time and costs
necessary to modify and test its computer  systems and  technology and determine
its  state of  readiness  are based on  management's  best  estimates  including
assumptions  regarding  future events,  including the continued  availability of
certain  resources,   Year  2000  modification  plans  and  other  factors.  New
developments

                                              14

<PAGE>



may occur that could  affect the  Company's  estimates of the amount of time and
costs  necessary  to  modify  and test its  systems  for Year  2000  compliance,
including, but not limited to (i) the availability and cost of personnel trained
in this area, (ii) the ability to locate and correct all relevant computer codes
and equipment  and (iii) the Year 2000  compliance  attained by its  significant
vendors.  The  Company  has not  developed,  nor  does it plan to  develop,  any
contingency  plans for any  unplanned  noncompliance  issues  from  internal  or
external sources.  There can be no guarantee any unplanned  noncompliance issues
from  internal  or  external  sources  will not have a  material  impact  on the
Company's business, financial condition or results of operations.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk
         ----------------------------------------------------------

                  Not Applicable.

                                              15

<PAGE>



                                  PART II - OTHER INFORMATION
                                  ---------------------------

             Items 1 through 4 have been omitted because the related information
is either inapplicable or has been previously reported.

Item 5.  Other Information
         -----------------

             Not Applicable.

Item 6.  Exhibits and Reports on Form  8-K
         ---------------------------------

        (a)    Exhibit 27 - Financial Data Schedule

        (b)    The  Company  did not file any  reports  on Form 8-K  during  the
               quarter ended March 31, 1999.



                                              16

<PAGE>


                                          SIGNATURES

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

                                            HEALTHCARE IMAGING SERVICES, INC.
                                            (Registrant)



Date:  May 17, 1999                         /s/ Elliott H. Vernon  
                                            -----------------------
                                            Elliott H. Vernon
                                            Chairman of the Board,
                                            President and Chief
                                            Executive Officer
                                            (Principal Executive Officer)




Date:  May 17, 1999                         /s/ Scott P. McGrory 
                                            -----------------------
                                            Scott P. McGrory
                                            Vice President - Controller
                                            (Principal Financial and
                                            Accounting Officer)

                                              17