SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

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

For the quarterly period ended June 30, 1997


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


Commission File Number 0-22970


                           NETWORK IMAGING CORPORATION
             (Exact name of registrant as specified in its charter)

         Delaware                                      54-1590649
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
incorporation or organization)

                 500 Huntmar Park Drive, Herndon, Virginia 20170
                    (Address of principal executive offices)


                                 (703) 478-2260
                           (Issuer's telephone number)


         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during the past 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] [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of outstanding shares of the issuer's Common Stock, $.0001 par value,
as of July 30,  1997 was 25,465,320.


<PAGE>




                           NETWORK IMAGING CORPORATION

                                    Form 10-Q


                                Table of Contents



PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements

           Consolidated Balance Sheets at June 30, 1997
           (unaudited) and December 31, 1996                             2

           Consolidated Statements of Operations (unaudited)
           for the three months ended June 30, 1997 and 1996             3

           Consolidated Statements of Operations (unaudited)
           for the six months ended June 30, 1997 and 1996               4

           Consolidated Statement of Changes in Stockholders' Equity
           (unaudited) for the six months ended June 30, 1997            5

           Consolidated Statements of Cash Flows (unaudited)
           for the six months ended June 30, 1997 and 1996               6

           Notes to Consolidated Financial Statements                    7

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


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                              14

Item 2.  Changes in Securites                                           14

Item 3.  Change upon Senior Securities                                  16

Item 4.  Submission of Matters to a Vote of Security Holders            16

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



<PAGE>
                  NETWORK IMAGING CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)


<TABLE>
<CAPTION>
                                                       June 30,     December 31,
                                                         1997          1996
                                                     ------------   -----------
                                                      (Unaudited)
<S>                                                  <C>            <C>   
      ASSETS

Current assets:
 Cash and cash equivalents                              $   1,845     $   7,601
 Accounts and notes receivable, net                        13,482        13,243
 Inventories                                                1,602         1,503
 Prepaid expenses and other                                 2,265         2,362
                                                        ---------     ---------
    Total current assets                                   19,194        24,709
Fixed assets, net                                           2,439         2,887
Long-term notes receivable, net                             1,697         1,979
Software development costs and
 purchased technology, net                                  3,496         3,813
Goodwill, net                                               2,473         3,237
Other assets                                                  140           153
                                                        ---------     ---------
    Total assets                                        $  29,439     $  36,778
                                                        =========     =========


      LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:
 Current debt maturities and
  obligations under capital leases                      $   1,243     $   2,063
 Accounts payable                                           3,326         3,185
 Accrued compensation and related
  expenses                                                  2,168         1,891
 Deferred revenue                                           4,329         3,789
 Other accrued expenses                                     3,582         3,888
                                                        ---------     ---------
    Total current liabilities                              14,648        14,816
Long-term debt and obligations
 under capital leases                                       5,186            88
Deferred income taxes                                         338           300
                                                        ---------     ---------
    Total liabilities                                      20,172        15,204
Commitments
Redeemable Series F preferred
 stock, 792,186 and 1,792,186
 shares issued and outstanding                              6,357         9,857
Stockholders' equity:
 Preferred stock, $.0001 par
  value,  20,000,000 shares
  authorized;  1,605,125 and
  1,605,675 shares issued and
  outstanding
 Common stock, $.0001 par value,
  50,000,000 shares authorized;
  25,177,743 and 22,896,612
  shares issued and outstanding                                 3             2
 Additional paid-in-capital                               122,709       124,429
 Accumulated deficit                                     (119,298)     (113,098)
 Translation adjustment                                      (504)          384
                                                        ---------     ---------
    Total stockholders' equity                              2,910        11,717
                                                        ---------     ---------
    Total liabilities and stockholders' equity          $  29,439     $  36,778
                                                        =========     =========
</TABLE>


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

                                      -2-
<PAGE>
                  NETWORK IMAGING CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (In thousands, except share and per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   Three Months Ended June 30,
                                                    1997                1996
                                                -------------     -------------
<S>                                             <C>               <C>

Revenue:
  Products                                       $      4,098      $      3,394
  Services                                              5,236             5,735
                                                 ------------      ------------
                                                        9,334             9,129
                                                 ------------      ------------
Costs and expenses:
  Cost of products sold                                 2,198             2,367
  Cost of services provided                             3,934             4,471
  Sales and marketing                                   3,640             4,351
  General and administrative                            1,689             3,102
  Product development                                   1,266             1,327
  Restructuring costs                                    --                 (19)
                                                 ------------      ------------
                                                       12,727            15,599
                                                 ------------      ------------
Loss before investment and
 interest income and income taxes                      (3,393)           (6,470)
  Investment and interest income
  (expense), net                                          (64)               87
                                                 ------------      ------------
Loss before income taxes                               (3,457)           (6,383)
  Income tax (benefit) provision                           61              (114)
                                                 ------------      ------------
Net loss                                               (3,518)           (6,269)
                                                 ------------      ------------

Preferred stock preferences                              (930)             (865)
                                                 ------------      ------------
Net loss applicable to
 common shares                                   $     (4,448)     $     (7,134)
                                                 ============      ============

Net loss per common share                        $      (0.18)     $      (0.35)
                                                 ============      ============

Weighted average shares outstanding                24,963,956        20,208,855
                                                 ============      ============
</TABLE>










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

                                      -3-
<PAGE>
                  NETWORK IMAGING CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
               (In thousands, except share and per share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                    Six Months Ended June 30,
                                                     1997              1996
                                                 ------------      ------------
<S>                                              <C>               <C>
Revenue:
  Products                                       $      8,366      $      9,390
  Services                                             10,087            10,281
                                                 ------------      ------------
                                                       18,453            19,671
                                                 ------------      ------------
Costs and expenses:
  Cost of products sold                                 4,156             5,807
  Cost of services provided                             7,816             8,275
  Sales and marketing                                   7,252             8,320
  General and administrative                            3,300             5,527
  Product development                                   2,308             3,061
  Gain from extinguishment of debt                       (267)             --
  Exchange fee and gain on
   sale of asset, net                                    --                 619
  Restructuring costs                                    --                (175)
                                                 ------------      ------------
                                                       24,565            31,434
                                                 ------------      ------------
Loss before investment and
 interest income and income taxes                      (6,112)          (11,763)
  Investment and interest income
  (expense), net                                          (33)              146
                                                 ------------      ------------
Loss before income taxes                               (6,145)          (11,617)
  Income tax (benefit) provision                           55               (12)
                                                 ------------      ------------
Net loss                                               (6,200)          (11,605)
                                                 ------------      ------------

Preferred stock preferences                            (1,906)           (1,884)
                                                 ------------      ------------
Net loss applicable to
 common shares                                   $     (8,106)     $    (13,489)
                                                 ============      ============

Net loss per common share                        $      (0.33)     $      (0.69)
                                                 ============      ============

Weighted average shares outstanding                24,715,116        19,560,045
                                                 ============      ============
</TABLE>










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

                                      -4-
<PAGE>
                  NETWORK IMAGING CORPORATION AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                     For the six months ended June 30, 1997
                      (In thousands, except share amounts)
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                                                                           Additional
                                                   Preferred Stock                 Common Stock             paid-in      Accumulated
                                                Shares           Amt.          Shares          Amt.         capital        Deficit  
                                             --------------------------     -------------------------     ------------   -----------
<S>                                          <C>            <C>             <C>            <C>            <C>            <C>

Balance December 31, 1996                     1,605,675     $    --         22,896,612     $        2     $  124,429     $ (113,098)

Issuance of common stock
 upon exercise of warrants                                                      23,331                            23

Conversion of preferred
 stock                                             (550)         --          2,257,800              1

Offering costs on issuance
 of preferred stock                                                                                              (25)

Issuance of warrants and
 extension                                                                                                       188

Dividends on preferred
 stock                                                                                                        (1,906)

Translation adjustment

Net loss                                                                                                                     (6,200)
                                             ----------      ----------     ----------     ----------     ----------     -----------

Balance June 30, 1997                         1,605,125     $    --         25,177,743     $        3     $  122,709     $ (119,298)
                                             ==========      ==========     ==========     ==========     ==========     ===========



                                                                
                                                     Translation
                                                      Adjustment        Total
                                                    -------------     ----------
<S>                                                 <C>               <C>

Balance December 31, 1996                            $    384          $ 11,717

Issuance of common stock
 upon exercise of warrants                                                   23

Conversion of preferred
 stock                                                                        1

Offering costs on issuance
 of preferred stock                                                         (25)

Issuance of warrants and
 extension                                                                  188

Dividends on preferred
 stock                                                                   (1,906)

Translation adjustment                                   (888)             (888)

Net loss                                                                 (6,200)
                                                     --------          --------

Balance June 30, 1997                                $   (504)         $  2,910
                                                     ========          ========

</TABLE>


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

                                      -5-
<PAGE>
                  NETWORK IMAGING CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                      Six months Ended June 30,
                                                        1997             1996
                                                    ------------     -----------
                                                           (In thousands)
<S>                                                 <C>              <C>
Cash flows from operating activities:
 Net loss                                              $ (6,200)       $(11,605)
 Adjustments to reconcile net loss
  to net cash used in operating
  activities:
   Depreciation and amortization                          2,550           2,934
   Gain on sale of asset                                   --              (111)
   Restructuring costs                                     --              (175)
   Other non-cash items                                      10            --
   Changes in assets and
    liabilities:
     Accounts and notes receivable                         (836)          2,673
     Inventories                                           (182)            533
     Prepaid expenses and other                             190            (732)
     Accounts payable                                       474          (1,523)
     Accrued compensation and
      related expenses                                      418            (290)
     Accrued expenses, other                               (212)          2,053
     Deferred revenues                                      641            (792)
     Deferred income taxes                                   74             (91)
                                                       --------        --------
Net cash used in operating activities                    (3,073)         (7,126)
                                                       --------        --------

Cash flows from investing activities:
 Sale of short-term investments                            --               111
 Capitalized software development
  and license costs                                        (751)         (1,125)
 Purchases of fixed assets                                 (410)           (582)
                                                       --------        --------
Net cash used in investing activities                    (1,161)         (1,596)
                                                       --------        --------

Cash flows from financing activities:
 Proceeds from issuance of common
  and preferred stocks, net                                  (2)         11,902
 Cash dividends paid on Series A
  preferred stock                                        (1,605)         (1,605)
 Cash dividends paid on Series F
  preferred stock                                          (174)           --
 Payments on Mandatory Redeemable
  Preferred Stock                                        (3,500)           --
 Proceeds from borrowings and
  short-term investments                                  5,000            --
 Proceeds from sale and leaseback
  of fixed assets                                          --               196
 Proceeds from Notes Receivable
  related to business divestitures                           60            --
 Principal payments on capital
  lease obligations                                        (536)           (423)
 Principal payments on debt                                (633)           (213)
                                                       --------        --------
Net cash (used in) provided by
 financing activities                                    (1,390)          9,857
                                                       --------        --------

Effect of exchange rate changes on
 cash and cash equivalents                                 (132)            (81)
Net decrease in cash and cash
 equivalents                                             (5,756)          1,054
Cash and cash equivalents at
 beginning of year                                        7,601           9,359
                                                       --------        --------
Cash and cash equivalents at June 30,                  $  1,845        $ 10,413
                                                       ========        ========
</TABLE>

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

                                      -6-
<PAGE>


                  NETWORK IMAGING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             June 30, 1997 and 1996

1.  BASIS OF PRESENTATION

The  unaudited  financial  statements  presented  herein  have been  prepared in
accordance with the  instructions to Form 10-Q and should be read in conjunction
with the financial statements and notes thereto included in the Company's Annual
Report  on Form  10-K  for the year  ended  December  31,  1996,  which  include
information  and  note  disclosures  not  included  herein.  In the  opinion  of
management  all  adjustments,  which  include  only those of a normal  recurring
nature, necessary to fairly present the Company's financial position, results of
operations  and  cash  flows  have  been  made  to  the  accompanying  financial
statements.  The results of  operations  for the six month period ended June 30,
1997 may not be  indicative  of the results  that may be  expected  for the year
ending December 31, 1997.

Certain   reclassifications  have  been  made  to  the  prior  period  financial
statements to conform to the current period presentation.


2.  NEW ACCOUNTING PRONOUNCEMENT

In February 1997, the Financial  Accounting Standards Board issued Statement No.
128,  Earnings per Share,  which is required to be adopted on December 31, 1997.
At that time,  the Company will be required to change the method  currently used
to compute  earnings per share and to restate all prior  periods.  Under the new
requirements for calculating  primary earnings per share, the dilutive effect of
stock options will be excluded.  The impact of Statement 128 on the  calculation
of the  primary  and fully  diluted  earnings  per share is not  expected  to be
material.


3.  REDEEMABLE PREFERRED STOCK

During the first  quarter of 1997,  the  Company  redeemed  1,000,000  shares of
Series F Preferred Stock for $3,500,000. The Company used proceeds from its line
of credit to finance the Series F Preferred share buy back.

During  the  second  quarter  of 1997,  the  Company  was to have  redeemed  the
remaining  792,186 shares of Series F Preferred Stock for  $2,772,651.  Under an
amendment to the December 1996 redemption  agreement,  the $2,772,651 payment is
now due on January 31, 1998,  subject to certain  acceleration  terms related to
the occurrence of certain events that are under the control of the Company.

                                       -7-
<PAGE>

4.  LINE OF CREDIT

During the second  quarter of 1997,  the Company drew the  remaining  $1,500,000
from its $5,000,000 line of credit established to finance the Series F Preferred
share  buy  back.  As  part of the  additional  borrowing,  the use of  proceeds
restriction was amended to allow its use for general corporate  purposes and the
Company entered into an amendment to the security agreement,  which expanded the
lender's  security  interest to include all  personal  property of the  Company,
including without limitation,  (1) all personal property of the Company, (2) all
leases, licenses, permits, (3) all 1View software products intellectual property
now owned or  hereafter  developed by the Company,  (4) all  inventory,  (5) all
accounts,  contract rights,  chattel papers,  instruments,  general intangibles,
documents,  other obligations,  monies, revenues,  credits, claims, goodwill and
causes of action.  (6) all trade or service  names,  trademarks,  service marks,
logos and all patents, patent applications, copyrights, licensing agreements and
royalty  payments,  (7)  proceeds of the  foregoing,  and (8) all of the capital
stock of Dorotech, S.A.

5.  NASDAQ-NMS MAINTENANCE REQUIREMENTS

At June 30, 1997, the Company had not maintained net tangible assets of at least
$4 million, which is one of the quantitative  maintenance criteria for inclusion
of the Company's  securities on Nasdaq-NMS.  To remedy the short-fall and offset
any adverse impact, the Company issued,  during July 1997 3,300 shares of Series
K Convertible  Preferred  Stock ("Series K Stock") and warrants and received net
proceeds of $2.9 million.  Pursuant to the terms of the offering, the purchasers
are also required to make  additional  purchases of shares for $3.0 million upon
the Company's achievement of certain performance milestones and the satisfaction
of certain other  conditions and an additional $4.7 million at their option (See
Note 6).  Although  the Company  believes  that it can maintain the required net
tangible  assets of at least $4  million  through  additional  issuances  of its
Series K Stock or other additional offerings of equity securities,  there can be
no  assurance  that the  Company  will  complete  such  offerings  or  that,  if
completed,  they  will be on terms  favorable  to the  Company  or in an  amount
sufficient to permit the Company to continue to maintain net tangible  assets of
at least $4 million.

6.  SUBSEQUENT EVENTS

During July 1997, the Company issued,  pursuant to a private placement exemption
under the Securities Act of 1933, as amended,  8% Convertible  Notes due July 8,
2002 totaling $1.8 million.  The notes are convertible into the Company's Common
Stock  beginning 45 days after issue at a conversion  price of $1.875 per share,
the price on the issue date.

On or after  October  30,  1997,  the  holders  have the  right  to  redeem  the
convertible  notes plus  accrued  interest on one  business  days' notice to the
Company in cash or shares of Common  Stock,  at the  Company's  election.  On or
after  October 30,  1997,  the  Company has the right to redeem the  convertible
notes plus accrued interest on 30 days' notice to

                                       -8-
<PAGE>

the  holders in cash or share of Common  Stock,  at the  holders'  election.  If
shares of Common Stock are used,  Common Stock is issued at a rate of 90% of the
previous 5 trading days average  closing bid price.  The interest is  compounded
semi-annually  . The warrants  issued to the investors have an exercise price of
$1.875 per share and expire on July 8, 2000.

During  July 1997,  the  Company  agreed to issue up to 11,000  units  ("Units")
consisting  of one share of Series K Stock and  warrants to acquire 75 shares of
Common Stock at an exercise  price of $2.40 per share at the price of $1,000 per
Unit. On July 28, 1997, the Company issued 3,300 Units and received net proceeds
of $2.9 million.  The Company also issued warrants to purchase 162,462 shares of
Common Stock at $1.625 per share to the placement agent in the  transaction.  In
accordance with the terms of the offering, the proceeds will be used for working
capital and general corporate  purposes.  Pursuant to the terms of the offering,
the purchasers are required to make  additional  purchases of the units for $3.0
million upon the Company's achievement of certain performance milestones and the
satisfaction of certain other conditions and the remaining $4.7 million is to be
offered to the purchasers and the purchasers, at their option, may elect to make
purchases of the units.  In connection  with the sale of the units,  the Company
agreed  to  register  the  Common  Stock  issuable  upon the  conversion  of the
preferred stock and the execute of the warrants.

The Series K Preferred Stock has a per share liquidation preference,  subject to
the  liquidation  preferences of the Series A Preferred  Stock,  the Series F-1,
F-2, F-3 and F-4 Preferred  and the Series H Preferred  Stock of an amount equal
to the sum of $1,000 plus 7% per annum  simple  interest  thereon for the period
since the date of  issuance.  Each  share is  convertible  at the  option of the
holder  into the number of shares of Common  Stock  determined  by  dividing  an
amount equal to the initial  purchase price of $1,000 by the lesser of (1) $2.00
and (2) the lowest  closing  sale price for the Common Stock for the ten trading
days  immediately   preceding  the  conversion  multiplied  by  the  "Conversion
Percentage."  The  "Conversion  Percentage"  is (a)  105%  prior to the 61st day
following  July 28,  1997 (the  "First  Closing  Date"),  (b) 96% for the period
between the 61st and the 90th day following the First Closing Date,  (c) 85% for
the period  between the 91st and the 180th day following the First Closing Date,
and (d) 81% for the period after the 180th day following the First Closing Date.
The Series K Stock has a dividend  rate of 7% per annum  which is payable at the
time of conversion  or redemption in cash or shares of Common Stock,  as elected
by the Company.

During July 1997,  the Company  announced  that it was  suspending  the dividend
payment to holders of Series A Cumulative Convertible Preferred Stock ("Series A
Stock").  Holders of Series A Stock did not  receive  dividends  payable for the
three months ended July 31, 1997 in the amount of $0.50 per share or $802,512.50
in the aggregate.

                                       -9-
<PAGE>

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

         The Private Securities Litigation Reform Act of 1995 (the "Reform Act")
provides a "safe harbor" for  forward-looking  statements to encourage companies
to provide  prospective  information  about  their  companies,  so long as those
statements are identified as  forward-looking  and are accompanied by meaningful
cautionary  statements  identifying  important  factors  that could cause actual
results to differ materially from those discussed in the statement.  The Company
desires to take  advantage of the "safe  harbor"  provisions  of the Reform Act.
Except for the historical information contained herein, the matters discussed in
this Form 10-Q quarterly  report are  forward-looking  statements  which involve
certain  risks  and  uncertainties.  Although  the  Company  believes  that  the
expectations  reflected  in  such  forward-looking  statements  are  based  upon
reasonable  assumptions,  it can give no assurance that its expectations will be
achieved. Important factors that could cause actual results to differ materially
from  the  Company's   expectations   are  disclosed  in  conjunction  with  the
forward-looking statements or elsewhere herein.

         The  following  discussion  of the  financial  condition and results of
operations  of the  Company  should be read in  conjunction  with the  Company's
Consolidated Financial Statements and related notes included herein.


Results of Operations - Six months ended June 30, 1997 and 1996

         Revenues.  Total  revenues were $18.5 million and $19.7 million for the
six months ended June 30, 1997 and 1996, respectively. The $1.2 million decrease
in revenue was the result of decreases in product  revenue of $1.0  million,  or
28%,  and a decrease  in service  revenue of  $194,000,  or 6%. The  decrease in
product  revenue  was  primarily  attributable  to the  disposition  in  1996 of
Symmetrical Technologies,  Inc. ("STI"), which reduced the Company's revenues by
$1.5 million. The decrease in service revenue of $194,000 was also primarily the
result of the disposition of STI, which contributed $170,000 of the decrease.

         Profit   Margins.   Profit  margins  for  product  sales  increased  12
percentage  points for the first six months of 1997 over the same period in 1996
as cost of products  decreased from 62% to 50% of sales. The increase in product
sales margins was primarily due to the  disposition  during 1996 of STI.  Profit
margins for service sales increased 3 percentage points for the six months ended
June 30, 1997 as compared to 1996 as the cost of services  decreased from 80% to
77% of sales.  The increase in service  sales margins from 20% to 23% was due to
the Company is increasing emphasis on its custom development services.

         Sales and marketing.  Sales and marketing expenses were $7.3 million or
39% of revenue for the six months ended June 30, 1997  compared to $8.3 million,
or 42% of revenue in 1996.  The decrease of $1.1 million,  or 13%, was primarily
the result of the Company's disposition of STI during 1996.

                                      -10-

<PAGE>

         General and  administrative.  G&A expenses  were $3.3 million or 18% of
revenue for the six months ended June 30, 1997 compared to $5.5 million,  or 28%
of revenue in 1996.  The decrease of $2.2  million,  or 40%, was  primarily  the
result of the Company's  efforts in cost reductions in the Company's  continuing
operations.

         Product  development.  The Company's  expenditures on software research
and  development  activities  for the six months  ended June 30,  1997 were $3.0
million,  of which $0.7 million was  capitalized  and $2.3 million was expensed.
Software  research and  development  expenditures  for the 1996 period were $4.2
million,  of which $1.1 million was  capitalized  and $3.1 million was expensed.
The  $1.2  million   decrease  in  research  and  development   expenditures  is
attributable to the Company's 1996 plan to consolidate the various 1View product
development  groups into a common  product  development  organization  operating
under a single senior manager.  During 1996, the Company  consolidated  its COLD
product development groups from three separate locations to one, and vacated the
excess  office  space.  The  Company's  disposition  of STI also  resulted  in a
reduction of $116,000 in research and development expenditures.

         Gain on  extinguishement  of  debt.  The  Company's  French  subsidiary
realized a $267,000 gain in connection  with the partial  forgiveness of a grant
made by a French government agency.

         Income taxes. The Company's income tax expense for the six months ended
June 30, 1997 of $55,000  resulted from income generated by the Company's French
operations  that  could  not be  offset by  operating  losses  or  carryforwards
available in other jurisdictions. The Company had income tax benefit for the six
months ended June 30, 1996 of $12,000, which was primarily the result of taxable
losses generated by the Company's French operations.

         Net loss. The Company's net loss for the six months ended June 30, 1997
was $6.2 million as compared to a net loss of $11.6  million for the  comparable
period of 1996.  The net loss  decrease of $5.4 million for the first six months
of 1997 as  compared  to the same  period in 1996 is due  primarily  to the $2.2
million reduction in G&A expenses, $1.1 million reduction in sales and marketing
expenses,  $1.1 million  reduction in product  development  expenses,  increased
profit margins resulting in $890,000  additional gross margin,  and the exchange
fee incurred in 1996.

         Net loss applicable to Common Stock.  The net loss applicable to common
shares includes  adjustments for dividends and accretion  amounts related to the
Company's  preferred  stock.  The net loss  applicable to common shares was $8.1
million, or ($.33) per share, for the six months ended June 30, 1997 as compared
to $13.5 million or ($.69) per share,  for the  comparable  period of 1996.  The
decrease is attributable to the decrease in net loss described above.

                                      -11-

<PAGE>

Results of Operations - Three months ended June 30, 1997 and 1996

         Revenues.  Total  revenues  were $9.3  million and $9.1 million for the
three months ended June 30, 1997 and 1996,  respectively.  The $205,000 increase
in revenue was the result of increases in product  revenue of $704,000,  or 21%,
offset by a decrease  in service  revenue of  $499,000,  or 9%. The  increase in
product revenue was attributable to a $1,050,000  increase in comparable company
revenue  offset by a $346,000  reduction due to the  disposition in 1996 of STI.
The decrease in service sales of $499,000 was the result of a $406,000  decrease
in comparable  company  revenues  attributable to reduced sales by the Company's
French operations and the weakening of the U.S. dollar against the French franc.
The remaining decrease of $93,000 was due to the disposition of STI.

         Profit   Margins.   Profit  margins  for  product  sales  increased  16
percentage  points in the second quarter of 1997 over the same period in 1996 as
cost of products  decreased  from 70% to 54% of sales.  The  increase in product
sales  margins was  primarily  due to the  increased  sales mix of the Company's
internally  developed  products and the  disposition  during 1996 of STI. Profit
margins for service  sales  increased 3  percentage  points for the three months
ended June 30, 1997 as compared to 1996 as the cost of services  decreased  from
78% to 75% of sales.  The increase in service  sales margins from 22% to 25% was
due to the Company increasing emphasis on its custom development services.

         Sales and marketing.  Sales and marketing expenses were $3.6 million or
39% of  revenue,  for the three  months  ended June 30,  1997  compared  to $4.4
million,  or 48% of revenue in 1996.  The  decrease  of  $711,000,  or 16%,  was
primarily the result of the Company's disposition of STI during 1996.

         General and  administrative.  G&A expenses  were $1.7 million or 18% of
revenue,  for the three months ended June 30, 1997 compared to $3.1 million,  or
34% of revenue in 1996. The decrease of $1.4 million,  or 46%, was primarily the
result of the Company's  efforts in cost reductions in the Company's  continuing
operations.

         Product  development.  The Company's  expenditures on software research
and  development  activities  in the three  months ended June 30, 1997 were $1.6
million,  of which $0.3 million was  capitalized  and $1.3 million was expensed.
Software  research and  development  expenditures  for the 1996 period were $1.7
million, of which $0.4 million was capitalized and $1.3 million was expensed.

         Income  taxes.  The  Company's  income tax expense for the three months
ended June 30, 1997 of $61,000  resulted from income  generated by the Company's
French  operations that could not be offset by operating losses or carryforwards
available  in other  jurisdictions.  The  Company had income tax benefit for the
three  months ended June 30, 1996 of $114,000,  which was  primarily  the result
from losses  generated  by the  Company's  French  operations  that could not be
offset by operating losses or carryforwards available in other jurisdictions.

                                      -12-
<PAGE>

         Net loss.  The  Company's  net loss for the three months ended June 30,
1997 was $3.5 million as compared to $6.3 million for the  comparable  period of
1996.  The net loss  decrease of $2.8  million in the second  quarter of 1997 as
compared  to the  same  period  in 1996 is due  primarily  to the  $1.4  million
reduction  in G&A  expenses,  increased  profit  margins  resulting  in $911,000
additional  gross  margin  and a  $711,000  reduction  in  sales  and  marketing
expenses.

         Net loss applicable to Common Stock.  The net loss applicable to common
shares includes  adjustments for dividends and accretion  amounts related to the
Company's  preferred  stock.  The net loss  applicable to common shares was $4.4
million,  or ($.18)  per share,  for the three  months  ended  June 30,  1997 as
compared to $7.1 million or ($.35) per share, for the comparable period of 1996.
The decrease is attributable to the decrease in net loss described above.


Liquidity and Capital Resources

         As of June 30,  1997,  the  Company  had $1.8  million in cash and cash
equivalents,  as  compared  to $7.6  million  in cash  and cash  equivalents  at
December  31,  1996.  Net working  capital was $4.5 million at June 30, 1997 and
$9.9 million at December 31, 1996.

         During the first six months of 1997,  the  Company  redeemed  1,000,000
shares of Series F Preferred  Stock for  $3,500,000  by using  proceeds from its
line of credit. In addition,  the Company drew the remaining $1,500,000 from its
domestic line of credit.

         For the six months  ended June 30, 1997,  the $5.8 million  decrease in
cash and cash equivalents  resulted from the use of $3.3 million in cash to fund
operating activities, $1.2 million to fund investing activities and $1.2 million
in cash to fund financing activities.

         The $3.3 million funding of operating  activities  arose primarily with
respect  to a net  loss in  operations.  The  $1.2  million  to  fund  investing
activities arose with respect to capitalized  software development costs and the
purchase of fixed assets. The $1.2 million in cash used by financing  activities
arose  primarily from the $1.8 million  payment of preferred stock dividends and
the principle  payments on debt and capital lease obligations offset by proceeds
of $5.0 million from borrowing from the line of credit.

         The adverse  results of operations  that the Company has experienced is
expected to continue at least for the  remainder of 1997.  The Company  believes
that its existing cash,  together with the current proceeds from the Convertible
Notes,  current and future proceeds from the sale of units,  and the anticipated
cash flows from  operations,  should  provide  sufficient  resources to fund its
activities through the next twelve months and to maintain net tangible assets of
at least  $4.0  million,  which  is  required  for  continued  inclusion  of the
Company's securities on Nasdaq-NMS. However, there can be no assurance that the

                                      -13-

<PAGE>

Company  will be able to satisfy the  conditions  precedent  to the  issuance of
additional  Units.  Anticipated cash flows from operations are largely dependent
upon the Company's  ability to achieve its sales and gross profit objectives for
its 1View and other products. If the Company is unable to meet these objectives,
it will consider alternative sources of liquidity,  such as additional offerings
of equity  securities.  Although the Company  believes that it can  successfully
implement its operating plan and, if necessary,  raise additional capital, there
can be no assurance that  implementation  of the plan will be successful or that
financing, if sought, will be available.



PART II.           OTHER INFORMATION

Item 1.            Legal Proceedings

         The Company is not  involved in any legal  proceedings,  other than the
routine litigation incidental to the business.

Item 2.           Changes in Securities

         (c) On July 9, 1997,  the Company  entered into a transaction  to raise
$1.8 million  through the issuance of two 8% convertible  notes due July 8, 2002
and warrants to purchase  36,000 shares of Common Stock at an exercise  price of
$1.875 per share to,  Wood  Gundy in trust for RRSP 550 98866 19 and  Gundyco in
trust for RRSP 550 99119 12. The notes and the warrants were issued  pursuant to
Rule 506 of Regulation D under the  Securities  Act of 1933, as amended,  to two
accredited  investors.  Pursuant  to the  terms of the  convertible  notes,  the
Company is  obligated to file a  registration  statement by September 9, 1997 to
register the Common Stock  issuable on  conversion  of the notes.  The notes and
warrants were sold for cash and no placement  agent or underwriter was used. The
warrants  expire on July 8, 2000.  The holders of the  convertible  notes have a
security interest in accounts receivable,  inventory,  the intellectual property
of the 1 View software and on the stock of Dorotech, S.A.

         The  convertible  notes are  convertible  into shares of the  Company's
Common Stock 45 days beginning  after issue at a conversion  price of $1.875 per
share.  On or after  October 30, 1997,  the holders have the right to redeem the
convertible  notes plus  accrued  interest on one  business  days' notice to the
Company in cash or shares of Common  Stock,  at the  Company's  election.  On or
after  October 30,  1997,  the  Company has the right to redeem the  convertible
notes plus  accrued  interest on 30 days' notice to the holders in cash or share
of Common Stock, at the holders'  election.  If shares of Common Stock are used,
Common  Stock is issued at a rate of 90% of the  previous 5 trading days average
closing bid price.

         In addition,  the Company entered into a securities  purchase agreement
dated as of July 28, 1997 ("Securities Purchase  Agreement"),  pursuant to which
the Company agreed to issue up to 11,000 units ("Units") consisting of one share
of Series K  Convertible  Preferred  Stock of the  Company  ("Series K Preferred
Stock") and warrants to purchase

                                      -14-
<PAGE>

75 shares of Common Stock (each a "Unit") to Zanett Lombardier, Ltd. and Capital
Ventures  International  ("Purchasers").  On July 28, 1997,  the Company  issued
3,300 Units and received net proceeds of $2.9  million.  The warrants  issued to
the Purchasers expire on July 27, 2002.  Pursuant to the terms of the Securities
Purchase  Agreement,  the Purchasers  are required to purchase 3,000  additional
Units if the Company  achieves  certain  performance  milestones  and  satisfies
certain  other  conditions  and the  Purchasers  have the option to  purchase an
additional $4.7 million of Units.  The Series K Preferred Stock and the warrants
were issued  pursuant to Rule 506 of  Regulation D under the  Securities  Act of
1933,  as amended,  to two  accredited  investors.  The Company has granted each
Purchaser  registration  rights,  whereby  the  Company is  obligated  to file a
registration  statement as soon as  practicable  after each  closing,  but in no
event later than the 60th day following  such closing  registering at least 135%
of the shares of Common Stock  issuable on  conversion of the Series K Preferred
Stock and the warrants issued to the Purchasers.

         Also,  in  connection  with each  issuance  of Units,  the  Company  is
obligated  to  pay  the  placement  agent,  The  Zanett  Securities  Corporation
("Zanett"),  a fee of 8% of the aggregate gross proceeds received by the Company
at closing and to issue to Zanett  warrants to purchase Common Stock equal to 8%
of the quotient  obtained by dividing the aggregate  purchase price of the Units
issued by $1.625,  the initial  exercise price of the warrants issued to Zanett.
The Company paid the  placement  agent a fee of $242,880 and issued a warrant to
purchase 162,462 shares of Common Stock at an exercise price of $1.625 per share
in connection  with the first closing on July 28, 1997.  The warrants  expire on
July 27, 2002. 135% of the number of shares of Common Stock issuable on exercise
of the  warrants  issued to Zanett  must also be  included  in the  registration
statement to be filed as described in the preceding paragraph.

         Each share of Series K Stock is convertible at the option of the holder
into the number of shares of Common  Stock  determined  by dividing  the initial
purchase  price of $1,000 by the lesser of (a) $2.00 and (b) the lowest  closing
sale price for the Common Stock for the ten trading days  immediately  preceding
the  conversion  multiplied  by the  "Conversion  Percentage."  The  "Conversion
Percentage"  is (a) 105%  prior to the 61st day  following  July 28,  1997  (the
"First Closing Date"),  (b) 96% for the period between the 61st and the 90th day
following the First Closing  Date,  (c) 85% for the period  between the 91st and
the 180th day following the First Closing Date, and (d) 81% for the period after
the 180th  day  following  the First  Closing  Date.  The  Series K Stock has an
effective  dividend  rate of 7% per  annum,  which  is  payable  at the  time of
conversion or  redemption  in cash or shares of Common Stock,  as elected by the
Company.

         The conversion  price of the Series K Preferred  Stock and the warrants
issued to the  Purchasers  and  Zanett  are  subject  to  adjustment  in certain
circumstances.

                                      -15-
<PAGE>

Item 3.           Changes Upon Senior Securities

         (b) The Company  failed to pay its  quarterly  dividend on its Series A
Cumulative  Convertible Preferred Stock of $0.50 per share or $802,512.50 in the
aggregate.

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

         The Company held its Annual Meeting of  Stockholders on June 3, 1997 at
which the Stockholders elected five directors, ratified the selection of Ernst &
Young LLP as the Company's  independent  accountants  for the fiscal year ending
1997,  and approved the adoption of the Employee Stock Purchase Plan. A proposal
to ratify Sections 3.02, 3.04 and 3.05 of the Company's  Bylaws was not approved
by the Stockholders.

         The  following  table sets forth the names of the nominees for director
and the votes for and withheld with respect to each such nominee:
<TABLE>
<CAPTION>

         Nominee                            For               Authority Withheld
         -------                        ----------            ------------------
         <S>                            <C>                   <C>
         Robert P. Bernardi............ 17,365,608                 3,109,570
         John F. Burton................ 20,136,387                   338,791
         James J. Leto................. 20,146,787                   328,391
         C. Alan Peyser................ 20,144,587                   330,591
         Robert Ripp................... 20,145,787                   329,391
</TABLE>

         In connection  with the  ratification of the selection of Ernst & Young
LLP as the independent auditors for the Company for the fiscal year ending 1997,
20,242,301  shares were voted in favor of the  ratification,  151,572 were voted
against, 81,305 abstained.

         With  respect to the  proposal to approve the  adoption of the Employee
Stock Purchase Plan, 19,429,885 shares were voted for the proposal, 607,143 were
voted against, 119,770 abstained, and 318,380 were Broker non-votes.

         As for the  proposal to ratify the adoption of  amendments  to Sections
3.02,  3.04,  and 3.05 of the Bylaws of the Company to provide for a  classified
Board of  Directors,  8,058,836  shares  were  voted  in favor of the  proposal,
1,240,517  were voted against,  79,870  abstained,  and  10,746,385  were Broker
non-votes.

Item 6.            Exhibits and Reports on Form 8-K

(a)                Exhibits

                  3.11  Amended and Restated Bylaws of the Company as of June 3,
                  1997

                  3.12  Certificate  of  Designation  of  Series  K  Convertible
                  Preferred  Stock of the Company  filed in Delaware on July 28,
                  1997.

                                      -16-
<PAGE>

                  10.22  Eight Percent (8%)  Convertible  Note  between  Network
                  Imaging Corporation and Wood Gundy in trust for RRSP 550 98866
                  19 and  Gundyco  in trust  for RRSP 550 99119 12 as of July 9,
                  1997 and attached Schedule.

                  10.23  Securities Purchase Agreement  between  Network Imaging
                  Corporation  and  Capital  Ventures  International  and Zanett
                  Lombardier, Ltd. as of July 28, 1997.

                  10.24  Registration Rights Agreement between  Network  Imaging
                  Corporation  and  Capital  Ventures  International  and Zanett
                  Lombardier, Ltd. as of July 28, 1997.

                  10.25 Warrant to purchase 20,000 shares of Common Stock issued
                  to Wood  Gundy in trust  for RRSP 550  98866 19 dated  July 9,
                  1997.

                  10.26 Warrant to purchase 16,000 shares of Common Stock issued
                  to Gundyco in trust for RRSP 550 99119 12 dated July 9, 1997.

                  10.27  Warrant  to  purchase  112,500  shares of Common  Stock
                  issued to Capital Ventures International dated July 28, 1997.

                  10.28  Warrant to purchase  135,000  shares  of  Common  Stock
                  issued to Zanett Lombardier, Ltd. dated July 28, 1997.

                  10.29  Warrant  to  purchase  162,462  shares of Common  Stock
                  issued to the  Zanett  Securities  Corporation  dated July 28,
                  1997.

                  10.30  Placement Agency  Agreement  dated July 2, 1997 between
                  Network   Imaging   Corporation   and  The  Zanett  Securities
                  Corporation

                  10.31 Security Agreement dated as of December 31, 1996 between
                  Network Imaging Corporation and Fred Kassner

                  10.32  Amendment No.  1 to Loan  Agreement dated as of June 8,
                  1997 between Network Imaging Corporation and Fred Kassner

                  10.33  Amendment No. 1 to Security Agreement  dated as of June
                  8, 1997 between Network Imaging Corporation and Fred Kassner

                  27.  Financial data schedule

(b)               Reports on Form 8-K

                  None

                                      -17-

<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 hereunto duly authorized.


                                        NETWORK IMAGING CORPORATION
                                                (Registrant)


Date:  August 14, 1997                     By /s/ James Leto
                                             --------------
                                           James J. Leto
                                           President and Chief Executive Officer


Date:  August 14, 1997                     By /s/ Jorge R. Forgues
                                              --------------------
                                           Jorge R. Forgues
                                           Senior Vice President of Finance and
                                           Administration, Chief Financial 
                                           Officer and Treasurer