FORM 10-QSB

                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549



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

                  For the quarterly period ended May 31, 1999

                        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.)

                  221Lathrop 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 July 14, 1999,  4,155,428  shares of common stock,  at no par value,  were
outstanding.


<PAGE>1



ITEM 1.  FINANCIAL STATEMENTS


<PAGE>2


                           Ophthalmic Imaging Systems
                             Condensed Balance Sheet
                                  May 31, 1999
                                   (Unaudited)
<TABLE>
<S>                                                                              <C>
Assets
Current assets:
      Cash and equivalents                                                            $          147,226
      Accounts receivable, net                                                                 1,067,203
      Inventories, net                                                                           326,579
      Prepaid expenses and other current assets                                                   43,089
                                                                                   ----------------------
Total current assets                                                                           1,584,097
Furniture and equipment, net of accumulated
      depreciation and amortization of $992,959                                                  324,508
Other assets                                                                                      14,669
                                                                                   ======================
                                                                                      $        1,923,274
                                                                                   ======================

Liabilities and Stockholders' Equity
Current liabilities:
      Borrowings under line of credit                                                 $          219,152
      Borrowings under note payable to, and unsecured
           advances from significant shareholder, net                                          1,288,991
      Accounts payable                                                                           567,908
      Accrued liabilities                                                                      1,226,635
      Accrued warrant appreciation right                                                         287,056
      Deferred extended warranty revenue                                                          92,056
      Customer deposits                                                                          369,011
      Capitalized lease obligation and other notes payable                                         8,939
                                                                                   ----------------------
Total current liabilities                                                                      4,059,748
Capitalized lease obligation and other notes payable,
      less current portion                                                                        20,251
Commitments
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;
           4,155,428 issued and outstanding                                                   10,462,604
      Deferred compensation                                                                     (113,185)
      Accumulated deficit                                                                    (12,506,144)
                                                                                   ----------------------
Total stockholders' deficit                                                                   (2,156,725)
                                                                                   ======================
                                                                                      $        1,923,274
                                                                                   ======================
</TABLE>

See accompanying notes.


<PAGE>3

                           Ophthalmic Imaging Systems
                       Condensed Statements of Operations
                                   (Unaudited)
<TABLE>
<S>                                         <C>                   <C>                      <C>                  <C>

                                                    Three months ended May 31,                      Nine months ended May 31,
                                                    1999                   1998                    1999                   1998
                                             -------------------    -------------------     --------------------   ----------------

Net revenues                                   $      1,655,610       $      1,377,830        $       5,005,897      $    4,747,864
Cost of sales                                           869,533                935,690                2,919,939           3,252,117
                                             -------------------    -------------------     --------------------   -----------------
Gross Profit                                            786,077                442,140                2,085,958           1,495,747
Operating expenses:
     Sales and marketing                                459,353                478,778                1,384,893           1,431,835
     General and administrative                         209,568                538,645                  733,360           1,792,003
     Research and development                           241,527                206,647                  712,440             608,352
                                             -------------------    -------------------     --------------------   -----------------
          Total operating expenses                      910,448              1,224,070                2,830,693           3,832,190
                                             -------------------    -------------------     --------------------   -----------------
Loss from operations                                   (124,371)              (781,930)                (744,735)         (2,336,443)
Other expense, net                                      (42,502)               (15,199)                (106,438)            (44,078)
                                             -------------------    -------------------     --------------------   -----------------
Loss before extraordinary item                         (166,873)              (797,129)                (851,173)         (2,380,521)
Extraordinary item                                      350,000                     --                  350,000                  --
                                             ===================    ===================     ====================   =================
Net income (loss)                              $        183,127       $       (797,129)       $        (501,173)     $   (2,380,521)
                                             ===================    ===================     ====================   =================

Shares used in the calculation of basic
     net income (loss) per share                      4,155,428              4,155,428                4,155,428           3,989,687
                                             ===================    ===================     ====================   =================
Basic loss per share before
     extraordinary item                        $          (0.04)      $          (0.19)       $           (0.20)     $        (0.60)
Extraordinary item                                         0.08                     --                     0.08                  --
                                             ===================    ===================     ====================   =================
Basic net income (loss) per share              $           0.04       $          (0.19)       $           (0.12)     $        (0.60)
                                             ===================    ===================     ====================   =================

Shares used in the calculation of diluted
     net income (loss) per share                      4,155,428              4,155,428                4,155,428           3,989,687
                                             ===================    ===================     ====================   =================
Diluted loss per share before
     extraordinary item                        $          (0.04)      $          (0.19)       $           (0.20)     $        (0.60)
Extraordinary item                                         0.08                     --                     0.08                  --
                                             ===================    ===================     ====================   =================
Diluted net income (loss) per share            $           0.04       $          (0.19)       $           (0.12)     $        (0.60)
                                             ===================    ===================     ====================   =================

</TABLE>

See accompanying notes.

<PAGE>4

                           Ophthalmic Imaging Systems
                       Condensed Statements of Cash Flows
                   Increase (Decrease) in Cash and Equivalents
                                   (Unaudited)
<TABLE>
<S>                                                              <C>                       <C>
                                                                           Nine months ended May 31,
                                                                         1999                     1998
                                                                 ----------------------  -----------------------

Operating activities:
Net loss                                                             $        (501,173)       $      (2,380,521)
Adjustments to reconcile net loss to net cash
     used in operating activities:
          Depreciation and amortization                                         85,277                   95,812
          Stock option compensation expense                                     78,115                   97,375
          Net (increase) decrease in current assets
               other than cash and equivalents                                (399,292)                 596,477
          Net increase in current liabilities
               other than short-term borrowings                                245,842                  753,406
                                                                 ----------------------  -----------------------
Net cash (used in) provided by operating activities                           (491,231)                (837,451)
Investing activities:
Purchases of furniture and equipment                                             1,607                 (147,721)
Net increase in other assets                                                    (7,284)                 (11,387)
                                                                 ----------------------  -----------------------
Net cash used in investing activities                                           (5,677)                (159,108)
Financing activities:
Principal payments on notes payable                                               (318)                  (2,048)
Net proceeds from borrowings under note payable to
     and unsecured advances from significant shareholder                         9,289                  910,027
Net proceeds from (repayments of) line-of-credit
     borrowings                                                                120,977                 (185,855)
Net proceeds from sale of common stock                                              --                  213,750
                                                                 ----------------------  -----------------------
Net cash provided by financing activities                                      129,948                  935,874
                                                                 ----------------------  -----------------------
Net decrease in cash and equivalents                                          (366,960)                 (60,685)
Cash and equivalents at beginning of period                                    514,186                  142,300
                                                                 ======================  =======================
Cash and equivalents at end of period                                $         147,226        $          81,615
                                                                 ======================  =======================

Supplemental schedule of noncash financing activities:
Reduction of borrowing under note payable to and
     unsecured advances from significant shareholder
     in exchange for inventory                                       $         182,778        $              --
                                                                 ======================  =======================

</TABLE>


See accompanying notes.









<PAGE>5

                           Ophthalmic Imaging Systems

                     Notes to Condensed Financial Statements

            Three and Nine Month Periods ended May 31, 1999 and 1998
                                   (Unaudited)


Note 1.         Basis of Presentation

                The accompanying unaudited condensed balance sheet as of May 31,
                1999,  condensed statements of operations for the three and nine
                month  periods  ended  May 31,  1999 and 1998 and the  condensed
                statements  of cash flows for the three and nine  month  periods
                ended May 31,  1999 and 1998 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)  Annual Report for the Fiscal Year
                Ended  August  31,  1998  on  Form  10-KSB.  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 May
                31, 1999 are not necessarily indicative of the operating results
                for the full year.

                Certain  amounts in the fiscal 1998  financial  statements  have
                been reclassified to conform with the presentation in the fiscal
                1999 financial statements.

Note 2.         Net Income (Loss) Per Share

                In  1997,  the  Financial   Accounting  Standards  Board  issued
                Statement of Financial  Accounting  Standards No. 128, "Earnings
                per Share".  Statement  128  replaced  the  previously  reported
                primary  and fully  diluted  earnings  per share  with basic and
                diluted  earnings per share.  Unlike primary earnings per share,
                basic  earnings  per share  excludes  any  dilutive  effects  of
                options, warrants, and convertible securities.  Diluted earnings
                per  share is very  similar  to the  previously  reported  fully
                diluted  earnings  per share.  All net  income  (loss) per share
                amounts  for  all  periods  have  been   presented,   and  where
                necessary,   restated   to   conform   to  the   Statement   128
                requirements.


<PAGE>6

Note 2.         Net Income (Loss) Per Share (continued)

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

<TABLE>
<S>                                               <C>               <C>            <C>            <C>

                                                             Unaudited                       Unaudited
                                                         Three Months Ended              Nine Months Ended
                                                              May 31,                         May 31,
                                                        1999            1998           1999            1998
                                                   =============== ============    ============== =============

                Numerator for basic and diluted
                net income (loss) per share          $ 183,128      $ (797,129)     $ (501,171)   $ (2,380,521)
                                                   =============== ============    ============== =============

                Denominator for basic net income
                (loss) per share:
                   Weighted average shares           4,155,428       4,155,428       4,155,428       3,989,687

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

                                                   =============== ============    ============== =============
                Denominator for diluted net
                income (loss) per share              4,155,428       4,155,428       4,155,428       4,155,428
                                                   =============== ============    ============== =============

                Basic net income (loss) per share        $ .04        $ (0.19)         $ (0.12)        $ (0.60)
                                                   =============== =============== ============== ===============


                Diluted net income (loss) per
                share                                   $ .04         $ (0.19)         $ (0.12)        $ (0.60)
                                                   =============== =============== ============== ===============
</TABLE>

Note 3.         Short-Term Borrowings

                In April 1995,  the  Company  entered  into a revolving  line of
                credit  agreement  (the "Credit  Agreement")  with its bank (the
                "Bank")  which,  after several  amendments,  matured in November
                1997.

                In  November  1997,   the  Company   entered  into  an  accounts
                receivable credit agreement (the "Agreement") with the Bank, and
                all  amounts   outstanding   under  the  Credit  Agreement  were
                considered to be the initial  advance under the  Agreement.  The
                Agreement  allows  for up to an 80%  advance  rate  on  eligible
                accounts  receivable  balances,  and the maximum  borrowing base
                under the Agreement is $1.2 million.  The Bank has full recourse
                against  the Company  and the  Agreement  remains in effect from
                year to year unless  terminated in writing by the Company or the
                Bank. Borrowings under the Agreement bear interest at the Bank's
                prime  lending rate plus 4%. In  addition,  the Bank will charge
                monthly an  administrative  fee equal to the  greater of 1/2% of
                the average  daily  balance  for the month or $1,200.  Under the
                terms of the Agreement,  borrowings are secured by substantially
                all of the  Company's  assets.  At May 31,  1999,  approximately
                $219,152 in principal was outstanding under the Agreement.

<PAGE>7


Note 4.         Note Payable to Related Party

                On April 30, 1998, the Company  executed a promissory  note (the
                "Note") in favor of Premier  Laser  Systems,  Inc., a California
                corporation   ("Premier").   Borrowings  against  the  Note  are
                available to the Company in the form of periodic  advances.  The
                maximum  principal  amount available under the Note is $500,000,
                which principal  amount  outstanding,  together with any and all
                accrued  interest,  is payable the earlier of (i) written demand
                by Premier or (ii) April 30, 1999.  Under the terms of the Note,
                borrowings  bear  interest at the rate of 8 1/2% per annum,  are
                secured by certain of the Company's  assets and are  subordinate
                to borrowings  against the accounts  receivable credit line with
                the Company's  Bank (see Note 3).  Premier also has made certain
                unsecured  advances to the Company  which are not covered by the
                Note.

                At  May  31,  1999,  the  Company  had  recorded   approximately
                $1,591,000 in principal and interest  outstanding under the Note
                and   unsecured   advances,   which   amount   was   reduced  to
                approximately   $1,408,000   by  an  offset  in  the  amount  of
                approximately   $183,000   pursuant   to   the   terms   of  the
                Manufacturing  Agreement  described in Note 5. While the amounts
                owing  under the Note are  currently  due,  Premier has not made
                demand for payment  and the  Company  and  Premier  have been in
                discussions,   among  other   things,   to  establish   mutually
                acceptable  repayment  terms.  In  that  connection,   there  is
                disagreement  between  Premier and the Company as to whether the
                Company is entitled to the $500,000  Termination Fee and whether
                such  Termination  Fee can be used as an offset to the Company's
                debt to Premier.

Note 5.         Manufacturing Agreement

                In  March  1999,   the  Company  and  Premier   entered  into  a
                manufacturing  agreement  ("Manufacturing   Agreement")  whereby
                Premier will manufacture the majority of the Company's products.
                The Manufacturing  Agreement will terminate upon the earlier of:
                (i) material  breach by either party,  which breach is not cured
                within thirty (30) days written notice thereof; (ii) ninety (90)
                days written notice by the Company to Premier; (iii) one hundred
                eighty (180) days written  notice by Premier to the Company;  or
                (iv) mutual written agreement of the parties.

                At May 31, 1999, the Company  recorded a charge of approximately
                $183,000, which amount was offset against the unsecured advances
                made to the Company by Premier. This amount represents inventory
                transferred to Premier pursuant to the Manufacturing  Agreement,
                net  of  charges  from  Premier  to  the  Company  for  products
                manufactured pursuant to the Manufacturing Agreement.

<PAGE>8


Note 6.         Stock Purchase Agreement

                In August 1998, the Company was notified by Premier that Premier
                would  be  unable  to  proceed  with  its  previously   proposed
                acquisition  of the remaining  48.7%  interest in the Company by
                the  termination  date of the Stock  Purchase  Agreement,  dated
                February   25,   1998,   with  the  Company   ("Stock   Purchase
                Agreement").  As a result,  the  Stock  Purchase  Agreement  was
                terminated  and the  Company  made a  demand  for  payment  from
                Premier of $500,000 as a termination fee (the "Termination Fee")
                pursuant to the Stock Purchase  Agreement.  The Termination Fee,
                however, is the subject of a disagreement between the companies.
                Accordingly,  the Company has not recognized the Termination Fee
                in its financial statements.

Note 7.         Extraordinary Item

                In May 1999,  the  Company  reached  agreement  with a financial
                advisor  to   significantly   reduce  the  aggregate  amount  of
                professional fees and expenses previously recorded in connection
                with the terminated Stock Purchase Agreement with Premier.

Note 8.         Subsequent Event

                In June  1999,  the  Company  received  a merger  proposal  from
                Premier.  The offer  called for an  exchange  of Premier  common
                stock for Company  common stock on the basis of $.85 in value of
                Premier common stock for each share of Company common stock. The
                offer  was  subject  to  negotiation  of  a  definitive   merger
                agreement  containing  customary  representations and warranties
                and  conditions to closing,  including:  (i) absence of material
                adverse change in either party; (ii) approval by at least 75% of
                the Company shares (i.e., a majority of the shares not presently
                owned by Premier); and (iii) the Company's obtaining a "fairness
                opinion" with respect to the proposed transaction.

                The Company rejected the offer as inadequate. However, to assist
                the Company in evaluating any subsequent offers received for the
                Company or its stock,  the Company  engaged  the  services of an
                investment  banker and legal  counsel.  To date, the Company has
                not received any subsequent offers.

<PAGE>9


Note 9.         Ability to Continue as a Going Concern

                The Company has an accumulated deficit of $12,506,144 at May 31,
                1999. In addition,  current liabilities exceed current assets by
                $2,475,651 as of that date. These factors, among others, raise a
                question   whether  the  Company is able to continue as a  going
                concern.

                The  principal  and accrued  interest on the Note, by its terms,
                were due and payable on April 30,  1999.  As of the date hereof,
                the Company has not made any payments  under the Note.  Although
                Premier has indicated its  willingness  to negotiate a repayment
                schedule  and defer  any  default  proceedings,  there can be no
                assurance that such negotiations will be successful and that the
                terms of the Note will be  revised or that  default  proceedings
                will be deferred. In addition, even if the Note is renegotiated,
                there can be no assurances  that it will be on terms  acceptable
                to the Company or that the Company  will  thereafter  be able to
                generate  sufficient  liquidity  from  operations  to  meet  its
                obligations as they become due.

                The Company is seeking sources of additional capital to meet its
                current cash  requirements,  including debt and other  financing
                arrangements.  There  can be no  assurance,  however,  that  any
                financing arrangements will be available and, if available,  can
                be obtained on terms favorable to the Company.




<PAGE>10



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

The statements below include  statements that are "forward  looking  statements"
within the meaning of Section 21A of the Securities Act of 1933, as amended,  in
Section 21E of the  Securities  Act of 1934,  as amended,  and is subject to the
safe harbor created thereby.  Future operating results may be adversely effected
as a result of a number of factors enumerated in the Company's public reports.

Overview

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 has been the retinal  specialists who number  approximately
2,000 in the United States  (approximately  12%-13% of  ophthalmologists  in the
U.S.).

OIS is currently  attempting to expand its role in the ophthalmic  imaging field
by  developing  new ocular  imaging  devices  and  applications  targeted at the
broader markets of general ophthalmology and optometry.

In this regard,  commencing in fiscal 1998, the Company has applied  significant
resources to the development of two ocular imaging  devices,  the Digital Fundus
Imager  ("DFI")  and the  Digital  Slit  Lamp  Imager  ("DSLI").  These  two new
products, which were introduced at the Annual Meeting of the American Academy of
Ophthalmology (the "AAO") in November 1998 (the "1998 AAO Meeting"), provide the
general  ophthalmology and optometry markets with affordable  diagnostic digital
imaging   devices.   The  Company  is  focusing  the  majority  of  its  current
development,  marketing  and sales  efforts  on its DFI and DSLI  products,  and
anticipates  that it will commence  delivering  these products during the fourth
quarter of fiscal 1999.

At the 1998 AAO Meeting, the DFI received  considerable interest and the Company
has received  significant  purchase  commitments for the product.  However,  the
Company   has   limited   financial   and   operational   resources,   including
manufacturing,  marketing and selling capacity to meet any increased demand that
may result from the successful introduction of this product. During the recently
completed  third  quarter  ended  May  31,  1999,  the  Company  entered  into a
manufacturing  agreement  ("the  Manufacturing  Agreement")  with Premier  Laser
Systems, Inc. ("Premier"),  a California corporation and holder of approximately
51.3% of the Company's outstanding common stock whereby Premier will manufacture
the  Company's  products,  including  the DFI and DSLI.  Initial  deliveries  of
revenue  generating  products  manufactured  by Premier under the  Manufacturing
Agreement  were  made  during  the  quarter.   The  Company   entered  into  the
Manufacturing  Agreement  to  reduce  the cost of  manufacturing  the  Company's
products and to take advantage of Premier's manufacturing capabilities. Based on
the limited  experience to date under the terms of the Manufacturing  Agreement,
there can be no  assurance  that this  arrangement  will provide the Company the
anticipated benefits.

<PAGE>11


In addition,  the Company  also is  negotiating  an agreement  with Premier on a
co-marketing and selling arrangement. The Company is seeking an arrangement with
Premier whereby: (a) the Company's sales force would have additional products to
sell,  including  Premier's  EyeSys  product  line;  (b) the  Company  access to
Premier's international distribution channels; and (c) the Company could benefit
from  the  EyeSys  products'  reputation  among  general   ophthalmologists  and
optometrists. Management believes that such an arrangement should also result in
certain cost  efficiencies  to the Company.  In that regard and in  anticipation
that an acceptable  agreement will be reached, the Company and Premier have been
selling their optical  products  through a jointly  managed EyeSys Vision Group.
The EyeSys  Vision Group made its debut at the American  Society of Cataract and
Refractive  Surgery  meeting  ("ASCRS")  in April  1999,  at which  the  Company
received   significantly  more  purchase  commitments  than  at  previous  ASCRS
meetings,  predominantly  for the DFI and DSLI  products.  While the  Company is
optimistic  that an  agreement  with  Premier in this  regard  will be  executed
shortly, there can be no assurance that an acceptable agreement, if any, will be
reached.

The Company  continues to  experience  a cash flow  deficit and its  liabilities
currently  exceed its assets.  In this regard,  the  Company's  recorded debt to
Premier,  as of May 31,  1999,  exceeded  $1.4  million.  The Company is seeking
additional  sources  of  financing.  The  Company  also is  hopeful  that it can
generate  revenues  from sales of its DFI and DSLI products  sufficient  to: (a)
fund the  production and  distribution  of these and current  products;  and (b)
enable the  Company  to begin to pay down the debt to  Premier  under a mutually
acceptable repayment plan with Premier. There can be no assurance, however, that
there will be  favorable  market  acceptance  of these  products  sufficient  to
generate needed revenues or that a mutually  acceptable  repayment plan, if any,
can be reached with Premier.

Notwithstanding the initiatives  discussed above, there can be no assurance that
the  Company  will be  successful  in such  efforts  or  that  any  contemplated
arrangements  can be  obtained on terms  favorable  to the  Company.  Failure to
achieve  one or more of these  objectives  may  have an  adverse  effect  on the
Company's  ability to continue as a going concern or realize the full  potential
benefits from timely delivery of its new products.

In June 1999,  the Company  received a merger  proposal from Premier.  The offer
called for an exchange of Premier  common stock for Company  common stock on the
basis of $.85 in value of Premier  common stock for each share of Company common
stock.  The offer was subject to  negotiation of a definitive  merger  agreement
containing  customary  representations and warranties and conditions to closing,
including: (i) absence of material adverse change in either party; (ii) approval
by at least 75% of the  Company  shares  (i.e.,  a  majority  of the  shares not
presently  owned by  Premier);  and (iii) the  Company's  obtaining  a "fairness
opinion" with respect to the proposed transaction.

The Company rejected the offer as inadequate.  However, to assist the Company in
evaluating  any  subsequent  offers  received for the Company or its stock,  the
Company engaged the services of an investment banker and legal counsel. To date,
the Company has not received any subsequent offers and there can be no assurance
any such offer or offers will be received in the future.

The Company's results of operations have historically fluctuated from quarter to
quarter due to a number of factors  and are not  necessarily  indicative  of the

<PAGE>12


results to be expected  for any future  period or  expected  for the fiscal year
ending  August  31,  1998.  There can be no  assurance  that  revenue  growth or
profitability can be achieved or sustained in the future.

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

The Company  recorded net income of $183,128,  or $.04 per share,  for the third
quarter of fiscal 1999 as compared to a net loss of $797,129, or $.19 per share,
for the third  quarter  of  fiscal  1998.  The  Company  incurred  a net loss of
$501,171, or $.12 per share, for the first nine months of 1999 versus a net loss
of $2,380,521,  or $.60 per share,  for the comparable  period of 1998. The 1999
figures  for both  the  third  quarter  and the  nine-month  period  include  an
extraordinary gain of $350,000, or $.08 per share, resulting from the negotiated
reduction  of certain  professional  fees and  expenses  previously  recorded in
connection with the terminated Stock Purchase Agreement with Premier.

The per share figures are basic amounts in accordance with Financial  Accounting
Standards  No.  128  (see  Note 2 of  Notes to  Condensed  Financial  Statements
included in Item 1 of this Form 10-QSB).

The 1998 loss reflects the adverse  impact on revenues and corporate  operations
resulting from efforts associated with the terminated Stock Purchase  Agreement,
including  significant  costs and  professional  fees and expenses in connection
therewith.  Principal  contributing factors to the significantly reduced loss in
1999 were a substantial reduction in those acquisition expenses and the positive
impact of the extraordinary item. Nevertheless, some negative impact on earnings
was  attributable  to  continuing  diversion  of  the  Company's  resources  and
management's attention to acquisition matters in 1999.

The  Company's  revenues for the third  quarter of fiscal 1999 were  $1,655,610,
representing  an increase of  approximately  20% from revenues of $1,377,830 for
the third  quarter of fiscal 1998.  Revenues for the first nine months of fiscal
1999 were $5,005,897, representing an increase of approximately 5% from revenues
of $4,747,864 for the comparable period of 1998. The increase in revenues in the
1999 third quarter and  nine-month  periods as compared to the  respective  1998
periods  was due  principally  to lower  than  normal  revenues  during the 1998
periods.  During the 1998 third quarter,  the Company deferred delivery of units
against  several  orders pending the  completion of certain  software  upgrades,
which  upgrades  were  completed  toward  the  end of the  1998  third  quarter.
Additionally,  the 1998 third quarter and  nine-month  revenues  were  adversely
impacted by the redirection of management's  efforts from core operations to its
negotiations with Premier.

<PAGE>13


During the 1998 AAO Meeting, the Company introduced its low-cost digital imaging
systems incorporating its recently developed ocular imaging devices, the DFI and
the DSLI. The Company received  substantially more purchase  commitments for its
products as  compared  to  previous  AAO  meetings,  with  significant  purchase
commitments  for the  newly  introduced  products,  deliveries  of  which  newly
introduced products are currently targeted to commence during the fourth quarter
of fiscal 1999.

Gross margins were approximately 47% during the third quarter ended May 31, 1999
versus  approximately 32% for the comparable quarter of 1998. For the nine-month
period ended May 31, 1999, gross margins were  approximately  42% as compared to
approximately  32% during the  comparable  period of 1998. The increase in gross
margin  percentage  during the third quarter was partially  attributable  to the
significantly  increased revenue levels during the third quarter of 1999 and the
reversal of certain  reserves  accrued in 1998 for potential field upgrades.  In
addition, the lower gross margins for the 1998 third quarter reflect the adverse
impact of increased reserves for potential field upgrades recognized for certain
systems delivered during the 1998 third quarter.  Further,  the increase in such
reserves  for  systems  delivered  during  the first  nine  months of 1998 was a
principal  factor for the lower gross margins for the nine-month  period of 1998
as compared to the same period for 1999.  The Company  continues to evaluate its
expenses  in  this  area  consistent  with  current  and  anticipated   business
conditions.  During the recently  completed  third quarter,  the Company entered
into a Manufacturing  Agreement with Premier which  management  anticipates will
provide certain  efficiencies which may result in improved gross margins.  While
initial deliveries of revenue generating products  manufactured by Premier under
the  Manufacturing  Agreement  were made  during the  recently  completed  third
quarter  ended May 31,  1999,  this is a new  arrangement  and its impact is not
clearly ascertainable at this time.

As a percentage of revenues,  sales and marketing and general and administrative
expenses  accounted for  approximately  40% of total  revenues  during the third
quarter of fiscal 1999 versus  approximately  74% of total  revenues  during the
comparable  third  quarter of fiscal  1998.  For the first nine months of fiscal
1999 and fiscal 1998, such expenses  accounted for  approximately 42% and 68% of
total  revenues  for the  respective  nine-month  periods.  Expense  levels also
decreased to $668,921 during the third quarter of 1999 versus  $1,017,423 during
the third  quarter of 1998.  For the first nine months of 1999,  expense  levels
decreased to $2,118,253  from $3,223,838  during the comparable  period of 1998.
The 1998 sales and  marketing  and  general  and  administrative  expenses  were
abnormally  high in  relation  to  revenues  because of  significant  investment
banking,  legal and other  professional  costs recognized  during the second and
third  quarters of 1998  associated  with the  negotiation of the Stock Purchase
Agreement.  In 1999,  such  expenses  returned to more normal  levels due to the
termination  of the Stock  Purchase  Agreement.  In  addition,  the 1999 amounts
reflect the cost reductions  realized from the termination of certain management
personnel during the latter half of 1998. The Company is currently  implementing
marketing and selling  alternatives  in an effort to reduce costs and/or improve
efficiencies in this area, including consolidating its current product offerings
and co-marketing and selling efforts.

Research  and  development   expenses,   as  a  percentage  of  revenues,   were
approximately  15% in both the third  quarter  of 1999 and the third  quarter of

<PAGE>14


1998.  For the first nine months of fiscal 1999,  such  expenses  accounted  for
approximately  14% of total revenues as compared to approximately 13% during the
comparable  period of 1998.  Expense levels  increased in actual dollar terms to
$241,527  during the third  quarter of 1999 from  $206,647  in 1998.  During the
first nine months of fiscal 1999, expense levels also increased in actual dollar
terms to $712,440  versus  $608,352 in 1998. The Company  intends to continue to
focus its  research and  development  efforts on its new digital  image  capture
products and reducing cost configurations for its current products.  The Company
anticipates that research and development expense will be maintained at or above
current levels in the immediate term.

Other expense was $42,502 during the third quarter of fiscal 1999 versus $15,199
during the second  quarter of 1998.  For the first nine months of 1999 and 1998,
other expense was $106,438 and $44,078,  respectively.  The primary contributing
factor  to  these  increases  was  interest  expense  during  1999  versus  1998
associated with borrowings and unsecured advances from Premier, which borrowings
and unsecured  advances were made after the first quarter of 1998 (see Note 4 of
Notes to Condensed Financial Statements included in Item 1 of this Form 10-QSB).


Liquidity and Capital Resources

The Company's  operating  activities used cash of $491,231 during the first nine
months of fiscal 1999 and $837,451  during the  comparable  period for 1998. The
cash used in  operations  during  the  first  nine  months of 1999 was  expended
principally  to fund the net loss during the period and the increase in accounts
receivable  associated with timing of product  deliveries  toward the end of the
period. This amount was partially offset by increases in customer deposits. Cash
used in  operating  activities  in the first  nine  months of 1998 was  expended
principally  to fund the net loss during the period.  This amount was  partially
offset by collection of accounts  receivable and increases in customer  deposits
and accrued  liabilities,  particularly those liabilities accrued in conjunction
with  significant   investment  banking,  legal  and  other  professional  costs
recognized  during the second and third  quarters  of 1998  associated  with the
negotiation of the Stock Purchase Agreement.

Cash used in  investing  activities  was $5,677  during the first nine months of
1999 as  compared to $159,108  during the same  period for 1998.  The  Company's
primary  investing  activities  consist of  equipment  and other  capital  asset
acquisitions.   The  Company  does  not  currently  have  any  pending  material
commitments for capital  expenditures  and the Company has deferred  significant
capital acquisition decisions pending improved cash flow.

The Company  generated cash from financing  activities in the amount of $129,948
during the first nine months of fiscal  1999 as compared to $935,874  during the
same period of fiscal 1998. The source of cash from financing  activities during
the 1999 period was  principally  proceeds from increased  borrowings  under the
credit  facility  with Imperial  Bank (the "Bank") and, to a lesser  extent,  an
increase in the amount of  borrowings  under the note  payable to and  unsecured
advances by Premier.  The sources of cash from financing activities in 1998 were
the net proceeds  from the  exercise of certain  warrants  issued  pursuant to a

<PAGE>15


private  placement of the Company's  common stock in November  1995,  borrowings
under the Note and unsecured advances from Premier. These amounts were partially
offset by net repayments of borrowings  under the credit facility with the Bank.
Principal repayments on notes payable was negligible in both 1999 and 1998.

In  November  1997,  the Company  entered  into an  accounts  receivable  credit
agreement (the "Agreement")  with the Bank, and all amounts  outstanding under a
matured  revolving line of credit  agreement with the Bank were considered to be
the initial advance under the Agreement.  The Agreement  allows for up to an 80%
advance rate on eligible accounts receivable balances, and the maximum borrowing
base under the Agreement is $1.2 million. The Bank has full recourse against the
Company and the Agreement  remains in effect from year to year unless terminated
in  writing by the  Company or the Bank.  Borrowings  under the  Agreement  bear
interest at the Bank's prime  lending  rate plus 4%. In addition,  the Bank will
charge monthly an administrative fee equal to the greater of 1/2% of the average
daily  balance  for the  month or  $1,200.  Under  the  terms of the  Agreement,
borrowings are secured by substantially  all of the Company's assets. At May 31,
1999, approximately $219,000 in principal was outstanding under the Agreement.

Additionally, on April 30, 1998, the Company executed a promissory note in favor
of Premier (the "Premier Note").  The Company has borrowed the maximum principal
amount of $500,000  available  under the Premier Note,  which  principal  amount
outstanding, together with any and all accrued interest, was payable the earlier
of (i) written demand by Premier or (ii) April 30, 1999.  Under the terms of the
Premier  Note,  borrowings  bear  interest at the rate of 8 1/2% per annum,  are
secured by certain of the  Company's  assets and are  subordinate  to borrowings
under the  Agreement  with the Bank as  described in the  immediately  preceding
paragraph. Premier also has made certain unsecured advances to the Company which
are not  specifically  covered by the Premier Note. At May 31, 1999, the Company
had recorded  approximately  $1,591,000  in principal  and interest  outstanding
under the Note and unsecured advances, which amount was reduced to approximately
$1,408,000 by an offset in the amount of approximately  $183,000 pursuant to the
terms of the Manufacturing Agreement (see Note 5 of Notes to Condensed Financial
Statements  included in Item 1 of this Form  10-QSB).  While  amounts  under the
Premier Note are due and have not yet been paid by the Company,  Premier has not
yet made  demand for  payment.  The  Company is hopeful  that it will be able to
negotiate a repayment  plan with Premier to avoid any default,  but there can be
no assurance that a final agreement  between the parties can be reached.  In the
event  that an  agreement  cannot be reached  and demand for  payment is made by
Premier,  then the  Company's  ability to continue as a going  concern  could be
seriously jeopardized, and would depend upon its ability to obtain new financing
to repay the debt to Premier.

At May 31, 1999, the Company's cash and cash equivalents were $147,226. Assuming
that no demand is made for payment of amounts owing under the Premier Note,  the
Company  believes  that  its  existing  cash  balances   together  with  ongoing
collections of its accounts  receivable and available  borrowing  capacity under
the Agreement will be adequate to meet its liquidity and capital requirements in
the  near  term.  However,  such  amounts  may not be  sufficient  if there is a
substantial delay in the mass  introduction of the DFI and DSLI products,  which
delay would result in reduced  anticipated cash flow from sales of such products
as well as potential increased costs associated therewith.  Further,  demand for

<PAGE>16


payment by the Bank of amounts claimed  pursuant to a stock  appreciation  right
granted to the Bank in connection with a credit arrangement between the Bank and
the Company also could result in the need for additional  cash. At May 31, 1999,
the Company  had accrued  approximately  $287,000 in  liability  under the stock
appreciation  right. If there is a substantial  delay in the introduction of the
Company's  new  products or the Company is required to make payment of the stock
appreciation right in full, then the Company would have to seek financing.

Further, although the Company may have the ability to manufacture and market its
DFI and DSLI products,  without an infusion of capital or other  improvements in
its  liquidity  position,  the  Company  may  have  difficulty  in  meeting  any
significant demand for these products.

The Company,  however,  is continuing  to seek sources of additional  capital to
meet its current  and  potential  cash  requirements,  including  debt and other
financing   arrangements.   There  can  be  no  assurance   that  any  financing
arrangements  will be  available  and,  if  available,  can be obtained on terms
favorable to the Company.


<PAGE>17



                            PART II OTHER INFORMATION

ITEM 1.             LEGAL PROCEEDINGS
                    None.

ITEM 2.             CHANGES IN SECURITIES
                    None.

ITEM 3.             DEFAULTS UPON SENIOR SECURITIES
                    As indicated  in Note 4 of the Notes to Condensed  Financial
                    Statements,  and  addressed  further  in the  Liquidity  and
                    Capital  Resources  discussion  of  Item 2 of Part I of this
                    report,  the  Company  is in default  of its  principal  and
                    interest payment obligations under the Note with Premier.

                    In  addition,  the Company  also has  recorded  liability to
                    Premier  for  unsecured  advances  made  to the  Company  by
                    Premier.

                    The aggregate  amount  recorded as liability at May 31, 1999
                    under the Note and unsecured  advances,  including principal
                    and interest, was approximately $1,591,000, which amount was
                    reduced  to  approximately  $1,408,000  by an  offset in the
                    amount of  approximately  $183,000  pursuant to the terms of
                    the Manufacturing Agreement described in Note 5 of the Notes
                    to Condensed Financial Statements.

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

ITEM 5.             OTHER INFORMATION
                    In May 1999, the Company granted to each of its non-employee
                    directors  options  to  purchase  up to  50,000  shares  (or
                    200,000  shares in the  aggregate of all  directors)  of the
                    Company's  common  stock at an exercise  price of $0.375 per
                    share.  In that  connection,  the options granted in January
                    1999 in similar amounts were cancelled.  The options granted
                    in  May  1999  were  granted  pursuant  the  Company's  1997
                    Nonstatutory  Stock  Option  Plan and are subject to certain
                    vesting  requirements.  None  of  these  options  have  been
                    exercised as of the date hereof.

ITEM 6.             EXHIBITS AND REPORTS ON FORM 8-K
                    (a)      The exhibits  listed on the  accompanying  Index to
                             Exhibits  below are filed as a part  hereof and are
                             incorporated by reference as noted.
                    (b)      None.



<PAGE>18

                                   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/ STEVEN R. VERDOONER
                                            -----------------------------------
                                            Steven R. Verdooner,
                                            Chief Executive Officer


                                     By: /s/ STEVEN C. LAGORIO
                                             ----------------------------------
                                             Steven C. Lagorio,
                                             Chief Financial Officer (principal
                                             accounting officer)



Dated:  July 14, 1999



<PAGE>19



                                                 INDEX TO EXHIBITS

<TABLE>
<S>                  <C>                                                                                     <C>
Exhibit Number                                                                                                 Footnote
                                                     Description of Exhibit                                    Reference

       2.1           Stock  Purchase  Agreement,  dated as of February 25, 1998, by and between  Registrant       (13)
                     and Premier Laser Systems, Inc.

       3.1           Articles of Incorporation of the Registrant, as amended.                                       *

       3.1(a)        Amendment to Articles of  Incorporation  (Certificate of  Determination of Preferences       (11)
                     of Series A Junior Participating Preferred Stock of Ophthalmic Imaging Systems).

       3.2           Amended Bylaws of the Registrant.                                                              *

       3.3           Amendment to Amended Bylaws of the Registrant dated January 28, 1998.                        (16)

       4.1           See Exhibits 3.1 and 3.2 for provisions of the Articles of Incorporation,  as amended,         *
                     and the  amended  Bylaws of the  Registrant  defining  the rights of holders of common
                     stock of the Registrant.

       4.2           Specimen of Stock Certificate.                                                                 *

       4.3           Rights  Agreement,  dated as of December 31,  1997,  between  Registrant  and American       (10)
                     Securities Transfer, Inc., including form of Rights Certificate attached thereto.

       4.4           Amendment to Rights Agreement,  dated as of February 25, 1998,  between Registrant and       (14)
                     American Securities Transfer, Inc.

       10.1          Lease  Agreement,  dated as of July 10, 1987,  between the  Registrant (as tenant) and         *
                     Transamerica/Emkay Income Properties I, as amended on July 23, 1990 and June 11, 1991.

       10.1(a)       Seventh Amendment to lease effective as of July 18, 1996.                                     (7)

       10.2          Employment  Agreement,  dated March 27,  1992,  between the  Registrant  and Dennis J.         *
                     Makes.

       10.2(a)       Amendment dated June 30, 1993 to the Employment  Agreement  between the Registrant and        (1)
                     Dennis J. Makes dated March 27, 1992.

       10.3          Confidentiality  Agreement,  dated March 27, 1992 between the Registrant and Dennis J.         *
                     Makes.

       10.4          Confidentiality  Agreement,  dated March 27, 1992 between the Registrant and Steven R.         *
                     Verdooner.

       10.5          Confidentiality  Agreement,  dated March 27, 1992 between the  Registrant  and Richard         *
                     Wullaert.

       10.6          Consulting  Agreement,  dated January 23, 1992,  between the  Registrant  and G. Peter         *
                     Halberg, M.D.

       10.7          Assignment dated October 23, 1990 of U.S. Patent  Application for Apparatus and Method         *
                     for  Topographical  Analysis of the Retina to the  Registrant by Steven R.  Verdooner,
                     Patricia C.  Meade,  and Dennis J. Makes (as  recorded on Reel 5490,  Frame 423 in the
                     Assignment Branch of the U.S. Patent and Trademark Office).

       10.8          Form of  International  Distribution  Agreement used by the Registrant and sample form         *
                     of End User Software License Agreement.

       10.9          Original Equipment Manufacturer  Agreement,  dated April 1, 1991, between the Registrant
                     and SONY Medical Electronics, a division of SONY Corporation of America.                       *

       10.10         Original Equipment  Manufacturer/Value  Added Reseller  Agreement,  dated May 7, 1991,         *
                     between the Registrant and Eastman Kodak Company.

       10.11         The Registrant's 1992  Nonstatutory  Stock Option Plan and sample form of Nonstatutory         *
                     Stock Option Agreement.

       10.12         Cross-Indemnification  Agreement, dated February 14,  1991, among Dennis Makes, Steven         *
                     Verdooner, and Richard Wullaert.

       10.13         Key Man Life Insurance Policies in the amount of $1,000,000 for each of Dennis J. Makes        *
                     and Steven R. Verdooner, with  the Registrant as the named beneficiary.

       10.14         Stock Option Plan.                                                                            (1)

       10.15         Rental  Agreement  dated May 1,  1994 by and  between  the  Registrant  and  Robert J.        (2)
                     Rossetti.

       10.16         Security and Loan Agreement  (with Credit Terms and Conditions)  dated April 12,  1995        (3)
                     by and between the Registrant and Imperial Bank.

       10.16(a)      General  Security  Agreement  dated  April 12,  1995 by and between the Registrant and        (3)
                     Imperial Bank.

       10.16(b)      Warrant dated  November 1, 1995 issued by the  Registrant to Imperial Bank to purchase        (4)
                     67,500 shares of common stock.

       10.16(c)      Amended Loan and Security  Agreement (with Credit Terms and Conditions) dated November        (4)
                     1, 1995.

       10.16(d)      Registration  Rights  Agreement  dated  November 1, 1995  between the  Registrant  and        (4)
                     Imperial Bank.

       10.16(e)      Amended Loan and Security  Agreement (with Credit Terms and Conditions) dated April 4,        (6)
                     1996.

       10.16(f)      Amended Loan and Security  Agreement (with Credit Terms and Conditions) dated July 12,        (7)
                     1996.

       10.16(g)      Amended Loan and Security  Agreement (with Credit Terms and Conditions) dated November        (7)
                     21, 1996.

       10.16(h)      Amended Loan and Security  Agreement (with Credit Terms and Conditions)  dated June 3,        (8)
                     1997.

       10.16(i)      Amended Loan and Security  Agreement (with Credit Terms and  Conditions)  dated August        (9)
                     28, 1997.

       10.16(j)      Amended Loan and Security  Agreement (with Credit Terms and Conditions)  dated October        (9)
                     24, 1997.

       10.16(k)      Amended Loan and Security  Agreement (with Credit Terms and Conditions) dated November        (9)
                     3, 1997.

       10.16(l)      Amended Loan and Security  Agreement (with Credit Terms and Conditions) dated November        (9)
                     21, 1997.

       10.16(m)      Agreement of Purchase of Receivable  (Full  Recourse)  dated November 18, 1997 between        (9)
                     Registrant and Imperial Bank.

       10.17         Employment  Agreement  dated  November 20, 1995 between the  Registrant  and Steven R.        (4)
                     Verdooner.

       10.17(a)      Amendment  dated  effective July 14, 1997 to Employment  Agreement  dated November 20,        (16)
                     1995 between the Registrant and Steven R. Verdooner.

       10.18         The Registrant's 1995  Nonstatutory  Stock Option Plan and sample form of Nonstatutory        (5)
                     Stock Option Agreement.

       10.19         The Registrant's 1997  Nonstatutory  Stock Option Plan and sample form of Nonstatutory       (12)
                     Stock Option Agreement.

       10.20         Promissory  Note dated April 30, 1998 from the  Registrant to Premier  Laser  Systems,       (15)
                     Inc.  in the maximum  amount of  $500,000  due in full upon the earlier of (i) written
                     demand by Premier or (ii) April 30, 1999.

       10.21         Security  Agreement  dated April 30, 1998 by and  between the  Registrant  and Premier       (15)
                     Laser Systems, Inc.

       10.22         Form of  Indemnification  Agreement  dated January 23, 1998 between the Registrant and       (16)
                     each of its directors, officers and certain key employees.

       10.23         Manufacturing  Agreement  dated March 7, 1999 between the Registrant and Premier Laser       (17)
                     Systems, Inc.

       27            Financial Data Schedule (for SEC use only).                                                  (18)

</TABLE>


*    Incorporated  by reference to the  Registrant's  Registration  Statement on
     Form S-18, number 33-46864-LA.

(1)  Incorporated by reference to the Registrant's  Annual Report on Form 10-KSB
     for the fiscal year ended August 31, 1993 filed on November 26, 1993.

(2)  Incorporated by reference to the Registrant's  Annual Report on Form 10-KSB
     for the fiscal year ended August 31, 1994 filed on November 29, 1994.

(3)  Incorporated  by reference  to the  Registrant's  Quarterly  Report on Form
     10-QSB for the quarterly period ended May 31, 1995 filed on July 14, 1995.

(4)  Incorporated by reference to the Registrant's  Annual Report on Form 10-KSB
     for the fiscal year ended August 31, 1995 filed on November 29, 1995.

(5)  Incorporated  by reference to the  Registrant's  Registration  Statement on
     Form S-8 filed on May 28, 1996, number 333-0461.

(6)  Incorporated  by reference  to the  Registrant's  Quarterly  Report on Form
     10-QSB for the quarterly period ended May 31, 1996 filed on July 15, 1996.

(7)  Incorporated by reference to the Registrant's  Annual Report on Form 10-KSB
     for the fiscal year ended August 31, 1996 filed on November 29, 1996.

(8)  Incorporated  by reference  to the  Registrant's  Quarterly  Report on Form
     10-QSB for the quarterly period ended May 31, 1997 filed on July 15, 1997.

(9)  Incorporated by reference to the Registrant's  Annual Report on Form 10-KSB
     for the fiscal year ended August 31, 1997 filed on December 1, 1997.

(10) Incorporated by reference to Exhibit 1 of the  Registrant's  Form 8-K filed
     on January 2, 1998.

(11) Incorporated  by  reference  to Exhibit A of Exhibit 1 of the  Registrant's
     Form 8-K filed on January 2, 1998.

(12) Incorporated  by reference  to the  Registrant's  Quarterly  Report on Form
     10-QSB for the  quarterly  period ended  November 30, 1997 filed on January
     14, 1998.

(13) Incorporated by reference to Exhibit 2.1 of the Registrant's Form 8-K filed
     on March 9, 1998.

(14) Incorporated by reference to Exhibit 4.1 of the Registrant's Form 8-K filed
     on March 9, 1998.

(15) Incorporated  by reference  to the  Registrant's  Quarterly  Report on Form
     10-QSB for the quarterly period ended May 31, 1998 filed on July 15, 1998.

(16) Incorporated by reference to the Registrant's  Annual Report on Form 10-KSB
     for the fiscal year ended August 31, 1998 filed on December 15, 1998.

(17) Incorporated  by reference  to the  Registrant's  Quarterly  Report on Form
     10-QSB for the quarterly  period ended February 28, 1999 filed on April 14,
     1999.

(18) Exhibit filed herewith.