UNITED STATES


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

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

                  FOR THE QUARTERLY PERIOD ENDED: JUNE 30, 1997

                                       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: 1-14190

                        INTELLIGENT MEDICAL IMAGING, INC.

             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

            DELAWARE                              65-0136178
 (STATE OR OTHER JURISDICTION           (IRS EMPLOYER IDENTIFICATION NO.)
OF INCORPORATION OR ORGANIZATION)

     4360 NORTHLAKE BOULEVARD, SUITE 214, PALM BEACH GARDENS, FLORIDA 33410
              (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES AND ZIP CODE)

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (561) 627-0344

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 __

AS OF AUGUST 4, 1997, THERE WERE OUTSTANDING  10,961,977 SHARES OF COMMON STOCK,
PAR VALUE $.01, OF THE REGISTRANT.

<PAGE>

                        INTELLIGENT MEDICAL IMAGING, INC.

                           QUARTER ENDED JUNE 30, 1997

                                      INDEX

                                                                        PAGE

PART I - FINANCIAL INFORMATION

    ITEM 1.    FINANCIAL STATEMENTS                                      3

               BALANCE SHEETS AS OF JUNE 30, 1997 AND                    3
               DECEMBER 31, 1996

               STATEMENTS OF OPERATIONS FOR THE THREE AND SIX            4
               MONTHS ENDED JUNE 30, 1997 AND 1996

               STATEMENTS OF CASH FLOWS FOR THE SIX  MONTHS              5
               ENDED JUNE 30, 1997 AND 1996

               NOTES TO FINANCIAL STATEMENTS                             6

    ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL         7
               CONDITION AND RESULTS OF OPERATIONS

PART II - OTHER INFORMATION                                             11

    ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS      11

    ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K                         11

SIGNATURES                                                              12



<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                        INTELLIGENT MEDICAL IMAGING, INC.
                                 BALANCE SHEETS

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

Assets
Current assets:                                                     
     Cash and cash equivalents                                             $278,469                   $288,001
     Investments available-for-sale                                      15,260,801                 24,793,872
     Accounts and notes receivable                                        1,604,999                    177,096
     Accrued interest receivable                                            161,021                    159,427
     Inventory                                                            5,157,495                  3,541,993
     Prepaid expenses                                                       367,174                     52,425
                                                                   -----------------      ---------------------
Total current assets                                                     22,829,959                 29,012,814

Property and equipment, net                                               2,934,442                  1,666,957

Other assets                                                                280,835                     52,252
                                                                   -----------------      ---------------------
                                                                        $26,045,236                $30,732,023


Liabilities and stockholders' equity
Current liabilities:
     Accounts payable                                                    $1,042,334                 $1,062,979
     Accrued salaries and benefits                                          573,613                    319,217
     Other accrued liabilities                                               44,346                    421,132
     Contingent settlement liability                                      1,013,071                  2,062,000
                                                                   -----------------      ---------------------
Total current liabilities                                                 2,673,364                  3,865,328


Stockholders' equity
Preferred stock, $.01 par value-authorized 2,000,000 shares;
     no shares issued or outstanding                                              0                          0
Common stock, $.01 par value-authorized 30,000,000 shares;          
     issued and outstanding, 10,921,155 shares at June 30, 1996
     and 10,898,054 at December 31, 1996                                    109,212                    108,981
Additional paid-in capital                                               42,457,475                 42,425,306
Deferred compensation                                                     (274,878)                  (321,504)
Net unrealized investment gains                                              77,363                     58,027
Accumulated deficit                                                    (18,997,300)               (15,404,115)
                                                                   -----------------      ---------------------
Total stockholders' equity                                               23,371,872                 26,866,695
                                                                   -----------------      ---------------------
                                                                        $26,045,236                $30,732,023

See accompanying notes
</TABLE>


<PAGE>

                        INTELLIGENT MEDICAL IMAGING, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>

                                          Three months      Three months       Six months        Six months
                                              ended             ended            ended             ended
                                          June 30, 1997     June 30, 1996     June 30, 1997    June 30, 1996
<S>                                           <C>                 <C>            <C>                  <C>    

Sales                                     $1,570,338          $889,879       $2,412,043        $3,066,082

Cost of sales                                888,978           485,205        1,295,221         1,709,411
                                        -------------       ----------      -----------        ----------
                                             681,360           404,674        1,116,822         1,356,671

Operating expenses:
     Selling, general and                  2,077,318           712,118        3,571,957         1,256,457
administrative
     Research and development              1,086,827           645,012        1,803,011           897,689
                                        ------------        ----------      -----------        -----------
Total operating expenses                   3,164,145         1,357,130        5,374,968         2,154,146
                                        ------------        ----------      -----------        -----------
Loss from operations                      (2,482,785)         (952,456)      (4,258,146)         (797,475)
Other income (expense):
     Other                                         0                 0                0            76,475
     Investment and interest income          358,104           393,650          664,961           410,682
     Interest expense                              0           (25,598)               0          (129,969)
                                        ------------        ----------      -----------        -----------
Other income                                 358,104           368,052          664,961           357,188

Net loss                                 ($2,124,681)        ($584,404)     ($3,593,185)        ($440,287)
                                        ============        ==========      ===========        ===========


Loss per common share                         ($0.19)           ($0.05)          ($0.33)           ($0.05)
                                        ============        ==========      ===========        ===========
Weighted average common
     shares outstanding                   10,911,612        10,687,173       10,907,213         9,000,278
                                        ============        ==========      ===========        ===========

See accompanying notes
</TABLE>

<PAGE>

                        INTELLIGENT MEDICAL IMAGING, INC.
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                           Six Months                 Six Months
                                                              ended                      ended
                                                            June 30,                   June 30,
                                                              1997                       1996
<S>                                                           <C>                       <C>
Operating activities
Net loss                                                     ($3,593,185)              ($440,287)
Adjustments to reconcile net loss
     to net cash used in operating activities:
          Depreciation                                            301,988                 109,054
          Services exchanged for common stock                      46,626                  33,227
          Changes in operating assets and liabilities
               Accounts receivable                            (1,427,903)               (191,840)
               Inventory                                      (2,458,360)               (454,322)
               Prepaid expenses and accrued interest                             
                    receivable                                  (316,343)               (119,760)
               Other assets                                     (228,583)                  42,101
               Accounts payable                                  (20,645)               (509,038)
               Accrued salaries and benefits                      254,396                  70,868
               Accrued interest payable                                 0               (139,478)
               Other accrued liabilities                        (376,786)                (14,301)
               Contingent settlement liability                (1,048,929)
               Due to related party                                     0               (867,897)
               Customer advance                                         0               (150,000)
                                                        ------------------      ------------------
Net cash used in operating activities                         (8,867,724)             (2,631,673)

Investing activities
Purchases of property and equipment                             (726,615)               (313,612)
Sales of investments available-for-sale                         9,552,407                       0
Purchases of investments available-for-sale                             0            (12,591,813)
                                                        ------------------      ------------------
Net cash provided by (used in) investing activities             8,825,792            (12,905,425)
                                                         
Financing activities                                     
Proceeds from long-term notes payable                                   0                  60,000
Repayment of long-term notes payable and                                         
     capitalized lease obligations                                      0               (736,066)
Repayments of notes payable to related parties                          0               (338,958)
Advance from factor                                                     0               2,216,614
Repayments to factor                                                    0             (2,216,614)
Proceeds from issuance of common stock                             32,400              34,450,177
                                                        ------------------      ------------------
Net cash provided by financing activities                          32,400              33,435,153

                                                                                 
Net (decrease) increase in cash and cash equivalents               (9,532)             17,898,055
Cash and cash equivalents at beginning of period                  288,001                  75,821
                                                        ------------------      ------------------

Cash and cash equivalents at end of period                       $278,469             $17,973,876
                                                        ==================      ==================

Supplemental information
Interest paid                                                          $0                $236,602

Notes payable and notes payable to related
     parties converted to common stock                                 $0                $300,000

Inventory transferred to property and equipment                  $842,858                $147,096

See accompanying notes

</TABLE>

<PAGE>

                        INTELLIGENT MEDICAL IMAGING, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.   BASIS OF PRESENTATION

The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting  principles for interim financial information
and  with the  instructions  to Form  10-Q and  Article  10 of  Regulation  S-X.
Accordingly,  they do not include all of the information and footnotes  required
by generally accepted accounting  principles for complete financial  statements.
In the opinion of management,  all adjustments  (consisting of normal  recurring
accruals) considered necessary for a fair presentation have been included. These
financial  statements,  footnotes and discussions  should be read in conjunction
with audited financial  statements and related footnotes included in Intelligent
Medical Imaging,  Inc.'s ("IMI" or "the Company") annual report on Form 10-K for
the year ended December 31, 1996. Operating results for the three- and six-month
periods ended June 30, 1997 are not  necessarily  indicative of the results that
may be expected for the year ending December 31, 1997.

2.   INVESTMENTS AVAILABLE-FOR-SALE

Investments  available-for-sale  consist of asset backed  securities,  corporate
bonds  and U.S.  Government  agency  bonds.  Management  determines  the  proper
classifications   of  investments  in  obligations  with  fixed  maturities  and
marketable  equity  securities  at the time of  purchase  and  reevaluates  such
designations  as of each balance  sheet date. At June 30, 1997,  all  securities
were designated as available for sale. Accordingly,  these securities are stated
at fair market value,  with  unrealized  gains and losses reported as a separate
component  of  stockholders'  equity.  Realized  gains  and  losses  on sales of
investments,  as determined on a specific  identification basis, are included in
the statements of operations.

Investment  securities  available for sale at June 30, 1997,  are  summarized as
follows:

<TABLE>
<CAPTION>
                                                        June 30, 1997                             December 31, 1996
                                                         Unrealized        Market                     Unrealized       Market
                                            Cost       Gains (Losses)      Value         Cost      Gains (Losses)      Value
                                        -------------  -------------  -----------    -----------  ----------------   --------
<S>                                        <C>             <C>            <C>           <C>             <C>          <C>
Cash and cash equivalents                    $246,863         $ 0        $246,863     $5,389,564       $2,950      $5,392,514

U.S. Government agency bonds and
mortgages                                  $8,175,179     $41,452      $8,216,631     $7,525,683      $18,169      $7,543,852
                                                                                                              
U.S. Corporate bonds and asset backed
securities                                 $6,761,396     $35,911      $6,797,307    $11,820,598      $36,908     $11,857,506
                                        -------------  ----------     -----------    -----------      -------     -----------

Total investments available for sale      $15,183,438     $77,363     $15,260,801    $24,735,845      $58,027     $24,793,872
                                        =============  ==========     ===========    ===========      =======     ===========
</TABLE>

3.   PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

<TABLE>
<CAPTION>
                                          June 30,               December 31,
                                            1997                     1996
                                      -----------------        -----------------
<S>                                         <C>                       <C>
Furniture, fixtures and office         
     equipment                              $1,474,609                 $461,690
Computer and development
     equipment                               2,392,093                1,835,539
                                      -----------------        -----------------
                                             3,866,702                2,297,229
Accumulated depreciation                     (932,260)                (630,272)
                                      -----------------        -----------------
                                            $2,934,442               $1,666,957
                                      =================        =================
</TABLE>



4.   IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS

In February 1997, the Financial  Accounting Standards Board issued Statement No.
128,  Earnings per Share,  which is required to be adopted in December  1997. At
that time,  the Company will be required to change the method  currently used to
compute  earnings  per share and to  restate  all prior  periods.  Under the new
requirements for calculating  primary earnings per share, the dilutive effect of
stock  options will be excluded.  Statement  128 would not have an impact on the
periods ended June 30, 1997 and 1996.


5.   COMMITMENTS AND CONTINGENCIES

On June 17, 1997, the Company notified DiaSys  Corporation  ("DiaSys"),  that it
was  terminating the Product  Integration  Agreement dated November 1, 1996 (the
"DiaSys  Agreement"),  between the Company and DiaSys,  due to DiaSys'  material
breaches of the DiaSys Agreement.  The Company also rejected all goods delivered
by  DiaSys  to  the  Company  as   non-conforming.   DiaSys  has  expressed  its
disagreement  with the Company's  position  regarding the  conformity of DiaSys'
products and the  Company's  termination  of the DiaSys  Agreement.  The Company
believes that it had a valid basis to terminate the DiaSys Agreement and is thus
relieved  from  the  minimum  purchase  requirements  set  forth  in the  DiaSys
Agreement.

In the second quarter of 1997, the Company paid Coulter Corporation  ("Coulter")
$3,600,000  in exchange  for the return of 26 of  Coulter's  used  inventory  of
Micro21  Systems and  reimbursement  to Coulter for  certain  costs  incurred in
connection with the sale and marketing of the Micro21 Systems in accordance with
the terms of a settlement agreement  ("Settlement  Agreement") executed on March
27, 1997. In the  Settlement  Agreement,  the Company also agreed to pay Coulter
approximately  $1,000,000,  subject to certain offsets, in exchange for: (i) the
return of certain spare parts and  equipment and (ii) the  assignment of four of
Coulter's  customer  contract  accounts  receivable.  As of June 30, 1997, spare
parts and equipment  with a carrying value of  approximately  $180,000 have been
returned and none of Coulter's  customer contract accounts  receivable have been
assigned to the Company.

Contingent  Settlement  Liability  includes  approximately  $900,000 of Micro 21
Systems which were not part of the Coulter Settlement Agreement.  The Company is
in negotiations  with Coulter  Corporation and anticipates this contingency will
be resolved by December 31, 1997.

On May 22,  1997,  the Board of  Directors  authorized  the  Company to loan the
President  and Chief  Executive  Officer up to  $500,000  on a secured  recourse
basis.  The terms are subject to the approval of the  Compensation  Committee of
the  Board of  Directors.  At June 30,  1997,  approximately  $174,000  has been
advanced with no stated interest rate or repayment and is classified as accounts
receivable.

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

OVERVIEW

The  Company  has  developed  and  is  marketing  the  MICRO21(TM)   System,  an
intelligent,  automated  microscope  system,  for  diagnostic  use in  hospital,
commercial  reference and physician  group  laboratories.  The MICRO21 System is
designed to automate a broad range of manual microscopic procedures, potentially
enabling the clinical  laboratory  to reduce costs and exposure to  liabilities,
enhance  analytical  accuracy  and  consistency,  increase the  productivity  of
medical technologists and improve patient care.

In August 1995,  the Company  entered into an exclusive  sales and  distribution
agreement (the "Coulter Agreement") with Coulter for worldwide sales,  marketing
and service of the MICRO21 system.  The Company terminated the Coulter Agreement
in the fourth quarter of 1996 because of Coulter's  revocation of its commitment
to purchase  $5,500,000 of MICRO21  systems during the third and fourth quarters
of 1996 and other breaches of the Coulter Agreement by Coulter. Coulter disputed
the  Company's  termination  of the  Coulter  Agreement  and claimed the Coulter
Agreement  remained in effect. The parties submitted the dispute to arbitration,
but settled the dispute as of March 27,  1997.  The dispute  between the Company
and  Coulter  has had an adverse  effect on sales and  marketing  and has been a
factor in the return of some MICRO21  systems  placed with  customers by Coulter
for evaluation. The Settlement Agreement provides for the Company to pay Coulter
approximately $4,600,000, subject to offsets, in exchange for: (i) the return of
twenty-six (26) of Coulter's used inventory of MICRO21 systems and certain spare
parts and  equipment;  (ii) the  assignment  of four (4) of  Coulter's  customer
contract  receivables;  and (iii)  reimbursement  to Coulter for  certain  costs
incurred in connection  with the sale and marketing of the MICRO21  system.  The
Company  believes  that  many  of  the  customers  who  returned  systems  under
evaluation  will order a MICRO21  system for  evaluation,  purchase or lease now
that the dispute with Coulter is resolved.  In the second  quarter of 1997,  the
Company  paid Coulter  $3,600,000  in exchange for the return of 26 of Coulter's
used inventory of Micro21 Systems.

In June 1997,  the Company  established a new division in The  Netherlands - IMI
Europe.  IMI Europe will perform sales and  marketing  functions in the European
market.


RESULTS OF OPERATIONS

Product  sales were  $1,570,338  for the second  quarter of 1997  compared  with
$889,879 for the second quarter of 1996, an increase of $680,459.  Product sales
were  $2,412,043 for the six months ended June 30, 1997 compared with $3,066,082
for the six months ended June 30, 1996, a decrease of $654,039. The increase for
the quarter was primarily due to the Micro21  System  gaining  acceptance in the
marketplace  and sales into foreign markets  through  distributors.  The overall
decrease in sales for the six months  ended June 30,  1997  compared to June 30,
1996 was primarily  due to the time required to build up the Company's  internal
sales  and  service  organizations  following  the  termination  of the  Coulter
Agreement in October 1996.

Cost of sales was $888,978 for the second quarter of 1997 compared with $485,205
for the second  quarter of 1996,  an  increase  of  $403,773.  Cost of sales was
$1,295,221  for the six months ended June 30, 1997 compared with  $1,709,411 for
the six months ended June 30, 1996, a decrease of $414,190. The increase in cost
of sales for the quarter was  primarily  due to  increased  sales of the Micro21
System.

Selling,  general and  administrative  expenses were  $2,077,318  for the second
quarter  of 1997  compared  with  $712,118  for the second  quarter of 1996,  an
increase of  $1,365,200.  Selling,  general  and  administrative  expenses  have
continued  to increase  because of the  continued  growth of the Company and the
need for additional personnel. Selling, general and administrative expenses were
$3,571,957  for the six months ended June 30, 1997 compared with  $1,256,457 for
the six months ended June 30, 1996, an increase of $2,315,500.  The increase was
primarily  due to increases in staffing  and business  development  expenses and
legal fees.

Research and development expenses were $1,086,827 for the second quarter of 1997
compared with $645,012 for the second  quarter of 1996, an increase of $441,815.
Research and development  expenses were $1,803,011 for the six months ended June
30, 1997  compared  with  $897,689 for the six months  ended June 30,  1996,  an
increase of $905,322.  Research and  development  expenses have increased due to
resources being utilized in the development of new procedures,  technologies and
products. Research and development expenses are expected to continue to increase
as new procedures, technologies and products are developed.

Other income was $0 for the six months ended June 30, 1997 compared with $76,475
for the six months ended June 30, 1996, a decrease of $76,475.  The decrease was
due to a gain recognized in 1996 in connection  with a discount  negotiated on a
note payable to a third party.

Interest  income was  $358,104  for the second  quarter  of 1997  compared  with
$393,650 for the second quarter of 1996, a decrease of $35,546. The decrease for
the quarter  was  primarily  due to the sale of  investment  securities  to fund
operations.  Interest income was $664,961 for the six months ended June 30, 1997
compared  with  $410,682 for the six months ended June 30, 1996,  an increase of
$254,279.  The increase was due to interest  income  earned on the proceeds from
the Company's initial public offering which closed on March 27, 1996.

Interest expense was $0 for the second quarter of 1997 compared with $25,598 for
the second quarter of 1996, a decrease of $25,598.  Interest  expense was $0 for
the six months  ended June 30, 1997  compared  with  $129,969 for the six months
ended June 30, 1996, a decrease of  $129,969.  The Company had no notes  payable
outstanding during 1997.


LIQUIDITY AND CAPITAL RESOURCES

The  Settlement  Agreement  provides  that  the  Company  will  pay  to  Coulter
approximately  $4,600,000.  $3,600,000  was  paid  in  1997.  In  addition,  the
Settlement  Agreement  required  Coulter to purchase  four current model MICRO21
systems,  to replace  certain units  returned,  at a discounted  purchase price.
These units were purchased in April 1997.

In March  1996,  the Company  completed  its initial  public  offering,  selling
3,450,000 shares of common stock at $11.00 per share, resulting in approximately
$34,000,000  in net  proceeds to the  Company.  In 1996,  the  Company  paid all
long-term  notes  payable,  indebtedness  and  amounts  due to  related  parties
totaling approximately  $4,300,000.  For the year ended December 31, 1996, cash,
cash equivalents and investments increased approximately $25,000,000,  primarily
due to net cash provided by proceeds from the initial public offering.

In May 1996 the Company employed  investment  advisors to manage the cash assets
of the Company subject to specific  restrictions and  limitations.  The advisors
are allowed to buy, sell, exchange and otherwise trade in any stocks,  bonds and
other  securities  consistent  with  the  Company's  objectives.   The  specific
restrictions and limitations limit the advisors to investments  characterized as
investment  grade  only  and of  maturities  no  longer  than two  years.  These
investments are classified as available for sale.

Cash and cash equivalents consist of cash and liquid investments with a maturity
of 90 days or less.  Investments  available  for sale  consist  of asset  backed
securities,  corporate  bonds  and  U.S.  Government  agency  bonds.  Management
determines  the  appropriate  classification  of debt  securities at the time of
purchase  and  re-evaluates  such  designation  as of each  balance  sheet date.
Unrealized  holding gains and losses on  securities  classified as available for
sale are reported as a separate component of stockholders' equity.

For the six months ended June 30, 1997, net cash used in operating activities of
$8,867,724 was primarily due to the Company's  operating loss due to an increase
in  overall  expenses  because  of the  increase  in  personnel  and  payment of
$3,600,000 to Coulter  Corporation to repurchase Micro21 Systems as specified in
the Settlement Agreement.

For the six  months  ended  June  30,  1997,  net  cash  provided  by  investing
activities  of  $8,825,792  was  primarily  the  result of sales of  investments
available for sale,  partially  offset by purchases of computer  equipment to be
used in research and development and leasehold improvements to the manufacturing
facility.

For the six  months  ended  June  30,  1997,  net  cash  provided  by  financing
activities  of $32,400 was primarily the result of proceeds from the exercise of
common stock options.

At June 30, 1997 the Company had a net operating  loss ("NOL")  carryforward  of
approximately  $11,000,000 available for income tax purposes that expire through
the year 2011. Section 382 of the Internal Revenue Code, as amended,  limits the
amount of federal  taxable income that may be offset by  pre-existing  NOLs of a
corporation  following  a  change  in  ownership  ("Ownership  Change")  of  the
corporation.  A portion of the  Company's  NOLs are  currently  subject to these
limitations  because the Company  experienced  an  Ownership  Change on June 30,
1995, due to the issuance of common stock.

The Company  believes that cash, cash equivalents and investments held for sale,
together with  projected cash flow from  operations,  will be sufficient to meet
the  Company's   liquidity  and  capital   requirements   for  projected  annual
expenditures  through 1998,  although no assurance  exists that the Company will
not require additional capital prior to the end of such period.

Statements  contained  in this  Form  10-Q  that are not  historical  facts  are
forward-looking  statements that are made pursuant to the safe harbor provisions
of the Private  Securities  Litigation  Reform Act of 1995. The Company cautions
that a number of important  factors could cause the Company's actual results for
1997 and beyond to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company.

Forward-looking   statements   involve  a  number  of  risks  and  uncertainties
including,  but not  limited  to, the  Company's  history of  operating  losses;
uncertainty of profitability and uncertainty of widespread market acceptance for
the MICRO21 system;  uncertainty,  risks and costs associated with the Company's
need to expand and enhance its own sales and marketing  organization  to replace
Coulter;  the  anticipated  loss of revenue  and  earnings  during the period of
transition of sales, marketing and service  responsibilities from Coulter to the
Company;  the delays and  impediments  to customer  acceptance  associated  with
industry and market perception of the historical dispute between the Company and
Coulter;  the risk that  expansion  of sales in foreign  markets may be possible
only  through  distributors,  such as Coulter,  at  transfer  prices too low for
favorable  profitability;  the  inability  of  the  Company  to  enter  into  an
alternative exclusive distribution  arrangement due to certain rights granted to
Coulter  under the  Coulter  Settlement  Agreement;  the delays and  impediments
associated  with the industry  and market  perception  of the  dispute,  even if
amicably  settled,  between the Company and  DiaSys,  and the  inability  of the
Company to resolve  its  dispute  with  DiaSys  amicably;  potential  delays and
technical problems in the development and commercial release of new products and
procedures such as the proposed  MICRO21  Microscopic  Workstation  System;  the
expense of product  development  and the  related  delay and  uncertainty  as to
receipt of any  requisite  FDA  clearance  or other  governmental  clearance  or
approval for new products and new procedures for use on the MICRO21 system;  the
uncertainty of profitability and  sustainability of revenues and  profitability;
the uncertainty of availability of capital for future capital needs,  especially
in the event of  further  delays in  anticipated  market  acceptance  and market
penetration of MICRO21 systems; the Company's limited manufacturing  experience;
fluctuations in operating  results;  the Company's  ability to its protect trade
secrets and  proprietary  technology;  competition  and technical  change in the
industry in which the Company is engaged;  product  liability and the ability of
the Company to obtain adequate insurance for product  liability;  uncertainty of
third  party  reimbursement  and health  care reform  policies;  and  government
regulation.  The Company  cannot  assure that it will be able to  anticipate  or
respond timely to any of the factors,  or changes in any of the factors,  listed
above,  which could adversely affect the operating results in one or more fiscal
quarters.  Results of  operations  in any past period  should not be  considered
indicative  of the results to be expected for future  periods.  Fluctuations  in
operating  results may also result in fluctuations in the price of the Company's
common stock.


<PAGE>

                           PART II - OTHER INFORMATION

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

       (a)  The Annual Meeting of Stockholders was held on May 22, 1997.

       (b)  Each of the persons  named in the Proxy  Statement  as a nominee for
            Director was elected.

       (c)  The  following  are the voting  results on each of the matters which
            were submitted to the stockholders:

<TABLE>
<CAPTION>
                                                              Withheld
                                                                or          Broker
                                    For           Against     Abstain      Non-Votes
<S>                                 <C>            <C>        <C>          <C>
Election of Directors:
Tyce M. Fitzmorris                  7,192,294     13,170
Gene M. Cochran                     7,192,494     12,970
James E. Davis                      7,192,594     12,870
R. Wayne Fritzsche                  7,192,594     12,870
George Masters                      7,199,194      6,270
James Skinner                       7,199,194      6,270
William Whittaker                   7,192,594     12,870


Resolutions:
  To ratify the appointment of
Ernst & Young LLP as
independent auditors for 1997       7,202,563     200         2,701
</TABLE>

     The text of the  matters  referred to under this Item 4 is set forth in the
Proxy Statement  dated April 21, 1997  previously  filed with the Commission and
incorporated herein by reference.


 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

       (a) Exhibits:

           LIST OF EXHIBITS               DESCRIPTION

                      27                  Financial Data Schedule

       (b) Reports on Form 8-K:

           None.



<PAGE>


                                   SIGNATURES

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

                        INTELLIGENT MEDICAL IMAGING, INC.

Date:   August 14, 1997           By:   /S/ TYCE M. FITZMORRIS
                                       ----------------------------------
                                        Tyce M. Fitzmorris, President and Chief
                                        Executive Officer


Date:   August 14, 1997           By:   /S/ GENE M. COCHRAN
                                       ----------------------------------
                                        Gene M. Cochran, Chief Financial Officer