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

                                   FORM 10-QSB

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

For the quarterly period ended June 30, 2003

Commission File Number: 1-11140

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

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

                 221 Lathrop Way, Suite I, Sacramento, CA 95815
                    (Address of principal executive offices)

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

Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

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

As of August 14, 2003, 14,354,521 shares of common stock, no par value, were
outstanding.

Transitional Small Business Disclosure Format:

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



<PAGE>



                            OPTHALMIC IMAGING SYSTEMS

                                   FORM 10-QSB

                       FOR THE QUARTER ENDED June 30, 2003



PART I.  FINANCIAL INFORMATION                                         Page
                                                                       ----

Item 1.  Financial Statements

         Condensed Balance Sheet as of June 30, 2003                     2

         Condensed Statements of Operations for the Three Months
         and Six Months ended June 30, 2003 and June 30, 2002            3

         Condensed Statements of Cash Flows for the Six Months
         ended June 30, 2003 and June 30, 2002                           4

         Notes to Financial Statements                                   5

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

Item 3.  Controls and Procedures                                         15

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                               16

Item 2.  Changes in Securities and Use of Proceeds                       16

Item 3.  Defaults upon Senior Securities                                 16

Item 4.  Submission of Matters to a Vote of Security Holders             16

Item 5.  Other Information                                               16

Item 6.  Exhibits and Reports on Form 8-K                                16


<PAGE>

                          PART I FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


                                       1
<PAGE>

                            OPTHALMIC Imaging Systems
                              Condensed Balance Sheet
                                 June 30, 2003
                                   (Unaudited)
<TABLE>
<CAPTION>
Assets
<S>                                                                 <C>
Current assets:
     Cash and equivalents                                           $    346,468
     Accounts receivable, net                                          1,203,036
     Inventories, net                                                    366,371
     Prepaid expenses and other current assets                           198,986
     Deferred tax asset                                                   51,000
                                                                    ------------
Total current assets                                                   2,165,861
Furniture and equipment, net of accumulated
     depreciation and amortization of $1,355,459                         170,540
Restricted cash for line of credit                                       150,000
Other assets                                                              12,890
                                                                    ------------
                                                                    $  2,499,291
                                                                    ============

Liabilities and Stockholders' Equity
Current liabilities:
     Accounts payable                                               $    539,029
     Accrued liabilities                                               1,550,607
     Deferred extended warranty revenue                                  381,254
     Customer deposits                                                   261,417
     Income taxes payable                                                 28,000
     Capitalized lease obligation and other notes payable                  2,758
                                                                    ------------
Total current liabilities                                              2,763,065
                                                                    ------------

Noncurrent Liabilities:
     Line of credit                                                      150,000
     Notes payable to related party                                      458,704
                                                                    ------------
Total noncurrent liabilities                                             608,704
                                                                    ------------

Stockholders' deficit:
     Preferred stock, no par value, 20,000,000 shares authorized;
         none issued or outstanding                                         --
     Common stock, no par value, 20,000,000 shares authorized;
         14,354,521 issued and outstanding                            13,780,604
     Accumulated deficit                                             (14,653,082)
                                                                    ------------
Total stockholders' deficit                                             (872,478)
                                                                    ------------
                                                                    $  2,499,291
                                                                    ============
</TABLE>

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


                                       2
<PAGE>
                            OPTHALMIC Imaging Systems
                       Condensed Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                            Three months ended June 30,   Six months ended June 30,
                                                2003           2002          2003            2002
                                            -----------    -----------    -----------    -----------
<S>                                        <C>             <C>            <C>            <C>
Net revenues                                $ 2,400,724    $ 1,947,609    $ 4,786,437    $ 3,835,701
Cost of sales                                   977,424        866,547      1,937,083      1,700,110
                                            -----------    -----------    -----------    -----------
Gross profit                                  1,423,300      1,081,062      2,849,354      2,135,591
Operating expenses:
    Sales and marketing                         697,699        569,882      1,330,555      1,084,970
    General and administrative                  164,757        168,502        541,331        532,656
    Research and development                    180,322        171,893        261,230        269,163
                                            -----------    -----------    -----------    -----------
       Total operating expenses               1,042,778        910,277      2,133,116      1,886,789
                                            -----------    -----------    -----------    -----------
Income from operations                          380,522        170,785        716,238        248,802
Interest and other expense, net                 (75,424)      (104,951)      (118,470)      (179,411)
                                            -----------    -----------    -----------    -----------
Net income before income taxes                  305,098         65,834        597,768         69,391
Income taxes                                     (3,000)           --          (3,000)           --
                                            -----------    -----------    -----------    -----------

Net income                                  $   302,098    $    65,834    $   594,768    $    69,391
                                            ===========    ===========    ===========    ===========

Shares used in the calculation of basic
      net income per share                    8,206,615      8,138,305      8,172,460      8,138,305

Basic  net income per share                 $      0.04    $      0.01    $      0.07    $      0.01
                                            ===========    ===========    ===========    ===========

Shares used in the calculation of diluted
      net income per share                    8,651,215      8,138,305      8,400,620      8,138,305

Diluted  net income per share               $      0.03    $      0.01    $      0.07    $      0.01
                                            ===========    ===========    ===========    ===========
</TABLE>


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


                                       3

<PAGE>
                            OPTHALMIC Imaging Systems
                       Condensed Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                     Six months ended June 30,
                                                                         2003          2002
                                                                    ------------- --------------
<S>                                                                 <C>            <C>
Operating activities:
Net income                                                          $   594,768    $    69,391
Adjustments to reconcile net income to net cash
    provided by(used in) operating activities
        Depreciation and amortization                                    24,914         37,765
        Net increase in current assets other
           than cash and equivalents                                   (350,270)      (117,996)
        Net increase(decrease) in current liabilities other
           than short-term borrowings                                    16,720        (45,553)
                                                                    -----------    -----------
Net cash provided by(used in) operating activities                      286,132        (56,393)
Investing activities:
Purchases of furniture and equipment                                    (16,903)       (14,719)
Increase in restricted cash                                            (150,000)
Net increase in other assets                                               --           (9,357)
                                                                    -----------    -----------
Net cash used in investing activities                                  (166,903)       (24,076)
Financing activities:
Principal payments on notes payable                                      (1,409)        (3,169)
Proceeds from borrowings under line of credit, net                      150,000           --
Proceeds from (repayments of) borrowings under notes
    payable to related party, net                                      (304,586)        97,800
                                                                    -----------    -----------
Net cash (used in) provided by financing activities                    (155,995)        94,631
                                                                    -----------    -----------
Net (decrease) increase in cash and equivalents                         (36,766)        14,162
Cash and equivalents at beginning of period                             383,234         71,926
                                                                    -----------    -----------
Cash and equivalents at end of period                               $   346,468    $    86,088
                                                                    ===========    ===========

Supplemental schedule of noncash financing activities:
        Addition to (reduction in) aggregate debt payable
        to significant shareholders in exchange for
        inventory and other noncash transactions, net                $ (104,586)   $  (145,497)
                                                                    ===========    ===========

Supplemental schedule of cash flow information:
        Conversion of related party notes payable to
          common stock                                              $ 1,150,000           --
        Cash paid for taxes                                         $     3,000           --
</TABLE>


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


                                       4

<PAGE>

                            OPTHALMIC Imaging Systems

                     Notes to Condensed Financial Statements

            Three and Six Month Periods ended June 30, 2003 and 2002


                                   (Unaudited)


Note 1.         Basis of Presentation

                The accompanying  unaudited  condensed  balance sheet as of June
                30, 2003,  condensed  statements of operations for the three and
                six month periods ended June 30, 2003 and 2002 and the condensed
                statements  of cash flows for the six month  periods  ended June
                30,  2003  and  2002  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  OPTHALMIC  Imaging
                Systems'  (the  "Company's")  Annual  Report  for the year Ended
                December 31, 2002 on Form 10-KSB.  In the opinion of management,
                the  accompanying  condensed  financial  statements  include all
                adjustments,  consisting only of normal  recurring  adjustments,
                necessary for a fair  presentation  of the  Company's  financial
                position and results of  operations  for the periods  presented.
                The results of operations for the period ended June 30, 2003 are
                not necessarily indicative of the operating results for the full
                year.

                Certain  amounts in the fiscal 2002  financial  statements  have
                been  reclassified to conform to the  presentation in the fiscal
                2003 financial statements.

Note 2.         Net Income Per Share

                Basic earnings per share ("EPS"),  which excludes  dilution,  is
                computed by dividing income available to common  shareholders by
                the weighted-average number of common shares outstanding for the
                period.  Diluted EPS reflects the potential  dilution that could
                occur if  securities  or other  contracts to issue common stock,
                such as stock  options,  result in the  issuance of common stock
                which shares in the earnings of the Company.  The treasury stock
                method is  applied to  determine  the  dilutive  effect of stock
                options in computing diluted EPS.



                                       5
<PAGE>

<TABLE>
<CAPTION>
                                                     Unaudited                 Unaudited
                                                Three Months Ended         Six Months Ended
                                                      June 30,                  June 30,
                                                 2003         2002        2003          2002
                                              ----------   ---------   -----------   ----------
<S>                                           <C>          <C>         <C>           <C>
Numerator for basic and diluted
net income per share                          $  302,098   $  65,834   $   594,768   $   69,391
                                              ==========   =========   ===========   ==========

Denominator for basic net income per share:
   Weighted average shares                     8,206,615   8,138,305     8,172,460    8,138,305

Effect of dilutive securities:
   Employee/director stock                       444,600        --         228,160         --
options
   Warrants and other                               --          --            --           --
                                              ----------   ---------   -----------   ----------
Dilutive potential common shares                    --          --            --           --
                                              ----------   ---------   -----------   ----------
Denominator for diluted net
income  per share                              8,651,215   8,138,305   8, 400,620     8,138,305
                                              ==========   =========   ===========   ==========

Basic net income per share                    $     0.04   $    0.01   $      0.07   $     0.01
                                              ==========   =========   ===========   ==========

Diluted net income per share                  $     0.03   $    0.01   $      0.07   $     0.01
                                              ==========   =========   ===========   ==========
</TABLE>

Options and warrants  whose  exercise  price exceeds the average market price of
the stock have been excluded from this computation.


Note 3.         Notes Payable to Related Parties

                During  the period of August  2000  through  July 1,  2001,  the
                Company executed several promissory notes in favor of MediVision
                Medical Imaging LTD. ("MediVision"),  an Israeli corporation and
                majority shareholder in the Company. The "Short-Term Note" had a
                maximum  principal  balance  of  $260,000  available,  while the
                "Working  Capital Funding  Agreement and Amendment No.1" to this
                agreement provided an additional  funding of $2.5 million.  Both
                Notes and the  Amendment  bear  interest at the rate of 9.3% per
                annum  and  are  secured  by all of the  Company's  assets.  The
                principal amount outstanding,  together with any and all accrued
                interest on the Working  Capital Note and Amendment,  is payable
                by August 31, 2003,  except that  MediVision may, at its option,
                at any time  convert any amount of principal  and interest  then
                outstanding  into  shares  of the  Company's  common  stock at a
                conversion  price of $.80 per share on the Working  Capital Note
                and  $0.185  per  share  on the  Amendment  No.1 to the  Working
                Capital Note.

                In May 2003, the Company and MediVision entered in Amendment No.
                2 to the Working  Capital  Funding  Agreement and the Short Term
                Note whereby the  repayment  terms on the debt were  extended on
                all principal and interest due until January 1, 2005.

                In June 2003,  MediVision exercised its option, as stipulated in
                the  Working  Capital  Funding  Agreement,  Amendment  No. 1, to
                convert $1,150,000 of

                                       6
<PAGE>

                principal and interest at a conversion price of $0.185 per share
                into  6,216,216  common  shares  of  stock.  As a result  of the
                foregoing transactions,  MediVision currently owns approximately
                85% of the Company's outstanding common stock.

                At June 30, 2003, after the conversion, the Company had recorded
                approximately  $459,000 in  aggregate  debt owed to  MediVision,
                which  amount is net of  approximately  $1,263,000  in  accounts
                receivable  recorded in  connection  with sales of the Company's
                products to MediVision.

                In  August  2002,   the  Company's   Board  of   Directors,   at
                MediVision's request, authorized the Company to guarantee and/or
                provide  security   interests  in  its  assets  for  certain  of
                MediVision's loans with financial  institutions,  in the maximum
                aggregate amount of approximately $1.9 million.  In August 2002,
                MediVision   subordinated  to  the  financial  institutions  its
                security  position  in the  Company's  assets,  which  had  been
                granted  in   consideration   of  loans  to  the  Company   from
                MediVision.  In December 2002, the Company's  Board of Directors
                approved  that the Company  enter into and issue a debenture  in
                favor of the bank to act as security for the debt of MediVision,
                such  debenture  shall be secured by a second lien on all of the
                Company's  assets.  Such  debenture  and  lien  were  signed  in
                December 2002.

Note 4.         Working Capital Line of Credit

                In May 2003, the Company  entered into a $150,000 Line of Credit
                agreement  with its  bank.  The  line is  secured  by a  pledged
                investment  with the bank  equal  to the  amount  of the line of
                credit.  The interest  charged on the line of credit is at prime
                rate and is due monthly. Advances on the line mature on June 10,
                2008.

Note 5.         Stock Based Compensation

                At June 30, 2003, the Company had five stock-based  compensation
                plans.  The Company accounts for the Plans under the recognition
                and  measurement  principles of APB Opinion No. 25,  "Accounting
                for Stock Issued to Employees," and related Interpretations.  No
                stock-based compensation cost is reflected in net income, as all
                options  granted under the Plans had an exercise  price equal to
                the market value of the  underlying  common stock on the date of
                grant.

                For purposes of pro forma disclosures,  the estimated fair value
                of  stock-based   compensation   plans  and  other  options  are
                amortized  to expense  primarily  over the vesting  period.  The
                following  tables  illustrate  the  effect  on  net  income  and
                earnings  per share if the  Company  had  applied the fair value
                recognition  provisions of FASB  Statement No. 123,  "Accounting
                for Stock-Based Compensation," to stock-based compensation.


                                       7
<PAGE>


<TABLE>
<CAPTION>
                                            Three Months Ended             Six Months Ended
                                                 June 30,                       June 30,
                                           2003           2002          2003            2002
                                        -----------    ----------    -----------    ----------
<S>                                     <C>            <C>           <C>            <C>
Net Income, As Reported                 $   302,098    $   65,834    $   594,768    $   69,391

Deduct Total Stock-Based Employee
   Compensation Expenses Determined
   Under the Fair Value Based Method
   For all Awards, Net of Related Tax
   Effects                                  (15,234)      (13,428)       (28,662)      (26,855)
                                        -----------    ----------    -----------    ----------

Pro Forma Net Income                    $   286,864    $   52,406    $   566,106    $   42,536
                                        ===========    ==========    ===========    ==========
Basic Earnings Per Share
    As Reported                         $      0.04    $     0.01    $      0.07    $     0.01
    Pro Forma                           $      0.04    $     0.01    $      0.07    $     0.01

Diluted Earnings Per Share:
    As Reported                         $      0.03    $     0.01    $      0.07    $     0.01
    Pro Forma                           $      0.03    $     0.01    $      0.07    $     0.01
</TABLE>


                As required,  the pro forma  disclosures  above include  options
                granted  since  January 1, 1995.  Consequently,  the  effects of
                applying  FASB   Statement  No.  123  for  providing  pro  forma
                disclosures may not be representative of the effects on reported
                net income for future  years until all options  outstanding  are
                included in the pro forma disclosures.

                The  fair  value  of each  option  granted  during  the  periods
                indicated   was   estimated  on  the  date  of  grant  using  an
                option-pricing model.

                Options were granted for the  three-month  period ended June 30,
                2003,  to  purchase  650,000  shares of common  stock,  of which
                400,000  shares were  cancelled and reissued with  substantially
                similar terms. In addition,  options to purchase  100,000 shares
                prior to this reporting period were cancelled resulting in a net
                grant for the three-month period ending June 30, 2003 of 150,000
                shares.


                                       8
<PAGE>

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

        This report contains  forward-looking  statements  within the meaning of
the federal securities laws. The Company intends such forward-looking statements
to be covered by the safe  harbor  provisions  contained  in Section  27A of the
Securities  Act of 1933,  as amended,  and in Section 21E of the Exchange Act of
1934,  as  amended.  Forward-looking  statements,  which  are  based on  certain
assumptions  and describe  future  plans,  strategies  and  expectations  of the
Company,  are generally  identifiable by use of the words  "believe,"  "expect,"
"intend,"  "anticipate,"  "estimate,"  "project,"  or similar  expressions.  The
Company's  ability to predict  results or the actual  effect of future  plans or
strategies is inherently uncertain.  Factors which could have a material adverse
effect on its operations and future prospects  include,  but are not limited to,
changes in: economic  conditions  generally and the medical  instruments  market
specifically, legislative or regulatory changes affecting the Company, including
changes in healthcare  regulation,  the  availability  of working  capital,  the
introduction of competing  products,  and other risk factors  described  herein.
These risks and uncertainties, together with the other risks described from time
to time in reports and documents  filed by the Company with the  Securities  and
Exchange   Commission   should  be  considered  in  evaluating   forward-looking
statements, and undue reliance should not be placed on such statements.  Indeed,
it is likely that some of the Company's  assumptions will prove to be incorrect.
The  Company's  actual  results  and  financial  position  will vary from  those
projected or implied in the forward-looking statements, and the variances may be
material.

Overview
--------

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

        In October 2001,  MediVision,  the Company's parent, signed an agreement
for the  acquisition  of a minority  interest by Agfa Gevaert  N.V.  creating an
alliance  for  joint  development  and  marketing  of  an  integrated,   digital
Ophthalmology  PACS  solution.  The marketing  efforts under this  agreement are
anticipated  to be  implemented  beginning in the US market,  and are to include
efforts by the Company.  The extent and focus of future research and development
efforts will depend, in large measure,  on direction from MediVision,  including
potential collaborative projects between MediVision and the Company.

        In June 2003,  the Company  signed a licensing  agreement  with  NextGen
Healthcare  Information  Systems,  Inc., a subsidiary of Quality  Systems,  Inc.
Under the terms of the agreement,  OIS will become a value added reseller of two
computer-based  practice  management and medical  records  products:  NextGen(R)
Electronic Medical Records (EMR) and NextGen(R)  Enterprise  Practice Management
(EPM).

        This strategic  business  alliance  diversifies the product portfolio of
OIS, enabling the Company to offer a wider variety of products and comprehensive
solutions to its customer base of ophthalmology  departments and practices.  The
NextGen(R)  EMR system  creates and  maintains  complete  medical  records  with
minimal effort while it streamlines workflow, controls utilization,  and manages
critical data related to patient care outcomes. The NextGen(R) EPM


                                       9
<PAGE>

system  is a  complete  physician  management  system  that  provides  a  common
registration system, enterprise-wide appointment scheduling,  referral tracking,
clinical support, a custom report writer, and patient financial management based
on a managed care model.

        At  June  30,  2003,  the  Company  had  a   stockholders'   deficit  of
approximately  $872,000 and its current liabilities  exceeded its current assets
by  approximately  $597,000.  The  Company  continues  to  experience  cash flow
pressures and there can be no assurance that the Company will be able to achieve
or sustain  significant  positive cash flows,  revenues or  profitability in the
future.

        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.

Critical Accounting Policies
----------------------------

        The  Company's  financial  statements  are prepared in  accordance  with
accounting  principles  generally  accepted  in the  United  States  of  America
("GAAP").  The financial  information  contained  within its statements is, to a
significant  extent,  financial  information  that is based on  measures  of the
financial  effects of  transactions  and events that have  already  occurred.  A
variety of factors could affect the ultimate value that is obtained  either when
earning  income,  recognizing  an expense,  recovering  an asset or  relieving a
liability.  The Company recognizes revenue when products are shipped.  Estimates
are used  relative  to the  expected  useful  lives of  depreciable  assets.  In
addition,  GAAP  itself  may change  from one  previously  acceptable  method to
another method.  Although the economics of the Company's  transactions  would be
the same, the timing of events that would impact transactions could change.

Financial Accounting Pronouncement FAS 148
------------------------------------------

        In December  2002,  the Financial  Accounting  Standards  Board ("FASB")
issued Statement of Financial  Accounting Standard ("SFAS") No. 148, "Accounting
for  Stock-Based  Compensation-Transition  and  Disclosure-an  amendment of FASB
Statement  No.  123"  (SFAS" No.  148").  This  Statement  amends  SFAS No. 123,
""Accounting  for  Stock-Based   Compensation"   (SFAS  No.  123"),  to  provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee  compensation.  In addition,  this
statement  amends  the  disclosure  requirements  of  SFAS  No.  123 to  require
prominent  disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results.  The transition  guidance and annual disclosure
provisions of SFAS No. 148 are effective for fiscal years ending after  December
15,  2002.  The  interim  disclosure  provisions  are  effective  for  financial
reporting  containing  financial  statements for interim periods beginning after
December  15,  2002.  Because the Company  accounts  for the  compensation  cost
associated  with its stock option plans under the intrinsic  value  method,  the
alternative methods of transition will not apply to the Company.  The additional
disclosure  requirements  of the  statement  are  included  in  these  financial
statements.  Management does not believe that the adoption of this Statement had
a material impact on the Company's consolidated financial


                                       10
<PAGE>

position or results of operations.


New Accounting Pronouncement FAS 149
------------------------------------

        On April 30,  2003,  the  Financial  Accounting  Standards  Board issued
Statement No. 149, "Amendment of Statement on Derivative Instruments and Hedging
Activities."  This Statement  amends and clarifies the accounting for derivative
instruments  by  providing  guidance  related  to  circumstances  under  which a
contract  with a net  investment  meets the  characteristics  of a derivative as
discussed  in Statement  133. The  Statement  also  clarifies  when a derivative
contains a  financing  component.  The  Statement  is intended to result in more
consistent reporting for derivative contracts and must be applied  prospectively
for contracts  entered into or modified after June 30, 2003,  except for hedging
relationships designated after June 30, 2003. In management's opinion,  adoption
of this  statement  is not expected to have a material  effect on the  Company's
financial position or results of operations.

New Accounting Pronouncement FAS 150
------------------------------------

        In May 2003,  the FASB  issued  SFAS No.  150,  Accounting  for  Certain
Financial  Instruments with Characteristics of both Liabilities and Equity. This
Statement  establishes  standards  for how an  issuer  classifies  and  measures
certain  financial  instruments  with  characteristics  of both  liabilities and
equity.  It  requires  that an issuer  classify a financial  instrument  that is
within its scope as a liability (or an asset in some circumstances). Some of the
provisions  of this  Statement  are  consistent  with the current  definition of
liabilities in FASB Concepts Statement No. 6, Elements of Financial  Statements.
The remaining  provisions of this Statement  incorporate the FASB's intention to
revise the definition to encompass  certain  obligations that a reporting entity
can or must settle by issuing its own equity shares,  depending on the nature of
the relationship  established  between the holder and the issuer. This Statement
concludes the first phase of the FASB's  redeliberations  of the Exposure Draft,
Accounting  for  Financial  Instruments  with  Characteristics  of  Liabilities,
Equity, or Both. This Statement is effective for financial  instruments  entered
into or modified after May 31, 2003, and otherwise is effective at the beginning
of  the  first  interim  period  beginning  after  June  15,  2003,  except  for
mandatorily   redeemable  financial   instruments  of  nonpublic  entities.   In
management's opinion,  adoption of this statement did not have a material effect
on the  Company's  consolidated  financial  position  or results  of  operations
Results of Operations

Revenues

        The Company's  revenues for the second  quarter ended June 30, 2003 were
$2,400,724,  representing  an increase  of  approximately  23% from  revenues of
$1,947,609  for the second  quarter ended June 30, 2002.  Revenues for the first
six  months  of  fiscal  2003  were  $4,786,437   representing  an  increase  of
approximately  25% from  revenues of  $3,835,701  for the  comparable  period of
fiscal  2002.  Digital  angiography   systems  and  peripherals   accounted  for
approximately  93% and 94% of the Company's  revenue for the second  quarter and
six-month period of 2003,  respectively.  Sales of these products  accounted for
approximately 94% and 93% of the Company's total revenues for the second quarter
and  six-month  period of 2002,  respectively.  Service  revenues  accounted for
approximately 7% of the Company's revenue for the second


                                       11
<PAGE>

quarter  and  six-month  period of 2003 and  2002.  Revenues  from  sales of the
Company's products to MediVision were approximately $237,000 and $290,000 during
the 3-month and  six-month  periods ended June 30, 2003 and $99,000 and $229,000
for the  comparable  three-month  and  six-month  periods  ending June 30, 2002,
respectively.

Gross Margins

        Gross  margins were  approximately  59% during the second  quarter ended
June 30, 2003 versus  approximately 56% for the comparable  quarter of 2002. For
the six-month period ended June 30, 2003, gross margins were  approximately  60%
as  compared  to 56% during  the  comparable  period of 2002.  The  Company  has
undertaken certain gross margin enhancement efforts and continues to monitor its
expenses  in this area in  contemplation  of current  and  anticipated  business
conditions.

Sales, Marketing, General and Administrative Expenses

        Sales and marketing and general and  administrative  expenses  accounted
for approximately 36% of total revenues during the second quarter of fiscal 2003
as compared  with  approximately  38% during the second  quarter of fiscal 2002.
Actual  expense levels  increased to $862,456  during the second quarter of 2003
versus  $738,384  during the second quarter of 2002. For the first six months of
fiscal 2003 and fiscal 2002 such expenses  accounted for  approximately  39% and
42% of total  revenues for the respective  six-month  periods.  Actual  expenses
increased to $1,871,886 from $1,617,626  during the six-month  periods of fiscal
2003 and 2002,  respectively.  Primary  contributing  factors  to the  increased
expenses,  while decreasing the percentage of expenses relative to revenue, were
salaries and support costs  related to direct sales and other support  personnel
added  during and  subsequent  to the second  quarter of 2002,  as well as other
costs in connection with the increased sales levels in 2003.

Research and Development Expenses

        Research and development expenses were $180,322 in the second quarter of
fiscal 2003 and  $171,893 in the second  quarter of fiscal 2002.  Such  expenses
accounted for  approximately  8% and 9% of revenues during the second quarter of
2003 and  2002,  respectively.  For the first six  months of fiscal  2003,  such
expenses  accounted  for  approximately  6% of total  revenues  as  compared  to
approximately  7% during the comparable  period of 2002. The Company has focused
its recent  research  and  development  efforts  on new  digital  image  capture
products and reducing cost configurations for its current products.  The company
is planning to increase R & D expenditures during the remainder of the year.

Interest and Other Expense, net

        Interest  and other  expense  was $75,424  during the second  quarter of
fiscal 2003 versus  $104,951  during the same period of 2002.  For the six-month
periods, other expense was $118,470 and $179,411 in fiscal 2003 and fiscal 2002,
respectively.  These amounts were  comprised  principally  of interest  expense,
mainly  associated  with net  borrowings  from  MediVision  and  with  financing
arrangements  provided to certain of the Company's  customers in connection with
sales of its products.


                                       12
<PAGE>

Net Income

        The Company  recorded net income of  $302,098,  or $0.04 per share basic
earnings and $0.03 per share diluted earnings, for the second quarter ended June
30, 2003 as compared to net income of $65,834 or $0.01 per share, for the second
quarter ended June 30, 2002. For the six-month periods, the Company recorded net
income of  $594,768 or $0.07 per share basic and diluted as compared to $69,391,
or $0.01 per share, during fiscal 2003 and fiscal 2002, respectively.

        The results of  operations  do not include any amounts with respect to a
potential  contingent  liability in connection with the collection of taxes from
the  Company's  customers,  which  amount  has been  estimated  on the  basis of
numerous factors and assumptions that might, in the least favorable combination,
reach $605,000.  Management  believes that the probability of such an assessment
is remote  and  accordingly,  has not  recorded  a  liability  in its  financial
statements.  However,  there can be no  assurance  that the  amount  that  might
ultimately  be  assessed  for prior  periods  would not  materially  affect  the
Company's results of operations or cash flows in any given reporting period.

Liquidity and Capital Resources
-------------------------------

        The Company's operating activities generated cash of $286,132 during the
six months  ended June 30, 2003 as compared to use of cash of $56,393 in the six
months ended June 30, 2002. The cash generated from operations  during the first
six months of 2003 was principally  from net income for the period which amounts
were  partially  offset by increased  receivables.  The cash used in  operations
during the first six months of 2002 was  principally to fund the  procurement of
inventory  required to meet the second quarter and  anticipated  near-term sales
demand for the Company's products.

        Cash used in  investing  activities  was  $166,903  during the first six
months of 2003 as  compared  to  $24,076  during the same  period for 2002.  The
Company's primary investing  activities consisted of an investment to secure the
line of  credit  with  its  bank.  The  Company  anticipates  continued  certain
near-term  capital  expenditures  in  connection  with  increasing  its  pool of
demonstration  equipment, as well as its ongoing efforts to upgrade its existing
management   information  and  corporate   communication  systems.  The  Company
anticipates that related  expenditures,  if any, will be financed from cash flow
from operations,  borrowings  under existing  arrangements  with MediVision,  if
available, or other financing arrangements available to the Company, if any.

        The Company used cash in  financing  activities  of $155,995  during the
first six months of fiscal 2003 as compared to generating cash of $94,631 during
the  comparable  period of fiscal 2002.  The cash used in  financing  activities
during  the  first  six  months  of 2003  was  principally  from  repayments  of
borrowings under existing arrangements with MediVision offset by the exercise of
options by MediVision,  while the cash generated  during the same period in 2002
was principally  from borrowings  under existing  arrangements  with MediVision.
Principal  payments on notes payable other than to MediVision in both years were
minimal.

        In June 2003,  MediVision  exercised  its option,  as  stipulated in the
Amendment No.1, to convert  $1,150,000 of principal and interest at a conversion
price of $0.185 per share into


                                       13
<PAGE>

6,216,216  common shares of stock.  As a result of the  foregoing  transactions,
MediVision currently owns approximately 85% of the Company's  outstanding common
stock.

        At June 30,  2003,  after  the  conversion,  the  Company  had  recorded
approximately $459,000 in aggregate debt owed to MediVision, which amount is net
of approximately  $1,263,000 in accounts  receivable recorded in connection with
sales of the Company's products to MediVision.

        On June 30, 2003 the Company's cash and cash  equivalents were $346,468.
Management anticipates that additional sources of capital beyond those currently
available  to the Company may be  required  to continue  operations  and procure
inventory  necessary to meet current and  anticipated  demand for the  Company's
products.  Substantial  delays in the delivery of the Company's  products  would
result in reduced  cash flow from sales of such  products  as well as  potential
increased costs.

        Notwithstanding   the  foregoing,   the  Company's   relationship   with
MediVision,  will, in management's opinion,  significantly improve the Company's
financial  condition  and  enhance  management's  ability to  achieve  sustained
profitable operations, particularly in light of the agreement between MediVision
and Agfa-Gevaert  N.V. entered into during the fourth quarter of 2001.  Pursuant
to the  agreement,  Agfa acquired a minority  interest in  MediVision  and is to
invest in  MediVision  up to $3.5  million,  $1 million of which was provided in
connection  with the  closing in October  2001,  $1 million of which was paid in
April 2002 and an additional  $500,000 of which was paid in October 2002.  Under
the terms of this  agreement,  among  other  things,  Agfa and  MediVision  will
jointly develop, promote and market a combined, Integrated Digital Ophthalmology
Picture  Archive  &  Communication  System.  The  Company  anticipates  actively
supporting  MediVision  in  these  efforts.  The  Company's   relationship  with
MediVision  provides  the  Company  access to  resources  in addition to working
capital. As a direct consequence of the MediVision transactions, the Company has
implemented  certain  gross  margin  enhancement  efforts,   including  improved
production cost control and sustaining  engineering programs.  In addition,  the
Company and  MediVision  are  continuing  collaborative  efforts with respect to
design and implementation of certain product development programs.  Furthermore,
the relationship  with MediVision could assist the Company in reducing  selling,
general  and   administrative   expenses,   particularly   in  connection   with
co-marketing and co-selling  arrangements currently contemplated with respect to
certain international markets.

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


                                       14
<PAGE>

        ITEM 3.      CONTROLS AND PROCEDURES

        The Company's Chief Executive Officer and Chief Financial Officer, based
on their  evaluation  within  90 days  prior to the date of this  report  of the
Company's  disclosure  controls and  procedures (as defined in Exchange Act Rule
13a--14(c)),   have  concluded  that  the  Company's   disclosure  controls  and
procedures are adequate and effective for purposes of Rule  13a--14(c) in timely
alerting  them to material  information  relating to the Company  required to be
included in the Company's filings with the SEC under the Securities Exchange Act
of 1934.

        There were no significant  changes in the Company's internal controls or
in other factors that could significantly affect internal controls subsequent to
the date of their evaluation.


                                       15
<PAGE>

                            PART II OTHER INFORMATION

ITEM 1.             LEGAL PROCEEDINGS
                    None.

ITEM 2.             CHANGES IN SECURITIES
                    None.

ITEM 3.             DEFAULTS UPON SENIOR SECURITIES
                    None.

ITEM 4.             SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                    None.

ITEM 5.             OTHER INFORMATION
                    None.

ITEM 6.             EXHIBITS AND REPORTS ON FORM 8-K

                    (a)     10.1 - Amendment No. 2 to Working Capital
                                Funding Agreement and Short Term Note

                            31.1 - Certification Required Under Section 302
                            of Sarbanes-Oxley Act of 2002

                            31.2 - Certification Required Under Section 302
                            of Sarbanes-Oxley Act of 2002

                            32 - Certification Required Under Section 906 of
                            Sarbanes-Oxley Act of 2002

                    (b)     None


                                       16
<PAGE>


                                   SIGNATURES

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

                                          OPTHALMIC IMAGING SYSTEMS
                                          (Company)


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



                                              /s/ Ariel Shenhar
                                              ----------------------------------
                                              Ariel Shenhar,
                                              Chief Financial Officer



Dated: August 14, 2003

                                       17