================================================================================

                     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 September 30, 2003

Commission File Number:    1-11140

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

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

                 221 LATHROP WAY, SUITE I, SACRAMENTO, CA 95815
                    (Address of principal executive offices)

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

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

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

As of November 11, 2003,  14,354,521  shares of common stock, no par value, were
outstanding.

Transitional Small Business Disclosure Format:

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

<PAGE>


                           OPHTHALMIC IMAGING SYSTEMS

                                   FORM 10-QSB

                    FOR THE QUARTER ENDED September 30, 2003


<TABLE>
<CAPTION>
PART I.           FINANCIAL INFORMATION                                                          PAGE
                                                                                                 ----

<S>               <C>                                                                             <C>
Item 1.           Financial Statements

                  Condensed Balance Sheet as of September 30, 2003                                 2

                  Condensed Statements of Operations for the Three Months and
                  Nine Months ended September 30, 2003 and September 30, 2002                      3

                  Condensed Statements of Cash Flows for the Nine Months
                  ended September 30, 2003 and September 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                                                          16

PART II.          OTHER INFORMATION

Item 1.           Legal Proceedings                                                                17

Item 2.           Changes in Securities and Use of Proceeds                                        17

Item 3.           Defaults upon Senior Securities                                                  17

Item 4.           Submission of Matters to a Vote of Security Holders                              17

Item 5.           Other Information                                                                17

Item 6.           Exhibits and Reports on Form 8-K                                                 18
</TABLE>


<PAGE>


                          PART I FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS






                                       1

<PAGE>

                           Ophthalmic Imaging Systems
                             Condensed Balance Sheet
                               September 30, 2003
                                   (Unaudited)

<TABLE>
<CAPTION>
ASSETS
<S>                                                                 <C>
Current assets:
      Cash and equivalents                                           $  1,644,998
      Accounts receivable, net                                          1,463,158
      Inventories, net                                                    321,703
      Prepaid expenses and other current assets                           243,968
      Deferred tax asset                                                   51,000
                                                                     ------------
Total current assets                                                    3,724,827
Furniture and equipment, net of accumulated
      depreciation and amortization of $1,369,190                         150,809
Restricted cash for line of credit                                        150,000
Other assets                                                               57,798
                                                                     ------------
                                                                     $  4,083,434
                                                                     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
      Accounts payable                                               $    558,740
      Current maturities of long-term debt                                363,636
      Accrued liabilities                                               1,587,346
      Deferred extended warranty revenue                                  468,104
      Customer deposits                                                   373,698
      Income taxes payable                                                 27,950
                                                                     ------------
Total current liabilities                                               3,379,474
                                                                     ------------

Noncurrent Liabilities:
      Notes payable other                                                 836,364
      Notes payable to related party                                      429,990
                                                                     ------------
Total noncurrent liabilities                                            1,266,354
                                                                     ------------

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                                             (14,342,998)
                                                                     ------------
Total stockholders' deficit                                              (562,394)
                                                                     ------------
                                                                     $  4,083,434
                                                                     ============
</TABLE>


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


                                       2

<PAGE>

                           Ophthalmic Imaging Systems
                       Condensed Statements of Operations
                                   (Unaudited)


<TABLE>
<CAPTION>
                                            Three months ended September 30, Nine months ended September 30,
                                                2003            2002            2003             2002
                                            ------------    ------------    ------------    ------------
<S>                                         <C>             <C>             <C>             <C>
Net revenues                                $  2,446,084    $  2,115,225    $  7,232,522    $  5,950,926
Cost of sales                                    986,422         878,057       2,923,506       2,578,167
                                            ------------    ------------    ------------    ------------
Gross profit                                   1,459,662       1,237,168       4,309,016       3,372,759
Operating expenses:
    Sales and marketing                          661,872         521,129       1,992,427       1,606,099
    General and administrative                   219,126         322,050         760,457         854,706
    Research and development                     215,003         135,429         476,234         404,592
                                            ------------    ------------    ------------    ------------
         Total operating expenses              1,096,001         978,608       3,229,118       2,865,397
                                            ------------    ------------    ------------    ------------
Income from operations                           363,661         258,560       1,079,898         507,362
Interest and other expense, net                  (46,077)        (86,574)       (164,546)       (265,985)
                                            ------------    ------------    ------------    ------------
Net income before income taxes                   317,584         171,986         915,352         241,377
Income taxes                                      (7,500)           --           (10,500)           --
                                            ------------    ------------    ------------    ------------

Net income                                  $    310,084    $    171,986    $    904,852    $    241,377
                                            ============    ============    ============    ============

Shares used in the calculation of basic
      net income per share                    14,354,521       8,138,305      10,233,147       8,138,305

Basic net income per share                  $       0.02    $       0.02    $       0.09    $       0.03
                                            ============    ============    ============    ============

Shares used in the calculation of diluted
      net income per share                    15,251,916       8,138,305      10,684,385       8,138,305

Diluted  net income per share               $       0.02    $       0.02    $       0.08    $       0.03
                                            ============    ============    ============    ============
</TABLE>


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


                                       3
<PAGE>

                           Ophthalmic Imaging Systems
                       Condensed Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                              Nine months ended September 30,
                                                                    2003          2002
                                                                -----------    -----------
<S>                                                            <C>             <C>
OPERATING ACTIVITIES:
Net income                                                      $   904,852    $   241,377
Adjustments to reconcile net income to net cash
     provided by (used in) operating activities
         Depreciation and amortization                               38,645         57,413
         Net increase in current assets other
             than cash and equivalents                             (610,705)      (153,605)
         Net increase (decrease) in current liabilities other
             than short-term borrowings                             272,250       (108,116)
                                                                -----------    -----------
Net cash provided by (used in) operating activities                 605,042         37,069
INVESTING ACTIVITIES:
Purchases of furniture and equipment                                (10,903)       (25,449)
Increase in restricted cash                                        (150,000)
Net increase in other assets                                        (44,908)        (9,357)
                                                                -----------    -----------
Net cash used in investing activities                              (205,811)       (34,806)
FINANCING ACTIVITIES:
Principal payments on notes payable                                  (4,167)        (5,874)
Proceeds from borrowings under line of credit, net                     --             --
Proceeds from notes payable, other                                1,200,000           --
Proceeds from (repayments of) borrowings under notes
     payable to related party, net                                 (333,300)        97,800
                                                                -----------    -----------
Net cash (used in) provided by financing activities                 862,533         91,926
                                                                -----------    -----------
Net (decrease) increase in cash and equivalents                   1,261,764         94,189
Cash and equivalents at beginning of period                         383,234         71,926
                                                                -----------    -----------
Cash and equivalents at end of period                           $ 1,644,998    $   166,115
                                                                ===========    ===========

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          $  (133,300)   $  (117,141)
                                                                ===========    ===========

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
         Conversion of related party notes payable to
           common stock                                         $ 1,150,000           --
         Cash paid for taxes                                    $    10,500           --

</TABLE>

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


                                       4

<PAGE>


                           Ophthalmic Imaging Systems

                     Notes to Condensed Financial Statements

         Three and Nine Month Periods ended September 30, 2003 and 2002


                                   (Unaudited)


Note 1.         Basis of Presentation

                The  accompanying   unaudited  condensed  balance  sheet  as  of
                September 30, 2003,  condensed  statements of operations for the
                three and nine month periods  ended  September 30, 2003 and 2002
                and the  condensed  statements  of cash flows for the nine month
                periods ended  September 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
                Ophthalmic 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
                September  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         Nine Months Ended
                                         September 30,             September 30,
                                   -----------------------   -------------------------
                                      2003          2002        2003          2002
                                   -----------   ---------   -----------   -----------
<S>                                <C>           <C>         <C>           <C>
Numerator for basic and diluted
net income per share               $   310,084   $ 171,986   $   904,852   $   241,377
                                   ===========   =========   ===========   ===========

Denominator for basic net income
per share:
   Weighted average shares          14,354,521   8,138,305    10,233,147     8,138,305

Effect of dilutive securities:
   Employee/director stock             897,395        --         451,238          --
options
   Warrants and other                     --          --            --            --
                                   -----------   ---------   -----------   -----------
Dilutive potential common shares          --          --            --            --

                                   -----------   ---------   -----------   -----------
Denominator for diluted net
income per share                    15,251,916   8,138,305    10,684,385     8,138,305
                                   ===========   =========   ===========   ===========

Basic net income per share         $      0.02   $    0.02   $      0.09   $      0.03
                                   ===========   =========   ===========   ===========

Diluted net income per share       $      0.02   $    0.02   $      0.08   $      0.03
                                   ===========   =========   ===========   ===========
</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  $2,500,000.  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,  was 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  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

                                       6
<PAGE>

                currently owns  approximately  85% of the Company's  outstanding
                common stock.

                At September  30, 2003,  after the  conversion,  the Company had
                recorded  approximately  $430,000  in  aggregate  debt  owed  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,  on the maximum
                aggregate  amount of approximately  $1,900,000.  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 first 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
                September 10, 2008.

Note 5.         Stock Based Compensation

                At  September  30,  2003,  the  Company  had  five   stock-based
                compensation  plans (the "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 or above 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        Nine Months Ended
                                             September 30,            September 30,
                                          2003         2002         2003         2002
                                       ---------    ---------    ---------    ---------
<S>                                    <C>          <C>          <C>          <C>
Net Income, As Reported                $ 310,084    $ 171,986    $ 904,852    $ 241,377
Deduct Total Stock-Based Employee
    Compensation Expenses Determined
    Under the Fair Value Based Method
    For all Awards, Net of Related Tax
    Effects                              (15,633)     (13,428)     (46,898)     (40,283)
                                       ---------    ---------    ---------    ---------

Pro Forma Net Income                   $ 294,451    $ 158,558    $ 857,954    $ 201,094
                                       =========    =========    =========    =========

Basic Earnings Per Share
    As Reported                        $   0.02     $   0.02     $   0.09     $   0.03
    Pro Forma                          $   0.02     $   0.02     $   0.09     $   0.03

Diluted Earnings Per Share:
    As Reported                        $   0.02     $   0.02     $   0.08     $   0.03
    Pro Forma                          $   0.02     $   0.02     $   0.08     $   0.03
</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.

                No  options  were  granted  for  the  three-month  period  ended
                September 30, 2003.


                                       8
<PAGE>

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

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

Overview
--------

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

     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 the
Company,  enabling  it 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


                                       9
<PAGE>

utilization,  and manages  critical data related to patient care  outcomes.  The
NextGen(R) EPM 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.

     In September  2003,  the Company  entered into a $1,200,000  debt agreement
with Laurus Master Fund, Ltd ("Laurus") in the form of a three-year  convertible
note with a fixed coupon price of 6.5% per annum.  The  convertible  note may be
converted by Laurus into the Company's  Common Stock at a fixed conversion price
of $1.07.  The  Company  also issued  seven-year  warrants to Laurus to purchase
375,000 shares of the Company's  Common Stock at exercise prices ranging between
$1.23 and $1.61 per share.

     At  September  30,  2003,  the  Company  had  a  stockholders'  deficit  of
approximately  $562,000 and its current assets exceeded its current  liabilities
by approximately  $345,000.  The convertible loan agreement with Laurus that was
entered  into during the quarter  has had a  favorable  impact on the  Company's
current  ratio.  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


                                       10
<PAGE>

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 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.

Disposal Obligations
--------------------

In June 2002,  the  Financial  Accounting  Standards  Board issued SFAS No. 146,
Accounting for Costs Associated with Exit or Disposal Activities, which requires
liabilities  for costs  related to exit or disposal  activities to be recognized
when the  liability is incurred.  SFAS No. 146

                                       11
<PAGE>

supersedes  EITF Issue No.  94-3,  Liability  Recognition  for Certain  Employee
Termination  Benefits and Other Costs to Exit an Activity,  and is effective for
the Company in fiscal 2003. The Company adopted SFAS No. 146 as of the first day
of fiscal 2003 and does not expect that the adoption of this statement will have
a  significant  impact  on  the  Company's  financial  position  or  results  of
operations.

Guarantor Accounting
--------------------

In November 2002, the FASB issued Interpretation No. 45, Guarantor's  Accounting
and Disclosure  Requirements for Guarantees,  Including  Indirect  Guarantees of
Indebtedness of Others ("FIN 45"). FIN 45 changes current practice in accounting
for, and disclosure of, guarantees. FIN 45 will require certain guarantees to be
recorded at fair value on the  Company's  balance  sheet,  a change from current
practice,  which is generally to record a liability only when a loss is probable
and reasonably  estimable,  as those terms are defined in SFAS No. 5, Accounting
for  Contingencies.  FIN 45 also  requires a guarantor to make  significant  new
disclosures, even when the likelihood of making any payments under the guarantee
is  remote,  which is another  change  from  current  practice.  The  disclosure
requirements  of FIN 45 are  effective  immediately  and are included in Note 8,
"Litigation and  Contingencies." The initial recognition and initial measurement
provisions  are  applicable  on a  prospective  basis to  guarantees  issued  or
modified after December 28, 2002. The Company  expects that the new  recognition
and measurement  provisions will not have a significant  impact on the Company's
future financial position or results of operations.

Consolidation of Variable Interest Entities
-------------------------------------------

In  January  2003,  the FASB  issued  Interpretation  No. 46,  Consolidation  of
Variable Interest  Entities ("FIN 46"). This standard  clarifies the application
of Accounting Research Bulletin No. 51, Consolidated  Financial Statements,  and
addresses  consolidation by business  enterprises of variable interest entities.
FIN  46  requires  existing  unconsolidated  variable  interest  entities  to be
consolidated by their primary  beneficiaries  if the entities do not effectively
disperse risk among the parties  involved.  FIN 46 also enhances the  disclosure
requirements related to variable interest entities.  This statement is effective
for variable  interest  entities  created or in which an  enterprise  obtains an
interest  after  January  31,  2003.  FIN 46 will be  effective  for the Company
beginning  September  7, 2003 for all  interests in variable  interest  entities
acquired before February 1, 2003. The adoption of FIN 46 is not expected to have
a material impact on the Company's  financial  position or results of operations

Results of Operations
---------------------

Revenues

     The Company's  revenues for the third quarter ended September 30, 2003 were
$2,446,084,  representing  an increase  of  approximately  16% from  revenues of
$2,115,225  for the third  quarter ended  September  30, 2002.  Revenues for the
first nine months of fiscal  2003 were  $7,232,522  representing  an increase of
approximately  22% from  revenues of  $5,950,926  for the  comparable  period of
fiscal  2002.  Digital  angiography   systems  and  peripherals   accounted  for
approximately  92% and 93% of the  Company's  revenue for the third  quarter and
nine-month  period  of both  2003  and  2002.  Service  revenues  accounted  for
approximately  8% and 7% of the  Company's


                                       12
<PAGE>

revenue  for the  third  quarter  and  nine-month  period of both 2003 and 2002.
Revenues from sales of the Company's  products to MediVision were  approximately
$88,000  and  $376,000  during the  three-month  and  nine-month  periods  ended
September 30, 2003 and $31,000 and $260,000 for the comparable  three-month  and
nine-month periods ending September 30, 2002, respectively.

Gross Margins

     Gross  margins  were  approximately  60%  during  the third  quarter  ended
September 30, 2003 versus  approximately 59% for the comparable quarter of 2002.
For  the  nine-month  period  ended  September  30,  2003,  gross  margins  were
approximately  60% as compared to 57% during the comparable  period of 2002. The
Company  continues  to monitor  its  expenses in this area in  contemplation  of
current and future  business  conditions.  It is anticipated  that the Company's
gross margins will decrease as its sales of the NextGen software products become
more significant,  since the gross margins  associated with such sales are below
the majority of the products that the Company currently markets.

Sales, Marketing, General and Administrative Expenses

     Sales and marketing and general and  administrative  expenses accounted for
approximately  36% of total revenues  during the third quarter of fiscal 2003 as
compared with  approximately 40% during the third quarter of fiscal 2002. Actual
expense  levels  increased to $880,998  during the third  quarter of 2003 versus
$843,179  during the third quarter of 2002.  For the first nine months of fiscal
2003 and fiscal 2002 such expenses  accounted for  approximately  38% and 41% of
total revenues for the respective nine-month periods.  Actual expenses increased
to $2,752,884 from $2,460,805  during the nine-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 third  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  $215,003 in the third quarter of
fiscal 2003 and  $135,429 in the third  quarter of fiscal  2002.  Such  expenses
accounted for  approximately  9% and 6% of revenues  during the third quarter of
2003 and 2002, respectively.  For the first nine months of fiscal 2003 and 2002,
such expenses accounted for approximately 7% of total revenues.  The Company has
focused its recent research and development efforts on new digital image capture
products. The Company expects its research and development  expenditures to grow
as a result of its paying for research and  development  conducted by MediVision
on the Company's  behalf.  In addition,  the Company  anticipates an increase in
reported expenses that were previously  reimbursed to the Company, in connection
with the "Computer Guided Laser Therapy" project, by the Israel-U.S.  Binational
Industrial Research and Development Foundation, that has since been completed.


                                       13
<PAGE>

Interest and Other Expense, net

Interest and other  expense was $46,077  during the third quarter of fiscal 2003
versus $86,574 during the same period of 2002. For the nine-month periods, other
expense was $164,547 and $265,985 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.

Net Income

     The Company  recorded net income of $310,084,  or $0.02 per share basic and
diluted earnings,  for the third quarter ended September 30, 2003 as compared to
net income of $171,986 or $0.02 per share, for the third quarter ended September
30,  2002.  For the  nine-month  periods,  the  Company  recorded  net income of
$904,852  or $0.09 per share  basic and $0.08 per share  diluted as  compared to
$241,377, or $0.03 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 $660,000.  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 $605,042 during the
nine months ended  September 30, 2003 as compared to generating  cash of $37,069
in the nine months ended  September 30, 2002. The cash generated from operations
during the first  nine  months of 2003 was  principally  from net income for the
period which amounts were partially  offset by increased  receivables.  The cash
generated from  operations  during the first nine months of 2002 was principally
from net income for the period  partially offset by the procurement of inventory
required to meet the third quarter and  anticipated  near-term  sales demand for
the Company's products.

     Cash used in investing activities was $205,811 during the first nine months
of 2003 as compared to $34,806  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  and the  costs  associated  with  the  placement  of the
convertible  debt  instrument  with Laurus.  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 or other  financing  arrangements  available to the Company,  if
any.

     The Company  generated cash in financing  activities of $862,533 during the
first nine  months of fiscal  2003 as  compared  to  generating  cash of $91,926
during the  comparable  period


                                       14
<PAGE>

of fiscal 2002. The cash generated in financing activities during the first nine
months of 2003 was  principally  from proceeds  received from the signing of the
$1,200,000  convertible debt instrument offset by repayments of borrowings under
existing arrangements with 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 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  September  30,  2003,  after the  conversion,  the Company had recorded
approximately $430,000 in aggregate debt owed to MediVision.

    On  September  30,  2003  the  Company's  cash  and  cash  equivalents  were
$1,644,998.  Management  anticipates  that additional  sources of capital beyond
those currently  available to the Company may be required to continue funding of
research and  development  for new products  and selling and  marketing  related
expenses for existing products.

     The Company  will  continue to evaluate  alternative  sources of capital to
meet its growth 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.

                                       15
<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.


                                       16
<PAGE>

                            PART II OTHER INFORMATION

ITEM 1.             LEGAL PROCEEDINGS
                    None.

ITEM 2.             CHANGES IN SECURITIES
                    On September  25, 3003,  the Company  entered into a private
                    placement  transaction  with Laurus Master Fund,  Ltd. which
                    was  exempt  from  registration  under  Section 4 (2) of the
                    Securities  Act  of  1933  and  Regulation  D and  Rule  506
                    promulgated there under. Pursuant to the securities purchase
                    agreement between Laurus a secured  convertible term note in
                    the principal  amount of $1,200,000  bearing interest at the
                    rate of six and  one-half  percent  (6.5%) per  annum,  duce
                    September 25, 2006, convertible into shares of the Company's
                    common  stock at a  conversion  price of  $1.07  per  share.
                    Interest  is  payable  at the  Company's  option  in cash or
                    shares of common stock.  Additionally,  the Company issued a
                    warrant to Laurus to purchase  375,000  shares of its common
                    stock at exercise prices ranging between $1.23 and $1.61 per
                    share. Laurus may exercise the warrant through September 25,
                    2010.  The Company is  obligated  to register for resale the
                    shares of common stock issuable upon  conversion of the note
                    and upon exercise of the warrant  pursuant to a registration
                    rights  agreement  dated  September  25,  2003  between  the
                    Company and the purchaser.

ITEM 3.             DEFAULTS UPON SENIOR SECURITIES
                    None.

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

ITEM 5.             OTHER INFORMATION
                    None.


                                       17
<PAGE>


ITEM 6.             EXHIBITS AND REPORTS ON FORM 8-K

                    (a)       4.1  -   Securities   Purchase   Agreement   dated
                              September  25, 2003 by and between the company and
                              the purchaser. *

                              4.2  -  Secured   Convertible   Term  Note   dated
                              September 25, 2003 issued to the purchaser. *

                              4.3 -  Common  Stock  Purchase  Warrant  Agreement
                              dated  September 25, 2003 issued to the purchaser.
                              *

                              4.4  -   Registration   Rights   Agreement   dated
                              September  25, 2003 by and between the Company and
                              the purchaser. *

                              4.5 - Security  Agreement dated September 25, 2003
                              by and between the Company and the purchaser. *

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

                             *Incorporated  herein by reference to the Company's
                              Form 8-K filed on October 1, 2003.

                    (b)      None


                                       18
<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.

                           OPHTHALMIC IMAGING SYSTEMS
                           (Company)


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



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



Dated: November 12, 2003


                                       19