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 June 30, 2002

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 August 14,  2002, 8,138,305 shares of common stock, no par value, were
outstanding.

Transitional Small Business Disclosure Format:

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



<PAGE>


                           OPHTHALMIC IMAGING SYSTEMS

                                   FORM 10-QSB

                       FOR THE QUARTER ENDED JUNE 30, 2002



PART I.  FINANCIAL INFORMATION                                         PAGE
                                                                       ----

Item 1.  Financial Statements

         Condensed Balance Sheet as of June 30, 2002                      2

         Condensed Statements of Operations for the Three Months
         and Six Months ended June 30, 2002 and June 30, 2001             3

         Condensed Statements of Cash Flows for the Three Months
         and Six Months ended June 30, 2002 and June 30, 2001             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                                              15

Item 2.  Changes in Securities and Use of Proceeds                      15

Item 3.  Defaults upon Senior Securities                                15

Item 4.  Submission of Matters to a Vote of Security Holders            15

Item 5.  Other Information                                              15

Item 6.  Exhibits and Reports on Form 8-K                               15

<PAGE>


                          PART I FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


<PAGE>
                                      Ophthalmic Imaging Systems
                                            June 30, 2002
                                       Condensed Balance Sheet
                                             (Unaudited)

<TABLE>
<CAPTION>
ASSETS
------
<S>                                                                                      <C>
Current assets:
      Cash and equivalents                                                               $    86,088
      Accounts receivable, net                                                               913,538
      Inventories, net                                                                       559,758
      Prepaid expenses and other current assets                                               48,067
                                                                                         -----------
Total current assets                                                                       1,607,451
Furniture and equipment, net of accumulated
      depreciation and amortization of $1,298,923                                            161,632
Other assets                                                                                  22,247
                                                                                         -----------
                                                                                         $ 1,791,330
                                                                                         ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
      Notes payable to related party                                                     $   568,430
      Accounts payable                                                                       532,123
      Accrued liabilities                                                                  1,590,507
      Deferred extended warranty revenue                                                     252,309
      Customer deposits                                                                      320,274
      Capitalized lease obligation and other notes payable                                     8,939
                                                                                         -----------
Total current liabilities                                                                  3,272,582
                                                                                         -----------

Noncurrent liabilities:
      Capitalized lease obligation, less current portion                                           -
      Notes payable to related party, less current portion                                 1,631,429
                                                                                         -----------
Total noncurrent liabilities                                                               1,631,429

                                                                                         -----------
Total liabilities                                                                          4,904,011
                                                                                         -----------

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                                                                (15,743,285)
                                                                                         -----------
Total stockholders' deficit                                                               (3,112,681)
                                                                                         -----------
                                                                                         $ 1,791,330
                                                                                         ===========

      The accompanying notes are an integral part of these condensed financial statements.
</TABLE>

                                       2
<PAGE>

<TABLE>


                                                    Ophthalmic Imaging Systems
                                                Condensed Statements of Operations
                                                            (Unaudited)

<CAPTION>
                                                         Three months ended June 30,                 Six months ended June 30,
                                                          2002                 2001                  2002                  2001
                                                      ----------            ----------            ----------           ----------

<S>                                                   <C>                   <C>                   <C>                  <C>
Net revenues                                         $ 1,819,816           $ 1,331,803           $ 3,559,645          $ 3,040,604
Cost of sales                                            744,436               617,751             1,426,495            1,434,503
                                                      ----------            ----------            ----------           ----------
Gross profit                                           1,075,380               714,052             2,133,150            1,606,101
Operating expenses:
     Sales and marketing                                 564,200               384,240             1,082,529              915,557
     General and administrative                          168,502               311,318               532,656              585,984
     Research and development                            171,893                94,339               269,163              177,290
                                                      ----------            ----------            ----------           ----------
          Total operating expenses                       904,595               789,897             1,884,348            1,678,831
                                                      ----------            ----------            ----------           ----------
Income from operations                                   170,785               (75,845)              248,802              (72,730)
Other expense, net                                      (104,951)              (54,381)             (179,411)            (108,341)
                                                      ----------            ----------            ----------           ----------
Income (loss) before extraordinary item                   65,834              (130,226)               69,391             (181,071)
Extraordinary item                                             -                     -                     -              188,762
                                                      ----------            ----------            ----------           ----------
Net income                                           $    65,834           $  (130,226)          $    69,391          $     7,691
                                                      ==========            ==========            ==========           ==========

Shares used in the calculation of basic
     net income per share                              8,138,305             8,138,305             8,138,305            8,138,305
                                                      ==========            ==========            ==========           ==========
Basic income (loss) per share before
     extraordinary item                              $      0.01           $     (0.02)          $      0.01          $     (0.02)
Extraordinary item                                             -                     -                     -                 0.02
                                                      ----------            ----------            ----------           ----------
Basic net income per share                           $      0.01           $     (0.02)          $      0.01          $      0.00
                                                      ==========            ==========            ==========           ==========

Shares used in the calculation of diluted
     net income per share                              8,138,305             8,138,305             8,138,305            8,138,305
                                                      ==========            ==========            ==========           ==========
Diluted income (loss) per share before
     extraordinary item                              $      0.01           $     (0.02)          $      0.01          $     (0.02)
Extraordinary item                                             -                     -                     -                 0.02
                                                      ----------            ----------            ----------           ----------
Diluted net income per share                         $      0.01           $     (0.02)          $      0.01          $      0.00
                                                      ==========            ==========            ==========           ==========

                         The accompanying notes are an integral part of these condensed financial statements.

</TABLE>


                                       3
<PAGE>

<TABLE>

                                        Ophthalmic Imaging Systems
                                    Condensed Statements of Cash Flows
                                               (Unaudited)


<CAPTION>
                                                                            Six months ended June 30,
                                                                            2002                 2001
                                                                         ----------           ----------

OPERATING ACTIVITIES:
<S>                                                                        <C>                  <C>
Net income                                                               $   69,391           $   7,691
Adjustments to reconcile net income to net cash
     used in operating activities:
          Depreciation and amortization                                      37,765              60,200
          Stock option compensation expense                                       -               3,049
          Extraordinary gain on early extinguishment of debt                      -            (188,762)
          Net increase in current assets other
               than cash and equivalents                                   (117,996)            (14,104)
          Net (decrease) increase in current liabilities
               other than short-term borrowings                             (45,553)             23,900
                                                                         ----------           ----------
Net cash used in operating activities                                       (56,393)           (108,026)

INVESTING ACTIVITIES:
Purchases of furniture and equipment                                        (14,719)            (56,223)
Net increase in other assets                                                 (9,357)               (306)
                                                                         ----------           ----------
Net cash used in investing activities                                       (24,076)            (56,529)

FINANCING ACTIVITIES:
Principal payments on notes payable                                          (3,169)             (3,467)
Proceeds from borrowings under
     notes payable to significant shareholders, net                          97,800             174,337
                                                                         ----------           ----------
Net cash provided by financing activities                                    94,631             170,870
                                                                         ----------           ----------
Net increase in cash and equivalents                                         14,162               6,315
Cash and equivalents at beginning of period                                  71,926              36,574
                                                                         ----------           ----------
Cash and equivalents at end of period                                    $   86,088           $  42,889
                                                                         ==========           ==========

SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
          Reduction in aggregate debt payable
          to significant shareholders in exchange for
          inventory and other noncash transactions, net                  $ (145,497)          $ (58,477)
                                                                         ==========           ==========

      The accompanying notes are an integral part of these condensed financial statements.

</TABLE>


                                       4
<PAGE>

                           Ophthalmic Imaging Systems

                     Notes to Condensed Financial Statements

            Three and Six Month Periods ended June 30, 2002 and 2001


                                   (Unaudited)


Note 1.   Basis of Presentation

          The  accompanying  unaudited  condensed  balance  sheet as of June 30,
          2002,  condensed  statements of operations for the three and six month
          periods ended June 30, 2002 and 2001 and the  condensed  statements of
          cash flows for the three and six month periods ended June 30, 2002 and
          2001  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 Ophthalmic  Imaging Systems'
          (the  "Company's")  Annual Report for the Twelve Months Ended December
          31,  2001  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 June 30, 2002 are not  necessarily  indicative of the
          operating results for the full year.

          Certain  amounts in the fiscal  2001  financial  statements  have been
          reclassified  to conform  with the  presentation  in the  fiscal  2002
          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 is 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              Six Months Ended
                                                        June 30,                       June 30,
                                                        --------                       --------
                                                  2002            2001           2002            2001
                                             --------------- ------------------------------ ---------------

<S>                                                  <C>           <C>            <C>          <C>
          Numerator for basic and diluted
          net income  (loss) per share               $    65,834   $  (130,266)   $   69,391   $    7,691
                                                     ===========   ===========    ==========   ==========

          Denominator for basic net income
            (loss) per share:
             Weighted average shares                   8,138,305     8,138,305     8,138,305    8,138,305

          Effect of dilutive securities:
            Employee/director stock options                   --            --            --           --
             Warrants and other                               --            --            --           --
                                                     -----------   -----------    ----------   ----------
          Dilutive potential common shares                    --            --            --           --
                                                     -----------   -----------    ----------   ----------
          Denominator for diluted net
          income (loss) per share                      8,138,305     8,138,305     8,138,305    8,138,305
                                                     ===========   ===========    ==========   ==========

          Basic net income (loss) per share          $      0.01   $     (0.02)   $     0.01   $     0.00
                                                     ===========   ===========    ==========   ==========

          Diluted net income (loss) per share        $      0.01   $     (0.02)   $     0.01   $     0.00
                                                     ===========   ===========    ==========   ==========
</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 a conversion price of $.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 this  transaction,  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  interest  is  payable  as
          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 June 30,  2002,  the
          Company had recorded  approximately $307,000 in principal and interest
          outstanding under the Short-Term Note.  MediVision and the Company are
          in discussions  with regard to  reclassifying  amounts  currently owed
          under the  Short-Term  Note

                                       6
<PAGE>

          to amounts owed under the Working Capital Note (as defined 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 Company has borrowed the maximum principal amount
          of $1.5  million  available  under the  Working  Capital  Note,  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 $.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.

          The Company and MediVision entered into Amendment No. 1 to the Working
          Capital Funding Agreement (the  "Amendment")  dated as of July 1, 2001
          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  June  30,  2002,   the  Company  had   recorded,   in   aggregate,
          approximately  $2,508,000 in principal and interest  outstanding under
          the Working Capital Note and Amendment Note.

          At June 30, 2002, the Company had recorded approximately $2,199,000 in
          aggregate   debt  owed  to   MediVision,   which   amount  is  net  of
          approximately  $616,000 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 control of the Company,  notified the Company that it
          was considering seeking protection under the U.S. Bankruptcy Code (the
          "Code") and the Company  thereupon  terminated a merger  agreement and
          rendered  non-effective  a  manufacturing  agreement and certain other
          arrangements  then in  effect  between

                                       7
<PAGE>

          the parties.  In March 2000,  Premier  filed a voluntary  petition for
          protection and reorganization under Chapter 11 of the 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). 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 Item

          In March 2001,  the Company  reached an 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  financial  statements  for the six  months
          ended June 30, 2001.



                                       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 the Company, 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 the Company with the  Securities  and
Exchange   Commission   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  a new line of digital  angiography  systems at the
2000 Annual  Meeting of the American  Academy of  Ophthalmology  ("AAO") held in
Dallas,  Texas. One of these products has received considerable interest and the
Company has received  significant  purchase commitments for this product. At the
2001 Annual  Meeting of the AAO held in New Orleans,  Louisiana  during the last
quarter of 2001, the Company  introduced its latest digital imaging system,  the
WinStation  5000,  which has also been  positively  received.  Since the initial
introduction  of these systems,  a preponderance  of the Company's  revenues has
come from the sale of these products, including upgrades.

     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.  After  generating  substantial  revenues from sales of these products
initially,  on-going  revenues  from the sale of these  products  continue to be
below  management's  original  expectations.  Nonetheless,  the Company  remains
committed

                                       9
<PAGE>

to these products and continues to evaluate  product  features and  enhancements
considering customer feedback and other market conditions and factors.

     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.

     At June 30,  2002,  the  Company  had an  accumulated  deficit in excess of
$15,000,000  and  its  current  liabilities   exceeded  its  current  assets  by
approximately  $1,481,000.   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
-----------------------------------

     In February 2000,  Premier,  then a significant  shareholder  with majority
voting  control of the Company,  notified  the Company  that it was  considering
seeking protection under the 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 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). 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.

     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
---------------------

Revenues

     The  Company's  revenues  for the second  quarter  ended June 30, 2002 were
$1,819,816,  representing  an increase  of  approximately  37% from  revenues of
$1,331,803  for the second  quarter ended June 30, 2001.  Revenues for the first
six  months  of  fiscal  2002  were  $3,559,645   representing  an  increase  of
approximately  17% from  revenues of

                                       10
<PAGE>

$3,040,604 for the  comparable  period of fiscal 2001. The amounts in both years
include revenues from deliveries of the Company's  digital  angiography  systems
introduced  at the annual AAO meeting held in the  preceding  quarter.  Sales of
these products  accounted for  approximately  78% and 80% of the Company's total
revenues  for the second  quarter and  six-month  period of 2002,  respectively.
Sales of these products accounted for approximately 67% and 64% of the Company's
total   revenues  for  the  second   quarter  and  six-month   period  of  2001,
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  6% and 12% of second quarter  revenues during 2002 and 2001,
respectively,  and 4% and 11% of  revenues  for the first six months of 2002 and
2001, respectively.

Gross Margins

     Gross margins were  approximately  59% during the second quarter ended June
30, 2002 versus  approximately  54% for the comparable  quarter of 2001. For the
six-month  period ended June 30, 2002, gross margins were  approximately  60% as
compared to approximately  53% during the comparable period of 2001. The Company
has 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  40% of total revenues during the second quarter of fiscal 2002 as
compared with approximately 52% during the second quarter of fiscal 2001. Actual
expense  levels  increased to $732,702  during the second quarter of 2002 versus
$695,558  during the second  quarter of 2001. For the first six months of fiscal
2002 and fiscal 2001 such expenses  accounted for  approximately  45% and 49% of
total revenues for the respective  six-month periods.  Actual expenses increased
to $1,615,185  from $1,501,541  during the six-month  periods of fiscal 2002 and
2001, respectively.  Primary contributing factors to the increased expenses were
salaries and support costs  related to direct sales and other support  personnel
added  subsequent  to the  second  quarter  of 2001 as well as  other  costs  in
connection with the Company's selling efforts in 2002.

Research and Development Expenses

     Research  and  development  expenses  increased  by  approximately  82%  to
$171,893 in the second quarter of fiscal 2002 from $94,339 in fiscal 2001.  Such
expenses  accounted for  approximately  9% and 7% of revenues  during the second
quarter of 2002 and 2001, respectively. For the first six months of fiscal 2002,
such expenses  accounted for  approximately  8% of total revenues as compared to
approximately  6% during the comparable  period of 2001. The Company has focused
its recent  research  and  development  efforts  on new  digital  image  capture
products and reducing cost configurations for its current products.


                                       11
<PAGE>

Other Expense

     Other expense was $104,951  during the second quarter of fiscal 2002 versus
$54,381 during the same period of 2001. For the six-month periods, other expense
was $179,411 and  $108,341 in fiscal 2002 and fiscal 2001,  respectively.  These
amounts were comprised  principally of interest expense,  mainly associated with
net  borrowings  from  MediVision and with  financing  arrangements  provided to
certain of the Company's customers in connection with sales of its products.

Net Income

     The Company  recorded  net income of $65,834,  or $0.01 per share,  for the
second  quarter  ended June 30, 2002 as compared to a net loss of  $130,226,  or
$0.02 per share,  for the second  quarter ended June 30, 2001. For the six-month
periods,  the Company  recorded  net income of $69,391,  or $0.01 per share,  as
compared to $7,691, or breakeven per share,  during fiscal 2002 and fiscal 2001,
respectively.

     The 2001 amounts  include an  extraordinary  gain of $188,762,  or $.02 per
share, resulting from the negotiated reduction of certain principal and interest
charges  previously  recorded  in  connection  with a stock  appreciation  right
granted 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 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  $2.2  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 $56,393  during the six
months  ended June 30, 2002 as compared to $108,026 in the six months ended June
30, 2001.  The cash used in  operations  during the first six months of 2002 was
principally  to fund the  procurement  of inventory  required to meet the second
quarter and anticipated  near-term sales demand for the Company's products.  The
cash used in operations  during the first six months of 2001 was  principally to
fund the loss  before  extraordinary  item,  the  impact of which was  partially
offset by an  increase  in accrued  liabilities  during the  period,  as well as
increases in customer deposits  resulting in large measure from orders generated
in connection with the 2000 AAO Meeting.

     Cash used in investing  activities  was $24,076 during the first six months
of 2002 as compared to $56,529  during the same period for 2001.  The  Company's
primary  investing  activities  consist of  equipment  and other  capital  asset
acquisitions.  The  Company

                                       12
<PAGE>

anticipates  continued certain near-term capital expenditures in connection with
increasing its pool of demonstration  equipment,  as well as its ongoing efforts
to upgrade its  existing  management  information  and  corporate  communication
systems.  The Company  anticipates  that related  expenditures,  if any, will be
financed from cash flow from operations,  borrowings under existing arrangements
with MediVision,  if available, or other financing arrangements available to the
Company, if any.

     The Company generated cash from financing  activities of $94,631 during the
first six months of fiscal 2002 as compared  to $170,870  during the  comparable
period of fiscal 2001.  The cash  provided by financing  activities  during both
periods was principally from increased  borrowings  under existing  arrangements
with MediVision.  Principal  payments on notes payable other than to significant
shareholders in both years were minimal.

     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 the Short-Term Note and the Company has borrowed
the maximum principal amount of $260,000 available under the Short-Term Note. At
June 30, 2002, the Company had recorded  approximately $307,000 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.

     In  addition,  in  connection  with  the  Closing  in  August  2000  of the
transactions  contemplated by the MediVision  investments,  the Company executed
the Working Capital Note. The Company has borrowed the maximum  principal amount
available under the Working Capital Note of $1,500,000,  which principal  amount
outstanding,  together with any and all accrued  interest,  is payable by August
31,  2003,  except that any  principal  and accrued but unpaid  interest  amount
outstanding is convertible at any time at MediVision's option into shares of the
Company's common stock at a conversion price of $0.80 per share. Under the terms
of the Working  Capital Note,  borrowings  bear interest at the rate of 9.3% per
annum and are secured by substantially all of the Company's assets.

     In July  2001,  the  Company  and  MediVision  entered  into the  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 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.

                                       13
<PAGE>

     At June 30, 2002,  the Company had recorded,  in  aggregate,  approximately
$2,508,000 in principal and interest  outstanding under the Working Capital Note
and the Amendment Note.

     At June 30, 2002,  the Company had  recorded  approximately  $2,199,000  in
aggregate debt owed to MediVision, which amount is net of approximately $616,000
in  accounts  receivable  recorded  in  connection  with sales of the  Company's
products to MediVision.

     Notwithstanding the foregoing,  the Company's relationship with 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  agreement  between  MediVision  and
Agfa-Gevaert  N.V.  entered into during the fourth quarter of 2001.  Pursuant to
the agreement,  Agfa acquired a minority interest in MediVision and is to invest
in MediVision up to $3.5 million, $1 million of which was provided in connection
with the closing in October 2001 and $1 million of which was paid in April 2002.
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  Company  anticipates  actively
supporting MediVision in these efforts.

     The Company's  relationship with MediVision  provides the Company access to
resources  in  addition  to  working  capital.  As a direct  consequence  of the
MediVision  transactions,  the  Company has  implemented  certain  gross  margin
enhancement  efforts,  including improved production cost control and sustaining
engineering  programs.  In addition,  the Company and  MediVision are continuing
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.


                                       14
<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)   None.
         (b)   None.


                                       15
<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
                                      (Company)


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


Dated:  August 14, 2002


                                       16