Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):

As of May 14, 2008, 16,866,831 shares of common stock, no par value, were outstanding.

Ophthalmic Imaging Systems
Condensed Balance Sheet

Assets			March 31, 2008	December 31, 2007
Current assets:
	Cash and cash equivalents		$5,559,490	$7,630,284
	Accounts receivable, net		2,409,107	2,535,843
	Accounts receivable from related party		496,817	397,307
	Note receivable from related party		1,765,404	1,146,872
	Inventories, net		1,094,508	746,342
	Prepaid expenses and other current assets		593,306	507,732
	Deferred tax asset		1,238,000	1,342,000
		Total current assets	13,156,632	14,306,380
Furniture and equipment, net of accumulated
	depreciation of $625,505 and $577,558 respectively		424,911	416,838
Restricted cash			169,555	168,218
Licensing agreement			273,808	273,808
Prepaid financing			132,468	148,365
AcerMed software purchase			553,830	90,815
Imaging software			157,836	0
Capitalized software development			225,892	0
Prepaid products			460,000	460,000
Capitalized merger costs			584,178	527,327
Other assets			302,430	295,144
		Total assets	$16,441,540	$16,686,895

Liabilities and Stockholders’ Equity
Current liabilities:
	Accounts payable		$853,328	$726,573
	Accrued liabilities		1,122,082	1,437,313
	Deferred extended warranty revenue		1,702,492	1,604,315
	Customer deposits		146,973	55,435
	Note payable- current portion		1,023,558	1,029,643
		Total current liabilities	4,848,433	4,853,279

Noncurrent liabilities:
	Line of credit		150,000	150,000
	Lease payable, less current portion		1,593,948	1,564,226
		Total liabilities	6,592,381	6,567,505

Stockholders’ equity:
	Common stock, no par value, 35,000,000 shares authorized;
		16,866,831 issued and outstanding	16,482,288	16,474,720
	Additional paid in capital		191,104	191,104
	Accumulated deficit		(6,824,233)	-6,546,434
		Total stockholders’ equity	9,849,159	10,119,390
		Total liabilities and stockholders’ equity	$16,441,540	$16,686,895
The accompanying notes are an integral part of these unaudited condensed financial statements.

Ophthalmic Imaging Systems
Condensed Statement of Operations
(Unaudited)
			Three months ended March 31,
			2008		2007

Net revenues			$	3,147,692	$	4,160,380
Cost of sales			1,543,832		1,728,546
Gross profit			1,603,860		2,431,834
Operating expenses:
	Sales and marketing		944,009		887,334
	General and administrative		466,165		521,029
	Research and development		436,978		408,527
		Total operating expenses	1,847,151		1,816,890
Income from operations			(243,291)		614,944
Interest and other income (expense), net			(33,223)		42,638
Net income before income taxes			(276,514)		657,582
Income taxes (expense) benefit			(1,286)		(4,439)

Net (loss) income			$	(277,800)	$	653,143

Shares used in the calculation of basic
	Net (loss) income per share		16,866,831		16,508,677

Basic net (loss) income per share			$	(0.02)	$	0.04

Shares used in the calculation of diluted
	Net (loss) income per share		17,103,385		18,356,856

Diluted net (loss) income per share			$	(0.02)	$	0.04

Ophthalmic Imaging Systems
Condensed Statements of Cash Flows
(Unaudited)
				Three months ended March 31,
				2008		2007

Operating activities:
Net (loss) income				$	(277,800)	$	653,143
Adjustments to reconcile net (loss) income to net cash (used in)
	provided by operating activities
		Depreciation and amortization		47,947		44,994
		Compensation Expense		7,569		7,712
		Net increase in current assets other
			than cash and cash equivalents	(302,514)		(168,199)
		Net increase in other assets		(8,337)		--
		Net decrease in current liabilities other
			than short-term borrowings	(4,846)		(54,104)
Net cash (used in) provided by operating activities				(537,981)		483,546
Investing activities:
Acquisition of furniture and equipment				(56,020)		(112,569)
Acquisition of patents				(285)
Acquisition of AcerMed software license				(463,015)
Development of Imaging software				(157,836)
R&D Capitalization				(225,892)
Merger capitalization				(56,851)

Net cash used in investing activities				(959,899)		(112,569)
Financing activities:
Principal payments on notes payable				--		(176)
Advance to related parties				(618,532)		--
Amortization of prepaid financing related to note payable				15,896
Amortization of discount related to note payable				29,722
Proceeds from exercise of options				--		908
Net cash (used in) provided by financing activities				(572,914)		732
Net (decrease) increase in cash and equivalents				(2,070,794)		371,709
Cash and equivalents, beginning of the period				7,630,284		6,163,857
Cash and equivalents, end of the period				$	5,559,490	$	6,535,566

Supplemental schedule of noncash financing activities:
		Addition (Reduction) to receivable from
		Related party in exchange for inventory and
		other noncash transactions, net		$	234,015	$	248,092

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

	Unaudited Three Months Ended March 31,
	2008			2007
Numerator for basic and diluted net (loss) income per share	$	(277,800	)	$	653,143

Denominator for basic net income per share:
Weighted average shares		16,866,831			16,508,677
Basic net income per share	$	(0.02	)	$	0.04

Diluted net income per share	$	N/A		$	0.04

On March 31, 2008, we and MediVision entered into a fourth addendum to the License and Distribution agreement to provide additional financing for the engineering of the Electro-Optical Unit. Under this fourth addendum, we agreed to increase the loan amount from an aggregate amount of $1,350,000 to an aggregate amount of up to $1,600,000. This loan will incur interest of 8% per annum and repayment will commence on May 1, 2009. Repayments will be made 36 equal payments, payable on the first of each month. The monthly amount will be calculated based on the amount of principal outstanding on April 30, 2009. This addendum also contains the following provisions in connection with the revised loan, (1) the number of MediVision’s shares of our stock acting as collateral for the revised loan will be recalculated as set forth in the fourth addendum, and (2) the formula to calculate our right to receive a portion of MediVision’s ownership interest in patent rights relating to the Electro-Optical Unit will be changed in accordance with the revised loan amount and as set forth in the fourth addendum. The amount of shares pledged under the revised loan was calculated using the amount of loan given to MediVision divided by $0.27, the average closing price of our common stock for the ten business days prior to March 31, 2008, less a 25% discount. MediVision has pledged as collateral for this note, and the security agreement described below, an aggregate 5,420,221 shares of our common stock. As of March 31, 2008, MediVision’s principal outstanding under this Loan and Security Agreement is $1,263,460.

On January 30, 2008, we also entered into a Loan and Security Agreement with MediVision whereby we agreed to lend to MediVision up to $200,000 upon their request for working capital. Interest will accrue on this note at 8% per annum. The loan is secured by MediVision’s shares in our stock. The number of shares will be calculated using the amount of loan given to MediVision divided by $0.43, the average closing price of our common stock for the ten business days prior to January 30, 2008, less a 25% discount.

On March 31, 2008, we also entered into an addendum to the Loan and Security Agreement with MediVision in order to provide additional financing for working capital. This addendum amends the working capital agreement entered into on January 30, 2008. Under this addendum, we agreed to increase the working capital amount from up to $200,000 to an aggregate amount of up to $550,000. Interest will accrue on this note at 8% per annum. The loan is secured by MediVision’s shares in our stock. The number of shares will be calculated using the amount of loan given to MediVision divided by $0.27, the average closing price of our common stock for the ten business days prior to March 31, 2008, less a 25% discount. As of March 31, 2008, MediVision’s principal outstanding under this Loan and Security Agreement is $343,098.

As of March 31, 2008, we had paid MediVision $1,606,558 for the loans under the License and Distribution Agreement, as amended, and the Loan and Security Agreement, as amended, and MediVision pledged as collateral 5,420,221 shares of our stock based on the calculated fixed share price of $0.27.

On June 28, 2006, we and MediVision entered into a License and Distribution Agreement whereby MediVision appointed us to be its exclusive distributor of a new digital imaging system in the Americas and the Pacific Rim (excluding China and India), for a term of ten years. In return, we paid $273,808, consisting of a cash payment of $200,000, and recognition of $73,808 of research and development advances made in previous periods. Additionally, we are obligated to pay advances totaling $460,000 based on the completion of certain phases of development of the new digital imaging system and the completion of certain documents, and granted MediVision a license to use our OIS WinStation software and any other applicable OIS system and the accompanying intellectual property rights therein. On September 21, 2006, we paid $160,000 based on the completion of the first milestone in the agreement. On June 20, 2007, we paid $150,000 based on the completion of the second milestone in the agreement.

The advanced funds will be recovered as we purchase new digital imaging systems in accordance with the specified quotas. The quota mandates that we purchase a minimum amount of the new digital ima``ging systems each year. If we fail to satisfy our quota obligation, then we may pay MediVision the gross profit on the shortfall units to maintain exclusivity in the agreed upon territory. If no such shortfall payment is made, such failure to meet the quota will constitute a material breach and MediVision may terminate the exclusivity provision or the entire agreement. The quotas for 2007, 2008, 2009, and 2010 are 50, 70, 80, and 90 units, respectively, and will be at least 95 units for each year thereafter. The initial term of the agreement is for ten years, which will be automatically renewed in one year periods. Either party may terminate the agreement with at least 6 months prior written notice, provided that, we meet the purchase quota. Cash payments made under this agreement for exclusive distribution rights have been capitalized and will be amortized over the term of the agreement upon sale of the first product.

On April 9, 2007, we and MediVision entered into an addendum to the license and distribution agreement in order to extend various dates and deadlines as specified in the original agreement. As long as we continue to make loan payments to MediVision as described above, MediVision shall provide to us monthly reports regarding the progress of performance of the tasks and the use of the loan proceeds. We also have rights, upon reasonable notice, to visit and inspect all facilities at which any tasks relating to the products are performed by MediVision and/or third parties and to test prototypes of the Electro-Optical Unit. We also have the right to make decisions regarding the performance of the engineering of the Electro-Optical Unit pursuant to the budget and schedule, including decisions concerning changes to personnel involved in the engineering, changes in the subcontractors used, and the use of the proceeds from the loan for the engineering and manufacture of the Electro-Optical Unit.

On September 25, 2007, we and MediVision entered into an addendum to the license and distribution agreement in order to provide additional financing for the engineering of the Electro-Optical Unit, and to revise terms related to the agreement. If MediVision defaults on its repayment obligation as specified in the addendum, we may seek repayment by foreclosing on the shares pledged as collateral or, alternatively, we have the option to receive a portion of MediVision’s ownership interest in patent rights relating the Electro-Optical Unit, calculated based on the amount of principal and interest outstanding and in default at the time we exercise this option, divided by 1,100,000, multiplied by 34.375%.

On March 20, 2008, we entered into a definitive merger agreement (the “Merger Agreement”) with MV Acquisitions Ltd., an Israeli company and a wholly-owned subsidiary (“Merger Sub”), and MediVision, pursuant to which Merger Sub will merge with and into MediVision (the “Merger”), with MediVision as the surviving entity.. At the effective time of the Merger (the “Effective Time”) (1) each ordinary share, par value NIS 0.1 per share, of MediVision (“MediVision Shares”) issued and outstanding immediately before the Effective Time, will be automatically converted into 1.66 shares of our common stock and each outstanding option to purchase MediVision Shares under certain of MediVision’s stock option plans, warrants or other rights to purchase MediVision Shares will be assumed by us such that it is converted into an option to purchase our common stock.

Consummation of the Merger is subject to certain conditions, including among others, (i) the approval of the holders of our common stock and MediVision Shares, (ii) the declaration by the SEC that the S-4 Registration Statement, registering shares of our common stock to be issued to MediVision’s shareholders pursuant to the Merger Agreement, has become effective under the Securities Act of 1933, as amended, (iii) the receipt of a permit of the “Israeli Prospectus,” a prospectus containing the Prospectus/Proxy Statement and any additional disclosures and that complies in form and substance with applicable Israeli Law and regulations in connection with the issuance of shares of our common stock in the Merger, from the Israeli Securities Authority, (iv) the approval of the applicable Belgian, Israeli, and U.S. governmental entities required for the consummation of the Merger and other transactions contemplated by the Merger Agreement, and (v) the elapse of certain Israeli statutory waiting periods.

We have capitalized the direct costs associated with the merger. As of March 31, 2008, these costs have accumulated to $584,178.

At March 31, 2008, we recorded a net amount due from MediVision of approximately $450,000 for products.

Sales to MediVision during the three months ended March 31, 2008 totaled approximately $104,000. Sales to MediVision during the three months ended March 31, 2007 totaled approximately $102,000. Sales derived from product shipments to MediVision are made at transfer pricing which is based on volume discounts similar to those available to other resellers and distributors of the Company’s products.

During the three month period ended March 31, 2008 and March 31, 2007, we paid approximately $440,000 and $326,000 to MediVision for research and development performed by MediVision on our behalf, respectively.

CCS Pawlowski

At March 31, 2008, we recorded a net amount due from CCS Pawlowski, a subsidiary of MediVision, of approximately $47,000 for products and services. Sales to CCS Pawlowski during the three months ended March 31, 2008 and March 31, 2007 totaled approximately $58,000 and $85,000, respectively.

Abraxas

In January 2008, we, through our wholly-owned subsidiary, Abraxas Medical Solutions, Inc., a Delaware corporation (“Abraxas”), acquired substantially all the assets of AcerMed, Inc., a leading developer of Electronic Medical Records (“EMR”) and Practice Management (“PM”) software. AcerMed has been providing comprehensive and advanced EMR and Practice Management software solutions for medical practices, from solo practitioners to multi-site practices nationwide. Through the acquisition, we gained the rights to software applications that automate the clinical, administrative, and financial operations of a medical office. This means that paper charting can be virtually eliminated and clinical charting would be done using, for example, a wireless computer pen tablet at the point of care. Due to the formation of Abraxas, NextGen Healthcare Information Systems, Inc. chose recently to discontinue its relationship with OIS. OIS was marketing and selling their EMR and PM software products to the ophthalmic market.

MediStrategy Ltd.

We have a service agreement with MediStrategy Ltd. (“MS”), an Israeli company owned by Noam Allon, a former Director of the Company, serving on the Board until December 2004. Under the terms of the agreement, MS provides services to us primarily in the business development field in ophthalmology, including business cooperation, mergers and acquisitions, identifying and analyzing new lines of business and defining new product lines or business opportunities to be developed. All services provided by MS are performed solely by Noam Allon.

In consideration for the services provided, we agreed to pay MS a monthly sum of $4,000. In addition, MS is to be paid a yearly performance bonus of up to $10,000 upon achievement of goals under the terms of the agreement determined by MS, Noam Allon and the Company’s Chairman of the Board. During the year ended December 31, 2006, MS earned fees of $48,000. This amount remains accrued, but not paid as of March 31, 2008. During the year ended December 31, 2007, MS earned fees of $48,000. This amount remains accrued, but not paid as of March 31, 2008. During the first three months of 2008, MS earned fees of $12,000. This amount remains accrued, but not paid as of March 31, 2008.

	Unaudited Three Months Ended March 31,
		2008			2007
Warranty balance at beginning of period	$	128,250		$	395,575

Reductions for warranty services provided		(39,063	)		(48,938	)
Changes for accruals in current period		20,000			100,000

Warranty balance at end of period	$	109,187		$	446,638

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

We make forward-looking statements in this report, in other materials we file with the Securities and Exchange Commission (the “SEC”) or otherwise release to the public, and on our website. In addition, our senior management might make forward-looking statements orally to analysts, investors, the media, and others. Statements concerning our future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings) and demand for our products and services, and other statements of our plans, beliefs, or expectations, including the statements contained in this Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” regarding our future plans, strategies, and expectations are forward-looking statements. In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would,” and similar expressions. We intend 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 Securities Exchange Act of 1934, as amended (the “Exchange Act”). You are cautioned not to place undue reliance on these forward-looking statements because these forward-looking statements we make are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements. Thus, our ability to predict results or the actual effect of our future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our 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 that affect us, including changes in healthcare regulation, the availability of working capital, and the introduction of competing products. These risks and uncertainties, together with the other risks described from time to time in reports and documents that we file 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 our assumptions will prove to be incorrect. Our actual results and financial position will vary from those projected or implied in the forward-looking statements and the variances may be material. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

To date, we have designed, developed, manufactured and marketed ophthalmic digital imaging systems and informatics solutions and have derived substantially all of our revenues from the sale of such products. The primary target market for our digital angiography systems and informatics solutions has been retinal specialists and general ophthalmologists. Recently we have purchased EMR and PM software to be sold to the following ambulatory-care specialties: ophthalmology, OBGYN, orthopedics and primary care.

At March 31, 2008, we had stockholders’ equity of $9,849,158 and our current assets exceeded our current liabilities by $8,308,199.

The following discussion should be read in conjunction with the unaudited interim financial statements and the notes thereto which are set forth in Item 1, “Financial Statements (unaudited).” In the opinion of management, the unaudited interim period financial statements include all adjustments, which are of a normal recurring nature, that are necessary for a fair presentation of the results of the periods. There can be no assurance that we will be able to achieve or sustain significant positive cash flows, revenues, or profitability in the future.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The financial information contained in the financial statements is, to a significant extent, financial information based on effects of transactions and events that have already occurred. A variety of factors could affect the ultimate value obtained when earning income, recognizing an expense, recovering an asset or relieving a liability.

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 these estimates. In addition, GAAP itself may change from one previously acceptable method to another. Although the economics of our transactions would not change, the timing of the recognition of such events for accounting purposes may change.

Our revenue recognition policies are in compliance with applicable accounting rules and 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 Force Issue 00-21, “Revenue Arrangements with Multiple Deliverables.”

Under EITF 00-21, the multiple components of our revenue are considered separate units of accounting in that revenue recognition occurs at different points of time for product shipment, installation and training services, and service contracts based on performance or contract period.

Revenue for the product shipment is recognized when title passes to the customer, which is upon shipment, provided there are no conditions to acceptance, including specific acceptance rights. If we make an arrangement that includes specific acceptance rights, revenue is recognized when the specific acceptance rights are met. Upon review, we concluded that consideration received from our customer agreements are reliably measurable because the amount of the consideration is fixed and no specific refund rights are included in the arrangement. We defer 100% of the revenue from sales shipped during the period that we believe may be uncollectible.

Installation revenue is recognized when the installation is complete. Separate amounts are charged and assigned in the customer quote, sales order and invoice, for installation and training services. These amounts are determined based on fair value, which is calculated in accordance with industry and competitor pricing of similar services and adjustments according to what the market will bear. There is no price reduction in the product price if the customer chooses to not have us complete the installation.

Extended product service contracts are offered to our customers and are generally entered into prior to the expiration of our one year product warranty. The revenue generated from these transactions are recognized over the contract period, normally one to four years.

In general, our arrangements with customers, resellers, and distributors do not provide any special rights or privileges with respect to refund or return rights, and in most cases, we do not have arrangements that include acceptance rights. If we make such arrangements for acceptance rights, revenue is recognized when the specific acceptance rights are met.

We calculate a tax provision quarterly and assess how much of our deferred tax asset is more likely than not to be used in the future. We use the following analysis to assess whether we will more likely than not realize the deferred tax asset. In the analysis, we assume that we will be able to use all of our unlimited NOL amounts. We then assess the amount of our future capped net operating losses we will more likely than not be able to use.

In order to realize our tax asset in 2008 and 2007, we needed to evaluate whether we will more likely than not be able to realize our deferred tax asset for 11 and 12 years ahead, respectively. We were not profitable for seventeen consecutive years between 1984 and 2000. We became profitable in 2001 and have been profitable for the last seven years. There is significant uncertainty in projecting future profitability due to the history of our business, and the rapidly changing medical technology market that we are in.

We used the following analysis to determine whether we needed to recognize a valuation allowance for our deferred tax asset, and if so, how much. In our analysis, we assumed, based on management’s determination, that we will be able to use all of our unlimited NOL amounts. We then assessed the amount of future capped net operating losses we will more likely than not be able to use. In Q1 2008, we made an assessment that we will be able to use six years of capped net operating losses in the future. In 2007, we made an assessment that we will be able to use six years of capped net operating losses in the future, and projected taxable income in 2008. In Q1 2008 and fiscal year end 2007, we did not have enough available information to look beyond the year 2014 when assessing the amount of deferred tax assets that are more likely than not to be used. Forming a conclusion that a valuation allowance is not needed is difficult if there is a history of losses in the company, especially if the losses were not due to an extraordinary item.

We re-evaluate our estimates and assumptions we use in our financials on an ongoing and quarterly basis. We adjust these estimates and assumptions as needed and as circumstances change. If circumstances change in the future, we will adjust our estimates and assumptions accordingly. At the present time, we cannot surmise whether our assumptions and estimates will change in the future. Based on historical knowledge, however, it is reasonably likely that there will be some changes in some of our estimates and assumptions.

We have two types of warranty reserves. A general product reserve on a per product basis and specific reserves created as we become aware of system performance issues. The product reserve is calculated based on a fixed dollar amount per system shipped each quarter. These specific reserves usually arise from the introduction of new products. When a new product is introduced, we reserve for specific problems arising from potential issues, if any. As issues are resolved, we reduce the specific reserve. These types of issues can cause our warranty reserve to fluctuate outside of sales fluctuations.

Historically, we estimated the cost of the various warranty services by taking into account the estimated cost of servicing routine warranty claims in the first year, including parts, labor and travel costs for service technicians. We analyze the margin of our total service department, the price of our extended warranty contracts, factor in the hardware costs of the various systems, and use a percentage for the first year warranty to calculate the cost per various systems for the first year manufacturer’s warranty. Based on this analysis, we did not need to change our estimated cost per product in our general reserve for products shipped in the current year.

In 2007, the warranty reserve decreased from $395,575 to $122,249 substantially due to the decrease of our specific reserves related to possible replacements, repairs or upgrades of our products. At the end of 2006, we had specific reserves for new products in the amount of $249,825. During 2007, many of the possible replacements, repairs or upgrades that were reserved for at the end of 2006 were determined unnecessary, leaving no specific reserve balance within our warranty reserve at December 31, 2007.

In 2008, the warranty reserve decreased from $122, 249 to $109,187 due to the decrease in product shipments versus the amount of replacements, repairs or upgrades performed.

In June 2006, the FASB issued FASB interpretation No. 48 (FIN48), Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in a company’s financial statements in accordance with FASB Statement No. 109, Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold and measurement standard for the financial statement recognition and measurement of an income tax position taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

The provisions of FIN 48 were adopted on January 1, 2007 and were applied to all tax positions. Only tax positions that meet the more-likely-than-not recognition threshold on January 1, 2007 were recognized or continue to be recognized upon adoption. We previously recognized income tax positions based on management’s estimate of whether it was reasonably possible that a liability had been incurred for unrecognized income tax benefits by applying FASB Statement No. 5, Accounting for Contingencies. The adoption of FIN 48 did not have a material impact on our financial position, results of operations of cash flow.

In December 2006, the Financial Accounting Standards Board (“FASB”) released Statement of Financial Accounting Standards No. 157 – Fair Value Measurements. This statement defines fair value in generally accepted accounting principles (“GAAP”), and expands disclosures about fair value measurements. This standard applies under other accounting pronouncements that require or permit fair value measurements and is intended to increase consistency and comparability. This statement was adopted as of January 1, 2008. The adoption of FASB 157 did not have a material impact on our financial position, results of operations or cash flows.

In February 2007, the FASB issued Statement No. 159 (SFAS 159) The Fair Value Option for Financial Assets and Financial Liabilities. SAFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. This Statement permits all entities to choose, at specified election dates, to measure eligible items at fair value (the “fair value option”). A business entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings (or another performance indicator if the business entity does not report earnings) at each subsequent reporting date. Upfront costs and fees related to items for which the fair value option is elected shall be recognized in earnings as incurred and not deferred. This Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of FASB Statement No. 157, Fair Value Measurements. Management does not expect the adoption of SFAS 159 to have a material impact to the Company’s financial position or result of operations. The adoption of FASB 159 did not have a material impact on our financial position, results of operations or cash flows.

In December 2007, the FASB issued Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations (SFAS No. 141R). SFAS No. 141(R), among other things, establishes principles and requirements for how the acquirer in a business combination (i) recognizes and measures in it’s financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquired business, (ii) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and (iii) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. We are required to adopt SFAS No. 141(R) for all business combinations for which the acquisition date is on or after January 1, 2009. Earlier adoption is prohibited. This standard will change the accounting treatment for business combinations on a prospective basis. We do not believe that the adoption of FASB 141 (R) will have a material impact on our financial position, results of operations or cash flows.

Our revenues for the three months ended March 31, 2008 were $3,147,692, representing a 24% decrease from revenues of $4,160,380 for the three months ended March 31, 2007. The decrease in revenues between the quarters is due to a decrease of product sales in the three months ended March 31, 2008 of approximately $1,169,000, offset by an increase in service revenue of approximately $156,000.

Product sales accounted for approximately 73% and 84% of our revenue for the first quarters of 2008 and 2007, respectively. Service revenues for these products accounted for approximately 27% and 16% of our revenue for the first quarters of 2008 and 2007, respectively. The increase in service revenue is mainly derived from increases in our extended service contract revenue. The volume of extended service contracts sold continues to increase relative to total sales as we continue to educate our customers about the benefits of the contracts. This education process has been ongoing for the last five years and our service revenue increases as more customers buy extended service contracts. The other components of service revenue have stayed relatively constant. Total service revenue during the three months ended March 31, 2008 was comprised mostly of service contract revenue and the rest consists of non-warranty repairs and parts, and technical support phone billings for customers not under warranty.

Revenues from sales of our products to related parties was approximately $162,000 and $187,000 during the three month periods ended March 31, 2008 and March 31, 2007, respectively.

Gross margins were approximately 51% and 58% during the three month period ended March 31, 2008 and March 31, 2007, respectively. Gross margins decreased due to the decrease in sales with fixed overhead costs.

Sales and marketing expenses accounted for approximately 30% of total revenues during the first quarter of fiscal 2008 as compared to approximately 21% during the first quarter of fiscal 2007. Expenses increased to $944,009 during the first quarter of 2008 versus $887,334 during the first quarter of 2007, representing an increase of $56,675 or 6%. This increase was mainly due to the sales and marketing expenses from Abraxas.

General and administrative expenses were $466,165 in the first quarter of fiscal 2008 and $521,029 in the first quarter of fiscal 2007, representing a decrease of $54,864 or 11%. Such expenses accounted for approximately 15% and 13% of revenues during the first quarters of 2008 and 2007, respectfully. The decrease was primarily due to lower legal expenses.

Research and development expenses were $436,978 in the first quarter of fiscal 2008 and $408,527 in the first quarter of fiscal 2007, representing an increase of $28,451 or 7%. Such expenses accounted for approximately 14% of revenues during the first quarter of 2008 and 10% of revenues during the first quarter of 2007. The increase in the first quarter of fiscal 2008 resulted from an increase in research and development done by MediVision of approximately $114,000, offset by the capitalization of new imaging software of approximately $80,000. Our research and development expenses are derived primarily from our continued research and development efforts on new digital image capture products. Outside consultants and MediVision currently conduct most of our research and development activities.

Abraxas capitalized research and development efforts in the first quarter of fiscal 2008 related to the development of its software to get it ready to sell to the market.

Interest and other income (expense) were ($33,223) during the first quarter of fiscal 2008 versus $42,638 during the first quarter of fiscal 2007. The decrease is primarily due to the interest expense related to our new financing agreement with the Tail Wind Fund.

Income tax expense was $1,286 during the first quarter of fiscal 2008 versus $4,439 during the first quarter of fiscal 2007.

We calculate a tax provision quarterly and assess how much deferred tax asset is more likely than not to be used in the future. In determining whether we will more likely than not realize the deferred tax asset, we assess the amount of our future capped net operating losses we will more likely than not be able to use.

We recorded net loss of ($277,800) or ($0.02) per share basic and diluted earnings, for the first quarter ended March 31, 2008 as compared to net income of $653,143 or $0.04 per share basic and diluted earnings for the first quarter ended March 31, 2007.

Our assets decreased by $245,355 as of March 31, 2008 as compared to December 31, 2007. This decrease was primarily due to a decrease in cash of ($2,070,794), offset by an increase in the note receivable from MediVision of $618,532, an increase in inventory of $348,166, the capitalization of a new software of $157,836, and the purchase of AcerMed software by Abraxas of $463,015 and the capitalization of the related development done on this product to get it ready for the market of $225,892.

Our liabilities increased by $24,876 as of March 31, 2008 as compared to December 31, 2007 primarily due to the amortization of the discount related to a convertible loan described above to qualified institutional buyers.

Our stockholders’ equity decreased by $270,231 as of March 31, 2008 as compared to December 31, 2007 primarily due to a decrease in retained earnings for the quarter.

Our assets increased by $3,167,221 as of March 31, 2008 as compared to March 31, 2007. This increase was primarily due to advances to MediVision of $1,622,306, expenses related to the possible merger with MediVision of $584,178, an increase in inventory of $393,600, prepaid financing costs related to the Tail Wind financing agreement of $132,469, prepaid products to MediVision of $400,000, the capitalization of a new software of $232,836, and the purchase of AcerMed software by Abraxas of $553,830 and the capitalization of the related development done on this product to get it ready for the market of $225,892, offset by a decrease in cash of ($976,077).

Our liabilities increased by $2,135,854 as of March 31, 2008 as compared to March 31, 2007 primarily due to a new convertible loan described above to qualified institutional buyers of $2,617,507, offset by a decrease of customer deposits of $177,680, and a decrease of warranty reserve of $337,450.

Our stockholders’ equity increased by $1,031,368 as of March 31, 2008 as compared to March 31, 2007 primarily due to net income from the previous 12 months of $621,673, exercise of employee stock options of $218,591 and additional paid in capital related to the financing agreement with the qualified institutional buyers described above of $191,104.

Our operating activities used cash of $537,981 during the three months ended March 31, 2008 as compared to cash generated of $483,546 in the three months ended March 31, 2007. The cash used in operations during the first three months of 2008 was principally from an increase in inventory of ($348,166) and net income of ($277,800).

Cash used in investing activities was $959,899 during the first three months of 2008 as compared to $112,569 during the first three months of 2007. Our investing activities consisted primarily of purchases of AcerMed software of $463,015, the related development to get the AcerMed software ready to sell of $225,892, and new imaging software of $157,836, costs related to possible merger with MediVision of $56,851 and furniture and miscellaneous software of $56,020. We anticipate continued research and development in connection with the AcerMed software to get it ready to sell to the market. We also anticipate that related expenditures, if any, will be financed from our cash flow from operations or other financing arrangements available to us, if any.

We used cash in financing activities of $572,914 during the first three months of fiscal 2008 as compared to cash generated of $732 during the first three months of fiscal 2007. The cash used in financing activities during the first three months of 2008 was principally from advances to related parties of $618,532, offset by amortization of discount and prepaid financing related to the note payable to the Tail Wind Fund of $29,722 and $15,896, respectively.

On March 31, 2008 our cash and cash equivalents were $5,559,490. Management anticipates that additional sources of capital beyond those currently available to us may be required to continue funding for research and development of new products and the continuation of the investment in Abraxas.

On October 29, 2007, we entered into a Purchase Agreement (the “Purchase Agreement”) with the purchasers named therein, pursuant to which we issued to such purchasers (i) an aggregate of $2,750,000 in principal amount of its 6.5% Convertible Notes Due April 30, 2010 (the “Notes”), which Notes are convertible into 1,676,829 shares of our common stock, no par value, and (ii) warrants to purchase an aggregate of 616,671 shares of our common stock at an exercise price of $1.87 per share. We will use the proceeds from the issuance of the Notes for working capital and the continued funding of Abraxas. We anticipate that these notes will be repaid from our cash flow from operations over time or alternative future financing arrangements.

We will continue to evaluate alternative sources of capital to meet our 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 us.

We have a Secured Debenture in favor of United Mizrahi Bank Ltd., in an amount of up to $2,000,000 (plus interest, commissions and all expenses). Under the Debenture, we guaranteed the payment of all the debts and liabilities of MediVision to United Mizrahi Bank. The Debenture is secured by a first lien on all of our assets. MediVision pledged 2,345,500 shares of our common stock it owns to us in order to secure the Debenture. The amount owed to the financial institution by MediVision and secured by us as of March 31, 2008 is approximately $2,000,000.

As of March 31, 2008, management of the Company, with the participation of the Company’s Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), evaluated the effectiveness of our “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Exchange Act. Disclosure controls and procedures are defined as the controls and other procedures of the Company that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act are accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, these officers concluded that, as of March 31, 2008, our disclosure controls and procedures were effective.

Other than as described below, there have been no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

During the quarter ended December 31, 2007, management of the Company, including the Company’s principal executive officer and principal financial officer, identified a material weakness and significant deficiency in the Company’s internal control over financial reporting.

It was discovered that the Company’s 2007 revenues included approximately $200,000 due to a change in estimate related to our rebate program. When a customer purchases an upgrade of our system, we generally quote a discount if the old system is returned to us. The customer receives an invoice in full and is expected to pay that full amount if the old system is not returned. When a customer pays the full amount, we keep the rebate portion in a deposit liability account assuming the customer is returning the system to us. We analyzed our deposit account this year and changed our estimate of how many systems will be returned and resulting in an increase to revenue. The significant deficiency related to the fact that when we analyzed our deposit account this year and changed our estimate of how many systems will be returned, we did not have adequate documentation gathered at the time we recorded the outcomes of the change in estimate.

The material weakness related to the fact that the Company recorded sales at or near an end of a reporting period under a bill and hold revenue recognition procedure defined by the SEC in Staff Accounting Bulletin no. 104 without completing all of the necessary documentation to support this treatment. This issue was identified and therefore, the revenue was not recognized at year-end.

Solely as a result of this significant deficiency and material weakness, management of the Company, including the Company’s principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2007.

During the quarter ended March 31, 2008, management of the Company, including the Company’s principal executive officer and principal financial officer, has developed and implemented remedial measures which include not recognizing revenue when shipping under bill and hold terms and gathering the necessary paperwork in order to change estimates with our deposit liability account to address this significant deficiency and material weakness. With the implementation of these newly implemented procedures, the Company believes it has developed procedures in order to ensure adequate documentation is gathered at the time we record outcomes related to changes in estimates.

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

California		94-3035367
(State or other jurisdiction of		(I.R.S. Employer Identification No.)
incorporation or organization)

PART I	FINANCIAL INFORMATION	Page
Item 1.	Financial Statements (unaudited)	1
	Condensed Balance Sheet as of March 31, 2008	3
	Condensed Statements of Operations for the Three Months ended March 31, 2008 and 2007	4
	Condensed Statements of Cash Flows for the Three Months ended March 31, 2008 and 2007	5
	Notes to Condensed Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 4T.	Controls and Procedures	23
PART II	OTHER INFORMATION	24
Item 1. Item 6.	Legal Proceedings Exhibits	24 25

Aggregate Intrinsic Value
Outstanding at January 1, 2008	2,358,686	$0.73	6.59	--
Granted	--	--	--	--
Exercised	--	--	--	--
Forfeited/Expired	(17,000)	$1.43	--	--
Outstanding at March 31, 2008	2,341,686	$0.72	6.36	--
Exercisable at March 31, 2008	1,522,478	$0.56	5.60	--

	Three months ended
	March 31,
	2008
Statement of Income:
Net revenues:
OIS	$ 3,105,555
Abraxas	42,137

Gross Profit:
OIS	1,661,327
Abraxas	(57,467)

Operating Income:
OIS	(55,888)
Abraxas	(187,403)
Net Income (Consolidated)	(277,800)

Balance Sheet:
Assets:
OIS	15,357,510
Abraxas	1,084,030

Liabilities:
OIS	6,382,793
Abraxas	209,588

Stockholders’ Equity:
OIS	10,043,063
Abraxas	(193,904)

	OPHTHALMIC IMAGING SYSTEMS
Date: May 14, 2008


	By:	/s/ Gil Allon
	Name: Title:	Gil Allon, Chief Executive Officer


	By:	/s/ Ariel Shenhar
	Name: Title:	Ariel Shenhar, Chief Financial Officer