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 March 31, 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 small business issuer 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 22070
                    (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 April 28, 1997 was 24,841,929


<PAGE>


                           NETWORK IMAGING CORPORATION

                                    Form 10-Q


                                Table of Contents



PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements

           Consolidated Balance Sheets at March 31, 1997
           (unaudited) and December 31, 1995                             2

           Consolidated Statements of Operations (unaudited)
           for the three months ended March 31, 1997 and 1996            3

           Consolidated Statement of Changes in Stockholders' Equity
           (unaudited) for the three months ended March 31, 1997         4

           Consolidated Statements of Cash Flows (unaudited)
           for the three months ended March 31, 1997 and 1996            5

           Notes to Consolidated Financial Statements                    6

Item 2. Management's Discussion and Analysis of Financial
           Condition and Results of Operations                           7


PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                              10

Item 6.  Exhibits and Reports on Form 8-K                               10




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



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

Current assets:
 Cash and cash equivalents                              $   5,058     $   7,601
 Accounts and notes receivable, net                        13,442        13,243
 Inventories                                                1,533         1,503
 Prepaid expenses and other                                 2,472         2,362
                                                        ---------     ---------
    Total current assets                                   22,505        24,709
Fixed assets, net                                           2,447         2,887
Long-term notes receivable, net                             1,977         1,979
Software development costs and
 purchased technology, net                                  3,656         3,813
Goodwill, net                                               2,793         3,237
Other assets                                                  143           153
                                                        ---------     ---------
    Total assets                                        $  33,521     $  36,778
                                                        =========     =========


      LIABILITIES & STOCKHOLDERS' EQUITY

Current liabilities:
 Current debt maturities and
  obligations under capital leases                      $   1,431     $   2,063
 Accounts payable                                           3,199         3,185
 Accrued compensation and related
  expenses                                                  2,138         1,891
 Deferred revenue                                           5,386         3,789
 Other accrued expenses                                     3,617         3,888
                                                        ---------     ---------
    Total current liabilities                              15,771        14,816
Long-term debt and obligations
 under capital leases                                       3,555            88
Deferred income taxes                                         290           300
                                                        ---------     ---------
    Total liabilities                                      19,616        15,204
Commitments
Redeemable Series F
 preferred stock, 1,792,186 and
 792,000 shares issued and
 outstanding                                                6,357         9,857
Stockholders' equity:
 Preferred stock, $.0001 par
  value, 20,000,000 shares
  authorized; 1,605,185 and
  1,605,675 shares issued and
  outstanding
 Common stock, $.0001 par value,
  50,000,000 shares authorized;
  24,835,263 and 22,896,612
  shares issued and outstanding                                 2             2
 Additional paid-in-capital                               123,552       124,429
 Accumulated deficit                                     (115,780)     (113,098)
 Translation adjustment                                      (226)          384
                                                        ---------     ---------
    Total stockholders' equity                              7,548        11,717
                                                        ---------     ---------
    Total liabilities and stockholders' equity          $  33,521     $  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 March 31,
                                                     1997              1996
                                                 ------------      -------------
<S>                                              <C>               <C>  
Revenue:
 Products                                        $      4,259      $      5,996
 Services                                               4,860             4,546
                                                 ------------      ------------
                                                        9,119            10,542
                                                 ------------      ------------
Costs and expenses:
 Cost of products sold                                  1,958             3,440
 Cost of services provided                              3,882             3,804
 Sales and marketing                                    3,612             3,969
 General and administrative                             1,611             2,425
 Product development                                    1,042             1,734
 Gain from extinguishment of debt                        (267)             --
 Exchange fee and gain on
  sale of asset, net                                     --                 619
 Restructuring costs                                     --                (156)
                                                                   ------------
                                                       11,838            15,835
                                                 ------------      ------------
Loss before investment and
 interest income and income taxes                      (2,719)           (5,293)
 Investment and interest income, net                       31                59
                                                 ------------      ------------
Loss before income taxes                               (2,688)           (5,234)
  Income tax (benefit) provision                           (6)              102
                                                 ------------      ------------
Net loss                                               (2,682)           (5,336)
                                                 ------------      ------------

Preferred stock preferences                              (976)           (1,020)
                                                 ------------      ------------
Net loss applicable to
 common shares                                   $     (3,658)     $     (6,356)
                                                 ============      ============

Net loss per common share                        $      (0.15)     $      (0.34)
                                                 ============      ============

Weighted average shares outstanding                24,463,511        18,911,235
                                                 ============      ============
</TABLE>














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

                                       -3-
<PAGE>
                  NETWORK IMAGING CORPORATION AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                    For the three months ended March 31, 1997
                      (In thousands, except share amounts)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                 Preferred Stock             Common Stock
                                Shares         Amt.       Shares         Amt.
                             ---------------------------------------------------
<S>                            <C>          <C>          <C>          <C>      
Balance December 31, 1996      1,605,675    $     --     22,896,612   $       2

Issuance of common stock
 upon exercise of warrants                                    9,999

Conversion of preferred
 stock                              (490)                 1,928,652

Offering costs on issuance
 of preferred stock

Issuance of warrants

Dividends on preferred
 stock

Translation adjustment

Net loss
                              ----------    ----------   ----------   ----------

Balance March 31, 1997         1,605,185          --     24,835,263   $        2
                              ==========    ==========   ==========   ==========


                                                  Additional
                                                   paid-in         Accumulated
                                                   capital           Deficit
                                                 ------------      ------------
<S>                                              <C>               <C>       
Balance December 31, 1996                           $ 124,429         ($113,098)

Issuance of common stock upon
 exercise of warrants                                      10

Conversion of preferred stock

Offering costs on issuance of
 preferred stock                                          (25)

Issuance of warrants                                      114

Dividends on preferred stock                             (976)

Translation adjustment

Net loss                                               (2,682)
                                                    ---------         ---------

Balance March 31, 1997                                123,552          (115,780)
                                                    =========         =========


                                                      Translation
                                                       Adjustment      Total
                                                     --------------------------
<S>                                                  <C>               <C>
Balance December 31, 1996                            $    384          $ 11,717

Issuance of common stock upon
 exercise of warrants                                      10

Conversion of preferred stock                               0

Offering costs on issuance of
 preferred stock                                          (25)

Issuance of warrants                                      114

Dividends on preferred stock                             (976)

Translation adjustment                                   (610)             (610)

Net loss                                               (2,682)
                                                     --------          --------

Balance March 31, 1997                                   (226)         $  7,548
                                                     ========          ========
</TABLE>




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

                                       -4-
<PAGE>
                  NETWORK IMAGING CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                    Three months Ended March 31,
                                                        1997           1996
                                                     -----------    -----------
                                                           (In thousands)
<S>                                                  <C>            <C>
Cash flows from operating activities:
  Net loss                                               $(2,682)       $(5,336)
  Adjustments to reconcile net
   loss to net cash used in
   operating activities:
    Depreciation and amortization                          1,338          1,485
    Gain on sale of asset                                   --             (111)
    Restructuring costs                                     --             (156)
    Changes in assets and liabilities:
     Accounts and notes receivable                          (797)           895
     Inventories                                             (66)          (208)
     Prepaid expenses and other                             (165)          (293)
     Accounts payable                                        309            603
     Accrued compensation and
      related expenses                                       343           (333)
     Accrued expenses, other                                (754)           (37)
     Deferred revenues                                     2,298            173
     Deferred income taxes                                    15             71
                                                         -------        -------
Net cash used in operating activities                       (161)        (3,247)
                                                         -------        -------

Cash flows from investing activities:
  Capitalized software development
   and license costs                                        (436)          (412)
  Purchases of fixed assets                                 (231)          (307)
                                                         -------        -------
Net cash used in investing activities                       (667)          (719)
                                                         -------        -------

Cash flows from financing activities:
  Proceeds from issuance of common
   and preferred stocks, net                                  99          4,654
  Cash dividends paid on Series A
   preferred stock                                          (803)          (803)
  Cash dividends paid on Series F
   preferred stock                                          (174)          --
  Payments on Mandatory Redeemable
   Preferred Stock                                        (3,500)          --
  Proceeds from borrowings and
   short-term investments                                  3,500           --
  Proceeds from sale and leaseback
   of fixed assets                                          --              196
  Proceeds from Notes Receivable
   related to business divestitures                           42           --
  Principal payments on capital
   lease obligations                                        (250)          (207)
  Principal payments on debt                                (532)          (329)
                                                         -------        -------
Net cash (used in) provided by
 financing activities                                     (1,618)         3,511
                                                         -------        -------

Effect of exchange rate changes on
 cash and cash equivalents                                   (97)           (39)
Net decrease in cash and cash
 equivalents                                              (2,543)          (494)
Cash and cash equivalents at
 beginning of year                                         7,601          9,359
                                                         -------        -------
Cash and cash equivalents at March 31,                   $ 5,058        $ 8,865
                                                         =======        =======

Supplemental Cash Flow Information:
  Interest paid                                          $    72        $   137
  Income taxes paid                                      $   112        $    14
</TABLE>




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

                                       -5-
<PAGE>



                  NETWORK IMAGING CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                             March 31, 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 three month period ended March 31,
1997 may not be  indicative  of the results  that may be  expected  for the year
ending December 31, 1997.

Net loss per common  share is  computed  using the  weighted  average  number of
common  shares  outstanding  during the year.  Common share  equivalents,  which
consist of common stock purchase  warrants,  stock options and preferred  stock,
are only included in the weighted average number of common shares outstanding if
dilutive.

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


2.  REDEEMABLE PREFERRED STOCK AND BORROWINGS

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.












                                       -6-

<PAGE>

                     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
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 - Three months ended March 31, 1997 and 1996

                   Revenues.  Total revenues were $9.1 million and $10.5 million
for the three  months  ended  March 31,  1997 and 1996,  respectively.  The $1.4
million  decrease in revenue was the result of decreases  in product  revenue of
$1.7 million,  or 29%, offset by an increase in service revenue of $314,000,  or
7%.  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 $1.2  million.  The increase in service sales of $314,000
was the result of a $372,000 increase in comparative  company revenues offset by
a decrease of $78,000 due to the disposition of STI.

                   Profit Margins. Profit margins for product sales increased 11
percentage  points in the first  quarter of 1997 over the same period in 1996 as
cost of products  decreased  from 57% to 46% 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 4  percentage  points for the three months
ended March 31, 1997 as compared to 1996 as the cost of services  decreased from
84% to 80% of sales.  The increase in service  sales margins from 16% to 20% was
due to the Company increasing emphasis on its custom development services.

                                       -7-
<PAGE>

                   Sales and marketing.  Sales and marketing  expenses were $3.6
million or 40% of revenue, for the three months ended March 31, 1997 compared to
$4.0 million,  or 38% of revenue in 1996.  The decrease of $357,000,  or 9%, was
primarily the result of the Company's dispositions of STI during 1996.

                   General and administrative. G&A expenses were $1.6 million or
18% of revenue,  for the three  months  ended  March 31,  1997  compared to $2.4
million,  or 23% of revenue in 1996.  The  decrease  of  $814,000,  or 34%,  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 March 31, 1997
were $1.5 million,  of which $0.5 million was  capitalized  and $1.0 million was
expensed.  Software  research and development  expenditures  for the 1996 period
were $2.1 million,  of which $0.4 million was  capitalized  and $1.7 million was
expensed.  The $600,000  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 it's 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 $90,000 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 from a French government agency.

                   Income taxes.  The Company's income tax benefit for the three
months  ended March 31, 1997 of $6,000  resulted  from losses  generated  by the
Company's  French  operations.  The Company had income tax expense for the three
months  ended  March 31,  1996 of  $102,000  which was  primarily  the result of
taxable income generated by the Company's  French  operations which could not be
offset by operating losses or carryforwards available in other jurisdictions.

                   Net loss.  The  Company's net loss for the three months ended
March 31, 1997 was $2.7 million as compared to $5.3  million for the  comparable
period of 1996.  The net loss  decrease of $2.6 million in the first  quarter of
1997 as compared to the same period in 1996 is due primarily to the $1.1 million
reduction in G&A expenses,  $700,000 reduction in product  development  expenses
and the exchange fee incurred in 1996.





                                       -8-
<PAGE>

                   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 $3.7 million,  or ($.15) per share,  for the three months ended March
31,  1997 as compared to $6.4  million or ($.34) 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 March 31,  1997,  the Company had $5.1  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 $6.7 million at March 31, 1997 and
$9.9 million at December 31, 1996.

                  During the first quarter 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.

                   For the three months  ended March 31, 1997,  the $2.5 million
decrease in cash and cash equivalents  resulted from the use of $161,000 in cash
to fund operating  activities,  $667,000 to fund  investing  activities and $1.6
million in cash to fund financing activities.

                   The $161,000 funding of operating  activities arose primarily
with  respect  to a net  loss in  operations.  The  $667,000  to fund  investing
activities arose with respect to capitalized  software development costs and the
purchase of fixed assets. The $1.6 million in cash used by financing  activities
arose  primarily from the $977,000  payment of Preferred Stock dividends and the
principle payments on debt and capital lease obligations.

                  The  adverse  results  of  operations  which the  Company  has
experienced  has been  declining and is expected to reverse in 1997. The Company
believes that its existing cash, together with the line of credit established in
the fourth quarter of 1996 and the anticipated  cash flows from 1997 operations,
should  provide  sufficient  resources  to fund its  activities  until the trend
completely reverses.








                                       -9-
<PAGE>



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 6.            Exhibits

(a)                Exhibits

                   None


(b)                Reports on Form 8-K

                   None
























                                      -10-
<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:  April 30, 1997                   By /s/ James Leto
                                           --------------
                                        James J. Leto
                                        President and Chief Executive Officer


Date:  April 30, 1997                   By /s/ Jorge R. Forgues
                                           --------------------
                                        Jorge R. Forgues
                                        Senior Vice President of Finance and
                                        Administration, Chief Financial Officer
                                        and Treasurer