<PAGE>   1


                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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, 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: 1-11578

                                   DISC, INC.
             (Exact name of registrant as specified in its charter)

          California                                           77-0129625
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                           Identification Number)

          372 Turquoise Street                                   95035
          Milpitas, California                                 (Zip Code)
(Address of principal executive offices)


Registrant's telephone number, including area code: (408) 934-7000


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
                                              ---    ---

The number of shares outstanding of the registrant's Common Stock as of April
30, 1997, was 3,288,162.


This report, including all exhibits and attachments, contains 9 pages.




      See the accompanying condensed notes to these Financial Statements.

<PAGE>   2
                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                                   DISC, INC.
                                  BALANCE SHEET

<TABLE>
<CAPTION>
                                                                    March 31,        December 31,
                                                                     1997               1996
                                                                  ------------      ------------
                                                                  (Unaudited)
<S>                                                               <C>               <C>         
ASSETS
Current assets:
   Cash                                                           $    285,000      $    305,000
   Accounts receivable, net of allowance for doubtful
        accounts of $116,000 and $115,000                            1,262,000         1,430,000
   Inventories                                                       1,750,000         1,862,000
   Prepaids and deposits                                               171,000            72,000
                                                                  ------------      ------------
        Total current assets                                         3,468,000         3,669,000

Property and equipment, net                                            413,000           441,000
                                                                  ------------      ------------
                                                                  $  3,881,000      $  4,110,000
                                                                  ============      ============
LIABILITIES, AND SHAREHOLDERS'  EQUITY
Current liabilities:
   Accounts payable                                               $  1,431,000      $  1,585,000
   Borrowings under credit line                                        993,000         1,087,000
   Other accrued liabilities                                           227,000           211,000
   Accrued warranty                                                     98,000            95,000
   Current portion of capitalized lease obligations                      1,000                --
                                                                  ------------      ------------
        Total current liabilities                                    2,750,000         2,978,000
Shareholders' equity:
   Series C Convertible Preferred Stock; no par value,
      372,296 shares authorized, issued and outstanding              1,861,000         1,861,000
   Series D Convertible Preferred Stock; no par value,
      600,000 shares authorized, 444,444 shares issued and
      outstanding                                                    1,971,000         1,971,000
   Series E Convertible Preferred Stock; no par value,
      500,000 shares authorized, issued and outstanding              1,980,000         1,980,000
   Series F Convertible Preferred Stock; no par value,
      250,000 shares authorized, issued and outstanding              1,250,000         1,250,000
   Series G Convertible Preferred Stock, no par value,
      110,000 shares authorized, issued and outstanding                950,000           950,000
   Series H Convertible Preferred Stock, no par value,
      26,109 shares authorized, issued and outstanding               1,000,000         1,000,000
   Series I Convertible Preferred Stock, no par value,
      167,065 shares authorized, issued and outstanding                700,000           700,000
   Series J Convertible Preferred Stock, no par value, shares
      authorized, 244,966 issued and outstanding                       730,000           730,000
   Series K Convertible Preferred Stock, no par value,
      235,110  shares authorized, issued, and outstanding              750,000
   Common Stock; no par value, 20,000,000 shares
      authorized; 3,288,162 and 3,279,532 shares
      issued and outstanding                                        10,925,000        10,925,000
   Accumulated deficit                                             (20,986,000)      (20,235,000)
                                                                  ------------      ------------
        Total shareholders' equity                                   1,131,000         1,132,000
                                                                  ------------      ------------
                                                                  $  3,881,000      $  4,110,000
                                                                  ============      ============
</TABLE>



      See the accompanying condensed notes to these Financial Statements.


<PAGE>   3

                                   DISC, INC.
                             STATEMENT OF OPERATIONS
                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                   Three Months Ended March 31,
                                   ----------------------------
                                        1997            1996
                                   -----------      -----------
<S>                                <C>               <C>       
Net sales                          $ 1,701,000       $1,402,000
                                   -----------      -----------

Costs and expenses:
   Cost of sales                     1,405,000        1,342,000
   Research and development            320,000          283,000
   Marketing and sales                 460,000          444,000
   General and administrative          240,000          252,000
                                   -----------      -----------
                                     2,425,000        2,321,000
                                   -----------      -----------

Loss from operations                  (724,000)        (919,000)
Interest income (expense), net         (27,000)         (33,000)
                                   -----------      -----------
Net loss                           $  (751,000)     $  (952,000)
                                   ===========      ===========

Net loss per share                 $     (0.23)     $     (0.31)
                                   ===========      ===========
Weighted average common
   shares and equivalents            3,282,000        3,044,000
                                   ===========      ===========
</TABLE>



      See the accompanying condensed notes to these Financial Statements.





<PAGE>   4


                                   DISC, INC.
                             STATEMENT OF CASH FLOWS
                           (DECREASE) INCREASE IN CASH
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                   Three Months Ended March 31,
                                                                   ----------------------------
                                                                        1997           1996
                                                                     ---------      ---------
<S>                                                                  <C>            <C>       
Cash flows from operating activities:
   Net loss                                                          $(751,000)     $(952,000)
   Adjustments to reconcile net loss to cash used in operating
     expenses
     Depreciation expense                                               37,000         74,000
   Changes in assets and liabilities:
     Accounts receivable                                               168,000        161,000
     Inventories                                                       112,000         (8,000)
     Prepaid and deposits                                              (99,000)       (20,000)
     Accounts payable                                                 (154,000)       (63,000)
     Other accrued liabilities                                          16,000       (147,000)
     Accrued warranty                                                    3,000        (18,000)
                                                                     ---------      ---------
Cash used in operating activities                                     (668,000)      (973,000)
                                                                     ---------      ---------

Cash flows used in investing activities for capital expenditures        (9,000)      (160,000)
                                                                     ---------      ---------

Cash flows from financing activities:
   Borrowing under bank line of credit                                 (94,000)       (58,000)
   Proceeds from issuance of Common Stock                                   --          2,000
   Proceeds from issuance of Preferred Stock                           750,000        950,000
   Repayment of capitalized lease obligations                            1,000        (12,000)
                                                                     ---------      ---------
Cash provided by financing activities                                  657,000        882,000
                                                                     ---------      ---------

Net decrease in cash                                                   (20,000)      (251,000)
Cash at beginning of period                                            305,000        298,000
                                                                     ---------      ---------
Cash at end of period                                                $ 285,000      $  47,000
                                                                     =========      =========
Supplemental disclosure of cash flow information:
   Cash paid during the period for interest                          $  28,000      $  33,000
                                                                     =========      =========
</TABLE>



      See the accompanying condensed notes to these Financial Statements.




<PAGE>   5

                                   DISC, Inc.
                     CONDENSED NOTES TO FINANCIAL STATEMENTS


NOTE 1 - GENERAL

The unaudited Financial Statements have been prepared by the Company pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations. In the opinion of
management, the financial statements reflect all adjustments, consisting only of
normal recurring adjustments, necessary for a fair statement of the financial
position, operating results and cash flows for those periods presented. These
Financial Statements should be read in conjunction with the Financial Statements
and notes thereto for the years ended December 31, 1996 and 1995, included in
the Company's Form 10-K. The results of operations for the interim periods are
not necessarily indicative of the results that may be expected for any other
period or for the fiscal year which ends December 31, 1997.

NOTE 2 - INVENTORIES

The components of inventory were as follows:

<TABLE>
<CAPTION>
                                                 March 31,     December 31,
                                                   1997            1996
                                                ----------     ----------
<S>                                              <C>            <C>      
Purchased component parts and subassemblies     $1,225,000     $1,286,000

Work-in-process                                    500,000        545,000

Finished goods                                      25,000         31,000
                                                ----------     ----------
                                                $1,750,000     $1,862,000
                                                ==========     ==========
</TABLE>

NOTE 3 - RELATED PARTY TRANSACTIONS

In April, 1997, the Company amended the March 1996 agreement, with one of its
shareholders to increase the total amount to be received upon issuance of
subordinated convertible debentures to $4,430,000. Through March 31, 1997, the
Company has received $3,180,000 pursuant to such agreement. The Company will
receive the remaining $1,250,000 in installments during 1997 in exchange for
subordinated convertible debentures. The debentures will convert to preferred
stock at June 30, September 30, and December 31, 1997 in amounts to be
determined at a price per share based on the closing bid price of the Company's
Common Stock on the last day of the calendar quarter.



<PAGE>   6
                                     PART II

                                OTHER INFORMATION


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

This Form 10-Q contains certain forward looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Act
of 1934 and the Company intends that such forward-looking statements are subject
to the safe harbors created thereby. These forward-looking statements include
(i) the existence and development of the Company's technical and manufacturing
capabilities, (ii) anticipated increased sales, (iii) potential future decreases
in manufacturing costs, and (iv) the need for, and availability of, additional
financing.

The forward-looking statements included herein are based on current expectations
that involve a number of risks and uncertainties. These forward-looking
statements are based on assumptions regarding the Company's business, which
involve judgments with respect to, among other things, future economic,
competitive and market conditions, and future business decisions, all of which
are difficult or impossible to predict accurately and many of which are beyond
the control of the Company. Although the Company believes that the assumptions
underlying the forward-looking statements are reasonable, any of the assumptions
could prove inaccurate and, therefore, there can be no assurance that the
results contemplated in forward-looking statements will be realized. In
addition, the business and operations of the Company are subject to substantial
risks which increase the uncertainty inherent in such forward-looking statements
(see "Additional Factors that May Affect Future Operating Results" on page 5 of
the Company's Annual Report on Form 10-K for the year ended December 31, 1996).
In light of the significant uncertainties inherent in the forward-looking
information included herein, the inclusion of such information should not be
regarded as a representation by the Company or any other person that the
objectives or plans of the Company will be achieved.

Results of Operations

The Company had sales of $1,701,000 for the quarter ended March 31, 1997, as
compared to $1,402,000 in the first quarter of 1996. This increase was primarily
due to sales to an expanded customer base as a result of an increase in the
Company's direct sales personnel. The general sales cycles for distribution of
the Company's products are similar to those of most businesses selling products
designed for use as part of large systems, and range from three to six months
for Value Added Resellers and small System Integrators and from one to two years
for Original Equipment Manufacturers, Product Integrators and large System
Integrators.

Cost of sales, as a percentage of sales, was 83% in the first quarter of 1997,
as compared to 96% in the first quarter of 1996. The Company's relatively low
gross margins reflected the Company's low levels of net sales, which have
resulted in unabsorbed manufacturing costs and high costs of materials due to
the inability to achieve purchasing economies of scale due to low sales volume.
The Company expects that, as product sales continue to increase, costs of sales
per unit of product will decrease because fixed manufacturing costs will be
distributed over the larger sales volume, and material costs will decrease as
the result of volume purchases.

Research and development expenses were $320,000 in the first quarter of 1997 as
compared to $283,000 in the first quarter of 1996. The primary reason for the
increase in the first quarter of 1997 as compared to the first quarter of 1996
was an increase in engineering personnel. The Company has restructured its
research and development group and is focused on building core competencies
internally. The Company believes that research and development expenses will
continue to increase moderately in 1997 due to current projects under
consideration.

Marketing and sales expenses were $460,000 in the first quarter of 1997 as
compared to $444,000 in the first quarter of 1996. The primary reason for the
increase was due to participation in more trade shows targeted to vertical
markets. The Company believes that marketing and sales expenses will moderately
increase in connection with the Company's continued efforts to broaden the 
market acceptance of its products.





<PAGE>   7
General and administrative expenses were $240,000 in the first quarter of 1997
as compared to $252,000 in the first quarter of 1996. The primary reason for the
decrease in expenses was due to a reduction in headcount.

Liquidity and Capital Resources

In the first quarter of 1997, the Company used $668,000 of cash in
operations, primarily to fund operating losses. Also in the first quarter of
1997, the Company raised $750,000 through the issuance of subordinated
convertible debentures. In addition, in April 1997, the Company amended its
agreement to raise funds through the issuance of subordinated convertible
debentures. The Company will receive $1,250,000 in installments during the
remainder of 1997. The Company believes that this cash together with borrowing
from the credit line, which allows it to borrow the lesser of $1,500,000 or 80%
of eligible receivables, and cash generated from operations will be sufficient
to meet its operating requirements at least through the end of 1997, although
the Company anticipates that it will continue to incur net losses for the
foreseeable future. The ability to sustain its operations for a significant
period after December 31, 1997, will depend on the Company's ability to
significantly increase sales or raise significant additional equity or debt
financing. There is no assurance that any of these conditions will be achieved.
In particular, the Company expects to require increasing amounts of cash to
finance the Company's efforts to increase sales, which the Company plans to
achieve by increasing selling efforts to large system integrators and OEMs. 
The company plans to hire additional sales and sales support staff, increase
its participation at industry trade shows and make evaluation units available
to VARs and software developers. In addition, the Company intends to expand its
current network of resellers. The Company expects that it will require cash to
finance purchases of inventory to satisfy anticipated increased sales as the
Company's products achieve market acceptance.


Item 6.  Exhibits and Reports on Form 8-K

         (a)  Exhibits

              27.1 Financial Data Schedule

         (b)  Reports on Form 8-K

                  During the fiscal quarter ended March 31, 1997, the Registrant
                  did not file any reports on Form 8-K.


<PAGE>   8

                                   SIGNATURES


         Pursuant to the requirements of Section 13 or 15(d) 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.



                                       DOCUMENT IMAGING SYSTEMS CORPORATION


Dated May 9, 1997                      By: /s/ J. Richard Ellis
                                          -------------------------------------
                                           J. Richard Ellis
                                           President
                                           Chief Executive Officer
                                           (Principal Executive Officer and
                                           Duly Authorized Officer)


Dated May 9, 1996                      By: /s/ Henry Madrid
                                          -------------------------------------
                                            Henry Madrid
                                            Vice President of Finance and
                                            Chief Financial Officer
                                            (Principal Financial Officer)



<PAGE>   9
                                 EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
  NO.                   DESCRIPTION
-------                 ----------- 
  <S>            <C>
  27             Financial Data Schedule
</TABLE>