SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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

                       For The Quarter Ended June 29, 1998


[  ]  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 0-19386

                           FISCHER IMAGING CORPORATION
             (Exact name of Registrant as specified in its charter)

           DELAWARE                                  36-2756787
  (State of incorporation)                (I.R.S. Employer Identification No.)

      12300 North Grant Street
         Denver, Colorado                               80241
(Address of principal executive offices)              (Zip Code)

       Registrant's telephone number, including area code: (303) 452-6800


Indicate by check mark whether the Registrant (i) 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  (ii)  has been  subject  to such  filing
requirements for the past 90 days.  Yes X   No
                                       ---    ---

                                                Shares Outstanding as of
        Title of Class                                 June 29, 1998
     --------------------                       ------------------------

Common Stock,  $0.01 par value                           6,980,150


<PAGE>


                           FISCHER IMAGING CORPORATION

                                TABLE OF CONTENTS


PART I.     FINANCIAL INFORMATION                                       PAGE



      Item 1.     Consolidated Financial Statements

                  Consolidated Balance Sheets -
                  June 29, 1998 and December 31, 1997                     3

                  Consolidated Statements of Operations -
                  Three and six months ended
                  June 29, 1998 and June 30, 1997                         4

                  Consolidated Statements of Cash Flows -
                  Three and six months ended
                  June 29, 1998 and  June 30, 1997                        5

                  Notes to Consolidated Financial Statements              6


      Item 2.     Management's Discussion and Analysis of Financial
                  Condition and Results of Operations                     9


PART II.    OTHER INFORMATION

      Item 1.     Legal Proceedings                                       15

      Item 4.     Submission of Matters to a Vote of Security Holders     15

      Item 6.     Exhibits and Reports on Form 8-K                        15


<PAGE>


                            FISCHER IMAGING CORPORATION
                            CONSOLIDATED BALANCE SHEETS
                      (Amounts in thousands except share data)
<TABLE>
<CAPTION>
                                                                 June 29,    December 31,
                                                                   1998        1997
                                                                ------------------------
                            ASSETS
                                                                (Unaudited)
CURRENT ASSETS
<S>                                                              <C>          <C>     
   Cash and cash equivalents                                     $  1,101     $  3,439
   Trade accounts receivable, net of allowance for doubtful
     accounts of approximately $674 and $778 at June 29, 1998
     and December 31, 1997, respectively                           14,048       14,132
   Inventories                                                     19,924       17,373
   Deferred income taxes                                            1,334        1,334
   Prepaid expenses and other current assets                        1,388        1,169
                                                                  -------      -------
         Total current assets                                      37,795       37,447
                                                                  -------      -------

PROPERTY AND EQUIPMENT (at cost)
   Manufacturing equipment                                          9,813        9,521
   Office equipment and leasehold improvements                      5,483        5,563
                                                                  -------      -------
                                                                   15,296       15,084
   Less-Accumulated depreciation and amortization                   9,499        9,417
                                                                  -------      -------
         Property and equipment, net                                5,797        5,667
                                                                  -------      -------
INTANGIBLE ASSETS, net                                              3,271        3,615
DEFERRED INCOME TAXES                                                 668          668
DEFERRED COSTS AND OTHER ASSETS                                     1,618        1,747
                                                                  -------      -------
         TOTAL ASSETS                                            $ 49,149     $ 49,144
                                                                  =======      =======

                    LIABILITIES AND STOCKHOLDERS' INVESTMENT
CURRENT LIABILITIES
   Notes payable and current maturities of long-term debt        $    287     $    224
     Trade accounts payable                                         5,419        4,876
   Accrued salaries and wages                                       1,738        2,027
   Customer deposits                                                2,682        1,136
   Accrued warranty and installation costs                          1,222        1,090
   Accrued restructuring costs                                        995        1,180
   Deferred service revenue                                           654          771
   Other current liabilities                                          868          964
                                                                  -------      -------
         Total current liabilities                                 13,865       12,268

LONG-TERM DEBT                                                        735          309
ACCRUED RESTRUCTURING COSTS, LONG-TERM                                745          900
OTHER NONCURRENT LIABILITIES                                          475          482
                                                                  -------      -------
         TOTAL LIABILITIES                                         15,820       13,959
                                                                  -------      -------
STOCKHOLDERS' INVESTMENT
   Common Stock, $.01 par value, 25,000,000 shares
     authorized, 6,980,150 and 6,948,648 shares issued
     and outstanding at June 29, 1998 and
     December 31, 1997, respectively                                   70           69
   Preferred Stock, 5,000,000 shares authorized:
     Series C Junior Participating Preferred Stock,
       $.01 par value, 500,000 shares authorized, 
       no shares issued and outstanding                                 -            -
     Series D Convertible Preferred Stock, $.01 par value,
       1,333,333 shares authorized, issued and outstanding
       at June 29, 1998 and December 31, 1997; liquidation 
       preference of $10,000,000                                       13           13
   Additional paid-in capital                                      49,366       49,235
   Accumulated deficit                                            (16,759)     (14,656)
   Accumulated other comprehensive income (foreign
     currency translation adjustments)                                639          524
                                                                  -------      -------
         TOTAL STOCKHOLDERS' INVESTMENT                            33,329       35,185
                                                                  -------      -------
         TOTAL LIABILITIES AND STOCKHOLDERS' INVESTMENT          $ 49,149     $ 49,144
                                                                  =======      =======
</TABLE>
     The accompanying notes are an integral part of these financial statements.
                                         3


<PAGE>


                             FISCHER IMAGING CORPORATION
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                     (Amounts in thousands except per share data)
                                     (Unaudited)


                                Three Months Ended           Six Months Ended
                               ---------------------     ----------------------
                                June 29,    June 30,       June 29,    June 30,
                                  1998        1997           1998        1997
                                --------    --------       --------    --------

REVENUES                        $15,250     $15,151        $28,917    $27,453

COST OF SALES                     9,304       9,808         17,712     18,360
                                 ------      ------         ------     ------
     Gross profit                 5,946       5,343         11,205      9,093

OPERATING EXPENSES
  Research and development        1,529       1,554          2,921      3,066
  Selling, marketing and          3,968       4,040          7,499      8,716
   service
  General and administrative      1,266       1,081          2,624      2,242
                                 ------      ------         ------     ------
       Total operating expenses   6,763       6,675         13,044     14,024
                                 ------      ------         ------     ------

LOSS FROM OPERATIONS               (817)     (1,332)        (1,839)    (4,931)

     Interest expense               (59)        (12)          (113)       (49)
     Interest income                 16         103             46        128
     Other (expense) income, net   (124)       (171)          (197)      (439)
                                 ------      ------         ------     ------

LOSS BEFORE INCOME TAXES           (984)     (1,412)        (2,103)    (5,291)
     Benefit for income taxes       --          --             --         -- 
                                 ------      ------         ------     ------
NET LOSS                        $  (984)    $(1,412)       $(2,103)   $(5,291)
                                 ======      ======         ======     ======

NET LOSS PER SHARE
      Basic                     $ (0.14)    $ (0.20)       $ (0.30)   $ (0.76)
                                 ======      ======         ======     ======
      Diluted                   $ (0.14)    $ (0.20)       $ (0.30)   $ (0.76)
                                 ======      ======         ======     ======

SHARES USED TO CALCULATE
LOSS PER SHARE
      Basic
                                  6,980       6,949          6,980      6,949
                                 ======      ======         ======     ======
      Diluted                     6,980       6,949          6,980      6,949
                                 ======      ======         ======     ======


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

                                          4


<PAGE>


                             FISCHER IMAGING CORPORATION
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (Amounts in thousands)
                                     (Unaudited)
                                                          Six Months Ended
                                                       ----------------------
                                                        June 29,     June 30,
                                                          1998         1997
                                                       ---------     --------
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                             $ (2,103)    $ (5,291)
                                                        -------      -------
  Adjustments to reconcile net loss to net cash
    (used in) provided by operating activities-
      Depreciation                                        1,130          904
      Amortization of intangible assets                     344          359
      Provision for doubtful accounts                      (112)          31
      Provision for excess and obsolete inventories         428          470
      Sales and retirements of assets                       103           49
      Foreign exchange losses                                43          385
      Restructuring costs                                  (340)          --
      Other changes in current assets and liabilities-
        Decrease in trade accounts receivable               196        4,576
        (Increase) Decrease in inventories               (3,302)       3,765
        Increase in prepaid expenses and other current     (219)         (77)
          assets
        Decrease in deferred costs and other assets         129          374
        Increase (Decrease) in trade accounts payable       543       (1,476)
        Decrease in accrued salaries and wages             (289)        (322)
        Increase in customer deposits                     1,546          251
        Increase (Decrease) in accrued warranty and         132         (211)
          installation costs
        Decrease in deferred service revenue               (117)          (2)
        Decrease in other current liabilities               (96)        (597)
      Other                                                  (7)           1
                                                        -------      -------
          Total adjustments                                 112        8,480
          Net cash (used in) provided by operating      -------      -------
            activities                                   (1,991)       3,189
                                                        -------      -------
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures                                     (410)      (1,201)
                                                        -------      -------
          Net cash used in investing activities            (410)      (1,201)
                                                        -------      -------

CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from sales of common stock, net                  132          142
  Repayments of long-term debt                             (141)        (219)
                                                        -------      -------
          Net cash used in financing activities              (9)         (77)
                                                        -------      -------
EFFECT OF EXCHANGE RATE CHANGES ON CASH                      72          (78)
                                                        -------      -------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS     (2,338)       1,833
CASH AND CASH EQUIVALENTS, beginning of period            3,439        3,289
                                                        -------      -------
CASH AND CASH EQUIVALENTS, end of period               $  1,101     $  5,122
                                                        =======      =======



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

                                          5

<PAGE>


                             FISCHER IMAGING CORPORATION

                      NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                      (Unaudited)
1. GENERAL

In the opinion of management,  the accompanying  unaudited  consolidated balance
sheets and  statements  of operations  and cash flows  contain all  adjustments,
consisting  only of normal  recurring  items,  necessary  to present  fairly the
financial  position of Fischer Imaging  Corporation  (the "Company") at June 29,
1998, its results of operations for the three and six months ended June 29, 1998
and June 30, 1997 and cash flows for the six months ended June 29, 1998 and June
30, 1997.

The  unaudited  consolidated  financial  statements  presented  herein have been
prepared in accordance with the instructions to Form 10-Q and do not include all
the information and note disclosures  required by generally accepted  accounting
principles.  The financial  statements  should be read in  conjunction  with the
audited financial statements and notes thereto contained in the Company's latest
annual report on Form 10-K for the year ended December 31, 1997.

The Company  typically  closes its first three fiscal  quarters as of the Sunday
closest  to the end of March,  June and  September.  In 1998 and  1997,  to more
evenly distribute the days between quarters, the first three fiscal quarters are
being closed as of the Monday closest to quarter-end.


2. INVENTORIES

Inventories include costs of materials, direct labor and manufacturing overhead.
Inventories  are  priced  at the lower of cost  (using  primarily  the  last-in,
first-out  ("LIFO")  method of  valuation) or market.  Writedowns  for excess or
obsolete  inventories  are charged to expense in the period in which  conditions
giving rise to the writedowns are first recognized.

Inventories consisted of the following components (in thousands):
                                             June 29,    December 31,
                                               1998          1997
                                            ----------   ------------
     FIFO cost-
       Raw materials                          $13,738      $11,960
       Work in process and finished goods      13,060       11,705
     LIFO valuation adjustment                   (586)        (586)
                                               ------       ------
       Total before valuation reserves         26,212       23,079
     Less valuation reserves                   (6,288)      (5,706)
                                               ------       ------
     Inventories, net                         $19,924      $17,373
                                               ======       ======

3.  OTHER CURRENT LIABILITIES

Other current liabilities consisted of the following (in thousands):
                                             June 29,    December 31,
                                               1998          1997
                                            ----------   ------------
     Accrued sales, property, and
       other state and local taxes              $ 459        $ 688
     Other                                        409          276
                                                 ----         ----
     Total other current liabilities            $ 868        $ 964
                                                 ====         ====


                                          6

<PAGE>


4. NOTES PAYABLE AND LONG-TERM DEBT

Notes payable and long-term debt consisted of the following (in thousands):

                                             June 29,    December 31,
                                               1998          1997
                                            ----------   ------------

     Capitalized lease obligations             $  995       $  505
     Other                                         27           28
                                                -----        -----
                                                1,022          533
     Less--Current maturities                    (287)        (224)
                                                -----        -----
     Long-term debt                            $  735       $  309
                                                =====        =====

See "Management's Discussion & Analysis - Liquidity and Capital Resources" for a
discussion of the Company's line of credit.


5.  NET (LOSS) EARNINGS PER SHARE

The Company  presents  basic and diluted  earnings per share in accordance  with
Statement of Financial  Accounting Standards No. 128 "Earnings per Share" ("SFAS
128"),  which  was  required  to be  adopted  on  December  15,  1997.  SFAS 128
establishes  standards for computing and presenting  basic and diluted  earnings
per share. Under this statement, basic earnings or loss per share is computed by
dividing the net earnings or loss by the  weighted  average  number of shares of
common stock  outstanding.  Diluted  earnings or loss per share is determined by
dividing the net earnings or loss by the sum of (1) the weighted  average number
of common shares outstanding, (2) if not anti-dilutive,  the number of shares of
convertible  preferred  stock  as if  converted  upon  issuance,  and (3) if not
anti-dilutive,  the effect of outstanding stock options determined utilizing the
treasury  stock  method.  For the three and six month  periods  included  in the
accompanying   Consolidated  Statements  of  Operations,   the  effects  of  the
convertible preferred stock and stock options were excluded from the calculation
of diluted earnings per share since the result would have been anti-dilutive.


6.  RESTRUCTURING COSTS

During the third  quarter of 1997,  the  Company  decided to close its  Addison,
Illinois  manufacturing  facility  and,  accordingly,  recorded  a $2.9  million
restructuring  provision for the anticipated  shortfall  between  required lease
payments and estimated  sublease payments during the facility's  remaining lease
term (which runs through June 2002), estimated facility closing costs, severance
and certain other non-recurring costs associated with this decision. The Company
expects that the transfer of production  from this facility will be completed in
the near  future.  During the three and six  months  ended  June 29,  1998,  the
Company spent approximately  $19,000 and $340,000,  respectively,  for severance
and facility closing costs, net of proceeds from asset dispositions.


                                          7

<PAGE>


7.  REPORTING COMPREHENSIVE INCOME

In 1998, the Company adopted Financial  Accounting  Standards No. 130 "Reporting
Comprehensive  Income"  ("SFAS 130").  SFAS 130,  effective for years  beginning
after December 15, 1997,  establishes standards for the reporting and display of
comprehensive income and its components.  Comprehensive income is defined as the
change  in  equity  of  a  business   enterprise  except  those  resulting  from
investments by or  distributions to its owners.  For the Company,  comprehensive
income  includes  only net  earnings  or loss and foreign  currency  translation
adjustments, as follows:

                                    Three Months Ended Six Months Ended
                                  -------------------   --------------------
                                  June 29,   June 30,   June 29,    June 30,
                                    1998       1997       1998        1997
                                  --------   --------   --------    --------

     Net loss                     $(984)     $(1,412)   $(2,103)    $(5,291)
     Foreign currency 
       translation adjustments       43           87        115         307
                                   ----       ------     ------      ------
     Comprehensive loss           $(941)     $(1,325)   $(1,988)    $(4,984)
                                   ====       ======     ======      ======



8.  CHANGES TO DIRECTOR STOCK OPTION PLAN

Under the Company's Nonemployee Director Plan (the "Director Plan"),  adopted in
1993,  non-qualified options to acquire shares of common stock may be granted to
nonemployee directors,  at a price no less than fair market value on the date of
grant. At the Company's June 12, 1998 Annual Meeting,  stockholders  approved an
amendment and restatement of the Director Plan to, among other changes, increase
from  200,000 to 300,000  the number of shares of common  stock  authorized  for
issuance  under the Director  Plan,  increase  from 2,000 to 5,000 the number of
shares granted annually to nonemployee  directors,  decrease from 2,000 to 1,000
the  number  of  options  granted   annually  to  directors  who  serve  on  the
Compensation Committee,  extend the term of the options, and increase the period
for exercising options after leaving the Board.

At the same time,  to  acknowledge  the  services  provided  by its  nonemployee
directors  and to  increase  the  Company's  ability to retain  such  Directors,
stockholders  also  approved  the  repricing  of  certain   outstanding  options
previously granted to nonemployee directors,  in view of the significant decline
in the market value of the Company's common stock. The repricing resulted in the
lowering of the exercise price of 68,000 options with existing  exercise  prices
ranging from $4.6875 to $13.380 to an exercise price of $4.25.  The repricing of
outstanding  options did not have a material impact on the operating  results of
the Company.


                                          8

<PAGE>


                       MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following  discussion of the results of operations  and financial  condition
should  be  read  in  conjunction  with  the  Company's  Consolidated  Financial
Statements  and Notes thereto  appearing in the Company's  Annual Report on Form
10-K for the year ended  December  31, 1997 (the "Form  10-K").  This Form 10-Q,
including  the   information   incorporated   by  reference   herein,   contains
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.  For  this  purpose,  statements  contained  herein  that  are  not
statements of historical  fact may be deemed to be  forward-looking  statements.
Without limiting the foregoing, the words "believes", "expects",  "anticipates",
"plans", "estimates", and similar words and expressions are intended to identify
such statements.  These forward-looking statements include statements concerning
the growth of the Company's markets, future operating results including revenues
and expenses, the Company's ability to satisfy its short and long-term liquidity
needs, the success and timing of its cost-cutting measures including the closure
of the  Company's  Addison,  Illinois  manufacturing  facility,  sales under the
Company's  strategic   alliances,   OEM  agreements  and  otherwise,   marketing
arrangements for its Mammotest  products and other products,  and other matters.
These  forward-looking  statements involve risks and  uncertainties.  The actual
results that the Company achieves may differ  materially from those discussed in
such forward-looking  statements due to the risks and uncertainties described in
this Form 10-Q, in the Business  section of Form 10-K under the headings  "Risks
Associated  with  OEM  Agreements",   "International   Operations,"   "Strategic
Alliances",  "Risks of  Technological  Change and New  Products,"  "Risks of New
Product Development and Market Acceptance," "Manufacturing and Operating Risks,"
"Competition," "Government Regulation," "Government Reimbursement," "Patents and
Intellectual   Property,"  "Risk  of  Dependence  on  Key  Personnel,"  "Product
Liability,   Market  Withdrawal,   and  Product  Recalls",  in  the  Market  for
Registrant's  Common Equity and Related Stockholder Matters section of Form 10-K
under the headings "Risk of Price Volatility of Common Stock," "Risks Associated
with  Shares  Eligible  for Future  Sale,"  "Risks  Associated  with  Control by
Management and Certain  Stockholders," and "Certain  Anti-Takeover  Effects," in
the Management's  Discussion and Analysis of Financial  Condition and Results of
Operations  ("MD&A")  section of Form 10-K  under the  "Overview"  heading,  and
elsewhere in the Business and MD&A sections and other sections of Form 10-K.

OVERVIEW

The Company  designs,  manufactures  and markets  specialty and general  purpose
medical  imaging  systems  for the  diagnosis  and  treatment  of  disease.  The
Company's newest product lines are directed towards medical specialties in which
image-guided,   minimally-invasive   therapies  are   replacing   open  surgical
procedures.  These products are used primarily in the diagnosis and treatment of
breast cancer,  heart disease and vascular disease. The Company also designs and
manufactures  specialty  x-ray imaging  components  and  subsystems  for several
leading medical products companies as an original equipment manufacturer ("OEM")
and  sells  general  radiology  systems  for  use  in  hospitals,   clinics  and
physicians' offices.


                                          9

<PAGE>


Revenues during the second quarter of 1998 were  $15,250,000,  about the same as
the second  quarter of 1997, but a 12% increase as compared to the first quarter
of 1998. Gross margin as a percent of revenues  increased from approximately 35%
in the second  quarter of 1997 to 39% in the second  quarter of 1998.  Operating
expenses  of  $6,763,000,  in the  second  quarter  were  about  the same as the
$6,675,000  for the  second  quarter  of  1997.  Excluding  legal  costs,  which
increased primarily due to the patent infringement  lawsuit against Trex Medical
Corporation,  operating  expenses were reduced in the second  quarter of 1998 as
compared to the second  quarter of 1997.  The  resulting net loss for the second
quarter of 1998 was $984,000,  or $.14 per share, as compared to the 1997 second
quarter net loss of $1,412,000, or $.20 per share.

The Company  experienced losses in late 1996, during the year ended December 31,
1997, and  during  the  first  half of 1998. Throughout this period, sales under
the Company's OEM arrangements  were  significantly  lower than comparable prior
periods,  primarily due to decreased  shipments of Tilt-C  systems to GE Medical
Systems.  During  the fourth  quarter  of 1996 and the first  half of 1997,  the
Company also experienced  decreases in the sales of its Mammotest systems versus
comparable  prior periods.  However,  during the last six months of 1997 and the
first six months of 1998 sales of Mammotest  systems increased versus comparable
prior  periods.   The  Company  continues  to  face  aggressive  and  successful
competition  within the surgical  stereotactic  core needle breast biopsy market
from U. S. Surgical  Corporation  but believes that its marketing  alliance with
Johnson and Johnson's Ethicon EndoSurgery, Inc. ("Ethicon EndoSurgery"), entered
into in October  1997,  is beginning  to  favorably  impact its revenues in this
market.

In November 1997, the Company entered into an alliance with Sterling  Diagnostic
Imaging,  Inc.  ("Sterling"),  under which the  Company  will  develop  specific
digital radiographic systems,  utilizing Sterling's  DirectRay(TM) digital image
detector  technology.  The Company believes that production shipments of digital
radiography  systems will begin during the fourth  quarter of 1998,  although no
assurance can be given to that effect.

The Company  believes  that,  in  addition to measures to increase  sales of its
products,  improving  factory  utilization  and  limiting  growth  of  operating
expenses will be key elements in its efforts to return to  acceptable  levels of
profitability.  Accordingly,  during  the third  quarter  of 1997,  the  Company
announced its intention to close its Addison,  Illinois  manufacturing  facility
and  outsource  or transfer  Addison  production.  The  Company  recorded a $2.9
million  restructuring  provision  in the  third  quarter,  to  provide  for the
anticipated  shortfall  between required lease and estimated  sublease  payments
during the facility's  remaining lease term,  estimated  facility closing costs,
severance and certain other  non-recurring  costs associated with this decision.
The Company  believes that transfer of production  from the Addison  facility is
nearing completion.


                                          10

<PAGE>


The Company cannot predict when it will return to profitability, although it has
taken  significant  steps to improve  sales and reduce  manufacturing  and other
costs.  Improvement in the Company's  results of operations  will depend on many
factors including,  among other things,  demand for the Company's products,  the
ability  of  the  Company  to  maintain  or  increase  gross  margins,   control
manufacturing and other costs, effectively implement distribution agreements for
its products,  implement its marketing and sales strategies in the United States
and  internationally,  and the successful  development  and  introduction of new
products.

The Company has experienced and is likely to continue to experience  significant
quarterly and annual fluctuations in revenues, operating results and net income,
depending on such factors as the timing of large system  shipments to customers,
the timing of orders under OEM contracts and related  manufacturing and shipment
scheduling,  new product introductions and new marketing programs by the Company
and its competitors, the effect of economic conditions on the Company's markets,
the  effects  of  managed  healthcare  on  customer  capital   expenditures  and
reimbursement,  increases in marketing and research  costs in relation to sales,
regulatory clearance of new products,  seasonal purchasing patterns of hospitals
and the timing of purchasing decisions by customers.  Additionally,  because the
timing of the  occurrence of such factors is difficult to anticipate and many of
the  Company's  costs are fixed,  the  Company  may not be able to  sufficiently
reduce its costs in periods when its revenues are less than  anticipated and may
suffer unexpected losses or lower income in these periods.

The Company is attempting to expand  international  sales and marketing efforts,
which can be expected to result in losses from  international  operations  until
international  revenues reach  sufficient  levels.  Additionally,  the Company's
exposure to foreign  currency  and other  risks of  international  business  may
increase as its  international  business grows. The Company attempts to minimize
these risks through measures  including,  but not limited to, requiring payments
in U.S. dollars and using letters of credit. There can be no assurance, however,
that the Company will be  successful  in its  international  sales efforts or in
minimizing any  associated  risks.  Revenues from  customers  outside the United
States declined  significantly  from 1996 to 1997 and in the first half of 1998,
versus the first half of 1997.

RESULTS OF OPERATIONS

The  Company's  revenues  and net  loss  for the  second  quarter  of 1998  were
$15,250,000 and $984,000,  respectively,  as compared to revenues of $15,151,000
and a net loss of  $1,412,000  for the second  quarter of 1997.  Revenues in the
second  quarter of 1998 were  favorably  impacted by  significant  increases  in
shipments of mammography and  electrophysiology  products.  These increases were
largely  offset by declines in OEM and general  radiography  product  shipments.
Gross margin as a percent of revenues increased from 35.3% in the second quarter
of 1997 to 39.0%  in the  second  quarter  of 1998,  primarily  due to  improved
absorption of  manufacturing  costs  associated with higher  production  levels,
manufacturing  cost  reductions  associated  with the  closure of the  Company's
Addison manufacturing  facility,  and a shift in mix to relatively higher margin
products.  Excluding  legal costs  primarily  associated with the patent lawsuit
against Trex Medical  Corporation,  operating  expenses were lower in the second
quarter of 1998 versus the second quarter of 1997. As a result of these factors,
the net loss in the second  quarter of 1998 was  reduced to  $984,000,  from the
second quarter 1997 net loss of $1,412,000, an improvement of $428,000.


                                          11

<PAGE>


The following table sets forth the percentage of revenues represented by certain
data  included  in the  Company's  statements  of  operations  for  the  periods
indicated:

                                  Three Months Ended         Six Months Ended
                               -------------------------   ---------------------
                                 June 29,     June 30,      June 29,    June 30,
                                  1998          1997         1998        1997
                               ------------  -----------   ----------  ---------

Revenues                           100.0 %      100.0 %     100.0 %     100.0 %

Gross profit                        39.0         35.3        38.7        33.1

Research and development            10.0         10.3        10.1        11.2

Selling, marketing and service      26.0         26.7        25.9        31.7

General and administrative           8.3          7.1         9.1         8.2

Loss from Operations                (5.4)        (8.8)       (6.4)      (18.0)

Benefit for income taxes             ---          ---         ---         ---

Net loss                            (6.5)        (9.3)       (7.3)      (19.3)



Revenues. Second quarter 1998 revenues were $15,250,000, up slightly from second
quarter 1997  revenues of  $15,151,000.  For the six months ended June 29, 1998,
revenues were  $28,917,000,  a 5% increase over revenues of $27,453,000  for the
comparable  six months of 1997.  For both the three and six month  periods,  the
increase   reflects   significantly   higher   shipments  of   mammography   and
electrophysiology  products,  partly  offset  by  declines  in OEM  and  general
radiography  product  shipments.  The increase was primarily in the U. S. direct
and dealer  channels of  distribution,  partly offset by declines in the OEM and
international dealer and direct channels.

Gross  Profit.  For the second  quarter of 1998,  gross  profit  expressed  as a
percentage of revenues was 39.0%, as compared to 35.3% for the second quarter of
1997. For the six months ended June 29, 1998 and June 30, 1997,  gross profit as
a  percentage  of revenues  was 38.7% and 33.1%,  respectively.  The increase in
gross profit as a percentage of revenues was due to  reductions  in  unfavorable
manufacturing  variances,  as a result of improved  absorption of  manufacturing
costs caused by higher  production  levels and by  reductions  in  manufacturing
costs  associated  with  the  closing  of the  Company's  Addison  manufacturing
facility. In addition,  the Company experienced a favorable shift in product mix
from OEM and general  radiography  products to proprietary  products and service
revenues, which generally have higher margins.

Research and Development  Expenses.  Research and  development  expenses for the
second quarter of 1998 and 1997 were $1,529,000 and $1,554,000, respectively, or
10.0% and 10.3%,  respectively,  of revenues.  For the six months ended June 29,
1998 and June 30, 1997,  research and  development  expenses were $2,921,000 and
$3,066,000  respectively,  or 10.1% and 11.2%,  respectively,  of revenues.  The
lower level of research  and  development  expenses  over last year is primarily
attributable  to  efficiencies  achieved  due to  the  transfer  of  engineering
activities  from the  Company's  Addison,  Illinois  location,  partly offset by
increased product  development  expenses relating to the Company's alliance with
Sterling Diagnostic Imaging. For both the three and six month periods ended June
29,  1998 and June 30,  1997,  the  decrease in research  and  development  as a
percentage of revenues is essentially  due to higher  revenues in the respective
three and six months periods of 1998 as compared to the same periods in 1997.

                                          12

<PAGE>


Selling, Marketing and Service Expenses. Selling, marketing and service expenses
for the  second  quarter  of 1998  and  1997  were  $3,968,000  and  $4,040,000,
respectively,  or 26.0% and 26.7%, respectively, of revenues. For the six months
ended June 29, 1998, selling, marketing and service expenses were $7,499,000, or
25.9% of revenues,  as compared to  $8,716,000,  or 31.7% of  revenues,  for the
comparable  six months of 1997.  The decrease in selling,  marketing and service
expense for the three and six month  periods  ended June 30, 1998 as compared to
the same periods of 1997 and the  decrease as a percentage  of revenues for both
the three and six month periods is primarily the result of a more cost-effective
sales  compensation  program,  a  reduced  scope of  marketing  activities,  and
efficiencies gained by the closure of the Addison manufacturing facility and the
resultant consolidation of service and technical support functions.

General and Administrative Expenses. General and administrative expenses for the
second quarter of 1998 and 1997 were $1,266,000 and $1,081,000, respectively, or
8.3% and 7.1%, respectively, of revenues. For the six months ended June 29, 1998
and June 30, 1997,  general and  administrative  expenses  were  $2,624,000  and
$2,242,000,  respectively, or 9.1% and 8.2%, respectively, of revenues. For both
the three and six month  periods,  the  increase in general  and  administrative
expenses and the increase as a percentage of revenues was due to increased legal
expenses associated with the Company's patent infringement lawsuits against Trex
Medical Corporation, which were partially offset by cost savings associated with
the Company's closure of its Addison, Illinois manufacturing facility.

Interest Expense / Interest Income. Interest expense for the three month periods
ended June 29, 1998 and June 30, 1997 was $59,000 and $12,000, respectively, and
for the six month  periods then ended,  was $113,000 and $49,000,  respectively.
Interest  income  for the  second  quarter  of 1998  and 1997  was  $16,000  and
$103,000,  respectively.  For the six month periods ended June 29, 1998 and June
30, 1997, interest income was $46,000 and $128,000,  respectively.  The increase
in interest  expense and the reduction in interest income for both the three and
six month  periods  ended June 29,  1998 as compared to the three and six months
ended June 30, 1997 are primarily due to increases in temporary borrowings under
the Company's  working capital line of credit and reductions in cash balances in
the 1998 three and six month periods,  due primarily to an increased  investment
in inventories.

Net Loss. The Company's net loss for the second quarter of 1998 was $984,000, an
improvement  of  $428,000 as  compared  to the second  quarter  1997 net loss of
$1,412,000. The net loss for the six months ended June 29, 1998 was $2,103,000 a
$3,188,000  improvement  over the $5,291,000  loss for the six months ended June
39, 1997. The improvement was due to the favorable  effects of higher  revenues,
the  improvement  in gross  margin as a percentage  of revenue  caused by higher
production levels and the resultant improved absorption of manufacturing  costs,
reductions in  manufacturing  costs  associated  with the closing of the Addison
manufacturing facility, and by reductions in operating expenses.


                                          13

<PAGE>


INCOME TAXES

The Company's  estimated effective tax rate for the year ended December 31, 1998
is currently  0%.  Accordingly,  no income tax benefit has been provided for the
three or six month periods ended June 29, 1998.  This rate was determined  based
upon the  anticipated  1998  results of  operations  includable  in the domestic
consolidated  tax return and upon  projected net temporary  differences  between
operating results reflected in the financial statements and those required to be
reflected in the domestic  consolidated  tax return for 1998. As of December 31,
1997, the Company had approximately $2,002,000 of net deferred tax assets, which
represents  timing  differences  that are more  likely  than not to be  realized
against  taxable  income of future  years.  The amount of net deferred tax asset
considered  realizable,  however, could be reduced in the near term if estimates
of future taxable income do not materialize.  No income tax provisions have been
recognized  for foreign tax  jurisdictions  and no income tax benefits have been
recognized  for  subsidiary  losses  outside the  domestic  consolidated  return
because they are not expected to reverse in the foreseeable future.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities for the six months ended June 29, 1998 was
$2.0 million  compared to $3.2 million  provided by operations in the comparable
period of 1997.  The use of cash flow in operations  was primarily due to a $1.8
million increase in working capital, excluding noncash provisions.  This working
capital  increase  was the  result of a $3.3  million  increased  investment  in
inventories and $0.3 million of  restructuring-related  expenditures (see Note 8
to  Notes  to  Consolidated  Financial  Statements),  offset  by a $1.5  million
increase in customer  deposits and a $0.5 million increase in accounts  payable.
Approximately $0.2 million of cash was used to fund the net loss before non-cash
depreciation,  amortization,  obsolescence,  and  other  provisions  for the six
months ended June 29, 1998.

Net cash used in investing  activities was $0.4 million for the six months ended
June 29,  1998,  compared  to $1.2  million  for the same  period  in 1997.  The
decrease was  principally  related to increased  use of non-cash  capital  lease
financing.

Net cash used in financing activities for the six months ended June 29, 1998 was
$0.0 million,  or essentially  unchanged from the $0.1 million used in financing
activities for the same period in 1997.

As of June 29, 1998,  the Company had $1.1 million in cash and cash  equivalents
and working capital of $23.9 million.  The Company has renewed,  on a short-term
basis,  its bank  revolving  line of credit  arrangement,  which had  expired in
February 1997. Under the terms of this renewal,  the Company has a $15.0 million
of  credit.  Due to the  effects  of  further  restrictions  based  on  eligible
receivables and inventory, $7.1 million of the line was available as of June 29,
1998, all of which was unused.  The  agreement,  which is renewable on a monthly
basis, is secured by the Company's  accounts  receivable,  inventory,  and fixed
assets.  Renewals  are  subject  to a  renewal  fee of  $5,000  per  month,  and
borrowings  under the agreement  would have been subject to interest of 9.5% per
annum (one  percent over the bank's prime rate of interest) as of June 29, 1998.
The Company expects its long-term  liquidity  needs to be satisfied  principally
from cash  flows  generated  from  operations.  The  Company  believes  that its
short-term   liquidity  needs  can  be  satisfied  through  cash  provided  from
operations and current cash and cash  equivalent  balances,  through  borrowings
under  its  revolving  line of  credit  arrangement,  or  through  other  credit
arrangements.

                                          14

<PAGE>


                              PART II.  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS:

The  information  contained  in Part  II,  Item 1,  "Legal  Proceedings"  of the
Company's Form 10-Q for the quarter ended March 30, 1998 is herein  incorporated
by reference.

In April 1992 and April 1998,  the Company filed  separate  patent  infringement
lawsuits  against  Trex Medical  Corporation  alleging  infringement  of certain
features of the Company's  Mammotest  stereotactic breast biopsy system. In July
1998, the United States District Court for the District of Colorado  granted the
Company's Motion to Consolidate the two patent infringement lawsuits

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

At the Annual  Meeting of  Stockholders,  held on June 12, 1998,  the  following
matters were submitted to a vote of stockholders and approved:

     (i) Election of two Class I directors to the Board of Directors:
                 Name              For            Against
                 ----              ---            -------
           R. John Fletcher     6,172,378         135,264
           Kathryn A. Paul      6,171,339         136,303

    (ii)  Approval  of  Amendments  to the  Employee  Stock  Purchase  Plan,  as
          described  in the  Company's  definitive  Proxy  Statement  filed with
          the Securities and Exchange Commission on April 29, 1998:
                 Name              For            Against          Not Voted
                 ----              ---            -------          ---------
              5,933,938          197,877          43,533            132,294

    (iii) Approval of the Amendment and Restatement of the Nonemployee  Director
          Stock Option Plan and the Repricing of  Outstanding  Nonemployee
          Director Options,  as described in the Company's  definitive  Proxy
          Statement filed with the Securities and Exchange Commission on
          April 29, 1998:
                 Name              For            Against          Not Voted
                 ----              ---            -------          ---------
              5,077,736         1,048,817         48,785            132,294

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:

(a)  EXHIBITS

          Exhibits filed with this report:
`
          Exhibit No.                Description
          -----------                -----------

                27                  Financial Data Schedule

(b)  REPORTS ON FORM 8-K

          None

                                          15


<PAGE>


                                      SIGNATURES

Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
Registrant  has duly caused this  Quarterly  Report on Form 10-Q for the quarter
ended June 29, 1998 to be signed on its behalf by the undersigned thereunto duly
authorized.




                                  FISCHER IMAGING CORPORATION




                                  /s/ WILLIAM C. FEE
                                  -----------------------------------
                                  William C. Fee
                                  Vice President/
                                  Chief Accounting Officer
                                  (Principal  Accounting Officer)



July 30, 1998


                                                 16


<PAGE>


                                  EXHIBIT INDEX


EXHIBIT NO.                          DESCRIPTION
   27                                Financial Data Schedule