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: 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: 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 MAY 11, 1998,  THERE WERE OUTSTANDING  11,384,019  SHARES OF COMMON STOCK,
PAR VALUE $.01, OF THE REGISTRANT.




<PAGE>


                        INTELLIGENT MEDICAL IMAGING, INC.

                          QUARTER ENDED MARCH 31, 1998

                                      INDEX

                                                                           PAGE

PART I - FINANCIAL INFORMATION

         ITEM 1.  FINANCIAL STATEMENTS                                        3

                  CONDENSED BALANCE SHEETS AS OF
                  MARCH 31, 1998 AND DECEMBER 31, 1997                        3

                  CONDENSED STATEMENTS OF OPERATIONS FOR
                  THE THREE  MONTHS ENDED MARCH 31, 1998 AND 1997             4

                  CONDENSED STATEMENTS OF CASH FLOWS FOR
                  THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997              5

                  NOTES TO CONDENSED FINANCIAL STATEMENTS                     6

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

PART II - OTHER INFORMATION                                                  11

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

SIGNATURES                                                                   12




<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  CONDENSED FINANCIAL STATEMENTS

                        INTELLIGENT MEDICAL IMAGING, INC.
                            CONDENSED BALANCE SHEETS



<TABLE>
<CAPTION>
                                                                        MARCH 31,          DECEMBER 31,
                                                                          1998                 1997
                                                                   --------------        --------------
                                                                       (UNAUDITED)

ASSETS
Current assets:
<S>                                                                     <C>                   <C>     
     Cash and cash equivalents                                          $482,604              $853,164
     Investments available for sale                                    2,549,413             6,230,009
     Accounts receivable, net                                            776,431               671,905
     Notes receivable related parties                                    622,267                    --
     Inventory                                                         5,295,831             5,933,815
     Prepaid expenses and other current assets                            37,126                74,950
     Current portion of investment in sales-type leases                   63,027               222,213
                                                                   --------------        --------------
Total current assets                                                   9,826,699            13,986,056

Revenue equipment, net                                                   375,551               263,632
Property and equipment, net                                            3,099,156             2,789,693

Investment in sales-type leases, net                                     310,537               240,145
Other assets                                                             186,413               126,884
                                                                   --------------        --------------
                                                                   ==============        ==============
                                                                     $13,798,356           $17,406,410
                                                                   ==============        ==============


LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Accounts payable                                                   $994,474            $1,298,811
     Accrued salaries and benefits                                       443,575               394,190
     Other accrued liabilities                                            78,317               101,816
     Current portion of deferred revenue                                 106,543                74,673
                                                                   --------------        --------------
Total current liabilities                                              1,622,909             1,869,491

Deferred revenue                                                         257,047               219,574

STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value-authorized 2,000,000 shares;
     no shares issued or outstanding                                          --                    --
Common stock, $.01 par value-authorized 30,000,000 shares;
     issued and outstanding, shares at 11,031,562 March 31, 1998
     and 11,023,938 at December 31, 1997                                 110,316               110,239
Additional paid-in capital                                            42,553,647            42,537,633
Deferred compensation                                                  (204,939)             (228,252)
Accumulated deficit                                                 (30,540,624)          (27,102,275)
                                                                   --------------        --------------
Total stockholders' equity                                            11,918,400            15,317,345
                                                                   ==============        ==============
                                                                     $13,798,356           $17,406,410
                                                                   ==============        ==============

See accompanying notes
</TABLE>


<PAGE>

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


<TABLE>
<CAPTION>

                                                     THREE MONTHS             THREE MONTHS
                                                       ENDED                     ENDED
                                                      MARCH 31,                 MARCH 31,
                                                       1998                      1997
                                                   -------------            -------------

<S>                                                  <C>                        <C>     
Sales                                                $1,042,298                 $841,705

Cost of sales                                           761,292                  406,243
                                                   -------------            -------------
                                                        281,006                  435,462

Operating expenses:
     Selling, general and administrative              2,349,725                1,494,638
     Research and development                         1,417,025                  716,184
                                                   -------------            -------------
Total operating expenses                              3,766,750                2,210,822
                                                   -------------            -------------
Loss from operations                                 (3,485,744)              (1,775,360)
Other income:
     Investment and interest income                      68,158                  306,857
                                                   ------------             -------------

Net loss                                            ($3,417,586)             ($1,468,503)
                                                   =============            =============


Loss per common share-basic and diluted                  ($0.31)                  ($0.13)
                                                   =============            =============
Weighted average common
     shares outstanding                              11,025,640               10,902,766
                                                   =============            =============

See accompanying notes
</TABLE>












<PAGE>


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


<TABLE>
<CAPTION>
                                                                          THREE MONTHS           THREE MONTHS
                                                                              ENDED                  ENDED
                                                                            MARCH 31,              MARCH 31,
                                                                              1998                   1997

OPERATING ACTIVITIES
<S>                                                                       <C>                      <C>         
Net loss                                                                  ($3,417,586)             ($1,468,503)
Adjustments to reconcile net loss
     to net cash used in operating activities:
          Depreciation                                                        292,702                  124,266
          Amortization of deferred revenue                                    (22,486)                      --
          Services exchanged for common stock                                  23,313                   23,313
          Changes in operating assets and liabilities
               Accounts receivable                                           (104,526)                (835,790)
               Inventory                                                      223,507                 (377,204)
               Prepaid expenses and other current assets                       37,824                  (85,686)
               Investment in sales-type leases                                 88,794                       --
               Other assets                                                   (59,529)                (144,135)
               Revenue equipment                                             (111,919)                      --
               Accounts payable                                              (304,337)                (364,037)
               Accrued salaries and benefits                                   49,385                  (16,897)
               Other accrued liabilities                                      (23,500)                (363,430)
               Deferred revenue                                                91,829                       --
                                                                      ----------------         ----------------
Net cash used in operating activities                                      (3,236,529)              (3,508,103)

INVESTING ACTIVITIES
Purchases of property and equipment                                         (187,688)                (251,727)
Sales of investments available for sale                                     3,659,833                4,988,771
Advances to related parties                                                 (622,267)                       --
                                                                      ----------------         ----------------
Net cash provided by investing activities                                   2,849,878                4,737,044

FINANCING ACTIVITIES
Proceeds from issuance of common stock                                         16,091                   16,100
                                                                      ----------------         ----------------
Net cash provided by financing activities                                      16,091                   16,100


Net (decrease) increase in cash and cash equivalents                         (370,560)               1,245,041
Cash and cash equivalents at beginning of period                              853,164                  288,001
                                                                      ----------------         ----------------

Cash and cash equivalents at end of period                                   $482,604               $1,533,042
                                                                      ================         ================

SUPPLEMENTAL INFORMATION

Inventory transferred to property and equipment                              $414,477                 $292,391
                                                                      ================         ================

See accompanying notes

</TABLE>






<PAGE>



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


1.   BASIS OF PRESENTATION

The accompanying  unaudited condensed 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, 1997.  Operating results for the three
month period ended March 31, 1998 are not necessarily  indicative of the results
that may be expected for the year ending December 31, 1998.

2.   REVENUE RECOGNITION

In October 1997, the American Institute of Certified Public Accountants  (AICPA)
issued Statement of Position (SOP) 97-2,  "Software Revenue  Recognition"  which
the Company has adopted for transactions  entered into during the year beginning
January 1, 1998. SOP 97-2 provides guidance for recognizing  revenue on software
transactions and supersedes SOP 91-1, "Software Revenue  Recognition".  In March
1998, the AICPA issued 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 necessary to recognize revenue for software
licenses in  multiple-element  arrangements  when  undelivered  elements  exist.
Additional guidance is expected to be provided prior to adoption of the deferred
provision  of SOP 97-2.  The Company  will  determine  the impact,  if any,  the
additional guidance will have on the 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 1998.

3.   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  re-evaluates  such
designations  as of each balance  sheet date. At March 31, 1998 and December 31,
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 March 31, 1998 and  December  31,
1997, are summarized as follows:

<TABLE>
<CAPTION>
                                                 March 31, 1998                                   December 31, 1997
                                                  Unrealized          Market                          Unrealized       Market
                                    Cost         Gains (Losses)        Value          Cost          Gains (Losses)      Value
                                  ----------------------------------------------------------------------------------------------

<S>                               <C>                  <C>           <C>              <C>             <C>               <C>     
Cash and cash equivalents         $1,404,475           $0            $1,404,475       $164,708        $0                $164,708

U.S. Government agency bonds
 and mortgages                      $775,170          ($0)             $775,170     $3,677,946      $5,466            $3,683,412

U.S. Corporate bonds and
 asset backed securities            $380,010     ($10,242)             $369,768     $2,356,350      $25,539           $2,381,889
                                  =============================================================================================
Total investments 
  available-for-sale              $2,559,655     ($10,242)           $2,549,413     $6,199,004      $31,005           $6,230,009
                                  ==============================================================================================
</TABLE>

4.   PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

                                          MARCH 31,             DECEMBER 31,
                                            1997                    1997
                                      -----------------      ----------------
Furniture, fixtures and office
     equipment                              $2,289,023            $1,403,234

Computer equipment                           2,678,526             2,962,150
                                      -----------------      ----------------
                                             4,967,549             4,365,384
Accumulated depreciation                    (1,868,393)           (1,575,691)
                                      -----------------      ----------------
                                            $3,099,156            $2,789,693
                                      =================      ================


5.   NOTE RECEIVABLE RELATED PARTIES

In January 1998,  $196,000 was advanced to the Company's  President and $424,000
was advanced to a member of the Board of Directors.  These  advances,  which are
secured by shares of the Company's common stock and bear interest at the rate of
prime plus 1% per annum, are due 180 days from the date of the first advance.

6.   COMMITMENTS AND CONTINGENCIES

In November 1996, IMI and DiaSys Corporation  ("DiaSys") (Nasdaq,  DIYS) entered
into a Product Integration  Agreement (the "DiaSys Agreement").  DiaSys designs,
develops,  manufactures and distributes workstation products which prepare fluid
samples.   Under  the  DiaSys   Agreement,   IMI  was  granted  a  nonexclusive,
nontransferable   license  to  integrate  the  patented  DiaSys  wet-preparation
specimen  handling  system  together  with  the  MICRO21  in  order  to  produce
integrated  systems for resale to MICRO21 end users.  The DiaSys  Agreement  was
terminated  in July 1997,  when IMI  rejected  products  delivered by DiaSys and
returned  them.  The  DiaSys  Agreement   provides  for  mandatory  and  binding
arbitration of disputes between the parties. On January 12, 1998, DiaSys filed a
demand for  arbitration of the dispute.  In its demand for  arbitration,  DiaSys
seeks  damages in excess of $1,000,000  for IMI's  alleged  breach of the DiaSys
Agreement and IMI's alleged defamation of DiaSys and its products. IMI filed its
response on February 9, 1998. In its  response,  IMI denies that it breached the
DiaSys  Agreement  or defamed  DiaSys,  and  states  that it  properly  rejected
products supplied by DiaSys due to  non-conformance.  IMI also seeks damages for
libelous  statements  made by DiaSys in a July 2, 1997 press  release  issued by
DiaSys, and for delays in IMI's product  development  efforts caused by DiaSys's
breach of the  DiaSys  Agreement.  Management  is  unable  to make a  meaningful
estimate of the  likelihood or amount or range of loss that could result from an
unfavorable  outcome  of the  pending  arbitration.  As of March 31,  1998,  the
Company has not accrued any loss contingencies or related expenses in connection
with this  arbitration.  The Company  believes that DiaSys's  claims are without
merit, and that the Company will prevail in the arbitration.  However, there can
be no  assurance  that the Company  will  prevail in the  arbitration  or in its
counterclaim  asserted  against  DiaSys,  or that any resolution of the dispute,
which is expected  to occur  within one year,  will not have a material  adverse
effect  on  the  Company's   liquidity,   financial  condition  and  results  of
operations. The Company and DiaSys are presently in the process of selecting the
panel of arbitrators and no hearing date for the arbitration has been scheduled.

On  March  7,  1997,  the  Company  entered  into a  settlement  agreement  with
International  Remote Imaging Systems,  Inc.  ("IRIS")  effective March 1, 1997.
Under  the  settlement  agreement,   IRIS  granted  the  Company  a  fully-paid,
royalty-free  license for  worldwide  direct sales of the MICRO21  system by the
Company.  The Company  agreed to pay a 4 percent  royalty on future sales of the
MICRO21 system through third-party  distributors in the United States. Since the
Company's  current  business plan is to sell its products  primarily on a direct
basis,  without  reliance on  third-party  distributors,  the  Company  does not
believe  the  4  percent  royalty  on  U.S.  sales  through   distributors  will
significantly  adversely impact the Company's  results of operations  during the
term of the  license.  This license and royalty  obligation  expire in September
2000,  when the IRIS  patents  that are the subject of the license  expire.  The
Company has the right,  but not the  obligation,  to request a license from IRIS
for  sales  through  third-party  distributors  outside  of the  United  States;
however,  the Company does not believe  that the MICRO21  system  infringes  any
foreign  patents  held by IRIS and the Company  has no current  plans to request
such a license.

<PAGE>

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.

The Company began to build up internal sales and service organizations following
termination  of its  exclusive  sales and  distribution  agreement  with Coulter
Corporation  (the "Coulter  Agreement").  Since  October 1, 1996,  the Company's
sales, marketing and service personnel have increased from 8 to 49 through March
31, 1998. IMI's marketing group has developed a comprehensive plan that includes
lead fulfillment, targeted advertising and an aggressive trade show schedule for
both domestic and international  markets. In the US, the Company has established
three  regions  comprising  nine  territories  and  employs a national  accounts
manager.   Each  US  territory  is  assigned  a  team   consisting  of  a  sales
representative,  a technical application  specialist and a regional manager. The
Company's domestic service organization  consists of four regional field service
offices and centralized  customer support personnel  providing 24-hour coverage.
In July 1997,  the Company  opened an office in the  Netherlands  to  coordinate
sales and service  efforts in European  markets.  In January  1998,  the Company
hired a consultant  to coordinate  distributors  in other  international  market
areas. IMI has field personnel located in Europe, and certified distributors are
service representatives in international markets other than Europe.

During  the fourth  quarter of 1997,  the  Company  began to offer a  short-term
rental  program  which  provides  for  monthly or annual  rentals of the MICRO21
system.  The  Company  believes  that this  program  will  augment its sales and
long-term  lease  programs by giving  potential  customers the ability to fund a
MICRO21  with  operating  funds,  thereby  overcoming  potential  cost  barriers
associated with limited or non-existent capital expenditure funds.  Expansion of
the short-term  rental  program may require that the Company  secure  additional
financing.

RESULTS OF OPERATIONS

Product sales were $1,042,298 for the three months ended March 31, 1998 compared
with  $841,705  for the three  months  ended  March 31,  1997,  an  increase  of
$200,593.  The  increase in sales for the three  months  ended March 31, 1998 as
compared to March 31, 1997 was primarily  due to increased  sales of the MICRO21
system to hospitals and laboratories.

Cost of sales was $761,292  for the three  months ended March 31, 1998  compared
with  $406,243  for the three  months  ended  March 31,  1997,  an  increase  of
$355,049.  The  increase in cost of sales for the three  months  ended March 31,
1998 was primarily due to support of evaluation  units  installed with customers
and depreciation recorded on rental units.

Selling,  general and  administrative  expenses  were  $2,349,725  for the three
months ended March 31, 1998 compared with  $1,494,638 for the three months ended
March 31, 1997,  an increase of $855,087.  The increase in selling,  general and
administrative  expenses was primarily due to increased  expenses related to the
continued growth of the Company and the need for additional  personnel following
the termination of the Coulter Agreement.

Research and  development  expenses were  $1,417,025  for the three months ended
March 31, 1998 compared with $716,184 for the three months ended March 31, 1997,
an increase of $700,841.  The increase in research and development  expenses was
primarily due to resources  being utilized in the development of new procedures,
technologies and products for the MICRO21 system.

Interest  income was $68,158 for the three months ended March 31, 1998  compared
with $306,857 for the three months ended March 31, 1997, a decrease of $238,699.
The decrease for the three months ended March 31, 1998 was  primarily due to the
sale of investment securities to fund operations.


LIQUIDITY AND CAPITAL RESOURCES

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 three months ended March 31, 1998, net cash used in operating activities
of $3,236,529 was primarily due to the Company's operating loss.

For the three  months  ended March 31,  1998,  net cash  provided  by  investing
activities  of  $2,849,878  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 advances to the Company's Chief Executive
Officer and a member of the Board of Directors.

For the three  months  ended March 31,  1998,  net cash  provided  by  financing
activities  of $16,091 was primarily the result of proceeds from the exercise of
common stock options.

At March 31, 1998, the Company had a net operating loss ("NOL")  carryforward of
approximately  $26,000,000 available for income tax purposes that expire through
the year 2012. 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's 1998 operating plan  contemplates  expanding sales revenue through
the efforts of its internal sales, marketing and service force. During the third
quarter of 1997, the Company  established a division in Europe to further expand
its marketing  efforts.  During the fourth quarter of 1997, the Company began to
offer a short-term  rental  program.  The  Company's  1998  operating  plan also
contemplates   implementing  cost  controls,   seeking  alternative  sources  of
financing and exploring  strategic  alternatives.  Although  management believes
that its plan will be  successful,  there can be no  assurance  that the Company
will be successful in its attempt to expand revenue, secure additional financing
or consummate a strategic alternative.

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. Additional funds
may be sought through equity or debt financings.  There can be no assurance that
commitment for such financings can be obtained on favorable terms, if at all.


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
1998 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;  possible  delays in the
development  of  monolayer  procedures  as a result  of the  termination  of the
license agreement with MonoGen, Inc.; potential delays and technical problems in
the  development  and commercial  release of new products and procedures such as
the proposed MICRO21 Microscopic  Workstation System; delays in closing sales of
systems placed for  evaluation  due to length of the closing cycle,  uncertainty
due to industry  consolidation  and customer budget processes and  restrictions;
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 technological 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.


                           PART II - OTHER INFORMATION


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:  MAY 15, 1998                   BY: /S/ TYCE M. FITZMORRIS
                                         ----------------------------------
                                          Tyce M. Fitzmorris, President and 
                                          Chief Executive Officer


Date:  MAY 15, 1998                   BY: /S/ GENE M. COCHRAN
                                          ---------------------------------
                                          Gene M. Cochran, Chief Financial 
                                          Officer