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 November 30, 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  January  12,  1998,  3,905,428  shares of common stock, at no par
value, were outstanding.

<PAGE>1
                    PART I     FINANCIAL INFORMATION


ITEM 1.   FINANCIAL STATEMENTS


                 OPHTHALMIC IMAGING SYSTEMS
                 CONDENSED BALANCE SHEET
                      NOVEMBER 30, 1997
                         (UNAUDITED)

ASSETS

CURRENT ASSETS:
   CASH AND EQUIVALENTS                              $    227,513
   ACCOUNTS RECEIVABLE, NET                             1,662,224
   INVENTORIES, NET                                       936,309
   PREPAID EXPENSES AND OTHER CURRENT ASSETS               60,073
                                                      -----------
TOTAL CURRENT ASSETS                                    2,886,119

FURNITURE AND EQUIPMENT, NET OF ACCUMULATED
   DEPRECIATION AND AMORTIZATION OF $804,290              369,849

OTHER ASSETS                                                9,216
                                                      -----------
                                                      $ 3,265,184
                                                      ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
   BORROWINGS UNDER LINE OF CREDIT                        397,932
   ACCOUNTS PAYABLE                                       687,326
   ACCRUED LIABILITIES                                  1,185,215
   ACCRUED WARRANT APPRECIATION RIGHT                     251,497
   DEFERRED EXTENDED WARRANTY REVENUE                     127,673
   CUSTOMER DEPOSITS                                      315,743
   CURRENT PORTION OF NOTES PAYABLE                           700
                                                       ----------
TOTAL CURRENT LIABILITIES                               2,966,086  

NOTES PAYABLE, LESS CURRENT PORTION                            --

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; 3,905,428 ISSUED AND OUTSTANDING       10,278,615

    DEFERRED COMPENSATION                                (312,213)

    ACCUMULATED DEFICIT                                (9,667,304)
                                                      -----------
TOTAL STOCKHOLDERS' EQUITY                                299,098
                                                      -----------
                                                        3,265,184
                                                      ===========
SEE ACCOMPANYING NOTES.


<PAGE> 2

                   OPHTHALMIC IMAGING SYSTEMS
                CONDENSED STATEMENTS OF OPERATIONS
                         (UNAUDITED)

                                            THREE MONTHS ENDED NOVEMBER 30,
                                            1997               1996
                                            -------------------------------

NET REVENUES                                $1,901,877         $   884,246
COST OF SALES                                1,181,996             621,532
                                            ------------------------------
GROSS PROFIT                                   719,881             262,714

OPERATING EXPENSES:
    SALES AND MARKETING                        572,418             496,978
    GENERAL AND ADMINISTRATIVE                 323,418             282,768
    RESEARCH AND DEVELOPMENT                   212,268             264,781
                                            ------------------------------ 
             TOTAL OPERATING EXPENSES        1,108,104           1,044,527
                                            ------------------------------
LOSS FROM OPERATIONS                          (388,223)           (781,813)

OTHER EXPENSE, NET                              (9,129)            (13,722)
                                            ------------------------------
NET LOSS                                      (397,352)           (795,535)
                                            ==============================
SHARES USED IN THE CALCULATION OF
  NET LOSS PER SHARE                         3,905,428           3,320,969
                                            ==============================
NET LOSS PER SHARE                               (0.10)              (0.24)
                                            ==============================

SEE ACCOMPANYING NOTES.


<PAGE>3


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


                                         THREE MONTHS ENDED NOVEMBER 30,
                                         1997                 1996
                                         ------------------------------- 
OPERATING ACTIVITIES:

NET LOSS                                 $  (397,352)         $  (795,535)
ADJUSTMENTS TO RECONCILE NET LOSS TO 
  NET CASH PROVIDED BY (USED IN) 
  OPERATING ACTIVITIES:
     DEPRECIATION AND AMORTIZATION            29,459               31,622
     STOCK OPTION COMPENSATION EXPENSE        28,681                   --
     NET (INCREASE) DECREASE IN
       CURRENT ASSETS OTHER THAN CASH
       AND EQUIVALENTS                      (126,605)             190,107
     NET INCREASE IN CURRENT LIABILITIES
       OTHER THAN SHORT-TERM BORROWINGS      485,991              247,986  
                                          -------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING 
  ACTIVITIES                                  20,174             (325,820)

INVESTING ACTIVITIES:

PURCHASES OF FURNITURE AND EQUIPMENT         (18,526)            (104,668) 
NET (INCREASE) DECREASE IN OTHER ASSETS       (1,831)              23,462  
                                          ------------------------------- 
NET CASH USED IN INVESTING ACTIVITIES        (20,357)             (81,206) 

FINANCING ACTIVITIES:

PRINCIPAL PAYMENTS ON NOTES PAYABLE           (1,534)              (1,386)

NET PROCEEDS FROM (REPAYMENTS OF)
  LINE-OF-CREDIT BORROWINGS                   86,930             (269,000) 

NET PROCEEDS FROM SALE OF COMMON STOCK            --               85,491  
                                           ------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING 
  ACTIVITIES                                  85,396             (184,895) 
                                           ------------------------------
NET INCREASE (DECREASE) IN CASH AND 
  EQUIVALENTS                                 85,213             (591,921) 
                                           ------------------------------
CASH AND EQUIVALENTS AT BEGINNING OF 
  PERIOD                                     142,300            1,051,325  
                                           ------------------------------
CASH AND EQUIVALENTS AT END OF PERIOD      $ 227,513           $  459,404
                                           ==============================

SEE ACCOMPANYING NOTES.



<PAGE>4

                       Ophthalmic Imaging Systems

                 Notes to Condensed Financial Statements

          Three Month Periods ended November 30, 1997 and 1996

                               (Unaudited)


Note 1.       BASIS OF PRESENTATION

THE ACCOMPANYING UNAUDITED  CONDENSED  BALANCE  SHEET AS OF NOVEMBER 30, 1997,
CONDENSED STATEMENTS OF OPERATIONS FOR THE THREE  MONTH PERIODS ENDED NOVEMBER
30, 1997 AND 1996 AND THE CONDENSED STATEMENTS OF CASH  FLOWS  FOR  THE  THREE
MONTH  PERIODS  ENDED  NOVEMBER  30,  1997  AND  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,  1997  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 NOVEMBER 30, 1997 ARE NOT NECESSARILY INDICATIVE OF THE OPERATING
RESULTS FOR THE FULL YEAR.

CERTAIN AMOUNTS IN THE FISCAL 1997 FINANCIAL STATEMENTS HAVE BEEN RECLASSIFIED
TO CONFORM WITH THE PRESENTATION IN THE FISCAL 1998 FINANCIAL STATEMENTS.

NOTE 2.     NET LOSS PER SHARE

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>6

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")  WHICH,  AFTER SEVERAL
AMENDMENTS,  EXPIRED ON NOVEMBER 7, 1997.  THE MAXIMUM AMOUNT AVAILABLE  UNDER
THE TERMS OF THE  CREDIT  AGREEMENT  WAS  $750,000 AND WAS BASED UPON ELIGIBLE
OUTSTANDING  ACCOUNTS  RECEIVABLE  BALANCES.    BORROWINGS  UNDER  THE  CREDIT
AGREEMENT BORE INTEREST AT THE BANK'S PRIME LENDING  RATE  PLUS  THREE PERCENT
AND WERE SECURED BY VIRTUALLY ALL ASSETS OF THE COMPANY.  THE CREDIT AGREEMENT
ALSO  CONTAINED CERTAIN RESTRICTIVE COVENANTS WHICH PROVIDED FOR, AMONG  OTHER
THINGS,  CERTAIN WORKING CAPITAL AND NET WORTH BALANCE AND RATIOS.  THE CREDIT
AGREEMENT  WAS  SUBSEQUENTLY  CONVERTED TO A FULL RECOURSE ACCOUNTS RECEIVABLE
CREDIT AGREEMENT.

ON  NOVEMBER  18, 1997, THE COMPANY ENTERED INTO AN ACCOUNTS RECEIVABLE CREDIT
AGREEMENT (THE  "AGREEMENT")  WITH THE BANK, AND ALL AMOUNTS OUTSTANDING UNDER
THE CREDIT AGREEMENT WERE CONSIDERED  TO  BE  THE  INITIAL  ADVANCE  UNDER THE
AGREEMENT.   THE  AGREEMENT  ALLOWS  FOR UP TO AN 80% ADVANCE RATE ON ELIGIBLE
ACCOUNTS  RECEIVABLE  BALANCES,  AND THE  MAXIMUM  BORROWING  BASE  UNDER  THE
AGREEMENT IS $1.2 MILLION.  THE BANK HAS FULL RECOURSE AGAINST THE COMPANY AND
THE AGREEMENT EXPIRES IN NOVEMBER  1998.   BORROWINGS UNDER THE AGREEMENT BEAR
INTEREST AT THE BANK'S PRIME LENDING RATE PLUS 4%.  IN ADDITION, THE BANK WILL
CHARGE MONTHLY AN ADMINISTRATIVE FEE EQUAL TO  THE  GREATER  OF   1/2 % OF THE
AVERAGE  DAILY  BALANCE  FOR  THE  MONTH  OR  $1,200.  UNDER THE TERMS OF  THE
AGREEMENT,  BORROWINGS  ARE  SECURED BY SUBSTANTIALLY  ALL  OF  THE  COMPANY'S
ASSETS.

NOTE 4.   PRIVATE PLACEMENT

IN  NOVEMBER  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 WAS APPROXIMATELY $1,075,000.  ALONG WITH EACH SHARE  OF  COMMON
STOCK  ISSUED,  THE  PURCHASERS  WERE  GIVEN  AN "A WARRANT AND "B WARRANT" TO
PURCHASE SHARES OF THE COMPANY'S COMMON STOCK.  THE A AND B WARRANTS PER SHARE
EXERCISE PRICES WERE $1.25 AND $1.75, RESPECTIVELY.   THE  A  AND  B  WARRANTS
EXPIRED ON FEBRUARY 19, 1997 AS AMENDED AND NOVEMBER 21, 1997, RESPECTIVELY.

THE  PRIVATE  PLACEMENT  UNDERWRITER  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  ON NOVEMBER 21,
1999.  IN ADDITION, THE UNDERWRITER WILL RECEIVE AS A COMMISSION,  10%  OF THE
PROCEEDS  RECEIVED  BY  THE  COMPANY  UPON  EXERCISE  OF  THE A AND B WARRANTS
DESCRIBED ABOVE.


<PAGE>7

NOTE 5.   NONSTATUTORY STOCK OPTION PLAN

IN   OCTOBER  1997,  THE  COMPANY'S  BOARD  OF  DIRECTORS  APPROVED  THE  1997
NONSTATUTORY  STOCK  OPTION  PLAN  (THE  "PLAN")  UNDER  WHICH  ALL  OFFICERS,
EMPLOYEES  DIRECTORS  AND  CONSULTANTS  MAY PARTICIPATE.  THE PLAN EXPIRES  IN
OCTOBER 2002.  OPTIONS GRANTED UNDER THE  PLAN ARE NON-QUALIFIED STOCK OPTIONS
AND WILL HAVE A TERM OF NOT LONGER THAN TEN (10) YEARS FROM THE DATE OF GRANT,
UNLESS OTHERWISE SPECIFIED IN THE OPTION AGREEMENT.  THE EXERCISE PRICES UNDER
THE PLAN WILL GENERALLY BE AT 100% OF THE FAIR  MARKET  VALUE OF THE COMPANY'S
COMMON  STOCK  ON  THE  DATE OF GRANT.  THE MAXIMUM NUMBER OF  SHARES  OF  THE
COMPANY'S COMMON STOCK WHICH  MAY  BE  OPTIONED  AND  SOLD  UNDER  THE PLAN IS
1,000,000,  OF  WHICH  861,500 OPTIONS REMAINED AVAILABLE FOR GRANTING  AS  OF
NOVEMBER 30, 1997.  AS OF NOVEMBER 30, 1997, STOCK OPTIONS TO PURCHASE 138,500
SHARES AT EXERCISE PRICES OF $1.09 WERE GRANTED AND OUTSTANDING UNDER THE PLAN
AND NONE OF THE GRANTED OPTIONS WERE EXERCISED.


<PAGE>8

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
technology and sales of digital ophthalmic imaging systems.

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.  OIS 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  fluorescein  angiography  market,  and  more recently  the
indocyanine green ("ICG") market.  While the Company believes  that the overall
angiography  market  has  modest  growth  potential, sustaining growth  in  its
traditional angiography equipment business  may  become  increasingly difficult
due to increased competition.  In recognition of this, the Company is expanding
its  product  capabilities  to address the emerging telemedicine  market.   The
Company  will  continue to support  and  expand  its  entire  line  of  digital
angiography products,  and  will focus its future efforts on developing product
enhancements and pursuing viable  opportunities in this market, particularly as
they relate to telemedicine applications.

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





<PAGE>9

In this regard, during fiscal  1996  and 1997, the Company expended significant
resources in developing a Reading and  Documentation  Center  through  which it
originally   intended  to  provide  documentation  services  of  electronically
transmitted digital  images  acquired  at  remote  locations.   The Company has
recently redefined the scope of the Reading and Documentation Center,  however,
to  support research and development efforts surrounding its existing products.
The Reading  and  Documentation  Center  is  presently  being  utilized  in the
validation of diabetic retinopathy screening through electronically transmitted
digital  images  acquired  at  remote  locations.   The  Company  is  currently
conducting  a  pilot  program  with  a  major managed care provider to evaluate
remote image interpretation for diabetic  retinopathy  screening and intends to
utilize this validation study to help expand the use of  the  Company's digital
imaging products for such screening.

The  Company  also  recently  has refocused its resources on the marketing  and
sales of its WinStation digital  imaging  systems.   The Company's products are
currently  being  utilized  in  a  variety  of  ophthalmic  settings   for  the
telemedicine  application  of  remote  consultation.   The Company is currently
focusing its product development efforts on features and  enhancements  to  its
existing   products   targeting   various   other   telemedicine  applications.
Additionally, in the near-term, the Company intends to  utilize its Reading and
Documentation  Center  to  develop  and  assess  viable opportunities  for  the
Company's digital imaging products in screening, remote  consultation, distance
learning and other telemedicine applications.

During  the  recently  completed  fall  meeting  of  the  American  Academy  of
Ophthalmology  ("AAO"),  the  Company  introduced  new  models of  its  digital
angiography  products incorporating enhanced telemedicine  features,  with  the
Company receiving  significantly  more purchase commitments for its products as
compared to previous AAO meetings.

The   Company   no   longer   actively   markets    for   the   sale   of   its
Glaucoma-Scope<reg-trade-mark> but continues to assess market opportunities for
this product.

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,  1998.   There  can  be  no assurance that revenue growth or
profitability can be achieved or sustained in the future.

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





<PAGE>10

RESULTS OF OPERATIONS

The Company incurred a net loss of $397,352,  or  $.10 per share, for the first
quarter  of  fiscal 1998 as compared to a net loss of  $795,535,  or  $.24  per
share, for the first quarter of fiscal 1997.

The Company's  revenues  for  the  first quarter of fiscal 1998 were $1,901,877
representing an increase of approximately  215%  from  revenues of $884,246 for
the  first  quarter  of  fiscal 1997.  The primary factor contributing  to  the
increased 1998 revenue levels was the significantly increased unit sales of the
Company's digital angiography  products  during  the  first  quarter  of  1998,
including   lower-priced  digital  imaging  systems  targeted  to  the  general
ophthalmology  and  retinal  specialty  practice markets introduced at the 1996
fall  meeting  of the American Academy of Ophthalmology  ("AAO"),  the  initial
deliveries of which were made during the latter half of 1997.  The Company also
made initial deliveries  during  the first quarter of 1998 of new models of its
digital angiography products introduced  at  the  recently  completed 1997 fall
meeting of the AAO, at which the Company received significantly  more  purchase
commitments  for  its  products  as  compared  to  previous  AAO  meetings.  In
addition,  the  reduced  1997 first quarter revenue level reflects the  adverse
impact of the reallocation  of  the  Company's resources to pursue sales of its
Reading and Documentation Center services,  which selling activities have since
ceased.  During 1998, the Company intends to continue to direct the majority of
its resources to both support the demand for  its digital imaging products and,
more recently, to pursue opportunities in the telemedicine/managed care market.

Gross margins were approximately 38% during the  first  quarter  ended November
30,  1997  versus  approximately  30% for the comparable quarter of 1997.  This
increase  in  gross  margin  percentage   was  attributable  primarily  to  the
significantly increased revenue levels during  1998.   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
additional  manufacturing  and  assembly  operations  and  related  fixed  cost
reduction measures  implemented  during  the  latter  half  of  1997, including
personnel cutbacks, economies of scale from increased unit production and other
manufacturing efficiencies.

Sales  and  marketing  and  general  and administrative expenses accounted  for
approximately 47% of total revenues during  the first quarter of fiscal 1997 as
compared  with  approximately  88% during the first  quarter  of  fiscal  1996.
Expense levels increased, however, to $895,836 during the first quarter of 1998
versus  $779,747  during  the first  quarter  of  1997.   The  primary  factors
contributing  to  the increase  were  increased  commissions  and  other  costs
associated with increase revenue levels during the first quarter of 1998 versus
the comparable period  1998,  as well as the costs related to additional senior
management level personnel hired during the fourth quarter of fiscal 1997.  The
Company anticipates expenses in this area will continue to run above historical
levels.


<PAGE>11

Research  and  development  expenses,   as   a   percentage  of  revenues,  was
approximately 11% in the first quarter of 1998 versus  approximately 30% during
the same period of 1997.  Expense levels also decreased  in actual dollar terms
to  $212,268  during  the  first quarter of 1998 from $264,781  in  1997.   The
Company  intends to focus its  research  and  development  efforts  on  current
product enhancements and reducing cost configurations for its current products.
The  Company   anticipates  that  research  and  development  expense  will  be
maintained at current levels in the near term.

Other expense was $9,129 during the first quarter of fiscal 1998 versus $13,722
during the same period of 1997.  The primary contributing factor to this change
was a decrease in  interest  expense  during  1998  versus 1997 associated with
reduced average daily borrowings against existing credit lines during the first
quarter of 1998 versus 1997.


LIQUIDITY AND CAPITAL RESOURCES

The  Company's  operating activities generated cash of  $20,174  in  the  first
quarter of fiscal 1998 and used cash of $325,820 in the first quarter of fiscal
1997.  Cash generated  from  operating  activities in the first quarter of 1998
resulted principally from the collection  of accounts receivable, significantly
increased  revenue  levels  and  increases  in customer  deposits  from  orders
generated at the 1997 AAO fall meeting, the aggregate impact of which more than
offset the net loss for the quarter.  Cash used by operations in the 1997 first
quarter 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  1996  AAO  meeting and other current
liabilities, excluding borrowings under the Credit Agreement.

Cash used in investing activities was $20,357 during the  first quarter of 1998
as compared to $81,206 during the same period for 1997.  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 and corporate communications 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.







<PAGE>12


The Company generated cash  of  $85,396  from  financing  activities during the
first  quarter  of  fiscal  1998  as  compared to using cash in the  amount  of
$184,895  during the same period of fiscal  1997.   The  source  of  cash  from
financing activities  in  1998 was proceeds from increased borrowings under the
Credit Agreement.  The use  of  cash  in  financing  activities during the 1997
period  was principally repayments of borrowings under  the  Credit  Agreement,
which amount  was  partially  offset by net proceeds from the exercise of stock
options  issued  to  employees.  Principal  repayments  on  notes  payable  was
negligible in both 1997 and 1996.

As indicated in Note 3  of  the  Notes  to  Condensed  Financial Statements, on
November  18,  1997,  the  Company entered into an accounts  receivable  credit
agreement (the "Agreement")  with  the  Bank, and all amounts outstanding under
the  Credit  Agreement were considered to be  the  initial  advance  under  the
Agreement.  The  Agreement  allows  for  up  to an 80% advance rate on eligible
accounts  receivable  balances,  and  the  maximum  borrowing  base  under  the
Agreement is $1.2 million.  The Bank has full  recourse against the Company and
the Agreement expires in November 1998.  Borrowings  under  the  Agreement bear
interest at the Bank's prime lending rate plus 4%.  In addition, the  Bank will
charge  monthly  an  administrative  fee equal to the greater of  1/2 % of  the
average  daily  balance  for the month or  $1,200.   Under  the  terms  of  the
Agreement, borrowings are secured by substantially all of the Company's assets.

The Company believes that  its  existing  cash  balances  together with ongoing
collections  of  its  accounts  receivable  and  recently  increased  available
borrowing capacity under the Agreement will be adequate to meet  its  liquidity
and  capital  requirements  in  the near term.  The Company does not expect  to
experience collection difficulties with respect to its accounts receivable that
would have a material adverse effect  on its liquidity.  In addition, principal
and interest amounts due under the alternative  stock  appreciation  right with
the  Bank,  which amounts were approximately $251,000 as of November 30,  1997,
and were originally  payable  on November 30, 1997, have recently been extended
to April 1, 1998.  The Company  will, however, continue to evaluate alternative
sources  of  capital  to  meet  its cash  requirements,  including  other  debt
financing,  issuing  equity  securities   and  entering  into  other  financing
arrangements and/or strategic alliances.  There  can  be no assurance, however,
that additional financing will be available and, if available,  can be obtained
on  terms  favorable  to  the Company.  Additional capital could also  be  made
available to the Company pursuant  to  the exercise of Series C Warrants issued
to  JB Oxford & Company ("JBO") in connection  with  a  November  1995  private
placement  of  the  Company's  common  stock, as well as from other outstanding
stock options; however, there can be no  assurance any such warrants or options
will be exercised in the near-term, if at all.  In this regard, there can be no
assurance that the SEC investigation of JBO discussed immediately below may not
adversely affect JBO's ability to exercise the Series C Warrants.




<PAGE>13


On or about August 17, 1997, the Company was  advised  that JB Oxford & Company
("JBO"),  one  of  several market makers in the Company's common  shares  which
trade over the counter  on  the NASDAQ Small-Cap Market, was being investigated
by the Securities and Exchange  Commission  ("SEC").   In  connection with this
investigation,  the  Company,  and  Mr.  Verdooner,  in his capacity  as  Chief
Executive Officer of the Company, were served by the SEC  with a subpoena on or
about August 18, 1997.  These subpoenas require the submission  to  the  SEC of
various documents, predominantly relating to JBO.

The  Company  has  cooperated  with  the  SEC investigation and is making every
effort to produce the documents requested.   The  Company does not believe, nor
has it any reason to believe, it is a subject of the SEC inquiries.

In  addition,  the  Company  faces the possibility of its  common  stock  being
delisted from NASDAQ unless it  meets  the Minimum Closing Price Requirement as
stipulated by NASDAQ.  Under the NASDAQ  rules,  one  prerequisite to continued
listing on NASDAQ, is maintenance by a company of a minimum  closing  bid price
of $1.00 per share.  If a company's closing bid price per share is below  $1.00
per share for ten (10) consecutive trading days, the company may be subject  to
having its shares delisted from NASDAQ.

In  September  1997, the Company's closing bid price per share fell below $1.00
per share for ten  (10)  consecutive  trading  days.   Accordingly, the Company
received  a  letter  from  NASDAQ which indicated that although  the  Company's
closing bid price per share  did not meet the minimum $1.00 requirement, NASDAQ
was not going to commence any  delisting  action at that time.  Instead, NASDAQ
stated that the Company would be in compliance  with  its minimum listing price
rules, if at any time during the next 90 calendar days from September 23, 1997,
the closing bid price per share of the Company's common stock is at least $1.00
for ten consecutive trading days ("Minimum Closing Price Requirement").

Although the bid price of the Company's shares has closed at or above $1.00 per
share for well in excess of ten (10) consecutive trading  days  since September
23, 1997, the Company did not meet the Minimum Closing Price Requirement during
the 90 calendar day period from September 23, 1997.  While the Company  remains
listed  and  has  not been notified that NASDAQ will commence delisting action,
there can be no assurance  that the Company may not become subject to delisting
from the NASDAQ Small-Cap Market in the future.

Another prerequisite  to continued  listing on NASDAQ is maintenance of capital
and surplus of at least $1 million.   At August 31, 1997, the Company's capital
and surplus balance was below $1 million  and,  in  December  1997, the Company
received  a  letter  from  NASDAQ which indicated that, although the  Company's
capital and surplus balance did not meet the $1 million requirement, NASDAQ was
not going to commence any delisting  action  at  that  time, pending receipt by
NASDAQ from the Company of proposal(s) for achieving compliance.   The  Company
is currently in discussion with NASDAQ regarding this issue.

If  the Company's common stock is delisted, it may be difficult for the Company
to raise capital through the sale of its common stock.


<PAGE>14

                PART II     OTHER INFORMATION


ITEM 1.       LEGAL PROCEEDINGS
              None.

ITEM 2.       CHANGES IN SECURITIES

In  October  1997, the Company's board of directors approved the
1997 Nonstatutory Stock Option Plan (the "Plan") under which all
officers, employees  directors  and consultants may participate.
The Plan expires in October 2002.   Options  granted  under  the
Plan  are  non-qualified stock options and will generally have a
term of ten  (10) years from the date of grant, unless otherwise
specified in the  option  agreement.   The exercise prices under
the Plan will generally be at 100% of the  fair  market value of
the  Company's common stock on the date of grant.   The  maximum
number  of  shares  of  the  Company's common stock which may be
optioned and sold under the Plan  is 1,000,000, of which 861,500
options remained available for granting as of November 30, 1997.
As  of  November  30, 1997, stock options  to  purchase  138,500
shares at exercise  prices of $1.09 were granted and outstanding
under the Plan and none of the granted options were exercised.

ITEM 3.      DEFAULTS UPON SENIOR SECURITIES

             None.

ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITIES

             None.


<PAGE>15

ITEM 5.    OTHER INFORMATION

The  Board  of Directors currently is considering the long range
strategic plan  for  the  Company  and  intends  to  engage  the
services  of  an investment banker or other financial advisor to
assist it in evaluating and analyzing the strategic alternatives
and  potential business  prospects  available  to  the  Company,
including  possible  joint  venture  arrangements, acquisitions,
third party investments, or the sale of  the  Company.  Although
the Company from time to time has considered and  evaluated, and
has  engaged  in  informal  and  formal  discussions concerning,
certain business combination transaction or other joint business
arrangements with unaffiliated third parties,  the  Company  has
not  entered  into any such transactions.  The Company, however,
recently has received  inquiries  from  third  parties regarding
possible  investments in the Company or other business  ventures
and opportunities  which  could involve, among other things, the
sale of the Company or other  business combination transactions.
The Company intends to evaluate  these  opportunities  with  its
investment banker or financial advisor as part of its long range
strategic  planning.   Presently,  the Company does not have any
current  understandings, arrangements,  or  agreements,  whether
written or  oral,  with respect to any specific transaction and,
to date, has had only preliminary discussions with third parties
relating thereto.  Upon  completion  of  the Board of Directors'
determination of the appropriate strategic  plan for the Company
and  its  shareholders, it will attempt to implement  the  plan.
However, there can be no assurance that the Company will be able
to successfully  implement  such  plan,  or if implemented, that
such plan will be successful.

ITEM 6.      EXHIBITS AND REPORTS ON FORM 8-K

(a)          The  exhibits  listed  on  the  accompanying  Index to
             Exhibits  below  are  filed  as  a part hereof and are
             incorporated by reference as  noted.

(b)          A  Form  8-K  was  filed on January 2, 1998, to report
             under  Item 5 thereof  the  Company's  adoption  of  a
             Rights Agreement,  dated  as  of  December  31,  1997,
             between   Ophthalmic  Imaginng  Systems  and  American
             Securities  Transfer,  Inc.,  a copy of which Form 8-K
             will be made available upon request  to the Company at
             its principal offices.


<PAGE>16

                                  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,
                                            Chief Executive Officer and Chief
                                            Financial Officer (principal
                                            executive officer and principal
                                            financial and accounting officer)

                                        By: WILLIAM L. MINCE
                                            William L. Mince,
                                            President and Chief Operating
                                            Officer

Dated:  January 14, 1998




<PAGE>17
                               INDEX TO EXHIBITS

<TABLE>
<CAPTION>
           Exhibit
           NUMBER          DESCRIPTION OF EXHIBIT                                Footnote REFERENCE
<S>        <C>             <C>                                                   <C>

           3.1             Articles  of Incorporation of the Registrant, as        *
                           amended.
           3.1(a)          Amendment    to   Articles   of   Incorportation      (11)
                           (Certificate of  Determination of Preferences of
                           Series A Junior Participating Preferred Stock of
                           Ophthalmic Imaging Systems).
           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.                          *
           4.3             Rights Agreement, dated as of December 31, 1997,      (10)
                           between   Registrant   and  American  Securities
                           Transfer,  Inc.,  including   form   of   Rights
                           Certificate attached thereto.
           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       (7)
                           July_18, 1996.
           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       (1)
                           Agreement between  the  Registrant and Dennis J.
                           Makes dated March 27, 1992.
           10.3            Confidentiality  Agreement, dated March 27, 1992        *
                           between the Registrant and Dennis J. Makes.
           10.4            Confidentiality  Agreement, dated March 27, 1992        *
                           between the Registrant and Steven R. Verdooner.


<PAGE>18

           10.5            Confidentiality  Agreement, dated March 27, 1992        *
                           between the Registrant and Richard Wullaert.
           10.6            Consulting  Agreement,  dated  January 23, 1992,        *
                           between  the  Registrant  and G. Peter  Halberg,
                           M.D.
           10.7            Assignment dated October 23, 1990 of U.S. Patent        *
                           Application   for   Apparatus   and  Method  for
                           Topographical  Analysis  of  the Retina  to  the
                           Registrant by Steven R. Verdooner,  Patricia  C.
                           Meade,  and Dennis J. Makes (as recorded on Reel
                           5490, Frame  423 in the Assignment Branch of the
                           U.S. Patent and Trademark Office).
           10.8            Form  of  International  Distribution  Agreement        *
                           used  by  the Registrant and sample form of  End
                           User Software License Agreement.
           10.9            Original Equipment Manufacturer Agreement, dated        *
                           April  1,  1991, between the Registrant and SONY
                           Medical  Electronics,   a   division   of   SONY
                           Corporation of America.
           10.10           Original   Equipment   Manufacturer/Value  Added        *
                           Reseller Agreement, dated  May  7, 1991, between
                           the Registrant and Eastman Kodak Company.
           10.11           The  Registrant's 1992 Nonstatutory Stock Option        *
                           Plan  and  sample  form  of  Nonstatutory  Stock
                           Option Agreement.
           10.12           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.


<PAGE>19

           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.
           10.15           Warrant  dated  February  12, 1993 issued by the       (1)
                           Registrant  to Steven R. Verdooner  to  purchase
                           50,000 shares of Common Stock.
           10.16           Stock Option Plan.                                     (1)
           10.17           Promissory  Note  dated January_4, 1993 from the       (1)
                           Registrant to Western  Financial Savings Bank in
                           the  amount  of  $25,209.83   due   in  full  by
                           January_4, 1998.
           10.18           Rental  Agreement  dated  May  1,  1994  by  and       (2)
                           between the Registrant and Robert J. Rossetti.
           10.19           Security  and  Loan Agreement (with Credit Terms       (3)
                           and Conditions)  dated  April_12,  1995  by  and
                           between the Registrant and Imperial Bank.
           10.19(a)        General  Security Agreement dated April_12, 1995       (3)
                           by and between the Registrant and Imperial Bank.
           10.19(b)        Warrant  dated  November  1,  1995 issued by the       (4)
                           Registrant to Imperial Bank to  purchase  67,500
                           shares of Common Stock.
           10.19(c)        Amended Loan and Security Agreement (with Credit       (4)
                           Terms and Conditions) dated November 1, 1995.
           10.19(d)        Registration  Rights Agreement dated November 1,       (4)
                           1995 between the Registrant and Imperial Bank.
           10.19(e)        Amended Loan and Security Agreement (with Credit       (6)
                           Terms and Conditions) dated April 4, 1996.
           10.19(f)        Amended Loan and Security Agreement (with Credit       (7)
                           Terms and Conditions) dated July 12, 1996.
           10.19(g)        Amended Loan and Security Agreement (with Credit       (7)
                           Terms and Conditions) dated November 21, 1996.
           10.19(h)        Amended Loan and Security Agreement (with Credit       (8)
                           Terms and Conditions) dated June 3, 1997.
<PAGE>20



           10.19(i)        Amended Loan and Security Agreement (with Credit       (9)
                           Terms and Conditions) dated August 28, 1997.
           10.19(j)        Amended Loan and Security Agreement (with Credit       (9)
                           Terms and Conditions) dated October 24, 1997.
           10.19(k)        Amended Loan and Security Agreement (with Credit       (9)
                           Terms and Conditions) dated November 3, 1997.
           10.19(l)        Amended Loan and Security Agreement (with Credit       (9)
                           Terms and Conditions) dated November 21, 1997.
           10.19(m)        Agreement   of   Purchase  of  Receivable  (Full       (9)
                           Recourse)  dated  November   18,   1997  between
                           Registrant and Imperial Bank.
           10.20           Purchase  Agreements  dated  November  21,  1995       (4)
                           between  the Registrant, JB Oxford & Company and
                           certain Investors.
           10.20(a)        Warrant   Agreement   dated  November  21,  1995       (4)
                           between the Registrant,  JB Oxford & Company and
                           certain Investors.
           10.20(b)        First Amendment Warrant Agreement dated November       (7)
                           21,  1996  between  the  Registrant, JB Oxford &
                           Company and certain Holders.
           10.20(c)        Registration Rights Agreement dated November 21,       (4)
                           1995 between the Registrant, JB Oxford & Company
                           and certain Investors.
           10.21           Employment  Agreement  dated  November  20, 1995       (4)
                           between the Registrant and Steven R. Verdooner.
           10.22           Employment  Agreement  dated  November  20, 1995       (4)
                           between the Registrant and R. Michael Clark.
           10.23           Employment Agreement dated July 14, 1997 between       (9)
                           the Registrant and William L. Mince.
           10.25           The  Registrant's 1995 Nonstatutory Stock Option       (5)
                           Plan  and  sample  form  of  Nonstatutory  Stock
                           Option Agreement.
           10.26           The  Registrant's 1997 Nonstatutory Stock Option      (12)
                           Plan  and  sample  form  of  Nonstatutory  Stock
                           Option Agreement.


<PAGE>21

          *           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.
         (8)          INCORPORATED BY REFERENCE TO THE REGISTRANT'S  QUARTERLY REPORT ON FORM 10-QSB
                      FOR THE QUARTERLY PERIOD ENDED MAY 31, 1997 FILED ON JULY 15, 1997.
         (9)          INCORPORATED BY REFERENCE TO THE REGISTRANT'S ANNUAL REPORT ON FORM 10-KSB FOR
                      THE FISCAL YEAR ENDED AUGUST 31, 1997 FILED ON DECEMBER 1, 1997.
        (10)          INCORPORATED BY REFERENCE TO EXHIBIT 1 OF THE REGISTRANT'S  FORM  8-K FILED ON
                      JANUARY 2, 1998.
        (11)          INCORPORATED  BY  REFERENCE TO EXHIBIT A OF EXHIBIT 1 OF THE REGISTRANT'S FORM
                      8-K FILED ON JANUARY 2, 1998.
        (12)          EXHIBIT FILED HEREWITH.

</TABLE>