U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                          ___________________________

                                   FORM 10-QSB

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                   OF THE SECURITIES AND EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2001

Commission File Number: 1-11140

                           OPHTHALMIC IMAGING SYSTEMS
             (Exact name of registrant as specified in its charter)

                CALIFORNIA                      94-3035367
           (State of Incorporation) (IRS Employer Identification No.)

                 221 LATHROP WAY, SUITE I, SACRAMENTO, CA 95815
                    (Address of principal executive offices)

                                 (916) 646-2020
                (Issuer's telephone number, including area code)

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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      XX                No
              -------------             -------------

As of November 14, 2001, 8,138,305 shares of common stock, at no par value, were
outstanding.

Transitional Small Business Disclosure Format:

         Yes                        No      XX
              -------------             -------------



<PAGE>



                           OPHTHALMIC IMAGING SYSTEMS

                                   FORM 10-QSB

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2001



PART I.  FINANCIAL INFORMATION                                              Page
                                                                            ----

Item 1.   Financial Statements

          Condensed Balance Sheet as of September 30, 2001                     2

          Condensed Statements of Operations for the Three Months
          and Nine Months ended September 30, 2001 and
          September 30, 2000                                                   3

          Condensed Statements of Cash Flows for the Nine Months
          September 30, 2001 and September 30, 2000                            4

          Notes to Financial Statements                                        5

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


PART II. OTHER INFORMATION

Item 1.   Legal Proceedings                                                   17

Item 2.   Changes in Securities and Use of Proceeds                           17

Item 3.   Defaults upon Senior Securities                                     17

Item 4.   Submission of Matters to a Vote of Security Holders                 17

Item 5.   Other Information                                                   17

Item 6.   Exhibits and Reports on Form 8-K                                    17

<PAGE>


                          PART I FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS














                                       1
<PAGE>

()()

<TABLE>
<CAPTION>


                                                     Ophthalmic Imaging Systems
                                                       Condensed Balance Sheet
                                                         September 30, 2001
                                                             (Unaudited)

<S>                                                                     <C>
ASSETS
Current assets:
     Cash and equivalents                                                 $     73,189
     Accounts receivable, net                                                  476,099
     Inventories, net                                                          355,340
     Prepaid expenses and other current assets                                  80,824
                                                                          ------------
Total current assets                                                           985,452
Furniture and equipment, net of accumulated
     depreciation and amortization of $1,228,979                               195,501
Other assets                                                                    12,335
                                                                          ------------
                                                                          $  1,193,288
                                                                          ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
     Notes payable to related party                                       $    424,908
     Accounts payable                                                          409,196
     Accrued liabilities                                                     1,539,460
     Accrued warrant appreciation right                                             --
     Deferred extended warranty revenue                                        198,259
     Customer deposits                                                         212,374
     Capitalized lease obligation and other notes
     payable                                                                     8,939
                                                                          ------------
Total current liabilities                                                    2,793,136
                                                                          ------------

Noncurrent liabilities:
     Capitalized lease obligation, less current portion                          5,024
     Notes payable to related party, less current portion                    1,750,312
                                                                          ------------
Total noncurrent liabilities                                                 1,755,336

                                                                          ------------
Total liabilities                                                            4,548,472
                                                                          ------------

Stockholders' deficit:
     Preferred stock, no par value, 20,000,000 shares authorized;
        none issued or outstanding                                                  --
     Common stock, no par value, 20,000,000 shares authorized;
        8,138,305 issued and outstanding                                    12,630,604
     Deferred compensation                                                          --
     Accumulated deficit                                                   (15,985,788)
                                                                          ------------
Total stockholders' deficit                                                 (3,355,184)
                                                                          ------------
                                                                          $  1,193,288
                                                                          ============

SEE ACCOMPANYING NOTES.
</TABLE>

                                       2
<PAGE>
<TABLE>
<CAPTION>

                                                     Ophthalmic Imaging Systems
                                                 Condensed Statements of Operations
                                                             (Unaudited)

                                                    Three months ended September 30,        Nine months ended September 30,
                                                         2001               2000               2001              2000
                                                    ---------------    --------------      -------------    --------------
<S>                                                    <C>                 <C>              <C>               <C>

Net revenues                                           $ 1,092,630         $ 741,979        $ 4,133,234       $ 3,261,075
Cost of sales                                              489,308           263,150          1,923,811         1,552,023
                                                    ---------------    --------------      -------------    --------------
Gross profit                                               603,322           478,829          2,209,423         1,709,052
Operating expenses:
      Sales and marketing                                  241,865           260,851          1,157,422         1,009,799
      General and administrative                           264,201           285,507            850,185           855,235
      Research and development                             134,601            70,279            311,891           192,142
                                                    ---------------    --------------      -------------    --------------
           Total operating expenses                        640,667           616,637          2,319,498         2,057,176
                                                    ---------------    --------------      -------------    --------------
Income (loss) from operations                              (37,345)         (137,808)          (110,075)         (348,124)
Other expense, net                                         (71,004)          (71,477)          (179,345)         (147,009)
                                                    ---------------    --------------      -------------    --------------
Income (loss) before extraordinary item                   (108,349)         (209,285)          (289,420)         (495,133)
Extraordinary item                                              --            62,836            188,762            62,836
                                                    ---------------    --------------      -------------    --------------
Net income (loss)                                       $ (108,349)       $ (146,449)        $ (100,658)       $ (432,297)
                                                    ===============    ==============      =============    ==============

Shares used in the calculation of basic
      net income (loss) per share                        8,138,305         5,680,264          8,138,305         4,763,707
                                                    ===============    ==============      =============    ==============

Basic income (loss) per share before
      extraordinary item                                $    (0.01)       $    (0.04)        $    (0.03)       $    (0.10)
 Extraordinary item                                             --              0.01               0.02              0.01
                                                    ---------------    --------------      -------------    --------------
Basic net income (loss) per share                       $    (0.01)       $    (0.03)        $    (0.01)       $    (0.09)
                                                    ===============    ==============      =============    ==============

Shares used in the calculation of diluted
      net income (loss) per share                        8,138,305         5,680,264          8,138,305         4,763,707
                                                    ===============    ==============      =============    ==============
Diluted  income (loss) per share before
      extraordinary item                                $    (0.01)       $    (0.04)        $    (0.03)       $    (0.10)
 Extraordinary item                                             --              0.01               0.02              0.01
                                                    ---------------    --------------      -------------    --------------
Diluted net income (loss) per share                     $    (0.01)       $    (0.03)        $    (0.01)       $    (0.09)
                                                    ===============    ==============      =============    ==============
</TABLE>

SEE ACCOMPANYING NOTES.


                                       3
<PAGE>


<TABLE>
<CAPTION>

                                                     Ophthalmic Imaging Systems
                                                 Condensed Statements of Cash Flows
                                             Increase (Decrease) in Cash and Equivalents
                                                             (Unaudited)


                                                                       Nine months ended September 30,
                                                                            2001                2000
                                                                     ---------------       ---------------
<S>                                                                     <C>                  <C>

OPERATING ACTIVITIEs:
Net income (loss)                                                       $ (100,658)        $   (432,297)
Adjustments to reconcile net income (loss) to net cash
      used in operating activities:
           Depreciation and amortization                                    92,147               63,491
           Stock option compensation expense                                 3,049               59,166
           Extraordinary gain on early exinguishment of debt              (188,762)                  --
           Extraordinary gain on conversion to common
                stock of debt owed to related party                             --              (53,911)
           Net (increase) decrease in current assets other
                than cash and equivalents                                 (102,421)              73,485
           Net decrease in current liabilities other than
                short-term borrowings                                     (116,037)             (86,239)
                                                                    ---------------       --------------
Net cash used in operating activities                                     (412,682)            (376,305)

INVESTING ACTIVITIES:
Purchases of furniture and equipment                                       (75,660)                  --
Net (increase) decrease in other assets                                     (2,040)              20,057
                                                                    ---------------       --------------
Net cash (used in) provided by investing activities                        (77,700)              20,057

FINANCING ACTIVITIES:
Principal payments on notes payable                                         (5,410)              (5,233)
Proceeds from borrowings under notes payable to
      significant shareholders, net                                        532,407              260,661
Net repayments of credit facility borrowings                                    --              (24,844)
                                                                    ---------------       --------------
Net cash provided by financing activities                                  526,997              230,584
                                                                    ---------------       --------------
Net increase (decrease) in cash and equivalents                             36,615             (125,664)
Cash and equivalents at beginning of period                                 36,574              212,586
                                                                    ---------------       --------------
Cash and equivalents at end of period                                   $   73,189         $     86,922
                                                                    ===============       ==============

SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
           Reduction in aggregate debt payable to
           significant shareholders in exchange for shares of
           the Company's common stock                                   $       --         $ (2,108,000)
                                                                    ===============       ==============

           (Reduction) increase in aggregate debt payable
           to significant shareholders in exchange for
           inventory and other noncash transactions, net                $ (115,738)        $   783,653
                                                                    ===============       ==============
</TABLE>


SEE ACCOMPANYING NOTES.

                                       4

<PAGE>

                           Ophthalmic Imaging Systems

                     Notes to Condensed Financial Statements

         Three and Nine Month Periods ended September 30, 2001 and 2000

                                   (Unaudited)


Note 1.         Basis of Presentation

                The  accompanying   unaudited  condensed  balance  sheet  as  of
                September 30, 2001,  condensed  statements of operations for the
                three and nine month periods  ended  September 30, 2001 and 2000
                and the  condensed  statements  of cash  flows for the three and
                nine month periods  ended  September 30, 2001 and 2000 have been
                prepared  in  accordance  with  generally  accepted   accounting
                principles  for  interim  financial  information  and  with  the
                instructions  to Form 10-QSB and Item 310(b) of Regulation  S-B.
                Accordingly,  they do not  include  all of the  information  and
                footnote  disclosures  required by generally accepted accounting
                principles for complete  financial  statements.  It is suggested
                that these condensed financial statements be read in conjunction
                with the audited financial statements and notes thereto included
                in the registrant's  (the Company's)  Transition  Report for the
                Four Months  Ended  December 31, 2000 on Form  10-KSB/A.  In the
                opinion of  management,  the  accompanying  condensed  financial
                statements  include all  adjustments,  consisting only of normal
                recurring adjustments,  necessary for a fair presentation of the
                Company's  financial  position and results of operations for the
                periods  presented.  The  results of  operations  for the period
                ended September 30, 2001 are not  necessarily  indicative of the
                operating results for the full year.

                Certain  amounts in the fiscal 2000  financial  statements  have
                been reclassified to conform with the presentation in the fiscal
                2001 financial statements.

Note 2.         Net Income (Loss) Per Share

                Basic  earnings   (loss)  per  share  ("EPS"),   which  excludes
                dilution,  is computed by dividing  income  (loss)  available to
                common  shareholders  by the  weighted-average  number of common
                shares  outstanding  for the period.  Diluted EPS  reflects  the
                potential  dilution  that  could  occur if  securities  or other
                contracts to issue common stock,  such as stock options,  result
                in the  issuance of common stock which shares in the earnings of
                the Company.  The treasury  stock method is applied to determine
                the dilutive  effect of stock options in computing  diluted EPS.
                However,  diluted EPS are not  presented  when a net loss occurs
                because   the   conversion   of   potential   common   stock  is
                antidilutive.

                                       5
<PAGE>


                The  following  table  sets forth the  computation  of basic and
                diluted income per share:

<TABLE>
<CAPTION>


                                                                         Unaudited                       Unaudited
                                                                     Three Months Ended              Nine Months Ended
                                                                        September 30,                   September 30,
                                                                     2001            2000           2001            2000
                                                                --------------- --------------- -------------- ---------------
                <S>                                             <C>             <C>             <C>           <C>
                Numerator for basic and diluted
                net loss per share                              $ (108,349)     $ (146,449)     $ (100,658)    $ (432,297)
                                                                =============== =============== ============== ===============

                Denominator for basic net loss per share:
                   Weighted average shares                       8,138,305       5,680,264       8,138,305      4,763,707

                Effect of dilutive securities:
                   Employee/director stock options                      --              --              --             --
                   Warrants and other                                   --              --              --             --
                Dilutive potential common shares                        --              --              --             --
                                                                --------------- --------------- -------------- ---------------

                Denominator for diluted net loss                 8,138,305       5,680,264       8,138,305      4,763,707
                per share
                                                                =============== =============== ============== ===============
                Basic net loss per share                        $    (0.01)     $    (0.03)     $    (0.01)    $    (0.09)
                                                                =============== =============== ============== ===============
                Diluted net loss per share                      $    (0.01)     $    (0.03)     $    (0.01)    $    (0.09)
                                                                =============== =============== ============== ===============

</TABLE>


Note 3.         Notes Payable to Related Parties

                In  July  2000,  the  Company,   Premier  Laser  Systems,   Inc.
                ("Premier"),  a California  corporation  and the Company's  then
                majority  shareholder,   and  MediVision  Medical  Imaging  Ltd.
                ("MediVision"), an Israeli corporation, entered into a series of
                definitive  agreements  relating to the  transfer  of  Premier's
                ownership  interests  in the Company to  MediVision,  including,
                among other things, converting in favor of Premier the Company's
                entire debt owed to Premier,  calculated at an approximate  book
                value of $2.1 million, into shares of the Company's common stock
                at conversion price of $0.55 per share.  This occurred in August
                2000  in  connection  with  the  closing  of  the   transactions
                contemplated by the definitive  agreements (the  "Closing").  In
                addition,  at the  Closing,  Premier and the Company  executed a
                mutual  waiver and  release of claims,  thereby  releasing  each
                other from any and all claims,  whether known or unknown between
                them.

                Also in connection with the definitive agreements, in July 2000,
                the Company  executed a promissory  note in favor of  MediVision
                (the  "Short-Term  Note").  The Company has borrowed the maximum
                principal  amount of  $260,000  available  under the  Short-Term
                Note, which principal amount outstanding,  together with any and
                all accrued interest,  was payable the earlier of the closing or
                termination of the  transactions  contemplated by the definitive
                agreements,  October 13, 2000 or as otherwise  stipulated in the
                Short-Term  Note.  Under  the  terms  of  the  Short-Term  Note,
                borrowings  bear  interest at the rate of 9.3% per annum and are
                secured by certain of the  Company's  assets.  At September  30,
                2001,  the  Company  had  recorded   approximately  $289,000  in
                principal and

                                       6
<PAGE>

                interest  outstanding under the Short-Term Note.  MediVision and
                the Company  are in  discussions  with  regard to  reclassifying
                amounts  currently  owing under the  Short-Term  Note to amounts
                owing under the Working Capital Note discussed in further detail
                below.

                In  further  connection  with the  Closing in August  2000,  the
                Company executed a second promissory note in favor of MediVision
                (the  "Working  Capital  Note").  The maximum  principal  amount
                available under the Working Capital Note, prior to the Amendment
                as discussed in further  detail below,  was $1.5 million,  which
                principal amount outstanding,  together with any and all accrued
                interest,  is  payable  by  August  31,  2003  or  as  otherwise
                stipulated in the Working  Capital Note,  except that MediVision
                may, at its option,  at any time convert any amount of principal
                and accrued but unpaid interest then  outstanding into shares of
                the  Company's  common stock at a conversion  price of $0.80 per
                share,  which price is subject to adjustment upon the occurrence
                of certain events set forth in the Working  Capital Note.  Under
                the terms of the Working Capital Note,  borrowings bear interest
                at the  rate of 9.3% per  annum  and are  secured  by all of the
                Company's assets.

                In July 2001, the Company and MediVision  entered into Amendment
                No. 1 to the Working  Capital  Funding  Agreement  ("Amendment")
                whereby,  among other things,  the maximum  principal  amount of
                allowable  borrowings  pursuant to the Working  Capital  Funding
                Agreement  entered  into in  connection  with  the  Closing  was
                increased by $1 million to $2.5 million.  In connection with the
                Amendment,  the  Company  executed  in  favor  of  MediVision  a
                promissory  note in the  aggregate  amount  of $1  million  (the
                "Amendment  Note").  Under the terms of the Amendment  Note, all
                principal amounts outstanding, together with any and all accrued
                interest,  is  payable  by  August  31,  2003  or  as  otherwise
                stipulated in the Amendment Note, except that MediVision may, at
                its  option,  at any time  convert any amount of  principal  and
                accrued but unpaid interest then  outstanding into shares of the
                Company's  common  stock at a  conversion  price of  $0.185  per
                share,  which price is subject to adjustment upon the occurrence
                of certain  events set forth in the  Amendment  Note.  Under the
                terms of the  Amendment  Note,  borrowings  bear interest at the
                rate of 9.3% per annum and are  secured by all of the  Company's
                assets.

                At September 30, 2001,  the Company had recorded,  in aggregate,
                approximately  $2,226,000 in principal and interest  outstanding
                under the Working Capital Note and Amendment.

                At September  30, 2001,  the Company had recorded  approximately
                $2,175,000 in aggregate debt owed to MediVision, which amount is
                net of approximately $340,000 in accounts receivable recorded in
                connection with sales of the Company's products to MediVision.

Note 4          MediVision and Premier Transactions

                In February 2000, Premier,  then a significant  shareholder with
                majority  voting

                                       7
<PAGE>

                control  of  the  Company,  notified  the  Company  that  it was
                considering  seeking  protection under the U.S.  Bankruptcy Code
                and the Company  thereupon  terminated  a merger  agreement  and
                rendered as non-effective a manufacturing  agreement and certain
                other arrangements then in effect between the parties.  In March
                2000,  Premier  filed a voluntary  petition for  protection  and
                reorganization under Chapter 11 of the U.S. Bankruptcy Code.

                In July 2000, the Company, Premier and MediVision entered into a
                series of  definitive  agreements  relating  to the  transfer of
                Premier's  ownership interests in the Company to MediVision (see
                Note 3 and Note 6). At the Closing,  MediVision purchased all of
                the stock of the  Company  then held by Premier,  including  150
                shares of the  Company's  Series B  Preferred  Stock  which were
                converted  by their  terms  into  shares  of common  stock,  and
                3,832,727   shares  of  common  stock  issued  pursuant  to  the
                conversion of the Premier debt.

                As a result of the foregoing transactions,  MediVision currently
                owns  approximately  73% of  the  Company's  outstanding  common
                stock.

Note 5          Extraordinary Items

                In March 2001, the Company reached  agreement with Imperial Bank
                (the "Bank") to retire the  aggregate  amount of  principal  and
                interest  previously  recorded pursuant to a stock  appreciation
                right granted to the Bank in connection with a credit agreement.
                Accordingly,  the debt  forgiven in the amount of  $188,762  has
                been  recognized  as an  extraordinary  item  in  the  condensed
                statement of operations.

                In   connection   with  the   Closing  in  August  2000  of  the
                transactions  by and among the Company,  Premier and MediVision,
                the  Company's   entire  debt  to  Premier,   calculated  at  an
                approximate  book  value of $2.1  million,  was  converted  into
                shares of the Company's common stock. The Company  recognized an
                extraordinary gain equivalent to the amount of the excess of the
                recorded  debt  owed to  Premier  over  the  fair  value  of the
                Company's common stock (see Note 3 and Note 4). In addition, the
                Company  recognized the impact of an insurance claim  settlement
                during fiscal 2000.

                                       8
<PAGE>


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

      THIS REPORT CONTAINS FORWARD-LOOKING  STATEMENTS WITHIN THE MEANING OF THE
FEDERAL SECURITIES LAWS. THE COMPANY INTENDS SUCH FORWARD-LOOKING  STATEMENTS TO
BE  COVERED  BY THE SAFE  HARBOR  PROVISIONS  CONTAINED  IN  SECTION  27A OF THE
SECURITIES  ACT OF 1933,  AS AMENDED,  AND IN SECTION 21E OF THE EXCHANGE ACT OF
1934,  AS  AMENDED.  FORWARD-LOOKING  STATEMENTS,  WHICH  ARE  BASED ON  CERTAIN
ASSUMPTIONS  AND DESCRIBE  FUTURE  PLANS,  STRATEGIES  AND  EXPECTATIONS  OF THE
COMPANY,  ARE GENERALLY  IDENTIFIABLE BY USE OF THE WORDS  "BELIEVE,"  "EXPECT,"
"INTEND,"  "ANTICIPATE,"  "ESTIMATE,"  "PROJECT,"  OR SIMILAR  EXPRESSIONS.  THE
COMPANY'S  ABILITY TO PREDICT  RESULTS OR THE ACTUAL  EFFECT OF FUTURE  PLANS OR
STRATEGIES IS INHERENTLY UNCERTAIN.  FACTORS WHICH COULD HAVE A MATERIAL ADVERSE
EFFECT ON ITS OPERATIONS AND FUTURE PROSPECTS  INCLUDE,  BUT ARE NOT LIMITED TO,
CHANGES IN: ECONOMIC  CONDITIONS  GENERALLY AND THE MEDICAL  INSTRUMENTS  MARKET
SPECIFICALLY, LEGISLATIVE OR REGULATORY CHANGES AFFECTING OIS, INCLUDING CHANGES
IN HEALTHCARE REGULATION,  THE AVAILABILITY OF WORKING CAPITAL, THE INTRODUCTION
OF COMPETING PRODUCTS,  AND OTHER RISK FACTORS DESCRIBED HEREIN. THESE RISKS AND
UNCERTAINTIES,  TOGETHER  WITH THE OTHER  RISKS  DESCRIBED  FROM TIME TO TIME IN
REPORTS  AND  DOCUMENTS  FILED BY OIS  WITH  THE SEC  SHOULD  BE  CONSIDERED  IN
EVALUATING  FORWARD-LOOKING  STATEMENTS, AND UNDUE RELIANCE SHOULD NOT BE PLACED
ON SUCH STATEMENTS.  INDEED, IT IS LIKELY THAT SOME OF THE COMPANY'S ASSUMPTIONS
WILL PROVE TO BE INCORRECT.  THE COMPANY'S ACTUAL RESULTS AND FINANCIAL POSITION
WILL VARY FROM THOSE PROJECTED OR IMPLIED IN THE FORWARD-LOOKING STATEMENTS, AND
THE VARIANCES MAY BE MATERIAL.

OVERVIEW

      To date, the Company has designed,  developed,  manufactured  and marketed
ophthalmic  digital  imaging  systems and has derived  substantially  all of its
revenues  from the sale of such  products.  The  primary  target  market for the
Company's  digital  angiography  systems and related products has  traditionally
been retinal specialists.

      The Company introduced its newest line of digital angiography systems, the
WinStation 1400 and WinStation  3000, at the 2000 Annual Meeting of the American
Academy of Ophthalmology  held in Dallas,  Texas during the last quarter of 2000
("2000 AAO Meeting"). These products have received considerable interest and the
Company has received significant  purchase  commitments for these products.  The
Company commenced  commercial delivery of these systems during the first quarter
ended March 31, 2001.

      In recent years, the Company expended research and development  efforts on
product  offerings and  applications  targeting  the broader  markets of general
ophthalmology and optometry. Two such products resulting from these efforts, the
Digital Fundus Imager (the "DFI") and the Digital Slit Lamp Imager (the "DSLI"),
were introduced in the latter half of 1998, with the DFI receiving  considerable
interest.

      The Company,  however, had limited financial and operational  resources to
meet the demand  resulting  from the  introduction  of the DFI. In that  regard,
during  1999,  the  Company   entered  into  a   manufacturing   agreement  (the
"Manufacturing  Agreement")  with Premier Laser  Systems,  Inc.  ("Premier"),  a
California  corporation  and the  Company's  majority  shareholder  at the time,
whereby  Premier began  assembling  and  manufacturing  the Company's  products,


                                        9
<PAGE>

including  the DFI and DSLI.  In  addition,  the Company  agreed with Premier on
certain  co-marketing  and  selling  arrangements  and the two  companies  began
selling their ophthalmic products through a jointly managed EyeSys Vision Group.

      The Company entered into these  arrangements in anticipation of the Merger
Agreement,   discussed  in  further  detail  below,   and  consummation  of  the
transactions contemplated thereby.

      In February 2000,  however,  Premier informed the Company of its inability
to  pursue  acquisition  of the  Company  under  the  Merger  Agreement  and its
intentions to seek voluntary bankruptcy  protection under Chapter 11 of the U.S.
Bankruptcy Code. The Company responded by terminating the Merger Agreement.

      As a consequence of the  termination  of the Merger  Agreement in February
2000 and Premier's filing for protection under the U.S. Bankruptcy Code in March
2000, the  co-marketing  and selling  arrangements  between the companies became
non-effective and Premier  discontinued  producing the Company's  products under
the Manufacturing  Agreement.  The Company  subsequently resumed manufacture and
assembly  of its  products  in its  facilities  in  Sacramento,  California  but
incurred  increased  costs and  significant  delays in  production  and  product
deliveries  as a result of these failed  arrangements.  The Company also noted a
reduction in its new order  bookings  following  the  termination  of the Merger
Agreement and Premier's subsequent filing for bankruptcy protection.

      In July 2000, the Company, Premier and MediVision entered into a series of
agreements,  discussed in further  detail below,  the closing of which in August
2000 resulted in, among other things, transfer of majority voting control of the
Company from Premier to  MediVision,  conversion  of the debt owed to Premier to
shares of the Company's  common stock and capital  commitments to the Company by
MediVision  of  $1,500,000,  which  commitments  were  increased  to  $2,500,000
pursuant a July 2001 amendment.

      The Company has  experienced  operating  losses for each fiscal year since
its initial  public  offering in 1992. At September 30, 2001, the Company had an
accumulated  deficit of  approximately  $16,000,000 and its current  liabilities
exceeded its current assets by approximately  $1,808,000.  The Company continues
to experience cash flow pressures and there can be no assurance that the Company
will be able to achieve or sustain significant positive cash flows,  revenues or
profitability in the future.

MEDIVISION AND PREMIER TRANSACTIONS

      On  February  25,  1998,  the Company  and  Premier  entered  into a Stock
Purchase Agreement (the "Stock Purchase Agreement"), whereby Premier would offer
to buy those shares of the  Company's  common stock not already  owned by it. In
August 1998,  however,  Premier  notified that Company that, due to a variety of
factors, Premier would not be able to close the transactions  contemplated under
the Stock  Purchase  Agreement and the Company  thereupon  terminated  the Stock
Purchase Agreement.

                                       10

<PAGE>

      On October 21, 1999, the Company and Premier entered into an Agreement and
Plan  of  Reorganization  (the  "Merger  Agreement")  whereby,   upon  requisite
shareholder approval, the Company would have become a wholly-owned subsidiary of
Premier.

      Also on October 21, 1999,  the Company and Premier  entered into two stock
purchase  agreements  with  respect to the  Company's  Series B Preferred  Stock
whereby,  among other  things,  Premier  purchased  150 shares of the  Company's
Series B  Preferred  Stock with each share  carrying  the voting  power of 1,000
shares of the Company's  common  stock,  at a per share price of $25 in exchange
for Premier's  cancellation  of certain of the  Company's  debt in the aggregate
amount of $3,750.

      In February  2000,  Premier  notified the Company that it was  considering
seeking  protection  under the U.S.  Bankruptcy  Code and the Company  thereupon
terminated  the Merger  Agreement on February 17, 2000.  In March 2000,  Premier
filed a voluntary petition for protection and reorganization under Chapter 11 of
the U.S. Bankruptcy Code.

      As a result of the foregoing  transactions,  at the time of its bankruptcy
filing,  Premier owned 49.5% of the Company's  outstanding  common stock and all
150 outstanding shares of the Company's Series B Preferred Stock, thereby giving
Premier majority voting control.

      On July 13,  2000,  the  Company,  Premier and  MediVision  entered into a
series of definitive  agreements relating to the transfer of Premier's ownership
interests  in the  Company to  MediVision  in  exchange  for cash and stock (the
"MediVision  Investments").  In separate  but related  transactions,  MediVision
loaned the Company $260,000 as short-term funding for continued  operations and,
upon the closing of the transactions contemplated under the agreements in August
2000 (the  "Closing"),  MediVision has committed to loan up to $1,500,000 to the
Company,  which  is  convertible  at  MediVision's  option  into  shares  of the
Company's common stock. This commitment was increased to $2,500,000  pursuant to
an amendment  effective July 1, 2001. Pursuant to the agreements relating to the
MediVision  Investments,  among other things: (i) the Company's entire debt owed
to Premier, calculated at an approximate book value of $2,100,000, was converted
per the agreements in favor of Premier into shares of the Company's common stock
at a conversion price of $0.55 per share;  and (ii) MediVision  purchased all of
the stock of the  Company  then held by  Premier,  including  150  shares of the
Company's  Series B  Preferred  Stock which were  converted  by their terms into
shares of common stock,  and 3,832,727 shares of common stock issued pursuant to
the conversion of the Premier debt.

      As a result  of the  foregoing  transactions,  MediVision  currently  owns
approximately 73% of the Company's outstanding common stock.

      The following  discussion should be read in conjunction with the unaudited
interim financial statements and the notes thereto which are set forth elsewhere
in this Report on Form  10-QSB.  In the  opinion of  management,  the  unaudited
interim period financial statements include all adjustments, all of which are of
a normal  recurring  nature,  that are necessary for a fair  presentation of the
results of the periods.


RESULTS OF OPERATIONS

                                       11

<PAGE>

Revenues

      The Company's revenues for the third quarter ended September 30, 2001 were
$1,092,630  representing  an  increase  of  approximately  47% from  revenues of
$741,979 for the third quarter ended September 30, 2000.  Revenues for the first
nine  months  of  fiscal  2001  were  $4,133,234  representing  an  increase  of
approximately  27% from  revenues of  $3,261,075  for the  comparable  period of
fiscal 2000. The increased  revenue  levels during fiscal 2001 include  revenues
from initial deliveries of the Company's newest digital angiography systems, the
WinStation  1400  and  WinStation  3000.  Sales  of  these  products,  including
upgrades,  accounted  for  approximately  85%  and  70% of the  Company's  total
revenues  for the  2001  third  quarter  and  nine-month  period,  respectively.
Revenues from sales of systems incorporating the Company's DFI and DSLI products
continue  to  be  below  initial  management   expectations  and  accounted  for
approximately  2% and  6% of  third  quarter  revenues  during  2001  and  2000,
respectively,  and 9% and 8% of  revenues  for the first nine months of 2001 and
2000, respectively.

Gross Margins

      Gross  margins  were  approximately  55%  during the third  quarter  ended
September 30, 2001 versus  approximately 65% for the comparable quarter of 2000.
For  the  nine-month  period  ended  September  30,  2001,  gross  margins  were
approximately  54% as compared to approximately 52% during the comparable period
of 2000.  The fiscal 2000 amounts  reflect the positive  impact of reductions to
inventory and related  reserves and certain other  non-recurring  adjustments at
August 31, 2000.  Pursuant to the Closing of the  transactions  with MediVision,
the Company has, with support from MediVision,  undertaken  certain gross margin
enhancement  efforts  and  continues  to monitor  its  expenses  in this area in
contemplation of current and anticipated business conditions.

Sales, Marketing, General and Administrative Expenses

      Sales and marketing and general and administrative  expenses accounted for
approximately  46% of total revenues  during the third quarter of fiscal 2001 as
compared with  approximately 74% during the third quarter of fiscal 2000. Actual
expense  levels  decreased to $506,066  during the third  quarter of 2001 versus
$546,358  during the third quarter of 2000. The fiscal 2001 third quarter amount
is net of a non-recurring  adjustment to reverse a previously accrued liability,
absent of which  adjustment  actual  expense  levels for the  period  would have
increased  by  approximately  8% over  expense  levels for the third  quarter of
fiscal  2000.  For the first nine  months of fiscal  2001 and  fiscal  2000 such
expenses  accounted  for  approximately  49% and 57% of total  revenues  for the
respective  nine-month  periods.  Actual  expenses  increased to $2,007,607 from
$1,865,034 during the nine-month periods of fiscal 2001 and 2000,  respectively.
Primary  contributing  factors  to the  increased  expenses  were  professional,
administrative  and other costs in connection  with or as a  consequence  of the
transactions with MediVision. Subsequent to the Closing of the transactions with
MediVision,  the Company has hired,  among others,  a Director of Operations and
certain  sales and  related  support  managers  and has  undertaken  recruitment
efforts for management and other personnel in this and other areas.


                                       12

<PAGE>

Research and Development Expenses

      Research  and  development  expenses  increased  by  approximately  92% to
$134,601  during  the third  quarter  of fiscal  2001 from  $70,279  during  the
comparable period of fiscal 2000. Such expenses  accounted for approximately 12%
of revenues during the third quarter of fiscal 2001 versus  approximately  9% of
revenues  during the third quarter of fiscal 2000.  For the first nine months of
fiscal 2001, such expenses  accounted for  approximately 8% of total revenues as
compared to approximately  6% during the comparable  period of 2000. The Company
has focused its recent  research and  development  efforts on new digital  image
capture products and reducing cost configurations for its current products.  The
extent and focus of future  research and  development  efforts  will depend,  in
large measure, on direction from MediVision,  including potential  collaborative
projects between MediVision and the Company, one of which such projects has been
undertaken commencing in the last quarter of fiscal 2000.

Other Expense

      Other  expense was $71,004  during the third quarter of fiscal 2001 versus
$71,477  during  the same  period of 2000.  For the  nine-month  periods,  other
expense was $179,345 and $147,009 in fiscal 2001 and fiscal 2000,  respectively.
These amounts were comprised principally of interest expense associated with net
borrowings   from   MediVision   and  Premier   during  fiscal  2001  and  2000,
respectively,  interest expense associated with financing  arrangements provided
to certain of the Company's  customers in connection  with sales of its products
and interest  expense in connection with a stock  appreciation  right granted to
the Company's bank discussed in further detail below.

Net Income

      The Company  recorded a net loss of $108,349,  or $0.01 per share, for the
third quarter ended September 30, 2001 as compared to a net loss of $146,449, or
$0.03 per  share,  for the third  quarter  ended  September  30,  2000.  For the
nine-month periods, the Company recorded net loss of $100,658, or $.01 per share
as compared to a net loss of $432,297, or $0.09 per share during fiscal 2001 and
fiscal 2000, respectively.

      The 2001 amounts include an  extraordinary  gain recorded during the first
quarter of $188,762, or $0.02 per share, resulting from the negotiated reduction
of certain principal and interest charges previously recorded in connection with
a stock  appreciation right granted to the Company's bank (the "Bank") discussed
in  further  detail in Note 5 of the  Notes to  Condensed  Financial  Statements
included in Item 1 of this Form 10-QSB.

      The 2000 amounts include an  extraordinary  gain recorded during the third
quarter of $62,836, or $0.01 per share,  comprised  principally of the write-off
of the  recorded  amount  of debt  owed  to  Premier  in  excess  of the  amount
calculated  in  connection  with the  conversion of said debt into shares of the
Company's  common  stock in  connection  with the  Closing in August 2000 of the
transaction by and among the Company,  Premier and MediVision,  and, to a lesser
extent, the impact of an insurance claim settlement during fiscal 2000 (see Note
5 of the Notes to Condensed Financial Statements included in Item 1 of this Form
10-QSB).


                                       13
<PAGE>

      The results of  operations  do not include any amounts  with  respect to a
potential  contingent  liability in connection with the collection of taxes from
the  Company's  customers,  which  amount  has been  estimated  on the  basis of
numerous factors and assumptions that might, in the least favorable combination,
reach  $1.9  million.  Management  believes  that  the  probability  of  such an
assessment  is remote  and  accordingly,  has not  recorded a  liability  in its
financial  statements.  However,  there can be no assurance that the amount that
might  ultimately be assessed for prior periods would not materially  affect the
Company's results of operations or cash flows in any given reporting period.


LIQUIDITY AND CAPITAL RESOURCES

      The Company's  operating  activities used cash of $412,682 during the nine
months ended September 30, 2001 as compared to $376,305 in the nine months ended
September 30, 2000. The cash used in operations  during the first nine months of
2001 was  principally to fund the loss before  extraordinary  item. In addition,
the Company recognized  significant sales during the latter portion of the third
quarter,  resulting in increased accounts receivable balances as well as reduced
customer  deposit  levels at the end of the period.  The impact of these factors
was only partially offset by a net increase in the aggregate of accounts payable
and accrued  liabilities  during the period.  The cash used in operations during
the first nine  months of fiscal  2000 was  principally  to fund the loss before
extraordinary  item, the impact of which was partially  offset by the net effect
of a number of factors,  including increased payable amounts associated with the
procurement  of  inventory,   including  inventory  purchased  from  Premier  by
MediVision  on  behalf  of the  Company,  as  well  as  collection  of  accounts
receivable  during the  period,  which  amounts  were only  partially  offset by
reduced levels of accrued liabilities and customer deposits.

      Cash used in investing activities was $77,700 during the first nine months
of 2001 as compared to cash provided by investing  activities of $20,057  during
the same period for 2000. The Company's primary investing  activities consist of
equipment  and  other  capital  asset  acquisitions.   The  Company  anticipates
continued certain near-term capital  expenditures in connection with its ongoing
efforts  to  upgrade  its  existing   management   information   and   corporate
communication   systems,  as  well  as  increasing  its  pool  of  demonstration
equipment.  The Company anticipates that related  expenditures,  if any, will be
financed  from  borrowings  under  existing  arrangements  with  MediVision,  if
available, or other financing arrangements, if any, available to the Company.

      The Company  generated cash from financing  activities of $526,997  during
the  first  nine  months of fiscal  2001 as  compared  to  $230,584  during  the
comparable  period of fiscal 2000.  The cash  provided by  financing  activities
during the first three  quarters of fiscal 2001 and fiscal 2000 was  principally
from increased  borrowings under existing  arrangements  with MediVision,  which
amounts in fiscal 2000 were partially offset by certain  repayments of debt owed
to Premier and, to a lesser extent,  net repayment of borrowings  under a credit
facility.  Principal  payments  on  notes  payable  other  than  to  significant
shareholders in both years was minimal.


                                       14
<PAGE>

      As  discussed  further  above  and in Note 3 and  Note 4 of the  Notes  to
Condensed  Financial  Statements included in Item 1 of this Form 10-QSB, on July
21, 2000,  the Company  executed a promissory  note in favor of MediVision  (the
"Short-Term  Note") and the Company has borrowed the maximum principal amount of
$260,000 available under the Short-Term Note. At September 30, 2001, the Company
had recorded  approximately $289,000 in principal and interest outstanding under
the Short-Term Note and the Company is currently in discussions  with MediVision
with regard to reclassifying  amounts  currently owing under the Short-Term Note
to amounts  owing under the Working  Capital Note  discussed  in further  detail
below.

      In  addition,  in  connection  with  the  Closing  in  August  2000 of the
transactions contemplated by the MediVision Investments,  the Company executed a
second promissory note in favor of MediVision (the "Working Capital Note").  The
maximum  principal amount available under the Working Capital Note, prior to the
Amendment  as  discussed  in  further  detail  below,  was $1.5  million,  which
principal amount  outstanding,  together with any and all accrued  interest,  is
payable by August 31, 2003 or as  otherwise  stipulated  in the Working  Capital
Note,  except that MediVision may, at its option, at any time convert any amount
of principal and accrued but unpaid interest then outstanding into shares of the
Company's common stock at a conversion price of $0.80 per share,  which price is
subject to adjustment  upon the  occurrence  of certain  events set forth in the
Working Capital Note.  Under the terms of the Working  Capital Note,  borrowings
bear  interest  at the  rate of 9.3% per  annum  and are  secured  by all of the
Company's assets.

      In July 2001, the Company and  MediVision  entered into Amendment No. 1 to
the Working Capital Funding Agreement ("Amendment") whereby, among other things,
the maximum  principal  amount of allowable  borrowings  pursuant to the Working
Capital  Funding  Agreement  entered  into in  connection  with the  Closing was
increased by $1 million to $2.5 million.  In connection with the Amendment,  the
Company  executed in favor of  MediVision  a  promissory  note in the  aggregate
amount of $1 million (the  "Amendment  Note").  Under the terms of the Amendment
Note,  all  principal  amounts  outstanding,  together  with any and all accrued
interest,  is payable  by August  31,  2003 or as  otherwise  stipulated  in the
Amendment Note,  except that MediVision may, at its option,  at any time convert
any amount of principal and accrued but unpaid  interest then  outstanding  into
shares of the Company's  common stock at a conversion price of $0.185 per share,
which price is subject to adjustment  upon the  occurrence of certain events set
forth in the Amendment Note.  Under the terms of the Amendment Note,  borrowings
bear  interest  at the  rate of 9.3% per  annum  and are  secured  by all of the
Company's assets.

      At  September  30,  2001,   the  Company  had   recorded,   in  aggregate,
approximately $2,226,000 in principal and interest outstanding under the Working
Capital Note and Amendment.

      At September 30, 2001, the Company had recorded  approximately  $2,175,000
in  aggregate  debt owed to  MediVision,  which  amount is net of  approximately
$340,000  in  accounts  receivable  recorded  in  connection  with  sales of the
Company's products to MediVision.


                                       15
<PAGE>

      On September  30,  2001,  the  Company's  cash and cash  equivalents  were
$73,189.  Management anticipates that additional sources of capital beyond those
currently  available to the Company will be required to continue  operations and
procure  inventory  necessary  to meet  current and  anticipated  demand for the
Company's products. Substantial delays in the delivery of the Company's products
would  result  in  reduced  cash  flow from  sales of such  products  as well as
potential increased costs.  Additionally,  such delays could prompt customers to
request return deposits which would further  adversely impact the Company's cash
position.

      The relationship between the Company and MediVision, will, in Management's
opinion,  significantly  improve the Company's  financial  condition and enhance
Management's ability to achieve sustained profitable operations, particularly in
light of the recently  announced  agreement between  MediVision and Agfa-Gevaert
N.V.,  pursuant  to  which  agreement  Agfa  acquired  a  minority  interest  in
MediVision  and is to  invest in  MediVision  up to Euro 3.9  million,  Euro 1.1
million of which has been  provided  in  connection  with the closing in October
2001. Under the terms of the Agreement,  among other things, Agfa and MediVision
will  jointly  develop,  promote  and  market  a  combined,  Integrated  Digital
Ophthalmology  Picture Archive & Communication  System, the first such system to
be introduced in the ophthalmic imaging field.

      The  Company's   relationship  with  MediVision  provides  OIS  access  to
resources  in  addition  to  working  capital.  As a direct  consequence  of the
MediVision  transactions,  the  Company  has  undertaken  certain  gross  margin
enhancement  efforts,  including improved production cost control and sustaining
engineering  programs.  In  addition,  the  Company  and  MediVision  have begun
collaborative  efforts  with  respect  to design and  implementation  of certain
product  development  programs.  Furthermore,  the relationship  with MediVision
could  assist the  Company  in  reducing  selling,  general  and  administrative
expenses,   particularly   in  connection  with   co-marketing   and  co-selling
arrangements  currently  contemplated  with  respect  to  certain  international
markets.

      Irrespective  of the  foregoing,  the  Company  will  continue to evaluate
alternative  sources of capital to meet its cash  requirements,  including other
asset or debt  financing,  issuing  equity  securities  and entering  into other
financing arrangements and is hopeful that it will be successful in this regard.
There  can be no  assurance,  however,  that any of the  contemplated  financing
arrangements  described  herein  will be  available  and, if  available,  can be
obtained on terms favorable to the Company.


                                       16
<PAGE>



                            PART II OTHER INFORMATION

ITEM 1.             LEGAL PROCEEDINGS
                    None.

ITEM 2.             CHANGES IN SECURITIES
                    None.

ITEM 3.             DEFAULTS UPON SENIOR SECURITIES
                    None.

ITEM 4.             SUBMISSION OF MATTERS TO A VOTE OF SECURITIES
                    None.

ITEM 5.             OTHER INFORMATION
                    None.

ITEM 6.             EXHIBITS AND REPORTS ON FORM 8-K
                    (a)      The following exhibits are filed as part of this
                             registration statement:

Exhibit
No.      Description                                           Location
-------  -----------                                           --------

 10.1    Amendment No. 1 to Working Capital Funding Agreement  Provided herewith

 10.2    Secured Convertible Working Capital Promissory Note   Provided herewith


                    (b)      None.


                                       17
<PAGE>


                                   SIGNATURES

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


                                             OPHTHALMIC IMAGING SYSTEMS
                                             (Registrant)


                                             By: /s/ Gil Allon
                                                 -------------------------------
                                                 Gil Allon,
                                                 Chief Executive Officer



Dated:  November 14, 2001



                                       18