SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)

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

                For the quarterly period ended MARCH 31, 2006 or

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

For the transition period from _______________ to ____________________

Commission File Number: 34-00031307

                       IMAGE TECHNOLOGY LABORATORIES, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

            Delaware                                             22-3531373
---------------------------------                           -------------------
  (State or Other Jurisdiction                                 (IRS Employer
of Incorporation or Organization)                           Identification No.)

                              602 Enterprise Drive
                            Kingston, New York 12401
                            ------------------------
                    (Address of Principal Executive Offices)

                                 (845) 338-3366
                                 --------------
                         (Registrant's Telephone Number)

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 as
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). YES [ ] NO [X]

As of May 18, 2006, there were 15,238,778 shares of the registrant's common
stock outstanding.


                                      INDEX

                                                                      PAGE NO.

PART I - FINANCIAL INFORMATION                                            2
Item 1 - Financial Statements                                             2
Condensed Balance Sheets                                                  3
Condensed Statements of Operations                                        4
Condensed Statement of Changes in Stockholders' Deficiency                5
Condensed Statements of Cash Flows                                        6
Notes to Condensed Financial Statements                                   7
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                                              15
Item 1 - Legal Proceedings                                               15
Item 2 - Changes in Securities                                           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                                15
SIGNATURES                                                               16
EXHIBIT 31.1 - CERTIFICATION                                             17
EXHIBIT 32.1 - ADDITIONAL CERTIFICATION                                  18


                                       2


                         PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

                            CONDENSED BALANCE SHEETS



                                                                              MARCH 31,     DECEMBER 31,
                                                                                2006            2005
                                                                             -----------    -----------
                                                                             (UNAUDITED)
                                                                                      
ASSETS
CURRENT ASSETS:
  Cash and cash equivalents                                                  $     2,459    $    40,698
  Accounts receivable                                                            155,334        112,201
  Prepaid expenses and other current assets                                       16,795          7,460
                                                                             -----------    -----------
      TOTAL CURRENT ASSETS                                                       174,588        160,359

  Equipment and improvements, net                                                158,270        171,257
  Rent - deposit                                                                   1,496          1,496
                                                                             -----------    -----------
      TOTAL ASSETS                                                           $   334,354    $   333,112
                                                                             ===========    ===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES:
  Loan payable to stockholder                                                $    50,000    $    50,000
  Loan: Bank line of credit                                                       71,414         59,350
  Current portion of long-term debt                                               91,941         93,453
  Current portion of notes payable to stockholders                                23,837          3,400
  Accrued Phelps arbitration award                                               130,060        130,060
  Accounts payable and accrued expenses                                          207,225        210,529
  Accrued compensation payable to stockholders                                    87,772         53,411
                                                                             -----------    -----------
      TOTAL CURRENT LIABILITIES                                                  662,249        600,203

Long-term debt, less current portion                                                   0         21,160
Notes payable to stockholders, less current portion                              143,063        141,000
Accrued compensation payable to stockholders, less current portion                27,072         27,072
                                                                             -----------    -----------
      TOTAL LIABILITIES                                                          832,384        789,435
                                                                             -----------    -----------
STOCKHOLDERS' DEFICIENCY:
  Preferred stock, par value $.01 per share; 5,000,000 shares
       authorized; 1,500,000 shares issued and outstanding                        15,000         15,000
  Common stock, par value $.01 per share; 50,000,000 shares
       authorized; 15,238,778 and 15,238,778 shares issued and outstanding       152,388        152,388
  Additional paid-in capital                                                   3,182,030      3,157,547
  Accumulated deficit                                                         (3,847,448)    (3,781,258)
                                                                             -----------    -----------
      TOTAL STOCKHOLDERS' DEFICIENCY                                            (498,030)      (456,323)
                                                                             -----------    -----------
      TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                         $   334,354    $   333,112
                                                                             ===========    ===========


The accompanying notes are an integral part of the financial statements.


                                       3


                       CONDENSED STATEMENTS OF OPERATIONS
                   THREE MONTHS ENDED MARCH 31, 2006 AND 2005
                                   (UNAUDITED)



                                                                THREE MONTHS
                                                               ENDED MARCH 31,
                                                               ---------------
                                                            2006            2005
                                                        ------------    ------------
                                                                  
REVENUE:
      Systems / software: license fees and sales        $    154,480    $     98,048
      Service Income                                           7,500
                                                        ------------    ------------
                  TOTAL REVENUE                              161,980          98,048

COST OF REVENUE:                                                   0               0
                                                        ------------    ------------
                  GROSS PROFIT                               161,980          98,048
                                                        ------------    ------------
COSTS AND EXPENSES:
      Research and development                                86,531          78,869
      Sales and marketing                                      6,375          25,942
      General and administrative (includes interest
         expense of $8125 and $8713 for the
         three months ending March 31, 2006 and 2005,
         respectively)                                       110,781          99,025
      Stock based compensation                                24,483
                                                        ------------    ------------
                  TOTAL COSTS AND EXPENSES                   228,170         203,836
                                                        ------------    ------------
NET LOSS                                                $    (66,190)   $   (105,788)
                                                        ============    ============
NET LOSS PER COMMON SHARE:
      Basic and diluted                                 $      (0.00)   $      (0.01)

AVERAGE NUMBER OF SHARES USED IN COMPUTATION:
      Basic and diluted                                   16,738,778      15,608,778
                                                        ============    ============


The accompanying notes are an integral part of the financial statements.


                                       4


           CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
                        THREE MONTHS ENDED MARCH 31, 2006
                                   (UNAUDITED)



                                             PREFERRED STOCK             COMMON STOCK
                                          ---------------------     ---------------------
                                                                                             ADDI-                       TOTAL
                                            NUMBER                    NUMBER                 TIONAL        ACCUMU-       STOCK-
                                              OF                        OF                   PAID-IN        LATED       HOLDERS'
                                            SHARES      AMOUNT        SHARES      AMOUNT     CAPITAL       DEFICIT     DEFICIENCY
                                          ---------    --------     ----------   --------   ----------   -----------   ----------
                                                                                                   
Balance, January 1, 2006                  1,500,000    $ 15,000     15,238,778   $152,388   $3,157,547   $(3,781,258)   $(456,323)
  Issuance of options for compensation                                                          24,483                     24,483
Net loss                                                                                                     (66,190)     (66,190)
                                          ---------    --------     ----------   --------   ----------   -----------    ---------
Balance, March 31, 2006                   1,500,000    $ 15,000     15,238,778   $152,388   $3,182,030   $(3,847,448)   $(498,030)
                                          =========    ========     ==========   ========   ==========   ===========    =========


The accompanying notes are an integral part of the financial statements.


                                       5


                       CONDENSED STATEMENTS OF CASH FLOWS
                   THREE MONTHS ENDED MARCH 31, 2006 AND 2005
                                   (UNAUDITED)



                                                                                         THREE MONTHS
                                                                                        ENDED MARCH 31,
                                                                                      2006          2005
                                                                                   ----------    ----------
                                                                                           
OPERATING ACTIVITIES:
       Net loss                                                                    $  (66,190)   $ (105,788)
       Adjustments to reconcile net loss to net cash
            used in operating activities:
                   Depreciation and amortization of equipment
                       and improvements                                                14,877        12,743
                   Stock based compensation                                            24,483            --
                   Changes in operating assets and liabilities:
                       Accounts receivable                                            (43,133)          (81)
                       Prepaid expenses and other current assets                       (9,335)       (8,977)
                       Accounts payable and accrued expenses                           (3,304)       37,175
                       Accrued compensation payable to stockholders                    34,361
                                                                                   ----------    ----------
                            NET CASH USED IN OPERATING ACTIVITIES                     (48,241)      (64,928)
                                                                                   ----------    ----------
INVESTING ACTIVITIES - purchase of equipment and improvements                          (1,890)       (2,349)
                                                                                   ----------    ----------
FINANCING ACTIVITIES:
       Proceeds from bank line of credit                                               12,064
       Proceeds from private placement of common stock                                              105,000
       Proceeds from notes payable and long-term debt                                                 9,787
       Proceeds from loans from stockholders                                           22,500
       Repayments of notes payable and long-term debt                                 (22,672)      (31,945)
                                                                                   ----------    ----------
                            NET CASH PROVIDED BY FINANCING ACTIVITIES                  11,892        82,842
                                                                                   ----------    ----------
                            NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS      (38,239)       15,565

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                         40,698         4,212
                                                                                   ----------    ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                           $    2,459    $   19,777
                                                                                   ==========    ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
        Interest paid                                                              $    2,857    $    5,245
                                                                                   ==========    ==========


The accompanying notes are an integral part of the financial statements.


                                       6


                     NOTES TO CONDENSED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION:

      In the opinion of management, the accompanying unaudited condensed
      financial statements reflect all adjustments, consisting of normal
      recurring accruals, necessary to present fairly the financial position of
      Image Technology Laboratories, Inc. (the "Company") as of March 31, 2006,
      its results of operations for the three months ended March 31, 2006 and
      2005, changes in stockholders' deficiency for the three months ended March
      31, 2006 and cash flows for the three months ended March 31, 2006 and
      2005. Certain terms used herein are defined in the audited financial
      statements of the Company as of December 31, 2005 and for the years ended
      December 31, 2005 and 2004 (the "Audited Financial Statements") included
      in the Company's Annual Report on Form 10-KSB previously filed with the
      Securities and Exchange Commission (the "SEC"). Pursuant to rules and
      regulations of the SEC, certain information and disclosures normally
      included in financial statements prepared in accordance with accounting
      principles generally accepted in the United States of America have been
      condensed in or omitted from these financial statements unless significant
      changes have taken place since the end of the most recent fiscal year.
      Accordingly, the accompanying unaudited condensed financial statements
      should be read in conjunction with the Audited Financial Statements and
      the other information included in the Form 10-KSB.

      The results of operations for the three months ended March 31, 2006 are
      not necessarily indicative of the results of operations to be expected for
      the full year ending December 31, 2006.

      These unaudited financial statements have been prepared assuming that the
      Company will continue as a going concern and, accordingly, do not include
      any adjustments that might result from the outcome of this uncertainty.
      The Company's independent registered public accounting firm's report on
      the financial statements included in the Company's Annual Report on Form
      10-KSB for the year ended December 31, 2005, contained an explanatory
      paragraph regarding the Company's ability to continue as a going concern.

NOTE 2 - EARNINGS (LOSS) PER SHARE:

      The Company presents basic earnings (loss) per share and, if appropriate,
      diluted earnings per share in accordance with the provisions of Statement
      of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS
      128") as explained in Note 1 to the financial statements in the Form
      10-KSB.

      The rights of the Company's preferred and common stockholders are
      substantially equivalent. The Company has included the 1,500,000
      outstanding preferred shares from the date of their issuance in the
      weighted average number of shares outstanding in the computation of basic
      loss per share for the three months ended March 31, 2006 and 2005, in
      accordance with the "two class" method of computing earnings (loss) per
      share set forth in SFAS 128.

      Since the Company had net losses for the three months ended March 31, 2006
      and 2005, the assumed effects of the exercise of options to purchase
      3,125,000 and 2,650,000 common shares outstanding at March 31, 2006 and
      2005, respectively, would be anti-dilutive and, therefore, they have not
      been considered in the calculations of diluted per share amounts in the
      accompanying condensed statements of operations for those periods.


                                       7


NOTE 3 - WORKING CAPITAL LOAN AGREEMENT:

      During September 2002, the Company entered into a one-year working capital
      loan agreement with a financial institution for borrowings of up to
      $75,000. The agreement automatically renews annually unless one of the
      parties gives appropriate notice for cancellation. Outstanding borrowings
      bear interest payable monthly at 1% above the prime rate, and are
      guaranteed by the Estate of the Company's principal stockholder, Dr. David
      Ryon. At March 31, 2006, there was $71,414 outstanding under this
      agreement.

NOTE 4 - LONG-TERM DEBT:

      In February 2004, the Company borrowed $125,000 from Valley Commercial
      Capital, LLC ("Valley"). This loan is evidenced by a promissory note,
      which provides for interest at 8% per annum and calls for monthly payments
      of principal and interest of $3,917 through February 2, 2007. In March
      2004, the Company borrowed an additional $138,997 from Valley, also
      evidenced by a promissory note, which provides for interest at 8% per
      annum and calls for monthly payments of principal and interest of $4,356
      through March 29, 2007. As of March 31, 2006, the outstanding balances on
      these loans aggregated $91,941. The loans are secured by equipment owned
      by the Company located at two customer sites, and an assignment of a
      contract with one of these customers. In addition, the loans are secured
      by a personal guarantee of the Estate of Dr. David Ryon.

NOTE 5 - NOTES PAYABLE TO STOCKHOLDERS:

      During November and December 2004, Dr. David Ryon, the Company's principal
      stockholder, President, and Chief Executive Officer, until his death in
      December 2004, loaned the Company an aggregate of $105,000. In December
      2004, to memorialize this loan, he executed, as President and Chief
      Executive Officer, on behalf of the Company, a demand promissory note
      payable to himself and bearing interest at 10% per annum. He also executed
      a security agreement, for himself on behalf of the Company, granting to
      himself a security interest in all of the Company's assets not previously
      encumbered as security for full payment under the note. Prior to April 12,
      2005, the Company negotiated with the Estate of Dr. David Ryon a 24 month
      payment schedule, beginning in January 2006. The Company's Board of
      Directors approved the revised terms of the promissory note on April 12,
      2005. In December 2005, the Estate of Dr. Ryon loaned the Company an
      additional $36,000 under an amendment to the December 2004 promissory note
      and the payment schedule was renegotiated to begin in January 2007. In
      March 2006, the Estate of Dr. Ryon loaned the Company an additional
      $22,500 under an amendment to the December 2004 promissory note. As of
      March 31, 2006, the entire principal amount of $163,500 was outstanding.
      Principal payments of $81,750 are required in both 2007 and 2008.

      In September 2005, the Company received a total of $50,000 in cash as part
      of a Bridge Loan Agreement that included the issuance of warrants to
      purchase 50,000 shares of Common Stock of the Company. All $50,000 of
      these funds came from a member of the Company's Board of Directors. The
      five-year warrants have an exercise price of $0.33 per share. The Bridge
      Loan has an annual interest rate of 14%, a maturity of 12 months and can
      be prepaid upon certain events such as receipt of a certain level of funds
      from the InMed Services agreement and gross proceeds of equity financing
      above $500,000.


                                       8


NOTE 6 - COMMON STOCK:

      There was no issuance of Common Stock by the Company during the quarter
      ended March 31, 2006.

NOTE 7 - STOCK OPTIONS

      The Company did not grant any options under the Company's option plan
      during the quarter ended March 31, 2006.

      Prior to January 1, 2006 the Company measured compensation cost related to
      stock options issued to employees using the intrinsic value method of
      accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB
      25"), "Accounting For Stock Issued To Employees". The Company has adopted
      the provisions of Statement of Financial Accounting Standards No. 123R
      ("SFAS 123R"), "Accounting For Stock-Based Compensation." As a result of
      SFAS 123R, the Company began expensing the fair value of employee stock
      options over the vesting period beginning with its fiscal quarter ending
      March 31, 2006. For the quarter ending March 31, 2006, the Company
      expensed $24,483 due to stock options. For the quarter ending March 31,
      2005, the pro forma stock option expense was $102,734, which would have
      resulted in a pro forma net loss of $208,522 (net loss per share of
      $0.01).

      The fair value of options granted were determined using a Black-Scholes
      pricing model in accordance with SFAS 123R, with the following assumptions
      used during the three months ended March 31, 2005 :

                                                        March 31,
                                                          2005
                                                          ----
                  Risk-free interest rate                 4.22%
                  Expected Volatility                      110%
                  Expected Years of option term             10
                  Expected Dividends                         0%

      The following table summarizes information about stock options outstanding
      at March 31, 2006.

                       Options Outstanding                Options Exercisable
            ----------------------------------------    -----------------------
                             Weighted
                              Average
               Number        Remaining      Weighted       Number      Weighted
Exercise    Outstanding     Contractual     Average     Outstanding     Average
 Price        at March         Life         Exercise      at March     Exercise
 Range        31, 2006        (Years)        Price        31, 2006       Price
 -----        --------        -------        -----        --------       -----
 $0.33       1,000,000           3.8         $0.33       1,000,000       $0.33
 $0.75          25,000           8.1         $0.75          25,000       $0.75
 $0.20         550,000           8.8         $0.20         550,000       $0.20
 $0.22         800,000           9.0         $0.22         200,000       $0.22
 $0.26         750,000           9.1         $0.26                       $0.26
             ---------        ------         -----       ---------       -----
             3,125,000           7.3         $0.27       1,775,000       $0.28
             =========        ======         =====       =========       =====


                                       9


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

                                    OVERVIEW

The following is a discussion of certain factors affecting Image Technology
Laboratories, Inc.'s results of operations, assets, liquidity and capital
resources. You should read the following discussion and analysis in conjunction
with Image Technology Laboratories, Inc.'s unaudited condensed financial
statements and related notes, which are included elsewhere in this filing.

Image Technology Laboratories, Inc. ("we", "our" or the "Company") is a medical
image and information management company in the healthcare information systems
market. We were incorporated in Delaware on December 5, 1997. The Company has
developed a single database "Radiology Information System and Picture Archiving
and Communications System" known as RIS/PACS for use in the secure management of
patient information and diagnostic images. Our lead product is the WarpSpeed
system. Through its unique, modular architecture the Company has created a total
radiology business solution that is readily scaled and easily upgraded. These
features will allow the Company to provide products tailored to the size of its
customers and to keep its customers at the forefront of future technological
advances by enabling the Company to easily update existing systems.

We expect that we will derive our future revenues primarily from sales of our
WarpSpeed system and associated maintenance charges along with Application
Service Provider (ASP) usage fees. We obtained our first contract for the sale
of WarpSpeed and related hardware and maintenance services in August 2002.
Accordingly, we are no longer in the development stage for accounting purposes,
but we continue to refine and enhance the capabilities of our WarpSpeed system.

We have had recurring losses and negative cash flows from our operating
activities since inception. We have cash of $2,459 and a working capital
deficiency of $487,661 as of March 31, 2006.


                                       10


         RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2006
               COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 2005

REVENUE:

For the three months ended March 31, 2006, our total revenue was $161,980, an
increase of $63,932 from the $98,048 in the prior year's comparable period,
attributed to revenue from our sale to InMed Diagnostic Services and an increase
in usage fees from St. Anthony Community Hospital.

COST OF REVENUE:

For each of the three months ended March 31, 2006 and 2005, no direct cost of
revenue was incurred.

SALES AND MARKETING EXPENSES:

During the three months ended March 31, 2006, we incurred sales and marketing
expenses of $6,375, as compared with sales and marketing expenses of $25,942
during the same period of 2005, a decrease of $19,567. The Company has focused
its efforts on controlling costs while identifying appropriate sales personnel
and resources. These costs are expected to grow as the company executes its
business plan.

NET LOSS:

We incurred a loss of $66,190 (less than $.01 per share) for the three months
ended March 31, 2006 as compared with a loss of $105,788 ($.01 per share) for
the three months ended March 31, 2005, a decrease in loss of $39,598.


                                       11


                         LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2006, our total assets were $334,354, an increase of $1,242 from
total assets of $333,112 on December 31, 2005.

As of March 31, 2006, we had cash and cash equivalents and a working capital
deficiency of $2,459 and $487,661, respectively.

Net cash used in our operating activities for the 3 months ending March 31, 2006
of $48,241 was substantially attributable to our net loss of $66,190 offset by
$34,362 in accrued compensation payable to stockholders. Of the net loss of
$66,190, $24,483 was stock option compensation expense. The net cash used in our
operating activities was financed with $22,500 resulting from an additional loan
from the Estate of Dr. David Ryon and a net of $12,064 from our bank line of
credit. Investing activities (purchase of equipment and improvements) for the
quarter ending March 31, 2005 totaled only $1,890.

The foregoing activities, i.e., operating, investing and financing, resulted in
our net cash decrease of $38,239 for the three months ended March 31, 2006.

During September 2002, we obtained a $75,000 working capital loan from a
financial institution. As of March 31, 2006, we have $71,414 outstanding under
that loan. Additionally, in February and March 2004, we obtained two loans from
a different financial institution that provided us with an aggregate principal
amount of approximately $264,000. As of March 31, 2006, we had $91,941
outstanding under these arrangements. In December 2004, we borrowed $105,000
from our former Chief Executive Officer Dr. David Ryon, which will be repaid
over 24 months, beginning in January 2007. An additional $36,000 and $22,500
were borrowed from the Estate of Dr. Ryon in December 2005 and March 2006,
respectively. Principal payments are $81,750 in 2007 and 2008.

In September 2005, the Company received a total of $50,000 in cash as part of a
Bridge Loan Agreement that included the issuance of warrants to purchase 50,000
shares of Common Stock of the Company. All $50,000 of these funds came from a
member of the Company's Board of Directors. The five-year warrants have an
exercise price of $0.33 per share. The Bridge Loan has an annual interest rate
of 14%, a maturity of 12 months and can be prepaid upon certain events such as
receipt of a certain level of funds from the InMed Services agreement and gross
proceeds of equity financing above $500,000.

In January 2004, ITL closed a five-year contract for the WarpSpeed system with
St. Anthony Community Hospital, Warwick, NY. St. Anthony is a member of Bon
Secours Charity Health System, which owns and operates 32 health care
facilities. ITL expanded it's installation to an off-campus Women's Center in
May 2005, for digital mammography and ultrasound, and again in November 2005 at
the hospital with the installation of Computed Radiography (CR) modalities as
St. Anthony Community Hospital became essentially film-less. Our installation at
St. Anthony Community Hospital also includes a fully-redundant hot-standby
server.

In March 2005, the Company signed a contract for the sale of two of its
WarpSpeed RIS/PACS systems to InMed Diagnostic Services of Massachusetts, LLC at
multi-modality imaging centers specializing in women's health care spread across
three sites, and one WarpSpeed system to InMed Diagnostics Services of South
Carolina, LLC in Columbia. The Columbia, South Carolina site is the largest
imaging center of the InMed affiliates.

In March 2006, the Company executed an amendment to its contract with Park
Avenue Associates in Radiology PC., Binghamton NY to extend the term of the
original RIS/PACS contract through December 31, 2006.

We require cash to fund our working capital needs and capital expenditures, as
well as to meet existing commitments. Such commitments include payments of
existing loans including our line of credit, two notes payable which call for
aggregate monthly payments of approximately $8,300 through March 2007, one note
with monthly payments of approximately $7,500 through December 2008, and $900
per month pursuant to a five-year lease commitment ending in October 2007 for
our operations center in Kingston, New York. At times, in order to help in
maximizing our working capital, our directors, officers and employees have
contributed to capital or deferred compensation due under their agreements. It
is anticipated, but not assured, that, should the need arise, such contributions
or deferrals might be available to us in the future. Additionally, we are
considering outside sources of equity funds and other types of financing in
order to help support our anticipated growth. There can be no assurance that
such efforts will be successful.


                                       12


Management believes that as a result of the proceeds from financing activities,
as well as anticipated cash flow generated by sales of its RIS/PACS solution (in
addition to the current cash flow resulting from our installed ASP base), the
Company will be able to continue to meet its obligations as they become due
through at least December 31, 2006. Management also believes, that if needed,
the Company will be able to obtain additional capital resources from financing
through financial institutions and other unrelated sources and/or through
additional related party loans and private placements. However, there can be no
assurance that the Company will become profitable or that financing will be
available. Accordingly, the accompanying financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amount and classification of liabilities that
may result from the outcome of this uncertainty.

                 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

In March 2006, the Estate of Dr. Ryon loaned the Company an additional $22,500
under an amendment to the December 2004 promissory note. As of March 31, 2006,
the entire principal amount of $163,500 was outstanding. Principal payments of
$81,750 are required in both 2007 and 2008.

                           FORWARD-LOOKING STATEMENTS

When used in the Quarterly Report on Form 10-QSB, the words "may", "will",
"should", "expect", "believe", "anticipate", "continue", "estimate", "project",
"intend" and similar expressions are intended to identify forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act regarding events, conditions and financial trends that
may affect our future plans of operations, business strategy, results of
operations and financial condition. We wish to ensure that such statements are
accompanied by meaningful cautionary statements pursuant to the safe harbor
established in the Private Securities Litigation Reform Act of 1995. Prospective
investors are cautioned that any forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties and that actual
results may differ materially from those included within the forward-looking
statements as a result of various factors including our ability to consummate,
and the terms of, acquisitions, if any. Such forward-looking statements should,
therefore, be considered in light of various important factors, including those
set forth herein and others set forth from time to time in our reports and
registration statements filed with the Securities and Exchange Commission (the
"Commission"). We disclaim any intent or obligation to update such
forward-looking statements.


                                       13


ITEM 3 - CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Our Chief Technology Officer who is our Principal Accounting Officer, after
evaluating the effectiveness of the Company's disclosure controls and procedures
(as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)
as of the end of the period covered by this report (the "Evaluation Date")),
have concluded that as of the Evaluation Date, our disclosure controls and
procedures were adequate and effective to ensure that material information
relating to the Company would be made known to them by others within the
Company, particularly during the period in which this quarterly report on Form
10-QSB was being prepared.

CHANGES IN INTERNAL CONTROLS

There were no significant changes in our internal controls or in other factors
that could significantly affect our disclosure controls and procedures
subsequent to the Evaluation Date, nor any significant deficiencies or material
weaknesses in such disclosure controls and procedures requiring corrective
actions. As a result, no corrective actions were taken.


                                       14


                           PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

During the quarter, there were no significant developments in our legal
proceedings. For a detailed discussion of our legal proceedings, please refer to
our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005.

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

On January 17, 2006 Barry C. Muradian informed the Company of his resignation as
the President, Chief Executive Officer and Principal Accounting Officer of the
Company, effective January 20, 2006. An 8-K report was filed on January 20,
2006. Mr. Muradian's 775,000 non-vested options were cancelled upon his
resignation and his 25,000 vested options were cancelled on April 20, 2006.

On March 3, 2006, the Company engaged Berenson LLP ("Berenson") to act as the
Company's new independent registered accounting firm and auditors. This
engagement was recommended and approved by Unanimous Written Consent of the
Board of Directors of the Company as of March 3, 2006. During the two most
recent fiscal years, and the interim period preceding the engagement, the
Company had not consulted Berenson regarding any of the matters set forth in
Item 304 (a) (2) (i) or (ii) of Regulation S-B. An 8-K report was filed on March
9, 2006.

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K

      (a)   EXHIBITS.

            31.1  Certification of Chief Technology Officer and Principal
                  Accounting Officer pursuant to Section 302 of the
                  Sarbanes-Oxley Act of 2002.

            32.1  Certification of Chief Technology Officer and Principal
                  Accounting Officer pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002.

      (b)   REPORTS ON FORM 8-K.

            None.


                                       15


                                   SIGNATURES

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


                        /s/ Lewis M. Edwards
                        -----------------------
                        Lewis M. Edwards,
                        Chairman, Executive Vice-President,
                        Chief Technology Officer, and
                        Principal Accounting Officer
                        May 18, 2006