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 March 31, 2005

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 May 11,  2005,  15,063,585  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 March 31, 2005



PART I.  FINANCIAL INFORMATION                                            PAGE
                                                                          ----

Item 1.  Financial Statements (unaudited)

         Condensed Balance Sheet as of March 31, 2005                      2

         Condensed Statements of Operations for the Three Months
         ended March 31, 2005 and March 31, 2004                           3

         Condensed Statements of Cash Flows for the Three Months
         ended March 31, 2005 and March 31, 2004                           4

         Notes to Condensed Financial Statements                           5

Item 2.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations                                             10

Item 3.  Controls and Procedures                                           14

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                 15

Item 2.  Changes in Securities and Use of Proceeds                         15

Item 3.  Defaults upon Senior Securities                                   15

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

Item 5.  Other Information                                                 15

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


<PAGE>


                          PART I FINANCIAL INFORMATION


ITEM 1.  FINANCIAL STATEMENTS


<PAGE>

                           Ophthalmic Imaging Systems
                             Condensed Balance Sheet
                                 March 31, 2005
                                   (Unaudited)

<TABLE>
<CAPTION>
ASSETS
------
Current assets:
<S>                                                                                      <C>
        Cash and equivalents                                                             $         2,091,446
        Accounts receivable, net                                                                   1,634,702
        Receivable from related party                                                                214,862
        Note receivable from related party                                                         1,252,927
        Inventories, net                                                                             464,082
        Prepaid expenses and other current assets                                                    227,000
        Deferred tax asset                                                                         1,029,000
                                                                                         ---------------------
             Total current assets                                                                  6,914,019

Furniture and equipment, net of accumulated
        depreciation and amortization of $270,708                                                    140,004
Restricted cash                                                                                      150,000
Other assets                                                                                         122,121
                                                                                         ---------------------
             Total assets                                                                $         7,326,144
                                                                                         =====================

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
        Accounts payable                                                                 $           536,944
        Accrued liabilities                                                                        1,375,885
        Deferred extended warranty revenue                                                           825,080
        Customer deposits                                                                            274,843
        Income taxes payable                                                                           7,649
        Notes payable- current portion                                                               774,012
                                                                                         ---------------------
             Total current liabilities                                                             3,794,413
                                                                                         ---------------------

Notes payable, less current portion                                                                  768,214
                                                                                         ---------------------
             Total liabilities                                                                     4,562,627
                                                                                         ---------------------

Stockholders' equity:
        Common stock, no par value, 35,000,000 shares authorized;
             15,063,585 issued and outstanding                                                    14,534,420
        Accumulated deficit                                                                      (11,770,903)
                                                                                         ---------------------
             Total stockholders' equity                                                            2,763,517
                                                                                         ---------------------
             Total liabilities and stockholders' equity                                  $         7,326,144
                                                                                         =====================

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



                                       2
<PAGE>

                           Ophthalmic Imaging Systems
                       Condensed Statements of Operations
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                            Three months ended March 31,
                                                            2005                   2004
                                                     -------------------    --------------------

<S>                                                   <C>                    <C>
       Net revenues                                   $      2,840,025       $       2,397,069
       Cost of sales                                         1,165,867                 957,546
                                                     -------------------    --------------------
       Gross profit                                          1,674,158               1,439,523
       Operating expenses:
         Sales and marketing                                   728,004                 659,682
         General and administrative                            312,996                 247,465
         Research and development                              242,408                 247,236
                                                     -------------------    --------------------
             Total operating expenses                        1,283,408               1,154,383
                                                     -------------------    --------------------
       Income from operations                                  390,750                 285,140
       Interest and other expense, net                         (52,590)                (45,325)
                                                     -------------------    --------------------
       Net income before income taxes                          338,160                 239,815
       Income taxes                                             (4,000)
                                                     -------------------    --------------------

       Net income                                     $        334,160       $         239,815
                                                     ===================    ====================

       Shares used in the calculation of basic
           net income per share                             15,041,141              14,436,547

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

       Shares used in the calculation of diluted
           net income per share                             16,318,728              15,465,852

       Diluted net income per share                   $           0.02       $            0.02
                                                     ===================    ====================

</TABLE>

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



                                       3
<PAGE>


                           Ophthalmic Imaging Systems
                       Condensed Statements of Cash Flows
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                               Three months ended March 31,
                                                                               2005                      2004
                                                                          --------------            -------------

OPERATING ACTIVITIES:
<S>                                                                       <C>                       <C>
Net income                                                                $     334,160             $   239,815
Adjustments to reconcile net income to net cash
       provided by  operating activities
            Depreciation and amortization                                        33,092                  24,005
            Non-cash payment of interest                                          2,818                  17,024
            Net decrease (increase) in current assets other
                than cash and equivalents                                        19,146                (368,328)
            Net  (decrease) increase in current liabilities other
                than short-term borrowings                                      (40,673)                142,749
                                                                          --------------            -------------
Net cash provided by operating activities                                       348,543                  55,265

INVESTING ACTIVITIES:
Acquisition of furniture and equipment                                           (6,800)                 (1,293)
                                                                          --------------            -------------
                                                                                 (6,800)                 (1,293)
FINANCING ACTIVITIES:
Principal payments on notes payable                                             (43,192)
Proceeds from sale of stock                                                                              13,468
Advances to related parties                                                    (197,415)               (156,997)
Repayments of borrowings under notes
       payable to related party, net                                                                   (200,979)
                                                                          --------------            -------------
Net cash used in  financing activities                                         (240,607)               (344,508)
                                                                          --------------            -------------
Net increase (decrease) in cash and equivalents                                 101,136                (290,536)
Cash and equivalents at beginning of period                                   1,990,310               1,272,034
                                                                          --------------            -------------
Cash and equivalents at beginning of period                               $   2,091,446             $   981,498
                                                                          ==============            =============

SUPPLEMENTAL SCHEDULE OF NONCASH FINANCING ACTIVITIES:
            Repayment of notes payable with common stock                  $      29,282             $   105,913
            Payment of interest with common stock                         $       2,818             $    17,024
            Additions to (Reductions) in aggregate receivables
              from significant shareholders in exchange for
              inventory and other noncash transactions, net               $     114,113             $    (7,989)
                                                                          ==============            =============

SUPPLEMENTAL SCHEDULE OF CASH FLOW INFORMATION:
            Cash paid for taxes                                           $      10,000             $    70,050
            Cash paid for interest                                        $      20,988             $    52,500
</TABLE>

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



                                       4
<PAGE>


                           Ophthalmic Imaging Systems

                     Notes to Condensed Financial Statements

                Three Month Periods ended March 31, 2005 and 2004


                                   (Unaudited)


Note 1.  Basis of Presentation

         The  accompanying  unaudited  condensed  balance  sheet as of March 31,
         2005,  condensed  statements of operations  for the three month periods
         ended  March 31,  2005 and 2004 and the  condensed  statements  of cash
         flows for the three  month  periods  ended March 31, 2005 and 2004 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, 2004 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 March 31, 2005 are not
         necessarily indicative of the operating results for the full year.

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>

                                                      Unaudited
                                                  Three Months Ended
                                                       March 31,
                                                  2005            2004
                                            ------------------------------

         Numerator for basic and diluted
         net income per share                  $ 334,160       $ 239,815
                                            ==============================

         Denominator for basic net
         income per share:
            Weighted average shares           15,041,141      14,436,547

         Effect of dilutive securities:
            Employee/director stock            1,277,587       1,029,305
         options
            Warrants and other                        --              --
                                            ------------------------------
         Dilutive potential common shares      1,277,587       1,029,305

                                            ------------------------------
         Denominator for diluted net
         income per share                     16,318,728      15,465,852
                                            ==============================

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

         Diluted net income per share             $ 0.02          $ 0.02
                                            ==============================

         As of March 31, 2005 and March 31, 2004 there were  714,500 and 401,500
         options and warrants,  respectively  whose  exercise price exceeded the
         average  market  price of the stock and have  been  excluded  from this
         computation.


Note 3.  Related Parties Transactions

         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.



                                       6
<PAGE>

         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 banks 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. The amount owed to the
         financial  institutions  by MediVision and secured by the Company as of
         March 31, 2005 was approximately $179,000.

         In March 2004,  the  Company's  Board of  Directors  approved a line of
         credit to MediVision  of $1,000,000 at 9.3% interest for two years.  In
         January 2005 the  Company's  Board of Directors  approved an additional
         loan advance of $150,000 for a thirty day term.

         On February 28, 2005,  the Company and  MediVision  entered into a Loan
         and Security  Agreement and Promissory  Note whereby the Company agreed
         to loan  MediVision up to two million  dollars  ($2,000,000).  The loan
         agreement  incorporates  the  $1,150,000  previously  approved  by  the
         Company's  Board  of  Directors.  Under  the  terms  of the  agreement,
         interest is 7.25% per annum and is payable on  February  28, 2006 along
         with all outstanding principal due at that date. The note is secured by
         2,409,000 of the 11,130,151  shares of the Company's common stock owned
         by  MediVision.  The number of shares is based on the  average  closing
         price of shares of stock of the Company during the period  covering the
         last ten (10) business days of February,  2005,  which average  closing
         price was $1.11,  discounted by 25%. In the event that MediVision sells
         any shares it owns in the Company during the period of the agreement, a
         minimum of 50% of the proceeds  from such sales would be required to be
         paid to the Company to reduce the outstanding amount owed.

         At March 31,  2005 the  Company  had  recorded  a net  amount  due from
         MediVision  of  approximately  $1,253,000  on the  promissory  note and
         approximately $215,000 net, due for products and services.

         Sales to  MediVision  during the three  months ended March 31, 2005 and
         2004 totaled approximately $267,000 and $183,000,  respectively.  Sales
         derived  from  product  shipments  to  MediVision  are made at transfer
         pricing which is based on similar  volume  discounts that are available
         to other resellers or distributors of the Company's products.

         During the  three-month  periods  ended  March 31,  2005 and 2004,  the
         Company  paid  approximately  $176,900 and  $148,700  respectively,  to
         MediVision  for research and  development  performed by  MediVision  on
         behalf of the Company.



                                       7
<PAGE>

         As of March 31, 2005,  MediVision  currently owns  approximately 74% of
         the Company's outstanding common stock.

Note 4.  Stock Based Compensation

         At March 31, 2005, 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.


                                                             Unaudited
                                                         Three Months Ended
                                                             March 31,
                                                    ----------------------------
                                                        2005           2004
                                                    -------------- -------------

         Net Income, As Reported                      $ 334,160      $ 239,815

         Deduct Total Stock-Based Employee
            Compensation Expenses Determined
            Under the Fair Value Based Method
            For all Awards, Net of Related Tax
            Effects                                      (5,030)        (1,087)
                                                    -------------- -------------

         Pro Forma Net Income                         $ 329,130      $ 238,728
                                                    ============== =============

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

         Diluted Earnings Per Share:
             As Reported                              $    0.02      $    0.02
             Pro Forma                                $    0.02      $    0.02



                                       8
<PAGE>

         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 the options granted during the periods  indicated was
         estimated on the date of grant using an option-pricing model.

         There were 46,000  options  granted for the  three-month  period  ended
         March 31, 2005, of which 26,000 were qualified  options and 20,000 were
         non-qualified.  The  estimated  fair market value of the  qualified and
         non-qualified options granted was $1.10 and $0.68, respectively.

         In December 2004 the FASB issued  Statement  Number 123 (revised  2004)
         (FAS 23 (R)),  Share-Based Payments.  FAS 123 (R) requires all entities
         to recognize  compensation expense in an amount equal to the fair value
         of share-based payments such as stock options granted to employees. The
         Company  is  required  to apply  FAS 23 (R) on a  modified  prospective
         method.   Under  this  method,   the  Company  is  required  to  record
         compensation  expense  (as  previous  awards  continue to vest) for the
         unvested portion of previously  granted awards that remain  outstanding
         at the date of adoption.  In  addition,  the Company may elect to adopt
         FAS 123 (R) by restating previously issued financial statements, basing
         the expense on that previously  reported in their pro forma disclosures
         required by FAS 123. FAS 123 (R) is effective  for the first  reporting
         period  beginning  after June 15,  2005.  For  companies  filing  under
         Regulation  S-B,  FAS 123 (R) is effective  the  beginning of the first
         interim or annual reporting period that begins after December 15, 2005,
         which for the  Company  will be the first  quarter  of the year  ending
         December 31, 2006.  The Company  anticipates  adopting  SFAS No. 123(R)
         beginning  in the quarter  ending March 31,  2006.  Management  has not
         completed its  evaluation of the effect that FAS 123 (R) will have, but
         believes that the effect will be consistent with its previous pro forma
         disclosures.

Note 5.  Warranty Obligations

         The Company generally offers a one year warranty to its customers.  The
         Company's  warranty requires it to repair or replace defective products
         during the warranty period.  At the time product revenue is recognized,
         the  Company  records  a  liability  for  estimated  costs  that may be
         incurred  under  its  warranties.  The  costs  are  estimated  based on
         historical  experience and any specific  warranty issues that have been
         identified.   Although  historical  warranty  costs  have  been  within
         expectations, there can be no assurance that future warranty costs will
         not exceed historical amounts. The amount of warranty liability accrued
         reflects the  Company's  best  estimate of the expected  future cost of
         honoring  its  obligations   under  the  warranty  plans.  The  Company
         periodically  assesses the adequacy of its recorded warranty  liability
         and adjusts the balance as necessary.



                                       9
<PAGE>

         The  following  provides a  reconciliation  of changes in the Company's
         warranty reserve.

                                                            Unaudited
                                                        Three Months Ended
                                                            March 31,
                                                   -----------------------------
                                                       2005           2004

     Warranty balance at beginning of period         $ 505,851     $   438,449

     Net provision (reduction) for current period       13,250          (5,771)
     Warranty costs incurred                          (125,119)        (26,313)
                                                   -------------- --------------

     Warranty balance at end of period               $ 393,982     $   406,365

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





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

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

Overview
--------

     To date,  the Company has designed,  developed,  manufactured  and marketed
ophthalmic  digital  imaging  systems and has derived  substantially  all of its
revenues  from the sale of such  products.  The  primary  target  market for the
Company's  digital  angiography  systems and related products has  traditionally
been retinal  specialists.  The Company made a strategic  decision to expand its
product offering to include the ophthalmic informatics field. Over the last year
the Company  introduced  its  Ophthalmology  Office line  composed of Electronic
Medical Records (EMR) and Enterprise Practice Management (EPM) software products
by  NextGen  Healthcare  Information  Systems,  Inc.  and the  Company's  import
modules.  This decision enables the Company to offer a wider variety of products
and  comprehensive  solutions to its customer base of ophthalmology  departments
and practices.



                                       10
<PAGE>

     On December 28, 2004, the Company entered into an investment agreement with
Dutchess Private Equities Fund II, LP ("Dutchess")  providing for an equity line
of credit. Pursuant to the investment agreement,  Dutchess has agreed to provide
the Company  with up to  $9,000,000  of funding  during the thirty  month period
beginning on the date that the registration statement the Company agreed to file
providing  for the  resale  of the  shares of common  stock  issuable  under the
investment  agreement  is declared  effective  by the  Securities  and  Exchange
Commission.  During this thirty month period, the Company may request a drawdown
under  the  investment  agreement  by  selling  shares  of its  common  stock to
Dutchess,  and Dutchess will be obligated to purchase the shares. The Company is
under no obligation to request any drawdowns under the investment agreement.

     The amount that the Company can request in any  drawdown  notice is, at the
Company's election, the greater of (A) up to 200% of the average daily volume of
the  Company's  common  stock for the ten trading  days prior to the date of the
drawdown notice  multiplied by the average of the three daily closing bid prices
for the common stock  immediately  preceding the date of the drawdown  notice or
(B) $100,000;  provided that the Company may not request more than $1,000,000 in
any single drawdown. As of March 31, 2005, the Company's  registration statement
had not been deemed effective; accordingly no drawdowns have been made.

     At March 31, 2005, the Company had a stockholders'  equity of approximately
$2,763,500  and  its  current  assets   exceeded  its  current   liabilities  by
approximately  $3,119,600.  The  convertible  loan agreements with Laurus Master
Fund.  Ltd.  ("Laurus")  that were entered into during the third quarter of 2003
and the second  quarter of 2004,  have had a favorable  impact on the  Company's
current  ratio.  As of March 31, 2005,  under the terms of the 2003  convertible
loan  agreement,  Laurus has  converted  $682,013 of principal and interest into
637,396 shares of the Company's  common stock at a conversion price of $1.07 per
share.  As of March 31, 2004,  Laurus had  converted  $156,186 of principal  and
interest  into 145,968  shares of the Company's  common  stock.  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's  revenue  recognition  policies are in compliance with
applicable accounting  regulations,  including Staff Accounting Bulletin No. 104
("SAB 104"), Revenue Recognition in Financial Statements,  American Institute of
Certified  Public  accountants  ("AICPA"),  Statement of Position  ("SOP") 97-2,
Software Revenue Recognition,  SOP 98-9,  Modification of SOP 97-2, with Respect
to Certain  Transactions  and Emerging  Issues Task



                                       11
<PAGE>

Force Issue 00-21,  Revenue  Arrangements with Multiple  Deliverables.  As such,
revenue is  recorded  when there is  evidence of an  arrangement,  delivery  has
occurred,  the price is fixed and determinable and  collectability is reasonably
assured.  Revenue from  installation  and training  services are recognized when
such  services are  performed.  Revenue  generated  from service  contracts  are
recognized  ratably over the term of the contracts.  Estimates are used relative
to the expected useful lives of depreciable assets.  Management is also required
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent  assets and liabilities at the date
of the  financial  statements  and revenues and  expenses  during the  reporting
period.  Actual  results could differ from those  estimates.  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.

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

Revenues

     The  Company's  revenues  for the first  quarter  ended March 31, 2005 were
$2,840,025,  representing  an 18% increase from  revenues of $2,397,069  for the
first quarter ended March 31, 2004. The increase in revenues is due primarily to
higher revenues  generated from the informatics  products and increased  service
revenues. Digital angiography systems, Informatics and peripherals accounted for
approximately  84% and 89% of the  Company's  revenue for the first  quarters of
2005 and 2004,  respectively.  Service revenues  accounted for approximately 15%
and 11% of the  Company's  revenue  for the  first  quarters  of 2005 and  2004,
respectively.  Revenues from sales of the Company's  products to MediVision were
approximately  $267,000 during the  three-month  period ended March 31, 2005 and
$183,000 for the comparable three-month period ending March 31, 2004.

Gross Margins

     Gross margins were  approximately  59% during the first quarter ended March
31, 2005 as  compared to 60% for the first  quarter  ended March 31,  2004.  The
decrease  in  margins  is a  result  of an  increase  in  sales  of the  NextGen
Healthcare  Information Systems, Inc. software products,  which have lower gross
margins than the majority of the Company's  other  products.  It is  anticipated
that the  Company's  gross  margins  will  decrease  as its sales of the NextGen
software products become more significant.

Sales and Marketing Expenses

     Sales and  marketing  expenses  accounted  for  approximately  26% of total
revenues  during the first  quarter of fiscal 2005 as compared to  approximately
28% during the first quarter of fiscal 2004.  Actual expense levels increased to
$728,004  during the first  quarter  of 2005  versus  $659,682  during the first
quarter of 2004. Primary contributing factors to the increased expenses were new
hires to the sales  organization and higher  commissions  associated with higher
revenue levels.

General and Administrative Expenses

     General and  administrative  expenses were $312,996 in the first quarter of
fiscal 2005 and  $247,465 in the first  quarter of fiscal  2004.  Such  expenses
accounted for  approximately 11% and 10% of revenues during the first quarter of
2005 and 2004, respectively. The increased expenses



                                       12
<PAGE>

were the result of increases in sales returns reserve requirements and increased
investor related expenses.

Research and Development Expenses

     Research and  development  expenses  were  $242,408 in the first quarter of
fiscal 2005 and  $247,236 in the first  quarter of fiscal  2004.  Such  expenses
accounted for  approximately  9% and 10% of revenues during the first quarter of
2005 and 2004,  respectively.  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 projects
for  research  and  development  conducted by  MediVision  and other  outsourced
consulting on the Company's behalf.

Interest and Other Expense, net

     Interest and other  expense was $52,590  during the first quarter of fiscal
2005 versus $45,325 during the first quarter of fiscal 2004.  These amounts were
comprised   principally  of  interest   expense,   mainly  associated  with  the
convertible  loans  from  Laurus 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 $334,160,  or $0.02 per share basic and
diluted earnings,  for the first quarter ended March 31, 2005 as compared to net
income of $239,815 or $0.02 per share basic and diluted  earnings  for the first
quarter ended March 31, 2004.


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

     The Company's  operating  activities  generated cash of $348,543 during the
three months ended March 31, 2005 as compared to  generating  cash of $55,265 in
the three months ended March 31, 2004. The cash generated from operations during
the first three months of 2005 was  principally  from net income for the period.
The cash  generated  from  operations  during the first three months of 2004 was
principally from net income for the period which amounts were principally offset
by increased receivables and inventory.

     Cash used in investing  activities was $6,800 during the first three months
of 2005 as  compared  to $1,293  during  the  first  three  months of 2004.  The
Company's investing  activities  consisted of minor purchases of equipment.  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 used cash in financing  activities of $240,607 during the first
three  months of fiscal 2005 as  compared  to using cash of $344,508  during the
first three months of fiscal 2004. The cash used in financing  activities during
the  first  three  months  of 2005 was  principally  from  advances  on the note
receivable  from  MediVision and repayments of the debt to Laurus.  Cash used in
financing



                                       13
<PAGE>

activities during the first three months of 2004 was principally from repayments
of  borrowings  under  existing  arrangements  with  MediVision  and advances to
MediVision.

     At March 31, 2005 the Company had recorded a net amount due from MediVision
of approximately  $1,253,000 on the promissory note and  approximately  $215,000
net amount due for products and services

      On March 31, 2005 the Company's cash and cash equivalents were $2,091,446.
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.  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.


     ITEM 3.      CONTROLS AND PROCEDURES

     As of the end of the  period  covered  by this  Report,  management  of the
Company,  with  the  participation  of the  Company's  Chief  Executive  Officer
(principal   executive  officer)  and  the  Company's  Chief  Financial  Officer
(principal  financial  officer),  evaluated the  effectiveness  of the Company's
"disclosure  controls and  procedures,"  as defined in Rule 13a-15(e)  under the
Securities  Exchange  Act of 1934.  Based  on that  evaluation,  these  officers
concluded  that,  as of March 31, 2005,  the Company's  disclosure  controls and
procedures  were  effective to provide  reasonable  assurance  that  information
required to be disclosed in the Company's  periodic filings under the Securities
Exchange  Act  of  1934  is  accumulated  and   communicated  to  the  Company's
management,  including  those  officers,  to allow  timely  decisions  regarding
required disclosure.

     During  the  quarter  ended  March 31,  2005,  there were no changes in the
Company's  internal  control  over  financial  reporting  that  have  materially
affected,  or are reasonably likely to materially affect, the Company's internal
control over financial reporting.




                                       14
<PAGE>

                            PART II OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

         On March 9, 2004, the Company filed a civil action in the United States
         District Court for the Eastern  District of California  against several
         of its former employees,  led by former  vice-president  Mark Fukuhara,
         who have been doing business for the last two years as Imaging  Service
         Group  (ISG) and Zeta  Development  Laboratories  in El  Dorado  Hills,
         California,  and several  affiliated  persons and companies,  including
         Dale Brodsky,  Eyepictures,  Inc.,  Johnny  Justice Jr., and two of his
         ophthalmic  equipment  businesses,  Zeta Development  Labs, Inc. (doing
         business as Justice Diagnostic Imaging) and Justice  Ophthalmics,  Inc.
         The complaint  alleges  claims for  misappropriation  of trade secrets,
         violations  of the  federal  computer  fraud and abuse  act,  copyright
         infringement, breach of contract, interference with contract, and false
         advertising. The complaint seeks monetary damages as well as injunctive
         relief against the defendants.

         On August 20, 2004,  the United States  District  Court for the Eastern
         District of California granted in part the Company's  application for a
         preliminary  injunction against certain of the defendants.  In December
         2004 the Court  dismissed  Johnny  Justice,  Jr. as an  individual  and
         Justice Ophthalmics,  Inc. from the case. Trial in the matter currently
         is scheduled for April 2006.

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.




                                       15
<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

         (a)      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)      On February  28,  2005 the Company  filed a Form 8-K
                  disclosing  that the Company  issued a press release
                  announcing   its  results  of  operations   for  the
                  Company's fiscal year ended December 31, 2004.






                                       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.


                                       OPHTHALMIC IMAGING SYSTEMS
                                       (Company)


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



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



Dated:  May 11, 2005







                                       17