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 February 28, 1997

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)

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  April 1, 1997, 3,732,999 shares of common stock, at no par value,
were outstanding.

<PAGE>

                           PART I FINANCIAL INFORMATION


ITEM 1. FINANCIAL STATEMENTS

                       OPHTHALMIC IMAGING SYSTEMS
                         CONDENSED BALANCE SHEET
                            FEBRUARY 28, 1997
                               (UNAUDITED)

ASSETS
Current assets:
  Cash and equivalents                                         $       335,169
  Accounts receivable, net                                           1,708,796
  Inventories, net                                                   1,353,198
  Prepaid expenses and other current assets                             94,557
                                                               ---------------  
Total current assets                                                 3,491,720

Furniture and equipment, net of accumulated 
depreciation and amortization of $701,044                              411,009

Other assets                                                            69,237
                                                                --------------
                                                                $    3,971,966
                                                                ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Borrowings under line of credit                               $      281,000
  Accounts payable                                                     867,290
  Accrued liabilities                                                  768,341
  Accrued warrant appreciation right                                   239,664
  Deferred extended warranty revenue                                    70,298
  Customer deposits                                                     48,213
  Current portion of notes payable                                       5,002
                                                                 -------------
Total current liabilities                                            2,279,808

Notes payable, less current portion                                        195

Commitments

Stockholders' equity:
  Preferred stock, no par value, 20,000,000 shares 
    authorized; none issued or outstanding                                  -- 
  Common stock, no par value, 20,000,000 shares authorized;
    3,720,699 issued and outstanding                                 9,545,677
Accumulated deficit                                                 (7,853,714)
                                                                  ------------
Total stockholders' equity                                           1,691,963
                                                                  ============
                                                                  $  3,971,966

SEE ACCOMPANYING NOTES.


<PAGE>

                       OPHTHALMIC IMAGING SYSTEMS
                   CONDENSED STATEMENTS OF OPERATIONS
                               (UNAUDITED)

<TABLE>
<CAPTION>                                          THREE MONTHS ENDED                         SIX MONTHS ENDED


                                FEBRUARY 28, 1997     FEBRUARY 29, 1996     FEBRUARY 28, 1997     FEBRUARY 29, 1996

<S>                           <C>                   <C>                   <C>                  <C>   
NET REVENUES                      $  2,285,407         $   2,169,753          $ 3,169,653           $ 4,079,679
COST OF SALES                        1,333,567             1,487,018            1,983,740             2,723,212
                                  -------------        --------------         ------------          ------------
GROSS PROFIT                           951,840               682,735            1,185,913             1,356,467

OPERATING EXPENSES:
  SALES AND MARKETING                  354,511               365,889              822,848               853,750
  GENERAL AND ADMINISTRATIVE           249,908               208,648              532,676               362,861
  RESEARCH AND DEVELOPMENT             232,645               170,832              497,426               367,848
                                  -------------         -------------         ------------          ------------
    TOTAL OPERATING EXPENSES           837,064               745,369            1,852,950             1,584,459
                                  -------------         -------------         ------------          -------------
INCOME (LOSS) FROM OPERATIONS          114,776               (62,634)            (667,037)             (227,992)

OTHER EXPENSE, NET                     (13,557)              (35,440)             (27,279)              (68,441)
                                  -------------         -------------         ------------          -------------
NET INCOME (LOSS)                 $    101,219          $    (98,074)         $  (694,316)          $  (296,433)
                                  ============          =============         =============         =============

SHARES USED IN THE CALCULATION 
  OF NET INCOME (LOSS) PER SHARE     5,014,422              2,243,533           3,432,566             1,626,992
                                  ============           =============         ============         =============
NET INCOME (LOSS) PER SHARE       $       0.02           $      (0.04)         $    (0.20)          $     (0.18)
                                  ============           =============         ============         =============
</TABLE>


SEE ACCOMPANYING NOTES.

<PAGE>

                       OPHTHALMIC IMAGING SYSTEMS
                   CONDENSED STATEMENTS OF CASH FLOWS
               INCREASE (DECREASE) IN CASH AND EQUIVALENTS
                               (UNAUDITED)

                                                    SIX MONTHS ENDED
                                      FEBRUARY 28, 1997      FEBRUARY 29, 1996

OPERATING ACTIVITIES:
Net loss                                     (694,316)                (296,433)
Adjustments to reconcile net 
  loss to net cash used in 
  operating activities:
     Depreciation and amortization             67,283                   47,973
     Net increase in current assets 
       other than cash and equivalents       (439,064)                (445,581)
     Net increase (decrease) in current 
       liabilities other than short-term 
       borrowings                             116,446                  (72,965)
                                           -----------              -----------
Net cash used in operating activities        (949,651)                (767,006)

INVESTING ACTIVITIES:
Purchases of furniture and equipment         (116,581)                 (60,746)
Net decrease (increase) in other assets        16,882                   (1,221)
                                           -----------              -----------
Net cash used in investing activities         (99,699)                 (61,967)

FINANCING ACTIVITIES:
Principal payments on notes payable            (3,287)                  (3,434)
Net (repayments of) proceeds from 
line-of-credit borrowings                    (269,000)                  50,000
Net proceeds from sale of common stock        605,481                1,074,841
                                           -----------              -----------
Net cash provided by financing activities     333,194                1,121,407
                                           -----------              -----------
Net increase (decrease) in cash and 
  equivalents                                (716,156)                 292,434
Cash and equivalents at beginning of 
  period                                    1,051,325                  317,205
                                           -----------              -----------
Cash and equivalents at end of period      $  335,169               $  609,639
                                           ===========              ===========


SEE ACCOMPANYING NOTES.

<PAGE>

                       Ophthalmic Imaging Systems

                 Notes to Condensed Financial Statements

Three and Six Month Periods ended February 28, 1997 and February 29, 1996

                               (Unaudited)


Note 1. Basis of Presentation

The accompanying  unaudited  condensed  balance  sheet as of February 28,
1997,  condensed  statements of operations for the three  and  six  month
periods ended February  28,  1997 and February 29, 1996 and the condensed
statements of cash flows for the  six  month  periods  ended February 28,
1997  and  February  29,  1996  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,  1996 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 February  28, 1997 are not
necessarily indicative of the operating results for the full year.

Certain amounts in the fiscal 1996 financial statements have been
reclassified to conform with the presentation in the fiscal 1997
financial statements.

Note 2. Net Income (Loss) Per Share

Net  income  per share is computed using the weighted average  number  of
common and common  equivalent  shares  of common stock outstanding, which
common equivalent shares include the dilutive  effect  from stock options
and warrants.  Net loss per share is computed using the  weighted average
number  of shares of common stock outstanding.  Common equivalent  shares
from stock  options and warrants are excluded from the computation of net
loss per share because their effect is antidilutive.

<PAGE>

Note 3. Line of Credit

In April 1995,  the  Company  entered  into  a  revolving  line of credit
agreement (the "Credit Agreement") with a bank (the "Bank").  The maximum
amount available under the terms of the Credit Agreement is  $750,000 and
is   based   upon  eligible  outstanding  accounts  receivable  balances.
Borrowings under  the  Credit Agreement bear interest at the Bank's prime
lending rate plus two and  one-half  percent and are secured by virtually
all assets of the Company (10.75% as of February 28, 1997).

The Credit Agreement contains certain restrictive covenants which provide
for, among other things, certain working  capital  and net worth balances
and  ratios, and limitations on the amount of net loss  the  Company  may
incur in a quarter.

In connection  with  the  Credit  Agreement,  the Company also modified a
warrant  previously  issued  to  the  Bank.   The modifications  included
increasing  the  number  of  common  shares  for  which  the  warrant  is
exercisable to 25,000, changing the per share exercise price to $2.39 and
extending the expiration date to April 2000.

In November 1995, the Company and the Bank amended  the Credit Agreement.
The amendments included extending the maturity date to  April  1996,  and
increasing the amount of the loss the Company may incur in a quarter.  As
a  condition  to  amending the Credit Agreement, the Company modified the
warrant issued to the  Bank.   The  modifications included increasing the
number  of  common shares under the warrant  for  which  the  warrant  is
exercisable to 67,500, reducing the per share exercise price to $1.73 and
extending the expiration date to November 2000.  The number of shares for
which the warrant  is  exercisable  was  reduced  to  50,000  due  to the
occurrence of certain events set forth in the Credit Agreement.

In April 1996, the Company and the Bank again amended the Credit
Agreement.  The amendments included extending the maturity date to July
1996 and limiting the amount of the net loss the Company may incur in a
quarter.

<PAGE>

Note 3. Line of Credit (continued)

In  May  1996, the Bank exercised an alternative stock appreciation right
available  under  the  warrant.   In  conjunction with said exercise, the
Company has accrued a liability of approximately  $220,000  as of May 31,
1996,  said  amount  being the entire amount of the obligation under  the
warrant.   The  Company   recognized   additional   interest  expense  of
approximately  $151,000  during  the  quarter  ended  May  31,   1996  in
connection  with  said  exercise.  The Company had previously accrued  as
interest expense approximately  $69,000  in  connection  with a put right
under the warrant, which right is foregone in lieu of the Bank exercising
its  alternative  stock appreciation right.  The parties have  agreed  in
principal to revise the form of consideration and timing of payment under
the alternative stock  appreciation  right, but have not as yet agreed to
the definitive terms thereof.

In  November 1996, the Company and the  Bank  again  amended  the  Credit
Agreement.   Then  amendments included, among other things, extending the
maturity date to March  1997, subject to the occurrence of certain equity
transactions, and limiting  the  amount  of  the net loss the Company may
incur in the first and second quarter of fiscal 1997.

As  of  February  28,  1997, borrowings in the amount  of  $281,000  were
outstanding  against the  Credit  Agreement.   The  Company  was  not  in
compliance with  certain  of  the  restrictive  covenants for the quarter
ending November 30, 1996 and the Company has requested  from  the  Bank a
waiver with respect to such non-compliance.  The potential impact of  not
receiving a waiver from the Bank is that the Bank could demand payment of
the balance owing against the Credit Agreement, which amount was $500,000
as of the date of this report.

Note 4. Private Placement

On  November  21,  1995,  the  Company  completed  a private placement of
1,368,421 shares of its common stock with detachable  warrants.   The net
proceeds  from  this  offering were approximately $1,075,000.  Along with
each share of common stock  issued,  the  purchasers  were  given  an  "A
Warrant"  and  a  "B  Warrant" to purchase shares of the Company's common
stock.  The A and B Warrants  per  share  exercise  prices  are $1.25 and
$1.75, respectively.  The number of shares exercisable as well as the per
share  exercise prices of the A and B Warrants are subject to  adjustment
upon the  occurrence  of certain events.  The A Warrants expired on March
5, 1997, as amended, and the B Warrants will expire on November 21, 1997.

<PAGE>

Note 4. Private Placement (continued)

In addition, the A and  B  Warrants  are  subject  to  redemption  by the
Company at $.10 per warrant commencing May 21, 1996 and May 21, 1997 (the
"Redemption  Dates"),  respectively.   The  A  and  B  Warrant redemption
provisions are only available if the Company's common stock price exceeds
$2.25  and  $2.50, respectively, for the twenty trading days  immediately
preceding the corresponding Redemption Dates.

The placement  agent  was  issued a warrant to purchase 250,000 shares of
the Company's common stock at  $.95  per  share.   The  number  of shares
exercisable  as  well  as  the  per  share  exercise price are subject to
adjustment upon the occurrence of certain events.   This  warrant expires
in  November  1999.  In addition, the placement agent will receive  as  a
commission, 10% of the proceeds received by the Company upon the exercise
of the A and B Warrants described above.

In May 1996, 1,052,631  of  the  A  Warrants  were  exercised.   The  net
proceeds from this exercise were approximately $1,184,000.

During  the  quarter  ended  February  28,1997,  the Company received net
proceeds of approximately $495,000 for the exercise  of  certain of the A
and  B Warrants, the certificates for which shares have not  been  issued
but which shares have been shown as outstanding as of February 28, 1997 in 
the accompanying Balance Sheet.

Note 5. Subsequent Events

The Credit Agreement discussed in Note 3 above expired in March 1997 and
the Company is currently negotiating with the Bank to extend said Credit
Agreement.  The potential impact of not negotiating an extension with the
Bank is that the Bank could demand payment of the balance owing against
the Credit Agreement, which amount was $500,000 as of the date of this
report ($281,000 as of February 28, 1997).

<PAGE>

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

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 Company has a reputation
within the ophthalmic  community  for  producing  high quality, reliable,
easy to use equipment and believes itself to be an  acknowledged industry
leader  in  the sales of digital ophthalmic imaging systems  for  instant
fluorescein angiography.

The Company believes,  however,  that as the U.S. healthcare system moves
toward managed care the needs of the  managed care providers are changing
the nature and demand for medical imaging  equipment  and  services.  New
opportunities  in  telemedicine are emerging that may allow managed  care
organizations to reduce  costs while maintaining their quality of patient
care.  The Company plans to  leverage  its digital imaging technology and
established  customer  base  to  develop product  features  and  services
targeting telemedicine/managed care  applications  for  the ocular health
care industry.

Since its inception, the Company's products have addressed  primarily the
needs of the ophthalmic flourescein angiography market, and more recently
the  indocyanine  green  ("ICG")  market.  The Company believes that  the
overall angiography market remains limited,  however, and that sustaining
growth  in  its traditional angiography equipment  business  will  become
increasingly difficult.  In recognition of this, the Company is expanding
its product capabilities  to  address  the  emerging telemedicine market,
including  remote  consultation.   While  the Company  will  continue  to
support its entire line of digital angiography  products,  it  will focus
its future efforts on developing product enhancements and pursuing viable
opportunities   in   this   market,   particularly   as  they  relate  to
telemedicine/managed care applications.

The Company's objective is to become a leading provider  of  telemedicine
products   and  services  in  the  ocular  health  care  industry,  while
maintaining  its  position  as  a  market  leader in its existing digital
imaging products.

In  this  regard,  in  fiscal 1996 the Company developed  a  Reading  and
Documentation Center, through  which  it intends to provide documentation
services of electronically transmitted  digital images acquired at remote
locations.

<PAGE>

During fiscal 1996, the Company also secured  an  agreement  to conduct a
pilot program with a major managed care provider to evaluate remote image
interpretation for diabetic retinopathy screening.  At the conclusion  of
the  pilot  program, if successful, the Company anticipates entering into
negotiations  with  the provider, and others, for contracting the Reading
Center services.  The  Company  currently has several initial commitments
to purchase its Reading and Documentation  Center services.  There can be
no assurance, however, that the pilot program  will  prove  a  success or
that these negotiations or commitments will result in contracts for these
services.

During  the  1996  fall meeting of the American Academy of Ophthalmology,
the   Company  introduced   a   lower-priced   digital   imaging   system
incorporating   telemedicine   features   and   targeting   the   general
ophthalmology  market.   The  majority  of orders received in conjunction
with this introduction are projected for  delivery  during the second and
third quarters of fiscal 1997.

The  Company  continues  to  assess  potential  market  opportunities  in
anticipation of results from clinical validation studies of its Glaucoma-
Scope<reg-trade-mark>  product, an instrument specifically  designed  for
the  early  diagnosis  of glaucoma,  a  commonly  occurring  eye  disease
regularly screened for by eye care practitioners.

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 results to  be  expected  for  any  future  period  or
expected for  the  fiscal  year  ending August 31, 1997.  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.

<PAGE>

RESULTS OF OPERATIONS

The Company's revenues  for  the  second  quarter  of  fiscal  1997  were
$2,285,407, representing an increase of approximately 5% from revenues of
$2,169,753 for the second quarter of fiscal 1996.  Revenues for the first
six  months  of  fiscal  1997  were  $3,169,653 versus $4,079,679 for the
comparable  period  of 1996.  The 1997 second  quarter  revenues  include
significant revenues  from  the  Company's  initial  deliveries of lower-
priced  higher-margin digital imaging systems incorporating  telemedicine
features,  which  systems were introduced at the 1996 fall meeting of the
American Academy of  Ophthalmology  and significant orders for which were
included in the Company's deliverable  backlog  at  the  end of the first
quarter  of  fiscal 1997.  A primary factor contributing to  the  reduced
1997 six-month  revenue  level  was  the  reallocation  of  the Company's
resources  to  address emerging opportunities in the telemedicine/managed
care market.  In addition, the 1996 six-month revenue levels were largely
attributable to strong sales of the Company's digital angiography systems
incorporating ICG  and  Windows<trademark>  features  introduced over the
previous two years.  The Company will continue to allocate  resources  to
address the telemedicine/managed care market, as sustaining growth in its
traditional   angiography   equipment   business   becomes   increasingly
difficult.  Based on its backlog of current orders, the Company  does not
anticipate  maintaining  revenue  levels  attained during the 1997 second
quarter and, in comparison to previous years,  the Company may experience
reduced  revenue  levels  from  sales  of its digital  imaging  equipment
products in the near-term.

Contributions  to  revenues from sales of  Glaucoma-Scope<reg-trade-mark>
units have been negligible and management does not anticipate significant
near-term  sales  improvement   for  the  Glaucoma-Scope<reg-trade-mark>,
recognizing that longer-term sales  growth  remains dependent upon market
acceptance  of  the  system  and  resolution  of  healthcare  reform  and
reimbursement issues.

Gross  margins  were  approximately 42% during the second  quarter  ended
February 28, 1997 versus  approximately 31% for the comparable quarter of
1996.  For the six-month period  ended  February  28, 1997, gross margins
were  approximately  37%  as  compared to approximately  33%  during  the
comparable period of 1996.  The  increase  in gross margin percentage for
the six-month period is attributable primarily to reduced direct material
costs associated with delivered systems, principally  the  sales  of  the
lower-priced  higher-margin  digital imaging systems delivered during the
1997 second quarter.  The increased  gross  margin  percentage during the
1997   second   quarter  also  reflects  the  impact  of  reduced   fixed
manufacturing and  support  costs  during 1997 compared to the comparable
quarter of 1996.  The Company continues  to evaluate its expenses in this
area  consistent  with current and anticipated  business  conditions  and
management anticipates  that  near-term margin improvement, if any, would
result principally from reduced  material  costs  associated with current
deliverable system configurations, outsourcing certain  manufacturing and
assembly operations and related fixed cost reduction measures implemented
during  the  third fiscal quarter of 1997, including personnel  cutbacks,
economies  of  scale   from   increased   unit   production,   and  other
manufacturing efficiencies.

<PAGE>

Sales and marketing and general and administrative expenses accounted for
approximately  26%  of  total revenues during the second quarter of  both
fiscal 1997 and fiscal 1996.  For the first six months of fiscal 1997 and
1996,  such  expenses  accounted   for   approximately   43%   and   30%,
respectively.   Expense  levels  also  increased  to  $604,417 during the
second quarter of 1997 versus $574,537 during the second quarter of 1996.
For the first six months of 1997, expense levels increased  to $1,355,522
from  $1,216,611  during  the  comparable  period  of  1996.  The primary
factors contributing to these increases were costs associated with hiring
additional  support  personnel,  and  related costs associated  with  the
telemedicine/managed care start-up marketing  efforts.  While the Company
has implemented during the third fiscal quarter  of  1997  certain  fixed
cost   reduction   measures,  including  personnel  cutbacks,  management
anticipates that expenses  in  this  area  will  continue  to  run  above
historical levels for the foreseeable future.

Research  and  development  expenses,  as  a percentage of revenues, were
approximately 10% in the second quarter of 1997  versus  approximately 8%
in the second quarter of 1996.  For the first six months of  fiscal 1997,
such  expenses  accounted  for  approximately  16%  of total revenues  as
compared  to  approximately  9%  during  the comparable period  of  1996.
Expense levels increased in actual dollar  terms  to  $232,646 during the
second  quarter  of  1997  from $170,832 in 1996.  During the  first  six
months of fiscal 1997, expense  levels  also  increased  in actual dollar
terms  to $497,427 versus $367,848 in 1996. The Company anticipates  that
it will  incur  increased expense levels in the near-term as it dedicates
more resources to  the  research  and development of telemedicine/managed
care applications, while continuing to incur expenses with respect to its
current  products.   In this regard,  the  Company  intends  to  continue
research and development  efforts  on  product  enhancements and reducing
cost configurations for its current products, particularly as they impact
telemedicine/managed care applications.

Other expense was $13,557 during the second quarter of fiscal 1997 versus
other income of $35,440 during the same period of  1996.   Other  expense
during  the  first  six months of fiscal 1997 was $27,279 as compared  to
$68,441 during the comparable  period  of  1996. The primary contributing
factor to these changes was a decrease in interest  expense  during  1997
versus  1996  associated  with  an  existing  credit  line,  including  a
reduction  in  borrowings  against  said  credit  line  and in particular
conjunction  with  interest  expense  recognized  during the 1996  second
quarter  and  first  six months in connection with a put  right  under  a
warrant previously issued to the Company's Bank, which right was foregone
in lieu of the Bank exercising  its  alternative stock appreciation right
available under said warrant in May 1996.   The  parties  have  agreed in
principal to revise the form of consideration and timing of payment under
the  alternative stock appreciation right, but have not as yet agreed  to
the definitive terms thereof.

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company's  operating activities used cash of $949,651 and $767,006 in
the first six months  of  fiscal  1997  and 1996, respectively.  The cash
used by operations in 1997 resulted primarily  from  the  net loss during
the  period  and  the  decrease  in  accounts receivable associated  with
significantly reduced revenue levels during  the period, which amount was
partially offset by increases in customer deposits  from orders generated
at  the  AAO meeting and other current liabilities, excluding  borrowings
under the Credit Agreement.  The cash used by operations in the first six
months of  fiscal  1996  resulted  primarily from the net loss during the
period and increases in accounts receivable  and  inventory,  and,  to  a
lesser extent, decreases in accounts payable and accrued liabilities.

Cash used in investing activities was $99,699 during the first six months
of  1997  as  compared  to  $61,967 during the same period for 1996.  The
Company's primary investing activities  consist  of  equipment  and other
capital  asset  acquisitions.   The  Company does not currently have  any
pending  material  commitments  regarding   capital   expenditures.   The
Company,  however,  will  continue  to  upgrade  its existing  management
information  systems,  which  may result in increased  near-term  capital
expenditures.   In  addition, the  Company  anticipates  certain  capital
expenditures  to  support   efforts   to   expand   its   technology   to
telemedicine/managed  care  applications.   The  Company anticipates that
related expenditures, if any, will be financed from  one  or  more of the
following  sources:   (i)  working  capital;  (ii)  borrowings  under  an
existing  credit agreement, if available; or (iii) debt, equity or  other
financing arrangements, if any, available to the Company.

The Company  generated  cash of $333,194 from financing activities during
the first six months of fiscal  1997 as compared to $1,121,407 during the
same period of fiscal 1996.  The cash generated from financing activities
during the 1997 period was principally the net proceeds from the exercise
of  warrants issued pursuant to a  private  placement  of  the  Company's
common stock in November 1995, and, to a lesser extent, net proceeds from
the exercise  of  stock  options  issued to employees, which amounts were
partially offset by repayments of borrowings  under the Credit Agreement.
The sources of cash from financing activities during the 1996 period were
principally the net proceeds from the private placement  of the Company's
common stock in November 1995, and, to a lesser extent, borrowings  under
the   Credit  Agreement.   Principal  repayments  on  notes  payable  was
negligible in both 1997 and 1996.

<PAGE>

As indicated above, the Company intends to allocate significant resources
to the  development  and  marketing of telemedicine/managed care products
and services.  During this  development  period,  the Company anticipates
that  it  could  experience  a decrease in revenues and  an  increase  in
operating  losses  as  a  result  of  incurring  additional  expenses  in
connection with activities relating  to  the development and marketing of
telemedicine/  managed  care  products  and services.   Accordingly,  the
Company anticipates that it could continue  to  experience  negative cash
flow from operations in the near-term.  In addition, as indicated in Note
5  of  the  Notes  to  Condensed  Financial  Statements,  the Company  is
currently negotiating with the Bank to extend the Credit Agreement  which
expired  in  March  1997.  While the Company has negotiated previous such
extensions with the Bank,  there can be no assurance that it will be able
to negotiate further extensions.  The potential impact of not negotiating
an extension from the Bank is  that  the Bank could demand payment of the
balance owing against the Credit Agreement,  which amount was $281,000 as
of February 28, 1997.  As indicated in Note 3  of  the Notes to Condensed
Financial Statements, the Company was not in compliance  with  certain of
the  restrictive  covenants for the quarter ending November 30, 1996  and
the Company has requested  from  the  Bank  a waiver with respect to such
non-compliance.  While the Bank has favorably  responded  to all previous
such requests, and since the Bank has recently extended additional credit
under  the  Credit  Agreement,  and  the  Company believes the Bank  will
respond favorably to its current request for  a  waiver,  there can be no
assurance that said waiver will be granted.  The potential  impact of not
receiving a waiver from the Bank is that the Bank could demand payment of
the balance owing against the Credit Agreement, which amount was $281,000
as  of February 28, 1997.  As also indicated above, although the  Company
and the Bank have agreed in principal to revise the form of consideration
and timing  of payment under the alternative stock appreciation right and
the Company believes that it will be able to enter into a final agreement
with the Bank with regard to such matters, there can be no assurance that
it will be able  to  do  so,  in  which  case  the  entire  amount of the
obligation, which amount at February 28, 1997, including accrued interest
thereon, was approximately $240,000, would be due.

Although  the  Company  believes that it will be able to raise the  funds
necessary to satisfy its  liquidity  and  capital requirements during the
next  twelve  months  from  alternative sources  including  extending  or
refinancing its Credit Agreement,  other  debt  financing, issuing equity
securities or entering into other financing arrangements, there can be no
assurance that such financing will be available and,  if  available, that
it  will  be  obtained  in  terms  favorable  to the Company.  Additional
capital  could  also  be made available to the Company  pursuant  to  the
exercise of additional  warrants  issued  in connection with the November
1995  private placement, as well as from other  outstanding  options  and
warrants.   In  this  regard,  the  Company  has received a commitment to
exercise  a  significant number of these warrants  from  certain  of  the
warrant holders, and while the Company is currently in active discussions
with such warrant  holders  regarding  said  exercise,  there  can  be no
assurance  that any such warrants will be exercised in the near-term,  if
at all.

<PAGE>
                      PART II  OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 2. CHANGES IN SECURITIES

In November  1996,  the  expiration  date  for the unexercised A Warrants
issued pursuant to the Private Placement of  the  Company's  Common Stock
effective  November  21,  1995,  was  extended from November 21, 1996  to
February 19, 1997.

In February 1997, said expiration date  was  extended  from  February 19,
1997 to March 5, 1997.

During the quarter, the Company issued 10,000 shares of its Common  Stock
in  consideration  of  $30,000 from the exercise of stock options granted
under the Company's 1992  Nonstatutory  Stock  Option  Plan.   The Common
Stock issued upon the exercise of the options were issued pursuant  to an
exemption  under  rule  701  promulgated under the Securities Act of 1933
(the  "Securities  Act").   There   were  no  underwriting  discounts  or
commissions paid in connection with such issuance.

Also during the quarter, 210,526 shares  of  the  Company's  Common Stock
were  purchased by Dr. Blumenkranz, a director of the Company,  upon  the
exercise  of  certain  Series  A  Warrants  for  a total consideration of
$263,158.   The  shares  were  purchased pursuant to an  exemption  under
Section 4(2) of the Securities Act  as a sale of a security not involving
a public offering.  In connection with  the  issuance  of  the shares, JB
Oxford & Company will receive underwriting and discount commissions in an
amount equal to $26,316.  (See Note 4 of the Notes to Condensed Financial
Statements.)

ITEM 3. DEFAULTS UPON SENIOR SECURITIES
As  indicated  in  Note 3 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  was not in compliance
with certain of the restrictive covenants of a Credit  Facility  with its
Bank  for  the  quarter  ending  November  30,  1996  and the Company has
requested from the Bank a waiver with respect to such non-compliance.

<PAGE>

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES
The  Company's  Annual  Meeting of Shareholders was held on  January  29,
1997.  Matters voted upon  at  the  meeting, and the number of votes cast
for and against each such matter, are described below:

     1.   Election of directors:

          Mark S. Blumenkranz, M.D. (2,632,213  shares in favor; 
          and 10,089  shares withheld);

          Robert  I.  Schnuer  (2,631,847  shares  in   favor;  
          and  10,455  shares withheld);

          Steven  R.  Verdooner  (2,632,013  shares  in favor;  
          and  10,289  shares withheld); and

          Lawrence A. Yannuzzi, M.D. (2,632,180 shares  in favor; and 
          10,122 shares withheld).

     2.   A proposal to ratify the appointment  of  Ernst  & Young LLP as
the  Company's  auditors  for  the 1997 fiscal year (2,628,771 shares  in
favor; 4,998 shares against; and 8,533 shares abstaining).

     At  the  initial  meeting of the  recently  elected  Board  held  in
February  1997,  Mark  S. Blumenkranz,  M.D.  was  elected  to  serve  as
Chairman.

ITEM 5. OTHER INFORMATION

None.

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.

     (b)  No reports on  Form 8-K were filed during the quarter for which
this report was filed.

<PAGE>
                               SIGNATURES

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

                              OPHTHALMIC IMAGING SYSTEMS
                              (Registrant)


                              By:   STEVEN R. VERDOONER

                                   Steven R. Verdooner,
                                   President and Chief Financial Officer
                                   (principal executive officer and 
                                   principal financial and accounting officer)


Dated:  April 14, 1997

<PAGE>

                               INDEX TO EXHIBITS

Exhibit                                                              Footnote
NUMBER               DESCRIPTION OF EXHIBIT                          REFERENCE

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

3.2       Amended Bylaws of the Registrant.                              *

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.                                 *

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 Dennis J. Makes dated 
          March 27, 1992.                                               (1)

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.                          *

<PAGE>

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     Common Stock and Warrant Purchase Agreement ("Stock Purchase
          Agreement"), dated as of February 8, 1992, among the 
          Registrant, Jonnie R. Williams, Kathleen M. O'Donnell, as 
          Trustee of Irrevocable Trust No. 6, FBO F.E. O'Donnell, Jr.,  
          M.D., Steven R. Verdooner and Dennis J. Makes.                 *

10.12(a)  Amendment No. 1 to Stock Purchase Agreement, dated March 25,
          1992, among the Registrant, Jonnie R. Williams, individually, 
          Jonnie R. Williams, as Trustee of Irrevocable Trust No. 1, 
          Rambert Simmons, and Kathleen M. O'Donnell, as Trustee of 
          Irrevocable Trust No. 6, FBO F.E. O'Donnell, Jr., M.D.         *

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

10.14     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.                           *

<PAGE>

10.15     Warrant dated February 12, 1993 issued by the Registrant to
          Steven R. Verdooner to purchase 50,000 shares of Common 
          Stock.                                                        (1)

10.16     Stock Option Plan.                                            (1)

10.17     Promissory Note dated January 4, 1993 from the Registrant to
          Western Financial Savings Bank in the amount of $25,209.83 
          due in full by January 4, 1998.                               (1)

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

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

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

10.19(b)  Warrant dated November 1, 1995 issued by the Registrant to
          Imperial Bank to purchase 67,500 shares of Common Stock.      (4)

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

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

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

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

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

10.20     Purchase Agreements dated November 21, 1995 between the
          Registrant, JB Oxford & Company and certain Investors.        (4)

10.20(a)  Warrant Agreement dated November 21, 1995 between the
          Registrant, JB Oxford & Company and certain Investors.        (4)

10.20(b)  First Amendment Warrant Agreement dated November 21, 1996
          between the Registrant, JB Oxford & Company and certain
          Holders.                                                      (7)

<PAGE>

10.20(c)  Registration Rights Agreement dated November 21, 1995 
          between the Registrant, JB Oxford & Company and certain 
          Investors.                                                    (4)

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

10.22     Employment Agreement dated November 20, 1995 between the
          Registrant and R. Michael Clark.                              (4)

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


*    Incorporated  by  reference to the like-numbered exhibits previously
filed with 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.