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

                          FORM 10-Q

(Mark One)

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

          For the quarterly period ended March 31, 1998

or

/  /  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE 
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____

        Commission File Number:            0-26832

                    Lumisys Incorporated
       (Exact name of registrant as specified in its charter)

Delaware                                              77-0133232
(State of incorporation)     (I.R.S. Employer Identification No.)

225 Humboldt Court, Sunnyvale, CA                          94089
(Address of principal executive offices)               (Zip Code)

                      (408) 733-6565
    (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all 
reports required to be filed by Section 13 or 15(d) of the 
Securities Exchange Act of 1934 during the preceding 12 months 
(or for such shorter period that the registrant was required to 
file such reports), and (2) has been subject to such filing 
requirements for the past 90 days.

               Yes / X /             No /  /
Indicate the number of shares outstanding of each of the issuer's 
classes of common stock, as of the latest practicable date.

As of May 13, 1998, 10,123,203 shares of the registrant's Common 
Stock, $.001 par value, were outstanding.








                    Lumisys Incorporated
                          Index

                                                           Page
Part I.  FINANCIAL INFORMATION

    Item 1.  Financial Statements:

             Consolidated balance sheets at March 31, 
              1998 and December 31, 1997                   3
		
             Consolidated statements of income for the
              three months ended March 31, 1998 and 1997   4

             Consolidated statements of cash flow for the
              three months ended March 31, 1998 and 1997   5

             Notes to financial statements                 6 - 8

    Item 2.  Management's discussion and Analysis 
              of Financial Condition and Results 
              of Operations                                8 - 17

Part II.  OTHER INFORMATION

    Item 1.  Legal proceedings                            17 - 18
	
    Item 6.  Exhibits and Reports on Form 8-K             18

SIGNATURES                                                19

			


Part I - FINANCIAL INFORMATION

Item 1. Financial Statements
                      Lumisys Incorporated
                  Consolidated Balance Sheets
                          (Unaudited)
                         (In thousands)
                                         March 31,   December 31,
                                           1998         1997
                                         ---------   ------------
	
                             ASSETS
Current assets:
 Cash and cash equivalents                       $ 5,937 $ 7,522
 Short-term investments                           17,027  17,007
 Accounts receivable, net of allowances 
  of $672 and $401                                 3,507   4,622
 Inventories                                       3,286   2,892
 Deferred tax assets                               1,453   1,453
 Other current assets                                333     316
                                                 ------- -------
   Total current assets                           31,543  33,812
Property and equipment, net                          694     606
                                                 ------- -------
                                                 $32,237 $34,418
                                                 ======= =======	

               LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Accounts payable                                $ 1,339 $ 1,355
 Accrued expenses                                  2,433   2,967
 Merger and related costs                          1,654   2,117
                                                 ------- -------
    Total current liabilities                      5,426   6,439
                                                 ------- -------

Note payable to related party                        134     130

Commitments and contingencies

Stockholders' equity
  Preferred stock, $0.001 par value; 5,000 shares 
   authorized; no shares issued and outstanding      ---     ---
  Common stock, $0.001 par value; 25,000 shares 
   authorized; 10,065 and 10,370 shares issued 
   and outstanding                                    10      10
  Additional paid-in capital		               30,852  32,265
  Accumulated deficit                             (4,170) (4,407)
  Deferred compensation related to stock options     (15)    (19)
                                                 ------- -------
    Total stockholders' equity                    26,677  27,849
                                                 ------- -------
                                                 $32,237 $34,418
                                                 ======= =======	
        The accompanying notes are an integral part of these 
                       financial statements.


                          Lumisys Incorporated
                   Consolidated Statements of Income
                              (Unaudited)
                (In thousands, except per share amounts)


                                          Three months ended
                                      -------------------------
                                       March 31,     March 31,
                                         1998          1997
                                      -----------   -----------
	
Sales                                   $  6,472      $  7,814
Cost of sales                              2,884         3,344
                                      -----------   -----------
   Gross profit                            3,588         4,470
                                      -----------   -----------
Operating expenses:
  Sales and marketing                        914         1,136
  Research and development                 1,600         1,567
  General and administrative                 950           904
                                      -----------   -----------
   Total operating expenses                3,464         3,607
                                      -----------   -----------
Income from operations                       124           863
Interest income                              261           294
                                      -----------   -----------
Income before income taxes                   385         1,157
Provision for income taxes                   148           503
                                      -----------   -----------
Net income                              $    237      $    654	
	                                 ===========   ===========	

Net income per share
  Basic                                 $   0.02      $   0.07
	                                 ===========   ===========	
  Diluted                               $   0.02      $   0.06
	                                 ===========   ===========	


Weighted average shares used to 
 compute net income per share
  Basic                                   10,223        10,038
	                                 ===========   ===========	
  Diluted                                 10,402        10,464
	                                 ===========   ===========	










 

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



                           Lumisys Incorporated
                   Consolidated Statements of Cash Flow
                                (Unaudited)
                              (In thousands)

                                          Three months ended
                                      -------------------------
                                       March 31,     March 31,
                                         1998          1997
                                      -----------   -----------
	
Cash flows from operating activities:
  Net income                            $   237       $   654
  Adjustments to reconcile net income 
   to net cash provided by operating 
   activities:
    Depreciation and amortization            80            92	
    Changes in assets and liabilities:
    Accounts receivable                   1,115        (1,355)
    Inventories                            (394)          163
    Other assets                            (17)           44
    Accounts payable                        (16)          (94)
    Accrued expenses                       (530)          590
    Merger and related costs               (463)          ---
                                      -----------   -----------
Net cash provided by operating 
 Activities                                  12            94
                                      -----------   -----------
Cash flows from investing activities:
	Purchase of short-term investments     (20)          ---
	Purchases of property and equipment   (164)         (187)
                                      -----------   -----------
Net cash used in investing activities      (184)         (187)
                                      -----------   -----------
Cash flows from financing activities:	
	Proceeds from sale (purchase) of
      common stock, net                  (1,413)           32
                                      -----------   -----------
Net cash provided by financing 
 Activities                              (1,413)           32
                                      -----------   -----------
Net decrease in cash and cash 
 Equivalents                             (1,585)          (61)
Cash and cash equivalents at 
 beginning of period                      7,522        22,490
                                      -----------   -----------
Cash and cash equivalents 
 at end of period                       $ 5,937       $22,429
	                                 ===========   ===========	










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



                          Lumisys Incorporated
             Notes to Consolidated Financial Statements

Note 1 - Basis of Presentation

The consolidated financial statements of Lumisys Incorporated 
(the "Company") presented herein have been prepared pursuant to 
the rules of the Securities and Exchange Commission for quarterly 
reports on Form 10-Q and do not include all of the information 
and note disclosures required by generally accepted accounting 
principles.  These statements should be read in conjunction with 
the consolidated financial statements and notes thereto for the 
year ended December 31, 1997, included in the Company's Annual 
Report on Form 10-K as filed with the Securities and Exchange 
Commission.  

On November 25, 1997, the Company merged with CompuRAD, Inc. 
("CompuRAD").  Such merger was accounted for as a pooling-of-
interests.  Accordingly, the consolidated historical financial 
statements for all periods presented combine the financial 
results of Lumisys and CompuRAD.

The consolidated balance sheet as of March 31, 1998, and the 
consolidated statements of income and of cash flows for the three 
months ended March 31, 1998 and 1997 are unaudited but, in the 
opinion of management, include all adjustments (consisting of 
normal, recurring adjustments) necessary for a fair presentation 
of the results for these interim periods.

The results of operations for the three months ended March 31, 
1998, are not necessarily indicative of the results to be 
expected for the entire fiscal year ending December 31, 1998 or 
any future period.

Note 2 - Net Income Per Share

The Company adopted SFAS No. 128 ("SFAS 128"), "Earnings Per 
Share."  SFAS 128 requires the presentation of basic and diluted 
earnings per share for companies with potentially dilutive 
securities, such as options.  All historical earnings per share 
information has been restated as required by SFAS 128.

Basic earnings per share is computed by dividing income available 
to common shareholders by the weighted-average common shares 
outstanding for the period.  Diluted earnings per share reflects 
the weighted-average common shares outstanding plus the potential 
effect of dilutive securities which are convertible to common 
shares such as options, warrants, convertible debt and preferred 
stock.  

The following is a reconciliation between the components of the 
basic and diluted net income per share calculations for the 
periods presented below (in thousands):

                                    Three Months Ended March 31,
                                        1998             1997	
                                    -----------      ----------	

  Net income                           $   237         $   654	
                                    ===========      ==========	

  Weighted average shares 
   outstanding - basic                  10,223          10,038	
  Effect of dilutive securities:
    Potential common stock
     Stock options and warrants            179             426	
                                    -----------      ----------	
  Weighted average shares 
   outstanding - diluted                10,402          10,464
                                    ===========      ==========	

For the three months ended March 31, 1998 options for 434,688 shares of common 
stock is considered anti-dilutive and is excluded from the calculation of 
dilutive net income per share.  


Note 3 - Composition of Certain Financial Statement Amounts

                                      March 31,      December 31,
                                         1998            1997
                                     -----------      ----------	
                                           (In thousands)
  Inventories:
   Raw materials                        $ 2,856         $ 2,363
   Work-in-process                          770             586
   Finished goods                           721           1,093
                                     -----------      ----------	
                                          4,347           4,042
    Less:  inventory reserves            (1,061)         (1,150)
                                     -----------      ----------	
                                        $ 3,286         $ 2,892
                                     ===========      ==========	
  Accrued expenses:
   Payroll and related benefits         $   783         $ 1,122
   Warranty                                 464             465
   Accrued professional fees                413             401
   Unearned revenue                         290             979
   Other                                    483             ---
                                     -----------      ----------	
                                        $ 2,433         $ 2,967
                                     ===========      ==========	


Note 4 - Revenue Recognition

In October 1997, the American Institute of Certified Public 
Accountants ("AICPA") issued Statement of Positions No. 97-2 
provides guidance for recognizing revenue on software 
transactions and supersedes SOP 91-1 "Software Revenue 
Recognition".

In March 1998, the AICPA issued Statement of Position No. 98-4 
("SOP 98-4") "Deferral of the Effective Date of a Provision of 
SOP 97-2, Software Revenue Recognition".  SOP 98-4 defers, for 
one year, the application of certain passages in SOP 97-2 which 
limit what is considered vendor-specific objective evidence 
("VSOE") necessary to recognize revenue for software licenses on 
multiple-element arrangements when undelivered elements exist.  
Additional guidance is expected bo be provided prior to adoption 
of the deferred provision of SOP 97-2.  The Company will 
determine the impact, if any, the further guidance will have on 
current revenue recognition practices when issued.  Adoption of 
the remaining provisions of SOP 97-2 did not have a material 
impact on revenue recognition during the first quarter of 1996.


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

Overview

Lumisys designs, manufactures and markets an integrated suite of 
hardware and software products for digitizing, networking, 
archiving, routing and displaying medical images in a PACS and 
teleradiology environment.  The Company offers laser and CCD x-
ray film digitizers, video frame digitizers, and software to 
enable health care organizations to capture, store, distribute 
and display medical images over LANs and WANs. 

Except for the historical information contained herein, the 
following discussion contains forward-looking statements that 
involve risks and uncertainties.  The Company's actual results 
could differ materially from those discussed here.  Factors that 
could cause or contribute to such differences include, but are 
not limited to, those discussed in this section, as well as those 
discussed in the Company's 1997 Annual Report on Form 10-K.

Results of Operations

Total sales for the first quarter of 1998 decreased 17.2% to $6.5 
million from $7.8 million for the first quarter of 1997.  This 
decrease was primarily due to lower software sales in 1998 as a 
result of the Company's software product strategy change.  In 
November 1997, the Company decided to sell software products to 
OEM and VAR customers only, whereas previously the Company sold 
software to direct end-user customers as well.  OEM and VAR sales 
have a longer sales cycle compared to the sales cycle for direct 
end-user customers and therefore sales decreased after the change 
in strategy.

Gross profit for the first quarter of 1998 decreased 19.7% to 
$3.6 million  from $4.5 million for the corresponding period of 
1997.  Gross margin decreased to 55.4% in the first quarter of 
1998 from 57.2% in the first quarter of 1997 primarily due to 
lower margins in software products as a result of lower software 
sales for the first quarter of 1998 compared to the first quarter 
of 1997.

Sales and marketing expenses decreased 19.5% in the first quarter 
of 1998 to $914,000 from $1,136,000 in the first quarter of 1997.  
The decrease was primarily due to the decrease in the Company's 
sales and marketing personnel as a result of the strategic change 
in software product sales.  As a percentage of sales, these 
expenses decreased slightly to 14.1% in the first quarter of 1998 
from 14.5%  in the first quarter of 1997.

Research and development expenses increased 2.1% in the first 
quarter of 1998 to $1,600,000 from $1,567,000 in the same quarter 
of 1997.  As a percentage of sales, research and development 
expenses increased to 24.7% in the first quarter of 1998 from 
20.0% in the same quarter of 1997, as a result of lower revenues.

General and administrative expenses increased 5.1% in the first 
quarter of 1998 to $950,000 from $904,000 in the first quarter of 
1997.  As a percentage of sales, general and administrative 
expenses increased to 14.7% in the first quarter of 1998 from 
11.6% in the first quarter of 1997 as a result of lower revenues.  

The Company recognized a provision for income taxes in the first 
quarter of 1998 of $148,000 compared with a provision of $503,000 
in the corresponding period of 1997.  The Company has provided a 
partial valuation allowance against the balance of the deferred 
tax assets remaining as of March 31, 1998.  The Company expects 
to continue to be subject to an effective tax rate of 
approximately 39% for the remainder of 1998.  

Liquidity and Capital Resources

The Company has financed its activities primarily from net cash 
provided by operations, which contributed $12,000 in the first 
quarter of 1998 and $94,000 in the same period of 1997.

At March 31, 1998, the Company's working capital was $26.1 
million.  The Company had cash, cash equivalents and short-term 
investments of approximately $23.0 million at March 31, 1998, 
compared with $24.5 million cash, cash equivalents and short-term 
investments at December 31, 1997.  The decrease is primarily due 
to the purchase by the Company of 344,000 shares of its Common 
Stock. 

The Company does not currently have any significant capital 
commitments and believes that existing sources of liquidity and 
funds expected to be generated from operations will provide 
adequate cash to fund the Company's anticipated working capital 
and other cash needs for the foreseeable future.

Risk Factors That Could Effect Results of Operations

Significant Fluctuations in Operating Results.  There can be no 
assurance that the Company will be profitable on a quarterly or 
annual basis in the future.  The Company has experienced 
quarterly fluctuations in operating results caused by various 
factors, including the timing of orders by major customers, 
customer inventory levels, shifts in product mix, the incurrence 
of acquisition-related costs and general conditions in the 
healthcare industry which have reduced capital equipment budgets 
and delayed or reduced the adoption of teleradiology, and expects 
that these fluctuations will continue.  

The Company typically does not obtain long-term volume purchase 
contracts from its customers, and a substantial portion of the 
Company's backlog is scheduled for delivery within 90 days or 
less.  Customers may cancel orders and change volume levels or 
delivery times without penalty.  Quarterly sales and operating 
results therefore depend on the volume and timing of the backlog 
as well as bookings received during the quarter.  A significant 
portion of the Company's operating expenses are fixed, and 
planned expenditures are based primarily on sales forecasts and 
product development programs.  If sales do not meet the Company's 
expectations in any given period, the materially adverse impact 
on operating results may be magnified by the Company's inability 
to adjust operating expenses sufficiently or quickly enough to 
compensate for such a shortfall.  Furthermore, the Company's 
gross margins may decrease in the future due to increasing sales 
of lower margin products and volume discounts.  Results of 
operations in any period should not be considered indicative of 
the results to be expected for any future period.  Fluctuations 
in operating results may also result in fluctuations in the price 
of the Company's Common Stock.  

Uncertainty of Market Acceptance.  The Company's success is 
dependent on market acceptance of its new and existing products. 
There can be no assurance that sales of new products will achieve 
significant market acceptance in the future.  In addition, third 
party payers, such as governmental programs and private insurance 
plans, can indirectly affect the pricing or the relative 
attractiveness of the Company's products by regulating the 
maximum amount of reimbursement that they will provide for the 
taking, storing and interpretation of medical images.  A decrease 
in the reimbursement amounts for radiological procedures may 
decrease the amount which physicians, clinics and hospitals are 
able to charge patients for such services.  As a result, adoption 
of teleradiology and PACS may slow as capital investment budgets 
are reduced, thereby significantly reducing the demand for the 
Company's products.  

New Product Development in Software Products; Uncertainty of 
Market Acceptance.  The market for PACS and teleradiology 
software is uncertain.  Current and future competitors are likely 
to introduce competing software making it difficult to predict 
the rate at which the market will grow, if at all, or the rate at 
which new or increased competition will result in market 
saturation. If the market for such software fails to grow or 
grows more slowly than anticipated, the Company's business, 
financial condition and results of operations would be materially 
adversely effected.  The Company expects that the sales cycle for 
PACS and teleradiology software through the OEM and System 
Integrator sales channels will be longer than that for its other 
existing hardware products.  Accordingly, the Company's quarterly 
revenues and operating results may be subject to greater 
fluctuation as the Company begins to market and sell PACS and 
teleradiology software through these new channels.  Additionally, 
the Company has limited experience in marketing, installing and 
supporting its software through these sales channels, and there 
can be no assurance that the Company can obtain the necessary 
resources to market, install and support its PACS and 
teleradiology software in an efficient, cost-effective and 
competitive manner.  The failure of PACS and teleradiology 
software to achieve market acceptance for any reason could have a 
material adverse effect on the Company's business, financial 
condition and results of operations.

Significant Risks Associated with Acquisitions. The integration 
of any acquisitions will require special attention from 
management, which may temporarily distract its attention from the 
day-to-day business of the Company.  Any acquisitions will also 
require integration of the companiess' product offerings and 
coordination of research and development and sales and marketing 
activities.  Furthermore, as a result of acquisitions, the 
Company may enter markets in which it has no or little direct 
prior experience.  There can also be no assurance that the 
Company will be able to retain key technical personnel of an 
acquired company or recruit new management personnel for the 
acquired businesses, or that the Company will, or may in the 
future, realize any benefits as a result of such acquisitions.  
Acquisitions by the Company may result in potentially dilutive 
issuances of equity securities, the incurrence of debt, one-time 
acquisition charges and amortization expenses related to goodwill 
and intangible assets, each of which could be significant and 
could materially adversely affect the Company's financial 
condition and results of operations.  In addition, the Company 
believes that it may be required to expand and enhance its 
financial and management controls, reporting systems and 
procedures as it integrates acquisitions.  There can be no 
assurance that the Company will be able to do so effectively, and 
failure to do so when necessary would have a material adverse 
effect upon the Company's business and results of operations.  

New Product Development in Image Digitizers; Rapid Technological 
Change; Product Development. The market for the Company's 
products is characterized by rapid technological advances, 
changes in customer requirements and frequent new product 
introductions and enhancements.  The Company's future success 
will depend upon its ability to enhance its current products, to 
develop and introduce new products that keep pace with 
technological developments and to respond to evolving customer 
requirements.  Any failure by the Company to anticipate or 
respond adequately to technological developments by its 
competitors or to changes in customer requirements, or any 
significant delays in product development or introduction, could 
result in a loss of competitiveness or revenues.  In the past, 
the Company has experienced delays in the development and 
introduction of new products and product enhancements, and there 
can be no assurance that the Company will not experience such 
delays in the future.  In addition, new product introductions or 
enhancements by the Company's competitors or the use of other 
technologies that do not depend on film digitization could cause 
a decline in sales or loss of market acceptance of the Company's 
products.  In particular, computed radiography ("CR") systems are 
currently available and have been sold for medical applications 
for over ten years with limited acceptance.  In addition, several 
companies have announced developments leveraging the technology 
used in flat panel displays, digital radiography ("DR"), to 
produce high-resolution, two dimensional image sensor arrays that 
make it possible for x-ray images to be captured digitally 
without film or chemical processing.  While this emerging 
technology is expensive, there can be no assurance that future 
advances in this technology or other technologies will not 
produce systems better positioned for the marketplace that will 
therefore reduce the digitizer market to the then installed base 
of imaging systems.  There can be no assurance that the Company 
will be successful in developing and marketing new products or 
product enhancements on a timely or cost-effective basis, and 
such failure could have a material adverse effect on the 
Company's business and results of operations.  

Risks Associated With Software Products.  Software and systems as 
complex as those offered by the Company frequently contain 
undetected errors or failures when first introduced or when new 
versions are released.  The Company has in the past discovered 
bugs and system errors in certain of its software enhancements, 
both before and after initial shipment.  There can be no 
assurance that, despite testing by the Company, errors will not 
occur in the Company's products resulting in loss of, or delay 
in, the Company's business, financial condition and results of 
operations.  Peripherals and hardware from third party 
manufacturers also may contain defects and incompatibilities 
which could adversely affect market acceptance of the Company's 
software products.  

Long Sales Cycles.  The OEM and System Integrator sales cycle for 
PACS and teleradiology systems is lengthy.  The sales cycle of 
the Company's products is subject to delays associated with 
changes or the anticipation of changes in the regulatory 
environment affecting healthcare enterprises, changes in the 
customer's strategic system initiatives, competing information 
systems projects within the customer organization, consolidation 
in the healthcare industry in general, the highly sophisticated 
nature of the Company's software and competition in the PACS and 
teleradiology markets in general.  The time required from initial 
contact to purchase order typically ranges from one to six 
months, and the time from purchase order to delivery and 
recognition of revenue typically ranges from one to six months.  
During the sales process, the Company expends substantial time, 
effort and funds preparing a contract proposal, demonstrating the 
software and negotiating the purchase order.  For these and other 
reasons, the Company cannot predict when or if the sales process 
with a prospective customer will result in a purchase order.

Competition. Competition in the United States laser-based film 
digitizer market has not been significant.  A new company, CLS 
entered the market in 1996 with a product similar to the laser-
based film digitizers offered by Lumisys. To date, the Company is 
unaware of any sales made by CLS. Several Japanese competitors 
such as Konica, Nishimoto Sangyo and Abe Sekkei offer competitive 
products on an international basis and may decide in the future 
to devote additional resources to marketing competitive products 
in the United States.   In addition, General Scanning Inc. is 
expected to introduce a laser-based film digitizer during 1998. 
The markets for medical film digitizers incorporating charge-
coupled devices ("CCDs") are highly competitive.  The Company 
faces competition from companies such as Vidar Systems Inc., 
Canon Inc., Vision Ten Inc., Hell Linotype and Howtek in the CCD-
based film digitizer market. There can be no assurance that the 
Company's competitors will not develop enhancements to, or future 
generations of, competitive products that will offer superior 
price or performance features that render the Company's products 
less competitive or obsolete.  

In addition, large domestic companies, such as Kodak, Imation, 
Sterling Diagnostics ("Sterling", formerly the medical group of 
E.I. DuPont de Nemours and Company) and General Electric Co. 
("GE"), and European companies, such as Siemens, Philips 
Electronics N.V. ("Philips") and Agfa, have the technical and 
financial ability to design and market digitizer products 
competitive with the Company's products, and some of them have in 
the past produced and marketed such products.  While most of 
these companies currently purchase products from the Company, the 
Company believes that it will be required to continue to improve 
the price and performance characteristics of its products to 
retain their business especially in view of the fact that these 
customers are not contractually required to purchase their 
digitizers exclusively or at all from the Company.  All of these 
companies have significantly greater financial, marketing and 
manufacturing resources than the Company and would be significant 
competitors if they decided to enter this market. 

The markets for medical video image digitizers are also highly 
competitive. Competitors in the video digitizer market are 
Precision Digital Images Corp., Epix, Inc. and Matrox Electronic 
Systems Ltd. 

Competition in the OEM markets for PACS and teleradiology 
software products and services is also intense and is expected to 
increase.  The Company's principal competitors in the PACS and 
teleradiology software market are ISG, Applicare Medical Imaging 
B.V.,  Mitra Imaging Inc.,  and Access Radiology Corporation.  
Furthermore, other major healthcare information and equipment 
companies not presently offering competing products may enter the 
Company's markets.  Increased competition could result in price 
reduction, reduced gross margins and loss of market share, any of 
which could materially adversely effect the Company's business, 
financial condition and results of operations.  In addition, many 
of the Company's competitors and potential competitors have 
significantly greater financial, technical, product development, 
marketing and other resources and market recognition than the 
Company in the Internet/Intranet clinical information systems 
area.  Many of the Company's competitors also currently have, or 
may develop or acquire, substantial installed customer bases in 
the healthcare industry.  As a result of these factors, the 
Company's competitors may be able to respond more quickly to new 
or emerging technologies and changes in customer requirements or 
to devote greater resources to the development, promotion and 
sale of their products than the Company.  There can be no 
assurances that the Company will be able to compete successfully 
against current and future competitors or that competitive 
pressures faced by the Company will not have a materially adverse 
effect on its business, financial condition or results of 
operations. 

Proprietary Rights.  The Company relies on a combination of trade 
secrets, copyright and trademark laws, nondisclosure and other 
contractual provisions to protect its proprietary rights.  The 
Company currently has no blocking patents covering its technology 
and it has not registered any of its trademarks.  There can be no 
assurance that measures taken by the Company to protect its 
intellectual property will be adequate or that the Company's 
competitors will not independently develop systems and services 
that are substantially equivalent or superior to those of the 
Company.  Substantial litigation regarding intellectual property 
rights exists in the software industry, and the Company expects 
that software products may be increasingly subject to third-party 
infringement claims as the number of competitors in the Company's 
industry segment grows and the functionality of systems overlap.  
Although the Company believes that its systems and applications 
do not infringe upon the proprietary rights of third-parties, 
there can be no assurance that third-parties will not assert 
infringement claims against the Company in the future, that the 
Company would prevail in any such dispute or that a license or 
similar agreement will be available on reasonable terms in the 
event of an unfavorable ruling on any such claim.  In addition, 
any such claim may require the Company to incur substantial 
litigation expenses or subject the Company to significant 
liabilities and could have a material adverse effect on the 
Company's business, financial condition and results of 
operations.

Customer Concentration; Reliance on OEMs.  A significant portion 
of the Company's net sales is derived from a small number of 
customers.  In 1995, 1996, and 1997, there were no companies that 
accounted individually for more than 10% of the Company's 
revenues.  Large customers accounted for a significant portion of 
the Company's backlog at March 31, 1997.  The Company expects to 
continue to depend upon its principal customers for a significant 
portion of its sales, although there can be no assurance that the 
Company's principal customers will continue to purchase products 
and services from the Company at current levels, if at all.  The 
loss of one or more major customers or a change in their buying 
patterns could have a material adverse effect on the Company's 
business and results of operations. 

Single-Source Suppliers.  The Company purchases industry-standard 
parts and components for the assembly of its products, generally 
from multiple vendors.  Although the Company relies on single-
source suppliers for certain components, such as lasers, 
photomultiplier tubes and certain electronic components primarily 
to control price and quality, the Company believes that alternate 
sources of supply are available from other vendors for such 
components and has qualified second source suppliers for some, 
but not all, single-sourced parts.  The Company maintains good 
relationships with its vendors and, to date, has not experienced 
any material supply problems.  While the Company seeks to 
maintain an adequate inventory of single-sourced components there 
can be no assurance that such inventories will be sufficient or 
that delays in part or component deliveries will not occur in the 
future, which could result in delays or reductions in product 
shipments.  Furthermore, even if currently single-sourced 
components could be replaced by other qualified parts, product 
redesign and testing could be costly and time consuming.  These 
factors could have a material adverse effect on the Company's 
business, financial condition and results of operations.

Government Regulation.  The manufacturing and marketing of the 
Company's digitizer, video board, and software products are 
subject to extensive government regulation in the United States 
and in other countries, and the process of obtaining and 
maintaining required regulatory approvals is lengthy, expensive 
and uncertain.  If a medical device manufacturer can establish 
that a newly developed device is "substantially equivalent" to a 
device that was legally marketed prior to May 1976, the date on 
which the Medical Device Amendments of 1976 were enacted, or to a 
device the FDA found to be substantially equivalent to a legally 
marketed pre-1976 device, the manufacturer may seek marketing 
clearance from the FDA to market the device by filing a 510(k) 
premarket notification.  The 510(k) premarket notification must 
be supported by appropriate data establishing the claim of 
substantial equivalence to the satisfaction of the FDA.  Receipt 
of 510(k) clearance normally takes at least three months, but may 
take much longer and may require the submission of clinical 
safety and efficacy data to the FDA.  All of the Company's laser-
based film digitizers, the CCD-based film digitizer and software 
products that are commercially available have received 510(k) 
clearance.  There can be no assurance that 510(k) clearance for 
any future product or any modification of an existing product 
will be granted, or that the process will not be unduly lengthy.  
In the future, the FDA may require manufacturers of certain 
medical devices to engage in a more thorough and time consuming 
approval process than the 510(k) process, which could have a 
material adverse effect on the Company's business and results of 
operations.

The Company is also required to register as a Class II medical 
device manufacturer with the FDA and state agencies, such as the 
California Department of Health Services ("CDHS").  As such, the 
Company may be inspected on a routine basis by both the FDA and 
the CDHS for compliance with the FDA's GMP, QSR and other 
applicable regulations.  These regulations require that the 
Company manufacture its products and maintain its documents in a 
prescribed manner with respect to manufacturing, reporting of 
product malfunctions and other matters.  If the FDA believes that 
a company is not in compliance with federal regulatory 
requirements, it can institute proceedings to detain or seize 
products, issue a recall, prohibit marketing and sales of the 
company's products and assess civil and criminal penalties 
against the company, its officers or its employees.  Failure to 
comply with the regulatory requirements could have a material 
adverse effect on the Company's business and results of 
operations.  The Company was inspected by the FDA in 1996 and was 
found to be compliant with the FDA's GMP regulations but has not 
been inspected by CDHS to date.  

The Company also relies on 510(k) pre-market notification for its 
current internally developed products.  Additionally, the Company 
relies on 510(k) clearance and the finding by the FDA of 
substantial equivalence for the Image Management System 
technology acquired from Star Technologies, Inc. in July 1997.  
The Company believes that its success depends upon commercial 
sales of new versions of its PACS and teleradiology software 
which may be subject to clearance or approval from the FDA and 
its foreign counterparts.  There can be no assurance that a 
similar 510(k) clearance for any future product or enhancement of 
an existing product will be granted or that the process will not 
be lengthy.  If the Company  cannot establish that a product is 
"substantially equivalent" to certain legally marketed devices, 
the 510(k) clearance procedure may be unavailable and the Company 
may be required to utilize the longer and more expensive PMA 
process.  Failure to receive or delays in receipt of FDA 
clearances or approvals, including the need for additional data 
as a prerequisite to clearance or approval, could have a material 
adverse effect on the Company's business, financial condition and 
results of operations.  

Sales of the Company's products outside the United States are 
subject to foreign regulatory requirements that vary from country 
to country. Additional approvals from foreign regulatory 
authorities may be required, and there can be no assurance that 
the Company will be able to obtain foreign approvals on a timely 
basis or at all, or that it will not be required to incur 
significant costs in obtaining or maintaining its foreign 
regulatory approvals.  In Europe, the Company will be required to 
obtain certifications necessary to enable the "CE" mark to be 
affixed to the Company's products by mid 1998 to continue 
commercial sales in member countries of the European Union.  The 
CE mark is an international symbol of quality and complies with 
applicable European medical device directives.  The Company has 
not yet obtained this CE certification.  The Company is currently 
working towards this certification, but such approval by mid-1998 
is not assured.  Failure to comply with foreign regulatory 
requirements could have a material adverse effect on the 
Company's business, financial condition and results of 
operations.

Litigation.  On July 9, 1997 and July 10, 1997, two class action 
complaints were filed in the Superior Court of the State of 
California, County of Santa Clara, and the U.S. District Court 
for the Northern District of California, respectively, against 
the Company, several of its current and former officers and 
directors, and its underwriters.  The complaints are brought on 
behalf of all persons who purchased the Company's Common Stock 
during the putative class period, November 15, 1995 to July 11, 
1996.  The complaints allege that, during the class period, 
defendants made material misstatements and omitted to disclose 
material information concerning the Company's actual and expected 
performance and results, causing the price of the Company's 
Common Stock to be artificially inflated. The federal complaint 
alleges claims under Sections 10(b) and 20(a) of the Exchange 
Act, and SEC Rule 10b-5 promulgated thereunder; the state 
complaint alleges claims under California state law.  Neither the 
federal nor the state complaint specifies the amount of damages 
sought.  The Company and the other defendants vigorously deny all 
allegations of wrongdoing, and intend to defend themselves 
aggressively.  On January 9, 1998, the Santa Clara Superior Court 
dismissed the State complaint in part with prejudice and in part 
with leave to amend.  Plaintiff has filed an amended complaint in 
State court and on March 23, 1998, defendants filed a demurer to 
the amended complaint.  On March 6, 1998, the federal court 
dismissed the federal complaint with leave to amend.  There can 
be no assurance that the Company will prevail in this action or 
that the plaintiffs will not recover damages.

Third-Party Reimbursement.  Third-party payers, such as 
governmental programs and private insurance plans, can indirectly 
affect the pricing or the relative attractiveness of the 
Company's products by regulating the maximum amount of 
reimbursement that they will provide for the taking, storing and 
interpretation of medical images.  In recent years, healthcare 
costs have risen substantially, and third-party payers have come 
under increasing pressure to reduce such costs.  In this regard, 
extensive studies undertaken by the Clinton Administration, even 
though not successfully translated into regulatory action, have 
stimulated widespread analysis and reaction in the private sector 
focused on healthcare cost reductions, which may involve 
reductions in reimbursement rates in radiology.  A decrease in 
the reimbursement amounts for radiological procedures may 
decrease the amount which physicians, clinics and hospitals are 
able to charge patients for such services.  As a result, adoption 
of teleradiology and PACS may slow as capital investment budgets 
are reduced, and the demand for the Company's products could be 
significantly reduced.

Product Liability and Insurance.  The manufacture and sale of 
medical products entails significant risk of product liability 
claims.  While the Company believes that its current insurance 
coverage is appropriate, there can be no assurance that such 
coverage is adequate to protect the Company from any liabilities 
it might incur in connection with the sale of the Company's 
products.  In addition, the Company may require increased product 
liability coverage as additional products are commercialized.  
Such insurance is expensive and in the future may not be 
available on acceptable terms, if at all.  A successful product 
liability claim or series of claims brought against the Company 
in excess of its insurance coverage could have a material adverse 
effect on the Company's business and results of operations.

Volatility of Stock Prices.  The market price of the Company's 
Common Stock has been and may continue to be volatile.  This 
volatility may result from a number of factors, including 
fluctuations in the Company's quarterly revenues and net income, 
announcements of technical innovations or new commercial products 
by the Company or its competitors, and conditions in the market 
for medical image digitizers and the teleradiology and health 
care industry and for PACS and teleradiology products and 
healthcare information systems and services.  Also, the stock 
market has experienced and continues to experience extreme price 
and volume fluctuations which have affected the market prices of 
securities, particularly those of medical technology companies, 
and which often have been unrelated to the operating performance 
of the companies. These broad market fluctuations, as well as 
general economic and political conditions, may adversely affect 
the market price of the Company's Common Stock in future periods.

Market Risk.  The Company has an investment portfolio of fixed 
income that are classified as "available-for-sale securities".  
These securities, like all fixed income instruments, are subject 
to interest rate risk and will fall in value if market interest 
rates increase.  The Company attempts to limit this exposure by 
investing primarily in short-term securities.

From time to time, the Company makes certain capital equipment or 
other purchases denominated in foreign currencies.  As a result, 
the Company's cash flows and earnings are exposed to fluctuations 
in interest rates and foreign currency exchange rates.  The 
Company attempts to limit these exposures through operational 
strategies and generally has not hedged currency exposures.

Year 2000 Issue.  The rapid approach of Year 2000 presents 
significant issues for many computer systems, since much of the 
software in use today may not accurately process data beyond 
1999.  The Company has recently implemented new information 
systems and accordingly does not anticipate any internal Year 
2000 issue from its own information systems, databases or 
programs.  However, the Company could be adversely impacted by 
Year 2000 issues faced by major distributors, suppliers, 
customers, vendors and financial service organizations with which 
the Company interacts.  The Company is currently taking steps to 
address the impact, if any, of the Year 2000 issue on the 
operations of the Company.  There can be no assurances that such 
a review will detect all potential failures of the Company's 
and/or third-party's computer systems.  A significant failure of 
the Company's or a third-party's computer system could have a 
material adverse effect on the Company's business, financial 
condition and results of operations.  

Part 2 - OTHER INFORMATION

Item 1.	Legal Proceedings

On July 9, 1997 and July 10, 1997, two class action complaints 
were filed in the Superior Court of the State of California, 
County of Santa Clara, and the U.S. District Court for the 
Northern District of California, respectively, against the 
Company, several of its current and former officers and 
directors, and its underwriters.  The complaints are brought on 
behalf of all persons who purchased the Company's Common Stock 
during the putative class period, November 15, 1995 to July 11, 
1996.  The complaints allege that, during the class period, 
defendants made material misstatements and omitted to disclose 
material information concerning the Company's actual and expected 
performance and results, causing the price of the Company's 
Common Stock to be artificially inflated. The federal complaint 
alleges claims under Sections 10(b) and 20(a) of the Exchange 
Act, and SEC Rule 10b-5 promulgated thereunder; the state 
complaint alleges claims under California state law.  Neither the 
federal nor the state complaint specifies the amount of damages 
sought.  The Company and the other defendants vigorously deny all 
allegations of wrongdoing, and intend to defend themselves 
aggressively.  On January 9, 1998, the Santa Clara Superior Court 
dismissed the State complaint in part with prejudice and in part 
with leave to amend.  Plaintiff has filed an amended complaint in 
State court and on March 23, 1998, defendants filed a demurer to 
the amended complaint.  On March 6, 1998, the federal court 
dismissed the federal complaint with leave to amend.  There can 
be no assurance that the Company will prevail in this action or 
that the plaintiffs will not recover damages.

On July 18, 1997, a third-party filed a complaint in Santa Clara 
Superior Court against the Company and one of its officers.  The 
complaint contains causes of action for liable, defamation, 
negligent infliction of emotional distress and punitive damages.  
The Company and the other defendant vigorously deny all 
allegations of wrongdoing and intend to defend themselves 
aggressively.


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

(a)  Exhibits furnished:
 	
        Exhibit
         Number          Description of Document
      -----------    --------------------------------
        27            Financial Data Schedule
  
(b)  Reports on Form 8-K:  none.



                             SIGNATURES

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

                                           LUMISYS INCORPORATED

Dated:  May 15, 1998                   By:/s/ Douglas G. DeVivo               
                                          -----------------------
                                          Douglas G. DeVivo
                                          Chief Executive Officer
	
         May 15, 1998                     /s/ Craig L. Klosterman
                                          -----------------------
                                          Craig L. Klosterman
                                          Chief Operating and
                                          Chief Financial Officer

		
	







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